10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT of 1934 [FEE REQUIRED]

For the Fiscal Year Ended December 31, 2004

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from              to             .

Commission File No. 000-24147

Killbuck Bancshares, Inc.

(Exact name of registrant as specified in its charter)

Ohio	34-1700284
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

165 North Main Street

Killbuck, Ohio 44637

(Address of principal executive offices)

Registrant’s telephone number, including area code: (330) 276-2771

Securities to be registered pursuant to Section 12(b) of the Act: None

Securities to be registered pursuant to Section 12(g) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock No Par Value	None

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

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

“Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).    Yes  ¨    No  x

The aggregate market value of the voting stock held by nonaffiliates of the registrant, calculated by reference to the stock valuation done on Killbuck Bancshares, Inc. common stock as of June 30, 2004 was $60,749,840 (Registrant has assumed that all of its executive officers and directors are affiliates. Such assumption shall not be deemed to be conclusive for any other purpose):

There were 657,486 shares of no par value common stock outstanding as of December 31, 2004.

DOCUMENTS INCORPORATED BY REFERENCE

1. Portions of the Annual Report to Shareholders for the Year ended December 31, 2004. (Part II, III and IV)

2. Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held on April 25, 2005 for the Year ended December 31, 2004. (Part III)

FORM 10-K INDEX

PART I
Item 1.	Business
Item 2.	Properties
Item 3.	Legal Proceedings
Item 4.	Submission of Matters to a Vote of Security Holders
PART II
Item 5.	Market for the Registrant’s Common Stock and Related Stockholder Matters
Item 6.	Selected Financial Data
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.	Quantitative and Qualitative Disclosure About Market Risk
Item 8.	Financial Statements and Supplementary Data
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.	Controls and Procedures
PART III
Item 10.	Directors and Executive Officers of Registrant
Item 11.	Executive Compensation
Item 12.	Security Ownership of Certain Beneficial Owners and Management
Item 13.	Certain Relationships and Related Transactions
Item 14.	Principal Accountant Fees and Services
PART IV
Item 15.	Exhibits, Financial Statement Schedules, and Reports on Form 8-K
	Signatures

PART I

Killbuck Bancshares, Inc. (the “Company”) may from time to time make written or oral “forward-looking statements”, including statements contained in the Company’s filings with the securities and exchange commission (including this annual report on Form 10-K and the exhibits thereto), in its report to shareholders and in other communications by the Company, which are made in good faith by the Company pursuant to the “safe harbor” provisions of the private securities litigation reform act of 1995.

These forward-looking statements involve risks and uncertainties, such as statements of the Company’s plans, objectives, expectations, estimates and intentions that are subject to change based on various important factors (some of which are beyond the Company’s control). The following factors, among others, could cause the Company’s financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements: the strength of the United States economy in general and the strength of the local economies in which the Company conducts operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the board of governors of the federal reserve system, inflation, interest rate, market and monetary fluctuations; the timely development of and acceptance of new products and services of the Company and the perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors’ products and services; the willingness of users to substitute competitors’ products and services for the Company’s products and services; the success of the Company in gaining regulatory approval of its products and services, when required; the impact of changes in financial services’ laws and regulations (including laws concerning taxes, banking, securities and insurance); technological changes, acquisitions; changes in consumer spending and savings habits; and the success of the Company at managing the risks involved in the foregoing.

The Company cautions that the foregoing list of important factors is not exclusive. The Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company.

Item 1. Business

Killbuck Bancshares, Inc. (the “Company”) was incorporated under the laws of the State of Ohio on November 29, 1991 at the direction of management of the Killbuck Savings Bank Company (the “Bank,”) for the purpose of becoming a bank holding company by acquiring all of the outstanding shares of the Bank. In November 1992, the Company became the sole shareholder of the Bank. The Bank carries on business under the name “The Killbuck Savings Bank Company.” The principal office of the Company is located at 165 N. Main Street, Killbuck, Ohio. The Killbuck Savings Bank Company was established under the banking laws of the State of Ohio in September, 1900.

The Bank is headquartered in Killbuck, Ohio, which is located in the northeast portion of Ohio, in the County of Holmes. Holmes County has a population of approximately 37,000.

The Bank provides a wide range of retail banking services to individuals and small to medium-sized businesses. These services include various deposit products, business and personal loans, credit cards, residential mortgage loans, home equity loans, internet banking, bill payment, and other consumer oriented financial services including IRA accounts, safe deposit and night depository facilities. The Bank also has automatic teller machines located at all locations providing 24 hour banking service to our customers. The Bank belongs to STAR, a national ATM network with thousands of locations nationwide. Neither the Company nor the Bank has any foreign operations, assets, investments or deposits.

The Company has one wholly owned subsidiary, The Killbuck Savings Bank Company. The Bank has ten offices, with seven in Holmes County including a loan production office, two in Knox County and one in Tuscarawas County. The full service branch facility in Sugarcreek, Ohio in Tuscarawas County opened in February 2000. The full service branch facility in Howard, Ohio in Knox County opened in July 2001. The Loan Production office in Millersburg, Ohio in Holmes County opened in July 2003. The full service branch facility in Berlin, Ohio in Holmes County opened in the German Village Market complex in April 2004.

The Company, through its subsidiary, The Killbuck Savings Bank Company, conducts the business of a commercial banking organization. At December 31, 2004, the Company and its subsidiary had consolidated total assets of $293,867,039 and consolidated total equity of $35,358,934. The capital of the Company consists of 1,000,000 authorized shares of capital stock, no par value of which 657,486 shares were outstanding at December 31, 2004 to 1,026 shareholders.

The Bank is a state banking Company. The Bank is regulated by the Ohio Division of Financial Institutions (“ODFI”) and its deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”) to the extent permitted by law and, as a subsidiary of the Company, is regulated by the Federal Reserve Board.

Employees

As of December 31, 2004, the Bank had 94 full-time and 30 part-time employees. The Company had no employees. The Bank provides a number of benefits for its full-time employees, including health and life insurance, pension, workers’ compensation, social security, paid vacations, and numerous bank services. No employees are union participants or subject to a collective bargaining agreement.

Competition

The commercial banking business in the market areas served by the Bank is very competitive. The Company and the Bank are in competition with commercial banks located in their own service areas. Some competitors of the Company and the Bank are substantially larger than the Bank. In addition to local bank competition, the Bank competes with larger commercial banks located in metropolitan areas, savings banks, savings and loan associations, credit unions, finance companies and other financial institutions for loans and deposits.

There are eight financial institutions operating in Holmes County. As of June 30, 2004 (the most recent date for which information is available) the Bank had the largest market share with $197 million in total deposits as of such date, representing a market share of 40.62%. The institution with the second largest market share had deposits of $191 million as of such date, representing a market share of 39.31%. The Bank had total assets as of December 31, 2004, of $293.9 million compared to the other institution’s total assets of $317.6 million as of such date.

Certain Regulatory Considerations

The following is a summary of certain statutes and regulations affecting the Company and its subsidiary. This summary is qualified in its entirety by such statutes and regulations.

The Company

The Company is a registered bank holding company under the Bank Holding Company Act of 1956, as amended, (“BHC Act”) and as such is subject to regulation by the Federal Reserve Board. A bank holding company is required to file with the Federal Reserve Board quarterly reports and other information regarding its business operations and those of its subsidiaries. A bank holding company and its subsidiary banks are also subject to examination by the Federal Reserve Board.

The BHC Act requires every bank holding company to obtain the prior approval of the Federal Reserve Board before acquiring substantially all the assets of any bank or bank holding company or ownership or control of any voting shares of any bank or bank holding company, if, after such acquisition, it would own or control, directly or indirectly, more than five percent (5%) of the voting shares of such bank or bank holding company.

In approving acquisitions by bank holding companies of companies engaged in banking-related activities, the Federal Reserve Board considers whether the performance of any such activity by a subsidiary of the holding company reasonably can be expected to produce benefits to the public, such as greater convenience, increased competition, or gains in efficiency, which outweigh possible adverse effects, such as over concentration of resources, decrease of competition, conflicts of interest, or unsound banking practices.

Bank holding companies are restricted in, and subject to, limitations regarding transactions with subsidiaries and other affiliates.

In addition, bank holding companies and their subsidiaries are prohibited from engaging in certain “tie in” arrangements in connection with any extensions of credit, leases, sales of property, or furnishing of services.

The Company Subsidiary

The Company operates a single bank, namely, The Killbuck Savings Bank Company. As an Ohio state chartered commercial bank, the Bank is supervised and regulated by the ODFI, and subject to laws and regulations applicable to Ohio banks.

Capital

The Federal Reserve Board, ODFI, and FDIC require banks and holding companies to maintain minimum capital ratios.

The Federal Reserve Board adopted final “risk-adjusted” capital guidelines for bank holding companies. The guidelines became fully implemented as of December 31, 1992. The ODFI and FDIC have adopted substantially similar risk-based capital guidelines. These ratios involve a mathematical process of assigning various risk weights to different classes of assets, then evaluating the sum of the risk-weighted balance sheet structure against the Company’s capital base. The rules set the minimum guidelines for the ratio of capital to risk-weighted assets (including certain off-balance sheet activities, such as standby letters of credit) at 8%. At least half of the total capital is to be composed of common equity, retained earnings, and a limited amount of perpetual preferred stock less certain goodwill items (“Tier 1 Capital”). The remainder may consist of a limited amount of subordinated debt, other preferred stock, or a limited amount of loan loss reserves.

In addition, the federal banking regulatory agencies have adopted leverage capital guidelines for banks and bank holding companies. Under these guidelines, banks and bank holding companies must maintain a minimum ratio of three percent (3%) Tier 1 Capital (as defined for purposes of the year-end 1992 risk-based capital guidelines) to total assets. The Federal Reserve Board has indicated, however, that banking organizations that are experiencing or anticipating significant growth, are expected to maintain capital ratios well in excess of the minimum levels.

Regulatory authorities may increase such minimum requirements for all banks and bank holding companies or for specified banks or bank holding companies. Increases in the minimum required ratios could adversely affect the Company and the Bank, including their ability to pay dividends.

At December 31, 2004, the Company’s respective total and Tier 1 risk-based capital ratios and leverage ratios exceeded the minimum regulatory requirements. See Note 17 in the audited consolidated financial statements included in the Annual Report and incorporated herein by reference in the report as Exhibit 13.

Additional Regulation

The Bank is also subject to federal regulation as to such matters as required reserves, limitation as to the nature and amount of its loans and investments, regulatory approval of any merger or consolidation, issuance or retirement of their own securities, limitations upon the payment of dividends and other aspects of banking operations. In addition, the activities and operations of the Bank are subject to a number of additional detailed, complex and sometimes overlapping laws and regulations. These include state usury and consumer credit laws, state laws relating to fiduciaries, the Federal Truth-in-Lending Act and Regulation Z, the Federal Equal Credit Opportunity Act and Regulation B, the Fair Credit Reporting Act, the Truth in Savings Act, the Community Reinvestment Act, anti-redlining legislation and antitrust laws.

Dividend Regulation

The ability of the Company to obtain funds for the payment of dividends and for other cash requirements is largely dependent on the amount of dividends that may be declared by the Bank. Generally, the Bank may not declare a dividend, without the approval of the ODFI, if the total of dividends declared in a calendar year exceeds the total of its net profits for that year combined with its retained profits of the preceding two years.

Government Policies and Legislation

The policies of regulatory authorities, including the ODFI, Federal Reserve Board, FDIC and the Depository Institutions Deregulation Committee, have had a significant effect on the operating results of commercial banks in the past and are expected to do so in the future. An important function of the Federal Reserve System is to regulate aggregate national credit and money supply through such means as open market dealings in securities, establishment of the discount rate on member bank borrowings, and changes in reserve requirements against member bank deposits. Policies of these agencies may be influenced by many factors, including inflation, unemployment, short-term and long-term changes in the international trade balance and fiscal policies of the United States government.

Financial Services Modernization Act of 1999

Under the Gramm-Leach-Bliley Act (better known as the Financial Services Modernization Act of 1999), bank holding companies can become financial holding companies and thereby affiliate with securities firms and insurance companies and engage in other activities that are financial in nature. A bank holding company may become a financial holding company if each of its subsidiary banks is well capitalized under the Federal Deposit Insurance Corporation Act of 1991 prompt corrective action provisions, is well managed, and has at least a satisfactory rating under the Community Reinvestment Act by filing a declaration that the bank holding company wishes to become a financial holding company. No regulatory approval will be required for a financial holding company to acquire a company, other than a bank or savings association, engaged in activities that are financial in nature or incidental to activities that are financial in nature, as determined by the Federal Reserve Board.

The Financial Services Modernization Act defines “financial in nature” to include”

• securities underwriting, dealing and market making;

• sponsoring mutual funds and investment companies;

• insurance underwriting and agency;

• merchant bank activities and activities that the Federal Reserve Board has determined to be closely relating to banking.

In addition, a financial holding company may not acquire a company that is engaged in activities that are financial in nature unless each of the subsidiary banks of the financial holding company has a Community Reinvestment Act rating of satisfactory or better.

The United States Congress has periodically considered and adopted legislation, such as the Gramm-Leach-Bliley Act, which has resulted in further deregulation of both banks and other financial institutions, including mutual funds, securities brokerage firms and investment banking firms. No assurance can be given as to whether any additional legislation will be adopted or as to the effect such legislation would have on the business of the Bank or the Company.

Deposit Insurance

The Federal Deposit Insurance Company Improvement Act of 1991 (“FDICIA”) requires federal bank regulatory authorities to take “prompt corrective action” with respect to banks that do not meet minimum capital requirements. For these purposes, FDICIA establishes five capital tiers: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized.

As an FDIC-insured institution, the Bank is required to pay deposit insurance premium assessments to the FDIC. The amount each institution pays for FDIC deposit insurance coverage is determined in accordance with a risk-based assessment system under which all insured depository institutions are placed into one of nine categories and assessed insurance premiums based upon their level of capital and supervisory evaluation. Institutions classified as well capitalized (as defined by the FDIC) and considered healthy pay the lowest premium while institutions that are less than adequately capitalized (as defined by the FDIC) and considered substantial supervisory concerns pay the highest premium. Because the Bank is presently “well capitalized” it pays the minimum deposit insurance premiums.

The FDIC may terminate the deposit insurance of any insured depository institution if the FDIC determines, after a hearing, that the institution has engaged or is engaging in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, order, or any condition imposed in writing by, or written agreement with, the FDIC. The FDIC may also suspend deposit insurance temporarily during the hearing process for a permanent termination of insurance if the institution has no tangible capital. Management of the Company is not aware of any activity or condition that could result in termination of the deposit insurance of the Bank.

Proposed Legislation

There have been proposed a number of legislative and regulatory proposals designed to strengthen the federal deposit insurance system and to improve the overall financial stability of the U.S. banking system. It is impossible to predict whether or in what form these proposals may be adopted in the future, and if adopted, what their effect would be on the Company or Bank.

Monetary Policies

The earnings of the Company are dependent upon the earnings of its wholly owned subsidiary bank. The earnings of the subsidiary bank are affected by the policies of regulatory authorities, including the Ohio Division of Financial Institutions, the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation. The policies and regulations of the regulatory agencies have had and will continue to have a significant effect on deposits, loans and investment growth, as well as the rate of interest earned and paid, and therefore will affect the earnings of the subsidiary bank and the Company in the future, although the degree of such impact cannot accurately be predicted.

Securities Laws and Compliance

As of June 30, 1998, the Company’s common stock was registered with the Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of 1934, as amended (“1934 Act”). This registration requires ongoing compliance with the 1934 Act and its periodic filing requirements as well as a wide range of Federal and State securities laws. These requirements include, but are not limited to, the filing of annual, quarterly and other reports with the SEC, certain requirements as to the solicitation of proxies from shareholders as well as other proxy rules, and compliance with the reporting requirements and “short-swing” profit rules imposed by section 16 of the 1934 Act.

Item 2 Description of Property

Properties

The Company owns no real property but utilizes the main office of the Bank. The Company’s and the Bank’s executive offices are located at 165 North Main Street, Killbuck, Ohio. The Company pays no rent or other form of consideration for the use of this facility. All offices are owned by the Bank. The Bank has seven offices located in Holmes County (1), two in Knox County (2), and one in Tuscarawas County (3). A loan production facility in Millersburg, Ohio opened in July 2003. The Bank’s total investment in office property and equipment was $10.1 million with a net book value $4.9 million at December 31, 2004. The offices are at the following locations.

Main Office: (1)	Berlin Branch (1)	Mt. Hope Branch (1)
165 North Main Street	4853 East Main Street	8115 State Rt. 241
Killbuck, Ohio 44637	Berlin Ohio 44610	Mt. Hope, Ohio 44660
Millersburg North Branch (1)	Millersburg South Branch (1)	Millersburg Loan Annex (1)
181 N. Washington Street	1642 S. Washington Street	164 N. Clay Street
Millersburg, Ohio 44654	Millersburg, Ohio 44654	Millersburg, Ohio 44654
German Village Branch (1)	Sugarcreek Branch (3)	Apple Valley Branch (2)
4900 Oak Street	1035 W. Main Street	21841 Plank Road
Berlin, Ohio 44610	Sugarcreek, Ohio 44681	Howard, Ohio 43028
Danville Branch (2)
701 S. Market Street
Danville, Ohio 43014

Item 3 Legal Proceedings

Neither the Bank nor the Company is involved in any material legal proceedings. The Bank, from time to time, is a party to litigation, which arises in the ordinary course of business, such as claims to enforce liens, claims involving the origination and servicing of loans, and other issues related to the business of the Bank. In the opinion of management the resolution of any such issues would not have a material adverse impact on the financial position, results of operation, or liquidity of the Bank or the Company.

Item 4 Submission of Matters to Vote of Security Holders

No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.

PART II

Item 5 Market for Registrant’s Common Stock and Related Stockholder Matters

As of December 31, 2004, the Company had 1,026 shareholders of record, as calculated by excluding individual participants in securities positions listings, who collectively held 657,486 of the 1,000,000 authorized shares of the Company’s no par value stock.

There is no established public trading market for the Company’s common stock and the shares of the Company are not listed on any exchange. Sale price information is based on information reported to the Company by individual buyers and sellers of the Company stock. The following table summarizes the high and low prices and dividend information for 2004 and 2003. Cash dividends are paid on a semi-annual basis.

Quarter Ended	High		Low		Cash Dividends Paid
2004     March 31	$	95.00	$	95.00	N/A
June 30		95.00		95.00	.95
September 30		96.69		95.00	N/A
December 31		97.38		96.38	1.00
2003     March 31	$	95.00	$	93.00	N/A
June 30		95.00		95.00	.90
September 30		95.00		95.00	N/A
December 31		95.00		91.25	.95

The Company has paid regular semi-annual cash dividends since it became a bank holding company in 1992, and assuming the ability to do so, it is anticipated that the Company will continue to declare regular semi-annual cash dividends.

For information on dividends per share, net income per share and ratio of dividends to net income per share see the Selected Financial Data of the Annual Report to Shareholders of Killbuck Bancshares, Inc. for the year ended December 31, 2004, included in this report as Exhibit 13 and is incorporated herein by reference.

The ability of the Company to pay dividends will depend on the earnings of its subsidiary bank and its financial condition, as well as other factors such as market conditions, interest rates and regulatory requirements. Therefore, no assurances may be given as to the continuation of the Company’s ability to pay dividends or maintain its present level of earnings. For a discussion on subsidiary dividends see Note 16 to the audited Consolidated Financial Statements of the Annual Report to Shareholders of Killbuck Bancshares, Inc. for the year ended December 31, 2004, included in this report as Exhibit 13 and is incorporated herein by reference.

The common stock of the Company is not subject to any redemption provisions or restrictions on alienability. The common stock is entitled to share pro rata in dividends and in distributions in the event of dissolution or liquidation. There are not any options, warrants, privileges nor other rights with respect to Company stock at the present time, nor are any such rights proposed to be issued.

Unregistered Sales of Equity Securities and Use of Proceeds

None

ISSUER PURCHASES OF EQUITY SECURITIES

Period	(a) Total Number of Shares (or Units) Purchased	(b) Average Price Paid per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
January 1 – 31, 2004	615	$	95.00	N/A	N/A
February 1 – 29, 2004	—		—	N/A	N/A
March 1 – 31, 2004	—		—	N/A	N/A
April 1 – 30, 2004	1,129	$	95.00	N/A	N/A
May 1 – 31, 2004				N/A	N/A
June 1 – 30, 2004	1,400	$	95.00	N/A	N/A
July 1 – 31, 2004	—		—	N/A	N/A
August 1 – 31, 2004	—		—	N/A	N/A
September 1 – 30, 2004	—		—	N/A	N/A
October 1 – 31, 2004	—		—	N/A	N/A
November 1 – 30, 2004	392		96.86	N/A	N/A
December 1 – 31, 2004	3,766		96.38	N/A	N/A
Total (1)	7,302	$	95.81	N/A	N/A

(1) 7,302 shares of common stock were purchased by Killbuck Bancshares in open-market transactions.

Item 6 Selected Financial Data

Selected Financial Data of the annual report to shareholders of Killbuck Bancshares, Inc. for the year ended December 31, 2004, included in this report as Exhibit 13, is incorporated herein by reference.

Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Annual Report to Shareholders of Killbuck Bancshares, Inc. for the year ended December 31, 2004, included in this report as Exhibit 13, and is incorporated herein by reference. Additional statistical information noted below is provided pursuant to SEC’s Industry Guide 3, Statistical Disclosure by Bank Holding Companies.

Investment Portfolio

Book Value of Investments

Book values of investment securities at December 31 are as follows (in thousands):

	2004		2003		2002		2001		2000
Securities available for sale:
Obligations of U.S. Government Agencies and Corporations	$	9,754	$	17,582	$	39,048	$	51,420	$	46,158
Total available for sale		9,754		17,582		39,048		51,420		46,158
Securities held to maturity:
Obligations of States and Political subdivisions		35,564		39,900		40,591		38,305		34,514
Corporate securities		451		729		987		1,498		1,615
Total held to maturity		36,015		40,629		41,578		39,803		36,129
Total	$	45,769	$	58,211	$	80,626	$	91,223	$	82,287

MATURITY SCHEDULE OF INVESTMENTS

The following table presents the investment portfolio, the weighted average yield and maturities at December 31, 2004 (dollars in thousands):

	Within three months				After three months but Within one year				After one year but Within five years				After five but Within ten years				After 10 years				Total
	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
Available for Sale (1)
Obligations of U.S. Government Agencies and Corporations	$	—	0.00	%	$	3,507	3.63	%	$	3,633	8.79	%	$	2,178	4.43	%	$	436	5.31	%	$	9,754
Total	$	—	0.00	%	$	3,507	3.63	%	$	3,633	8.79	%	$	2,178	4.43	%	$	436	5.31	%	$	9,754
Held to Maturity
Obligations of States and Political subdivisions (2)	$	155	4.96	%	$	3,507	4.19	%	$	15,475	4.29	%	$	16,220	4.45	%	$	207	4.40	%	$	35,564
Corporate bonds		—	0.00	%		451	5.94	%		—	0.00	%		—	0.00	%		—	0.00	%		451
Total	$	155	4.96	%	$	3,958	10.13	%	$	15,475	4.29	%	$	16,220	4.45	%	$	207	4.40	%	$	36,015

(1) The weighted average yield has been computed using the historical amortized cost for available for sale securities.

(2) Weighted average yields on nontaxable obligations have been computed based on actual yield stated on the security.

Excluding holdings of U.S. Treasury and other agencies and corporations of the U.S. Government, there were no investments in securities of any one issuer that exceeded 10% of the Bank’s shareholder equity at December 31, 2004.

TYPES OF LOANS

The following table presents the composition of the loan portfolio and the percentage of loans by type as follows (dollars in thousands):

	December 31,
	2004				2003				2002				2001				2000
	Amount		% of Total Loans		Amount		% of Total Loans		Amount		% of Total Loans		Amount		% of Total Loans		Amount		% of Total Loans
Real estate-residential	$	97,811	45.0	%	$	88,649	44.0	%	$	73,143	41.8	%	$	55,812	36.7	%	$	53,529	35.3	%
Real estate-farm		12,309	5.6			12,298	6.1			9,108	5.2			3,377	2.2			3,945	2.6
Real estate-commercial		47,226	21.8			42,090	20.8			35,005	20.0			24,117	15.9			23,063	15.2
Real estate-construction		11,000	5.1			10,978	5.4			11,812	6.7			2,937	1.9			2,044	1.3
Commercial and other		40,752	18.8			38,269	19.0			35,160	20.1			37,205	24.4			38,355	25.3
Consumer and credit card		8,075	3.7			9,413	4.7			10,929	6.2			28,710	18.9			30,864	20.3
	$	217,173	100.0	%	$	201,697	100.0	%	$	175,157	100.0	%	$	152,158	100.0	%	$	151,800	100.0	%

The largest category of loans comprising the Bank’s loan portfolio is residential real estate loans. These loans are primarily single-family residential real estate loans secured by a first mortgage on the dwelling. The risks associated with these loans are primarily the risk of default in repayment and inadequate collateral. Real estate commercial loans represent the second largest category and include development loans as well as investment commercial real estate loans. These loans have risks, which include the risk of default in the repayment of principal and inadequate collateral as well as the risk of cash flow interruption due to, in the case of rental real estate, the inability to obtain or collect adequate rental rates. The next largest loan segment of the Bank’s loan portfolio is the commercial and other category. The loans comprising this category represent loans to business interest located primarily within the Bank’s defined market areas, with no significant industry concentration. Commercial loans include both secured and unsecured loans. The risks associated with these loans are principally the risk in default of the repayment of principal resulting from economic problems of the commercial customer, economic downturn affecting the market in general and in the case of secured loans, inadequate collateral.

MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATE

The following table presents maturity distribution and interest rate sensitivity of real estate – commercial, real estate - construction and commercial and other loans at December 31, 2004 (dollars in thousands):

	Within 1 Year		After 1 Year Within 5 Years		After 5 Years		Total
Real estate – commercial	$	45,036	$	1,773	$	417	$	47,226
Real estate – construction		9,744		276		980		11,000
Commercial and other		34,055		5,950		747		40,752
	$	88,835	$	7,999	$	2,144	$	98,978
Fixed interest rates	$	6,026	$	7,957	$	2,144	$	16,127
Variable interest rates		82,809		42		—		82,851
	$	88,835	$	7,999	$	2,144	$	98,978

RISK ELEMENTS

Loans are subject to ongoing periodic monitoring by management and the board of directors. A loan is classified as nonaccrual when, in the opinion of management, there are doubts about collectibility of interest and principal. At the time the accrual of interest is discontinued, future income is recognized only when cash is received. Renegotiated loans are those loans which terms have been renegotiated to provide a reduction or deferral of principal or interest as a result of the deterioration of the borrower. At December 31, 2004 all of the non-accrual loans are comprised of two loans. The two commercial loans total approximately $1.1 million secured by equipment and real estate. The $1 million loan was originally $1.3 million and was written down by approximately $300,000 to the allowance for loan loss in the 4^th quarter of 2004. The collateral was not sold by the end of the fiscal year as anticipated. An auction date is set for March 24, 2005. The following table presents information concerning nonperforming assets including nonaccrual loans, loans 90 days or more past due, renegotiated loans, other real estate and repossessed assets at December 31, (dollars in thousands).

	December 31,
	2004			2003			2002			2001			2000
Loans on nonaccrual basis	$	1,095		$	220		$	149		$	144		$	298
Loans past due 90 days or more		—			1			—			125			340
Renegotiated loans		—			—			—			—			—
Total nonperforming loans		1,095			221			149			269			638
Other real estate		—			—			—			—			—
Repossessed assets		—			—			—			—			—
Total nonperforming assets	$	1,095		$	221		$	149		$	269		$	638
Nonperforming loans as a percent of total loans		.50	%		.11	%		.08	%		.18	%		.42	%
Nonperforming loans as a percent of total assets		.37	%		.08	%		.05	%		.10	%		.24	%
Nonperforming assets as a percent of total assets		.37	%		.08	%		.05	%		.10	%		.24	%

The amount of interest income that would have been recognized had the loans performed in accordance with their original terms was approximately $38,263 and the amount of interest income that was recognized was $0 for the year ended December 31, 2004.

There are no loans as of December 31, 2004, other than those disclosed above, where known information about the borrower caused management to have serious doubts about the borrower’s ability to comply with their contractual repayment obligations. There are no concentrations of loans to borrowers engaged in similar activities, which exceed 10% of total loans that management is aware of. Based upon the ongoing quarterly review and assessment of credit quality, management is not aware of any trends or uncertainties related to any accounts which might have a material adverse effect on future earnings, liquidity or capital resources.

There are no other interest bearing assets that would be subject to disclosure as either nonperforming or impaired if such interest bearing assets were loans.

LOAN LOSS EXPERIENCE

Management makes periodic provisions to the allowance for loan losses to maintain the allowance at an acceptable level commensurate with the credit risks inherent in the loan portfolio. There can be no assurances, however, that additional provisions will not be required in future periods. The following table presents a summary of loan losses by loan type and changes in the allowance for loan losses for the years ended December 31, (dollars in thousands):

	Year Ended December 31,
	2004			2003			2002			2001			2000
Allowance for loan losses at beginning of year	$	2,702		$	2,326		$	2,261		$	2,359		$	1,887
Provision charged to expense		225			390			210			262			540
Charge-offs:
Real estate-residential		17			6			18			—			—
Real estate-farm		—			—			—			—			—
Real estate-commercial		—			—			—			—			—
Real estate-construction		—			—			—			—			—
Commercial and other		311			16			43			122			42
Consumer and credit card		28			99			262			364			207
Total charge-offs		356			121			323			486			249
Recoveries:
Real estate-residential		1			—			—			—			—
Real estate-farm		—			—			—			—			—
Real estate-commercial		—			—			—			—			—
Real estate-construction		—			—			—			—			—
Commercial and other		13			19			14			21			112
Consumer and credit card		61			88			164			105			69
Total recoveries		75			107			178			126			181
Net charge-offs		281			14			145			360			68
Business acquisition		—			—			—			—			—
Allowance for loan losses at end of period	$	2,646		$	2,702		$	2,326		$	2,261		$	2,359
Total loans outstanding	$	217,173		$	201,697		$	175,157		$	152,158		$	151,800
Average loans outstanding	$	213,463		$	187,554		$	162,413		$	153,488		$	147,224
Allowance for loan losses as a percent of total loans		1.22	%		1.34	%		1.33	%		1.49	%		1.55	%
Net charge-offs as a percent of average loans		.13	%		.01	%		.09	%		.24	%		.05	%

The Bank reviews the adequacy of its allowance for loan losses on a quarterly basis. In determining the adequacy of its allowance account the Bank makes general allocations based upon loan categories, nonaccrual, past due and classified loans. After general allocations, the Bank makes specific allocations for individual credits. The Bank has determined that the reserve is adequate as of December 31, 2004, based upon its analysis and experience. However, there can be no assurance that the current allowance for loan losses will be adequate to absorb all future loan losses.

The following table presents management’s estimate of the allocation of the allowance for loan losses among the loan categories, although the entire allowance balance is available to absorb any actual charge-offs that may occur, along with the percentage of loans in each category to total loans for the years ended December 31 (dollars in thousands):

	2004				2003				2002				2001				2000
	Allowance		% of Loans to Total Loans		Allowance		% of Loans to Total Loans		Allowance		% of Loans to Total Loans		Allowance		% of Loans to Total Loans		Allowance		% of Loans to Total Loans
Real estate – residential	$	478	45.0	%	$	432	44.0	%	$	338	41.8	%	$	254	36.7	%	$	450	35.3	%
Real estate – farm		58	5.7			124	6.1			60	5.2			74	2.2			23	2.6
Real estate – commercial		755	21.7			704	20.8			376	20.0			373	15.9			350	15.2
Real estate – construction		—	5.1			—	5.4			—	6.7			—	1.9			11	1.3
Commercial and other loans		1,034	18.8			1,038	19.0			967	20.1			964	24.4			705	25.3
Consumer and credit loans		321	3.7			404	4.7			585	6.2			596	18.9			820	20.3
	$	2,646	100.00	%	$	2,702	100.0	%	$	2,326	100.0	%	$	2,261	100.0	%	$	2,359	100.0	%

CONTRACTUAL OBLIGATIONS

The following table presents, as of December 31, 2004, significant fixed and determinable contractual obligations to third parties by payment date. Further discussion of the nature of each obligation is included in the referenced note to the financial statements for December 31, 2004, attached hereto as Exhibit 13 to this Form 10K.

(In thousands)	Note Reference	One Year or Less	One to Three Years	Three to Five Years	Over Five Years	Total
Borrowed funds	9,10	6,186	2,781	634	974	10,575
Certificates of Deposit	8	62,603	24,292	17,889	24	104,808
Operating Leases	13	19	38	38	308	403
Deposits without a stated maturity	—	142,541	—	—	—	142,541

The Company has entered into an operating lease to lease 1,600 square feet with a drive-thru facility within the German Village Store in Berlin, Ohio beginning in April 2004 and expiring in the year 2024 with an additional ten year option.

COMMITMENTS

The following table details the amounts and expected maturities of significant commitments as of December 31, 2004. Further discussion of these commitments is included in Note 15 to the financial statements as of December 31, 2004, attached hereto as Exhibit 13 to this Form 10K.

(In thousands)	One Year or Less	One to Three Years	Three to Five Years	Over Five Years	Total
Commitments to extent credit
Commercial	14,508	3,511	—	—	18,019
Residential real estate	2,367	184	—	—	2,551
Revolving home equity	—	—	—	8,888	8,888
and credit card lines	1,874	—	—	—	1,874
Standby letters of credit	529	—	—	—	529

Item 7A Quantitative and Qualitative Disclosures About Market Risk

The Bank’s primary market risk exposure is interest rate risk and, to a lesser extent, liquidity risk. Because of the nature of the Bank’s operations, the Bank is not subject to currency exchange or commodity price risk and, since the Bank has no trading portfolio, it is not subject to trading risk. The Bank’s loan portfolio, concentrated primarily within the surrounding market area, is subject to risks associated with the local economy. Since all of the interest earning assets and interest bearing liabilities are located at the Bank, all of the interest rate risk lies at the Bank level. As a result, all significant interest rate risk management procedures are performed at the Bank level.

The Bank actively manages interest rate sensitivity and asset/liability products through an asset/liability management committee. The principle purposes of asset-liability management are to maximize current net interest income while minimizing the risk to future earnings of negative fluctuations in net interest margin and to insure adequate liquidity exists to meet operational needs.

In an effort to reduce interest rate risk and protect itself from the negative effects or rapid or prolonged changes in interest rates, the Bank has instituted certain asset and liability management measures, including underwriting long-term fixed rate loans that are saleable in the secondary market, offering longer term deposit products and diversifying the loan portfolio into shorter term consumer and commercial business loans. In addition, since the mid-1980’s, the Bank has originated adjustable-rate loans and as of December 31, 2004, they comprised approximately 85.4% of the total loan portfolio.

One of the principal functions of the Company’s asset/liability management program is to monitor the level to which the balance sheet is subject to interest rate risk. The goal of this program is to manage the relationship between interest-earning assets and interest-bearing liabilities to minimize the fluctuations in the net interest spread and achieve consistent growth in net interest income during periods of changing interest rates.

Interest rate sensitivity is measured as the difference between the volume of assets and liabilities that are subject to repricing in a future period of time. These differences are known as interest sensitivity gaps. The Bank utilizes gap management as the primary means of measuring interest rate risk. Gap analysis identifies and quantifies the Bank’s exposure or vulnerability to changes in interest rates in relationship to the Bank’s interest rate sensitivity position. A rate sensitive asset or liability is one, which is capable of being repriced (i.e., the interest rate can be adjusted or principal can be reinvested) within a specified period of time. Subtracting total rate sensitive liabilities (RSL) from total rate sensitive assets (RSA) within specified time horizons nets the Bank’s gap positions. These gaps reflect the Bank’s exposure to changes in market interest rates, as discussed below.

Because many of the Bank’s deposit liabilities are capable of being immediately repriced, the Bank offers variable rate loan products in order to help maintain a proper balance in its ability to reprice various interest bearing assets and liabilities. Furthermore, the Bank’s deposit rates are not tied to an external index. As a result, although changing market interest rates impact repricing, the Bank has retained much of its control over repricing.

The Bank conducts the rate sensitivity analysis through the use of a simulation model which also monitors earnings at risk by projecting earnings of the Bank based upon an economic forecast of the most likely interest rate movement. The model also calculates earnings of the Bank based upon what are estimated to be the largest foreseeable rate increase and the largest foreseeable rate decrease. Such analysis translates interest rate movements and the Bank’s rate sensitivity position into dollar amounts by which earnings may fluctuate as a result of rate changes. A 2% immediate increase in interest rates would increase earnings by 20.9% and a 2% immediate decrease in interest rates would decrease earnings by 20.7%.

The data included in the table that follows indicates that the Bank is asset sensitive within one year. Generally, an asset sensitive gap could negatively affect net interest income in an environment of decreasing interest rates as a greater amount of interest bearing assets could be repricing at lower rates. During times of rising interest rates, an asset sensitive gap could positively affect net interest income as rates would be increased on a larger volume of assets as compared to deposits. As a result, interest income would increase more rapidly than interest expense. A liability sensitive gap indicates that declining interest rates could positively affect net interest income as expense of liabilities would decrease more rapidly than interest income would decline. Conversely, rising rates could negatively affect net interest income as income from assets would increase less rapidly than deposit costs. Although rate sensitivity analysis enables the Bank to minimize interest rate risk, the magnitude of rate increases or decreases on assets versus liabilities may not correlate directly. As a result, fluctuations in interest spreads can occur even when repricing capabilities are perfectly matched.

It is the policy of the Bank to generally maintain a gap ratio within a range that is minus 10 percent to plus 20 percent of total assets for the time horizon of one year. When Management believes that interest rates will increase it can take actions to increase the RSA/RSL ratios. When Management believes interest rates will decline, it can take actions to decrease the RSA/RSL ratio.

During 2004, the Bank’s focus was on spreading out the maturities of time deposits within the one to five year time frame while continuing to make variable rate loans. The above strategy was implemented to better position the Bank for rate changes in a rising rate environment. The Bank’s asset/liability management focus for 2005 will include improving the Bank’s rate sensitivity gap. As noted above, at December 31, 2004 the Bank was asset sensitive; however, the cumulative rate sensitivity gap was such that the Bank’s earnings and capital should not be materially affected by the repricing of assets and liabilities due to decreases in interest rates in 2005.

Changes in market interest rates can also affect the Bank’s liquidity position through the impact rate changes may have on the market value of the Bank’s investment portfolio. Rapid increases in market rates can negatively impact the market values of investment securities. As securities values decline it becomes more difficult to sell investments to meet liquidity demands without incurring a loss. The Bank can address this by increasing liquid funds, which may be utilized to meet unexpected liquidity needs when a decline occurs in the value of securities.

The following table presents the Bank’s interest rate sensitivity gap position as of December 31, 2004 (dollars in thousands):

INTEREST RATE SENSITIVITY GAPS

(IN THOUSANDS)

	2005			2006			2007			2008			2009			Thereafter			Total
Interest-earnings assets:
Loans:
Fixed	$	14,931		$	6,040		$	3,683		$	2,097		$	1,576		$	3,472		$	31,799
Variable		184,874			302			198			—			—			—			185,374
Securities:
Fixed		7,620			4,818			4,571			4,502			5,217			19,041			45,769
Variable		—			—			—			—			—			—			—
Other interest-earning assets		9,668			—			—			—			—			—			9,668
Total interest-earning assets		217,093			11,160			8,452			6,599			6,793			22,513			272,610
Interest-bearing liabilities:
Demand and savings deposits		28,558			28,558			28,558			28,558			—			—			114,230
Time deposits:
Fixed		61,727			13,885			9,891			8,845			9,044			23			103,415
Variable		876			517			—			—			—			—			1,393
Short-term borrowings		3,730			—			—			—			—			—			3,730
FHLB advances		2,456			2,411			370			334			300			974			6,845
Total interest-bearing liabilities		97,347			45,371			38,819			37,737			9,344			997			229,613
Interest rate sensitivity gap		119,746			(34,211	)		(30,367	)		(31,138	)		(2,551	)		21,516
Cumulative rate sensitivity gap	$	119,746		$	85,535		$	55,168		$	24,030		$	21,479		$	42,995
Cumulative interest rate sensitivity gap as a percent of interest earning assets		43.93	%		31.38	%		20.24	%		8.82	%		7.88	%		15.77	%

Item 8 Financial Statements and Supplementary Data

The report of independent auditors and consolidated financial statements included in the Annual Report to shareholders of Killbuck Bancshares, Inc. for the year ended December 31, 2004, included in this report as Exhibit 13, are incorporated herein by reference.

Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None

Item 9A. Controls and Procedures

The Company has carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s President and Chief Executive Officer and Vice President and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the President and Chief Executive Officer and Vice President and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective, as of the end of the period covered by this report, in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic SEC filings.

Disclosure controls and procedures are the control and other procedures of the Company that are designed to ensure that the information required to be disclosed by the Company in its reports or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchanges Commission’s rules and forms.

There was no change in the Company’s internal control over financial reporting that occurred during the Company’s fiscal quarter ended December 31, 2004 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART III

Item 10 Directors and Executive Officers of Registrant

The following table lists the Executive Officers of the Company and its subsidiary, Killbuck Savings Bank Company, and certain other information with respect to each individual, as of December 31, 2004. The information required by this item with respect to Directors and other executive officers of the Company and its subsidiary, Killbuck Savings Bank Company, is incorporated herein by reference to the information under the heading “Election of Directors and Information with Respect to Directors and Officers” in the Proxy Statement of the Company. The information required regarding disclosure of any known late filings or failure by an insider to file a report required by Section 16(a) of the Securities Exchange Act is incorporated herein by reference to the information under the heading “Compliance with Section 16(a) of the Securities Exchange Act of 1934” in the Proxy Statement of the Company.

Name	Age	All Positions with Company and Bank
Luther E. Proper	56	President and CEO of the Company and the Bank since 1991. Vice-chairman of the Board of Directors of both the Company and the Bank since 2001.
Craig A. Lawhead	47	Vice president and treasurer of Company since 1992; Executive vice president of bank since 1991.
Diane S. Knowles	42	Vice president and secretary of Company since July, 2000; Senior vice president and Chief Financial Officer of Bank since June, 2000.

The Board of Directors has determined that the Company does not have an audit committee financial expert serving on its audit committee. However, the Board of Directors has determined that each audit committee member has sufficient knowledge in financial and auditing matters to serve on the committee. At this time, the Board does not believe it is necessary to actively search for an outside person to serve on the Board who would qualify as a financial expert.

The Company has adopted a code of ethics that applies to its principal executive, financial and accounting officers. A copy of the code of ethics is posted on the Company’s web site at http://www.killbuckbank.com/bank.cfm. In the event we make any amendment to, or grant any waiver of, a provision of the code of ethics that applies to the principal executive, financial or accounting officer, or any person performing similar functions, that requires disclosure under applicable SEC rules, we intend to disclose such amendment or waiver, the nature of and reasons for it, along with the name of the person to whom it was granted and the date, on our internet website.

Item 11 Executive Compensation

Information required by this item is incorporated herein by reference to the information under the heading “Executive Compensation and Other Information” in the Proxy Statement of the Company.

Item 12 Security Ownership of Certain Beneficial Owners and Management

Information required by this item is incorporated herein by reference to the information under the heading “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement of the Company. The Company currently has no equity compensation plans or arrangements, such as stock option or restricted stock arrangements, pursuant to which equity securities of the Company are authorized for issuance.

Item 13 Certain Relationships and Related Transactions

Information required by this item is incorporated herein by reference to the information under the heading “Certain Relationships and Related Transactions” in the Proxy Statement of the Company and in Note 4 of the Notes to Consolidated Financial statements included in the Annual Report to Shareholders for the year ended December 31, 2004, included in this report as Exhibit 13, and incorporated herein by reference.

Item 14 Principal Accountant Fees and Services

Information required by this item is incorporated here in by reference to the information under the heading “Audit Committee Report” in the Proxy Statement of the Company.

PART IV

Item 15 Exhibits, Financial Statement Schedules and Reports on Form 8

Financial Statements and Schedules

The following consolidated financial statements of Killbuck Bancshares, Inc. and subsidiary, included in the Annual Report to Shareholders for the year ended December 31, 2004, are incorporated by reference in item 8:

Schedules are omitted because they are inapplicable, not required, or the information is included in the consolidated financial statements or notes thereto.

Reports on Form 8-K

No reports on Form 8-K were filed during the fourth quarter of 2004.

Exhibits

The following exhibits are filed herewith and/or are incorporated herein by reference.

Exhibit Number	Description
3(i)	Certificate and Articles of Incorporation of Killbuck Bancshares, Inc.*
3(ii)	Code of regulations of Killbuck Bancshares, Inc.*
10.1	Employment Agreement
10.2	Employment Agreement
10.3	Employment Agreement
12	Statement regarding computation of ratios.
13	Portions of the 2004 Annual Report to Shareholders
21	Subsidiary of the Holding Company.*
31.1	Section 302 Certification
31.2	Section 302 Certification
32.1	Certification pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2003.
32.2	Certification pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2003.

* Incorporated by reference to an identically numbered exhibit to the Form 10 (File No. 000-24147) filed with SEC on April 30, 1998 and subsequently amended on July 8, 1998 and July 31, 1998.

SIGNATURES

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

Killbuck Bancshares, Inc.
(Registrant)
By:	/s/ Luther E. Proper
	Luther E. Proper
President and Chief Executive Officer/Director
(Duly authorized representative)

Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signatures	Description	Date
/s/ Luther E. Proper Luther E. Proper	President, Chief Executive Officer and Director	March 14, 2005
/s/ John W. Baker John W. Baker	Director	March 14, 2005
/s/ Ted Bratton Ted Bratton	Director	March 14, 2005
/s/ Richard L. Fowler Richard L. Fowler	Director	March 14, 2005
/s/ Allan R. Mast Allan R. Mast	Director	March 14, 2005
/s/ Max A. Miller Max A. Miller	Director	March 14, 2005
/s/ Dean J. Mullet Dean J. Mullet	Director	March 14, 2005
/s/ Kenneth E. Taylor Kenneth E. Taylor	Director	March 14, 2005
/s/ Michael S. Yoder Michael S. Yoder	Director	March 23, 2005
/s/ Diane S. Knowles Diane S. Knowles	Chief Financial and Chief Accounting Officer	March 14, 2005

EX-10.1

EXHIBIT 10.1

EMPLOYMENT AGREEMENT

THIS AGREEMENT entered into this 26^nd day of April, 2004, (“Effective Date”), by and between THE KILLBUCK SAVINGS BANK COMPANY and LUTHER E. PROPER (the “Employee”).

WHEREAS, the Employee has heretofore been employed by The Killbuck Savings Bank Company as President and is experienced in all phases of the business of The Killbuck Savings Bank Company; and

WHEREAS, the parties desire by this agreement to set forth the continuing employment relationship of The Killbuck Savings Bank Company and the Employee.

NOW, THEREFORE, it is AGREED as follows:

1. Employment. The Employee is employed in the capacity as the President of The Killbuck Savings Bank Company. The Employee shall render such administrative and management services to The Killbuck Savings Bank Company as are currently rendered and as are customarily performed by persons situated in a similar executive capacity. The Employee shall promote the business of The Killbuck Savings Bank Company. The Employee’s other duties shall be such as the Board of Directors for The Killbuck Savings Bank Company may from time to time reasonably direct, including normal duties as an officer of The Killbuck Savings Bank Company.

2. Base Compensation. The Killbuck Savings Bank Company agrees to pay the Employee during the Term of this Agreement (as hereinafter defined at Section 5) a salary at the rate of at least $158,000.00 per annum, payable in cash not less frequently than monthly; provided, that the rate of such salary shall be reviewed by the Board of Directors not less often than annually, and Employee shall be entitled to receive annually an adjustment at such percentage or in such an amount as the Board of Directors in its sole discretion may decide at such time.

3. Discretionary Bonus. The Employee shall be entitled to participate in an equitable manner with all other senior management employees of The Killbuck Savings Bank Company in discretionary bonuses that may be authorized and declared by the Board of Directors to its senior management employees from time to time. No other compensation provided for in this Agreement shall be deemed a substitute for the Employee’s right to participate in such discretionary bonuses when and as declared by the Board of Directors.

4. (a) Participation in Retirement and Medical Plans. The Employee shall be entitled to participate in any plan of The Killbuck Savings Bank Company relating to pension, profit-sharing, or other retirement benefits and medical coverage or reimbursement plans that The Killbuck Savings Bank Company may adopt for the benefit of its employees. Additionally, Employee’s dependent family shall be eligible to participate in medical and dental insurance plans sponsored by The Killbuck Savings Bank Company with the cost of such premiums paid by The Killbuck Savings Bank Company.

(b) Employee Benefits; Expenses. The Employee shall be eligible to participate in any fringe benefits which may be or may become applicable to The Killbuck Savings Bank Company’s senior management employees, including by example, participation in any stock option or incentive plans adopted by the Board of Directors of The Killbuck Savings Bank Company and any other benefits which are commensurate with the responsibilities and functions to be performed by the Employee under this Agreement. The Killbuck Savings Bank Company shall reimburse Employee for all reasonable out-of-pocket expenses which Employee shall incur in connection with his service for The Killbuck Savings Bank Company.

5. Term. The term of employment of Employee under this Agreement shall be for the period commencing on the Effective Date and ending one year thereafter. Additionally, on, or before, each annual anniversary date from the Effective Date, the term of employment under this Agreement shall be extended for up to an additional one year period beyond the then effective expiration date upon a determination and resolution of the Board of Directors that the performance of the Employee has met the requirements and standards of the Board, and that the Terms of such Agreement shall be extended. If at any time during the original term of this Agreement, or any extension thereof, discussions or negotiations take place which, if concluded by agreement, would result in a change in control as defined in paragraph 12, the determination and resolution referred to above shall not be required, and this Agreement shall be deemed extended for a period of one (1) year beyond the then effective expiration date. Such extension shall occur whether or not such discussions or negotiations actually resulted in an agreement.

6. Loyalty; Noncompetition.

(a) The Employee shall devote his full time and attention to the performance of his employment under this Agreement. During the term of Employee’s employment under this Agreement, the Employee shall not engage in any business or activity contrary to the business affairs or interest of The Killbuck Savings Bank Company.

(b) Nothing contained in this Section 6 shall be deemed to prevent or limit the right of Employee to invest in the capital stock or other securities of any business dissimilar from that of The Killbuck Savings Bank Company exceeding 4.9% of said Company.

7. Standards. The Employee shall perform his duties under this Agreement in accordance with such reasonable standards expected of employees with comparable positions in comparable organizations and as may be established from time to time by the Board of Directors.

8. Vacation and Sick Leave. At such reasonable times as the Board of Directors shall in its discretion permit, the Employee shall be entitled, without loss of pay, to absent himself voluntarily from the performance of his employment under this Agreement, with all such voluntary absences to count as vacation time; provided that:

(a) The Employee shall be entitled to annual vacation leave in accordance with the policies as are periodically established by the Board of Directors for senior management employees of The Killbuck Savings Bank Company.

(b) Employee shall not be entitled to accumulate unused vacation from one fiscal year to the next, except to the extent authorized by the Board of Directors for senior management employees of The Killbuck Savings Bank Company.

(c) In addition to the aforesaid paid vacations, the Employee shall be entitled without loss of pay to absent himself voluntarily from the performance of his employment with The Killbuck Savings Bank Company for such additional periods of time and for such valid and legitimate reasons as the Board of Directors in its discretion may determine. Further, the Board of Directors shall be entitled to grant to the Employee a leave or leaves of absence with or without pay at such time or times and upon such terms and conditions as the Board of Directors in its discretion may determine.

(d) In addition, the Employee shall be entitled to an annual sick leave benefit as established by the Board of Directors for senior management employees of The Killbuck Savings Bank Company. In the event that any sick leave benefit shall not have been used during any year, such leave shall accrue to subsequent years to the extent authorized by the Board of Directors for employees of The Killbuck Savings Bank Company.

9. Termination and Termination Pay.

The Employee’s employment under this Agreement shall be terminated upon any of the following occurrences:

(a) The death of the Employee during the term of this Agreement, in which event the Employee’s estate shall be entitled to receive the compensation due the Employee through the last day of the third calendar month following the month in which Employee’s death shall have occurred.

(b) The Board of Directors may terminate the Employee’s employment at any time, but any termination by the Board of Directors other than termination for Just Cause, shall not prejudice the Employee’s right to compensation or other benefits under the Agreement. The Employee shall have no right to receive compensation or other benefits for any period after termination for Just Cause. Termination for “Just Cause” shall include termination because of the Employee’s personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order, or material breach of any provision of the Agreement.

(c) Except as provided pursuant to Section 12 herein, in the event Employee’s employment under this Agreement is terminated by the Board of Directors without Just Cause, The Killbuck Savings Bank Company shall be obligated to continue to pay the Employee the salary provided pursuant to Section 2 herein, up to the date of termination of the Term (including any renewal term) of this Agreement and the cost of Employee obtaining all health, life, disability, and other benefits which the Employee would be eligible to participate in through such date based upon the benefit levels substantially equal to those being provided Employee at the date of termination of employment. Notwithstanding the foregoing, in no event except as provided pursuant to Section 12 herein shall the Employee receive payment of his salary in accordance with Section 2 herein and the cost of applicable benefits for a period of more than twelve months from the date of termination of employment without Just Cause. To receive compensation under this section, employee agrees not to be employed at any financial institution, which maintains offices within Holmes County while receiving such compensation. Such employment will result in employee forfeiting any remaining compensation as described in this section.

(d) If the Employee is removed and/or permanently prohibited from participating in the conduct of The Killbuck Savings Bank Company’s affairs by an order issued under Section 8 (e) (4) or 8 (g) (1) of the Federal Deposit Insurance Act (“FDIA”) (12 U.S.C. 1818 (e) (4) and (g) (1)), all obligations of The Killbuck Savings Bank Company under this Agreement shall terminate, as of the effective date of the order, but the vested rights of the parties shall not be affected.

(e) If The Killbuck Savings Bank Company is in default (as defined in Section 3 (x) (1) of FDIA) all obligations under this Agreement shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the contracting parties.

(f) All obligations under this Agreement shall be terminated, except as to the extent determined that continuation of this Agreement is necessary for the continued operation of The Killbuck Savings Bank Company (i) by the Superintendent of the Division of Financial Institutions, or his designee, at the time that the Federal Deposit Insurance Corporation (“FDIC”) or the Resolution Trust Corporation enters into an agreement to provide assistance to or on behalf of The Killbuck Savings Bank Company under the authority contained in Section 13 (c) of FDIA; or (ii) by the Superintendent of the Division of Financial Institutions, or his designee, at the time that the Superintendent of the Division of Financial Institutions, or his designee, approves a supervisory merger to resolve problems related to operation of The Killbuck Savings Bank Company or when The Killbuck Savings Bank Company is determined by the Superintendent of the Division of Financial Institutions to be in an unsafe or unsound condition. Any rights of the parties that have already vested, however, shall not be affected by such action.

(g) The voluntary termination by the Employee during the term of this Agreement with the delivery of no less than 60 days written notice to the Board of Directors, other than pursuant to Section 12 (b) in which case the Employee shall be entitled to receive only the compensation, vested rights, and all employee benefits up to the date of such termination.

(h) Notwithstanding anything herein to the contrary, any payments made to the Employee pursuant to the Agreement or otherwise, shall be subject to and conditioned upon compliance with 12 USC Sec. 1828 (k) and any regulations promulgated thereunder.

10. Suspension of Employment. If the Employee is suspended and/or temporarily prohibited from participating in the conduct of The Killbuck Savings Bank Company’s affairs by a notice served under Section 8 (e) (3) or (g) (1) of the FDIA (12 U.S.C. 1818 (e) (3) and (g) (1)), The Killbuck Savings Bank Company’s obligations under the Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, The Killbuck Savings Bank Company may in its discretion (i) pay the Employee all or part of the compensation withheld while its contract obligations were suspended and (ii) reinstate any of its obligations which were suspended.

11. Disability. If the Employee shall become disabled or incapacitated to the extent that he is unable to perform his duties hereunder, by reason of medically determinable physical or mental impairment, as determined by a doctor engaged by the Board of Directors, Employee shall nevertheless continue to receive the compensation and benefits provided under the terms of this Agreement in accordance with The Killbuck Savings Bank Company’s disability policy, as in effect on the date he becomes disabled. Such benefits noted herein shall be reduced by any benefits otherwise provided to the Employee during such period under the provisions of disability insurance coverage in effect for The Killbuck Savings Bank Company’s employees. Thereafter, Employee shall be eligible to receive benefits provided by The Killbuck Savings Bank Company under the provisions of disability insurance coverage in effect for The Killbuck Savings Bank Company’s employees. Upon returning to active full-time employment, the Employee’s full compensation as set forth in this Agreement shall be reinstated as of the date of commencement of such activities. In the event that the Employee returns to active employment on other than a full-time basis, then his compensation (as set forth in Section 2 of this Agreement) shall be reduced in proportion to the time spent in said employment, or as shall otherwise be agreed to by the parties at the discretion of the Board of Directors.

12. Change in Control.

(a) Notwithstanding any provision herein to the contrary, in the event of the involuntary termination of Employee’s employment during the Term of this Agreement following any change in control of The Killbuck Savings Bank Company, absent Just Cause, Employee shall be paid an amount equal to the product of 2.99 times the Employee’s “base amount” as defined in Section 280G (b) (3) of the Internal Revenue Code of 1986, as amended (the “Code”) and regulations promulgated thereunder. Said sum shall be paid, at the option of employee, either in one (1) lump sum within thirty (30) days of such termination discounted to the present value of such payment using as the discount rate the “prime rate” as published in the Wall Street Journal Eastern Edition as of the date of such payment minus 100 basis points, or in periodic payments over the next 36 months or the remaining term of this Agreement whichever is less, as if Employee’s employment had not been terminated, and such payments shall be in lieu of any other future payments which the Employee would be otherwise entitle to receive under Section 9 of this Agreement. Notwithstanding the forgoing, all sums payable hereunder shall be reduced in such manner and to such extent so that no such payments made hereunder when aggregated with all other payments to be made to the Employee by The Killbuck Savings Bank Company shall be deemed an “excess parachute payment” in accordance with Section 280G of the Code and be subject to the excise tax provided at Section 4999(a) of the Code. The term “control” shall refer to the ownership, holding or power to vote more than 25% of the Holding Company’s voting stock, the control of the election of a majority of The Killbuck Savings Bank Company’s directors, or the exercise of a controlling influence over the management or policies of The Killbuck Savings Bank Company by any person or by persons acting as a group within the meaning of Section 13(d) of the Securities Exchange Act of 1934. The term “person” means an individual other than the Employee, or a corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization or any other form of entity not specifically listed herein.

(b) Notwithstanding any other provision of this Agreement to the contrary, Employee may voluntarily terminate his employment during the Term of this Agreement following a change in control of The Killbuck Savings Bank Company, and Employee shall thereupon be entitled to receive the payment described in Section 12(a) of this Agreement, upon the occurrence, or within one hundred eighty (180) days thereafter, of any of the following events, which have not been consented to in advance by the Employee in writing: (i) if Employee would be required to move his personal residence or perform his principal executive functions more than thirty-five (35) miles from the Employee’s primary office as of the signing of this Agreement; (ii) if in the organizational structure of The Killbuck Savings Bank Company, Employee would be required to report to a person or persons other than the Board of The Killbuck Savings Bank Company; (iii) if The Killbuck Savings Bank Company should fail to maintain Employee’s base compensation in effect as of the date of the Change in Control and the existing employee benefits plans, including material fringe benefit, stock option and retirement plans, except to the extent that such reduction in benefit programs is part of an overall adjustment in benefits for all employees of The Killbuck Savings Bank Company and does not disproportionately adversely impact the Employee; (iv) if Employee would be assigned duties and responsibilities other than those normally associated with his position as referenced at Section 1, herein; (v) if Employee would not be elected or re-elected to the Board of Directors of The Killbuck Savings Bank Company or (vi) if Employee’s responsibilities or authority have in any way been diminished or reduced.

13. Successors and Assigns.

(a) This Agreement shall inure to the benefit of and be binding upon any corporate or other successor of The Killbuck Savings Bank Company which shall acquire, directly or indirectly, by merger, consolidation, purchase or otherwise, all or substantially all of the assets or stock of The Killbuck Savings Bank Company.

(b) Since The Killbuck Savings Bank Company is contracting for the unique and personal skills of the Employee, the Employee shall be precluded from assigning or delegating his rights or duties hereunder without first obtaining the written consent of The Killbuck Savings Bank Company.

14. Amendments. No amendments or additions to this Agreement shall be binding upon the parties hereto unless made in writing and signed by both parties, except as herein otherwise specifically provided.

15. Applicable Law. This Agreement shall be governed by all respects whether as to validity, construction, capacity, performance or otherwise, by the laws of the State of Ohio, except to the extent that Federal law shall be deemed to apply.

16. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.

17. Arbitration. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration in accordance with the rules then in effect of the district office of the American Arbitration Association (“AAA”) nearest to the home office of The Killbuck Savings Bank Company, and judgment upon the award rendered may be entered in any court having jurisdiction thereof, except to the extent that the parties may otherwise reach a mutual settlement of such issue. The Killbuck Savings Bank Company shall reimburse Employee for all reasonable costs and expenses, including reasonable attorneys’ fees, arising from such dispute, proceedings or actions, following the delivery of the decision of the arbitrator finding in favor of the Employee. Further, the settlement of the dispute to be approved by the Board of Directors of The Killbuck Savings Bank Company may include a provision for the reimbursement by The Killbuck Savings Bank Company to the Employee for all reasonable costs and expenses, including reasonable attorneys’ fees, arising from such dispute, proceedings or actions, or the Board of Directors of The Killbuck Savings Bank Company may authorize such reimbursement of such reasonable costs and expenses by separate action upon a written action and determination of the Board of Directors following settlement of the dispute.

18. Entire Agreement. This Agreement together with any understanding or modifications thereof as agreed to in writing by the parties, shall constitute the entire Agreement between the parties hereto subject to the Laws of the State of Ohio.

IN WITNESS WHEREOF, the parties have executed this Agreement on the day and first hereinabove written.

Signed in presence of	THE KILLBUCK SAVINGS BANK COMPANY
/s/ Max A. Miller	By:	1.	/s/ Richard L. Fowler
Witness as to 1			Richard L. Fowler, Chairman Board of Directors
/s/ John W. Baker
Witness as to 1
	EMPLOYEE
/s/ John W. Baker	By:	2.	/s/ Luther E. Proper
Witness as to 2			Luther E. Proper, President
/s/ Kenneth E. Taylor
Witness as to 2

EX-10.2

EXHIBIT 10.2

EMPLOYMENT AGREEMENT

THIS AGREEMENT entered into this 26^nd day of April, 2004, (“Effective Date”), by and between THE KILLBUCK SAVINGS BANK COMPANY and CRAIG A. LAWHEAD (the “Employee”).

WHEREAS, the Employee has heretofore been employed by The Killbuck Savings Bank Company as Exec. Vice President and is experienced in all phases of the business of The Killbuck Savings Bank Company; and

WHEREAS, the parties desire by this agreement to set forth the continuing employment relationship of The Killbuck Savings Bank Company and the Employee.

NOW, THEREFORE, it is AGREED as follows:

1. Employment. The Employee is employed in the capacity as the Exec. Vice President of The Killbuck Savings Bank Company. The Employee shall render such administrative and management services to The Killbuck Savings Bank Company as are currently rendered and as are customarily performed by persons situated in a similar executive capacity. The Employee shall promote the business of The Killbuck Savings Bank Company. The Employee’s other duties shall be such as the Board of Directors for The Killbuck Savings Bank Company may from time to time reasonably direct, including normal duties as an officer of The Killbuck Savings Bank Company.

2. Base Compensation. The Killbuck Savings Bank Company agrees to pay the Employee during the Term of this Agreement (as hereinafter defined at Section 5) a salary at the rate of at least $105,500.00 per annum, payable in cash not less frequently than monthly; provided, that the rate of such salary shall be reviewed by the Board of Directors not less often than annually, and Employee shall be entitled to receive annually an adjustment at such percentage or in such an amount as the Board of Directors in its sole discretion may decide at such time.

3. Discretionary Bonus. The Employee shall be entitled to participate in an equitable manner with all other senior management employees of The Killbuck Savings Bank Company in discretionary bonuses that may be authorized and declared by the Board of Directors to its senior management employees from time to time. No other compensation provided for in this Agreement shall be deemed a substitute for the Employee’s right to participate in such discretionary bonuses when and as declared by the Board of Directors.

4. (a) Participation in Retirement and Medical Plans. The Employee shall be entitled to participate in any plan of The Killbuck Savings Bank Company relating to pension, profit-sharing, or other retirement benefits and medical coverage or reimbursement plans that The Killbuck Savings Bank Company may adopt for the benefit of its employees. Additionally, Employee’s dependent family shall be eligible to participate in medical and dental insurance plans sponsored by The Killbuck Savings Bank Company with the cost of such premiums paid by The Killbuck Savings Bank Company.

(b) Employee Benefits; Expenses. The Employee shall be eligible to participate in any fringe benefits which may be or may become applicable to The Killbuck Savings Bank Company’s senior management employees, including by example, participation in any stock option or incentive plans adopted by the Board of Directors of The Killbuck Savings Bank Company and any other benefits which are commensurate with the responsibilities and functions to be performed by the Employee under this Agreement. The Killbuck Savings Bank Company shall reimburse Employee for all reasonable out-of-pocket expenses which Employee shall incur in connection with his service for The Killbuck Savings Bank Company.

5. Term. The term of employment of Employee under this Agreement shall be for the period commencing on the Effective Date and ending one year thereafter. Additionally, on, or before, each annual anniversary date from the Effective Date, the term of employment under this Agreement shall be extended for up to an additional one year period beyond the then effective expiration date upon a determination and resolution of the Board of Directors that the performance of the Employee has met the requirements and standards of the Board, and that the Terms of such Agreement shall be extended. If at any time during the original term of this Agreement, or any extension thereof, discussions or negotiations take place which, if concluded by agreement, would result in a change in control as defined in paragraph 12, the determination and resolution referred to above shall not be required, and this Agreement shall be deemed extended for a period of one (1) year beyond the then effective expiration date. Such extension shall occur whether or not such discussions or negotiations actually resulted in an agreement.

6. Loyalty; Noncompetition.

(a) The Employee shall devote his full time and attention to the performance of his employment under this Agreement. During the term of Employee’s employment under this Agreement, the Employee shall not engage in any business or activity contrary to the business affairs or interest of The Killbuck Savings Bank Company.

(b) Nothing contained in this Section 6 shall be deemed to prevent or limit the right of Employee to invest in the capital stock or other securities of any business dissimilar from that of The Killbuck Savings Bank Company exceeding 4.9% of said Company.

7. Standards. The Employee shall perform his duties under this Agreement in accordance with such reasonable standards expected of employees with comparable positions in comparable organizations and as may be established from time to time by the Board of Directors.

8. Vacation and Sick Leave. At such reasonable times as the Board of Directors shall in its discretion permit, the Employee shall be entitled, without loss of pay, to absent himself voluntarily from the performance of his employment under this Agreement, with all such voluntary absences to count as vacation time; provided that:

(a) The Employee shall be entitled to annual vacation leave in accordance with the policies as are periodically established by the Board of Directors for senior management employees of The Killbuck Savings Bank Company.

(b) Employee shall not be entitled to accumulate unused vacation from one fiscal year to the next, except to the extent authorized by the Board of Directors for senior management employees of The Killbuck Savings Bank Company.

(c) In addition to the aforesaid paid vacations, the Employee shall be entitled without loss of pay to absent himself voluntarily from the performance of his employment with The Killbuck Savings Bank Company for such additional periods of time and for such valid and legitimate reasons as the Board of Directors in its discretion may determine. Further, the Board of Directors shall be entitled to grant to the Employee a leave or leaves of absence with or without pay at such time or times and upon such terms and conditions as the Board of Directors in its discretion may determine.

(d) In addition, the Employee shall be entitled to an annual sick leave benefit as established by the Board of Directors for senior management employees of The Killbuck Savings Bank Company. In the event that any sick leave benefit shall not have been used during any year, such leave shall accrue to subsequent years to the extent authorized by the Board of Directors for employees of The Killbuck Savings Bank Company.

9. Termination and Termination Pay.

The Employee’s employment under this Agreement shall be terminated upon any of the following occurrences:

(a) The death of the Employee during the term of this Agreement, in which event the Employee’s estate shall be entitled to receive the compensation due the Employee through the last day of the third calendar month following the month in which Employee’s death shall have occurred.

(b) The Board of Directors may terminate the Employee’s employment at any time, but any termination by the Board of Directors other than termination for Just Cause, shall not prejudice the Employee’s right to compensation or other benefits under the Agreement. The Employee shall have no right to receive compensation or other benefits for any period after termination for Just Cause. Termination for “Just Cause” shall include termination because of the Employee’s personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order, or material breach of any provision of the Agreement.

(c) Except as provided pursuant to Section 12 herein, in the event Employee’s employment under this Agreement is terminated by the Board of Directors without Just Cause, The Killbuck Savings Bank Company shall be obligated to continue to pay the Employee the salary provided pursuant to Section 2 herein, up to the date of termination of the Term (including any renewal term) of this Agreement and the cost of Employee obtaining all health, life, disability, and other benefits which the Employee would be eligible to participate in through such date based upon the benefit levels substantially equal to those being provided Employee at the date of termination of employment. Notwithstanding the foregoing, in no event except as provided pursuant to Section 12 herein shall the Employee receive payment of his salary in accordance with Section 2 herein and the cost of applicable benefits for a period of more than twelve months from the date of termination of employment without Just Cause. To receive compensation under this section, employee agrees not to be employed at any financial institution, which maintains offices within Holmes County while receiving such compensation. Such employment will result in employee forfeiting any remaining compensation as described in this section.

(d) If the Employee is removed and/or permanently prohibited from participating in the conduct of The Killbuck Savings Bank Company’s affairs by an order issued under Section 8 (e) (4) or 8 (g) (1) of the Federal Deposit Insurance Act (“FDIA”) (12 U.S.C. 1818 (e) (4) and (g) (1)), all obligations of The Killbuck Savings Bank Company under this Agreement shall terminate, as of the effective date of the order, but the vested rights of the parties shall not be affected.

(e) If The Killbuck Savings Bank Company is in default (as defined in Section 3 (x) (1) of FDIA) all obligations under this Agreement shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the contracting parties.

(f) All obligations under this Agreement shall be terminated, except as to the extent determined that continuation of this Agreement is necessary for the continued operation of The Killbuck Savings Bank Company (i) by the Superintendent of the Division of Financial Institutions, or his designee, at the time that the Federal Deposit Insurance Corporation (“FDIC”) or the Resolution Trust Corporation enters into an agreement to provide assistance to or on behalf of The Killbuck Savings Bank Company under the authority contained in Section 13 (c) of FDIA; or (ii) by the Superintendent of the Division of Financial Institutions, or his designee, at the time that the Superintendent of the Division of Financial Institutions, or his designee, approves a supervisory merger to resolve problems related to operation of The Killbuck Savings Bank Company or when The Killbuck Savings Bank Company is determined by the Superintendent of the Division of Financial Institutions to be in an unsafe or unsound condition. Any rights of the parties that have already vested, however, shall not be affected by such action.

(g) The voluntary termination by the Employee during the term of this Agreement with the delivery of no less than 60 days written notice to the Board of Directors, other than pursuant to Section 12 (b) in which case the Employee shall be entitled to receive only the compensation, vested rights, and all employee benefits up to the date of such termination.

(h) Notwithstanding anything herein to the contrary, any payments made to the Employee pursuant to the Agreement or otherwise, shall be subject to and conditioned upon compliance with 12 USC Sec. 1828 (k) and any regulations promulgated thereunder.

10. Suspension of Employment. If the Employee is suspended and/or temporarily prohibited from participating in the conduct of The Killbuck Savings Bank Company’s affairs by a notice served under Section 8 (e) (3) or (g) (1) of the FDIA (12 U.S.C. 1818 (e) (3) and (g) (1)), The Killbuck Savings Bank Company’s obligations under the Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, The Killbuck Savings Bank Company may in its discretion (i) pay the Employee all or part of the compensation withheld while its contract obligations were suspended and (ii) reinstate any of its obligations which were suspended.

11. Disability. If the Employee shall become disabled or incapacitated to the extent that he is unable to perform his duties hereunder, by reason of medically determinable physical or mental impairment, as determined by a doctor engaged by the Board of Directors, Employee shall nevertheless continue to receive the compensation and benefits provided under the terms of this Agreement in accordance with The Killbuck Savings Bank Company’s disability policy, as in effect on the date he becomes disabled. Such benefits noted herein shall be reduced by any benefits otherwise provided to the Employee during such period under the provisions of disability insurance coverage in effect for The Killbuck Savings Bank Company’s employees. Thereafter, Employee shall be eligible to receive benefits provided by The Killbuck Savings Bank Company under the provisions of disability insurance coverage in effect for The Killbuck Savings Bank Company’s employees. Upon returning to active full-time employment, the Employee’s full compensation as set forth in this Agreement shall be reinstated as of the date of commencement of such activities. In the event that the Employee returns to active employment on other than a full-time basis, then his compensation (as set forth in Section 2 of this Agreement) shall be reduced in proportion to the time spent in said employment, or as shall otherwise be agreed to by the parties at the discretion of the Board of Directors.

12. Change in Control.

(a) Notwithstanding any provision herein to the contrary, in the event of the involuntary termination of Employee’s employment during the Term of this Agreement following any change in control of The Killbuck Savings Bank Company, absent Just Cause, Employee shall be paid an amount equal to the product of 2.00 times the Employee’s “base amount” as defined in Section 280G (b) (3) of the Internal Revenue Code of 1986, as amended (the “Code”) and regulations promulgated thereunder. Said sum shall be paid, at the option of employee, either in one (1) lump sum within thirty (30) days of such termination discounted to the present value of such payment using as the discount rate the “prime rate” as published in the Wall Street Journal Eastern Edition as of the date of such payment minus 100 basis points, or in periodic payments over the next 24 months or the remaining term of this Agreement whichever is less, as if Employee’s employment had not been terminated, and such payments shall be in lieu of any other future payments which the Employee would be otherwise entitle to receive under Section 9 of this Agreement. Notwithstanding the forgoing, all sums payable hereunder shall be reduced in such manner and to such extent so that no such payments made hereunder when aggregated with all other payments to be made to the Employee by The Killbuck Savings Bank Company shall be deemed an “excess parachute payment” in accordance with Section 280G of the Code and be subject to the excise tax provided at Section 4999(a) of the Code. The term “control” shall refer to the ownership, holding or power to vote more than 25% of the Holding Company’s voting stock, the control of the election of a majority of The Killbuck Savings Bank Company’s directors, or the exercise of a controlling influence over the management or policies of The Killbuck Savings Bank Company by any person or by persons acting as a group within the meaning of Section 13(d) of the Securities Exchange Act of 1934. The term “person” means an individual other than the Employee, or a corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization or any other form of entity not specifically listed herein.

(b) Notwithstanding any other provision of this Agreement to the contrary, Employee may voluntarily terminate his employment during the Term of this Agreement following a change in control of The Killbuck Savings Bank Company, and Employee shall thereupon be entitled to receive the payment described in Section 12(a) of this Agreement, upon the occurrence, or within one hundred eighty (180) days thereafter, of any of the following events, which have not been consented to in advance by the Employee in writing: (i) if Employee would be required to move his personal residence or perform his principal executive functions more than thirty-five (35) miles from the Employee’s primary office as of the signing of this Agreement; (ii) if in the organizational structure of The Killbuck Savings Bank Company, Employee would be required to report to a person or persons other than the Board of The Killbuck Savings Bank Company; (iii) if The Killbuck Savings Bank Company should fail to maintain Employee’s base compensation in effect as of the date of the Change in Control and the existing employee benefits plans, including material fringe benefit, stock option and retirement plans, except to the extent that such reduction in benefit programs is part of an overall adjustment in benefits for all employees of The Killbuck Savings Bank Company and does not disproportionately adversely impact the Employee; (iv) if Employee would be assigned duties and responsibilities other than those normally associated with his position as referenced at Section 1, herein; (v) if Employee would not be elected or re-elected to the Board of Directors of The Killbuck Savings Bank Company or (vi) if Employee’s responsibilities or authority have in any way been diminished or reduced.

13. Successors and Assigns.

(a) This Agreement shall inure to the benefit of and be binding upon any corporate or other successor of The Killbuck Savings Bank Company which shall acquire, directly or indirectly, by merger, consolidation, purchase or otherwise, all or substantially all of the assets or stock of The Killbuck Savings Bank Company.

(b) Since The Killbuck Savings Bank Company is contracting for the unique and personal skills of the Employee, the Employee shall be precluded from assigning or delegating his rights or duties hereunder without first obtaining the written consent of The Killbuck Savings Bank Company.

14. Amendments. No amendments or additions to this Agreement shall be binding upon the parties hereto unless made in writing and signed by both parties, except as herein otherwise specifically provided.

15. Applicable Law. This Agreement shall be governed by all respects whether as to validity, construction, capacity, performance or otherwise, by the laws of the State of Ohio, except to the extent that Federal law shall be deemed to apply.

16. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.

17. Arbitration. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration in accordance with the rules then in effect of the district office of the American Arbitration Association (“AAA”) nearest to the home office of The Killbuck Savings Bank Company, and judgment upon the award rendered may be entered in any court having jurisdiction thereof, except to the extent that the parties may otherwise reach a mutual settlement of such issue. The Killbuck Savings Bank Company shall reimburse Employee for all reasonable costs and expenses, including reasonable attorneys’ fees, arising from such dispute, proceedings or actions, following the delivery of the decision of the arbitrator finding in favor of the Employee. Further, the settlement of the dispute to be approved by the Board of Directors of The Killbuck Savings Bank Company may include a provision for the reimbursement by The Killbuck Savings Bank Company to the Employee for all reasonable costs and expenses, including reasonable attorneys’ fees, arising from such dispute, proceedings or actions, or the Board of Directors of The Killbuck Savings Bank Company may authorize such reimbursement of such reasonable costs and expenses by separate action upon a written action and determination of the Board of Directors following settlement of the dispute.

18. Entire Agreement. This Agreement together with any understanding or modifications thereof as agreed to in writing by the parties, shall constitute the entire Agreement between the parties hereto subject to the Laws of the State of Ohio.

IN WITNESS WHEREOF, the parties have executed this Agreement on the day and first hereinabove written.

Signed in presence of	THE KILLBUCK SAVINGS BANK COMPANY
/s/ Max A. Miller	By:  1.	/s/ Richard L. Fowler
Witness as to 1		Richard L. Fowler, Chairman Board of Directors
/s/ John W. Baker
Witness as to 1
	EMPLOYEE
/s/ Kenneth E. Taylor	By:  2.	/s/ Craig A. Lawhead
Witness as to 2		Craig A. Lawhead
		Exec. Vice President
/s/ John W. Baker
Witness as to 2

EX-10.3

EXHIBIT 10.3

EMPLOYMENT AGREEMENT

THIS AGREEMENT entered into this 26^nd day of April, 2004, (“Effective Date”), by and between THE KILLBUCK SAVINGS BANK COMPANY and DIANE S. KNOWLES (the “Employee”).

WHEREAS, the Employee has heretofore been employed by The Killbuck Savings Bank Company as Chief Financial Officer and is experienced in all phases of the business of The Killbuck Savings Bank Company; and

WHEREAS, the parties desire by this agreement to set forth the continuing employment relationship of The Killbuck Savings Bank Company and the Employee.

NOW, THEREFORE, it is AGREED as follows:

1. Employment. The Employee is employed in the capacity as the Chief Financial Officer of The Killbuck Savings Bank Company. The Employee shall render such administrative and management services to The Killbuck Savings Bank Company as are currently rendered and as are customarily performed by persons situated in a similar executive capacity. The Employee shall promote the business of The Killbuck Savings Bank Company. The Employee’s other duties shall be such as the Board of Directors for The Killbuck Savings Bank Company may from time to time reasonably direct, including normal duties as an officer of The Killbuck Savings Bank Company.

2. Base Compensation. The Killbuck Savings Bank Company agrees to pay the Employee during the Term of this Agreement (as hereinafter defined at Section 5) a salary at the rate of at least $100,000.00 per annum, payable in cash not less frequently than monthly; provided, that the rate of such salary shall be reviewed by the Board of Directors not less often than annually, and Employee shall be entitled to receive annually an adjustment at such percentage or in such an amount as the Board of Directors in its sole discretion may decide at such time.

3. Discretionary Bonus. The Employee shall be entitled to participate in an equitable manner with all other senior management employees of The Killbuck Savings Bank Company in discretionary bonuses that may be authorized and declared by the Board of Directors to its senior management employees from time to time. No other compensation provided for in this Agreement shall be deemed a substitute for the Employee’s right to participate in such discretionary bonuses when and as declared by the Board of Directors.

4. (a) Participation in Retirement and Medical Plans. The Employee shall be entitled to participate in any plan of The Killbuck Savings Bank Company relating to pension, profit-sharing, or other retirement benefits and medical coverage or reimbursement plans that The Killbuck Savings Bank Company may adopt for the benefit of its employees. Additionally, Employee’s dependent family shall be eligible to participate in medical and dental insurance plans sponsored by The Killbuck Savings Bank Company with the cost of such premiums paid by The Killbuck Savings Bank Company.

(b) Employee Benefits; Expenses. The Employee shall be eligible to participate in any fringe benefits which may be or may become applicable to The Killbuck Savings Bank Company’s senior management employees, including by example, participation in any stock option or incentive plans adopted by the Board of Directors of The Killbuck Savings Bank Company and any other benefits which are commensurate with the responsibilities and functions to be performed by the Employee under this Agreement. The Killbuck Savings Bank Company shall reimburse Employee for all reasonable out-of-pocket expenses which Employee shall incur in connection with her service for The Killbuck Savings Bank Company.

5. Term. The term of employment of Employee under this Agreement shall be for the period commencing on the Effective Date and ending one year thereafter. Additionally, on, or before, each annual anniversary date from the Effective Date, the term of employment under this Agreement shall be extended for up to an additional one year period beyond the then effective expiration date upon a determination and resolution of the Board of Directors that the performance of the Employee has met the requirements and standards of the Board, and that the Terms of such Agreement shall be extended. If at any time during the original term of this Agreement, or any extension thereof, discussions or negotiations take place which, if concluded by agreement, would result in a change in control as defined in paragraph 12, the determination and resolution referred to above shall not be required, and this Agreement shall be deemed extended for a period of one (1) year beyond the then effective expiration date. Such extension shall occur whether or not such discussions or negotiations actually resulted in an agreement.

6. Loyalty; Noncompetition.

(a) The Employee shall devote her full time and attention to the performance of her employment under this Agreement. During the term of Employee’s employment under this Agreement, the Employee shall not engage in any business or activity contrary to the business affairs or interest of The Killbuck Savings Bank Company.

(b) Nothing contained in this Section 6 shall be deemed to prevent or limit the right of Employee to invest in the capital stock or other securities of any business dissimilar from that of The Killbuck Savings Bank Company exceeding 4.9% of said Company.

7. Standards. The Employee shall perform her duties under this Agreement in accordance with such reasonable standards expected of employees with comparable positions in comparable organizations and as may be established from time to time by the Board of Directors.

8. Vacation and Sick Leave. At such reasonable times as the Board of Directors shall in its discretion permit, the Employee shall be entitled, without loss of pay, to absent herself voluntarily from the performance of her employment under this Agreement, with all such voluntary absences to count as vacation time; provided that:

(a) The Employee shall be entitled to annual vacation leave in accordance with the policies as are periodically established by the Board of Directors for senior management employees of The Killbuck Savings Bank Company.

(b) Employee shall not be entitled to accumulate unused vacation from one fiscal year to the next, except to the extent authorized by the Board of Directors for senior management employees of The Killbuck Savings Bank Company.

(c) In addition to the aforesaid paid vacations, the Employee shall be entitled without loss of pay to absent herself voluntarily from the performance of her employment with The Killbuck Savings Bank Company for such additional periods of time and for such valid and legitimate reasons as the Board of Directors in its discretion may determine. Further, the Board of Directors shall be entitled to grant to the Employee a leave or leaves of absence with or without pay at such time or times and upon such terms and conditions as the Board of Directors in its discretion may determine.

(d) In addition, the Employee shall be entitled to an annual sick leave benefit as established by the Board of Directors for senior management employees of The Killbuck Savings Bank Company. In the event that any sick leave benefit shall not have been used during any year, such leave shall accrue to subsequent years to the extent authorized by the Board of Directors for employees of The Killbuck Savings Bank Company.

9. Termination and Termination Pay.

The Employee’s employment under this Agreement shall be terminated upon any of the following occurrences:

(a) The death of the Employee during the term of this Agreement, in which event the Employee’s estate shall be entitled to receive the compensation due the Employee through the last day of the third calendar month following the month in which Employee’s death shall have occurred.

(b) The Board of Directors may terminate the Employee’s employment at any time, but any termination by the Board of Directors other than termination for Just Cause, shall not prejudice the Employee’s right to compensation or other benefits under the Agreement. The Employee shall have no right to receive compensation or other benefits for any period after termination for Just Cause. Termination for “Just Cause” shall include termination because of the Employee’s personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order, or material breach of any provision of the Agreement.

(c) Except as provided pursuant to Section 12 herein, in the event Employee’s employment under this Agreement is terminated by the Board of Directors without Just Cause, The Killbuck Savings Bank Company shall be obligated to continue to pay the Employee the salary provided pursuant to Section 2 herein, up to the date of termination of the Term (including any renewal term) of this Agreement and the cost of Employee obtaining all health, life, disability, and other benefits which the Employee would be eligible to participate in through such date based upon the benefit levels substantially equal to those being provided Employee at the date of termination of employment. Notwithstanding the foregoing, in no event except as provided pursuant to Section 12 herein shall the Employee receive payment of her salary in accordance with Section 2 herein and the cost of applicable benefits for a period of more than twelve months from the date of termination of employment without Just Cause. To receive compensation under this section, employee agrees not to be employed at any financial institution, which maintains offices within Holmes County while receiving such compensation. Such employment will result in employee forfeiting any remaining compensation as described in this section.

(d) If the Employee is removed and/or permanently prohibited from participating in the conduct of The Killbuck Savings Bank Company’s affairs by an order issued under Section 8 (e) (4) or 8 (g) (1) of the Federal Deposit Insurance Act (“FDIA”) (12 U.S.C. 1818 (e) (4) and (g) (1)), all obligations of The Killbuck Savings Bank Company under this Agreement shall terminate, as of the effective date of the order, but the vested rights of the parties shall not be affected.

(e) If The Killbuck Savings Bank Company is in default (as defined in Section 3 (x) (1) of FDIA) all obligations under this Agreement shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the contracting parties.

(f) All obligations under this Agreement shall be terminated, except as to the extent determined that continuation of this Agreement is necessary for the continued operation of The Killbuck Savings Bank Company (i) by the Superintendent of the Division of Financial Institutions, or his designee, at the time that the Federal Deposit Insurance Corporation (“FDIC”) or the Resolution Trust Corporation enters into an agreement to provide assistance to or on behalf of The Killbuck Savings Bank Company under the authority contained in Section 13 (c) of FDIA; or (ii) by the Superintendent of the Division of Financial Institutions, or his designee, at the time that the Superintendent of the Division of Financial Institutions, or his designee, approves a supervisory merger to resolve problems related to operation of The Killbuck Savings Bank Company or when The Killbuck Savings Bank Company is determined by the Superintendent of the Division of Financial Institutions to be in an unsafe or unsound condition. Any rights of the parties that have already vested, however, shall not be affected by such action.

(g) The voluntary termination by the Employee during the term of this Agreement with the delivery of no less than 60 days written notice to the Board of Directors, other than pursuant to Section 12 (b) in which case the Employee shall be entitled to receive only the compensation, vested rights, and all employee benefits up to the date of such termination.

(h) Notwithstanding anything herein to the contrary, any payments made to the Employee pursuant to the Agreement or otherwise, shall be subject to and conditioned upon compliance with 12 USC Sec. 1828 (k) and any regulations promulgated thereunder.

10. Suspension of Employment. If the Employee is suspended and/or temporarily prohibited from participating in the conduct of The Killbuck Savings Bank Company’s affairs by a notice served under Section 8 (e) (3) or (g) (1) of the FDIA (12 U.S.C. 1818 (e) (3) and (g) (1)), The Killbuck Savings Bank Company’s obligations under the Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, The Killbuck Savings Bank Company may in its discretion (i) pay the Employee all or part of the compensation withheld while its contract obligations were suspended and (ii) reinstate any of its obligations which were suspended.

11. Disability. If the Employee shall become disabled or incapacitated to the extent that she is unable to perform her duties hereunder, by reason of medically determinable physical or mental impairment, as determined by a doctor engaged by the Board of Directors, Employee shall nevertheless continue to receive the compensation and benefits provided under the terms of this Agreement in accordance with The Killbuck Savings Bank Company’s disability policy, as in effect on the date she becomes disabled. Such benefits noted herein shall be reduced by any benefits otherwise provided to the Employee during such period under the provisions of disability insurance coverage in effect for The Killbuck Savings Bank Company’s employees. Thereafter, Employee shall be eligible to receive benefits provided by The Killbuck Savings Bank Company under the provisions of disability insurance coverage in effect for The Killbuck Savings Bank Company’s employees. Upon returning to active full-time employment, the Employee’s full compensation as set forth in this Agreement shall be reinstated as of the date of commencement of such activities. In the event that the Employee returns to active employment on other than a full-time basis, then her compensation (as set forth in Section 2 of this Agreement) shall be reduced in proportion to the time spent in said employment, or as shall otherwise be agreed to by the parties at the discretion of the Board of Directors.

12. Change in Control.

(a) Notwithstanding any provision herein to the contrary, in the event of the involuntary termination of Employee’s employment during the Term of this Agreement following any change in control of The Killbuck Savings Bank Company, absent Just Cause, Employee shall be paid an amount equal to the product of 2.00 times the Employee’s “base amount” as defined in Section 280G (b) (3) of the Internal Revenue Code of 1986, as amended (the “Code”) and regulations promulgated thereunder. Said sum shall be paid, at the option of employee, either in one (1) lump sum within thirty (30) days of such termination discounted to the present value of such payment using as the discount rate the “prime rate” as published in the Wall Street Journal Eastern Edition as of the date of such payment minus 100 basis points, or in periodic payments over the next 24 months or the remaining term of this Agreement whichever is less, as if Employee’s employment had not been terminated, and such payments shall be in lieu of any other future payments which the Employee would be otherwise entitle to receive under Section 9 of this Agreement. Notwithstanding the forgoing, all sums payable hereunder shall be reduced in such manner and to such extent so that no such payments made hereunder when aggregated with all other payments to be made to the Employee by The Killbuck Savings Bank Company shall be deemed an “excess parachute payment” in accordance with Section 280G of the Code and be subject to the excise tax provided at Section 4999(a) of the Code. The term “control” shall refer to the ownership, holding or power to vote more than 25% of the Holding Company’s voting stock, the control of the election of a majority of The Killbuck Savings Bank Company’s directors, or the exercise of a controlling influence over the management or policies of The Killbuck Savings Bank Company by any person or by persons acting as a group within the meaning of Section 13(d) of the Securities Exchange Act of 1934. The term “person” means an individual other than the Employee, or a corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization or any other form of entity not specifically listed herein.

(b) Notwithstanding any other provision of this Agreement to the contrary, Employee may voluntarily terminate her employment during the Term of this Agreement following a change in control of The Killbuck Savings Bank Company, and Employee shall thereupon be entitled to receive the payment described in Section 12(a) of this Agreement, upon the occurrence, or within one hundred eighty (180) days thereafter, of any of the following events, which have not been consented to in advance by the Employee in writing: (i) if Employee would be required to move her personal residence or perform her principal executive functions more than thirty-five (35) miles from the Employee’s primary office as of the signing of this Agreement; (ii) if in the organizational structure of The Killbuck Savings Bank Company, Employee would be required to report to a person or persons other than the Board of The Killbuck Savings Bank Company; (iii) if The Killbuck Savings Bank Company should fail to maintain Employee’s base compensation in effect as of the date of the Change in Control and the existing employee benefits plans, including material fringe benefit, stock option and retirement plans, except to the extent that such reduction in benefit programs is part of an overall adjustment in benefits for all employees of The Killbuck Savings Bank Company and does not disproportionately adversely impact the Employee; (iv) if Employee would be assigned duties and responsibilities other than those normally associated with her position as referenced at Section 1, herein; (v) if Employee would not be elected or re-elected to the Board of Directors of The Killbuck Savings Bank Company or (vi) if Employee’s responsibilities or authority have in any way been diminished or reduced.

13. Successors and Assigns.

(a) This Agreement shall inure to the benefit of and be binding upon any corporate or other successor of The Killbuck Savings Bank Company which shall acquire, directly or indirectly, by merger, consolidation, purchase or otherwise, all or substantially all of the assets or stock of The Killbuck Savings Bank Company.

(b) Since The Killbuck Savings Bank Company is contracting for the unique and personal skills of the Employee, the Employee shall be precluded from assigning or delegating her rights or duties hereunder without first obtaining the written consent of The Killbuck Savings Bank Company.

14. Amendments. No amendments or additions to this Agreement shall be binding upon the parties hereto unless made in writing and signed by both parties, except as herein otherwise specifically provided.

15. Applicable Law. This Agreement shall be governed by all respects whether as to validity, construction, capacity, performance or otherwise, by the laws of the State of Ohio, except to the extent that Federal law shall be deemed to apply.

16. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.

17. Arbitration. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration in accordance with the rules then in effect of the district office of the American Arbitration Association (“AAA”) nearest to the home office of The Killbuck Savings Bank Company, and judgment upon the award rendered may be entered in any court having jurisdiction thereof, except to the extent that the parties may otherwise reach a mutual settlement of such issue. The Killbuck Savings Bank Company shall reimburse Employee for all reasonable costs and expenses, including reasonable attorneys’ fees, arising from such dispute, proceedings or actions, following the delivery of the decision of the arbitrator finding in favor of the Employee. Further, the settlement of the dispute to be approved by the Board of Directors of The Killbuck Savings Bank Company may include a provision for the reimbursement by The Killbuck Savings Bank Company to the Employee for all reasonable costs and expenses, including reasonable attorneys’ fees, arising from such dispute, proceedings or actions, or the Board of Directors of The Killbuck Savings Bank Company may authorize such reimbursement of such reasonable costs and expenses by separate action upon a written action and determination of the Board of Directors following settlement of the dispute.

18. Entire Agreement. This Agreement together with any understanding or modifications thereof as agreed to in writing by the parties, shall constitute the entire Agreement between the parties hereto subject to the Laws of the State of Ohio.

IN WITNESS WHEREOF, the parties have executed this Agreement on the day and first hereinabove written.

Signed in presence of	THE KILLBUCK SAVINGS BANK COMPANY
/s/ Max A. Miller	By:  1.	/s/ Richard L. Fowler
Witness as to 1		Richard L. Fowler, Chairman Board of Directors
/s/ John W. Baker
Witness as to 1
	EMPLOYEE
/s/ John W. Baker	By:  2	/s/ Diane S. Knowles
Witness as to 2		Diane S. Knowles,
		Chief Financial Officer
/s/ Kenneth E. Taylor
Witness as to 2

EX-12

EXHIBIT 12

Statement Regarding Computation of Ratios

The following formulas were used to calculate the ratios in the Selected Financial Data for the years ended December 31, 2004, 2003, 2002, 2001 and 2000, included in this report as Exhibit 13.

(Calculation)

Net Income/Weighted average shares of common stock outstanding for the period = Earnings Per Share.

	December 31,
	2004		2003		2002		2001		2000
Net income	$	3,419,408	$	3,208,820	$	3,217,544	$	2,944,565	$	3,282,921
Weighted Average Shares Outstanding		662,415		676,380		687,216		696,674		704,498
Per Share Amount	$	5.16	$	4.75	$	4.68	$	4.23	$	4.66
Cash dividends/Weighted Average Shares Outstanding = Cash dividends declared Per share
	December 31,
	2004		2003		2002		2001		2000
Cash dividends	$	1,291,144	$	1,240,872	$	1,200,309	$	1,113,627	$	1,020,487
Weighted Average shares outstanding		662,415		676,380		687,216		696,674		704,498
Per Share Amount	$	1.95	$	1.85	$	1.75	$	1.60	$	1.45
Shareholders’ Equity/Shares Outstanding at period end = Book Value per share
	December 31,
	2004		2003		2002		2001		2000
Shareholders’ Equity	$	35,358,934	$	34,061,554	$	34,203,659	$	33,037,452	$	31,741,165
Shares outstanding		657,486		664,788		683,660		693,287		702,548
Per Share Amount	$	53.78	$	51.24	$	50.03	$	47.65	$	45.18

Net Income/Average Assets = Return on Average Assets

	(In Thousands) December 31,
	2004			2003			2002			2001			2000
Net Income	$	3,419		$	3,209		$	3,218		$	2,945		$	3,283
Average Assets	$	288,574		$	284,725		$	280,598		$	268,265		$	250,577
Return on Average Assets		1.18	%		1.13	%		1.15	%		1.10	%		1.31	%
Net Income/Average Shareholders’ equity = Return on Average Equity
	(In Thousands) December 31,
	2004			2003			2002			2001			2000
Net Income	$	3,419		$	3,209		$	3,218		$	2,945		$	3,283
Average
Shareholders’ Equity	$	33,333		$	32,838		$	31,868		$	31,534		$	29,893
Return on Average Equity		10.26	%		9.77	%		10.10	%		9.34	%		10.98	%
Cash dividends per share/ Net income per share = Dividends Payout Ratio
	December 31,
	2004			2003			2002			2001			2000
Cash dividends per share	$	1.95		$	1.85		$	1.75		$	1.60		$	1.45
Net income per share	$	5.16		$	4.75		$	4.68		$	4.23		$	4.66
Dividend Payout Ratio		37.79	%		38.95	%		37.31	%		37.83	%		31.12	%

Average Equity/Average Assets = Average Equity To Average Assets

	(In thousands) December 31,
	2004			2003			2002			2001			2000
Average Shareholders’ Equity	$	33,333		$	32,838		$	31,868		$	31,534		$	29,893
Average Assets	$	288,574		$	284,725		$	280,598		$	268,265		$	250,577
Average Equity to Average Assets		11.55	%		11.53	%		11.36	%		11.75	%		11.93	%
Loans/Total deposits = Loan to Deposit Ratio
	(In thousands) December 31,
	2004			2003			2002			2001			2000
Total loans	$	217,173		$	201,697		$	175,157		$	152,158		$	151,800
Total deposits	$	247,349		$	241,724		$	239,039		$	237,971		$	219,168
Loan to Deposit Ratio		87.8	%		83.44	%		73.28	%		63.94	%		69.26	%
Allowance for Loan Loss/Total Loan = Allowance To Total Loan Ratio
	(In thousands) December 31,
	2004			2003			2002			2001			2000
Allowance	$	2,646		$	2,702		$	2,326		$	2,261		$	2,359
Total loans	$	217,173		$	201,697		$	175,157		$	152,158		$	151,800
Allowance to total Loan ratio		1.22	%		1.34	%		1.33	%		1.49	%		1.55	%

EX-13

EXHIBIT 13

Killbuck Bancshares, Inc.

Corporate Profile

Killbuck Bancshares, Inc. (the “Company”) was incorporated under the laws of the State of Ohio on November 29, 1991 at the direction of management of the Bank, for the purpose of becoming a bank holding company by acquiring all of the outstanding shares of The Killbuck Savings Bank Company. In November 1992, the Company became the sole shareholder of the Bank. The Bank carries on business under the name “The Killbuck Savings Bank Company.” The principal office of the Company is located at 165 N. Main Street, Killbuck, Ohio.

The Killbuck Savings Bank Company was established under the banking laws of the State of Ohio in September of 1900. The Bank is headquartered in Killbuck, Ohio, which is located in the northeast portion of Ohio, in Holmes County. The Bank is insured by the Federal Deposit Insurance Corporation, and is regulated by the Ohio Division of Financial Institutions and the Board of Governors of the Federal Reserve System.

The Bank provides customary retail and commercial banking services to its customers, including checking and savings accounts, time deposits, interest-bearing accounts, internet banking, bill payment, safe deposit facilities, real estate mortgage loans and consumer loans. The Bank also makes secured and unsecured commercial loans.

Stock Market Information

There is no established public trading market for our common stock and our shares are not listed on any exchange. Sale price information is based on information reported to us by individual buyers and sellers of our stock. The following table summarizes the high and low prices and dividend information for 2004 and 2003. Cash dividends are paid on a semi-annual basis.

Quarter Ended		High		Low		Cash Dividends Paid
2004	March 31	$	95.00	$	95.00		N/A
	June 30		95.00		95.00	$	.95
	September 30		96.69		95.00		N/A
	December 31		97.38		96.38	$	1.00
2003	March 31	$	95.00	$	93.00		N/A
	June 30		95.00		95.00	$	.90
	September 30		95.00		95.00		N/A
	December 31		95.00		91.25	$	.95

At December 31, 2004 the Company had approximately 1,026 shareholders of record.

Selected Financial Data

The following table sets forth general information and ratios of the Company at the dates indicated (in thousands except per share data and shares).

	Year Ended December 31,
	2004			2003			2002			2001			2000
For The Year:
Total interest income	$	14,033		$	14,283		$	16,057		$	19,025		$	19,265
Total interest expense		3,264			4,017			5,926			9,237			9,367
Net interest income		10,769			10,266			10,131			9,788			9,898
Provision for loan losses		225			390			210			263			540
Net interest income after provision for loan losses		10,544			9,876			9,921			9,525			9,358
Total other income		1,015			1,120			873			730			724
Total other expense		7,158			7,045			6,642			6,407			5,720
Income before income taxes		4,401			3,951			4,152			3,848			4,362
Income tax expense		982			742			934			903			1,079
Net income	$	3,419		$	3,209		$	3,218		$	2,945		$	3,283
Per share data
Net earnings	$	5.16		$	4.75		$	4.68		$	4.23		$	4.66
Dividends	$	1.95		$	1.85		$	1.75		$	1.60		$	1.45
Book value (at period end)	$	53.78		$	51.24		$	50.03		$	47.65		$	45.18
Average no. of shares outstanding		662,130			676,133			686,739			696,017			703,784
Year-end balances:
Total loans	$	217,173		$	201,697		$	175,157		$	152,158		$	151,800
Securities		45,769			58,211			80,626			91,223			82,287
Total assets		293,867			284,139			283,174			281,258			262,000
Deposits		247,349			241,724			239,039			237,971			219,168
Borrowings		10,575			7,810			9,198			9,522			10,514
Shareholders’ equity		35,359			34,062			34,204			33,037			31,741
Significant ratios:
Return on average assets		1.18	%		1.13	%		1.15	%		1.10	%		1.31	%
Return on average equity		10.26			9.77			10.10			9.34			10.98
Dividends per share to net income per share		37.72			38.95			37.31			37.83			31.12
Average equity to average assets		11.55			11.53			11.36			11.75			11.93
Loans to deposits		87.80			83.44			73.28			63.94			69.26
Allowance for loan loss to total loans		1.22			1.34			1.33			1.49			1.55

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

Killbuck Bancshares, Inc. (“Killbuck” or the “Company”) is the parent holding company for the Killbuck Savings Bank Company (the “Bank”). The following discussion and analysis is intended to provide information about the financial condition and results of operation of the Company and should be read in conjunction with the audited Consolidated Financial Statements, footnotes and other discussions appearing elsewhere in this annual report and the Company’s Form 10-K.

Certain information presented in this discussion and analysis and other statements concerning future performance, developments or events, and expectations for growth and market forecasts constitute forward-looking statements which are subject to a number of risks and uncertainties, including interest rate fluctuations, changes in local or national economic conditions, and government and regulatory actions which might cause actual results to differ materially from stated expectations or estimates.

Critical Accounting Policies

The Company’s accounting policies are integral to understanding the results reported. The accounting policies are described in detail in Note 1 of the consolidated financial statements. Our most complex accounting policies require management’s judgment to ascertain the valuation of assets, liabilities, commitments and contingencies. We have established detailed policies and control procedures that are intended to ensure valuation methods are well controlled and applied consistently from period to period. In addition, the policies and procedures are intended to ensure that the process for changing methodologies occurs in an appropriate manner. The following is a brief description of our current accounting policies involving significant management valuation judgments.

Allowance for Loan Losses

Arriving at an appropriate level of allowance for loan losses involves a high degree of judgment. The Company’s allowance for loan losses provides for probable losses based upon evaluations of known and inherent risks in the loan portfolio.

Management uses historical information to assess the adequacy of the allowance for loan losses as well as the prevailing business environment as it is affected by changing economic conditions and various external factors, which may impact the portfolio in ways currently unforeseen. The allowance is increased by provisions for loan losses and by recoveries of loans previously charged-off and reduced by loans charged-off. For a full discussion of the Company’s methodology of assessing the adequacy of the reserve for loan losses, refer to Note 1 of “Notes to Consolidated Financial Statements.”

Goodwill and Other Intangible Assets

As discussed in Note 7 of the consolidated financial statements, the Company must assess goodwill and other intangible assets each year for impairment. This assessment involves estimating cash flows for future periods. If the future cash flows were less than the recorded goodwill and other intangible assets balances, we would be required to take a charge against earnings to write down the assets to the lower value.

Deferred Tax Assets

We use an estimate of future earnings to support our position that the benefit of our deferred tax assets will be realized. If future income should prove non-existent or less than the amount of the deferred tax assets within the tax years to which they may be applied, the asset may not be realized and our net income will be reduced. Our deferred tax assets are described further in Note 14 of the consolidated financial statements.

Overview

The reported results of the Company are dependent on a variety of factors, including the general interest rate environment, competitive conditions in the industry, governmental policies and regulations and conditions in the markets for financial assets. We are not aware of any market or institutional trends, events or uncertainties that are expected to have a material effect on liquidity, capital resources or operations. Net interest income is the largest component of net income, and consists of the difference between income generated on interest-earning assets and interest expense incurred on interest-bearing liabilities. Net interest income is primarily affected by the volume, interest rates and composition of interest-earning assets and interest-bearing liabilities.

The branch facility in Sugarcreek, Ohio opened for business in February 2000. In July 2001, a branch facility in Howard, Ohio (Apple Valley Area) opened for business. These locations have given us a presence in the Sugarcreek and Apple Valley areas and allowed us to develop new business and deposit relationships in these areas. A loan production facility was opened in Millersburg, Ohio in July 2003. This facility has allowed us to concentrate our Millersburg lenders into one location to provide better service, more office space, and new business opportunities with a commercial calling officer. In April of 2004, a branch facility was opened in the German Village grocery store complex in Berlin, Ohio. It provides a greater level of convenience to the Berlin community.

RESULTS OF OPERATIONS

Summary

For 2004, we recorded net income of $3.4 million compared to $3.2 million for 2003 and $3.2 million for 2002.

Other operating income was $1.0 million for 2004 compared to $1.1 million for 2003 and $873,000 for 2002.

Total other operating expenses were $7.2 million in 2004 compared to $7.0 million in 2003 and $6.6 million in 2002.

Earnings per share for 2004 were $5.16 compared to $4.75 for 2003 and $4.68 for 2002.

NET INTEREST INCOME

Our net interest income increased by $503,000 in 2004 from 2003 and increased by $135,000 in 2003 from 2002.

Total interest income decreased by $250,000 or 1.8% for 2004 from 2003. The decrease of $250,000 for 2004 resulted primarily from a decrease of $875,000 in interest income on investment securities. The decrease in investment security interest income resulted primarily from decreases in the average volume in the investment portfolio which led to a decrease of 1 basis point to 4.26%. The increases in loan interest income resulted primarily from increases in the average volume of the loan portfolio. The average loan portfolio increased $25.9 million or 13.8% for 2004. The current yield on the average loan portfolios decreased 42 basis points to 5.46%. The decrease in the current yield was a result of the economic environment, historically low interest rates.

Total interest income decreased by $1,774,000 or 11.04% for 2003 from 2002. The decrease of $1,774,000 for 2003 resulted primarily from a decrease of $475,000 in interest income on loans and $1,148,000 in interest income on investment securities. The decreases in loan interest income resulted primarily from decreases in the current yield on the loan portfolios which decreased 120 basis points to 5.88%. The decrease in investment security interest income resulted primarily from decreases in volume in the investment portfolio which led to a decrease of 59 basis points to 4.28%. The decrease in the current yield was a result of the economic environment, more specifically, falling interest rates.

The yield on earning assets was 5.13%, 5.28%, and 6.03% for 2004, 2003, and 2002 respectively. The decrease in the yield on earning assets is attributable to the general decline in interest rates.

Interest expense for 2004 decreased by $753,000 or 18.74% from 2003 and decreased by $1,909,000 for 2003 from 2002. The decrease was due to a decrease in the cost on interest bearing liabilities, which declined 35 basis points from 1.89% in 2003 to 1.54% in 2004 and declined 89 basis points from 2.78% in 2002 to 1.89% in 2003.

The average volume of time deposits decreased $5.8 million and interest-bearing demand deposits, money market deposits, and savings deposits increased $.7 million, $39,000, and $1.6 million respectively in 2004. The volume decrease in time deposits and increases in other deposit categories are primarily due to the low interest rate environment and the uncertainty of interest rate levels. The funds are continuing to shift into liquid deposits. The average volume of time deposits decreased $6.5 million while interest bearing demand deposits, money market deposits, and savings deposits increased $1.2 million, $1.6 million, and $4.1 million respectively for 2003.

The cost on average interest-bearing liabilities was 1.54% for 2004 and 1.89% for 2003, and 2.78% for 2002. The decrease for 2004 and 2003 is due mainly to a decrease in the cost of time deposits of 37 and 101 basis points.

Due mainly to an increase in the average volume of loans, the net yield on earning assets has increased this year reversing the decreases of prior years. The net yield on average interest-earning assets is 3.94%, 3.80% and 3.80% for 2004, 2003 and 2002 respectively.

The following table sets forth, for the periods indicated, information regarding the total dollar amounts of interest income from average interest-earning assets and the resulting yields, the total dollar amount of interest expense on average interest-bearing liabilities and the resulting rate paid, net interest income, interest rate spread and the net yield on interest-earning assets (dollars in thousands):

Average Balance Sheet and Net Interest Analysis

	For the Year Ended December 31
	2004							2003							2002
	Average Balance			Interest		Yield/ Rate		Average Balance			Interest		Yield/ Rate		Average Balance			Interest		Yield/ Rate
Assets
Interest earning assets:
Loans (1)(2)(3)	$	213,463		$	11,657	5.46	%	$	187,554		$	11,029	5.88	%	$	162,413		$	11,504	7.08	%
Securities - taxable (4)		13,308			517	3.88	%		30,874			1,263	4.09	%		46,440			2,393	5.15	%
Securities – nontaxable		38,685			1,700	4.39	%		41,504			1,827	4.40	%		40,599			1,845	4.54	%
Securities – Equity (4)(5)		1,515			67	4.45	%		1,470			69	4.69	%		1,423			69	4.85	%
Federal funds sold		6,404			92	1.44	%		8,860			95	1.07	%		15,370			246	1.60	%
Total interest - earnings assets		273,375			14,033	5.13	%		270,262			14,283	5.28	%		266,245			16,057	6.03	%
Noninterest-earning assets
Cash and due from other Institutions		9,627							8,508							8,743
Premises and equipment, net		5,013							5,088							5,209
Accrued interest		781							978							1,306
Other assets		2,542							2,401							1,386
Less allowance for loan losses		(2,764	)						(2,512	)						(2,291	)
Total	$	288,574						$	284,725						$	280,598
Liabilities and Shareholders Equity
Interest bearing liabilities:
Interest bearing demand	$	33,610		$	123	0.37	%	$	32,944		$	161	.49	%	$	31,768		$	321	1.01	%
Money market accounts		19,316			171	0.89	%		19,277			198	1.03	%		17,636			330	1.87	%
Savings deposits		42,198			267	0.63	%		40,582			415	1.02	%		36,438			602	1.65	%
Time deposits		106,629			2,427	2.28	%		112,388			2,980	2.65	%		118,851			4,346	3.66	%
Short term borrowings		3,871			8	0.21	%		3,913			5	.13	%		3,831			5	.13	%

Average Balance Sheet and Net Interest Analysis (Continued)

	For the Year Ended December 31
	2004						2003						2002
	Average Balance		Interest		Yield/ Rate		Average Balance		Interest		Yield/ Rate		Average Balance		Interest		Yield/ Rate
Federal Home Loan Bank Advances		6,003		268	4.46	%		3,838		258	6.72	%		4,751		322	6.78	%
Total interest bearing liabilities		211,627		3,264	1.54	%		212,942		4,017	1.89	%		213,275		5,926	2.78	%
Noninterest bearing liabilities:
Demand deposits		41,220						36,327						33,524
Accrued expenses and other liabilities		2,394						2,618						1,931
Shareholder’s equity		33,333						32,838						31,868
Total	$	288,574					$	284,725					$	280,598
Net interest income			$	10,769					$	10,266					$	10,131
Interest rate spread (6)					3.59	%					3.39	%					3.25	%
Net yield on interest earning assets (7)					3.94	%					3.80	%					3.80	%

(1) For purposes of these computations, the daily average loan amounts outstanding are net of deferred loan fees.

(2) Included in loan interest income are loan related fees of $299,952, $406,089, and $414,438 in 2004, 2003, and 2002, respectively.

(3) Nonaccrual loans are included in loan totals and do not have a material impact on the information presented.

(4) Average balance is computed using the carrying value of securities. The average yield has been computed using the historical amortized cost average balance for available for sale securities.

(5) Equity securities are comprised of common stock of the Federal Home Loan Bank, Federal Reserve Bank, and Great Lakes Bankers Bank.

(6) Interest rate spread represents the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities.

(7) Net yield on interest earning assets represents net interest income as a percentage of average interest earning assets.

Rate/Volume Analysis

The table below sets forth certain information regarding changes in interest income and interest expense of the Company for the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (i) changes in volume (changes in average volume multiplied by old rate) and (ii) changes in rates (changes in rate multiplied by old average volume). Changes which are not solely attributable to rate or volume are allocated to changes in rate due to rate sensitivity of interest-earning assets and interest-bearing liabilities (dollars in thousands).

	2004 Compared to 2003									2003 Compared to 2002
	Increase (Decrease) Due To									Increase (Decrease) Due To
	Volume			Rate			Net			Volume			Rate			Net
Interest income
Loans	$	1,524		$	(896	)	$	628		$	1,781		$	(2,256	)	$	(475	)
Securities-taxable		(719	)		(27	)		(746	)		(802	)		(328	)		(1,130	)
Securities-nontaxable		(124	)		(3	)		(127	)		41			(59	)		(18	)
Securities-equities		2			(4	)		(2	)		2			(2	)		—
Federal funds sold		(26	)		23			(3	)		(104	)		(47	)		(151	)
Total interest earning Assets		657			(907	)		(250	)		918			(2,692	)		(1,774	)
Interest expense
Interest bearing demand		3			(41	)		(38	)		12			(172	)		(160	)
Money market accounts		—			(27	)		(27	)		31			(163	)		(132	)
Savings deposits		17			(165	)		(148	)		68			(255	)		(187	)
Time deposits		(153	)		(400	)		(553	)		(236	)		(1,130	)		(1,366	)
Short-term borrowing		—			3			3			—			—			—
Federal Home Loan Bank Advances		146			(136	)		10			(62	)		(2	)		(64	)
Total interest bearing Liabilities		13			(766	)		(753	)		(187	)		(1,722	)		(1,909	)
Net change in interest income	$	644		$	(141	)	$	503		$	1,105		$	(970	)	$	135

Provision for Loan Losses

The provision for loan losses was $225,000 for 2004, $390,000 for 2003, and $210,000 for 2002. We make periodic provisions to the allowance for loan losses to maintain the allowance at an acceptable level commensurate with the credit risks inherent in the loan portfolio. There can be no assurances, however, that additional provisions will not be required in future periods. The allowance for loan losses as a percent of total loans was 1.22%, 1.34% and 1.33% for 2004, 2003 and 2002 respectively.

The allowance for loan losses is Management’s estimate of the amount of probable credit losses in the portfolio. The Company determines the allowance for loan losses based upon an ongoing evaluation. This evaluation is inherently subjective, as it requires material estimates, including the amounts and timing of cash flows expected to be received on impaired loans that may be susceptible to significant change. Increases to the allowance for loan losses are made by charges to the provision for loan losses. Loans deemed uncollectible are charged against the allowance for loan losses. Recoveries of previously charged-off amounts are credited to the allowance for loan losses.

The Company’s allowance for loan losses is the accumulation of various components calculated based upon independent methodologies. All components of the allowance for loan losses represent an estimation performed according to either Financial Accounting Standards No. 5 or No. 114. Management’s estimate of each allowance component is based on certain observable data that Management believes is the most reflective of the underlying loan losses being estimated. Changes in the amount of each component of the allowance for loan losses are directionally consistent with changes in the observable data and corresponding analyses. Some of the components that Management factors in are current economic conditions, loan growth assumptions, and levels of nonperforming loans.

A key element of the methodology for determining the allowance for loan losses is the Company’s credit-risk-evaluation process, which includes credit-risk grading of individual commercial loans. Loans are assigned credit-risk grades based on an internal assessment of conditions that affect a borrower’s ability to meet its contractual obligation under the loan agreement. The assessment process includes reviewing a borrower’s current financial information, historical payment experience, credit documentation, public information, and other information specific to each individual borrower. Certain commercial loans are reviewed on an annual or rotational basis or as Management becomes aware of information affecting a borrower’s ability to fulfill its obligation.

Noninterest Income

Other income, which is comprised principally of fees and charges on customers’ deposit accounts, decreased $104,000 or 9.3% to $1,015,000 in 2004 from $1,119,000 in 2003, and increased $246,000 or 28.2% in 2003 from 2002. Service charges on customer accounts increased $67,000 or 9.1% in 2004 due in part to an increase in ATM usage by non-customers and an increase in Non Sufficient Funds occurrences, $22,000 and $38,000, respectively. The Bank sells fixed rate loans in the secondary market. Due to market conditions, the Bank originated and sold $10.5 million less of these loans in 2004 compared to 2003. Gains for these sales were $63,000 in 2004, $241,000 in 2003 and $129,000 in 2002. Income from the alternative investment service was $25,000 for 2004 and $15,000 for 2003 and $13,000 for 2002.

Noninterest Expense

Other expense increased $113,000 or 1.6% to $7.2 million in 2004 as compared to $7.0 million in 2003 and increased $403,000 or 6.1% for 2003 from $6.6 million in 2002.

Salary and employee benefits for 2004 totaled $4.0 million, an increase of $268,000 or 7.2% from $3.7 million in 2003 and increased $318,000 for 2003 or 9.4% from $3.4 million in 2002. These increases are due to: 1) Normal recurring employee cost increases for annual salary raises and employee benefits, 2) Additional business development staff hired in March 2003 for Knox County, and 3) Due to the retirement of the branch manager, the bank hired new management personnel in June 2004 for the Tuscarawas County Office. Salary for the retiree was expensed through February 2005 for earned but non-accrued benefits. The increase for 2003 was attributable to staff additions and normal recurring employee cost increases for salary and employee benefits.

Occupancy and equipment expense decreased $72,000 in 2004 and increased $88,000 in 2003. In October of 2000, a new computer network was installed. In 2003, the majority of this equipment was fully depreciated, hence the decrease in expense during 2004. For 2003, the increases were attributable to normal and recurring items and the opening of the Loan Annex in Millersburg, Ohio in July 2003.

Other operating expenses for 2004 totaled $2.20 million, an $81,000 or 3.6% decrease from the $2.28 million reported in 2003 and a $4,000 or .18 % decrease for 2003 from the 2002 total of $2.28 million. The credit card processing expenses decreased by $115,000 or 53.5% from $215,000 in 2003 to $100,000 in 2004 due to the sale of the merchant program. The postage, express and freight expenses increased by $9,000 or 6.1% from $147,000 in 2003 to $156,000 in 2004 due to increased branch usage and the German Village Branch, Berlin, Ohio opening in April 2004. The telephone expense increased $24,000 or 18.3% from $131,000 in 2003 to $155,000 in 2004 due to increased bandwidth on the frame relay and the increased taxes and government surcharges and additional usage at the Loan Annex and German Village locations. The data processing expense for 2004 totaled $168,000, an $8,000 or a 5.0% increase from the $160,000 reported 2003 and a $48,000 or 42.9% increase from the 2002 total of $112,000. In 2004, the Check Imaging System was upgraded from a DOS based system to a Windows environment. This format change required a different Hot Site for disaster recovery planning and testing and the transfer of archived information into the new format, $3,200 and 4,500, respectively. In 2003, $35,000 of this increase was due to Security Monitoring and Testing of the computer network which are provisions of the Gramm-Leach-Bliley Act. The initial testing was conducted in 2003 but not completed until 2004. The monitoring is conducted 24 hours a day 7 days a week 365 days a year.

The decrease in other expense in 2002 was due to several factors including the elimination of the amortization expense for goodwill of $ 111,000, with the adoption of FAS No. 142. For further discussion of the goodwill expense, see Note 7 of the consolidated financial statements.

Income Tax Expense

Income tax expense increased by $239,000 for 2004 to $981,000 from $742,000 in 2003 and decreased $193,000 in 2003 from $935,000 in 2002. The effective rate on taxes for 2004, 2003 and 2002 was 22.2%, 18.8% and 22.5% respectively. The effective tax rate is affected by the amount of tax-exempt income earned by the Company each year.

Comparison of Financial Condition at December 31, 2004 and 2003

Total assets at December 31, 2004 amounted to $294 million, an increase of $10 million compared to $284 million at December 31, 2003.

Cash and cash equivalents increased $4.1 million or 23.3% from December 31, 2003 to December 31, 2004, with liquid funds held in the form of federal funds sold increasing $1.7 million. The increase in federal funds sold at December 31, 2004 is the excess of funds from the net increase in deposits that was not used in investing activities, financing activities, or operating activities.

Total investment securities decreased $12.4 million or 21.4% from December 31, 2003 to December 31, 2004. The decrease in investments was due to maturities and calls and was used to help fund loan growth. Information detailing the book value of the investment portfolio by security type and classification is present in Note 3 to the consolidated financial statements.

Total loans were $217.2 million at December 31, 2004 an increase of $15.5 million or 7.7% from $201.7 million at December 31, 2003. The loan increases were due in part to an effective marketing of our loan products including but not limited to a business development calling officer program. Also the general economic well-being of the communities we serve contributed to our loan growth. Of this $15.5 million increase approximately $9.2 million was in the residential real estate loan portfolio, approximately $11,000 was an increase in the agriculture real estate loan portfolio, approximately $5.1 million was an increase in the commercial real estate loan portfolio, approximately $22,000 was an increase in the construction real estate loan portfolio, approximately $2.5 million was an increase in the commercial and other loan portfolio, and approximately $1.3 million was a decrease in the consumer and credit loan portfolio. Approximately $13.3 million of the $9.2 million increase in real estate loans was in residential 1 to 4 family adjustable rate mortgages while approximately $4.1 million in residential 1 to 4 family fixed rate mortgages decreased. Late in 1997 we began to offer residential mortgage customers a new fixed rate product. This program enables us to offer competitive long-term fixed rates. These loans are made with the intent to sell in the secondary loan market. We originated and sold $11.6 million and $22.1 million of loans in 2004 and 2003. Profit on the sale of these loans was $63,000 and $241,000 for 2004 and 2003. Information detailing the composition of the loan portfolio is presented in Note 4 to the consolidated financial statements.

Total deposits increased $5.6 million or 2.3% from December 31, 2003 to December 31, 2004. All deposit accounts increased except interest bearing demand deposits and time deposits. The interest bearing demand deposits decreased $176,000 and time deposits decreased $3.1 million. The increases are attributable to new deposit account growth and internal growth for existing accounts. See also, Average Balance Sheet and Net Interest Analysis for information related to the average amount and average interest paid on deposit accounts during 2004 and 2003. Information related to the maturity of time deposits of $100,000 and over at December 31, 2004 is presented in Note 8 of the accompanying consolidated financial statements.

Advances were $6.8 million and $3.4 million at December 31, 2004 and 2003 respectively. There was $6.0 million in new advances in 2004. These advances are six months to two years in term and were used for general liquidity purposes. There were no new advances in 2003. The prior advances were used to fund fixed rate residential real estate loans with similar maturities. Additional information on the Federal Home Loan Bank Advances is presented in Note 10 of the accompanying consolidated financial statements.

Shareholders’ equity increased $1.3 million during 2004 to $35.4 million at December 31, 2004 from $34.1 million at December 31, 2003. This increase was the result of an increase of $3.4 million in net earnings during the year, a net unrealized loss on securities available for sale of $.1 million, and Cash Dividends paid totaling $1.3 million. The Company also purchased treasury stock for $.7 million. Treasury stock purchases are monitored against the Company’s Strategic Plan and the goals set forth in the plan. The Treasury stock purchases have been within the Strategic Plan’s guidelines for 2004.

Market Risk and Asset/Liability Management

Our primary market risk exposure is interest rate risk and, to a lesser extent, liquidity risk. Because of the nature of our operations, we are not subject to currency exchange or commodity price risk and, since we have no trading portfolio, it is not subject to trading risk. Currently, we have equity securities that represent only 3.2% of its investment portfolio and, therefore, equity price risk is not significant.

We actively manage interest rate sensitivity and asset/liability products through an asset/liability management committee. The principle objectives of asset-liability management are to maximize current net interest income while minimizing the risk to future earnings of negative fluctuations in net interest margin and to insure adequate liquidity exists to meet operational needs.

In an effort to reduce interest rate risk and protect itself from the negative effects or rapid or prolonged changes in interest rates, we have instituted certain asset and liability management measures, including underwriting long-term fixed rate loans that are saleable in the secondary market, offering longer term deposit products and diversifying the loan portfolio into shorter term consumer and commercial business loans. In addition, since the mid-1980’s, we have originated adjustable-rate loans and as of December 31, 2004, they comprised approximately 85.4% of the total loan portfolio.

Liquidity

Liquidity represents our ability to meet normal cash flow requirements of our customers for the funding of loans and repayment of deposits. Both short term and long term liquidity needs are generally derived from the repayments and maturities of loans and investment securities, and the receipt of deposits. Management monitors liquidity daily, and on a monthly basis incorporates liquidity management into its asset/liability program. The assets defined as liquid are: cash and cash equivalents and the available for sale security portfolio. The liquidity ratio as of December 31, 2004 and 2003 are 11% and 12%, respectively.

Operating activities, as presented in the statement of cash flows in the accompanying consolidated financial statements, provided $1.5 and $4.0 million in cash during 2004 and 2003 respectively, generated principally from net income.

Investing activities consist primarily of loan originations and repayments, investment purchases and maturities, and investment in technology. These activities used $3.8 million in funds during 2004, principally for the net funding of loans, and the net purchase of technology and fixed assets totaling $15.7 million, and $.3 million respectively; and provided the net proceeds of investments of $12.2 million. For 2003, investing activities used $5.0 million, principally for the net funding of loans, and the net purchase of technology and fixed assets totaling $26.5 million, and $.3 million respectively; and provided the net proceeds of investments of $21.8 million.

Financing activities consisted of the solicitation and repayment of customer deposits, borrowings and repayments, and the payment of dividends. For 2004, financing activities provided $6.4 million, comprised mainly of net deposit increases of $5.6 million, proceeds from Federal Home Loan Bank advances of $6 million, repayment of Federal Home Loan Bank advances of $2.6 million, net decrease in short-term borrowings of $.6 million, purchase of treasury stock of $.7 million and payment of dividends of $1.3 million. For 2003 financing activities used $1.6 million, comprised mainly of net deposit increases of $2.6 million, Federal Home Loan Bank advance repayments of $.8 million, net decrease in short-term borrowings of $.5 million, purchase of treasury stock of $1.7 million and payment of dividends of $1.2 million.

In addition to using the loan, investment and deposit portfolios as sources of liquidity, we have access to funds from the Federal Home Loan Bank of Cincinnati. We also have a ready source of funds through the available-for-sale component of the investment securities portfolio.

Capital Resources

Capital adequacy is our ability to support growth while protecting the interests of shareholders and depositors. Bank regulatory agencies have developed certain capital ratio requirements, which are used to assist them in monitoring the safety and soundness of financial institutions. We continually monitor these capital requirements and believe the Company to be in compliance with these regulations at December 31, 2004.

Our regulatory capital position at December 31, 2004, as compared to the minimum regulatory capital requirements imposed on us by banking regulators at that date is presented in Note 17 of the accompanying consolidated financial statements. We are not aware of any actions contemplated by banking regulators, which would result in us being in non-compliance with capital requirements.

Impact of Inflation Changing Prices

The consolidated financial statements and the accompanying notes presented elsewhere in this document, have been prepared in accordance with accounting principles generally accepted in the United States of America, which require the measurement of financial position and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time and due to inflation. Unlike most industrial companies, virtually all of the assets and liabilities are monetary in nature. The impact of inflation is reflected in the increased cost of operations. As a result, interest rates have a greater impact on performance than do the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

Killbuck Bancshares, Inc.

Killbuck, Ohio

Audit Report

December 31, 2004

Killbuck Bancshares, Inc.

AUDITED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2004

	Page Number
Report of Independent Registered Public Accounting Firm	2
Financial Statements
Consolidated Balance Sheet	3
Consolidated Statement of Income	4
Consolidated Statement of Changes in Shareholders’ Equity	5
Consolidated Statement of Cash Flows	6
Notes to Consolidated Financial Statements	7-25

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Killbuck Bancshares, Inc.

We have audited the accompanying consolidated balance sheet of Killbuck Bancshares, Inc. and subsidiary as of December 31, 2004 and 2003, and the related consolidated statements of income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Killbuck Bancshares, Inc. and subsidiary as of December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2004 in conformity with U.S. generally accepted accounting principles.

/s/ S.R. SNODGRASS, A.C.

Steubenville, Ohio

February 9, 2005

S.R. Snodgrass, A.C.

626 North Fourth Street

Steubenville, Ohio 43952-1982

Phone: 740-282-2771

Facsimile: 740-282-1606

-2-

Killbuck Bancshares, Inc.

CONSOLIDATED BALANCE SHEET

	December 31,
	2004			2003
ASSETS
Cash and cash equivalents:
Cash and amounts due from depository institutions	$	12,163,199		$	9,755,218
Federal funds sold		9,500,000			7,800,000
Total cash and cash equivalents		21,663,199			17,555,218
Investment securities:
Securities available for sale		9,754,110			17,582,096
Securities held to maturity (fair value of $37,947,368 and $42,952,009)		36,015,317			40,628,977
Total investment securities		45,769,427			58,211,073
Loans (net of allowance for loan losses of $2,645,981 and $2,701,943)		214,161,315			198,628,138
Loans held for sale		167,500			521,450
Premises and equipment, net		4,949,795			5,020,577
Accrued interest receivable		927,860			924,193
Goodwill, net		1,329,249			1,329,249
Other assets		4,898,694			1,949,477
Total assets	$	293,867,039		$	284,139,375
LIABILITIES
Deposits:
Noninterest bearing demand	$	47,185,066		$	40,136,527
Interest bearing demand		34,569,644			34,745,944
Money market		17,504,480			17,398,777
Savings		43,282,000			41,579,239
Time		104,807,571			107,863,327
Total deposits		247,348,761			241,723,814
Federal Home Loan Bank advances		6,845,342			3,444,805
Short-term borrowings		3,730,000			4,365,000
Accrued interest and other liabilities		584,002			544,202
Total liabilities		258,508,105			250,077,821
SHAREHOLDERS’ EQUITY
Common stock – No par value: 1,000,000 shares authorized, 718,431 issued		8,846,670			8,846,670
Retained earnings		31,558,974			29,430,710
Accumulated other comprehensive income		35,201			166,471
Treasury stock, at cost (60,945 and 53,643 shares)		(5,081,911	)		(4,382,297	)
Total shareholders’ equity		35,358,934			34,061,554
Total liabilities and shareholders’ equity	$	293,867,039		$	284,139,375

See accompanying notes to the consolidated financial statements.

-3-

Killbuck Bancshares, Inc.

CONSOLIDATED STATEMENT OF INCOME

	Year Ended December 31,
	2004		2003		2002
INTEREST INCOME
Interest and fees on loans	$	11,656,645	$	11,029,106	$	11,504,240
Federal funds sold		92,160		95,625		245,539
Investment securities:
Taxable		583,917		1,331,800		2,462,536
Exempt from federal income tax		1,700,170		1,826,764		1,845,087
Total interest income		14,032,892		14,283,295		16,057,402
INTEREST EXPENSE
Deposits		2,988,827		3,754,438		5,599,201
Federal Home Loan Bank advances		267,509		257,525		321,749
Short term borrowings		7,844		5,081		4,952
Total interest expense		3,264,180		4,017,044		5,925,902
NET INTEREST INCOME		10,768,712		10,266,251		10,131,500
Provision for loan losses		225,000		390,000		210,000
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		10,543,712		9,876,251		9,921,500
NONINTEREST INCOME
Service charges on deposit accounts		803,823		736,763		624,197
Gain on sale of loans, net		62,777		240,885		128,645
Other income		148,615		141,787		119,938
Total other income		1,015,215		1,119,435		872,780
NONINTEREST EXPENSE
Salaries and employee benefits		3,987,149		3,719,307		3,401,327
Occupancy and equipment		974,517		1,047,156		958,750
Other expense		2,196,676		2,278,040		2,281,801
Total other expense		7,158,342		7,044,503		6,641,878
INCOME BEFORE INCOME TAXES		4,400,585		3,951,183		4,152,402
Income taxes		981,177		742,363		934,858
NET INCOME	$	3,419,408	$	3,208,820	$	3,217,544
EARNINGS PER SHARE	$	5.16	$	4.75	$	4.68
WEIGHTED AVERAGE SHARES OUTSTANDING		662,415		676,380		687,216

See accompanying notes to the consolidated financial statements.

-4-

Killbuck Bancshares, Inc.

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

	Common Stock		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Shareholders’ Equity			Comprehensive Income
BALANCE, DECEMBER 31, 2001	$	8,846,670	$	25,445,528		$	493,654		$	(1,748,400	)	$	33,037,452
Net income				3,217,544									3,217,544		$	3,217,544
Other comprehensive income:
Unrealized gain on available for sale securities, net of tax of $21,295							41,336						41,336			41,336
Comprehensive income															$	3,258,880
Cash dividends paid ($1.75 per share)				(1,200,310	)								(1,200,310	)
Purchase of Treasury Stock, at cost (9,627 shares)										(892,363	)		(892,363	)
BALANCE, DECEMBER 31, 2002		8,846,670		27,462,762			534,990			(2,640,763	)		34,203,659
Net income				3,208,820									3,208,820		$	3,208,820
Other comprehensive income:
Unrealized loss on available for sale securities, net of tax benefit of $189,843							(368,519	)					(368,519	)		(368,519	)
Comprehensive income															$	2,840,301
Cash dividends paid ($1.85 per share)				(1,240,872	)								(1,240,872	)
Purchase of Treasury Stock, at cost (18,872 shares)										(1,741,534	)		(1,741,534	)
BALANCE, DECEMBER 31, 2003		8,846,670		29,430,710			166,471			(4,382,297	)		34,061,554
Net income				3,419,408									3,419,408		$	3,419,408
Other comprehensive income:
Unrealized loss on available for sale securities, net of tax benefit of $67,624							(131,270	)					(131,270	)		(131,270	)
Comprehensive income															$	3,288,138
Cash dividends paid ($1.95 per share)				(1,291,144	)								(1,291,144	)
Purchase of Treasury Stock, at cost (7,302 shares)										(699,614	)		(699,614	)
BALANCE, DECEMBER 31, 2004	$	8,846,670	$	31,558,974		$	35,201		$	(5,081,911	)	$	35,358,934

See accompanying notes to the consolidated financial statements.

-5-

Killbuck Bancshares, Inc.

CONSOLIDATED STATEMENT OF CASH FLOWS

	Year Ended December 31,
	2004			2003			2002
OPERATING ACTIVITIES
Net income	$	3,419,408		$	3,208,820		$	3,217,544
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		225,000			390,000			210,000
Depreciation, amortization and accretion, net		395,031			541,810			509,805
Gain on sale of loans, net		(62,777	)		(240,885	)		(128,645	)
Origination of loans held for sale		(11,567,660	)		(22,109,417	)		(17,408,920	)
Proceeds from the sale of loans		11,984,386			22,248,602			17,711,015
Federal Home Loan Bank stock dividend		(46,500	)		(45,300	)		(51,200	)
Net changes in:
Accrued interest and other assets		(2,838,759	)		166,875			369,283
Accrued interest and other liabilities		39,800			(190,244	)		6,545
Net cash provided by operating activities		1,547,929			3,970,261			4,435,427
INVESTING ACTIVITIES
Investment securities available for sale:
Proceeds from maturities and repayments		8,202,151			32,954,112			37,186,127
Purchases		(563,104	)		(12,031,475	)		(24,738,527	)
Investment securities held to maturity:
Proceeds from maturities and repayments		4,843,728			5,571,974			4,475,491
Purchases		(235,000	)		(4,681,460	)		(6,276,462	)
Net increase in loans		(15,758,177	)		(26,535,632	)		(23,131,545	)
Purchase of premises and equipment		(329,272	)		(314,933	)		(561,915	)
Net cash used in investing activities		(3,839,674	)		(5,037,414	)		(13,046,831	)
FINANCING ACTIVITIES
Net increase in deposits		5,624,947			2,685,183			1,067,528
Proceeds from Federal Home Loan Bank advances		6,035,000			—			—
Repayment of Federal Home Loan Bank advances		(2,634,463	)		(822,861	)		(959,066	)
Net (decrease) increase in short-term borrowings		(635,000	)		(564,993	)		634,993
Purchase of treasury shares		(699,614	)		(1,741,534	)		(892,363	)
Cash dividends paid		(1,291,144	)		(1,240,872	)		(1,200,310	)
Net cash provided by (used in) financing activities		6,399,726			(1,685,077	)		(1,349,218	)
Increase (decrease) in cash and cash equivalents		4,107,981			(2,752,230	)		(9,960,622	)
Cash and cash equivalents at beginning of year		17,555,218			20,307,448			30,268,070
Cash and cash equivalents at end of year	$	21,663,199		$	17,555,218		$	20,307,448

See accompanying notes to the consolidated financial statements.

-6-

Killbuck Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting and reporting policies applied in the presentation of the consolidated financial statements follows:

Nature of Operations and Basis of Presentation

Killbuck Bancshares, Inc. (the “Company”) is an Ohio corporation organized as the holding company of The Killbuck Savings Bank Company (the “Bank”). The Bank is a state-chartered bank located in Ohio. The Company and its subsidiary operate in the single industry of commercial banking and derive substantially all their income from banking and bank-related services which include interest earnings on residential real estate, commercial mortgage, commercial and consumer loan financing as well as interest earnings on investment securities and charges for deposit services to its customers through nine full service branches and one loan production office. The Board of Governors of the Federal Reserve System supervises the Company and Bank, while the Bank is also subject to regulation and supervision by the Ohio Division of Financial Institutions.

The consolidated financial statements of the Company include its wholly owned subsidiary, the Bank. All intercompany transactions have been eliminated in consolidation. The investment in subsidiary on the parent company financial statements is carried at the parent company’s equity in the underlying net assets.

The accounting principles followed by the Company and the methods of applying these principles conform with U.S. generally accepted accounting principles and with general practice within the banking industry. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the consolidated balance sheet date and related revenues and expenses for the period. Actual results may differ significantly from those estimates.

Investment Securities

Investment securities are classified, at the time of purchase, based upon management’s intention and ability, as securities held to maturity or securities available for sale. Debt securities acquired with the intent and ability to hold to maturity are stated at cost adjusted for amortization of premium and accretion of discount which are computed using the level yield method. Certain other debt and equity securities have been classified as available for sale to serve principally as a source of liquidity. Unrealized holding gains and losses on available for sale securities are reported as a separate component of shareholders’ equity, net of tax, until realized. Realized securities gains and losses are computed using the specific identification method. Interest and dividends on investment securities are recognized as income when earned.

Common stock of the Federal Home Loan Bank, Federal Reserve Bank and Great Lakes Bankers Bank represent ownership in institutions, which are wholly-owned by other financial institutions. These securities are accounted for at cost and are classified with other assets.

Bank-Owned Life Insurance (BOLI)

The Company purchased life insurance policies on certain key employees. BOLI is recorded at its cash surrender value or the amount that can be realized.

-7-

Loans

Loans are stated at their outstanding principal, less the allowance for loan losses and any net deferred loan fees. Interest income on loans is recognized on the accrual method. Accrual of interest on loans is generally discontinued when it is determined that a reasonable doubt exists as to the collectibility of principal, interest, or both. Loans are returned to accrual status when past due interest is collected, and the collection of principal is probable.

Loan origination and commitment fees, as well as certain direct origination costs, are deferred and amortized as a yield adjustment over the lives of the related loans using the interest method. Amortization of deferred loan fees is discontinued when a loan is placed on nonaccrual status.

Mortgage loans originated and held for sale in the secondary market are carried at the lower of cost or market value determined on an aggregate basis. Net unrealized losses are recognized in a valuation allowance through charges to income. Gains and losses on the sale of loans held for sale are determined using the specific identification method. All loans are sold to Freddie Mac.

Allowance for Loan Losses

The allowance for loan losses represents the amount which management estimates is adequate to provide for probable losses inherent in its loan portfolio. The allowance method is used in providing for loan losses. Accordingly, all loan losses are charged to the allowance, and all recoveries are credited to it. The allowance for loan losses is established through a provision for loan losses which is charged to operations. The provision is based upon management’s periodic evaluation of individual loans, the overall risk characteristics of the various portfolio segments, past experience with losses, the impact of economic conditions on borrowers, and other relevant factors. The estimates used in determining the adequacy of the allowance for loan losses including the amounts and timing of future cash flows expected on impaired loans, are particularly susceptible to significant change in the near term.

Impaired loans are commercial and commercial real estate loans for which it is probable that the Company will not be able to collect all amounts due according to the contractual terms of the loan agreement. The Company individually evaluates such loans for impairment and does not aggregate loans by major risk classifications. The definition of “impaired loans” is not the same as the definition of “nonaccrual loans,” although the two categories overlap. The Company may choose to place a loan on nonaccrual status due to payment delinquency or uncertain collectibility, while not classifying the loan as impaired, provided the loan is not a commercial or commercial real estate classification. Factors considered by management in determining impairment include payment status and collateral value. The amount of impairment for these types of loans is determined by the difference between the present value of the expected cash flows related to the loan, using the original interest rate, and its recorded value, or as a practical expedient in the case of collateralized loans, the difference between the fair value of the collateral and the recorded amount of the loans. When foreclosure is probable, impairment is measured based on the fair value of the collateral.

Mortgage loans secured by one-to-four family properties and all consumer loans are large groups of smaller balance homogeneous loans and are measured for impairment collectively. Loans that experience insignificant payment delays, which are defined as 90 days or less, generally are not classified as impaired. Management determines the significance of payment delays on a case-by-case basis, taking into consideration all of the circumstances concerning the loan, the credit worthiness and payment history of the borrower, the length of the payment delay, and the amount of shortfall in relation to the principal and interest owed.

Premises and Equipment

Premises and equipment are stated at cost, less accumulated depreciation. Depreciation is principally computed on the straight-line method over the estimated useful lives of the related assets, which range from three to ten years for furniture, fixtures and equipment and 25 to 50 years for building premises. Leasehold improvements are amortized over the shorter of their estimated useful lives or their respective lease terms, which range from seven to fifteen years. Expenditures for maintenance and repairs are charged against income as incurred. Costs of major additions and improvements are capitalized.

-8-

Real Estate Owned

Real estate acquired in settlement of loans is stated at the lower of the recorded investment in the property or its fair value minus estimated costs of sale. Prior to foreclosure the value of the underlying collateral is written down by a charge to the allowance for loan losses if necessary. Any subsequent write-downs are charged against operating expenses. Operating expenses of such properties, net of related income and losses on their disposition, are included in other expenses.

Intangible Assets and Liabilities

Goodwill represents the amount by which the market value of the stock issued in the merger of Commercial Saving Bank Co. (Commercial) of Danville, Ohio with and into The Killbuck Savings Bank Company exceeded the market value of the assets, liabilities and capital of Commercial on the date of the merger. As of December 31, 2004 and 2003 respectively, net goodwill was $1,329,249 and $1,329,249. The Company adopted Statement of Financial Accounting Standards (“FAS”) No. 142, Goodwill and Other Intangible Assets, which changed the accounting for goodwill from an amortization method to an impairment-only approach. This statement eliminates the regularly scheduled amortization of goodwill and replaces this method with a two-step process for testing the impairment of goodwill on at least an annual basis. This approach could cause more volatility in the Company’s reported net income because impairment losses, if any, could occur irregularly and in varying amounts.

Mortgage Servicing Rights (“MSRs”)

The Company has agreements for the express purpose of selling loans in the secondary market. The Company maintains all servicing rights for these loans. Originated MSRs are recorded by allocating total costs incurred between the loan and servicing rights based on their relative fair values. MSRs are amortized in proportion to the estimated servicing income over the estimated life of the servicing portfolio. Impairment is evaluated based on the fair value of the right, based on portfolio interest rates and prepayment characteristics. MSRs are a component of other assets on the Consolidated Balance Sheet.

Recent Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“FAS”) No. 123 (Revised 2004), “Share-Based Payment”. The Statement requires that compensation cost relating to share-based payment transactions be recognized in financial statements and that this cost be measured based on the fair value of the equity or liability instruments issued. FAS No. 123 (Revised 2004) covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. The Company will adopt FAS No. 123 (Revised 2004) during 2005 and management is currently evaluating the impact the adoption of the standard will have on the Company’s results of operations.

In October 2003, the American Institute of Certified Public Accountants issued SOP 03-3, “Accounting for Loans or Certain Debt Securities Acquired in a Transfer.” SOP 03-3 applies to a loan that is acquired where it is probable, at acquisition, that a transferee will be unable to collect all contractually required payments receivable. SOP 03-3 requires the recognition, as accretable yield, the excess of all cash flows expected at acquisition over the investor’s initial investment in the loan as interest income on a level-yield basis over the life of the loan. The amount by which the loan’s contractually required payments exceed the amount of its expected cash flows at acquisition may not be recognized as an adjustment to yield, a loss accrual or a valuation allowance for credit risk. SOP 03-3 is effective for loans acquired in fiscal years beginning after December 31, 2004. Early adoption is permitted. The adoption of SOP 03-3 is not expected to have a material impact on the consolidated financial statements.

Employee Benefits Plans

The Bank maintains an integrated money purchase pension plan and a 401(K) plan covering eligible employees. The Bank’s contributions are based upon the plan’s contribution formula.

-9-

Income Taxes

The Company and its subsidiary file a consolidated federal income tax return. Income tax expense is allocated among the parent company and the subsidiary as if each had filed a separate return. Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Deferred income tax expenses or benefits are based on the changes in the deferred tax asset or liability from period to period.

Earnings Per Share

The Company currently maintains a simple capital structure; therefore, there are no dilutive effects on earnings per share. As such, earnings per share are calculated using the weighted average number of share outstanding for the period.

Comprehensive Income

The Company is required to present comprehensive income in a full set of general purpose financial statements for all periods presented. Other comprehensive income is comprised exclusively of unrealized holding gains and losses on the available for sale securities portfolio. The Company has elected to report the effects of other comprehensive income as part of the Consolidated Statement of Changes in Shareholders’ Equity.

Cash Flow Information

For purposes of reporting cash flows, cash and cash equivalents include cash and amounts due from financial institutions and federal funds sold. Cash payments for interest in 2004, 2003 and 2002 were $3,275,495, $4,082,922, and $6,043,639, respectively. Cash payments for income taxes for 2004, 2003, and 2002 were $883,858, $940,517, and $895,358 respectively.

Reclassification of Comparative Amounts

Certain amounts in the prior year consolidated financial statements have been reclassified to conform to the current year presentation. These reclassifications had no effect on shareholders’ equity or net income.

2. FEDERAL FUNDS SOLD

Federal funds sold at December 31 consists of the following:

	2004			2003
Institution	Maturity	Balance		Maturity	Balance
National City Bank	1-02-05	$	7,100,000	1-02-04	$	7,400,000
Great Lakes Bankers Bank	1-02-05		2,400,000	1-02-04		400,000
		$	9,500,000		$	7,800,000

-10-

3. INVESTMENT SECURITIES

The amortized cost of securities and their estimated market values are as follows:

Securities available for sale

	2004
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Obligations of U.S. Government
Agencies and Corporations	$	9,700,775	$	93,480	$	40,145	$	9,754,110
Total	$	9,700,775	$	93,480	$	40,145	$	9,754,110
	2003
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Obligations of U.S. Government
Agencies and Corporations	$	17,329,867	$	283,001	$	30,772	$	17,582,096
Total	$	17,329,867	$	283,001	$	30,772	$	17,582,096
Securities held to maturity
	2004
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Obligations of States and Political Subdivisions	$	35,564,141	$	1,955,536	$	29,684	$	37,489,993
Corporate Securities		451,176		6,199		—		457,375
Total	$	36,015,317	$	1,961,735	$	29,684	$	37,947,368
	2003
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Obligations of States and Political Subdivisions	$	39,900,030	$	2,342,520	$	51,102	$	42,191,448
Corporate Securities		728,947		31,614		—		760,561
Total	$	40,628,977	$	2,374,134	$	51,102	$	42,952,009

-11-

3. INVESTMENT SECURITIES (CONTINUED)

The amortized cost and fair market values of debt securities at December 31, 2004, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or repay obligations with or without call or prepayment penalties.

	Available For Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	3,499,109	$	3,507,032	$	4,113,642	$	4,182,133
Due after one year through five years		3,604,136		3,632,500		15,474,752		16,282,537
Due after five through ten years		2,155,445		2,178,318		16,219,561		17,268,911
Due after ten years		442,085		436,260		207,362		213,787
	$	9,700,775	$	9,754,110	$	36,015,317	$	37,947,368

Investment securities with an approximate carrying value of $38,141,000 and $46,630,000 at December 31, 2004 and 2003, respectively were pledged to secure public deposits, securities sold under agreement to repurchase and for other purposes as required or permitted by law.

The following table shows the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time, that the individual securities have been in a continuous unrealized loss position, at December 31, 2004.

	2004
	Less Than Twelve Months				Twelve Months or Greater				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
U.S. Government agencies and corporations	$	1,420,010	$	22,075	$	1,214,914	$	18,070	$	2,634,924	$	40,145
Obligations of states and Political subdivisions		2,005,933		16,117		457,993		13,567		2,463,926		29,684
Total debt securities	$	3,425,943	$	38,192	$	1,672,907	$	31,637	$	5,098,850	$	69,829

The Company’s investment securities portfolio contains unrealized losses of direct obligations of the U.S. Government securities, including mortgage-related instruments issued or backed by the full faith and credit of the United States government, and debt obligations of a U.S. state or political subdivision.

On a monthly basis, the Company evaluates, the severity and duration of impairment for its investment securities portfolio. Unless the Company has the ability to hold the security to maturity without incurring a loss, impairment is considered other than temporary when an investment security has sustained a decline of ten percent or more for six months.

The Company has concluded that any impairment of its investment securities portfolio is not other than temporary, but is the result of interest rate changes that are not expected to result in the noncollection of principal and interest, during the period.

-12-

4. LOANS

Major classification of loans are summarized as follows:

	2004			2003
Real estate – residential	$	97,811,648		$	88,648,922
Real estate – farm		12,308,653			12,298,008
Real estate – commercial		47,226,324			42,089,608
Real estate – construction		10,999,833			10,978,554
Commercial and other loans		40,751,867			38,269,095
Consumer and credit loans		8,074,908			9,413,249
		217,173,233			201,697,436
Less allowance for loan losses		(2,645,981	)		(2,701,943	)
Less net deferred loan fees		(365,937	)		(367,355	)
Loans, net	$	214,161,315		$	198,628,138

Loans held for sale at December 31, 2004 and 2003 were $167,500 and $521,450 respectively. Real estate loans serviced for Freddie Mac, which are not included in the consolidated balance sheet, totaled $44,545,402 and $39,803,210 at December 31, 2004 and 2003, respectively. The Bank is currently collecting a fee of .25% for servicing these loans.

Total nonaccrual loans and the related interest for the years ended December 31 are as follows. In management’s opinion, these loans did not meet the definition of impaired loans.

	2004		2003		2002
Principal outstanding	$	1,094,922	$	220,098	$	148,928
Contractual interest due	$	38,263	$	6,560	$	12,583
Interest income recognized	$	—	$	—	$	—

The Company’s primary business activity is with customers located within its local trade area. Residential, commercial, personal, and agricultural loans are granted. The Company also selectively funds loans originated outside of its trade area provided such loans meet its credit policy guidelines. Although the Company has a diversified loan portfolio at December 31, 2004 and 2003, loans outstanding to individuals and businesses are dependent upon the local economic conditions in its immediate trade area.

The Bank entered into transactions with certain directors, executive officers, significant stockholders, and their affiliates. A summary of loan activity for those directors, executive officers, and their associates with loan balances in excess of $60,000 for the year ended December 31, 2004 is as follows:

Balance December 31, 2003	Additions		Amounts Collected		Balance December 31, 2004
$4,297,829	$	2,697,767	$	2,967,016	$	4,028,580

-13-

5. ALLOWANCE FOR LOAN LOSSES

An analysis of the change in the allowance for loan losses follows:

	2004			2003			2002
Balance, January 1	$	2,701,943		$	2,325,560		$	2,260,555
Add:
Provision charged to operations		225,000			390,000			210,000
Loan recoveries		74,942			106,885			177,543
Less: Loans charged off		(355,904	)		(120,502	)		(322,538	)
Balance, December 31	$	2,645,981		$	2,701,943		$	2,325,560

6. PREMISES AND EQUIPMENT

Premises and equipment are summarized as follows:

	2004		2003
Land	$	1,415,541	$	1,415,541
Building and improvements		4,115,367		4,143,706
Leasehold improvements		75,619		—
Furniture, fixtures and equipment		4,469,710		4,193,772
		10,076,237		9,753,019
Less accumulated depreciation		5,126,442		4,732,442
Total	$	4,949,795	$	5,020,577

Depreciation expense charged to operations was $408,422 for 2004, $492,257 for 2003, and $496,743 for 2002.

7. GOODWILL

As of December 31, 2004 and 2003, goodwill had a gross carrying amount of $1,661,561 and an accumulated amortization amount of $332,312 resulting in a net carrying amount of $1,329,249.

The gross carrying amount of goodwill was tested for impairment in the second quarter. Due to an increase in overall earning asset growth, operating profits and cash flows were greater than expected for the reporting units. Based on fair value of the reporting unit, estimated using the expected present value of future cash flows, no goodwill impairment loss was recognized in the current year.

The following tables set forth a comparison of net income and basic and diluted earnings per share adjusted for the adoption of FAS No. 142, Goodwill and Other Intangible Assets:

	2004		2003		2002
Goodwill amortization	$	—	$	—	$	—
Net income		3,419,408		3,208,820		3,217,544
Addback: Goodwill amortization (net of tax)		—		—		—
Adjusted net income	$	3,419,408	$	3,208,820	$	3,217,544
Basic earnings per share:
Net income	$	5.16	$	4.75	$	4.68
Goodwill amortization		—		—		—
Adjusted basic earnings per share	$	5.16	$	4.75	$	4.68

-14-

8. DEPOSITS

Time deposits include certificates of deposit in denominations of $100,000 or more. Such deposits aggregated $34,479,668 and $34,498,178 at December 31, 2004 and 2003, respectively.

Interest expense on certificates of deposit $100,000 and over amounted to $661,560 in 2004, $855,558 in 2003, and $1,281,223 in 2002.

The following table sets forth the remaining maturity of time certificates of deposits of $100,000 or more at December 31, 2004.

3 months or less	$	8,648,327
Over 3 through 6 months		7,181,129
Over 6 through 12 months		6,277,799
Over 12 months		12,372,413
Total	$	34,479,668

The following table sets forth the remaining maturity of all time deposits at December 31, 2004.

12 month or less	$	62,602,661
12 months through 24 months		14,401,466
24 months through 36 months		9,891,019
36 months through 48 months		8,845,737
48 months through 60 months		9,044,228
Over 60 months		22,460
	$	104,807,571

9. SHORT-TERM BORROWINGS

Short-term borrowings consist of securities sold under agreements to repurchase. These retail repurchase agreements are with customers in their respective loan market areas. These borrowings are collateralized with securities owned by the Company and held in their safekeeping account at an independent correspondent bank. The outstanding balances and related information for short-term borrowings are summarized as follows:

	2004			2003
Short-term borrowings:
Ending balance	$	3,730,000		$	4,365,000
Maximum month-end balance during the year		4,480,000			4,720,000
Average month-end balance during the year		3,624,583			3,859,167
Weighted average at year end		.13	%		.13	%
Weighted average rate during the year		.13	%		.13	%

The Company has pledged investment securities with carrying values of $5,005,625 and $5,094,576 as of December 31, 2004 and 2003, respectively, as collateral for the repurchase agreements.

-15-

10. FEDERAL HOME LOAN BANK ADVANCES

The Federal Home Loan Bank advances have monthly principal and interest payments due with maturity dates from 2005 through 2017. Interest rates range from 2.60% to 8.90% on the advances. The scheduled aggregate minimum future principal payments on the advances outstanding as of December 31, 2004 are as follows:

Year Ending December 31,	Amount
2005	$	2,456,533
2006		2,410,833
2007		370,164
2008		333,973
2009		300,235
2010 and thereafter		973,604
Total	$	6,845,342

The Bank maintains a credit arrangement with Federal Home Loan Bank of Cincinnati, Ohio (“FHLB”). The FHLB borrowings, when used, are collateralized by the Bank’s investment in Federal Home Loan Bank stock and a blanket collateral pledge agreement with FHLB under which the Bank has pledged certain qualifying assets equal to 150 percent of the unpaid amount of the outstanding balances. At December 31, 2004 the Bank had a borrowing capacity of approximately $38.2 million with the FHLB. At December 31, 2004 and 2003 there was $6,845,342 and $3,444,805, respectively borrowed against this credit arrangement.

11. EMPLOYEE BENEFIT PLANS

The Bank maintains an integrated money purchase pension plan and a 401(k) plan.

Under the integrated money purchase pension plan contribution formula, the Bank, for each plan year, will contribute an amount equal to 8% of an employee’s compensation for the plan year and 5.7% of the amount of an employee’s excess compensation for the plan year. Excess compensation is a participant’s compensation in excess of the designated integration level. This designated integration level is 100% of the taxable wage base in effect at the beginning of the plan year. The federal government annually adjusts the taxable wage base. This plan does not permit nor require employees to make contributions to the plan.

The 401(k) plan allows employees to make salary reduction contributions to the plan up to 20% of a participant’s compensation. For each plan year, the Bank may contribute to the plan an amount of matching contributions for a particular plan year. The Bank may choose not to make matching contributions for a particular plan year. For 2004 and 2003 the Bank matched 25% of the employees’ voluntary contributions up to 1% of the employee’s compensation.

Both plans cover substantially all employees with one year of service and attained age 21. For 2004, the annual contribution to a participant’s retirement account may not exceed $41,000.

The pension costs charged to operating expense for the years 2004, 2003 and 2002 amounted to $253,812, $237,540 and $207,608, respectively.

-16-

12. OTHER OPERATING EXPENSE

Other operating expense included the following:

	2004		2003		2002
Professional fees	$	190,389	$	231,217	$	259,355
Franchise tax		433,920		398,931		397,238
Telephone		154,739		131,249		128,373
Stationery, supplies and printing		165,140		166,304		167,055
Postage, express and freight		156,279		146,537		162,264
Data processing		167,532		160,268		112,440
Other		928,677		1,043,534		1,055,076
Total	$	2,196,676	$	2,278,040	$	2,281,801

13. OPERATING LEASES

The bank leases the space housing the German Village branch located in Berlin, Ohio. The lease expires in nine years, with an option to automatically renew for an additional ten year period. Minimum future rental payments are as follows:

Less than 1 year	$	18,900
1 to 3 years		37,800
3 to 5 years		37,800
Greater than 5 years		307,946
	$	402,446

14. INCOME TAXES

The provision for federal income taxes for the years ended December 31 consist of:

	2004		2003			2002
Current payable	$	884,920	$	806,521		$	918,823
Deferred		96,257		(64,158	)		16,035
Total provision	$	981,177	$	742,363		$	934,858

The following is a reconcilement between the actual provision for federal income taxes and the amount of income taxes, which would have been provided at statutory rates for the year ended December 31:

	2004					2003					2002
	Amount			% of Pre-Tax Income		Amount			% of Pre-Tax Income		Amount			% of Pre-Tax Income
Provision at statutory rate	$	1,496,199		34.0	%	$	1,343,402		34.0	%	$	1,411,817		34.0	%
Tax exempt income		(579,220	)	(13.2	)		(622,791	)	(15.7	)		(627,878	)	(15.1	)
Non-deductible interest Expense		30,3767		.7			40,364		1.00			59,082		1.4
Other, net		33,822		.7			(18,612	)	(.5	)		91,837		2.2
Tax expense and effective rate	$	981,177		22.2	%	$	742,363		18.8	%	$	934,858		22.5	%

-17-

14. INCOME TAXES (CONTINUED)

The tax effects of deductible and taxable temporary differences that gave rise to significant portions of the net deferred tax assets and liabilities at December 31 are as follows:

	2004		2003
Deferred Tax Assets:
Allowance for loan losses	$	705,680	$	725,022
Deferred loan fees		7,115		9,155
Deferred tax asset		712,795		734,177
Deferred Tax Liabilities:
Premise and equipment		298,375		251,336
Stock dividends		175,576		159,766
Net unrealized gain on securities		18,136		85,757
Other, net		86,081		74,055
Deferred tax liabilities		578,168		570,914
Net deferred tax assets	$	134,627	$	163,263

No valuation allowance was established at December 31, 2004 and 2003 in view of certain tax strategies coupled with the anticipated future taxable income as evidenced by the company’s earnings potential.

15. COMMITMENTS AND CONTINGENT LIABILITIES

Commitments

In the normal course of business, the Company has outstanding commitments and contingent liabilities, such as commitments to extend credit and standby letters of credit, which are not included in the accompanying consolidated financial statements. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. The Company uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet.

These commitments were comprised of the following at December 31:

	2004		2003
Commitments to extend credit	$	31,332,000	$	31,263,000
Standby letters of credit		529,000		356,000
Total	$	31,861,000	$	31,619,000

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

-18-

15. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee. The fees earned from issuance of letters are recognized at the origination of the coverage period. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Company’s policy for obtaining collateral, and the nature of such collateral, is essentially the same as that involved in making commitments to extend credit.

The Company has not been required to perform any financial guarantees during the past two years. The Company has not incurred any losses on its commitments in either 2004 or 2003.

Contingent Liabilities

The Company and its subsidiary are subject to claims and lawsuits which arise primarily in the ordinary course of business. It is the opinion of management that the disposition or ultimate resolution of such claims and lawsuits will not have a material adverse effect on the consolidated financial position of the Company.

16. REGULATORY MATTERS

The approval of regulatory authorities is required if the total of all dividends declared by the Bank in any calendar year exceeds net profits as defined for that year combined with its retained net profits for the two preceding calendar years less any required transfers to surplus. Under this formula, the amount available for payment of dividends by the Bank to the Company in 2005, without the approval of the regulatory authorities, is approximately $1,693,294 plus 2005 profits retained up to the date of the dividend declaration.

Included in cash and due from banks are required federal reserves of $3,866,000 and $3,512,000 at December 31, 2004 and 2003, respectively, for facilitating the implementation of monetary policy by the Federal Reserve System. The required reserves are computed by applying prescribed ratios to the classes of average deposit balances. These are held in the form of cash on hand and/or balances maintained directly with the Federal Reserve Bank.

Federal law prevents the Company from borrowing from the Bank unless the loans are secured by specific obligations. Further, such secured loans are limited in amount to ten percent of the Bank’s capital. The Company had no such borrowings at December 31, 2004 and 2003.

17. REGULATORY CAPITAL REQUIREMENTS

Federal regulations require the Company and the Bank to maintain minimum amounts of capital. Specifically, each is required to maintain certain minimum dollar amounts and ratios of Total and Tier I capital to risk-weighted assets and of Tier I capital to average total assets.

In addition to the capital requirements, the Federal Deposit Insurance Corporation Improvement Act (“FDICIA”) established five capital categories ranging from “well capitalized” to “critically undercapitalized.” Should any institution fail to meet the requirements to be considered “adequately capitalized,” it would become subject to a series of increasingly restrictive regulatory actions.

As of December 31, 2004 and 2003, the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be classified as a well capitalized financial institution, Total risk-based, Tier I risk-based, and Tier I Leverage capital ratios must be at least ten percent, six percent, and five percent, respectively. There have been no conditions or events since notification that management believes have changed this category.

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17. REGULATORY CAPITAL REQUIREMENTS (CONTINUED)

The Company’s actual capital ratios are presented in the following table, which shows the Company met all regulatory capital requirements. The capital position of the Bank does not differ significantly from the Company’s.

	2004				2003
	Amount		Ratio		Amount		Ratio
Total Risk Based Capital (to Risk Weighted Assets)
Actual	$	36,595	17.31	%	$	35,022	17.58	%
For Capital Adequacy Purposes		16,913	8.00			15,938	8.00
To be well capitalized		21,142	10.00			19,922	10.00
Tier 1 Capital (to Risk Weighted Assets)
Actual	$	33,994	16.08	%	$	32,566	16.35	%
For Capital Adequacy Purposes		8,457	4.00			7,969	4.00
To be well capitalized		12,685	6.00			11,953	6.00
Tier 1 Capital (to Average Assets)
Actual	$	33,994	11.54	%	$	32,566	11.44	%
For Capital Adequacy Purposes		11,785	4.00			11,388	4.00
To be well capitalized		14,732	5.00			14,235	5.00

18. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS

The carrying amounts and estimated fair values at December 31 are as follows:

	2004				2003
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Cash and due from banks	$	12,163,199	$	12,163,199	$	9,755,218	$	9,755,218
Federal funds sold		9,500,000		9,500,000		7,800,000		7,800,000
Securities available for sale		9,754,110		9,754,110		17,582,096		17,582,096
Securities held to maturity		36,015,317		37,947,368		40,628,977		42,952,009
Net loans		214,161,315		217,168,148		198,628,138		203,388,811
Loans held for sale		167,500		169,852		521,450		530,189
Accrued interest receivable		927,860		927,860		924,193		924,193
Regulatory Stock		1,533,810		1,533,810		1,487,310		1,487,310
BOLI		3,000,000		3,000,000		—		—
Financial liabilities:
Deposits	$	247,348,761	$	246,138,000	$	241,723,814	$	244,156,000
Federal Home Loan Bank advances		6,845,342		6,906,000		3,444,805		3,828,000
Short term borrowings		3,730,000		3,730,000		4,365,000		4,365,000
Accrued interest payable		151,357		151,357		162,672		162,672

Financial instruments are defined as cash, evidence of ownership interest in an entity, or a contract which creates an obligation or right to receive or deliver cash or another financial instrument from/to a second entity on potentially favorable or unfavorable terms.

-20-

18. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS (CONTINUED)

Fair value is defined as the amount at which a financial instrument could be exchanged in a current transaction between willing parties other than in a forced or liquidation sale. If a quoted market price is available for a financial instrument, the estimated fair value would be calculated based upon the market price per trading unit of the instrument.

If no readily available market exists, the fair value estimates for financial instruments should be based upon management’s judgment regarding current economic conditions, interest rate risk, expected cash flows, future estimated losses, and other factors as determined through various option pricing formulas or simulation modeling. As many of these assumptions result from judgments made by management based upon estimates which are inherently uncertain, the resulting estimated fair values may not be indicative of the amount realizable in the sale of a particular financial instrument. In addition, changes in assumptions on which the estimated fair values are based may have a significant impact on the resulting estimated fair values.

As certain assets and liabilities such as deferred tax assets and liabilities, premises and equipment and many other operational elements of the Company, are not considered financial instruments, but have value, this estimated fair value of financial instruments would not represent the full market value of the Company.

The Company employed simulation modeling in determining the estimated fair value of financial instruments for which quoted market prices were not available based upon the following assumptions:

Cash and Due from Banks, Federal Funds Sold, Accrued Interest Receivable, Regulatory Stock, BOLI, Short-Term Borrowings, and Accrued Interest Payable

The fair value approximates the current carrying value.

Investment Securities and Loans Held for Sale

The fair value of investment securities and loans held for sale are equal to the available quoted market price. If no quoted market price is available, fair value is estimated using the quoted market price for similar securities.

Loans, Deposits, and Federal Home Loan Bank Advances

The fair value of loans is estimated by discounting the future cash flows using a simulation model which estimates future cash flows and constructs discount rates that consider reinvestment opportunities, operating expenses, non-interest income, credit quality, and prepayment risk. Demand, savings, and money market deposit accounts are valued at the amount payable on demand as of year end. Fair values for time deposits and Federal Home Loan Bank advances are estimated using a discounted cash flow calculation that applies contractual costs currently being offered in the existing portfolio to current market rates being offered for deposits and borrowings of similar remaining maturities.

Commitments to Extend Credit and Standby Letters of Credit

These financial instruments are generally not subject to sale, and estimated fair values are not readily available. The carrying value, represented by the net deferred fee arising from the unrecognized commitment or letter of credit, and the fair value, determined by discounting the remaining contractual fee over the term of the commitment using fees currently charged to enter into similar agreements with similar credit risk, are not considered material for disclosure. The contractual amounts of unfunded commitments and letters of credit are presented previously in the commitments and contingent liabilities note.

-21-

19. PARENT COMPANY

The following are parent only condensed financial statements:

CONDENSED BALANCE SHEET

	December 31,
	2004		2003
ASSETS
Cash	$	104,802	$	270,610
Investment in bank subsidiary		35,254,115		33,790,944
Federal income tax receivable		17		—
Total assets	$	35,358,934	$	34,061,554
LIABILITIES AND SHAREHOLDERS’ EQUITY
Shareholders’ equity	$	35,358,934	$	34,061,554
Total liabilities and shareholders’ equity	$	35,358,934	$	34,061,554

CONDENSED STATEMENT OF INCOME

	Year Ended December 31,
	2004			2003			2002
INCOME
Dividends from bank subsidiary	$	1,825,000		$	3,110,000		$	1,775,000
Operating expenses		50			50			50
Income before income taxes		1,824,950			3,109,950			1,774,950
Income tax benefit		(17	)		(17	)		(17	)
Income before equity in undistributed net income of subsidiary		1,824,967			3,109,967			1,774,967
Equity in undistributed net income of subsidiary		1,594,441			98,853			1,442,577
NET INCOME	$	3,419,408		$	3,208,820		$	3,217,544

-22-

19. PARENT COMPANY (CONTINUED)

CONDENSED STATEMENT OF CASH FLOWS

	Year Ended December 31,
	2004			2003			2002
OPERATING ACTIVITIES
Net income	$	3,419,408		$	3,208,820		$	3,217,544
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed net income of subsidiary		(1,594,441	)		(98,853	)		(1,442,577	)
(Increase) decrease in other assets		(17	)		—			—
Net cash provided by operating activities		1,824,950			3,109,967			1,774,967
FINANCING ACTIVITIES
Purchase of treasury shares		(699,614	)		(1,741,534	)		(892,363	)
Dividends paid		(1,291,144	)		(1,240,872	)		(1,200,310	)
Net cash used in financing activities		(1,990,758	)		(2,982,406	)		(2,092,673	)
INCREASE (DECREASE) IN CASH		(165,808	)		127,561			(317,706	)
CASH AT BEGINNING OF YEAR		270,610			143,049			460,755
CASH AT END OF YEAR	$	104,802		$	270,610		$	143,049

-23-

20. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

(IN THOUSANDS EXCEPT PER SHARE DATA)

	Three Months Ended
	March 2004		June 2004		September 2004		December 2004
Total interest income	$	3,386	$	3,435	$	3,522	$	3,690
Total interest expense		812		779		817		856
Net interest income		2,574		2,656		2,705		2,834
Provision for loan losses		90		30		30		75
Net interest income after provision for loans losses		2,484		2,626		2,675		2,759
Total other income		245		250		262		258
Total other expense		1,746		1,883		1,708		1,821
Income before income taxes		983		993		1,229		1,196
Income taxes		210		211		282		279
Net income	$	773	$	782	$	947	$	917
Per share data:
Net earnings	$	1.16	$	1.18	$	1.43	$	1.39
Weighted average shares outstanding		664,369		662,919		661,644		660,727

-24-

20. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)(CONTINUED)

(IN THOUSANDS EXCEPT PER SHARE DATA)

	Three Months Ended
	March 2003		June 2003		September 2003		December 2003
Total interest income	$	3,653	$	3,605	$	3,518	$	3,508
Total interest expense		1,124		1,046		959		888
Net interest income		2,529		2,559		2,559		2,620
Provision for loan losses		105		105		90		90
Net interest income after provision for loans losses		2,424		2,454		2,469		2,530
Total other income		245		329		301		245
Total other expense		1,721		1,806		1,697		1,822
Income before income taxes		948		977		1,073		953
Income taxes		196		207		234		105
Net income	$	752	$	770	$	839	$	848
Per share data:
Net earnings	$	1.10	$	1.14	$	1.24	$	1.27
Weighted average shares outstanding		682,158		677,089		676,788		669,484

-25-

EX-31.1

Exhibit 31.1

SECTION 302 CERTIFICATION

I, Luther Proper, Chief Executive Officer, of Killbuck Bancshares, Inc., certify that:

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

2. Based on my knowledge, this annual 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 annual 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 officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13A-14 and 15d-14) for the registrant and have:

(a) designed such disclosure controls and procedures 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) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the “Evaluation Date”); and

(c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, 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 in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officer and I have indicated in this report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: March 14, 2005	/s/ Luther Proper
	Signature/Title

EX-31.2

Exhibit 31.2

SECTION 302 CERTIFICATION

I, Diane Knowles, Chief Financial Officer, of Killbuck Bancshares, Inc., certify that:

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

2. Based on my knowledge, this annual 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 officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13A-14 and 15d-14) for the registrant and have:

a. designed such disclosure controls and procedures 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. evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the “Evaluation Date”); and

c. presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, 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 in the design or operation of internal controls which could adversely affect he registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officer and I have indicated in this report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: March 14, 2005	/s/ Diane Knowles
	Signature/Title

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ENACTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Killbuck Bancshares, Inc. (the “Company”) on Form 10-K for the period ending December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Luther E. Proper, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

By:	/s/ Luther E. Proper
	Luther E. Proper
	Chief Executive Officer
	March 14, 2005

A signed original of this written statement required by Section 906 has been provided to Killbuck Bancshares, Inc. and will be retained by Killbuck Bancshares, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ENACTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Killbuck Bancshares, Inc. (the “Company”) on Form 10-K for the period ending December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Diane Knowles, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

By:	/s/ Diane S. Knowles
	Diane S. Knowles
	Chief Financial Officer
	March 14, 2005

A signed original of this written statement required by Section 906 has been provided to Killbuck Bancshares, Inc. and will be retained by Killbuck Bancshares, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.