Killbuck Bancshares (KLIB) 10-Q 2008 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarter Ended June 30, 2008

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF SECURITIES EXCHANGE ACT OF 1934

Commission File Number 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 N. Main Street, Killbuck, OH 44637

(Address of principal executive offices and zip code)

(330) 276-2771

(Registrant’s telephone number, including area code)

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

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

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x

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

State the number of shares outstanding for each of the issuer’s classes of common equity as of the latest practicable date:

Class: Common Stock, no par value

Outstanding at July 31, 2008: 626,841

KILLBUCK BANCSHARES, INC.

Index

		Page Number
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):
	Consolidated Balance Sheet as of June 30, 2008 and December 31, 2007	3
	Consolidated Statement of Income for the six months ended June 30, 2008 and 2007	4
	Consolidated Statement of Income for the three months ended June 30, 2008 and 2007	5
	Consolidated Statement of Changes In Shareholders’ Equity for the six months ended June 30, 2008	6
	Consolidated Statement of Cash Flows for the six months ended June 30, 2008 and 2007	7
	Notes to Unaudited Consolidated Financial Statements	8-10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11-20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.	Controls and Procedures	21
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 3.	Default Upon Senior Securities	22
Item 4.	Submissions of Matters to a Vote of Security Holders	22-23
Item 5.	Other Information	23
Item 6.	Exhibits	23
SIGNATURES		24

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Killbuck Bancshares, Inc.

CONSOLIDATED BALANCE SHEET (UNAUDITED)

	June 30, 2008			December 31, 2007
ASSETS
Cash and cash equivalents:
Cash and amounts due from depository institutions	$	10,920,127		$	11,794,750
Federal funds sold		28,080,000			29,378,000
Total cash and cash equivalents		39,000,127			41,172,750
Investment securities:
Securities available for sale		53,532,659			54,115,975
Securities held to maturity (fair value of $31,550,721 and $30,247,416)		31,133,967			29,552,217
Total investment securities		84,666,626			83,668,192
Loans (net of allowance for loan losses of $2,486,212 and $2,510,011)		198,233,597			196,519,881
Loans held for sale		—			170,000
Premises and equipment, net		6,510,487			6,537,553
Accrued interest receivable		1,442,862			1,589,899
Goodwill, net		1,329,249			1,329,249
Other assets		7,665,305			5,349,524
Total assets	$	338,848,253		$	336,337,048
LIABILITIES
Deposits:
Noninterest bearing demand	$	50,171,932		$	51,195,017
Interest bearing demand		27,101,463			27,475,379
Money market		20,356,698			16,306,095
Savings		38,569,619			37,467,917
Time		151,918,756			153,006,933
Total deposits		288,118,468			285,451,341
Short-term borrowings		5,510,000			5,745,000
Federal Home Loan Bank advances		2,179,092			2,536,851
Accrued interest and other liabilities		1,063,338			1,486,215
Total liabilities		296,870,898			295,219,407
SHAREHOLDERS’ EQUITY
Common stock – No par value: 1,000,000 shares authorized, 718,431 issued		8,846,670			8,846,670
Retained earnings		41,252,028			39,848,570
Accumulated other comprehensive loss		232,527			498,651
Treasury stock, at cost (91,214 and 88,849 shares)		(8,353,870	)		(8,076,250	)
Total shareholders’ equity		41,977,355			41,117,641
Total liabilities and shareholders’ equity	$	338,848,253		$	336,337,048

See accompanying notes to the unaudited consolidated financial statements.

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Killbuck Bancshares, Inc. and Subsidiary

CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

	Six Months Ended June 30,
	2008		2007
INTEREST INCOME
Interest and fees on loans	$	7,415,755	$	8,504,788
Federal funds sold		332,011		579,819
Investment securities:
Taxable		1,413,447		1,010,808
Exempt from federal income tax		653,740		687,614
Total interest income		9,814,953		10,783,029
INTEREST EXPENSE
Deposits		3,539,243		3,722,540
Short term borrowings		11,290		74,969
Federal Home Loan Bank advances		67,414		86,670
Total interest expense		3,617,947		3,884,179
NET INTEREST INCOME		6,197,006		6,898,850
Provision for loan losses		—		67,119
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		6,197,006		6,831,731
NON INTEREST INCOME
Service charges on deposit accounts		180,494		166,952
NSF & OD fees, net		424,778		383,163
Gain on sale of loans, net		23,837		4,370
BOLI		340,513		69,997
Other income		78,383		74,979
Total non interest income		1,048,005		699,461
NON INTEREST EXPENSE
Salaries and employee benefits		2,509,789		2,407,870
Occupancy and equipment expense		543,238		488,333
Professional fees		183,260		141,939
Franchise tax		248,540		222,170
Other expenses		805,642		808,238
Total non interest expense		4,290,469		4,068,550
INCOME BEFORE INCOME TAXES		2,954,542		3,462,642
Income taxes		641,620		982,066
NET INCOME	$	2,312,922	$	2,480,576
Earning per common share	$	3.68	$	3.89
Dividend per share	$	1.45	$	1.35
Weighted Average shares outstanding		628,832		637,350

See accompanying notes to the unaudited consolidated financial statements.

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Killbuck Bancshares, Inc. and Subsidiary

CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

	Three Months Ended June 30,
	2008		2007
INTEREST INCOME
Interest and fees on loans	$	3,573,113	$	4,339,331
Federal funds sold		134,998		288,543
Investment securities:
Taxable		716,642		502,431
Exempt from federal income tax		309,116		352,621
Total interest income		4,733,869		5,482,926
INTEREST EXPENSE
Deposits		1,657,892		1,933,508
Short term borrowings		2,990		36,500
Federal Home Loan Bank advances		32,580		42,140
Total interest expense		1,693,462		2,012,148
NET INTEREST INCOME		3,040,407		3,470,778
Provision for loan losses		—		61,899
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		3,040,407		3,408,879
NON INTEREST INCOME
Service charges on deposit accounts		95,203		87,382
NSF & OD fees, net		214,800		199,079
Gain on sale of loans, net		7,634		2,406
BOLI		291,434		36,237
Other income		38,966		43,971
Total non interest income		648,037		369,075
NON INTEREST EXPENSE
Salaries and employee benefits		1,136,191		1,087,390
Occupancy and equipment expense		264,377		240,802
Professional fees		97,010		73,018
Franchise tax		125,490		105,120
Other expenses		414,158		399,176
Total non interest expense		2,037,226		1,905,506
INCOME BEFORE INCOME TAXES		1,651,218		1,872,448
Income taxes		325,836		559,707
NET INCOME	$	1,325,382	$	1,312,741
Earning per common share	$	2.11	$	2.06
Dividend per share	$	1.45	$	1.35
Weighted Average shares outstanding		628,247		636,455

See accompanying notes to the unaudited consolidated financial statements.

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Killbuck Bancshares, Inc. and Subsidiary

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)

SIX MONTHS ENDED JUNE 30, 2008

	Common Stock		Retained Earnings			Accumulated Other Comprehensive Income			Treasury Stock			Total Shareholders’ Equity			Comprehensive Income (Loss)
Balance, December 31, 2007	$	8,846,670	$	39,848,570		$	498,651		$	(8,076,250	)	$	41,117,641
Net income				2,312,922									2,312,922		$	2,312,922
Purchase of Treasury stock, at cost (2,365 shares)										(277,620	)		(277,620	)
Cash dividends paid ($1.45 per share)				(909,464	)								(909,464	)
Other comprehensive income:
Net unrealized (loss) on securities, net of tax benefit $111,677							(266,124	)					(266,124	)		(266,124	)
Comprehensive income															$	2,046,798
Balance, June 30, 2008	$	8,846,670	$	41,252,028		$	232,527		$	(8,353,870	)	$	41,977,355

See accompanying notes to the unaudited consolidated financial statements.

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Killbuck Bancshares, Inc. and Subsidiary

CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

	Six Months Ended June 30,
	2008			2007
OPERATING ACTIVITIES
Net income	$	2,312,922		$	2,480,576
Adjustments to reconcile net income to net cash provided by
Operating activities:
Provision for loan losses		—			67,119
Gain on sale of loans		(23,837	)		(4,370	)
Provision for depreciation and amortization		250,076			190,958
Origination of loans held for sale		(2,705,600	)		(2,938,580	)
Proceeds from the sale of loans		2,899,437			2,743,450
Federal Home Loan Bank stock dividend		—			(19,700	)
Bank Owned Life Insurance (BOLI) benefit income		(234,396	)		—
Net change in:
Accrued interest and other assets		(497,935	)		(446,832	)
Accrued expenses and other liabilities		(143,528	)		(105,457	)
Net cash provided by operating activities		1,857,139			1,967,164
INVESTING ACTIVITIES
Investment securities available for sale:
Proceeds from maturities and repayments		12,107,505			6,141,967
Purchases		(11,902,043	)		(9,947,313	)
Investment securities held to maturity:
Proceeds from maturities and repayments		360,054			351,225
Purchases		(1,956,330	)		(2,827,923	)
Net (increase) in loans		(1,713,716	)		(10,674,597	)
Net Disposal of foreclosed real estate		—			80,000
Bank Owned Life Insurance (BOLI)
Proceeds		395,915			—
Purchases		(2,000,000	)		—
Net Purchase of premises and equipment		(208,431	)		(389,133	)
Net cash (used in) investing activities		(4,917,046	)		(17,265,774	)
FINANCING ACTIVITIES
Net increase (decrease) in demand, money market and savings deposits		3,755,304			(4,477,829	)
Net (decrease) increase in time deposits		(1,088,177	)		13,012,930
Repayments of Federal Home Loan Bank advances		(357,759	)		(380,586	)
Net (decrease) in short term borrowings		(235,000	)		(705,281	)
Purchase of Treasury stock		(277,620	)		(266,043	)
Dividends paid		(909,464	)		(858,975	)
Net cash provided by financing activities		887,284			6,324,216
Net decrease in cash and cash equivalents		(2,172,623	)		(8,974,394	)
Cash and cash equivalents at beginning of period		41,172,750			42,705,362
Cash and cash equivalents at end of period	$	39,000,127		$	33,730,968
Supplemental Disclosures of Cash Flows Information
Cash Paid During the Period For:
Interest on deposits and borrowings	$	3,731,100		$	3,860,460
Income taxes	$	644,193		$	966,760

See accompanying notes to the unaudited consolidated financial statements.

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Killbuck Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 – BASIS OF PRESENTATION

The consolidated financial statements include the accounts of Killbuck Bancshares, Inc. (the “Company”) and its wholly-owned subsidiary Killbuck Savings Bank Company (the “Bank”). All significant intercompany balances and transactions have been eliminated in the consolidation.

The accompanying reviewed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not necessarily include all information that would be included in audited financial statements. The information furnished reflects all adjustments, which are, in the opinion of management, necessary for a fair statement of the results of operations. All such adjustments are of a normal recurring nature. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.

These statements should be read in conjunction with the consolidated statements of and for the year ended December 31, 2007 and related notes which are included on the Form 10-K (file no. 000-24147).

NOTE 2 – 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 number of shares for the period.

NOTE 3 – COMPREHENSIVE INCOME

The Company is required to present comprehensive income and its components in a full set of general purpose financial statements. Comprehensive income is comprised of the following:

	Six Months Ended June 30, 2008			Six Months Ended June 30, 2007
Net income	$	2,312,922		$	2,480,576
Other comprehensive income:
Net unrealized loss on securities		(377,801	)		(189,851	)
Tax effect		111,677			64,549
Total comprehensive income	$	2,046,798		$	2,355,274
	Three Months Ended June 30, 2008			Three Months Ended June 30, 2007
Net income	$	1,325,382		$	1,312,741
Other comprehensive income:
Net unrealized loss on securities		(949,785	)		(237,443	)
Tax effect		306,152			80,730
Total comprehensive income	$	681,749		$	1,156,028

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NOTE 4 – FAIR VALUE MEASUREMENTS (SFAS No. 157)

Effective January 1, 2008, the Company adopted SFAS No. 157, which, among other things, requires enhanced disclosures about assets and liabilities carried at fair value. SFAS No. 157 establishes a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring assets and liabilities at fair value. The three broad levels defined by SFAS No. 157 hierarchy are as follows:

Level I:	Quoted prices are available in active markets for identical assets or liabilities as of the reported date.
Level II:	Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities include items for which quoted prices are available but traded less frequently, and items that are fair valued using other financial instruments, the parameters of which can be directly observed.
Level III:	Assets and liabilities that have little to no pricing observability as of the reported date. These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.

The following table presents the assets reported on the consolidated statements of financial condition at their fair value as of June 30, 2008 by level within the fair value hierarchy. As required by SFAS No. 157, financial assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

	June 30, 2008
	Level I		Level II		Level III		Total
	(In thousands)
Assets:
Securities available for sale	$	—	$	53,532,659	$	—	$	53,532,659
Loans held for sale		—		—		—		—

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NOTE 5 – RECENT ACCOUNTING PRONOUNCEMENTS

In December 2007, the FASB issued FAS No. 141 (revised 2007),Business Combinations (“FAS 141(R)”), which establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in an acquiree, including the recognition and measurement of goodwill acquired in a business combination. FAS No. 141(R) is effective for fiscal years beginning on or after December 15, 2008. Earlier adoption is prohibited. The adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position.

In December 2007, the FASB issued FAS No. 160,Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51. FAS No. 160 amends ARB No. 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary, which is sometimes referred to as minority interest, is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. Among other requirements, this statement requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest. It also requires disclosure, on the face of the consolidated income statement, of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest. FAS No. 160 is effective for fiscal years beginning on or after December 15, 2008. Earlier adoption is prohibited. The adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position.

In May 2008, the FASB issued FAS No. 162,The Hierarchy of Generally Accepted Accounting Principles. FAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (the GAAP hierarchy). FAS No. 162 will become effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411,The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The Company does not expect the adoption of FAS No. 162 to have a material effect on its results of operations and financial position.

In April 2008, the FASB issued FASB Staff Position No. 142-3,Determination of the Useful Life of Intangible Assets(“FSP 142-3”). FSP 142-3 amends the factors that should be considered in developing assumptions about renewal or extension used in estimating the useful life of a recognized intangible asset under FAS No. 142, Goodwill and Other Intangible Assets. This standard is intended to improve the consistency between the useful life of a recognized intangible asset under FAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under FAS No. 141R and other GAAP. FSP 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008. The measurement provisions of this standard will apply only to intangible assets of the Company acquired after the effective date.

In June 2008, the FASB issued FASB Staff Position (FSP) No. EITF 03-6-1,Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities, to clarify that instruments granted in share-based payment transactions can be participating securities prior to the requisite service having been rendered. A basic principle of the FSP is that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are to be included in the computation of EPS pursuant to the two-class method. The provisions of this FSP are effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. All prior-period EPS data presented (including interim financial statements, summaries of earnings, and selected financial data) are required to be adjusted retrospectively to conform with the provisions of the FSP. The adoption of this FSP is not expected to have a material effect on the Company’s results of operations or financial position.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

The Private Securities Litigation Reform Act of 1995 contains safe harbor provisions regarding forward-looking statements. When used in this discussion, the words “believes”, “anticipates”, “contemplates”, “expects”, and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from those projected. Those risks and uncertainties include changes in interest rates, risks associated with the ability to control costs and expenses, and general economic conditions. Killbuck Bancshares, Inc. undertakes no obligation to publicly release the results of any revisions to those forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

The Company conducts no significant business or operations of its own other than holding all of the outstanding stock of the Killbuck Savings Bank Company. As a result, references to the Company generally refer to the Bank unless the context indicates otherwise.

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 filed with the Commission as part of the Company’s annual report on Form 10-K for its fiscal year ended December 31, 2007. 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 involve 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 the consolidated financial statements filed with the Commission as part of the Company’s annual report on Form 10-K for its fiscal year ended December 31, 2007.

Goodwill and Other Intangible Assets—As discussed in Note 7 of the consolidated financial statements, filed with the Commission as part of the Company’s annual report on Form 10-K for its fiscal year ended December 31, 2007; 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 filed with the Commission as part of the Company’s annual report on Form 10-K for its fiscal year ended December 31, 2007.

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Financial Condition

Total assets at June 30, 2008 were $338,848,000 compared to $336,337,000 at December 31, 2007.

Cash and cash equivalents decreased by $2,173,000 or 5.3% from December 31, 2007, to June 30, 2008, with federal funds sold decreasing $1,298,000. The decrease was used to partially fund the increase in the Bank’s loan portfolio.

Investment securities available for sale decreased by $583,000 or 1.1% from December 31, 2007, to June 30, 2008 due to an increase in the securities that were called and a lack of suitable securities to purchase for the portfolio. Investments held to maturity increased $1,582,000 or 5.4% due to some attractive municipal securities available for the portfolio.

Net loans increased by $1,714,000 or .9% from December 31, 2007 to June 30, 2008. A decrease of $3,231,000 occurred in the real estate loan category, which is attributable primarily to residential real estate of $2,598,000 with additional decreases in both commercial and farm lending of $460,000 and $583,000 respectively, and an increase of $410,000 in construction loan activity. Management believes the residential loan activities have slowed significantly in the Bank’s lending area. Commercial and other loan balances increased by $5,046,000 due to continued inventory growth, which will start to pay down in the third quarter. The Consumer loan balances decreased by $101,000.

Total deposits at June 30, 2008 were $288,118,000 compared to $285,451,000 at December 31, 2007. Money market accounts and savings accounts increased $4,051,000 and $1,102,000, respectively, while demand accounts and time deposits accounts decreased $1,397,000 and $1,088,000 respectively. Management attributes these changes to the changes in interest rates. A Money Market account is a short term investment that customers use while waiting until the interest rates meet their expectations for longer term Time deposits. Management believes the demand accounts decreases are attributable to normal fluctuations due to customer usage.

Federal Home Loan Bank advances decreased $358,000 due to maturities and scheduled repayments, and short-term borrowings decreased $235,000 at June 30, 2008 from December 31, 2007.

Shareholders’ Equity increased by $859,000 or 2.1%, which was mainly due to earnings of $2,313,000 for the first six months of 2008 decreased by a $266,000 unrealized loss on securities included in other comprehensive income, dividends paid totaling $910,000 and by the purchase of Treasury stock for $278,000. Treasury stock purchases are monitored against the Company’s Strategic Plan and the goals set forth in the plan. The Treasury stock purchases have not exceeded the Strategic Plan’s guidelines for the first six months of 2008. Management monitors risk-based capital and leveraged capital ratios in order to assess compliance of the regulatory guidelines. At June 30, 2008, the total capital ratio was 18.84%; the Tier I capital ratio was 17.75%, and the leverage ratio was 11.97%, compared to regulatory capital requirements of 8.00%, 4.00% and 4.00% respectively. These ratios are well in excess of regulatory capital requirements.

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RESULTS OF OPERATIONS

Comparison of the Six Months Ended June 30, 2008 and 2007

Net income for the six-month period ended June 30, 2008, was $2,313,000, a decrease of $168,000 or 6.8% from the $2,481,000 reported at June 30, 2007.

Total interest income of approximately $9,815,000 for the six-month period ended June 30, 2008, compares to $10,783,000 for the same period in 2007, a decrease of $968,000 or 9.0%. The decrease in total interest income is primarily attributable to a decrease in interest and fees on loans due primarily to a decrease in the average yield on the underlying principle balances. See “Average Balance Sheet” for the six-month periods ended June 30, 2008 and 2007. The yield on loans decreased to 7.36% for the first six months of 2008 compared to 8.35% for the first six months of 2007. Average loan balances were $201,399,000 for the first six months of 2008 compared to $203,821,000 for the first six months of 2007. The increase in interest on taxable investment securities partially offsets the interest decrease from loans. The interest on taxable investment securities of $1,413,000 for 2008 compares to $1,011,000 for 2007. The increase in investment income is primarily attributable to an increase in volume. Average investment balances were $53,382,000 compared to $37,478,000 and the yields were 5.11% compared to 5.14% for the first six months of 2008 and 2007 respectively.

Total interest expense of $3,618,000 for the six-month period ending June 30, 2008 represents a decrease of $266,000 from the $3,884,000 reported for the same six-month period in 2007. The decrease in interest expense on deposits of $183,000 is due mainly to a decrease in interest rates. The decreases in the average rate paid on the underlying principle balances of the interest bearing liabilities are due mainly to the Time deposits. The cost of Time deposits was 4.11% compared to 4.59% for this six-month period of 2008 and 2007, respectively. The cost on interest bearing deposits was 2.97%, compared to 3.33% for the six-month periods of 2008 and 2007 respectively. Average interest-bearing deposits were $238,682,000 for the first six months of 2008 compared to $223,821,000 for the first six months of 2007. See “Average Balance Sheet” for the six-month periods ended June 30, 2008 and 2007.

Net interest income of $6,197,000 for the six months ended June 30, 2008, compares to $6,899,000 for the same six-month period in 2007, a decrease of $702,000 or 10.2%. Management anticipates interest rates will remain relatively stable for the remainder of 2008; therefore, the net interest margin is expected to begin stabilizing in 2008.

Total non-interest income for the six-month period ended June 30, 2008, of $1,048,000 compares to $699,000 for the same six-month period in 2007, an increase of $349,000 or 49.9%. The net Non-sufficient funds fees and overdraft fees increased $42,000 due to an increase in Non-sufficient funds activity. Gains on sale of loans increased $20,000. Bank Owned Life Insurance (BOLI) income increased $271,000 primarily due to a benefit payout of approximately $234,000. Approximately $35,000 of the increase is due to the additional $2 million Bank Owned Life Insurance (BOLI) purchased on certain Bank officers.

Total non-interest expense of $4,290,000 for the six months ended June 30, 2008, compares to $4,069,000 for the same six-month period in 2007. This represents an increase of $221,000 or 5.4%. Salary and employee benefits increased approximately $102,000. The expenses are due to normal increases in salaries and employee benefits. Occupancy and Equipment costs increased approximately $55,000; approximately $38,000 is due to increased depreciation expense on updated branch facilities and updated technologies in the computer network area in the last year. Approximately $9,000 of the increase was attributable to snow related expenses associated with more severe winter weather conditions in early 2008. Professional fees increased approximately $41,000, which includes additional auditing fees for SOX 404 compliance and other regulatory requirements such as Bank Secrecy Act and Gramm-Leach-Bliley Act, increasing regulatory examination costs, and legal expenses. Franchise tax expense to the State of Ohio increased approximately $27,000. The changes in the remaining expense accounts were attributable to increases/decreases in items that are normal and recurring in nature.

-13-

RESULTS OF OPERATIONS

Comparison of the Three Months Ended June 30, 2008 and 2007

Net income for the three-month period ended June 30, 2008, was $1,325,000, an increase of $12,000 or 0.9% from the $1,313,000 reported at June 30, 2007.

Total interest income of approximately $4,734,000 for the three-month period ended June 30, 2008, compares to $5,483,000 for the same period in 2007, a decrease of $749,000 or 13.7%. The decrease in total interest income is primarily attributable to a decrease in the loan category. Interest and fees on loans decreased $766,000 or 17.7% for the three-month period ended June 30, 2008 compared to the same period for 2007. The decrease in interest and fees on loans is due to both a decrease in the volume of principal loan balances and the yields earned on the underlying principle balances. Average loan balances were $202,567,000 compared to $207,517,000 and the yield was 7.06% compared to 8.36% for this three-month period of 2008 and 2007, respectively. See “Average Balance Sheet” for the three-month periods ended June 30, 2008 and 2007. The increase in interest on taxable investment securities of $217,000 was primarily attributable to an increase in the average balances outstanding of taxable investment securities of $52,768,000 for 2008 compared to $36,937,000 for 2007 and the yield was 5.24% compared to 5.13% for this three-month period of 2008 and 2007 respectively. See “Average Balance Sheet” for the three-month periods ended June 30, 2008 and 2007.

Total interest expense of $1,693,000 for the three-month period ending June 30, 2008, represents a decrease of $319,000 from the $2,012,000 reported for the same three-month period in 2007.

The decrease in interest expense on deposits of $276,000 is due mainly to the decreases in the average rate paid on the underlying principle balances of the interest bearing liabilities, specifically the Time deposits. The cost of Time deposits was 3.87% compared to 4.66% for this three-month period of 2008 and 2007, respectively and the cost of interest bearing deposits was 2.76% compared to 3.40% for this three-month period of 2008 and 2007 respectively. The average time deposits were $154,275,000 for this three-month period of 2008 compared to $142,318,000 for the same three months of 2007. Average interest-bearing deposits were $240,391,000 for this three-month period of 2008 compared to $227,673,000 for the same three months of 2007. See “Average Balance Sheet” for the three-month periods ended June 30, 2008 and 2007.

Net interest income of $3,040,000 for the three months ended June 30, 2008, compares to $3,471,000 for the same three-month period in 2007, a decrease of $431,000 or 12.4%. Management anticipates interest rates will remain relatively stable for the remainder of 2008; therefore, the net interest margin is expected to begin stabilizing in 2008.

Total non-interest income for the three-month period ended June 30, 2008, of $648,000 compares to $369,000 for the same three-month period in 2007, an increase of $279,000 or 75.6%. Non-sufficient funds (NSF) fees and Overdraft fees increased $16,000. Approximately $255,000 of the increase was due to income from the Bank-Owned Life Insurance (BOLI), of which, approximately $234,000 was due to a benefit payout; the remaining $21,000 was due to the additional $2 million purchased in the first quarter of 2008. The changes in the remaining income accounts were attributable to increases/decreases in items that are normal and recurring in nature

Total non-interest expense of $2,037,000 for the three months ended June 30, 2008, compares to $1,906,000 for the same three-month period in 2008. This represents an increase of $131,000 or 6.9%. Salary and employee benefits increased $49,000. The expense was due to normal recurring employee cost increase for salary and employee benefits and staff additions. Occupancy and equipment expenses increased $23,000 or 9.5%, of which, approximately $19,000 is due to increased depreciation expense on updated branch facilities and updated technologies in the computer network area in the last year. Franchise tax expense to the State of Ohio increased approximately $20,000. The changes in the remaining expense accounts were attributable to increases/decreases in items that are normal and recurring in nature.

-14-

Liquidity

Management monitors projected liquidity needs and determines the level desirable based in part on the Company’s commitments to make loans and management’s assessment of the Company’s ability to generate funds.

The primary sources of funds are deposits, repayment of loans, maturities of investments, funds provided from operations and advances from the FHLB of Cincinnati. While scheduled repayments of loans and maturities of investment securities are predictable sources of funds, deposit flows and loan repayments are greatly influenced by the general level of interest rates, economic conditions and competition. The Company uses its sources of funds to fund existing and future loan commitments, to fund maturing time deposits and demand deposit withdrawals, to invest in other interest-earning assets, to maintain liquidity, and to meet operating expenses.

Cash and amounts due from depository institutions and federal funds sold totaled $39,000,000 at June 30, 2008. These assets provide the primary source of liquidity for the Company. In addition, management has designated a portion of the investment portfolio, $53,533,000 as available for sale and has an available unused line of credit of $40,704,000 with the Federal Home Loan Bank of Cincinnati to provide additional sources of liquidity at June 30, 2008. As of June 30, 2008, the Company had commitments to fund loans of approximately $2,031,000 and unused lines of credit totaling $38,924,000.

Cash was provided during the six month period ended June 30, 2008, mainly from operating activities of $1.8 million, and the net increase in deposits of $2.7 million, the maturities and repayments of investment securities of $12.5 million, and the proceeds from a Bank Owned Life Insurance (BOLI) benefit payment of $.4 million. Cash was used during the six month period ended June 30, 2008, mainly to fund a net increase in loans of $1.7 million, for the purchase of investment securities of $13.9 million, to purchase an additional $2.0 million of Bank Owned Life Insurance (BOLI), and to reduce $.6 million in Federal Home Loan Bank advances and short-term borrowings. In addition, $.2 million was used to purchase equipment, $.3 million was used to purchase Treasury Stock, and $.9 million was used to pay dividends to shareholders. Cash and cash equivalents totaled $39.0 million at June 30, 2008, a decrease of $2.2 million from $41.2 million at December 31, 2007.

Management is not aware of any conditions, including any regulatory recommendations or requirements, which would adversely affect its liquidity or ability to meet its funding needs in the normal course of business.

-15-

Risk Elements

The table below presents information concerning nonperforming assets including nonaccrual loans, renegotiated loans, loans 90 days or more past due, other real estate loans and repossessed assets at June 30, 2008, and December 31, 2007. The Company ceased accruing interest on residential mortgages secured by real estate and consumer loans when principal or interest payments are delinquent 90 days or more. Commercial loans, that are 90 days or more past due, are reviewed by the Executive Vice President and the loan officer to determine whether they will be classified as nonperforming. These officers review various factors, which include, but are not limited to, the timing of the maturity of the loan in relation to the ability to collect, whether the loan is deemed to be well secured, whether the loan is in the process of collection, and the favorable results of the analysis of customer financial data. A nonperforming loan will only be re-classified as a performing loan when stringent criteria have been met. At the time the accrual of interest is discontinued, future income is recognized only when cash is received or the loan has been returned to performing loan status. Renegotiated loans are those loans which terms have been renegotiated to provide a reduction or deferral of principal or interest as of result of the deterioration of the borrower.

	June 30, 2008			December 31, 2007
	(dollars in thousands)
Loans on nonaccrual basis	$	108		$	839
Loans past due 90 days or more		—			—
Renegotiated loans		—			—
Total nonperforming loans	$	108		$	839
Other real estate		—			—
Repossessed assets		—			—
Total nonperforming assets	$	108		$	839
Nonperforming loans as a percent of total loans		0.05	%		0.14	%
Nonperforming loans as a percent of total assets		0.03	%		0.09	%
Nonperforming assets as a percent of total assets		0.03	%		0.09	%

Management monitors impaired loans on a continual basis. As of June 2008, impaired loans had no material effect on the Company’s financial position or results from operations.

The allowance for loan losses at June 30, 2008, totaled $2,486,000 or 1.24% of total loans as compared to $2,510,000 or 1.26% at December 31, 2007. Provisions for loan losses were $0 for the six months ended June 30, 2008 and $67,000 for the six months ended June 30, 2007.

The level of funding for the provision is a reflection of the overall loan portfolio. Nonperforming loans consist of approximately $81,000 in commercial real estate, $22,000 in one to four family residential mortgages, and $5,000 in consumer loans. The collateral requirements on such loans reduce the risk of potential losses to an acceptable level in management’s opinion.

Management performs a quarterly evaluation of the allowance for loan losses. The evaluation incorporates internal loan review, actual historical losses, as well as any negative economic trends in the local market. The evaluation is presented to and approved by the Board of Directors. Although the Company maintains its allowance for loan losses at a level that it considers to be adequate to provide for the inherent risk of loss in its portfolio, there can be no assurance that future losses will not exceed estimated amounts or that additional provisions for loan losses will not be required in future periods.

-16-

AVERAGE BALANCE SHEET

Average Balance Sheet for the Six-Month Period Ended June 30

The following table sets forth certain information relating to the Company’s average balance sheet and reflects the average yield on assets and average cost of liabilities for the periods indicated and the average yields earned and rates paid. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods presented. Average balances are derived from month-end balances. Management does not believe that the use of month-end balances instead of daily average balances has caused any material differences in the information presented.

	Period Ended
	2008							2007
	Average Balance			Interest		Yield/ Rate		Average Balance			Interest		Yield/ Rate
Assets
Interest Earnings Assets:
Loans (1)(2)(3)	$	201,399,245		$	7,415,755	7.36	%	$	203,820,981		$	8,504,788	8.35	%
Securities-taxable (4)		53,382,523			1,364,802	5.11	%		37,477,776			962,269	5.14	%
Securities-nontaxable (4)		30,234,021			653,740	4.32	%		31,298,166			687,614	4.39	%
Securities-Equity (4,5)		1,689,532			48,645	5.76	%		1,680,486			48,539	5.78	%
Federal funds sold		25,300,562			332,011	2.62	%		21,805,478			579,819	5.32	%
Total interest earnings assets		312,005,883			9,814,953	6.29	%		296,082,887			10,783,029	7.28	%
Noninterest earning assets:
Cash and due from other institutions		11,255,494							10,397,086
Premises and equipment, net		6,546,152							5,729,065
Accrued interest		1,439,102							1,457,562
Other assets		7,560,007							5,811,910
Less allowance for loan losses		(2,499,920	)						(2,426,394	)
Total noninterest earnings assets		24,300,835							20,969,229
Total Assets	$	336,306,718						$	317,052,116
Liabilities and Shareholders’ Equity
Interest bearing liabilities:
Interest bearing demand		26,371,723			56,718	0.43	%	$	27,597,021		$	80,360	0.58	%
Money market accounts		20,137,976			173,661	1.72	%		19,360,582			256,463	2.65	%
Savings deposits		38,116,901			142,659	0.75	%		37,647,413			190,778	1.01	%
Time deposits		154,055,664			3,166,205	4.11	%		139,215,991			3,194,939	4.59	%
Short term borrowings		5,298,620			11,290	0.43	%		5,031,655			74,969	2.98	%
Federal Home Loan Advances		2,334,680			67,414	5.78	%		3,029,302			86,670	5.72	%
Total interest bearing liabilities		246,315,564			3,617,947	2.94	%		231,881,964			3,884,179	3.35	%
Noninterest bearing liabilities:
Demand deposits		47,248,392							43,674,497
Accrued expenses and other liabilities		2,779,012							2,617,841
Total noninterest bearing liabilities		50,027,404							46,292,338
Shareholders’ equity		39,963,750							38,877,814
Total Liabilities and Shareholders’ Equity	$	336,306,718						$	317,052,116
Net interest income				$	6,197,006						$	6,898,850
Interest rate spread (6)						3.35	%						3.93	%
Net yield on interest earning assets (7)						3.97	%						4.66	%

(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 $186,000 and $166,000 in 2008 and 2007, 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 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.

-17-

AVERAGE BALANCE SHEET

Average Balance Sheet for the Three-Month Period Ended June 30

The following table sets forth certain information relating to the Company’s average balance sheet and reflects the average yield on assets and average cost of liabilities for the periods indicated and the average yields earned and rates paid. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods presented. Average balances are derived from month-end balances. Management does not believe that the use of month-end balances instead of daily average balances has caused any material differences in the information presented.

	Period Ended
	2008							2007
	Average Balance			Interest		Yield/ Rate		Average Balance			Interest		Yield/ Rate
Assets
Interest Earnings Assets:
Loans (1)(2)(3)	$	202,567,482		$	3,573,113	7.06	%	$	207,517,313		$	4,339,331	8.36	%
Securities-taxable (4)		52,767,906			691,380	5.24	%		36,936,759			473,637	5.13	%
Securities-nontaxable (4)		30,661,178			309,116	4.03	%		32,133,770			352,621	4.39	%
Securities-Equity (4,5)		1,698,155			25,262	5.95	%		1,680,910			28,794	6.85	%
Federal funds sold		26,151,679			134,998	2.06	%		22,001,325			288,543	5.25	%
Total interest earnings assets		313,846,400			4,733,869	6.03	%		300,270,077			5,482,926	7.30	%
Noninterest earning assets:
Cash and due from other institutions	$	11,506,796							10,659,480
Premises and equipment, net		6,543,027							5,760,112
Accrued interest		1,501,470							1,572,772
Other assets		7,958,378							5,855,449
Less allowance for loan losses		(2,495,839	)						(2,451,183	)
Total noninterest earnings assets		25,013,832							21,396,630
Total Assets	$	338,860,232						$	321,666,707
Liabilities and Shareholders’ Equity
Interest bearing liabilities:
Interest bearing demand	$	26,648,190		$	25,882	0.39	%	$	26,910,123		$	39,714	0.59	%
Money market accounts		21,225,595			78,945	1.49	%		20,633,349			138,790	2.69	%
Savings deposits		38,242,265			59,630	0.62	%		37,811,948			96,594	1.02	%
Time deposits		154,275,126			1,493,435	3.87	%		142,317,491			1,658,410	4.66	%
Short term borrowings		5,220,867			2,990	0.23	%		4,964,434			36,500	2.94	%
Federal Home Loan Advances		2,251,002			32,580	5.79	%		2,942,608			42,140	5.73	%
Total interest bearing liabilities		247,863,045			1,693,462	2.73	%		235,579,953			2,012,148	3.42	%
Noninterest bearing liabilities:
Demand deposits		47,919,665							44,158,663
Accrued expenses and other liabilities		3,410,318							3,322,437
Total noninterest bearing liabilities		51,329,983							47,481,100
Shareholders’ equity		39,667,204							38,605,654
Total Liabilities and Shareholders’ Equity	$	338,860,232						$	321,666,707
Net interest income				$	3,040,407						$	3,470,778
Interest rate spread (6)						3.30	%						3.88	%
Net yield on interest earning assets (7)						3.88	%						4.62	%

(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 $100,000 and $82,000 in 2008 and 2007, 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 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.

-18-

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).

	Six-Month Period Ended June 2008 Compared to 2007 Increase (Decrease) Due To
	Volume			Rate			Net
Interest income
Loans	$	(202	)	$	(887	)	$	(1,089	)
Securities-taxable		817			(414	)		403
Securities-nontaxable		(47	)		13			(34	)
Securities-equities		1			(1	)		—
Federal funds sold		186			(434	)		(248	)
Total interest earning
Assets		755			(1,723	)		(968	)
Interest expense
Interest bearing demand		(7	)		(16	)		(23	)
Money market accounts		21			(104	)		(83	)
Savings deposits		5			(53	)		(48	)
Time deposits		681			(710	)		(29	)
Short-term borrowing		8			(72	)		(64	)
Federal Home Loan Bank
Advances		(40	)		21			(19	)
Total interest bearing
Liabilities		668			(934	)		(266	)
Net change in net interest income	$	87		$	(789	)	$	(702	)

-19-

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).

	Three-Month Period Ended June 2008 Compared to 2007 Increase (Decrease) Due To
	Volume			Rate			Net
Interest income
Loans	$	(414	)	$	(352	)	$	(766	)
Securities-taxable		812			(595	)		217
Securities-nontaxable		(65	)		21			(44	)
Securities-equities		1			(5	)		(4	)
Federal funds sold		218			(371	)		(153	)
Total interest earning
Assets		552			(1,302	)		(750	)
Interest expense
Interest bearing demand		(2	)		(12	)		(14	)
Money market accounts		16			(76	)		(60	)
Savings deposits		4			(41	)		(37	)
Time deposits		557			(722	)		(165	)
Short-term borrowing		8			(41	)		(33	)
Federal Home Loan Bank
Advances		(40	)		30			(10	)
Total interest bearing
Liabilities		543			(862	)		(319	)
Net change in net interest income	$	9		$	(440	)	$	(431	)

-20-

Item 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

Not Applicable to Smaller Reporting Companies.

Item 4 – 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-15. 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 June 30, 2008 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

-21-

Part II – OTHER INFORMATION

Item 1—Legal Proceedings

None

Item 1A—Risk Factors

There have been no material changes from the risk factors disclosed in the registrant’s form 10K.

Item 2—Unregistered sales of equity securities and use of proceeds

The Company did not engage in any unregistered sales of its securities during the quarter ended June 30, 2008.

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
April 1 – 30, 2008	360	$	114.44	N/A	N/A
May 1 – 31, 2008	—	$	—	N/A	N/A
June 1 – 30, 2008	—	$	—	N/A	N/A
Total (1)	360	$	114.44	N/A	N/A

(1) 360 shares of common stock were purchased by Killbuck Bancshares in open-market transactions.

Item 3—Default upon senior securities

None

Item 4—Results of votes of security holders

-22-

The following represent the results of matters submitted to a vote of the shareholders at the annual meeting held on April 28, 2008.

Affixing the number of directors at nine for 2008:

For	501,908
Abstain	534
Absent	125,740

Election of Directors:

The following directors were elected with terms to expire 2011:

	For	Withheld
John W. Baker	501,908	126,274
Gail E. Patterson	501,908	126,274
Kenneth E. Taylor	501,908	126,274

Other directors not up for election but continuing in office include: Allan R. Mast, Dean J. Mullet, Luther E. Proper, Theodore A. Bratton, Max A. Miller, and Michael S. Yoder.

Item 5—Other Information

None

Item 6—Exhibits

The following exhibits are included in this report or incorporated herein by reference:

3.1(i) Articles of Incorporation of Killbuck Bancshares, Inc.*

3.1(ii) Amendment to the Articles of Incorporation of Killbuck Bancshares, Inc. increasing authorized shares.**

3.2 Code of Regulations of Killbuck Bancshares, Inc.*

31.1 Rule 13a-14(a) Certification

31.2 Rule 13a-14(a) Certification

32.1 Section 1350 Certifications

32.2 Section 1350 Certifications

99.1 Report of Independent Registered Public Accounting Firm

* Incorporated by reference to an identically numbered exhibit to the Form 10 (file No. 0-24147) filed with SEC on April 30, 1998 and subsequently amended on July 8, 1998 and July 31, 1998.

** Incorporated by reference to Registrant’s report on Form 10-Q for the quarter ended March 31, 2004, filed with the Commission on May 13, 2004.

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused the report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Killbuck Bancshares, Inc.
Date: August 11, 2008	By:	/s/ Luther E. Proper
		Luther E. Proper
		President and Chief Executive Officer
Date: August 11, 2008	By:	/s/ Diane Knowles
		Diane Knowles
		Chief Financial Officer

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