- Quarterly Report (10-Q)

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 March 31, 2012

[ ] 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [ x ] Yes [ ] No

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 May 7, 2012: 613,521

KILLBUCK BANCSHARES, INC.

Index

		Page Number

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements:

	Consolidated Balance Sheet as of March 31, 2012 and December 31, 2011	3

	Consolidated Statements of Income for the three months ended March 31, 2012 and 2011	4

	Consolidated Statements of Comprehensive Income for the three months ended March 31, 2012 and 2011	5

	Consolidated Statement of Changes In Shareholders’ Equity for the three months ended March 31, 2012	6

	Consolidated Statements of Cash Flows for the three months ended March 31, 2012 and 2011	7

	Notes to Unaudited Consolidated Financial Statements	8-25

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26-33

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34

Item 4.	Controls and Procedures	34

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	35

Item 1A.	Risk Factors	35

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35

Item 3.	Default Upon Senior Securities	35

Item 4.	Mine Safety Disclosures	35

Item 5.	Other Information	36

Item 6.	Exhibits	36

SIGNATURES		37

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Killbuck Bancshares, Inc.

CONSOLIDATED BALANCE SHEET

	March 31, 2012 (unaudited)			December 31, 2011
ASSETS
Cash and cash equivalents:
Cash and amounts due from depository institutions	$	67,956,341		$	51,528,204
Federal funds sold		4,061,000			3,168,000
Total cash and cash equivalents		72,017,341			54,696,204
Investment securities:
Securities available for sale		90,102,771			98,102,214
Securities held to maturity (fair value of $44,263,744 and $43,833,969)		41,617,484			41,039,935
Total investment securities		131,720,255			139,142,149
Loans (net of allowance for loan losses of $2,440,596 and $2,275,176)		228,909,378			224,333,021
Loans held for sale, at lower of cost or market		74,500			--
Premises and equipment, net		5,408,754			5,460,594
Accrued interest receivable		1,534,297			1,121,007
Bank-owned life insurance		7,514,095			7,448,771
Goodwill, net		1,329,249			1,329,249
Other assets		3,118,286			3,003,406
Total assets	$	451,626,155		$	436,534,401
LIABILITIES
Deposits:
Noninterest bearing demand	$	77,653,978		$	75,875,791
Interest bearing demand		33,599,021			34,785,442
Money market		55,408,516			46,570,972
Savings		63,088,538			60,024,882
Time		172,895,764			171,806,036
Total deposits		402,645,817			389,063,123
Short-term borrowings		1,565,000			945,000
Federal Home Loan Bank advances		358,533			415,776
Accrued interest and other liabilities		1,007,192			887,671
Total liabilities		405,576,542			391,311,570
SHAREHOLDERS’ EQUITY
Common stock – No par value: 1,000,000 shares authorized, 718,431 issued		8,846,670			8,846,670
Retained earnings		46,564,355			45,840,968
Accumulated other comprehensive income		528,968			397,793
Treasury shares, at cost (104,910 and 104,660 shares at March 31, 2012 and December 31, 2011, respectively)		(9,890,380	)		(9,862,600	)
Total shareholders’ equity		46,049,613			45,222,831
Total liabilities and shareholders’ equity	$	451,626,155		$	436,534,401

See accompanying notes to the unaudited consolidated financial statements.

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Killbuck Bancshares, Inc.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

	Three Months Ended March 31,
	2012		2011
INTEREST INCOME
Interest and fees on loans	$	2,803,558	$	2,700,449
Federal funds sold and other		23,469		31,939
Investment securities:
Taxable		484,496		444,666
Exempt from federal income tax		351,456		372,649
Total interest income		3,662,979		3,549,703
INTEREST EXPENSE
Deposits		854,874		972,964
Federal Home Loan Bank advances		6,314		9,926
Short-term borrowings		920		1,803
Total interest expense		862,108		984,693
NET INTEREST INCOME		2,800,871		2,565,010
Provision for loan losses		--		--
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		2,800,871		2,565,010
NONINTEREST INCOME
Service charges on deposit accounts		239,137		241,276
Gain on sale of loans, net		--		12,934
Bank-owned life insurance		65,324		56,988
Other income		29,847		42,048
Total noninterest income		334,308		353,246
NONINTEREST EXPENSE
Salaries and employee benefits		1,351,797		1,309,534
Occupancy and equipment expense		250,315		251,329
Professional fees		68,249		59,636
Franchise tax		138,800		135,050
Insurance and bond expense		67,134		122,692
Stationery, supplies and printing		36,114		33,527
Postage, express and freight		51,510		61,955
Data processing		49,517		69,633
Advertising expense		41,714		40,910
Other expenses		189,329		216,991
Total noninterest expense		2,244,479		2,301,257
INCOME BEFORE INCOME TAXES		890,700		616,999
Income taxes		167,313		49,262
NET INCOME	$	723,387	$	567,737
Earnings per common share	$	1.18	$	0.92
Weighted average shares outstanding		613,637		615,897

See accompanying notes to the unaudited consolidated financial statements.

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Killbuck Bancshares, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

	Three Months Ended March 31,
	2012			2011
Net Income	$	723,387		$	567,737
Other comprehensive income:
Net unrealized gain on securities available for sale		198,750			170,252
Tax effect		(67,575	)		(57,886	)
Other comprehensive income		131,175			112,366
Comprehensive Income	$	854,562		$	680,103

See accompanying notes to the unaudited consolidated financial statements.

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Killbuck Bancshares, Inc.

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2012

	Common Stock		Retained Earnings		Accumulated Other Comprehensive Income		Treasury Shares			Total Shareholders’ Equity
Balance, December 31, 2011	$	8,846,670	$	45,840,968	$	397,793	$	(9,862,600	)	$	45,222,831
Net income				723,387							723,387
Net unrealized gain on securities, net of tax $67,575						131,175					131,175
Purchase of treasury shares, at cost (250 shares)								(27,780	)		(27,780	)
Balance, March 31, 2012 (Unaudited)	$	8,846,670	$	46,564,355	$	528,968	$	(9,890,380	)	$	46,049,613

See accompanying notes to the unaudited consolidated financial statements.

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Killbuck Bancshares, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Three Months Ended March 31,
	2012			2011
OPERATING ACTIVITIES
Net income	$	723,387		$	567,737
Adjustments to reconcile net income to net cash provided by
Operating activities:
Gain on sale of loans		--			(12,934	)
Provision for depreciation and amortization		124,036			119,632
Origination of loans held for sale		(74,500	)		(1,151,100	)
Proceeds from the sale of loans		--			1,484,034
Bank-owned life insurance income		(65,324	)		(52,038	)
Net change in:
Accrued interest and other assets		(595,746	)		(363,843	)
Accrued expenses and other liabilities		119,522			(105,937	)
Net cash provided by operating activities		231,375			485,551
INVESTING ACTIVITIES
Investment securities available for sale:
Proceeds from maturities and repayments		21,355,622			15,298,166
Purchases		(13,157,430	)		(16,259,451	)
Investment securities held to maturity:
Proceeds from maturities and repayments		235,000			485,620
Purchases		(862,812	)		(3,273,717	)
Net increase in loans		(4,576,357	)		(4,459,588	)
Purchase of premises and equipment		(23,503	)		(9,524	)
Proceeds from the sale of fixed assets		1,571			--
Net cash provided by (used in) investing activities		2,972,091			(8,218,494	)
FINANCING ACTIVITIES
Net increase (decrease) in demand deposits		591,766			(5,070,436	)
Net increase in money market and savings deposits		11,901,200			11,248,441
Net increase in time deposits		1,089,728			1,286,269
Net increase (decrease) in short-term borrowings		620,000			(275,000	)
Repayment of Federal Home Loan Bank advances		(57,243	)		(64,442	)
Purchase of treasury shares		(27,780	)		(17,437	)
Net cash provided by financing activities		14,117,671			7,107,395
Net increase (decrease) in cash and cash equivalents		17,321,137			(625,548	)
Cash and cash equivalents at beginning of period		54,696,204			66,424,145
Cash and cash equivalents at end of period	$	72,017,341		$	65,798,597
Supplemental Disclosures of Cash Flows Information
Cash Paid During the Period For:
Interest on deposits and borrowings	$	869,598		$	991,062
Income taxes	$	--		$	--

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, in the opinion of management, are necessary for a fair presentation of financial condition and 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, 2011, 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 potential dilutive effects on earnings per share. As such, earnings per share are calculated using the weighted number of shares for the period.

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Killbuck Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

NOTE 3 – FAIR VALUE MEASUREMENTS

The Company utilizes 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 under the literature 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 fair value as of March 31, 2012, and December 31, 2011, by level within the fair value hierarchy. As required by the authoritative accounting guidance, financial assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

	March 31, 2012
	Level I		Level II		Level III		Total
	(In thousands)

Assets measured on a recurring basis:
Securities available for sale:
U.S. Government and Agency Obligations	$	--	$	89,461	$	--	$	89,461
Mutual Funds		--		642		--		642

Assets measured on a nonrecurring basis:
Impaired loans		--		--	$	86	$	86

	December 31, 2011
	Level I		Level II		Level III		Total
	(In thousands)

Assets measured on a recurring basis:
Securities available for sale:
U.S. Government and Agency Obligations	$	--	$	97,599	$	--	$	97,599
Mutual Funds		--		503		--		503

Assets measured on a nonrecurring basis:
Impaired loans		--		--	$	668	$	668

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Killbuck Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

NOTE 4 - FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS

The carrying amounts and estimated fair values at March 31, 2012 and December 31, 2011 are as follows:

	2012
	Level I		Level II		Level III		Total Fair Value
	(In thousands)
Financial assets:
Cash and due from depository institutions	$	67,956	$	--	$	--	$	67,956
Federal funds sold		4,061		--		-		4,061
Securities available for sale		--		90,103		--		90,103
Securities held to maturity		--		44,264		--		44,264
Net loans		--		--		239,288		239,288
Loans held for sale		--		--		74		74
Accrued interest receivable		--		--		1,534		1,534
Regulatory stock		--		1,884		--		1,884
Bank-owned life insurance (“BOLI”)		--		--		7,514		7,514

Financial liabilities:
Deposits	$	--	$	--	$	406,265	$	406,265
Short-term borrowings		--		--		1,565		1,565
Federal Home Loan Bank advances		--		417		--		417
Accrued interest payable		--		--		152		152

	2012				2011
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In thousands)
Financial assets:
Cash and due from depository institutions	$	67,956	$	67,956	$	51,528	$	51,528
Federal funds sold		4,061		4,061		3,168		3,168
Securities available for sale		90,103		90,103		98,102		98,102
Securities held to maturity		41,617		44,264		41,040		43,834
Net loans		228,909		239,288		224,333		235,528
Loans held for sale		74		74		--		--
Accrued interest receivable		1,534		1,534		1,121		1,121
Regulatory stock		1,884		1,884		1,884		1,884
Bank-owned life insurance (“BOLI”)		7,514		7,514		7,449		7,449

Financial liabilities:
Deposits	$	402,646	$	406,265	$	389,063	$	393,054
Short-term borrowings		1,565		1,565		945		945
Federal Home Loan Bank advances		359		417		416		483
Accrued interest payable		152		152		160		160

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.

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.

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Killbuck Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

NOTE 4 - FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS - CONTINUED

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 Depository Institutions, 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 is estimated by discounting future cash flows using current market inputs at which loans with similar terms and qualities would be made to borrowers of similar credit quality. Where quoted market prices were available, primarily for certain residential mortgage loans, such market rates were utilized as estimates for fair value. Demand, savings, and money market deposit accounts are valued at the amount payable on demand as of the period presented. The fair values of certificates of deposit and other borrowed funds are based on the discounted value of contractual cash flows. The discount rates are estimated using rates currently offered for similar instruments with 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.

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Killbuck Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

NOTE 5 – INVESTMENT SECURITIES

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

Securities Available for Sale

	March 31, 2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss			Fair Value
Obligations of U.S. Government Agencies and Corporations	$	88,757,890	$	797,924	$	(95,266	)	$	89,460,548
Mutual funds		543,415		98,808		--			642,223
Total	$	89,301,305	$	896,732	$	(95,266	)	$	90,102,771

	December 31, 2011
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss			Fair Value
Obligations of U.S. Government Agencies and Corporations	$	96,956,082	$	766,897	$	(123,959	)	$	97,599,020
Mutual funds		543,415		--		(40,221	)		503,194
Total	$	97,499,497	$	766,897	$	(164,180	)	$	98,102,214

Securities Held to Maturity

	March 31, 2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss			Fair Value
Obligations of States and Political S ubdivisions	$	41,617,484	$	2,669,211	$	(22,951	)	$	44,263,744
Total	$	41,617,484	$	2,669,211	$	(22,951	)	$	44,263,744

	December 31, 2011
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss			Fair Value
Obligations of States and Political Subdivisions	$	41,039,935	$	2,815,688	$	(21,654	)	$	43,833,969
Total	$	41,039,935	$	2,815,688	$	(21,654	)	$	43,833,969

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Killbuck Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

NOTE 5 - INVESTMENT SECURITIES - CONTINUED

The following tables show 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 March 31, 2012, and December 31, 2011. As of March 31, 2012, there were a total of 15 securities in an unrealized loss position.

	March 31, 2012

	Less Than 12 Months							12 Months or Greater						Total
			Gross			Number of				Gross		Number of				Gross
	Fair		Unrealized			Impaired		Fair		Unrealized		Impaired		Fair		Unrealized
	Value		Loss			Securities		Value		Loss		Securities		Value		Loss

U. S. Government Agencies and Corporations	$	13,898,826	$	(95,266	)		7		-		-		-	$	13,898,826	$	(95,266	)

Obligations of States and Political Subdivisions		2,458,553		(22,951	)		8		-		-		-		2,458,553		(22,951	)

Total temporarily impaired debt securities		16,357,379		(118,217	)		15		-		-		-		16,357,379		(118,217	)

Total of all securities	$	16,357,379	$	(118,217	)		15		-		-		-	$	16,357,379	$	(118,217	)

	December 31, 2011

	12 Months or Less							12 Months or Greater						Total
			Gross			Number of				Gross		Number of				Gross
	Fair		Unrealized			Impaired		Fair		Unrealized		Impaired		Fair		Unrealized
	Value		Loss			Securities		Value		Loss		Securities		Value		Loss

U. S. Government Agencies and Corporations	$	32,709,685	$	(123,959	)		8		-		-		-	$	32,709,685	$	(123,959	)

Obligations of States and Political Subdivisions		1,400,448		(21,654	)		5		-		-		-		1,400,448		(21,654	)

Total temporarily impaired debt securities		34,110,133		(145,613	)		13		-		-		-		34,110,133		(145,613	)
Mutual Funds		503,194		(40,221	)		1		-		-		-		503,194		(40,221	)
Total temporarily impaired equity securities		503,194		(40,221	)		1								503,194		(40,221	)
Total of all securities	$	34,613,327	$	(185,834	)		14		-		-		-	$	34,613,327	$	(185,834	)

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Killbuck Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

NOTE 5 – INVESTMENT SECURITIES – CONTINUED

The amortized cost and fair values of debt securities at March 31, 2012, 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		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Due in one year or less	$	850,549	$	866,875	$	2,465,571	$	2,495,379
Due after one year through five years		43,806,327		44,338,164		14,982,943		15,880,718
Due after five through ten years		40,887,638		40,999,103		23,037,072		24,699,279
Due after ten years		3,213,376		3,256,406		1,131,898		1,188,368
	$	88,757,890	$	89,460,548	$	41,617,484	$	44,263,744

At least quarterly the corporation conducts a comprehensive security level impairment assessment on all securities in an unrealized loss position to determine if other than temporary impairment (OTTI) exists. An unrealized loss exists when the current fair value of an individual security is less than its amortized cost basis. Under the current OTTI accounting model for debt securities, an OTTI loss must be recognized for a debt security in an unrealized loss position if the Corporation intends to sell the security or it is more likely than not that the corporation will be required to sell the security before recovery of its amortized cost basis. In this situation, the amount of loss recognized in income is equal to the difference between fair value and the amortized cost basis of the security. Even if the Corporation does not expect to sell the security, the Corporation must evaluate the expected cash flows to be received to determine if a credit loss has occurred. In the event of a credit loss, only the amount of impairment associated with the credit loss is recognized in income. The portion of the unrealized loss relating to other factors, such as liquidity conditions in the market or changes in the market interest rates, is recorded in other comprehensive income. Equity securities are also evaluated to determine whether the unrealized loss is expected to be recoverable based on whether evidence exists to support a realizable value equal to or greater than the amortized cost basis. If it is probable that the Corporation will not recover the amortized cost basis, taking into consideration the estimated recovery period and its ability to hold the equity security until recovery, OTTI is recognized. The security level assessment is performed on each security, regardless of the classification of the security as available for sale or held to maturity. The assessments are based on the nature of the securities, the financial condition of the issuer, the extent and duration of the securities, the extent and duration of the loss and whether Management intends to sell or it is more likely than not that it will be required to sell a security before recovery of its amortized cost basis, which may be maturity. For those securities for which the assessment shows the Corporation will recover the entire cost basis, Management does not intend to sell these securities and it is more likely than not that the Corporation will not be required to sell them before the anticipated recovery of the amortized cost basis, the gross unrealized losses are recognized in other comprehensive income, net of tax.

-14-

Killbuck Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

NOTE 6 - LOANS

Major classifications of loans are summarized as follows:

	March 31, 2012			December 31, 2011
Real estate – residential	$	99,242,430		$	97,583,238
Real estate – farm		12,301,783			11,028,432
Real estate – commercial		58,097,953			58,213,465
Real estate – construction		13,251,670			12,467,999
Commercial and other loans		43,167,850			41,666,625
Consumer and credit card loans		5,509,341			5,865,194
		231,571,027			226,824,953
Less allowance for loan losses		(2,440,596	)		(2,275,176	)
Less net deferred loan origination fees		(221,053	)		(216,756	)
Loans, net	$	228,909,378		$	224,333,021

	March 31, 2012
	Loans Individually		Loans Collectively
	Evaluated for		Evaluated for
	Impairment		Impairment		Total

Real estate - residential and farm	$	--	$	111,544,213	$	111,544,213
Real estate - commercial and construction		--		71,349,623		71,349,623
Commercial and other loans		465,252		42,702,598		43,167,850
Consumer and credit card loans		--		5,509,341		5,509,341
Total	$	465,252	$	231,105,775	$	231,571,027

	December 31, 2011
	Loans Individually		Loans Collectively
	Evaluated for		Evaluated for
	Impairment		Impairment		Total

Real estate - residential and farm	$	--	$	108,611,670	$	108,611,670
Real estate - commercial and construction		545,040		70,136,424		70,681,464
Commercial and other loans		481,706		41,184,919		41,666,625
Consumer and credit card loans		--		5,865,194		5,865,194
Total	$	1,026,746	$	225,798,207	$	226,824,953

Loans held for sale at March 31, 2012, and December 31, 2011, were $74,500 and $-0-, respectively and were carried at cost. Real estate loans serviced for the Federal Home Loan Mortgage Corporation (FHLMC), which are not included in the consolidated balance sheet, totaled $42.1 million and $43.8 million at March 31, 2012, and December 31, 2011, respectively. The Bank is currently collecting a fee of .25% for servicing these loans.

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 March 31, 2012, and December 31, 2011, loans outstanding to individuals and businesses are dependent upon the local economic conditions in its immediate trade area.

-15-

Killbuck Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

NOTE 6 – LOANS – CONTINUED

The segments of the Bank’s loan portfolio are disaggregated to a level that allows management to monitor risk and performance. The residential real estate loan segment is further disaggregated into two classes: amortizing term loans, which are primarily first liens, and home equity lines of credit, which are generally second liens. The commercial real estate (“CRE”) loan segment is further disaggregated into two classes. Non-owner occupied CRE loans, which include loans secured by non-owner occupied nonfarm nonresidential properties, generally have a greater risk profile than all other CRE loans, which include loans secured by multifamily structures and owner-occupied commercial structures. The commercial and other loans segment consists of loans made for the purpose of financing the activities of commercial customers. The consumer loan segment consists primarily of installment loans (direct and indirect) and credit card loans.

Management evaluates individual loans in all of the commercial segments for possible impairment if the loan is greater than $250,000 or is part of a relationship that is greater than $500,000, and if the loan either is in nonaccrual status, or is risk rated Substandard and is greater than 60 days past due. Loans are considered to be impaired when, based on current information and events, it is probable that the Corporation will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in evaluating impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. The Corporation does not separately evaluate individual consumer and residential mortgage loans for impairment, unless such loans are part of larger relationship that is impaired, or are classified as a troubled debt restructuring agreement.

Once the determination has been made that a loan is impaired, the determination of whether a specific allocation of the allowance is necessary is measured by comparing the recorded investment in the loan to the fair value of the loan using one of three methods: (a) the present value of expected future cash flows discounted at the loan’s effective interest rate; (b) the loan’s observable market price; or (c) the fair value of the collateral less selling costs. The method is selected on a loan-by loan basis, with management primarily utilizing the fair value of collateral method. The evaluation of the need and amount of a specific allocation of the allowance and whether a loan can be removed from impairment status is made on a quarterly basis. The Corporation’s policy for recognizing interest income on impaired loans does not differ from its overall policy for interest recognition.

-16-

Killbuck Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

NOTE 6 – LOANS - CONTINUED

The following tables present impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary as of March 31, 2012, and December 31, 2011:

					Impaired
					Loans with No
	Impaired Loans with				Specific
March 31, 2012	Specific Allowance				Allowance		Total Impaired Loans
									Unpaid
	Recorded		Related		Recorded		Recorded		Principal
	Investment		Allowance		Investment		Investment		Balance

Commercial and other loans	$	465,252	$	378,874		--	$	465,252	$	465,252
Total Impaired Loans	$	465,252	$	378,874		--	$	465,252	$	465,252

					Impaired
					Loans with No
	Impaired Loans with				Specific
December 31, 2011	Specific Allowance				Allowance		Total Impaired Loans
									Unpaid
	Recorded		Related		Recorded		Recorded		Principal
	Investment		Allowance		Investment		Investment		Balance

Real estate - commercial and construction	$	-	$	-	$	545,040	$	545,040	$	545,040
Commercial and other loans		481,706		358,662		-		481,706		481,706
Total Impaired Loans	$	481,706	$	358,662	$	545,040	$	1,026,746	$	1,026,746

The following table presents the average recorded investment in impaired loans and related interest income recognized for the three months ended March 31, 2012, and for the year 2011:

	March 31, 2012		December 31, 2011

Average Investment in impaired loans:
Real estate – commercial	$	179,863	$	751,315
Commercial loans		473,479		494,612
Interest income recognized on an accrual basis on impaired loans:
Real estate – commercial	$	--	$	--
Commercial loans		7,940		32,581
Interest income recognized on a cash basis on impaired loans	$	--	$	--

-17-

Killbuck Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

NOTE 6 – LOANS - CONTINUED

Total nonaccrual loans and the related interest for the three months ended March 31, 2012, and for the year ended December 31, 2011, are as follows.

	2012		2011
Principal outstanding	$	50,793	$	596,376
Contractual interest due	$	2,505	$	54,166
Interest income recognized	$	--	$	--

The following table presents loans that are new troubled debt restructurings as of March 31, 2012, and December 31, 2011:

Troubled Debt

Restructurings that

New Troubled Debt

Subsequently

Restructurings in

Defaulted during Prior

YTD Period

Twelve Months

Number of

Recorded

Number of

Recorded

March 31, 2012

Contracts

Investment

Contracts

Investment

Real estate - residential and farm

Real estate - commercial and construction

Commercial and other loans

Consumer and credit card loans

Total

					Troubled Debt
					Restructurings that
	New Troubled Debt				Subsequently
	Restructurings in				Defaulted during Prior
	YTD Period				Twelve Months
	Number of		Recorded		Number of		Recorded
December 31, 2011	Contracts		Investment		Contracts		Investment

Real estate - residential and farm		--		--		--		--
Real estate - commercial and construction		--		--		--		--
Commercial and other loans		1	$	244,546		--		--
Consumer and credit card loans		1		1,231		--		--
Total		2	$	245,777		--		--

Management uses an eight point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first four categories are considered not criticized, and are aggregated as “Pass” rated. The criticized rating categories utilized by management generally follow bank regulatory definitions. The Special Mention category includes assets that are currently protected but are potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification. Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt, and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. All loans greater than 90 days past due are considered Substandard. Any portion of a loan that has been charged off is placed in the Loss category.

-18-

Killbuck Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

NOTE 6 – LOANS - CONTINUED

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Bank has a structured loan rating process with several layers of internal and external oversight. Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as bankruptcy, delinquency, repossession, or death occurs to raise awareness of a possible credit event. The Bank’s Commercial Loan Officers are responsible for the timely and accurate risk rating of the loans in their portfolios at origination and on an ongoing basis. The Credit Department performs an annual review of all commercial relationships $250,000 or greater. Confirmation of the appropriate risk grade is included in the review on an ongoing basis. The Bank has an experienced Loan Review Department that continually reviews and assesses loans within the portfolio. The Bank engages an external consultant to conduct loan reviews on at least an annual basis. Generally, the external consultant reviews commercial relationships greater than $250,000 and all criticized relationships. Detailed reviews, including plans for resolution, are performed on loans classified as Substandard on a quarterly basis. Loans in the Special Mention and Substandard categories that are collectively evaluated for impairment are given separate consideration in the determination of the allowance.

The following table presents the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system as of March 31, 2012, and December 31, 2011. Included in the Pass category are loans that have not been individually reviewed and graded on an annual basis.

			Special
March 31, 2012	Pass		Mention		Substandard		Doubtful		Total

Real estate - residential and farm	$	108,725,068	$	1,174,896	$	1,644,249		--	$	111,544,213
Real estate - commercial and construction		65,104,400		2,966,044		3,279,179		--		71,349,623
Commercial and other loans		41,524,852		125,591		1,395,795	$	121,612		43,167,850
Consumer and credit card loans		5,450,784		39,430		19,127		--		5,509,341
Total	$	220,805,104	$	4,305,961	$	6,338,350	$	121,612	$	231,571,027

			Special
December 31, 2011	Pass		Mention		Substandard		Doubtful		Total

Real estate - residential and farm	$	105,915,706	$	1,001,602	$	1,694,362		--	$	108,611,670
Real estate - commercial and construction		63,836,573		3,199,901		3,644,990		--		70,681,464
Commercial and other loans		40,045,424		497,806		999,124	$	124,271		41,666,625
Consumer and credit card loans		5,798,288		42,142		24,764		--		5,865,194
Total	$	215,595,991	$	4,741,451	$	6,363,240	$	124,271	$	226,824,953

-19-

Killbuck Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

NOTE 6 – LOANS - CONTINUED

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of March 31, 2012, and December 31, 2011:

			30-59 Days		60-89 Days		Greater Than		Total		Non-
March 31, 2012	Current		Past Due		Past Due		89 Days		Past Due		Accrual		Total Loans

Real estate – residential and farm	$	110,490,152	$	884,126	$	128,608		--	$	1,012,734	$	41,327	$	111,544,213
Real estate - commercial and construction		71,340,814		8,809		--		--		8,809		--		71,349,623
Commercial and other loans		43,037,243		122,460		--		--		122,460		8,147		43,167,850
Consumer and credit card loans		5,490,121		17,901		--		--		17,901		1,319		5,509,341
Total	$	230,358,330	$	1,033,296	$	128,608		--	$	1,161,904	$	50,793	$	231,571,027

			30-59 Days		60-89 Days		Greater Than		Total		Non-
December 31, 2011	Current		Past Due		Past Due		89 Days		Past Due		Accrual		Total Loans

Real estate – residential and farm	$	108,388,429	$	102,095	$	82,371		--	$	184,466	$	38,775	$	108,611,670
Real estate – commercial and construction		70,136,424		--		--		--		--		545,040		70,681,464
Commercial and other loans		41,584,712		67,892		3,274		--		71,166		10,747		41,666,625
Consumer and credit card loans		5,848,336		10,250		4,278	$	516		15,044		1,814		5,865,194
Total	$	225,957,901	$	180,237	$	89,923	$	516	$	270,676	$	596,376	$	226,824,953

NOTE 7 - ALLOWANCE FOR LOAN LOSSES

An allowance for loan losses (“ALL”) is maintained to absorb losses from the loan portfolio. The ALL is based on management’s continuing evaluation of the risk characteristics and credit quality of the loan portfolio, assessment of current economic conditions, diversification and size of the portfolio, adequacy of collateral, past and anticipated loss experience, and the amount of non-performing loans.

The Bank’s methodology for determining the ALL is based on the requirements of ASC Section 310-10-35 for loans individually evaluated for impairment (discussed above) and ASC Subtopic 450-20 for loans collectively evaluated for impairment, as well as the Interagency Policy Statements on the Allowance for Loan and Lease Losses and other bank regulatory guidance. The total of the two components represents the Bank’s ALL.

Loans that are collectively evaluated for impairment are analyzed with general allowances being made as appropriate. For general allowances, historical loss trends are used in the estimation of losses in the current portfolio. These historical loss amounts are modified by other qualitative factors.

The classes described above provide the starting point for the ALL analysis. Management tracks the historical net charge-off activity for each class. A historical charge-off factor is calculated for each class utilizing a rolling 12 quarters.

-20-

Killbuck Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

NOTE 7 - ALLOWANCE FOR LOAN LOSSES - CONTINUED

“Pass” rated credits are segregated from “Criticized” credits for the application of qualitative factors. Management has identified a number of qualitative factors which it uses to supplement the historical charge-off factor because these factors are likely to cause estimated credit losses associated with the existing loan pools to differ from historical loss experience. The factors that are evaluated quarterly and updated using information obtained from internal, regulatory, and governmental sources are: national and local economic trends and conditions; levels of and trends in delinquency rates and non-accrual loans; trends in volumes and terms of loans; effects of changes in lending policies; experience, ability, and depth of lending staff; value of underlying collateral; and concentrations of credit from a loan type, industry and/or geographic standpoint.

Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the ALL. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ALL.

An analysis of the change in the allowance for loan losses for the three months ended March 31, 2012, and the year ended December 31, 2011, follows:

	2012			2011
Balance, Beginning of the period	$	2,275,176		$	2,665,607
Add:
Provision charged to operations		--			--
Loan recoveries		187,728			26,842
Less: Loans charged off		(22,308	)		(417,273	)
Balance, End of the period	$	2,440,596		$	2,275,176

The following tables summarize the primary segments of the ALL, segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of March 31, 2012 and December 31, 2011. During the first quarter of 2012, the Company recorded a large recovery, approximately $180 thousand, on a commercial real estate loan that was partially charged-off during 2011. Activity in the allowance is presented for the three months ended March 31, 2012 and the twelve months ended December 31, 2011:

	Real Estate			Real Estate			Commercial		Consumer
	Residential			Commercial			and		And
March 31, 2012	and Farm			and Construction			Other Loans		Credit Cards			Total

Allowance for Loan Losses:
Beginning Balance	$	673,905		$	616,781		$	932,861	$	51,629		$	2,275,176
Charge-offs		(22,041	)		--			--		(267	)		(22,308	)
Recoveries		1,500			180,860			4,754		614			187,728
Provision		37,142			(50,946	)		13,300		504			--
Ending Balance	$	690,506		$	746,695		$	950,915	$	52,480		$	2,440,596

Ending Balance: individually evaluated for impairment	$	0		$	0		$	378,874	$	0		$	378,874

Ending Balance: collectively evaluated for impairment	$	690,506		$	746,695		$	572,041	$	52,480		$	2,061,722

-21-

Killbuck Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

NOTE 7 - ALLOWANCE FOR LOAN LOSSES - CONTINUED

December 31, 2011	Real Estate Residential and Farm			Real Estate Commercial and Construction			Commercial and Other Loans			Consumer and Credit Cards			Total

Allowance for Loan Losses:
Beginning Balance	$	671,646		$	985,042		$	954,526		$	54,393		$	2,665,607
Charge-offs		(19,095	)		(392,830	)		--			(5,348	)		(417,273	)
Recoveries		67			3,600			20,591			2,584			26,842
Provision		21,287			20,969			(42,256	)		--			--
Ending Balance	$	673,905		$	616,781		$	932,861		$	51,629		$	2,275,176

Ending Balance: individually evaluated for impairment	$	--		$	--		$	358,662		$	--		$	358,662

Ending Balance: collectively evaluated for impairment	$	673,905		$	616,781		$	574,199		$	51,629		$	1,916,514

The allowance for loan losses is based on estimates, and actual losses will vary from current estimates. Management believes that the breakdown of the homogeneous pools and the related historical loss ratios and other qualitative factors, as well as the consistency in the application of assumptions, result in an ALL that is representative of the risk found in the components of the portfolio at any given date.

-22-

Killbuck Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

NOTE 8 – RECENT ACCOUNTING PRONOUNCEMENTS

In April 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) 2011-03, Transfers and Services (Topic 860): Reconsideration of Effective Control for Repurchase Agreements . The main objective in developing this Update is to improve the accounting for repurchase agreements (repos) and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The amendments in this Update remove from the assessment of effective control (1) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (2) the collateral maintenance implementation guidance related to that criterion. The amendments in this Update apply to all entities, both public and nonpublic. The amendments affect all entities that enter into agreements to transfer financial assets that both entitle and obligate the transferor to repurchase or redeem the financial assets before their maturity. The guidance in this Update is effective for the first interim or annual period beginning on or after December 15, 2011 and should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. Early adoption is not permitted. This ASU did not have a significant impact on the Company’s financial statements.

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The amendments in this Update result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The amendments in this Update are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. For nonpublic entities, the amendments are effective for annual periods beginning after December 15, 2011. Early application by public entities is not permitted. This ASU did not have a significant impact on the Company’s financial statements.

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. The amendments in this Update improve the comparability, clarity, consistency, and transparency of financial reporting and increase the prominence of items reported in other comprehensive income. To increase the prominence of items reported in other comprehensive income and to facilitate convergence of U.S. GAAP and IFRS, the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity was eliminated. The amendments require that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income. All entities that report items of comprehensive income, in any period presented, will be affected by the changes in this Update. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. The amendments in this Update should be applied retrospectively, and early adoption is permitted. The Company has provided the necessary disclosure in the Statement of Comprehensive Income.

-23-

Killbuck Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

NOTE 8 – RECENT ACCOUNTING PRONOUNCEMENTS - CONTINUED

In September 2011, the FASB issued ASU 2011-08, Intangibles – Goodwill and Other Topics (Topic 350), Testing Goodwill for Impairment . The objective of this update is to simplify how entities, both public and nonpublic, test goodwill for impairment. The amendments in the Update permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. Under the amendments in this Update, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. The amendments in this Update apply to all entities, both public and nonpublic, that have goodwill reported in their financial statements and are effective for interim and annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. This ASU is not expected to have a significant impact on the Company’s financial statements.

In September 2011, the FASB issued ASU 2011-09, Compensation-Retirement Benefits-Multiemployer Plans (Subtopic 715-80): Disclosures about an Employer’s Participation in a Multiemployer Plan . The amendments in this Update will require additional disclosures about an employer’s participation in a multiemployer pension plan to enable users of financial statements to assess the potential cash flow implications relating to an employer’s participation in multiemployer pension plans. The disclosures also will indicate the financial health of all of the significant plans in which the employer participates and assist a financial statement user to access additional information that is available outside the financial statements. For public entities, the amendments in this Update are effective for annual periods for fiscal years ending after December 15, 2011, with early adoption permitted. For nonpublic entities, the amendments are effective for annual periods of fiscal years ending after December 15, 2012, with early adoption permitted. The amendments should be applied retrospectively for all prior periods presented. This ASU is not expected to have a significant impact on the Company’s financial statements.

In December 2011, the FASB issued ASU 2011-10, Property, Plant, and Equipment (Topic 360): Derecognition of in Substance Real Estate-a Scope Clarification. The amendments in this Update affect entities that cease to have a controlling financial interest in a subsidiary that is in substance real estate as a result of default on the subsidiary's nonrecourse debt. Under the amendments in this Update, when a parent (reporting entity) ceases to have a controlling financial interest in a subsidiary that is in substance real estate as a result of default on the subsidiary's nonrecourse debt, the reporting entity should apply the guidance in Subtopic 360-20 to determine whether it should derecognize the in substance real estate. Generally, a reporting entity would not satisfy the requirements to derecognize the in substance real estate before the legal transfer of the real estate to the lender and the extinguishment of the related nonrecourse indebtedness. That is, even if the reporting entity ceases to have a controlling financial interest under Subtopic 810-10, the reporting entity would continue to include the real estate, debt, and the results of the subsidiary's operations in its consolidated financial statements until legal title to the real estate is transferred to legally satisfy the debt. The amendments in this Update should be applied on a prospective basis to deconsolidation events occurring after the effective date. Prior periods should not be adjusted even if the reporting entity has continuing involvement with previously derecognized in substance real estate entities. For public entities, the amendments in this Update are effective for fiscal years, and interim periods within those years, beginning on or after June 15, 2012. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2013, and interim and annual periods thereafter. Early adoption is permitted. This ASU is not expected to have a significant impact on the Company’s financial statements.

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Killbuck Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)

NOTE 8 – RECENT ACCOUNTING PRONOUNCEMENTS - CONTINUED

In December 2011, the FASB issued ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities . The amendments in this Update affect all entities that have financial instruments and derivative instruments that are either (1) offset in accordance with either Section 210-20-45 or Section 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement. The requirements amend the disclosure requirements on offsetting in Section 210-20-50. This information will enable users of an entity's financial statements to evaluate the effect or potential effect of netting arrangements on an entity's financial position, including the effect or potential effect of rights of setoff associated with certain financial instruments and derivative instruments in the scope of this Update. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. This ASU is not expected to have a significant impact on the Company’s financial statements.

In December 2011, the FASB issued ASU 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 . In order to defer only those changes in Update 2011-05 that relate to the presentation of reclassification adjustments, the paragraphs in this Update supersede certain pending paragraphs in Update 2011-05. Entities should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before Update 2011-05. All other requirements in Update 2011-05 are not affected by this Update, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. Public entities should apply these requirements for fiscal years, and interim periods within those years, beginning after December 15, 2011. Nonpublic entities should begin applying these requirements for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. The Company has provided the necessary disclosure in Statement of Comprehensive Income.

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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 calendar year ended December 31, 2011. 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 the Consolidated Financial Statements filed with the Commission as part of the Company’s Annual Report on Form 10-K for its calendar year ended December 31, 2011.

Goodwill and Other Intangible Assets - As discussed in Note 6 of the Consolidated Financial Statements, filed with the Commission as part of the Company’s Annual Report on Form 10-K for its calendar year ended December 31, 2011; the Company must assess goodwill and other intangible assets each year for impairment. ASU 2011-08 allows a company to first assess qualitative factors to determine whether it is necessary to perform a two-step goodwill impairment test. The two-step impairment test 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 13 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, 2011.

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Financial Condition

The Company’s assets at March 31, 2012, totaled $451.6 million, an increase of $15.1 million, or 3.5% over 2011 totals.

The asset growth during the first quarter of 2012 generally reflects a $13.6 million, or 3.5% increase in total deposits. The deposit growth is generally reflective of the Company’s continuing marketing efforts directed at profitable organic growth.

Cash and cash equivalents increased by $17.3 million, or 31.7% to $72.0 million at March 31, 2012. The Company has maintained above normal levels of cash and cash equivalents due to the economic uncertainty in the environment.

Investment securities available for sale decreased by $8.0 million or 8.2% from December 31, 2011, to March 31, 2012 due to a decrease in suitable securities available to purchase for the portfolio. Investments held to maturity increased $0.6 million or 1.4% due to some attractive municipal securities available for the portfolio.

Net loans increased during the first quarter of 2012 by $4.6 million, or 2.0%, totaling $228.9 million at quarter end. An increase of $3.6 million occurred in the real estate loan category, which is attributable primarily to increases in residential real estate lending, farm lending and construction lending of $1.6 million, $1.2 million and $0.8 million, respectively. The Company also experienced an increase of $1.5 million in commercial lending. The Company experienced modest declines in commercial real estate lending and consumer lending of $0.1 million and $0.4 million, respectively, due to lower demand in those sectors.

The Company’s allowance for loan losses at March 31, 2012, totaled $2.4 million, or 1.05% of total loans, as compared to $2.3 million, or 1.0% of total loans at December 31, 2011.

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 Board Accounting Standards Codification Topic 450-Contingencies, or Topic 310-Receivables. 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, credit concentrations, 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.

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Total deposits at March 31, 2012, were $402.6 million compared to $389.1 million at December 31, 2011. Demand accounts, money market accounts, savings accounts and time deposits accounts increased $0.6 million, $8.8 million, $3.1 million, and $1.1 million 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 account increases are attributable to normal fluctuations due to customer usage.

Federal Home Loan Bank advances decreased $57,000 due to maturities and scheduled repayments, and short-term borrowings increased $620,000 at March 31, 2012, from December 31, 2011.

Shareholders’ equity increased by approximately $827,000 during the quarter ended March 31, 2012, totaling $46.0 million at quarter-end, as compared to $45.2 million at December 31, 2011. The growth in shareholders’ equity during the first quarter of 2012 was comprised of period earnings of $723,000 and an increase of $131,000 in accumulated other comprehensive income, which were offset by $28,000 in treasury share purchases. Management monitors risk-based capital and leveraged capital ratios in order to assess compliance of the regulatory guidelines. At March 31, 2012, the total capital ratio was 18.10%; the Tier I capital ratio was 17.16%, and the leverage ratio was 10.10%, compared to regulatory capital requirements of 8%, 4% and 4% respectively. These ratios are well in excess of regulatory capital requirements.

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RESULTS OF OPERATIONS

Comparison of the Quarters Ended March 31, 2012 and 2011

Net income for the three-month period ended March 31, 2012, was $723,000, an increase of $155,000 or 27.4% from the $568,000 reported at March 31, 2011.

Total interest income of approximately $3,663,000 for the three-month period ended March 31, 2012, compares to $3,550,000 for the same period in 2011, an increase of $113,000 or 3.2%. The increase in total interest income is primarily attributable to an increase in interest and fees on loans due primarily to an increase in the average volume. See “Average Balance Sheet” for the three-month periods ended March 31, 2012 and 2011. The yield on loans decreased to 4.92% for the first three months of 2012 compared to 5.16% for the first three months of 2011. Average loan balances were $228,152,000 for the first three months of 2012 compared to $209,486,000 for the first three months of 2011. The interest on taxable investment securities of $484,000 for 2012 compares to $445,000 for 2011. The increase in taxable investment income is primarily attributable to an increase in volume. Average taxable investment balances were $97,029,000 compared to $73,954,000 and the yields were 1.93% compared to 2.30% for the first three months of 2012 and 2011, respectively. The interest on tax exempt investment securities of $351,000 for 2012 compares to $373,000 for 2011. The decrease in tax exempt investment income is primarily attributable to a decrease in yield. Average nontaxable investment balances were $41,038,000 compared to $40,423,000 and the yields were 3.43% compared to 3.69% for the first three months of 2012 and 2011, respectively.

Total interest expense of $862,000 for the three-month period ending March 31, 2012, represents a decrease of $123,000 from the $985,000 reported for the same three-month period in 2011. The decrease in interest expense on deposits of $118,000 is due mainly to a decrease in interest rates. The decrease in interest expense on Federal Home Loan Bank advances of $4,000 is due to maturities and principal payments on the advances. The cost of interest bearing liabilities was 1.08%, compared to 1.30% for the three-month periods of 2012 and 2011, respectively. Average interest-bearing liabilities were $319,881,000 for the first three months of 2012 compared to $302,472,000 for the first three months of 2011. See “Average Balance Sheet” for the three-month periods ended March 31, 2012 and 2011.

Net interest income of $2,801,000 for the three months ended March 31, 2012, compares to $2,565,000 for the same three-month period in 2011, an increase of $236,000 or 9.2%. The foregoing factors culminated in the Company’s attainment of an interest rate spread of 2.46% and a net yield on earning assets of 2.70% in 2012, compared to 2.40% and 2.67% respectively, in 2011.

There was no provision for loan losses for the first quarter of 2012 or 2011. This is principally attributable to the continuing low levels of nonperforming assets in the loan portfolio. As stated previously, the Company maintains the allowance at a level commensurate with the credit risks inherent in the portfolio.

Total non-interest income for the three-month period ended March 31, 2012, of $334,000 compares to $353,000 for the same three-month period in 2011, a decrease of $19,000 or 5.4%. Gain on sale of loans decreased $13,000 as no mortgage loans were sold in the secondary market during the first quarter of 2012.

Total non-interest expense of $2,244,000 for the three months ended March 31, 2012, compares to $2,301,000 for the same three-month period in 2011. This represents a decrease of $57,000 or 2.5%. Salary and employee benefits increased approximately $42,000 due to normal salary increases and an increase in hospitalization costs. Insurance and bond expense decreased approximately $56,000 due mainly to lower FDIC insurance premiums. The changes in the remaining expense accounts were attributable to increases/decreases in items that are normal and recurring in nature.

Income tax expense increased to $167,000 in 2012, representing a $118,000, or 239.6%, increase from the $49,000 of income tax expense recorded in 2011. The quarter over quarter increase is primarily attributable to higher pretax income and lower levels of tax-exempt income in the 2012 quarter. The Company’s effective tax rate was 18.8% in 2012, as compared to 8.0% in 2011. The principal difference between the Company’s effective tax rate in 2012 and 2011 and the 34% statutory tax rate in effect for both quarters resulted from the beneficial effects of tax-exempt income.

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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 $72.0 million at March 31, 2012. These assets provide the primary source of liquidity for the Company. In addition, management has designated a portion of the investment portfolio, $90.1 million as available for sale and has an available unused line of credit of $35.9 million with the Federal Home Loan Bank of Cincinnati to provide additional sources of liquidity at March 31, 2012. As of March 31, 2012, the Company had commitments to fund loans of approximately $2.7 million and unused lines of credit totaling $54.5 million.

Cash was provided during the three month period ended March 31, 2012, mainly from the net increase in deposits of $13.6 million, and the maturities and repayments of investment securities of $21.6 million. Cash was used during the three month period ended March 31, 2012, mainly for the purchase of investment securities of $14.0 million and the net increase in loans of $4.6 million. Cash and cash equivalents totaled $72.0 million at March 31, 2012, an increase of $17.3 million from $54.7 million at December 31, 2011.

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.

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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 March 31, 2012, and December 31, 2011. The Company ceases 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 reclassified 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.

	March 31, 2012			December 31, 2011
	(dollars in thousands)
Loans on nonaccrual basis	$	51		$	596
Loans past due 90 days or more		--			1
Renegotiated loans (1)		7			--
Total nonperforming loans		58			597
Other real estate		--			--
Repossessed assets		--			--
Total nonperforming assets	$	58		$	597


Nonperforming loans as a percent of total loans		0.03	%		0.26	%
Nonperforming loans as a percent of total assets		0.01	%		0.14	%
Nonperforming assets as a percent of total assets		0.01	%		0.14	%

(1) Excludes renegotiated loans that are performing or reported as nonaccrual.

The allowance for loan losses at March 31, 2012, totaled $2.4 million or 1.05% of total loans as compared to $2.3 million or 1.00% at December 31, 2011. There was no provision for the three months ended March 31, 2012 and 2011.

The level of funding for the provision is a reflection of the overall loan portfolio. Nonaccrual loans as of March 31, 2012 consist primarily of one to four family residential mortgages. The collateral requirements on such loans reduce the risk of potential losses to an acceptable level in management’s opinion. Renegotiated loans as of March 31, 2012 consist primarily of commercial loans.

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.

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AVERAGE BALANCE SHEET

Average Balance Sheet for the Three-Month Period Ended March 31

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.

	March 31, 2012								March 31, 2011
	Average Balance			Interest		Yield/ Rate			Average Balance			Interest		Yield/ Rate
Assets
Interest-earning assets:
Loans (1)(2)(3)	$	228,151,730		$	2,803,558		4.92	%	$	209,485,639		$	2,700,449		5.16	%
Securities - taxable (4)		97,029,498			468,856		1.93	%		73,953,861			425,246		2.30	%
Securities – nontaxable (4)		41,038,413			351,456		3.43	%		40,423,387			372,649		3.69	%
Securities Equity (4,5)		1,884,560			15,640		3.32	%		1,884,560			19,420		4.12	%
Federal funds sold		5,222,719			1,007		0.08	%		6,407,947			1,827		0.11	%
Due from Federal Reserve Bank		41,072,543			22,462		0.22	%		52,059,270			30,112		0.23	%
Total interest-earning assets		414,399,463			3,662,979		3.54	%		384,214,664			3,549,703		3.70	%
Noninterest-earning assets:
Cash and due from other institutions		9,210,323								9,313,671
Premises and equipment, net		5,445,879								5,723,485
Accrued interest		1,267,921								1,045,052
Other assets		10,727,708								9,160,242
Less allowance for loan losses		(2,383,537	)							(2,669,088	)
Total noninterest-earning assets		24,268,294								22,573,362
Total assets	$	438,667,757							$	406,788,026
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest bearing demand	$	33,068,457			12,409		0.15	%	$	28,539,261			9,713		0.14	%
Money market accounts		50,557,193			52,332		0.41	%		47,510,755			68,982		0.58	%
Savings Deposits		61,329,818			43,111		0.28	%		52,397,515			44,846		0.34	%
Time deposits		172,944,703			747,022		1.73	%		170,239,650			849,423		2.00	%
Short-term borrowings		1,602,245			920		0.23	%		3,184,019			1,803		0.23	%
Federal Home Loan Bank advances		378,550			6,314		6.67	%		601,230			9,926		6.60	%
Total interest-bearing liabilities		319,880,966			862,108		1.08	%		302,472,430			984,693		1.30	%
Noninterest-bearing liabilities:
Demand deposits		71,769,387								60,314,103
Accrued expenses and other liabilities		1,560,174								1,118,026
Total noninterest-bearing liabilities		73,329,561								61,432,129
Shareholders’ equity		45,457,230								42,883,467
Total liabilities and shareholders’ equity	$	438,667,757							$	406,788,026
Net interest income				$	2,800,871							$	2,565,010
Interest rate spread (6)							2.46	%							2.40	%
Net yield on interest-earning assets (7)							2.70	%							2.67	%

(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 $82,000 and $78,000 in 2012 and 2011, 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.

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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 March
	2012 Compared to 2011
	Increase (Decrease) Due To
	Volume			Rate			Net
Interest income
Loans	$	240		$	(137	)	$	103
Securities-taxable		133			(89	)		44
Securities-nontaxable		6			(27	)		(21	)
Securities-equities		--			(4	)		(4	)
Federal funds sold		--			(1	)		(1	)
Due from Federal Reserve Bank		(6	)		(2	)		(8	)
Total interest-earning assets		373			(260	)		113
Interest expense
Interest bearing demand		2			1			3
Money market accounts		4			(21	)		(17	)
Savings deposits		8			(10	)		(2	)
Time deposits		14			(116	)		(102	)
Short-term borrowing		(1	)		--			(1	)
Federal Home Loan Bank advances		(4	)					(4	)
Total interest-bearing liabilities		23			(146	)		(123	)
Net change in net interest income	$	350		$	(114	)	$	236

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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 Chief Executive Officer and Senior Vice President/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 Chief Executive Officer and Senior Vice President/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 March 31, 2012, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Part II – OTHER INFORMATION

Item 1 -

Legal Proceedings

None

Item 1A –

Risk Factors

Not applicable to Smaller Reporting Companies.

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 March 31, 2012.

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, 2012	114	$110.52	N/A	N/A
February 1 – 29, 2012	0	--	N/A	N/A
March 1 – 31, 2012	136	$111.62	N/A	N/A
Total (1)	250	$111.12	N/A	N/A

(1) 250 shares of common stock were purchased by Killbuck Bancshares in open-market transactions.

Item 3 -

Default upon senior securities

None

Item 4 -

Mine Safety Disclosures

-35-

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.

101.INS

XBRL Instance

101.SCH

XBRL Taxonomy Extension Schema

101.CAL

XBRL Taxonomy Extension Calculation

101.DEF

XBRL Taxonomy Extension Definition

101.LAB

XBRL Taxonomy Extension Labels

101.PRE

XBRL Taxonomy Extension Presentation

*	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.

-36-

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.



Date: May 9, 2012	By:	/s/ Craig Lawhead
		Craig Lawhead President and Chief Executive Officer


Date: May 9, 2012	By:	/s/ Lawrence Cardinal
		Lawrence Cardinal Chief Financial Officer

-37-

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