<PAGE>

                                   EXHIBIT 13

                            Killbuck Bancshares, Inc.

Corporate Profile
-----------------

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

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

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

Stock Market Information
------------------------

There is no established public trading market for our common stock and our
shares are not listed on any exchange. Sale price information is based on
information reported to us by individual buyers and sellers of our stock. The
following table summarizes the high and low prices and dividend information for
2001 and 2000. Cash dividends are paid on a semi-annual basis.

                                               Cash
                                             Dividends
    Quarter Ended       High       Low         Paid
    -------------      ------     ------     ---------
2001  March 31         $94.86     $88.30       N/A
      June 30           90.19      88.92       $.80
      September 30      92.43      90.35       N/A
      December 31       93.18      91.42       $.80

2000  March 31         $96.77     $86.17       N/A
      June 30           88.46      86.64       .70
      September 30      92.13      89.54       N/A
      December 31       94.56      92.64       .75

At December 31, 2001 the Company had approximately 999 shareholders of record.
<PAGE>

Selected Financial Data
-----------------------

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

<TABLE>
<CAPTION>
                                                        Year Ended December 31,
                                        --------------------------------------------------------
                                          2001        2000        1999        1998        1997
                                        --------    --------    --------    --------    --------
<S>                                     <C>         <C>         <C>         <C>         <C>
For The Year:
     Total interest income              $ 19,025    $ 19,350    $ 17,069    $ 16,024    $ 15,224
     Total interest expense                9,237       9,366       8,201       7,892       7,344
                                        --------    --------    --------    --------    --------
         Net interest income               9,788       9,984       8,868       8,132       7,880
     Provision for loan losses               263         540         240         183         180
                                        --------    --------    --------    --------    --------
         Net interest income after
          provision for loan losses        9,525       9,444       8,628       7,949       7,700
     Total other income                      730         638         646         558         449
     Total other expense                   6,407       5,720       5,319       4,574       4,036
                                        --------    --------    --------    --------    --------
         Income before
          income taxes                     3,848       4,362       3,955       3,933       4,113
     Income tax expense                      903       1,079         937       1,017       1,108
                                        --------    --------    --------    --------    --------
         Net income                     $  2,945    $  3,283    $  3,018    $  2,916    $  3,005
                                        ========    ========    ========    ========    ========

Per share data
     Net earnings (1)                   $   4.23    $   4.66    $   4.28    $   4.37    $   4.52
     Dividends (1)                      $   1.60    $   1.45    $   1.25    $   1.05    $   0.92
     Book value (at period end)(1)      $  47.65    $  45.18    $  41.00    $  38.90    $  33.48

Average no. of shares outstanding (1)    696,017     703,784     705,331     684,650     664,578

Year-end balances:
     Total loans                        $152,158    $151,800    $143,777    $137,891    $122,034
     Securities                           91,223      82,287      75,574      65,676      57,434
     Total assets                        281,258     262,000     243,150     231,994     197,909
     Deposits                            237,971     219,168     201,738     192,079     163,809
     Borrowings                            9,522      10,514      12,013      11,922      11,455
     Shareholders' equity                 33,037      31,741      28,917      27,437      22,158

Significant ratios:
     Return on average assets               1.10%       1.31%       1.29%       1.40%       1.55%
     Return on average equity               9.34       10.98       10.69       12.35       14.26
     Dividends per share to net
      income per share                     37.86       31.12       29.21       24.03       20.35
     Average equity to
      average assets                       11.75       11.93       12.05       11.32       10.86
     Loans to deposits                     63.94       69.26       71.27       71.79       74.50
     Allowance for loan
      loss to total loans                   1.49        1.55        1.31        1.34        1.43
</TABLE>

(1) Adjusted for 5 for 1 stock split in 1998.
<PAGE>

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

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

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

Overview
--------

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

During 1998, we completed the merger of Commercial and Savings Bank Company of
Danville, Ohio with, and into the Bank. This merger has allowed us to better
serve our existing clients in this area, while allowing us the opportunity to
attract new customers from the Danville area.

A new branch facility in Sugarcreek, Ohio opened for business in February, 2000.
In July 2001, a new branch facility in Howard, Ohio (Apple Valley Area) opened
for business. These new locations will give us a presence in the Sugarcreek and
Apple Valley areas and allow us to develop new business and deposit
relationships in these areas.
<PAGE>

RESULTS OF OPERATIONS

Summary

For 2001, we recorded net income of $2.9 million compared to $3.3 million for
2000 and $3.0 million for 1999.

Other operating income was $730,000 for 2001 compared to $638,000 for 2000 and
$646,000 for 1999.

Total other operating expenses were $6.4 million in 2001 compared to $5.7
million in 2000 and $5.3 million in 1999.

Earnings per share for 2001 were $4.23 compared to $4.66 for 2000 and $4.28 for
1999.

NET INTEREST INCOME

Our net interest income decreased by $202,000 in 2001 from 2000 and increased by
$1,102,000 in 2000 from 1999.

Total interest income decreased by $331,000 or 1.72% for 2001 from 2000. The
decrease of $331,000 for 2001 resulted primarily from a decrease of $345,000 in
interest income on loans and $40,000 in interest income on investment
securities. The decreases in loan and investment security interest income
resulted primarily from decreases in the current yield on the loan and
investment portfolios which decreased .59 basis points to 9.05% and .20 basis
points to 5.48% respectively. The decrease in the current yield was a result of
the economic environment, more specifically, falling interest rates.

Total interest income increased by $2,267,000 or 13.34% for 2000 from 1999 due
from both an increase in the average outstanding balances of the loan and
investment portfolios of $7.0 million and $9.0 million respectively, and from
increases in the yield on the loan and investment portfolios of .58 basis points
and .29 basis points respectively. The increase in the current yield was a
result of the economic environment, more specifically, rising interest rates.

The yield on earning assets was 7.53%, 8.19%, and 7.71% for 2001, 2000, and 1999
respectively. The decrease in the yield on earning assets is attributable to the
general decline in interest rates.
<PAGE>

Interest expense for 2001 decreased by $129,000 or 1.38% from 2000 and increased
by $1,166,000 for 2000 from 1999. The decrease was due to a decrease in the cost
on interest bearing liabilities, which declined .38 basis points from 4.86% in
2000 to 4.48% in 2001. The increase in 2000 from 1999 was due to both increases
in the cost on interest bearing liabilities which rose .31 basis points from
4.55% to 4.86%, and increases in the average volume of interest bearing
liabilities, which increased $13.3 million during 2001 and $12.8 million during
2000.

The average volume of time deposits and interest bearing demand deposits
increased $10.1 million and $143,000 respectively in 2001 while time deposits
and interest bearing demand deposits increased $9.7 million, and $1.6 million
respectively for 2000.

The cost on interest bearing liabilities was 4.48% for 2001 and 4.86% for 2000,
and 4.55% for 1999. The decrease for 2001 is due mainly to a decrease in the
cost of time deposits of .25 basis points.

Due mainly to a decrease in the yield on total earning assets, the net yield on
earning assets has decreased this year reversing the increase of the prior year.
The net yield on interest earning assets is 3.86%, 4.21% and 3.99% for 2001,
2000 and 1999 respectively.

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

Average Balance Sheet and Net Interest Analysis

<TABLE>
<CAPTION>
                                                    For the Year Ended  December 31,
                                          -----------------------------------------------------------
                                                        2001                        2000
                                          ----------------------------   ----------------------------
                                           Average              Yield/    Average              Yield/
                                           Balance   Interest    Rate     Balance   Interest    Rate
                                          --------   --------   ------   --------   --------   ------
<S>                                       <C>        <C>         <C>     <C>         <C>        <C>
Assets
Interest earning assets:
   Loans (1)(2)(3)                        $153,119   $ 13,854    9.05%   $147,224    $14,199    9.64%
   Securities taxable (4)                   43,312      2,689    6.21%     44,312      2,854    6.44%
   Securities nontaxable                    36,653      1,697    4.63%     33,600      1,572    4.68%
   Federal funds sold                       18,407        693    3.76%     10,194        639    6.27%
                                          --------   --------            --------    -------
       Total interest earnings assets      251,491     18,933    7.53%    235,330     19,264    8.19%
                                                     --------                        -------

Noninterest-earning assets
   Cash and due from other Institutions      8,538                          7,666
   Premises and equipment, net               4,950                          4,079
   Accrued interest                          1,477                          1,900
   Other assets                              4,095                          3,606
   Less allowance for loan losses           (2,286)                        (2,004)
                                          --------                       --------
       Total                              $268,265                       $250,577
                                          ========                       ========

Liabilities and Shareholders
 Equity
Interest bearing liabilities:
   Interest bearing demand                $ 28,817   $    557    1.93%   $ 28,674    $   736    2.57%
   Money market accounts                    13,316        442    3.32%     11,249        412    3.66%
   Savings deposits                         30,523        788    2.58%     27,980        873    3.12%
   Time deposits                           123,928      7,000    5.65%    113,868      6,717    5.90%
   Short term borrowings                     3,942         65    1.65%      4,523        181    4.00%

<CAPTION>
                                          For the Year Ended  December 31,
                                          --------------------------------
                                                        1999
                                          --------------------------------
                                           Average                  Yield/
                                           Balance     Interest      Rate
                                          --------     --------     ------
<S>                                       <C>           <C>          <C>
Assets
Interest earning assets:
   Loans (1)(2)(3)                        $140,202      $12,698      9.06%
   Securities taxable (4)                   38,778        2,309      5.95%
   Securities nontaxable                    30,345        1,420      4.68%
   Federal funds sold                       11,115          570      5.13%
                                          --------      -------
       Total interest earnings assets      220,440       16,997      7.71%
                                                        -------

Noninterest-earning assets
   Cash and due from other Institutions      7,292
   Premises and equipment, net               3,533
   Accrued interest                          1,301
   Other assets                              3,652
   Less allowance for loan losses           (1,939)
                                          --------
       Total                              $234,279
                                          ========

Liabilities and Shareholders
 Equity
Interest bearing liabilities:
   Interest bearing demand                $ 27,102      $   691      2.55%
   Money market accounts                    11,364          401      3.53%
   Savings deposits                         26,583          829      3.12%
   Time deposits                           104,202        5,660      5.43%
   Short term borrowings                     3,090           86      2.78%
</TABLE>

Average Balance Sheet and Net Interest Analysis (Continued)

<TABLE>
<CAPTION>
                                                              For the Year Ended  December
                                            ------------------------------------------------------------
<S>                                         <C>
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
                                                          2001                          2000
                                            -----------------------------   ----------------------------
                                             Average               Yield/    Average              Yield/
                                             Balance    Interest    Rate     Balance   Interest    Rate
                                            --------    --------   ------   --------   --------   ------
<S>                                         <C>          <C>        <C>     <C>         <C>        <C>
   Federal Home Loan Bank Advances             5,676        385     6.78%      6,610       447     6.76%
                                            --------     ------             --------    ------
       Total interest bearing liabilities    206,202      9,237     4.48%    192,904     9,366     4.86%
                                                         ------                         ------

Noninterest bearing liabilities:
   Demand deposits                            28,603                          27,117
   Accrued expenses and other liabilities      1,926                             663

Shareholder's equity                          31,534                          29,893
                                            --------                        --------
       Total                                $268,265                        $250,577
                                            ========                        ========

Net interest income                                      $9,696                         $9,898
                                                         ======                         ======

Interest rate spread (5)                                            3.05%                          3.33%
                                                                    ====                           ====

Net yield on interest earning assets (6)                            3.86%                          4.21%
                                                                    ====                           ====

<CAPTION>
                                            For the Year Ended  December 31,
                                            --------------------------------
                                                         1999
                                            --------------------------------
                                             Average                  Yield/
                                             Balance      Interest     Rate
                                            --------      --------    ------

<S>                                         <C>            <C>         <C>
   Federal Home Loan Bank Advances             7,805          534      6.84%
                                            --------       ------
       Total interest bearing liabilities    180,146        8,201      4.55%
                                                           ------

Noninterest bearing liabilities:
   Demand deposits                            25,144
   Accrued expenses and other liabilities        751

Shareholder's equity                          28,238
                                            --------
       Total                                $234,279
                                            ========

Net interest income                                        $8,796
                                                           ======

Interest rate spread (5)                                               3.16%
                                                                       ====

Net yield on interest earning assets (6)                               3.99%
                                                                       ====
</TABLE>

(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 $344,644,
     $300,335, and $252,742 in 2001, 2000, and 1999, 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)  Interest rate spread represents the difference between the average yield on
     interest earning assets and the average cost of interest bearing
     liabilities.
(6)  Net yield on interest earning assets represents net interest income as a
     percentage of average interest earning assets.
<PAGE>

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).

<TABLE>
<CAPTION>
                                  2001 Compared to 2000         2000 Compared to 1999
                                --------------------------    --------------------------
                                Increase (Decrease) Due To    Increase (Decrease) Due To
                                --------------------------    --------------------------
                                Volume     Rate       Net     Volume     Rate      Net
                                ------    -------    -----    ------    ------    ------
<S>                             <C>       <C>        <C>      <C>       <C>       <C>
Interest income
   Loans                        $  569    $  (914)   $(345)   $  636    $  865    $1,501
   Securities-taxable              (64)      (101)    (165)      330       215       545
   Securities-nontaxable           143        (18)     125       152        --       152
   Federal funds sold              515       (461)      54       (47)      116        69
                                ------    -------    -----    ------    ------    ------
      Total interest earning
       Assets                    1,163     (1,494)    (331)    1,071     1,196     2,267
                                ------    -------    -----    ------    ------    ------

Interest expense
   Interest bearing demand           4       (183)    (179)       40         5        45
   Money market accounts            76        (46)      30        (4)       15        11
   Savings deposits                 79       (163)     (84)       44        (1)       43
   Time deposits                   594       (312)     282       525       533     1,058
   Short-term borrowing            (23)       (93)    (116)       40        55        95
   Federal Home Loan Bank
    Advances                       (63)         1      (62)      (82)       (5)      (87)
                                ------    -------    -----    ------    ------    ------
      Total interest bearing
       Liabilities                 667       (796)    (129)      563       602     1,165
                                ------    -------    -----    ------    ------    ------

Net change in interest income   $  496    $  (698)   $(202)   $  508    $  594    $1,102
                                ======    =======    =====    ======    ======    ======
</TABLE>

Provision for Loan Losses
<PAGE>

The provision for loan losses was $262,500 for 2001, $540,000 for 2000, and
$240,000 for 1999. We make periodic provisions to the allowance for loan losses
to maintain the allowance at an acceptable level commensurate with the credit
risks inherent in the loan portfolio. There can be no assurances, however, that
additional provisions will not be required in future periods. The allowance for
loan losses as a percent of total loans was 1.49%, 1.55% and 1.31% for 2001,
2000 and 1999 respectively.

The allowance for loan losses is Management's estimate of the amount of probable
credit losses in the portfolio. The Bank 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 uncollectable are charged
against the allowance for loan losses. Recoveries of previously charged-off
amounts are credited to the allowance for loan losses.

The Bank`s allowance for loan losses is the accumulation of various components
calculated based upon independent methodologies. All components of the allowance
for loan losses represent an estimation performed according to either Financial
Accounting Standards No. 5 or No. 114. Management's estimate of each allowance
component is based on certain observable data that Management believes is the
most reflective of the underlying loan losses being estimated. Changes in the
amount of each component of the allowance for loan losses are directionally
consistent with changes in the observable data and corresponding analyses. One
of the components that Management factors in is current economic condition. The
current economic condition factor for 2001 is an additional 10% of actual
projected reserves needed.

A key element of the methodology for determining the allowance for loan losses
is the Bank'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.

While 2000 was a year of strong loan performance; management recognized that the
general economic environment continued to change. Overall economic growth in the
United States slowed and utility prices rose dramatically. These changes also
affected our local communities. The added burden of higher utility prices and
the possibility of slower employment growth, workweek shortages or layoffs, made
meeting monthly consumer debt obligations more difficult.

For the reasons mentioned above, the provision for loan losses was increased
substantially during the fourth quarter of 2000.

Other Income

Other income, which is comprised principally of fees and charges on customers'
deposit accounts, increased $92,000 or 14.4% to $730,000 in 2001 from $638,000
in 2000, and decreased $8,000 or 1.2% in 2000 from 1999. Service charges on
customer accounts increased $59,000 or 11.8% in 2001 due to increased deposit
activity caused by the opening of the Apple Valley Office in July
<PAGE>

2001 and increases in new deposit accounts. Service charges on customer accounts
increased $17,000 or 3.5 % in 2000 due to increased deposit activity caused by
the opening of the Sugarcreek Office in February 2000 and increases in new
deposit accounts. The Bank started to sell fixed rate loans in the secondary
market in late 1997. Due to market conditions, the Bank originated and sold $8.8
million more of these loans in 2001 compared to 2000. Gains for these sales were
$76,000 in 2001, $10,000 in 2000 and $42,000 in 1999. Income from the
alternative investment service the Bank introduced in 1997 was $2,000 for 2001
and $41,000 for 2000 and $32,000 for 1999. The year 2001 was a rebuilding year
for the program due to the absence of permanent personnel and a change in the
broker/dealer relationship.

Other Expense

Other expense increased $687,000 or 12% to $6.4 million in 2001 as compared to
$5.7 million in 2000 and increased $401,000 or 7.5% for 2000 from $5.3 million
in 1999.

Salary and employee benefits for 2001 totaled $3.2 million, an increase of
$400,000 or 14.3% from $2.8 million in 2000 and increased $212,000 for 2000 or
8.1% from $2.6 million in 1999. This increase is due to the new branch in
Howard, Ohio and normal recurring employee cost increases for annual salary
raises, staff additions and employee benefits for 2001. The increase for 2000
represents the effect of a full year's expense associated with new employees due
to the addition of the branch office in Sugarcreek, Ohio and normal recurring
employee cost increases for annual salary increases, staff additions and
employee benefits.

Occupancy and equipment expense increased $89,000 in 2001 and $69,000 in 2000.
The increase in expense during 2001 was attributable to the addition of the new
branch office in Howard, Ohio and additional improvements and equipment
purchases for operations. For 2000, the increases were attributable to normal
and recurring items and a full year of occupancy and equipment expense on the
Sugarcreek branch.

Other operating expenses for 2001 totaled $2.3 million, a $200,000 or 10%
increase from the $2.1 million reported in 2000 and a $100,000 or 5% increase
for 2000 from the 1999 total of $2.0 million. The increase in other expense is
due to several factors including a $61,000 increase in telephone expenses, a
$28,000 increase in advertising, $68,000 increase in credit card processing
expense, $24,000 increase in Internet expense, and increases in normal and
recurring expenses. The telephone expense is attributable to the new Howard
branch, a full year of cost on the circuits for the WAN, and increases in normal
recurring expenses; the increases in advertising expenses is associated with the
new branch, and increase in normal recurring advertisements. The credit card
processing expense increase is due mainly to the $25,000 increase in credit card
receivables and the increase in merchant relations. The Internet expense is a
full year of cost in providing a web site with online transactions and bill
payment services as opposed to only one quarter last year. The increase of
$100,000 in 2000 from 1999 in other expenses is attributable to costs associated
with increases in normal and recurring expenses associated with a new branch and
existing branches and the costs of implementing new technologies.

Income Tax Expense
<PAGE>

Income tax expense decreased by $176,000 for 2001 to $903,000 from $1,079,000 in
2000 and increased $142,000 in 2000 from $.9 million in 1999. The effective rate
on taxes for 2001, 2000 and 1999 was 23.5%, 24.7% and 23.7% respectively. The
effective tax rate is affected by the amount of tax-exempt income earned by the
Company each year.

Comparison of Financial Condition at December 31, 2001 and 2000

Total assets at December 31, 2001 amounted to $281 million, an increase of $19
million compared to $262 million at December 31, 2000.

Cash and cash equivalents increased $9.8 million or 47.6% from December 31, 2000
to December 31, 2001, with liquid funds held in the form of federal funds sold
increasing $11.5 million. The increase in federal funds sold at December 31,
2001 is the excess of funds from the net increase in deposits that was not used
in investing activities, financing activities, or operating activities.

Total investment securities increased $9 million or 10.8% from December 31, 2000
to December 31, 2001. The increase in investments was funded by the increase in
deposits. Information detailing the book value of the investment portfolio by
security type and classification is present in Note 3 to the consolidated
financial statements.

Total loans were $152.2 million at December 31, 2001 an increase of $.4 million
or .26% from $151.8 million at December 31, 2000. Of this $.4 million increase
approximately $3.2 million was in the real estate residential loan portfolio,
approximately $.6 million was a decrease in the agriculture real estate loan
portfolio, and approximately $2.2 million was a decrease in the
<PAGE>

consumer and credit loan portfolio. Approximately $2.9 million of the $3.2
million increase in real estate loans was in residential 1 to 4 family
adjustable rate mortgages and approximately $.3 million was in residential 1 to
4 family fixed rate mortgages. Of the $2.2 million decrease in consumer and
credit loans, approximately $2.1 million was in general consumer products
including vehicle loans of approximately $1.8 million, and $.3 million in real
estate. Late in 1997 we began to offer residential mortgage customers a new
fixed rate product. This program enables us to offer competitive long-term fixed
rates. These loans are made with the intent to sell in the secondary loan
market. We originated and sold $12.1 million and $3.2 million of loans in 2001
and 2000. Profit on the sale of these loans was $76,000 and $10,000 for 2001 and
2000. Information detailing the composition of the loan portfolio is presented
in Note 4 to the consolidated financial statements.

Total deposits increased $18.8 million or 8.6% from December 31, 2000 to
December 31, 2001. All deposit accounts increased. The increases are
attributable to new deposit account growth and internal growth for existing
accounts. See also, Average Balance Sheet and Net Interest Analysis for
information related to the average amount and average interest paid on deposit
accounts during 2001 and 2000. Information related to the maturity of time
deposits of $100,000 and over at December 31, 2001 is presented in Note 7 of the
accompanying consolidated financial statements.

Advances were $5.2 million and $6.2 million at December 31, 2001 and 2000
respectively. These advances were used to fund fixed rate residential real
estate loans with similar maturities in prior years. There were no new advances
in 2001 or 2000.

Shareholders' equity increased $1.3 million during 2001 to $33 million at
December 31, 2001 from $31.7 million at December 31, 2000. This increase was the
result of an increase of $1.8 million in net retained earnings during the year
and a net unrealized gain on securities available for sale of $.3 million. The
Company also purchased treasury stock for $.8 million.

Market Risk and Asset/Liability Management

Our primary market risk exposure is interest rate risk and, to a lesser extent,
liquidity risk. Because of the nature of our operations, we are not subject to
currency exchange or commodity price risk and, since we have no trading
portfolio, it is not subject to trading risk. Currently, we have equity
securities that represent only 1.50% of its investment portfolio and, therefore,
equity price risk is not significant.

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

In an effort to reduce interest rate risk and protect itself from the negative
effects or rapid or prolonged changes in interest rates, we have instituted
certain asset and liability management measures, including underwriting
long-term fixed rate loans that are saleable in the secondary market, offering
longer term deposit products and diversifying the loan portfolio into shorter
term consumer and commercial business loans. In addition, since the mid-1980's,
we have originated adjustable-rate loans and as of December 31, 2001, they
comprised approximately 62.8% of the total loan portfolio.
<PAGE>

Liquidity
---------

Liquidity represents our ability to meet normal cash flow requirements of our
customers for the funding of loans and repayment of deposits. Both short term
and long term liquidity needs are generally derived from the repayments and
maturities of loans and investment securities, and the receipt of deposits.
Management monitors liquidity daily, and on a monthly basis incorporates
liquidity management into its asset/liability program. The assets defined as
liquid are: cash and cash equivalents and the available for sale security
portfolio. The liquidity ratio as of December 31, 2001 and 2000 are 29% and 25%,
respectively.

Operating activities, as presented in the statement of cash flows in the
accompanying consolidated financial statements, provided $4.3 and $3.7 million
in cash during 2001 and 2000 respectively, generated principally from net
income.

Investing activities consist primarily of loan originations and repayments,
investment purchases and maturities, and investment in technology. These
activities used $10.4 million in funds during 2001, principally for the net
funding of loans, the net purchase of investments, and the net purchase of
technology and fixed assets totaling $.8 million, $8.5 million, and $1.1 million
respectively. For 2000, investing activities used $14.7 million, principally for
the net funding of loans, the net purchase of investments, and the net purchase
of technology and fixed assets totaling $8.1 million, $5.6 million, and $1.0
million respectively.

Financing activities consisted of the solicitation and repayment of customer
deposits, borrowings and repayments, and the payment of dividends. For 2001,
financing activities provided $15.8 million, comprised mainly of net deposit
increases of $18.8 million, repayment of Federal Home Loan Bank advances of $1.0
million, purchase of treasury stock of $.9 million and payment of dividends of
$1.1 million. For 2000 financing activities provided $14.7 million, comprised
mainly of net deposit increases of $17.4 million, Federal Home Loan Bank advance
repayments of $.9 million, net short-term borrowing increases of $.6 million and
payment of dividends of $1 million.

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

Capital Resources

Capital adequacy is our ability to support growth while protecting the interests
of shareholders and depositors. Bank regulatory agencies have developed certain
capital ratio requirements, which are used to assist them in monitoring the
safety and soundness of financial institutions. We continually monitor these
capital requirements and believe the Company to be in compliance with these
regulations at December 31, 2001.

Our regulatory capital position at December 31, 2001, as compared to the minimum
regulatory capital requirements imposed on us by banking regulators at that date
is presented in Note 15 of the accompanying consolidated financial statements.
We are not aware of any actions contemplated by banking regulators, which would
result in us being in non-compliance with capital requirements.
<PAGE>

Impact of Inflation Changing Prices

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

                            Killbuck Bancshares, Inc.

                                 Killbuck, Ohio

                                  Audit Report

                                December 31, 2001
<PAGE>

                            Killbuck Bancshares, Inc.
                    AUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

                                                                           Page
                                                                          Number
                                                                          ------

Report of Independent Auditors                                              2

Financial Statements

   Consolidated Balance Sheet                                               3

   Consolidated Statement of Income                                         4

   Consolidated Statement of Changes in Shareholders' Equity                5

   Consolidated Statement of Cash Flows                                     6

Notes to Consolidated Financial Statements                                 7-27
<PAGE>

                         Report of Independent Auditors
                         ------------------------------

[LOGO]

The Board of Directors and Shareholders
Killbuck Bancshares, Inc.

We have audited the accompanying consolidated balance sheet of Killbuck
Bancshares, Inc. and subsidiary as of December 31, 2001 and 2000, and the
related consolidated statements of income, changes in shareholders' equity, and
cash flows for each of the three years in the period ended December 31, 2001.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Killbuck Bancshares,
Inc. and subsidiary as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001 in conformity with accounting principles generally accepted in
the United States of America.

/s/ S.R. Snodgrass, A.C.
Steubenville, Ohio
January 31, 2002

S.R. Snodgrass, A.C.
626 North Fourth Street
Steubenville, OH 43952

Phone: 740-282-2771
Fax:   740-282-1606

                                      -2-
<PAGE>

                            Killbuck Bancshares, Inc.
                           CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
                                                                            December 31,
                                                                        2001            2000
                                                                    ------------    ------------
<S>                                                                 <C>             <C>
ASSETS
  Cash and cash equivalents:
     Cash and amounts due from depository institutions              $  7,768,070    $  9,512,736
     Federal funds sold                                               22,500,000      11,000,000
                                                                    ------------    ------------
         Total cash and cash equivalents                              30,268,070      20,512,736
                                                                    ------------    ------------

  Investment securities:
     Securities available for sale                                    51,419,900      46,157,678
     Securities held to maturity (market value of $40,734,605
      and $36,601,277)                                                39,803,246      36,129,625
                                                                    ------------    ------------
         Total investment securities                                  91,223,146      82,287,303
                                                                    ------------    ------------

  Loans (net of allowance for loan losses of $ 2,260,555 and
   $2,358,759)                                                       149,560,961     149,061,901

  Loans held for sale                                                    593,200         520,000
  Premises and equipment, net                                          5,138,782       4,528,169
  Accrued interest receivable                                          1,508,784       1,885,665
  Goodwill, net                                                        1,329,249       1,440,020
  Other assets                                                         1,635,996       1,764,235
                                                                    ------------    ------------
         Total assets                                               $281,258,188    $262,000,029
                                                                    ============    ============

LIABILITIES
  Deposits:
     Noninterest bearing demand                                     $ 32,198,109    $ 31,815,997
     Interest bearing demand                                          32,659,909      27,833,483
     Money market                                                     15,169,110      10,249,064
     Savings                                                          33,247,687      28,493,290
     Time                                                            124,696,288     120,776,058
                                                                    ------------    ------------
         Total deposits                                              237,971,103     219,167,892
  Federal Home Loan Bank advances                                      5,226,732       6,197,930
  Short-term borrowings                                                4,295,000       4,315,768
  Accrued interest and other liabilities                                 727,901         577,274
                                                                    ------------    ------------
         Total liabilities                                           248,220,736     230,258,864
                                                                    ------------    ------------

SHAREHOLDERS' EQUITY
  Common stock - No par value: 1,000,000 shares authorized,
   718,431 issued                                                      8,846,670       8,846,670
  Retained earnings                                                   25,445,528      23,614,590
  Accumulated other comprehensive income                                 493,654         168,141
  Treasury stock, at cost (25,144 and 15,883 shares)                  (1,748,400)       (888,236)
                                                                    ------------    ------------
         Total shareholders' equity                                   33,037,452      31,741,165
                                                                    ------------    ------------

         Total liabilities and shareholders' equity                 $281,258,188    $262,000,029
                                                                    ============    ============
</TABLE>

See accompanying notes to the consolidated financial statements.

                                       -3-
<PAGE>

                            Killbuck Bancshares, Inc.
                        CONSOLIDATED STATEMENT OF INCOME

                                                 Year Ended December 31,
                                             2001         2000          1999
                                         -----------   -----------   -----------
INTEREST INCOME
  Interest and fees on loans             $13,853,843   $14,199,350   $12,698,236
  Federal funds sold                         693,149       639,622       568,636
  Investment securities:
     Taxable                               2,777,588     2,936,565     2,381,982
     Exempt from federal income tax        1,699,994     1,574,855     1,419,777
                                         -----------   -----------   -----------
         Total interest income            19,024,574    19,350,392    17,068,631
                                         -----------   -----------   -----------

INTEREST EXPENSE
  Deposits                                 8,786,868     8,738,303     7,580,106
  Federal Home Loan Bank advances            384,809       447,023       534,468
  Short term borrowings                       65,289       181,234        85,826
                                         -----------   -----------   -----------
         Total interest expense            9,236,966     9,366,560     8,200,400
                                         -----------   -----------   -----------

NET INTEREST INCOME                        9,787,608     9,983,832     8,868,231

Provision for loan losses                    262,500       540,000       240,000
                                         -----------   -----------   -----------

NET INTEREST INCOME AFTER PROVISION
 FOR LOAN LOSSES                           9,525,108     9,443,832     8,628,231
                                         -----------   -----------   -----------

OTHER INCOME
  Service charges on deposit accounts        559,293       499,858       483,071
  Gain on sale of loans, net                  75,808         9,786        41,581
  Other income                                94,636       128,635       121,232
                                         -----------   -----------   -----------
         Total other income                  729,737       638,279       645,884
                                         -----------   -----------   -----------

OTHER EXPENSE
  Salaries and employee benefits           3,167,553     2,827,003     2,615,225
  Occupancy and equipment                    899,194       810,111       741,289
  Other expense                            2,340,110     2,083,192     1,962,189
                                         -----------   -----------   -----------
         Total other expense               6,406,857     5,720,306     5,318,703
                                         -----------   -----------   -----------

INCOME BEFORE INCOME TAXES                 3,847,988     4,361,805     3,955,412
  Income taxes                               903,423     1,078,884       937,085
                                         -----------   -----------   -----------

NET INCOME                               $ 2,944,565   $ 3,282,921   $ 3,018,327
                                         ===========   ===========   ===========

EARNINGS PER SHARE                       $      4.23   $      4.66   $      4.28
                                         ===========   ===========   ===========

WEIGHTED AVERAGE SHARES OUTSTANDING          696,674       704,498       705,331
                                         ===========   ===========   ===========

See accompanying notes to the consolidated financial statements.

                                       -4-
<PAGE>

                            Killbuck Bancshares, Inc.
           CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                     Accumulated
                                                                                       Other
                                                           Common      Retained     Comprehensive    Treasury
                                                            Stock      Earnings     Income (Loss)     Stock
                                                         ----------   -----------   -------------   -----------
<S>                                                      <C>          <C>             <C>           <C>
BALANCE, DECEMBER 31, 1998                               $8,846,670   $19,215,493     $   8,536     $  (633,488)

   Net income                                                           3,018,327
   Other comprehensive income:
       Unrealized loss on available for sale
        securities, net of tax benefit of $338,535                                     (657,156)

   Comprehensive income

   Cash dividends paid ($1.25 per share)                                 (881,664)
                                                         ----------   -----------     ---------     -----------

BALANCE, DECEMBER 31, 1999                                8,846,670    21,352,156      (648,620)       (633,488)

   Net income                                                           3,282,921
   Other comprehensive income:
       Unrealized gain on available for sale
        securities, net of tax of $420,756                                              816,761

   Comprehensive income

   Cash dividends paid ($1.45 per share)                               (1,020,487)
   Purchase of Treasury Stock, at cost                                                                 (254,748)
                                                         ----------   -----------     ---------     -----------

BALANCE, DECEMBER 31, 2000                                8,846,670    23,614,590       168,141        (888,236)

   Net income                                                           2,944,565
   Other comprehensive income:
       Unrealized gain on available for sale
        securities, net of tax of $167,689                                              325,513

   Comprehensive income                                                (1,113,627)

   Cash dividends paid ($1.60 per share)
   Purchase of Treasury Stock, at cost                                                                 (860,164)
                                                         ----------   -----------     ---------     -----------

BALANCE, DECEMBER 31, 2001                               $8,846,670   $25,445,528     $ 493,654     $(1,748,400)
                                                         ==========   ===========     =========     ===========

<CAPTION>
                                                            Total
                                                         Shareholders'   Comprehensive
                                                            Equity         Income
                                                         -------------   -------------
<S>                                                       <C>             <C>
BALANCE, DECEMBER 31, 1998                                $27,437,211

   Net income                                               3,018,327     $3,018,327
   Other comprehensive income:
       Unrealized loss on available for sale
        securities, net of tax benefit of $338,535           (657,156)      (657,156)
                                                                          ----------
Comprehensive income                                                      $2,361,171
                                                                          ==========
Cash dividends paid ($1.25 per share)                        (881,664)
                                                          -----------

BALANCE, DECEMBER 31, 1999                                 28,916,718

   Net income                                               3,282,921     $3,282,921
   Other comprehensive income:
       Unrealized gain on available for sale
        securities, net of tax of $420,756                    816,761        816,761
                                                                          ----------
   Comprehensive income                                                   $4,099,682
                                                                          ==========
   Cash dividends paid ($1.45 per share)                   (1,020,487)
   Purchase of Treasury Stock, at cost                       (254,748)
                                                          -----------

BALANCE, DECEMBER 31, 2000                                 31,741,165

   Net income                                               2,944,565     $2,944,565
   Other comprehensive income:
       Unrealized gain on available for sale
        securities, net of tax of $167,689                    325,513        325,513
                                                                          ----------

   Comprehensive income                                    (1,113,627)    $3,270,078
                                                                          ==========
   Cash dividends paid ($1.60 per share)
   Purchase of Treasury Stock, at cost                       (860,164)
                                                          -----------

BALANCE, DECEMBER 31, 2001                                $33,037,452
                                                          ===========
</TABLE>

See accompanying notes to the consolidated financial statements.

                                       -5-
<PAGE>

                            Killbuck Bancshares, Inc.
                      CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                           Year Ended December 31,
                                                                    2001            2000            1999
                                                                ------------    ------------    ------------
<S>                                                             <C>             <C>             <C>
OPERATING ACTIVITIES
  Net income                                                    $  2,944,565    $  3,282,921    $  3,018,327
  Adjustments to reconcile net income to net cash
  provided by operating activities:
     Provision for loan losses                                       262,500         540,000         240,000
     Depreciation, amortization and accretion, net                   544,535         420,419         414,035
     Gain on sale of loans, net                                      (75,808)         (9,786)        (41,581)
     Origination of loans held for sale                          (12,105,010)     (3,303,720)     (4,674,850)
     Proceeds from the sale of loans                              12,107,617       3,149,506       4,594,181
     Federal Home Loan Bank stock dividend                           (71,500)        (66,400)        (60,500)
     Decrease (increase) in accrued interest and other assets        519,703        (421,711)        (53,929)
     Increase (decrease) in accrued interest and other
     Liabilities                                                     150,627          95,323         (77,346)
                                                                ------------    ------------    ------------

        Net cash provided by operating activities                  4,277,229       3,686,552       3,358,337
                                                                ------------    ------------    ------------

INVESTING ACTIVITIES
 Investment securities available for sale:
     Proceeds from maturities and repayments                      35,840,062       4,490,576      15,067,374
     Purchases                                                   (40,645,564)     (8,260,583)    (19,131,130)
  Investment securities held to maturity:
     Proceeds from maturities and repayments                       2,225,527       1,707,128       1,967,986
     Purchases                                                    (5,959,703)     (3,465,473)     (8,885,152)
  Net increase in loans                                             (761,560)     (8,080,826)     (6,116,761)
  Purchase of premises and equipment                              (1,058,111)     (1,043,588)       (550,970)
  Proceeds from sale of other real estate owned                           --              --          73,334
                                                                ------------    ------------    ------------
        Net cash used in investing activities                    (10,359,349)    (14,652,766)    (17,575,319)
                                                                ------------    ------------    ------------

FINANCING ACTIVITIES
  Net increase in deposits                                        18,803,211      17,429,434       9,659,777
  Repayment of Federal Home Loan Bank advances                      (971,198)       (914,823)     (1,474,549)
  Net (decrease) increase in short-term borrowings                   (20,768)       (584,232)      1,565,000
  Purchase of treasury shares                                       (860,164)       (254,748)             --
  Cash dividends paid                                             (1,113,627)     (1,020,487)       (881,664)
                                                                ------------    ------------    ------------
        Net cash provided by financing activities                 15,837,454      14,655,144       8,868,564
                                                                ------------    ------------    ------------

        Increase (decrease) in cash and cash equivalents           9,755,334       3,688,930      (5,348,418)

Cash and cash equivalents at beginning of year                    20,512,736      16,823,806      22,172,224
                                                                ------------    ------------    ------------

Cash and cash equivalents at end of year                        $ 30,268,070    $ 20,512,736    $ 16,823,806
                                                                ============    ============    ============
</TABLE>

See accompanying notes to the consolidated financial statements.

                                       -6-
<PAGE>

                            Killbuck Bancshares, Inc.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Nature of Operations and Basis of Presentation
----------------------------------------------

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

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

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

Investment Securities
---------------------

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

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

                                       -7-
<PAGE>

Loans
-----

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

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

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

Mortgage Servicing Rights ("MSRs")
----------------------------------

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

Allowance for Loan Losses
-------------------------

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

                                       -8-
<PAGE>

Allowance for Loan Losses (Continued)
-------------------------------------

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

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

Premises and Equipment
----------------------

Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets. Maintenance and repairs are expensed as incurred
while major additions and improvements are capitalized.

Real Estate Owned
-----------------

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

Intangible Assets and Liabilities
---------------------------------

Goodwill represents the amount by which the market value of the stock issued in
the merger of Commercial Saving Bank Co. (Commercial) of Danville, Ohio with and
into The Killbuck Savings Bank Company exceeded the market value of the assets,
liabilities and capital of Commercial on the date of the merger. As of December
31, 2001 and 2000 respectively, net goodwill of $1,329,249 and $1,440,020 was
being amortized using the straight-line method over fifteen years.

Market value adjustments to various asset and liabilities accounts are being
amortized using the straight-line method over the period to be benefited. The
market value adjustments are components of their respective account balances on
the balance sheet.

                                       -9-
<PAGE>

Employee Benefits Plans
-----------------------

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

Income Taxes
------------

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

Earnings Per Share
------------------

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

Comprehensive Income
--------------------

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

Cash Flow Information
---------------------

For purposes of reporting cash flows, cash and cash equivalents include cash and
amounts due from financial institutions and federal funds sold. Cash payments
for interest in 2001, 2000 and 1999 were $9,305,850, $9,291,388, and $8,229,575,
respectively. Cash payments for income taxes for 2001, 2000, and 1999 were
$718,294, $1,209,236, and $960,417 respectively.

Pending Accounting Pronouncements
---------------------------------

In July 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (FAS) No. 141, Business Combinations,
effective for all business combinations initiated after June 30, 2001, as well
as all business combinations accounted for by the purchase method that are
completed after June 30, 2001. The new statement requires that the purchase
method of accounting be used for all business combinations and prohibits the use
of the pooling-of-interest method. The adoption of Statement No. 141 is not
expected to have a material effect on the Company's financial position or
results of operations.

                                      -10-
<PAGE>

Pending Accounting Pronouncements (Continued)
---------------------------------------------

In July 2001, the FASB issued FAS No. 142, Goodwill and Other Intangible Assets,
effective for fiscal years beginning after December 15, 2001. The statement
changes the accounting for goodwill from an amortization method to an
impairment-only approach. Thus, amortization of goodwill, including goodwill
recorded in past business combinations, will cease upon adoption of this
statement. However, the new statement did not amend FAS No. 72, Accounting for
Certain Acquisitions of Banking or Thrift Institutions, which requires
recognition and amortization of unidentified intangible assets relating to the
acquisition of financial institutions or branches thereof. The FASB has decided
to undertake a limited scope project to reconsider the provision of FAS No. 72
in 2002. Therefore, the adoption of Statement No. 142 is expected to have a
material effect on the Company's financial position or results of operations.

In August 2001, the FASB issued FAS No. 143, Accounting for Asset Retirement
Obligations, which requires that the fair value of a liability be recognized
when incurred for the retirement of a long-lived asset and the value of the
asset be increased by that amount. The statement also requires that the
liability be maintained at its present value in subsequent periods and outlines
certain disclosures for such obligations. The adoption of this statement, which
is effective January 1, 2003, is not expected to have a material effect on the
Company's financial statements.

In October 2001, the FASB issued FAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. FAS No. 144 supercedes FAS No. 121 and applies to
all long-lived assets (including discontinued operations) and consequently
amends APB Opinion No. 30, Reporting Results of Operations - Reporting the
Effects of Disposal of a Segment of a Business. FAS No. 144 requires that
long-lived assets that are to be disposed of by sale be measured at the lower of
book value or fair value less costs to sell. FAS No. 144 is effective for
financial statements issued for fiscal years beginning after December 15, 2001
and, generally, its provisions are to be applied prospectively. The adoption of
this statement is not expected to have a material effect on the Company's
financial statements.

Reclassification of Comparative Amounts
---------------------------------------

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

2.   FEDERAL FUNDS SOLD

     Federal funds sold at December 31 consists of the following:

                                        2001                     2000
                                ----------------------   ----------------------
           Institution          Maturity     Balance     Maturity      Balance
     ------------------------   --------   -----------   --------   -----------

     National City Bank          1-02-02   $19,600,000   1-02-01    $ 9,700,000
     Great Lakes Bankers Bank    1-02-02     2,900,000   1-02-01      1,300,000
                                           -----------              -----------
                                           $22,500,000              $11,000,000
                                           ===========              ===========

                                      -11-
<PAGE>

3.   INVESTMENT SECURITIES

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

     Securities available for sale

     <TABLE>
     <CAPTION>
                                                              2001
                                      ---------------------------------------------------
                                                      Gross        Gross       Estimated
                                       Amortized    Unrealized   Unrealized      Market
                                          Cost         Gains       Losses        Value
                                      -----------   ----------   ----------   -----------
     <S>                              <C>            <C>             <C>      <C>
     Obligations of U.S. Government   $50,671,940    $747,960        $--      $51,419,900
                                      -----------    --------        ---      -----------
      Agencies and Corporations

          Total                       $50,671,940    $747,960        $--      $51,419,900
                                      ===========    ========        ===      ===========
     </TABLE>

     <TABLE>
     <CAPTION>
                                                              2000
                                      ---------------------------------------------------
                                                      Gross        Gross       Estimated
                                       Amortized    Unrealized   Unrealized      Market
                                          Cost         Gains       Losses        Value
                                      -----------   ----------   ----------   -----------
     <S>                              <C>            <C>             <C>      <C>
     Obligations of U.S. Government
      Agencies and Corporations       $45,902,919    $254,759        $--      $46,157,678
                                      -----------    --------        ---      -----------

          Total                       $45,902,919    $254,759        $--      $46,157,678
                                      ===========    ========        ===      ===========
     </TABLE>

     Securities held to maturity

     <TABLE>
     <CAPTION>
                                                                  2001
                                           ---------------------------------------------------
                                                            Gross        Gross      Estimated
                                            Amortized    Unrealized   Unrealized     Market
                                               Cost         Gains        Losses       Value
                                           -----------   ----------   ----------   -----------
     <S>                                   <C>           <C>           <C>         <C>
     Obligations of States and Political
      Subdivisions                         $38,304,631   $1,003,792    $69,573     $39,238,850
     Corporate Securities                    1,498,615       25,342     28,202       1,495,755
                                           -----------   ----------    -------     -----------
          Total                            $39,803,246   $1,029,134    $97,775     $40,734,605
                                           ===========   ==========    =======     ===========
     </TABLE>

     <TABLE>
     <CAPTION>
                                                                  2000
                                           ---------------------------------------------------
                                                           Gross        Gross       Estimated
                                            Amortized    Unrealized   Unrealized     Market
                                                Cost        Gains       Losses        Value
                                           -----------   ----------   ----------   -----------
     <S>                                   <C>            <C>          <C>         <C>
     Obligations of States and Political
      Subdivisions                         $34,514,191    $608,803     $ 94,665    $35,028,329
     Corporate Securities                    1,615,434       3,492       45,978      1,572,948
                                           -----------    --------     --------    -----------
          Total                            $36,129,625    $612,295     $140,643    $36,601,277
                                           ===========    ========     ========    ===========
     </TABLE>

                                      -12-
<PAGE>

3.   INVESTMENT SECURITIES (CONTINUED)

     The amortized cost and estimated market values of debt securities at
     December 31, 2001, 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.

     <TABLE>
     <CAPTION>
                                                 Available For Sale          Held to Maturity
                                             -------------------------   -------------------------
                                                            Estimated                   Estimated
                                              Amortized      Market       Amortized      Market
                                                Cost          Value          Cost         Value
                                             -----------   -----------   -----------   -----------

     <S>                                     <C>           <C>           <C>           <C>
     Due in one year or less                 $ 3,000,000   $ 3,071,718   $ 3,016,672   $ 3,065,093
     Due after one year through five years    43,627,132    44,103,317    14,829,235    15,340,709
     Due after five through ten years          4,044,808     4,244,865    18,285,641    18,647,619
     Due after ten years                              --            --     3,671,698     3,681,184
                                             -----------   -----------   -----------   -----------
                                             $50,671,940   $51,419,900   $39,803,246   $40,734,605
                                             ===========   ===========   ===========   ===========
     </TABLE>

     Investment securities with an approximate carrying value of $40,376,000 and
     $37,010,000 at December 31, 2001 and 2000, respectively were pledged to
     secure public deposits, securities sold under agreement to repurchase and
     for other purposes as required or permitted by law.

4.   LOANS

     Major classification of loans are summarized as follows:

                                             2001              2000
                                         ------------      ------------

     Real estate - residential           $ 55,811,947      $ 53,528,900
     Real estate - farm                     3,377,083         3,945,484
     Real estate - commercial              24,116,828        23,062,836
     Real estate - construction             2,937,181         2,043,971
     Commercial and other loans            37,205,543        38,355,007
     Consumer and credit loans             28,709,892        30,863,939
                                         ------------      ------------
                                          152,158,474       151,800,137
     Less allowance for loan losses        (2,260,555)       (2,358,759)
     Less net deferred loan fees             (336,958)         (379,477)
                                         ------------      ------------
          Loans, net                     $149,560,961      $149,061,901
                                         ============      ============

     Loans held for sale at December 31, 2001 and 2000 were $593,200 and
     $520,000 respectively. The Bank is currently collecting a fee of .25% for
     servicing these loans. Real estate loans serviced for Freddie Mac, which
     are not included in the consolidated balance sheet, totaled $14,172,071 and
     $4,053,953 at December 31, 2001 and 2000, respectively.

                                      -13-
<PAGE>

4.   LOANS (CONTINUED)

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

                                    2001       2000       1999
                                  --------   --------   --------

     Principal outstanding        $221,050   $298,286   $287,017
     Contractual interest due     $ 21,254   $ 10,013   $ 19,969
     Interest income recognized   $     --   $     --   $     --

     The Company's primary business activity is with customers located within
     its local trade area. Residential, commercial, personal, and agricultural
     loans are granted. The Company also selectively funds loans originated
     outside of its trade area provided such loans meet its credit policy
     guidelines. Although the Company has a diversified loan portfolio at
     December 31, 2001 and 2000, loans outstanding to individuals and businesses
     are dependent upon the local economic conditions in its immediate trade
     area.

     The Bank entered into transactions with certain directors, executive
     officers, significant stockholders, and their affiliates. A summary of loan
     activity for those directors, executive officers, and their associates with
     loan balances in excess of $60,000 for the year ended December 31, 2001 is
     as follows:

          Balance                     Amounts         Balance
     December 31, 2000   Additions   Collected   December 31, 2001
     -----------------   ---------   ---------   -----------------

          $67,301        $193,762     $22,835         $238,228

5.   ALLOWANCE FOR LOAN LOSSES

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

     <TABLE>
     <CAPTION>
                                                   2001         2000         1999
                                                ----------   ----------   ----------
     <S>                                        <C>          <C>           <C>
     Balance, January 1                         $2,358,759   $1,887,773   $1,851,175
          Add:
              Provision charged to operations      262,500      540,000      240,000
              Loan recoveries                      125,822      180,850       80,135
          Less: Loans charged off                 (486,526)    (249,864)    (283,537)
                                                ----------   ----------   ----------
     Balance, December 31                       $2,260,555   $2,358,759   $1,887,773
                                                ==========   ==========   ==========
     </TABLE>

                                      -14-
<PAGE>

6.   PREMISES AND EQUIPMENT

     Premises and equipment are summarized as follows:

                                            2001         2000
                                         ----------   ----------

     Land                                $1,053,945   $1,053,945
     Building and improvements            4,034,816    3,485,328
     Furniture, fixtures and equipment    3,793,463    3,290,894
                                         ----------   ----------
                                          8,882,224    7,830,167
     Less accumulated depreciation        3,743,442    3,301,998
                                         ----------   ----------
          Total                          $5,138,782   $4,528,169
                                         ==========   ==========

     Depreciation expense charged to operations was $441,444 for 2001, $361,338
     for 2000, and $321,492 for 1999.

7.   DEPOSITS

     Time deposits include certificates of deposit in denominations of $100,000
     or more. Such deposits aggregated $40,779,099 and $41,743,149 at December
     31, 2001 and 2000, respectively.

     Interest expense on certificates of deposit $100,000 and over amounted to
     $2,021,500 in 2001, $1,874,053 in 2000, and $1,487,708 in 1999.

     The following table sets forth the remaining maturity of time certificates
     of deposits of $100,000 or more at December 31, 2001.

         3 months or less                $14,093,085
     Over 3 through 6 months              10,358,503
     Over 6 through 12 months             13,875,113
     Over 12 months                        2,452,398
                                         -----------
                   Total                 $40,779,099
                                         ===========

                                      -15-
<PAGE>

8.   SHORT-TERM BORROWINGS

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

     <TABLE>
     <CAPTION>
                                                             2001         2000
                                                          ----------   ----------
     <S>                                                  <C>          <C>
     Short-term borrowings:
              Ending balance                              $4,295,000   $4,315,768
              Maximum month-end balance during the year    4,760,409    5,195,001
              Average month-end balance during the year    3,991,246    4,557,783
              Weighted average at year end                       .13%        4.36%
              Weighted average rate during the year             1.64%        3.99%
     </TABLE>

     The Company has pledged investment securities with carrying values of
     $6,201,093 and $5,968,280 as of December 31, 2001 and 2000, respectively,
     as collateral for the repurchase agreements.

9.   FEDERAL HOME LOAN BANK ADVANCES

     The Federal Home Loan Bank advances have monthly principal and interest
     payments due with maturity dates from 2009 through 2017. Interest rates
     range from 6.00% to 8.90% on the advances. The scheduled aggregate minimum
     future principal payments on the advances outstanding as of December 31,
     2001 are as follows:

        Year Ending
         December 31,                    Amount
     -------------------               ----------

     2002                              $  658,980
     2003                                 599,133
     2004                                 546,365
     2005                                 499,844
     2006                                 459,009
     2007 and thereafter                2,463,401
                                       ----------
     Total                             $5,226,732
                                       ==========

     The Bank maintains a credit arrangement with Federal Home Loan Bank of
     Cincinnati, Ohio ("FHLB"). The FHLB borrowings, when used, are
     collateralized by the Bank's investment in Federal Home Loan Bank stock and
     a blanket collateral pledge agreement with FHLB under which the Bank has
     pledged certain qualifying assets equal to 150 percent of the unpaid amount
     of the outstanding balances. At December 31, 2001 the Bank had a borrowing
     capacity of approximately $40.3 million with the FHLB. At December 31, 2001
     and 2000 there was $5,226,732 and $6,197,930, respectively borrowed against
     this credit arrangement.

                                      -16-
<PAGE>

10.  EMPLOYEE BENEFIT PLANS

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

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

     The 401(k) plan allows employees to make salary reduction contributions to
     the plan up to 10% of their compensation for the plan year. For each plan
     year, the Bank may contribute to the plan an amount of matching
     contributions for a particular plan year. The Bank may choose not to make
     matching contributions for a particular plan year. For 2001 and 2000 the
     Bank matched 25% of the employees voluntary contributions up to 1% of the
     employee's compensation.

     Both plans cover substantially all employees with one year of service and
     attained age 21.

     The pension costs charged to operating expense for the years 2001, 2000 and
     1999 amounted to $192,433, $178,801 and $180,369, respectively.

11.  OTHER OPERATING EXPENSE

     Other operating expense included the following:

                                 2001         2000        1999
                              ----------   ----------   ----------

     Professional fees        $  270,198   $  255,325   $  257,986
     Franchise tax               388,226      343,662      361,089
     Credit Card Processing      223,168      155,293      139,651
     Other                     1,458,518    1,328,912    1,203,463
                              ----------   ----------   ----------
          Total               $2,340,110   $2,083,192   $1,962,189
                              ==========   ==========   ==========

12.  INCOME TAXES

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

                                 2001        2000        1999
                               --------   ----------   --------

     Current payable           $831,042   $1,221,389   $959,746
     Deferred                    72,381     (142,505)   (22,661)
                               --------   ----------   --------
          Total provision      $903,423   $1,078,884   $937,085
                               ========   ==========   ========

                                      -17-
<PAGE>

12.  INCOME TAXES (CONTINUED)

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

     <TABLE>
     <CAPTION>
                                           2001                   2000                 1999
                                   --------------------   --------------------   --------------------
                                                 % of                   % of                   % of
                                                Pre-Tax                Pre-Tax                Pre-Tax
                                     Amount     Income      Amount     Income      Amount     Income
                                   ----------   -------   ----------   -------   ----------   -------
     <S>                           <C>           <C>      <C>           <C>      <C>           <C>
     Provision at statutory rate   $1,308,316    34.0%    $1,483,013    34.0%    $1,344,840    34.0%
     Tax exempt income               (577,998)  (15.0)      (535,451)  (12.3)      (482,724)  (12.2)
     Non-deductible interest
      Expense                          82,503     2.1         83,133     1.9         81,600     2.1
     Non-deductible amortization       37,662     1.0         37,662      .9         37,662      .9
     Other, net                        52,940     1.4         10,527      .2        (44,293)   (1.1)
                                   ----------   -----     ----------   -----     ----------   -----
     Tax expense
      and effective rate           $  903,423    23.5%    $1,078,884    24.7%    $  937,085    23.7%
                                   ==========   =====     ==========   =====     ==========   =====
     </TABLE>

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

                                                        2001       2002
                                                      --------   --------
     Deferred Tax Assets:
          Allowance for loan losses                   $574,949   $608,339
          Deferred loan fees                            13,822     19,942
                                                      --------   --------
               Deferred tax asset                      588,771    628,281
                                                      --------   --------

     Deferred Tax Liabilities:
          Premise and equipment                        224,209    239,168
          Stock dividends                              126,956    102,540
          Net unrealized gain on securities            254,307     86,618
          Other, net                                    36,709     13,294
                                                      --------   --------
              Deferred tax liabilities                 642,181    441,620
                                                      --------   --------

              Net deferred tax (liabilities) assets   $(53,410)  $186,661
                                                      ========   ========

     No valuation allowance was established at December 31, 2001 and 2000 in
     view of certain tax strategies coupled with the anticipated future taxable
     income as evidenced by the Company's earnings potential.

                                      -18-
<PAGE>

13.  COMMITMENTS AND CONTINGENT LIABILITIES

     Commitments
     -----------

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

     These commitments were comprised of the following at December 31:

                                       2001          2000
                                    -----------   -----------

     Commitments to extend credit   $20,984,000   $20,350,000
     Standby letters of credit          253,000       703,529
                                    -----------   -----------
         Total                      $21,237,000   $21,053,529
                                    ===========   ===========

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

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

     The Company has not been required to perform any financial guarantees
     during the past two years. The Company has not incurred any losses on its
     commitments in either 2001 or 2000.

     Contingent Liabilities
     ----------------------

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

                                      -19-
<PAGE>

14.  REGULATORY MATTERS

     The approval of regulatory authorities is required if the total of all
     dividends declared by the Bank in any calendar year exceeds net profits as
     defined for that year combined with its retained net profits for the two
     preceding calendar years less any required transfers to surplus. Under this
     formula, the amount available for payment of dividends by the Bank to the
     Company in 2002, without the approval of the regulatory authorities, is
     approximately $2,828,000 plus 2002 profits retained up to the date of the
     dividend declaration.

     Included in cash and due from banks are required federal reserves of
     $2,696,000 and $2,185,000 at December 31, 2001 and 2000, respectively, for
     facilitating the implementation of monetary policy by the Federal Reserve
     System. The required reserves are computed by applying prescribed ratios to
     the classes of average deposit balances. These are held in the form of cash
     on hand and/or balances maintained directly with the Federal Reserve Bank.

     Federal law prevents the Company from borrowing from the Bank unless the
     loans are secured by specific obligations. Further, such secured loans are
     limited in amount to ten percent of the Bank's capital. The Company had no
     such borrowings at December 31, 2001 and 2000.

15.  REGULATORY CAPITAL REQUIREMENTS

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

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

     As of December 31, 2001 and 2000, the FDIC categorized the Bank as well
     capitalized under the regulatory framework for prompt corrective action. To
     be classified as a well capitalized financial institution, Total
     risk-based, Tier I risk-based, and Tier I Leverage capital ratios must be
     at least ten percent, six percent, and five percent, respectively. There
     have been no conditions or events since notification that management
     believes have changed this category.

                                      -20-
<PAGE>

15.  REGULATORY CAPITAL REQUIREMENTS (CONTINUED)

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

     <TABLE>
     <CAPTION>
                                                               2001               2000
                                                          ---------------    ---------------
                                                           Amount   Ratio     Amount   Ratio
                                                          -------   -----    -------   -----
     <S>                                                  <C>       <C>      <C>       <C>
     Total Risk Based Capital (to Risk Weighted Assets)
     --------------------------------------------------

         Actual                                           $33,216   20.75%   $32,421   20.39%
         For Capital Adequacy Purposes                     12,804    8.00     12,720    8.00
         To be well capitalized                            16,005   10.00     15,900   10.00

     Tier 1 Capital (to Risk Weighted Assets)
     ----------------------------------------

         Actual                                           $31,215   19.50%   $30,133   18.95%
         For Capital Adequacy Purposes                      6,402    4.00      6,360    4.00
         To be well capitalized                             9,603    6.00      9,540    6.00

     Tier 1 Capital (to Average Assets)
     ----------------------------------

         Actual                                           $31,215   11.27%   $30,133   11.68%
         For Capital Adequacy Purposes                     11,074    4.00     10,322    4.00
         To be well capitalized                            13,843    5.00     12,903    5.00
     </TABLE>

16.  FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS

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

     <TABLE>
     <CAPTION>
                                                      2001                          2000
                                           ---------------------------   ---------------------------
                                             Carrying         Fair         Carrying         Fair
                                              Amount          Value         Amount          Value
                                           ------------   ------------   ------------   ------------
     <S>                                   <C>            <C>            <C>            <C>
     Financial assets:
         Cash and due from banks           $  7,768,070   $  7,768,070   $  9,512,736   $  9,512,736
         Federal funds sold                  22,500,000     22,500,000     11,000,000     11,000,000
         Securities available for sale       51,419,900     51,419,900     46,157,678     46,157,678
         Securities held to maturity         39,803,246     40,734,605     36,129,625     36,601,277
         Net loans                          149,560,961    156,422,796    149,061,901    154,063,883
         Loans held for sale                    593,200        628,204        520,000        541,118
         Accrued interest receivable          1,508,784      1,508,784      1,885,665      1,885,665
         Regulatory Stock                     1,390,810      1,390,810      1,319,710      1,319,710
                                           ------------   ------------   ------------   ------------
              Total                        $274,544,971   $282,373,169   $255,587,315   $261,082,067
                                           ============   ============   ============   ============

     Financial liabilities:
         Deposits                          $237,971,103   $241,558,000   $219,167,892   $220,333,000
         Federal Home Loan Bank advances      5,226,732      5,545,563      6,197,930      6,649,000
         Short term borrowings                4,295,000      4,295,000      4,315,768      4,315,768
         Accrued interest payable               346,287        346,287        415,171        415,171
                                           ------------   ------------   ------------   ------------
              Total                        $247,839,122   $251,744,850   $230,096,761   $231,712,939
                                           ============   ============   ============   ============
     </TABLE>

                                      -21-
<PAGE>

16.  FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS (CONTINUED)

     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.

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

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

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

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

     The fair value approximates the current carrying value.

     Investment Securities and Loans Held for Sale
     ---------------------------------------------

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

     Loans, Deposits, and Federal Home Loan Bank Advances
     ----------------------------------------------------

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

                                      -22-
<PAGE>

16.  FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS (CONTINUED)

     Commitments to Extend Credit and Standby Letters of Credit
     ----------------------------------------------------------

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

                                      -23-
<PAGE>

17.  PARENT COMPANY

     The following are parent only condensed financial statements:

                             CONDENSED BALANCE SHEET
                             -----------------------

                                                            December 31,
                                                        2001          2000
                                                     -----------   -----------

ASSETS
  Cash                                               $   460,755   $   234,578
  Investment in bank subsidiary                       32,576,697    31,506,587
                                                     -----------   -----------
        Total assets                                 $33,037,452   $31,741,165
                                                     ===========   ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
  Shareholders' equity                               $33,037,452   $31,741,165
                                                     -----------   -----------
        Total liabilities and shareholders' equity   $33,037,452   $31,741,165
                                                     ===========   ===========

                          CONDENSED STATEMENT OF INCOME
                          -----------------------------

<TABLE>
<CAPTION>
                                                                 Year Ended December 31,
                                                              2001          2000          1999
                                                           ----------    ----------    ----------
<S>                                                        <C>           <C>           <C>
INCOME
  Dividends from bank subsidiary                           $2,200,000    $1,200,000    $1,175,000

  Operating expenses                                               50            50           300
                                                           ----------    ----------    ----------

        Income before income taxes                          2,199,950     1,199,950     1,174,700

Income tax benefit                                                (17)          (17)         (102)
                                                           ----------    ----------    ----------

        Income before equity in undistributed net income
         of subsidiary                                      2,199,967     1,199,967     1,174,802

Equity in undistributed net income of subsidiary              744,598     2,082,954     1,843,525
                                                           ----------    ----------    ----------

NET INCOME                                                 $2,944,565    $3,282,921    $3,018,327
                                                           ==========    ==========    ==========
</TABLE>

                                      -24-
<PAGE>

17.  PARENT COMPANY (CONTINUED)

                        CONDENSED STATEMENT OF CASH FLOWS
                        ---------------------------------

<TABLE>
<CAPTION>
                                                                 Year Ended December 31,
                                                            2001           2000           1999
                                                         -----------    -----------    -----------
<S>                                                      <C>            <C>            <C>
OPERATING ACTIVITIES
  Net income                                             $ 2,944,565    $ 3,282,921    $ 3,018,327
  Adjustments to reconcile net income to net cash
   provided by operating activities:
      Equity in undistributed net income of subsidiary      (744,598)    (2,082,954)    (1,843,525)
                                                         -----------    -----------    -----------
         Net cash provided by operating activities         2,199,967      1,199,967      1,174,802
                                                         -----------    -----------    -----------

FINANCING ACTIVITIES
  Purchase of treasury shares                               (860,163)      (254,749)            --
  Dividends paid                                          (1,113,627)    (1,020,487)      (881,664)
                                                         -----------    -----------    -----------
         Net cash used in financing activities            (1,973,790)    (1,275,236)      (881,664)
                                                         -----------    -----------    -----------

INCREASE (DECREASE) IN CASH                                  226,177        (75,269)       293,138

CASH AT BEGINNING OF YEAR                                    234,578        309,847         16,709
                                                         -----------    -----------    -----------

CASH AT END OF YEAR                                      $   460,755    $   234,578    $   309,847
                                                         ===========    ===========    ===========
</TABLE>

                                      -25-
<PAGE>

18.  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
     (IN  THOUSANDS EXCEPT PER SHARE DATA)

                                                  Three Months Ended
                                      ------------------------------------------
                                        March      June     September   December
                                        2001       2001       2001        2001
                                      --------   --------   ---------   --------

Total interest income                 $  4,993   $  4,923    $  4,657   $  4,452
Total interest expense                   2,538      2,427       2,278      1,994
                                      --------   --------    --------   --------

Net interest income                      2,455      2,496       2,379      2,458
Provision for loan losses                   83         90          90         --
                                      --------   --------    --------   --------
Net interest income after
 provision for loans losses              2,372      2,406       2,289      2,458

Total other income                         165        180         186        199
Total other expense                      1,563      1,635       1,558      1,651
                                      --------   --------    --------   --------

Income before income taxes                 974        951         917      1,006
Income taxes                               249        217         206        231
                                      --------   --------    --------   --------

Net income                            $    725   $    734    $    711   $    775
                                      ========   ========    ========   ========

Per share data:
Net earnings                          $   1.04   $   1.05    $   1.02   $   1.12
                                      ========   ========    ========   ========

Weighted average shares outstanding    698,661    697,579     696,213    694,241
                                      ========   ========    ========   ========

                                      -26-
<PAGE>

18.  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)(CONTINUED)
     (IN THOUSANDS EXCEPT PER SHARE DATA)

                                                  Three Months Ended
                                      ------------------------------------------
                                       March       June     September   December
                                        2000       2000       2000        2000
                                      --------   --------   ---------   --------

Total interest income                 $  4,512   $  4,750    $  5,007   $  5,081
Total interest expense                   2,111      2,253       2,480      2,522
                                      --------   --------    --------   --------

Net interest income                      2,401      2,497       2,527      2,559
Provision for loan losses                   60         60          60        360
                                      --------   --------    --------   --------
Net interest income after
  provision for loans losses             2,341      2,437       2,467      2,199

Total other income                         157        158         163        160
Total other expense                      1,394      1,464       1,342      1,520
                                      --------   --------    --------   --------

Income before income taxes               1,104      1,131       1,288        839
Income taxes                               270        288         329        192
                                      --------   --------    --------   --------

Net income                            $    834   $    843    $    959   $    647
                                      ========   ========    ========   ========

Per share data:
Net earnings                          $   1.18   $   1.19    $   1.36   $    .92
                                      ========   ========    ========   ========

Weighted average shares outstanding    705,295    705,037     704,715    702,961
                                      ========   ========    ========   ========

                                      -27-