UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549










FORM
10-K





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





For the
fiscal year ended December
31, 2009.




Commission
File Number000-27894





COMMERCIAL
BANCSHARES, INC.


(Exact
name of registrant as specified in its charter)





OHIO
              34-1787239(State
      or other jurisdiction of
              (I.R.S.
      Employerincorporation
      or organization)
              Identification
      No.)




118
S. Sandusky Avenue, Upper Sandusky, Ohio 43351


(Address
of principal executive offices including zip code)


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





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





Title of
Each Class


None





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





Title of
Each Class


Common
Shares, no par value





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.  Yes o No þ





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act.    Yes
o No þ





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months, and (2) has been subject to such filing requirements for
the past 90 days.  Yes þNo o





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




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





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company (Check
one):





Large
accelerated filer  o                                                                Accelerated
filer  o


Non-Accelerated
filer   o                                                                Smaller
reporting company þ







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




Based on
the closing price of the registrant’s common shares as of June 30, 2009, the
aggregate value of the voting common shares held by non-affiliates was
$13,636,764.





At March
31, 2010, there were issued and outstanding 1,181,038 of the registrant’s Common
Shares.










DOCUMENTS
INCORPORATED BY REFERENCE




Portions
of the registrant’s 2009 Annual Report to Shareholders are incorporated by
reference into Parts I and II of this Form 10-K.  Portions of the
registrant’s Proxy Statement dated March 31, 2010 for the May 13, 2010 Annual
Meeting of Shareholders are incorporated by reference into Part III of the Form
10-K.









INDEX


FORM
10-K




PART
      I
              PageItem
      1.
              Description
      of Business
              5Item
      1A.
              Risk
      Factors
              11Item
      1B.
              Unresolved
      Staff Comments
              15Item
      2.
              Properties
              15Item
      3.
              Legal
      Proceedings
              16PART
      IIItem
      4.
              Market
      for Common Equity, Related Shareholder Matters and Issuer Purchases
      of Equity Securities
              16Item
      5.
              Selected
      Financial Data
              17Item
      6.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operation
              17Item
      6A.
              Quantitative
      and Qualitative Disclosures about Market Risk
              17Item
      7.
              Financial
      Statements and Supplementary Data
              17Item
      8.
              Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
              17Item
      8A.
              Controls
      and Procedures
              17Item
      8B.
              Other
      Information
              18PARTIIIItem
      9.
              Directors
      and Executive Officers of the Registrant
              18Item
      10.
              Executive
      Compensation
              18Item
      11.
              Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
              18Item
      12.
              Certain
      Relationships and Related Transactions
              19Item
      13.
              Principal
      Accountant Fees and Services
              19PART
      IVItem
      14.
              Exhibits
      and Financial Statement Schedules
              19Signatures
              22




4




PART
I




ITEM
1 - DESCRIPTION OF BUSINESS




General




In
February 1995, Commercial Bancshares, Inc. (the “Corporation”) received approval
from the Board of Governors of the Federal Reserve System to become a bank
holding company by acquiring all the voting shares of common stock of The
Commercial Savings Bank (the “Bank”). The principal business of the Corporation
presently is to operate the Bank, which is a wholly-owned subsidiary, and its
principal asset.  The Corporation and the main office of the Bank are
located at 118 South Sandusky Avenue, Upper Sandusky, Ohio 43351.  On
December 23, 2003, Articles of Incorporation were filed for Commercial Financial
and Insurance Agency, LTD (“Commercial Financial”), an Ohio limited liability
company.  This company, a subsidiary of the Corporation, was formed to
enable the Corporation to expand the products and services available to current
customers and others to include the sales of non-deposit investment products and
other selected financial and insurance products and services.





Although
wholly owned by the Corporation, the Bank functions as an independent community
bank.  The Bank was organized on April 20, 1920 as a state-chartered
Bank and incorporated as “The Lewis Bank & Trust Corporation” under the laws
and statutes of the State of Ohio.  An amendment to the articles of
incorporation on February 8, 1929 changed the name of the Bank to its present
name.  The Bank provides customary retail and commercial banking
services to its customers, including acceptance of deposits for demand, savings
and time accounts, individual retirement accounts (IRAs) and servicing of such
accounts; commercial, consumer and real estate lending, including installment
loans, and safe deposit and night depository facilities.  The Bank is
a nonmember of the Federal Reserve System, is insured by the Federal Deposit
Insurance Corporation (FDIC) and is regulated by the Ohio Division of the
Financial Institutions and the FDIC.





The Bank
grants residential, installment and commercial loans to customers located
primarily in the Ohio counties of Wyandot, Marion and Hancock and the
surrounding area.  Commercial loans are primarily variable rate and
include operating lines of credit and term loans made to small businesses
primarily based on the ability to repay the loan from the cash flow of the
business.  Such loans are typically secured by business assets such as
equipment and inventory, and occasionally by the business owner’s personal
residence.  When the borrower is not an individual, the Bank generally
obtains the personal guarantee of the business owner.  Commercial real
estate loans are primarily secured by borrower-occupied business real estate,
and are dependent on the ability of the related business to generate adequate
cash flow to service the debt.  Such loans predominantly carry
adjustable interest rates.  Residential real estate loans are made
with primarily variable rates and are secured by the borrower’s
residence.  Such loans are made based on the borrower’s ability to
make repayment from employment and other income.  The Bank generally
makes these loans in amounts of 80% or less of the value of
collateral.  An appraisal is obtained from a qualified real estate
appraiser for substantially all loans secured by real
estate.  Construction loans are secured by residential and business
real estate that primarily will be borrower-occupied upon
completion.  The Bank usually does not make the permanent loan at the
end of the construction phase, unless the customer accepts a variable rate
mortgage.  Installment loans to individuals include loans secured by
automobiles and other consumer assets, including second mortgages on personal
residences.  Loans secured by automobiles are generated both by direct
application from the customer and from the Bank’s purchase of indirect retail
installment contracts from the dealers.  The Bank entered into a
business relationship during 2000 whereby the Bank obtained an ownership
interest in Beck Title Agency, Ltd. of Carey, Ohio (“Beck
Title”).  This joint venture provides an additional source of fee
income for title research activity on new home loan originations in the local
market.





As with
other financial institutions, the earnings of the Corporation are affected by
general economic conditions and by the monetary policies of the Federal Reserve
Board.  The Federal Reserve Board exerts a substantial influence on
interest rates and credit conditions primarily through open market operations in
U.S. Government securities, setting the reserve requirement of member banks and
establishing the discount rate on bank borrowings.  The Federal
Reserve Board’s policies have a direct impact on loan and deposit growth along
with interest rates charged and paid on outstanding balances.  They
also impact the source, cost of funds and the rates of return on
investments.  Changes in the Federal Reserve Board’s monetary policies
have had a significant impact on the operating results of the Corporation and
are expected to continue to do so in the future however, the exact impact upon
the future business and earnings cannot accurately be predicted.




5





The
general economic conditions in the Corporation’s market area have generally been
consistent with the state as a whole.  The Corporation is not aware of
any exposure to material costs associated with environmental hazardous waste
cleanup.  The Bank’s loan procedures require that where such potential
risk is considered likely to exist, before approving any commercial real estate
loan, management must obtain state and federal environmental regulatory
studies.





Competition in Financial
Services





The Bank,
Commercial Financial and Beck Title compete for business primarily in the Ohio
counties of Wyandot, Hancock and Marion.  The Corporation’s
competitors for business come from two primary sources: large regional firms and
independent community banks and thrifts.  As of June 30, 2009 (the
most recent date for which the FDIC provides market share information), there
were approximately 19 depository institutions (excluding credit unions)
competing in these markets.  As of that date, the Corporation ranked
3rd in total market share, with aggregate deposits of approximately $242
million.





The Bank
also competes, particularly for deposit dollars, with insurance companies,
brokerage firms and investment companies.  Competition with
independent community banks is enhanced by creating product niches so as not to
resort solely to pricing as a means to attract business.





Employees




Currently
the Corporation has 82 full-time employees and 21 part-time
employees.





Supervision and
Regulation




General


Commercial
Bancshares, Inc. is a corporation organized under the laws of the State of
Ohio.  The business in which the Corporation and its subsidiary are
engaged is subject to extensive supervision, regulation and examination by
various bank regulatory authorities.  The supervision, regulation and
examination to which the Corporation and its subsidiaries are subject are
intended primarily for the protection of depositors and the deposit insurance
funds that insure the deposits of banks, rather than for the protection of
shareholders.





Several
of the more significant regulatory provisions applicable to banks and bank
holding companies to which the Corporation and the Bank are subject are
discussed below.  To the extent that the following information
describes statutory or regulatory provisions, it is qualified in its entirety by
reference to the particular statutory provisions.  Any change in
applicable law or regulation may have a material effect on the business and
prospects of the Corporation and the Bank.





Regulatory
Agencies


The
Corporation is a registered financial holding company and is subject to
inspection, examination and supervision by the Board of Governors of the Federal
Reserve System (the “Federal Reserve Board”) pursuant to the Bank Holding
Company Act of 1956, as amended.




The Bank
is an Ohio chartered commercial bank.  It is subject to regulation and
examination by both the Ohio Division of Financial Institutions (the “ODFI”) and
the Federal Deposit Insurance Corporation (the “FDIC”).





The Holding
Company


As a
holding company incorporated and doing business within the State of Ohio, the
Corporation is subject to regulation and supervision under the Bank Holding Act
of 1956, as amended (the “Act”).  The Corporation is required to file
with the Federal Reserve Board, on a quarterly basis, information pursuant to
the Act.  The Federal Reserve Board may conduct examinations or
inspections of the Corporation and the Bank.




6





The
Corporation is required to obtain prior approval from the Federal Reserve Board
for the acquisition of more than five percent of the voting shares or
substantially all of the assets of any bank or bank holding
company.  In addition, the Corporation is generally prohibited by the
Act from acquiring direct or indirect ownership or control of more than five
percent of the voting shares of any company which is not a bank or bank holding
company and from engaging directly or indirectly in activities other than those
of banking, managing or controlling banks or furnishing services to its
subsidiaries.  The Corporation may, however, subject to certain prior
approval requirements of the Federal Reserve Board, engage in, or acquire shares
of companies engaged in activities which are deemed by the Federal Reserve Board
by order or by regulation to be financial in nature or closely related to
banking.





On
November 12, 1999, the Gramm-Leach Bliley Act (the “GLB Act”) was enacted into
law.  The GLB Act made sweeping changes with respect to the
permissible financial services which various types of financial institutions may
now provide.  The Glass-Steagall Act, which had generally prevented
banks from affiliation with securities and insurance firms, was
repealed.  Pursuant to the GLB Act, bank holding companies may elect
to become a “financial holding company,” provided that all of the depository
institution subsidiaries of the bank holding company are “well capitalized” and
“well managed” under applicable regulatory standards.





Under the
GLB Act, a bank holding company that has elected to become a financial holding
company may affiliate with securities firms and insurance companies and engage
in other activities that are financial in nature.  Activities that are
“financial in nature” include securities underwriting, dealing and
market-making, sponsoring mutual funds and investment companies, insurance
underwriting and agency, merchant banking and activities that the Federal
Reserve Board has determined to be closely related to banking.  No
Federal Reserve Board approval is required for the Corporation to acquire a
company, other than a bank holding company, bank or savings association, engaged
in activities that are financial in nature or incidental to activities that are
financial in nature, as determined by the Federal Reserve
Board.  Prior Federal Reserve Board approval is required before the
Corporation may acquire the beneficial ownership or control of more than five
percent of the voting shares, or substantially all of the assets, of a bank
holding company, bank or savings association.  If any subsidiary bank
of the Corporation ceases to be “well capitalized” or “well managed” under
applicable regulatory standards, the Federal Reserve Board may, among other
actions, order the Corporation to divest the subsidiary
bank.  Alternatively, the Corporation may elect to conform its
activities to those permissible for a bank holding company that is not also a
financial holding company.  If any subsidiary bank of the Corporation
receives a rating under the Community Reinvestment Act of 1977 of less than
satisfactory, the Corporation will be prohibited from engaging in new activities
or acquiring companies other than bank holding companies, banks or savings
associations.





The Bank




General.


The Bank
is an Ohio-chartered bank that is not a member of the Federal Reserve System and
is therefore regulated by the ODFI as well as the FDIC.  The
regulatory agencies have the authority to regularly examine the Bank, which is
subject to all applicable rules and regulations promulgated by its supervisory
agencies.  In addition, the Bank’s deposits are insured by the FDIC to
the fullest extent permitted by law.





Deposit
Insurance.


As an
FDIC-insured institution, the Bank is required to pay deposit insurance premium
assessments to the FDIC.  The FDIC has adopted a risk-based assessment
system under which all insured institutions are placed into one of nine
categories and assessed insurance premiums based upon their respective levels of
capital and results of supervisory evaluations.  Institutions
classified as well capitalized (as defined by the FDIC) and considered healthy,
pay the lowest premium while institutions that are less than adequately
capitalized (as defined by the FDIC) and considered of substantial supervisory
concern, pay the highest premium.  Risk classification of all insured
institutions is made by the FDIC for each semi-annual assessment
period.




7




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





Capital
Requirements.


The
Federal Reserve Board, ODFI and FDIC require banks and holding companies to
maintain minimum capital ratios.  The “risk-adjusted” capital
guidelines for the Bank and the Corporation involve a mathematical process of
assigning various risk weights to different classes of assets, then evaluating
the sum of the risk-weighted balance sheet structure against the Bank’s and the
Corporation’s capital base.  The rules set the minimums guidelines for
the ratio of capital to risk-weighted assets (including certain off-balance
sheet activities, such as standby letters of credit) at 8%.  Tier 1
capital is comprised of common equity, retained earnings, and a limited amount
of perpetual preferred stock less certain intangible items.  At least
half of the total capital is to be Tier 1 Capital.  The remainder may
consist of a limited amount of subordinated debt, other preferred stock, and a
portion of the loan loss reserves (not to exceed 1.25% of risk-weighted
assets).  The Bank anticipates maintaining capital at a level
sufficient to be classified as “well capitalized” pursuant to the Federal
Reserve guidelines.





In
addition, the federal banking regulatory agencies have adopted leverage capital
guidelines for banks and bank holding companies.  Under these
guidelines, banks and bank holding companies must maintain a minimum ratio of
three percent (3%) Tier 1 Capital to total assets.  However, most
banking organizations are expected to maintain capital ratios well in excess of
the minimum level and generally must keep their Tier 1 ratio at or above
5%.  The Bank intends to maintain capital well above the regulatory
minimum.





The
capital requirements described above are minimum requirements.  Higher
capital levels will be required if warranted by the particular circumstances or
risk profiles of individual institutions.  For example, the
regulations provide that additional capital may be required to take adequate
account of, among other things, interest rate risk or the risks posed by
concentrations of credit, nontraditional activities or securities trading
activities.  As of December 31, 2009, the Bank exceeded its minimum
regulatory capital requirements with a total risk-based capital ratio of 10.3%,
a Tier 1 risk-based capital ratio of 9.1% and a Tier 1 leverage ratio of
7.8%.





In
addition to the minimum regulatory capital requirements discussed above,
provisions contained in the Federal Deposit Insurance Corporation Improvement
Act (“FDICIA”) expressly provide for certain supervisory actions which are
directly keyed to the capital levels of an insured depository
institution.  These “prompt corrective action” provisions impose
progressively more restrictive constraints on operations, management and capital
distributions of a particular institution as its regulatory capital
decreases.  Using Tier 1 risk-based, total risk-based, and Tier 1
leverage capital ratios as the relevant measures, FDIC insured depository
institutions are grouped into one of the following five prompt corrective action
capital categories: well capitalized, adequately capitalized; undercapitalized;
significantly undercapitalized; and critically undercapitalized.  An
institution is considered well capitalized if it has a total risk-based capital
ratio of at least 10%, a Tier 1 risk-based capital ratio of at least 6% and a
Tier 1 leverage capital ratio of at least 5%, provided, however, such
institution is not subject to a written advisement, order or capital directive
to meet and maintain a specific capital level for any particular capital
measure.  An adequately capitalized institution must have a total
risk-based capital ratio of at least 8%, a Tier 1 risk-based capital ratio of at
least 4% and a Tier 1 leverage capital ratio of at least 4% (3% if the
institution has achieved the highest composite rating in its most recent
examination).  At December 31, 2009, the Bank satisfied all
requirements for inclusion in the “well capitalized” category.




8





Dividends.


Ohio law
prohibits the Bank, without the prior approval of the ODFI, from paying
dividends in an amount greater than the lesser of its undivided profits or the
total of its net income for that year, combined with its retained net income
from the preceding two years.  The payment of dividends by any
financial institution or its holding company is also affected by the requirement
to maintain adequate capital pursuant to applicable capital adequacy guidelines
and regulations, and a financial institution generally is prohibited from paying
any dividends if, following payment thereof, the institution would be
under-capitalized.  As described above, the Bank exceeded its minimum
capital requirements under applicable guidelines as of December 31,
2009.





Branching
Authority


Ohio
chartered banks have the authority under Ohio law to establish branches anywhere
in the State of Ohio, subject to receipt of all required regulatory
approvals.  Additionally, in May 1997 Ohio adopted legislation “opting
in” to the provisions of Riegle-Neal Interstate Banking and Branching Efficiency
Act of 1994 (the “Interstate Act”) which allows banks to establish interstate
branch networks through acquisitions of other banks, subject to certain
conditions, including certain limitations on the aggregate amount of deposits
that may be held by the surviving bank and all of its insured depository
institution affiliates.  The establishment of de novo interstate
branches or the acquisition of individual branches of a bank in another state
(rather than the acquisition of an out-of-state bank in its entirety) is also
allowed by the Riegle-Neal Act and authorized by Ohio law.





Affiliate
Transactions.


Various
governmental requirements, including Sections 23A and 23B of the Federal Reserve
Act, limit borrowings by holding companies and non-bank subsidiaries from
affiliated insured depository institutions, and also limit various other
transactions between holding companies and their non-bank subsidiaries, on the
one hand, and their affiliated insured depository institutions on the
other.  Section 23A of the Federal Reserve Act also generally requires
that an insured depository institution’s loan to its non-bank affiliates be
secured, and Section 23B of the Federal Reserve Act generally requires that an
insured depository institution’s transactions with it non-bank affiliates be on
arms-length terms.





Depositor
Preference.


The
Federal Deposit Insurance Act provides that, in the event of the “liquidation or
other resolution” of an insured depository institution, the claims of depositors
of the institution, including the claims of the FDIC as subrogee of insured
depositors, and certain claims for administrative expenses of the FDIC as a
receiver, will have priority over other general unsecured claims against the
institution.  If an insured depository institution fails, insured and
uninsured depositors, along with the FDIC, will have priority in payment ahead
of unsecured, non-deposit creditors and shareholders of the
institution.





Privacy Provisions of
Gramm-Leach-Bliley Act.


Under the
GLB Act, federal banking regulators adopted rules that limit the ability of
banks and other financial institutions to disclose non-public information about
consumers to non-affiliated third parties.  These limitations require
disclosure of privacy policies to consumers and, in some circumstances, allow
consumers to prevent disclosure of certain personal information to
non-affiliated third parties.  The privacy provisions of the GLB Act
affect how consumer information is transmitted through diversified financial
companies and conveyed to outside venders.





Anti-Money Laundering
Provisions of the USA Patriot Act of 2001.


On
October 26, 2001, the USA Patriot Act of 2001 (the “Patriot Act”) was signed
into law.  The Patriot Act is intended to strengthen U.S. law
enforcement’s and intelligence community’s ability to work cohesively to combat
terrorism on a variety of fronts.  The potential impact of the Patriot
Act on financial institutions of all kinds is significant and
wide-ranging.  The Patriot Act contains sweeping anti-money laundering
and financial transparency laws and requires various regulations,
including:  (a) due diligence requirements for financial institutions
that administer, maintain, or manage private bank accounts or correspondent
accounts for non-U.S. persons; (b) standards for verifying customer
identification at account opening; and (c) rules to promote cooperation among
financial institutions, regulators and law enforcement entities in identifying
parties that may be involved in terrorism or money laundering.




9





Fiscal and Monetary
Policies.


The
Bank’s business and earnings are affected significantly by the fiscal and
monetary policies of the federal government and its agencies.  The
Bank is particularly affected by the policies of the Federal Reserve Board,
which regulates the supply of money and credit in the United
States.  Among the instruments of monetary policy available to the
Federal Reserve are (a) conducting open market operations in United States
government securities, (b) changing the discount rates of borrowings of
depository institutions, (c) imposing or changing reserve requirements against
depository institutions’ deposits, and (d) imposing or changing reserve
requirements against certain borrowing by banks and their
affiliates.  These methods are used in varying degrees and
combinations to directly affect the availability of bank loans and deposits, as
well as the interest rates charged on loans and paid on deposits.  For
that reason alone, the policies of the Federal Reserve Board have a material
effect on the earnings of the Bank.





Additional and Pending
Regulation.


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





Congress
regularly considers legislation that may have an impact upon the operations of
the Corporation and the Bank.  At this time, the Corporation is unable
to predict whether any proposed legislation will be enacted and, therefore, is
unable to predict the impact such legislation may have on the operations of the
Corporation.





The Credit Crisis and the
Emergency Economic Stabilization Act of 2008




In
response to unprecedented financial market turmoil, the Emergency Economic
Stabilization Act of 2008 (“EESA”) was enacted on October 3,
2008.  EESA authorizes the U.S. Treasury Department to provide up to
$700 billion in funding for the financial services industry.  Pursuant
to the EESA, the Treasury was initially authorized to use $350 billion for the
Troubled Asset Relief Program (TARP).  Of this amount, Treasury
allocated $250 billion to the TARP Capital Purchase Program.  On
January 15, 2009, the second $350 billion of TARP monies was released to the
Treasury.  The Secretary’s authority under TARP expires on December
31, 2009 unless the Secretary certifies to Congress that extension is necessary
provided that his authority may not be extended beyond October 3,
2010.  The Corporation is not participating in the TARP Capital
Purchase Program.





Before
and after EESA, there have been numerous actions by the Federal Reserve Board,
Congress, the Treasury, the FDIC, the SEC and others to further the economic and
banking industry stabilization efforts, including the American Recovery and
Reinvestment Act.  It remains unclear at this time what further
legislative and regulatory measures will be implemented under EESA affecting the
Corporation.





10




Statistical
Disclosures




The
following statistical information for 2009, 2008, and 2007, included in the
Annual Report is incorporated herein by reference.




Annual
      Report PageReturn
      on Equity and Assets
              
              
              2Volume
      / Rate Analysis
              
              
              7Distribution
      of Assets, Liabilities and Shareholders’ Equity
              
              
              8Loan
      Portfolio
              
              
              11-12Summary
      of Loan Loss Experience
              
              
              12-14Investment
      Portfolio
              
              
              14-15Deposits
              
              
              16-17





The
Corporation files annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and proxy solicitation materials, as applicable,
under Commission Regulation 14A.  The public may read and copy any
materials the Corporation files with the Commission at the SEC’s Public
Reference Room at 100 F. Street, NE, Washington, DC 20549, on official business
days during the hours of 10:00 am to 3:00 pm.  The public may obtain
information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330.  The Commission maintains an internet
site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the Commission at
http://www.sec.gov.  The
Corporation’s internet website is at www.csbanking.com.





ITEM
1A – RISK FACTORS




There are
risks inherent to the Corporation’s business.  The material risks and
uncertainties that management believes affect the Corporation are described
below.  The risks and uncertainties described below are not the only
ones facing the Corporation.  Additional risks and uncertainties that
management is not aware of or focused on or that management currently deems
immaterial may also impair the Corporation’s business
operations.  This report is qualified in its entirety by these risk
factors.  If any of the following risks actually occur, the
Corporation’s financial condition and results of operations could be materially
and adversely affected.





The
Corporation is Subject to Interest Rate Risk




The
Corporation’s earnings and cash flows are largely dependent upon its net
interest income.  Net interest income is the difference between
interest income earned on interest earning assets such as loans and securities
and interest expense paid on interest bearing liabilities such as deposits and
borrowed funds.  Interest rates are highly sensitive to many factors
that are beyond the Corporation’s control, including general economic conditions
and policies of various governmental and regulatory agencies and, in particular,
the Board of Governors of the Federal Reserve System.  Changes in
monetary policy, including changes in interest rates, could influence not only
the interest the Corporation receives on loans and securities and the amount of
interest it pays on deposits and borrowings, but such changes could also affect
(i) the Corporation’s ability to originate loans and obtain deposits, (ii) the
fair value of the Corporation’s financial assets and liabilities, and (iii) the
average duration of the Corporation’s mortgage-backed securities
portfolio.  If the interest rates paid on deposits and other
borrowings increase at a faster rate than the interest rates received on loans
and other investments, the Corporation’s net interest income, and therefore
earnings, could be adversely affected.  Earnings could also be
adversely affected if the interest rates received on loans and other investments
fall at a faster pace than the interest rates paid on deposits and other
borrowings.





Although
management believes it has implemented effective asset and liability management
strategies to reduce the potential effects of changes in interest rates on the
Corporation’s results of operations, any substantial, unexpected or prolonged
change in market interest rates could have a material adverse effect on the
Corporation’s financial condition and results of operations.  See the
sections captioned “Results of Operations – Net Interest Income” and
“Quantitative and Qualitative Disclosures about Market Risk” set forth in the
Corporation’s 2009 Annual Report to Shareholders incorporated herein by
reference.





11




The
Corporation is Subject to Lending Risk




There are
inherent risks associated with the Corporation’s lending
activities.  These risks include, but are not limited to, the impact
of changes in interest rates and changes in the economic conditions in the
markets where the Corporation operates as well as those across the State of
Ohio, as well as the entire United States.  Increases in interest
rates and/or weakening economic conditions could adversely impact the ability of
borrowers to repay outstanding loans or the value of the collateral securing
these loans.  The Corporation is also subject to various laws and
regulations that affect its lending activities.  Failure to comply
with the applicable laws and regulations could subject the Corporation to
regulatory enforcement action that could result in the assessment of significant
civil monetary penalties against the Corporation.





As of
December 31, 2009, approximately 74.0% of the Corporation’s loan and lease
portfolio consisted of commercial, construction and commercial real estate
loans.  These types of loans are generally viewed as having more risk
of default than residential real estate loans or consumer
loans.  These types of loans are also typically larger than
residential real estate loans and consumer loans.  Because the
Corporation’s loan portfolio contains a significant number of commercial and
industrial, construction and commercial real estate loans with relatively large
balances, the deterioration of one or a few of these loans could cause a
significant increase in non-performing loans.  An increase in
non-performing loans could result in a net loss of earnings from these loans, an
increase in the provision for loan losses and an increase in loan charge-offs,
all of which could have a material adverse effect on the Corporation’s financial
condition and results of operations.  See the section captioned
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Loans” set forth in the Corporation’s 2009 Annual Report to
Shareholders and incorporated herein by reference.





The
Corporation’s Allowance For Loan and Lease Losses May Be
Insufficient




The
Corporation maintains an allowance for loan and lease losses, which is an
allowance established through a provision for loan and lease losses charged to
expense, that represents management’s best estimate of probable losses that have
been incurred within the existing portfolio of loans and leases.  The
allowance, in the judgment of management, is necessary to reserve for estimated
loan and lease losses and risks inherent in the loan and lease
portfolio.  The level of the allowance reflects management’s
continuing evaluation of industry concentrations, specific credit risks, loan
loss experience, current loan and lease portfolio quality, current economic
conditions, political and regulatory conditions and unidentified losses inherent
in the current loan portfolio.  The determination of the appropriate
level of the allowance for loan and lease losses inherently involves a high
degree of subjectivity and requires the Corporation to make significant
estimates of current credit risks and future trends, all of which may undergo
material changes.  Changes in economic conditions affecting borrowers,
new information regarding existing loans, identification of additional problem
loans and other factors, both within and outside of the Corporation’s control,
may require an increase in the allowance for loan losses. In addition, bank
regulatory agencies periodically review the Corporation’s allowance for loan
losses and may require an increase in the provision for loan losses or the
recognition of further loan charge-offs, based on judgments different than those
of management. In addition, if charge-offs in future periods exceed the
allowance for loan and lease losses, the Corporation will need additional
provisions to increase the allowance for loan and lease losses.  These
increases in the allowance for loan and lease losses will result in a decrease
in net income and, possibly, capital, and may have a material adverse effect on
the Corporation’s financial condition and results of operations.  See
the section captioned “Management’s Discussion and Analysis of Financial
Condition and Results of Operations – Allowance for Loan Losses” set forth in
the Corporation’s 2009 Annual Report to Shareholders incorporated herein by
reference for further discussion related to the Corporation’s process for
determining the appropriate level of the allowance for loan and
losses.




12





The
Corporation’s Profitability Depends Significantly on Economic Conditions in
North Central Ohio




The
Corporation’s success depends primarily on the general economic conditions of
North Central Ohio and the specific local markets in which the Corporation
operates.  Unlike larger national or other regional banks that are
more geographically diversified, the Corporation provides banking and financial
services to customers primarily in the North Central Ohio counties of Wyandot,
Marion and Hancock.  The local economic conditions in these areas have
a significant impact on the demand for the Corporation’s products and services
as well as the ability of the Corporation’s customers to repay loans, the value
of the collateral securing loans and the stability of the Corporation’s deposit
funding sources.  A significant decline in general economic conditions
caused by inflation, recession, acts of terrorism, outbreak of hostilities or
other international or domestic occurrences, unemployment, changes in securities
markets or other factors could impact these local economic conditions and, in
turn, have a material adverse effect on the Corporation’s financial condition
and results of operations.





The
Corporation Operates In A Highly Competitive Industry and Market
Area




The
Corporation faces substantial competition in all areas of its operations from a
variety of different competitors, many of which are larger and may have more
financial resources. Such competitors primarily include national, regional, and
community banks within the various markets in which the Corporation
operates.  The Corporation also faces competition from many other
types of financial institutions, including but not limited to, savings and
loans, credit unions, finance companies, brokerage firms, insurance companies,
factoring companies and other financial intermediaries.  The financial
services industry could become even more competitive as a result of legislative,
regulatory and technological changes and continued
consolidation.  Banks, securities firms and insurance companies can
merge under the umbrella of a financial holding company, which can offer
virtually any type of financial service, including banking, securities
underwriting, insurance (both agency and underwriting) and merchant banking.
Also, technology has lowered barriers to entry and made it possible for
non-banks to offer products and services traditionally provided by banks, such
as automatic transfer and automatic payment systems.  Many of the
Corporation’s competitors have fewer regulatory constraints and may have lower
cost structures. Additionally, due to their size, many competitors may be able
to achieve economies of scale and, as a result, may offer a broader range of
products and services as well as better pricing for those products and services
than the Corporation can.  The Corporation’s ability to compete
successfully depends on a number of factors, including, among other
things:





·
              The
      ability to develop, maintain and build upon long-term customer
      relationships based on top quality service, high ethical standards and
      safe, sound assets.
 ·
              The
      ability to expand the Corporation’s market
  position.
 ·
              The
      scope, relevance and pricing of products and services offered to meet
      customer needs and demands.
 ·
              The
      rate at which the Corporation introduces new products and services
      relative to its competitors.
 ·
              Customer
      satisfaction with the Corporation’s level of
  service.
 ·
              Industry
      and general economic trends.




Failure
to perform in any of these areas could significantly weaken the Corporation’s
competitive position, which could adversely affect the Corporation’s growth and
profitability, which, in turn, could have a material adverse effect on the
Corporation’s financial condition and results of operations.





The
Corporation Is Subject To Extensive Government Regulation and
Supervision




The
Corporation, primarily through Commercial Savings Bank, is subject to extensive
federal regulation and supervision.  Banking regulations are primarily
intended to protect depositors’ funds, federal deposit insurance funds and the
banking system as a whole, not shareholders.  These regulations affect
the Corporation’s lending practices, capital structure, investment practices,
dividend policy and growth, among other things.  Congress and federal
regulatory agencies continually review banking laws, regulations and policies
for possible changes.  Changes to statutes, regulations or regulatory
policies, including changes in interpretation or implementation of statutes,
regulations or policies, could affect the Corporation in substantial and
unpredictable ways. Such changes could subject the Corporation to additional
costs, limit the types of financial services and products the Corporation may
offer and/or increase the ability of non-banks to offer competing financial
services and products, among other things.  Failure to comply with
laws, regulations or policies could result in sanctions by regulatory agencies,
civil money penalties and/or reputation damage, which could have a material
adverse effect on the Corporation’s business, financial condition and results of
operations.  While the Corporation has policies and procedures
designed to prevent any such violations, there can be no assurance that such
violations will not occur. See the section captioned “Supervision and
Regulation” in Part I, Item 1, located elsewhere in this
report.





13




The
Corporation’s Controls and Procedures May Fail or Be Circumvented




Management
regularly reviews and updates the Corporation’s internal controls, disclosure
controls and procedures, and corporate governance policies and
procedures.  Any system of controls, however well designed and
operated, is based in part on certain assumptions and can provide only
reasonable, not absolute, assurances that the objectives of the system are met.
Any failure or circumvention of the Corporation’s controls and procedures or
failure to comply with regulations related to controls and procedures could have
a material adverse effect on the Corporation’s business, results of operations
and financial condition.




The
Corporation Relies on Dividends From Its Subsidiaries For Most Of Its
Revenue




The
Corporation is a separate and distinct legal entity from Commercial Savings
Bank.  It receives substantially all of its revenue from dividends
from Commercial Savings Bank.  These dividends are the principal
source of funds to pay dividends on the Corporation’s common stock and interest
and principal on the Corporation’s debt. Various federal and/or state laws and
regulations limit the amount of dividends that Commercial Savings Bank may pay
to the Corporation.  Also, the Corporation’s right to participate in a
distribution of assets upon a subsidiary’s liquidation or reorganization is
subject to the prior claims of the subsidiary’s creditors.  In the
event Commercial Savings Bank is unable to pay dividends to the
Corporation, the Corporation may not be able to service debt, pay
obligations or pay dividends on the Corporation’s common stock.





The
inability to receive dividends from Commercial Savings Bank could have a
material adverse effect on the Corporation’s business, financial condition and
results of operations. See the section captioned “Supervision and Regulation” in
Part I, Item 1 located elsewhere in this report.




The
Corporation May Not Be Able To Attract and Retain Skilled People




The
Corporation’s success depends, in large part, on its ability to attract and
retain key people.  Competition for the best people in most activities
engaged in by the Corporation can be intense and the Corporation may not be able
to hire people or to retain them.  The unexpected loss of services of
one or more of the Corporation’s key personnel could have a material adverse
impact on the Corporation’s business because of their skills, knowledge of the
Corporation’s market, years of industry experience and the difficulty of
promptly finding qualified replacement personnel.





The
Corporation’s Information Systems May Experience An Interruption Or Breach In
Security




The
Corporation relies heavily on communications and information systems to conduct
its business.  Any failure, interruption or breach in security of
these systems could result in failures or disruptions in the Corporation’s
customer relationship management, general ledger, deposit, loan and other
systems.  While the Corporation has policies and procedures designed
to prevent or limit the effect failure, interruption or security breach of its
information systems, there can be no assurance that any such failures,
interruptions or security breaches will not occur or, if they do occur, that
they will be adequately addressed.  The occurrence of any failures,
interruptions or security breaches of the Corporation’s information systems
could damage the Corporation’s reputation, result in a loss of customer
business, subject the Corporation to additional regulatory scrutiny, or expose
the Corporation to civil litigation and possible financial liability, any of
which could have a material adverse effect on the Corporation’s financial
condition and results of operations.




14




The
Corporation Continually Encounters Technological Change




The
financial services industry is continually undergoing rapid technological change
with frequent introductions of new technology-driven products and
services.  The effective use of technology increases efficiency and
enables financial institutions to better serve customers and to reduce
costs.  The Corporation’s future success depends, in part, upon its
ability to address the needs of its customers by using technology to provide
products and services that will satisfy customer demands, as well as create
additional efficiencies in the operations of the Corporation.  Many of
the Corporation’s competitors have substantially greater resources to invest in
technological improvements. The Corporation may not be able to effectively
implement new technology-driven products and services or be successful in
marketing these products and services to its customers.  Failure to
successfully keep pace with technological change affecting the financial
services industry could have a material adverse impact on the Corporation’s
business and, in turn, the Corporation’s financial condition and results of
operations.




The
Corporation’s Articles Of Incorporation and Code of Regulations, As Well As
Certain Banking Laws, May Have An Anti-Takeover Effect




Provisions
of the Corporation’s articles of incorporation and code of regulations and
federal banking laws, including regulatory approval requirements, could make it
more difficult for a third party to acquire the Corporation, even if doing so
would be perceived to be beneficial to the Corporation’s shareholders. The
combination of these provisions effectively inhibits a non-negotiated merger or
other business combination, which, in turn, could adversely affect the market
price of the Corporation’s common shares.




ITEM
1B.  UNRESOLVED STAFF COMMENTS.




None.




ITEM
2 - PROPERTIES




The
Corporation’s headquarters and the Bank’s main office are located at 118 South
Sandusky Avenue, Upper Sandusky, Ohio, in Wyandot County.  The
building is used exclusively by the Corporation and the Bank.




Location
              
              Description1.
              
              Main
      Office118 S. Sandusky Ave. Upper Sandusky, Ohio
    43351
              
              Two
      story building built in the early 1900’s and remodeled in
      1991.2.
              
              Carey
      Office128 S. Vance Street Carey, OH 43316
              
              One
      story building built and opened in 1973, and remodeled in
      2007.3.
              
              Harpster
      Office17480 Cherokee Street Harpster, OH 43323
              
              One
      story building purchased in 1978.4.
              
              North
      Drive-In Office400 N. Sandusky Avenue Upper Sandusky, OH
      43351
              
              One
      story drive in office opened in 1981.5.
              
              Findlay
      Tiffin Avenue Office1600 Tiffin Avenue Findlay, OH
      45840
              
              One
      story building purchased in 1992.  The building was renovated in
      1999 to add more office space.6.
              
              Marion
      Jamesway Office279 Jamesway Marion, OH 43302
              
              One
      story building constructed and opened in 1996.7.
              
              Findlay
      Lincoln Street Office 201 Lincoln StreetFindlay, OH
      45850
              
              One
      story building purchased in 1999 and opened in 2000.8.
              
              Operations
      Center245 Tarhee Trail Upper Sandusky,
      OH  43351
              
              One
      story building constructed and opened in 2006.9.
              
              Marion
      Barks Rd West Office195 Barks Rd West Marion,
      OH  43302
              
              One
      story building purchased in 2008.  The building was renovated
      and opened in 2009.10.
              
              Arlington
      Office112 East Liberty Street Arlington, OH 45814
              
              Leased
      (with option to buy).  Two story building opened in
      2009.




15




The Bank
considers its physical properties to be in good operating condition (subject to
reasonable wear and tear) and suitable for the purposes for which they are being
used.   The Corporation took advantage of a competitor’s branch
closing and purchased a branch in the Marion market for the purpose of
relocating its existing Marion Barks Road office to improve convenience and
accessibility.




ITEM
3 – LEGAL PROCEEDINGS




There is
no pending litigation, other than routine litigation incidental to the business
of the Corporation, Bank or Commercial Financial of a material nature involving
or naming the Corporation, Bank or Commercial Financial as a
defendant.  Furthermore, there are no material legal proceedings in
which any director, officer or affiliate of the Corporation, or any security
holder owning five percent of the Corporation’s common stock; or any associates
of such persons is a party or has a material interest that is adverse to the
Corporation, Bank or Commercial Financial.  None of the routine
litigation in which the Corporation, Bank or Commercial Financial is involved is
expected to have a material adverse impact on the financial position or results
of operations of the Corporation, Bank or Commercial Financial.




PART
II




ITEM
4 – MARKET FOR COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES




The
information set forth under the heading “Shareholder Information” on page 43 of
the Annual Report is incorporated herein by reference.





Issuer Purchases of Equity
Securities




The
      Corporation issued 1,230 shares totaling $14,732 under the Commercial
      Savings Bank Deferred Compensation Plan, a nonqualified deferred
      compensation plan, to various members of the Board during the three-month
      period ending December 31, 2009.  These transactions were not
      registered, but were made in reliance upon the exemption from registration
      contained in Section 4(2) of the Securities Act of
  1933.





16




The
      following table reflects shares repurchased by the Corporation during the
      fourth quarter, ended December 31, 2009.


Period
            
            Total
      Number of Shares Purchased
            
            
            Average
      Price Paid per
    Share
            
            
            Total
      Number of Shares Purchased as Part of Publicly Announced Plans or Programs
            
            
            Maximum
      Number (or Approximate Dollar Value) of Shares that May Yet
      be Purchased Under the Plans or
      ProgramsOctober
      1, 2009 – October 31, 2009
            
            
            -0-
            
            
            
            n/a
            
            
            
            -0-
            
            
            
            23,548November
      1, 2009 – November 30, 2009
            
            
            -0-
            
            
            
            n/a
            
            
            
            -0-
            
            
            
            23,548December
      1, 2009 – December 31, 2009
            
            
            -0-
            
            
            
            n/a
            
            
            
            -0-
            
            
            
            23,548Total
            
            
            -0-
            
            
            
            n/a
            
            
            
            -0-
            
            
            
            23,548




ITEM
5 – SELECTED FINANCIAL DATA




The
information set forth under the heading “Comparative Summary of Selected
Financial Data” on page 2 of the Annual Report is incorporated herein by
reference.




ITEM
6 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION




The
information set forth under the heading “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” on pages 3 through 21, inclusive,
of the Annual Report is incorporated herein by reference.




ITEM
6A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK




The
information set forth under the heading “Quantitative and Qualitative
Disclosures about Market Risk” on page 19 of the Annual Report is incorporated
herein by reference.




ITEM
7 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA




The
information contained in the consolidated financial statements and related notes
and the report of independent registered public accounting firm thereon, on
pages 22 through 42, inclusive, of the Annual Report is incorporated herein by
reference.





ITEM
8 – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE




There
were no changes in or disagreements with the Corporation’s independent
accountants on accounting and financial disclosures.




ITEM
8A – CONTROLS AND PROCEDURES




Commercial
Bancshares, Inc. carried out an evaluation, under the supervision and with the
participation of its management, including its Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Corporation’s disclosure controls and procedures as of December 31, 2009,
pursuant to Exchange Act Rule 13a-15.  Based upon that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that the
Corporation’s disclosure controls and procedures were effective as of December
31, 2009, in timely alerting them to material information required to be in the
Corporation’s (including its consolidated subsidiaries) periodic SEC
filings.




17




Management
is responsible for establishing and maintaining adequate internal control over
financial reporting for the Corporation.  Under the supervision and
with the participation of management, including principal executive and
principal financial officers, an evaluation was of the effectiveness of internal
control over financial reporting was conducted based on the framework in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission, as required by paragraph (c) of §240.13a-15 of this
chapter.  Based on the evaluation under Internal Control – Integrated
Framework, management concluded that the Corporation’s internal control
over financial reporting was effective as of December 31, 2009.  This
annual report does not include an attestation report of the Corporation’s
registered public accounting firm regarding internal control over financial
accounting.  Management’s report was not subject to attestation by the
Corporation’s registered public accounting firm pursuant to temporary rules of
the Securities and Exchange Commission that permit the Corporation to provide
only management’s report in this annual report.  There was no change
in the Corporation’s internal control over financial reporting that occurred
during the Corporations’ fiscal quarter ending December 31, 2009 that has
materially affected, or is reasonably likely to materially affect, the
Corporation’s internal control over financial reporting.




ITEM
8B – OTHER INFORMATION




None.




PART
III




ITEM
9 – DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT




Information
concerning Directors and Executive Officers of the Corporation appear under the
captions “Board and Committee Membership,” “Committees of the Board,”
“Information relating to Nominees and other Directors,” “Executive Officers,”
and “Section 16(a) Beneficial Ownership Reporting Compliance” in the
Corporation’s Definitive Proxy Statement dated March 31, 2010 for the Annual
Meeting of Shareholders to be held on May 13, 2010 and is incorporated herein by
reference.





The
Corporation has adopted a code of ethics that applies to its principal executive
officer, principal financial officer, and principal accounting
officer.  A copy of the Corporation’s Code of Ethics may be viewed on
the Corporation’s website, www.csbanking.com.   In the event the
Corporation makes an amendment to, or grants any waiver of, a provision of its
code of ethics, the Corporation intends to disclose such amendment or waiver,
the reasons for it, and the nature of any waiver, the name of the person to whom
it was granted, and the date, on the Corporation’s internet
website.




ITEM
10 – EXECUTIVE COMPENSATION




Information
concerning executive compensation appears, under the captions “Compensation,”
“Summary Compensation Table,” “Outstanding Equity Awards at Fiscal Year and Year
End,” “Deferred Compensation Plan,” and “Employment Agreements” in the
Corporation’s Definitive Proxy Statement dated March 31, 2010 for the Annual
Meeting of Shareholders to be held on May 13, 2010 and is incorporated herein by
reference.





ITEM
11 – SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS




Information
concerning security ownership of certain beneficial owners and management is
contained under the captions “Voting Securities and Principal Holders Thereof,”
“Information Relating to Nominees and other Directors,” and “Share Ownership of
Management and Directors” in the Corporation’s Definitive Proxy Statement dated
March 31, 2010 for the Annual Meeting of Shareholders to be held on May 13, 2010
and is incorporated herein by reference.




18





At
December 31, 2009, the Corporation maintained the 1997 Stock Option Plan and the
2009 Incentive Stock Option Plan.  No additional grants may be made
under the 1997 Stock Option Plan.  The 2009 Plan, which is shareholder
approved, permits the grant of stock options, restricted stock and certain other
stock-based awards for up to 150,000 shares.  All stock options have
an exercise price that is equal to the closing market value of the Corporation’s
stock on the date options are granted.  In 2009, 18,100 stock options
with an exercise price of $12.30 were granted to executive officers and certain
key employees.  The weighted average fair value of options granted was
$2.08 per share.  These options will vest over three years and expire
ten years from the date of grant.





Additionally,
2,100 restricted stock awards were granted to executive officers in
2009.  Restricted stock awards are recorded as deferred compensation,
a component of shareholders’ equity, at fair value at the date of grant and
amortized to compensation expense over the vesting period





The
following table includes information as of December 31, 2009 with respect to the
Stock Option Plans, under which equity securities of the Corporation are
authorized for issuance.





Plan category
            
            Number
      of securities to be issued upon exercise of outstanding options, warrants and rights
            
            
            Weighted-average
              exercise
      price of outstanding options, warrants and
      rights
            
            
            Number
      of securities remaining available for future issuance under equity
      compensation plans (excluding securities reflected in column[a])(a)
            
            
            (b)
            
            
            (c)Equity
      Compensation
              plans
      approved by
              security
      holders
            
            
            24,702
            
            
            $
            15.58
            
            
            
            129,800




ITEM
12 – CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS




Information
concerning director independence and certain relationships and related
transactions is contained under the caption “Director Independence and Related
Party Transactions” in the Corporation’s Definitive Proxy Statement dated March
31, 2010 for the Annual Meeting of Shareholders to be held on May 13, 2010 and
is incorporated herein by reference.




ITEM
13 – PRINCIPAL ACCOUNTANT FEES AND SERVICES




Information
concerning principal accountant fees and services is contained under the caption
“Principal Accounting Firm Fees” of the Corporation’s Definitive Proxy Statement
dated March 31, 2010 for the Annual Meeting of Shareholders to be held on May
13, 2010 and is incorporated herein by reference.




PART  IV




ITEM
14 – EXHIBITS AND FINANCIAL STATEMENT SCHEDULES




(a)
            The
      following Consolidated Financial Statements and related Notes to
      Consolidated Financial Statements, together with the report of the
      Independent Registered Public Accounting Firm dated March 11, 2010 appear on
      pages 22 through 42 of the Commercial Bancshares, Inc. 2009 Annual Report
      and are incorporated herein by
reference.




19





1.     Financial
Statements





Consolidated
Balance Sheets


December
31, 2009 and 2008





Consolidated
Statements of Income for the Years Ended


December
31, 2009, 2008 and 2007





Consolidated
Statements of Shareholders’ Equity for the Years Ended


December
31, 2009, 2008 and 2007





Consolidated
Statements of Cash Flows for the Years Ended


December
31, 2009, 2008 and 2007





Notes to
Consolidated Financial Statements for the Years Ended


December
31, 2009, 2008 and 2007





Report of
Independent Registered Public Accounting Firm





Financial
statement schedules are omitted as they are not required or are not applicable
or because the required information is included in the consolidated financial
statements or notes thereto.




(b)         EXHIBITS




Exhibit
      Number
              
              Description
      of Document3.1.a
              
              Amended
      Articles of Incorporation of the Corporation(incorporated by reference to
      Registrant’s Form 8-K dated April 27, 1995)3.1.b
              
              Amendment
      to the Corporation’s Amended Articles of Incorporation to increase the
      number of shares authorized for issuance to 4,000,000 common shares, no
      par value (incorporated by reference to Appendix I to Registrant’s
      Definitive Proxy Statement filed March 13, 1997)3.2
              
              Code
      of Regulations of the Corporation(incorporated by reference to
      Registrant’s Form 8-K dated April 27, 1995)4
              
              Form
      of Certificate of Common Shares of the Corporation(incorporated by
      reference to Registrant’s Form 8-K dated April 27,
1995)10.1
              
              Commercial
      Bancshares, Inc. 1997 Stock Option Plan(incorporated by reference to
      Appendix II to our Proxy Statement, as filed with the SEC on Schedule 14A
      on March 13, 1997)10.2
              
              Commercial
      Bancshares, Inc. Deferred Compensation Plan(incorporated by reference to
      Exhibit 4.1 to our Registration Statement Form S-8, as filed with the SEC
      on March 17, 1999)
  20
  10.3
              
              Executive
      Employment Contract with Robert E. Beach dated November 1, 2007
      (incorporated by reference to Exhibit 10 to Registrant’s Form 8-K filed
      November 7, 2007)10.4
              
              Executive
      Employment Contract with Scott A. Oboy, dated June 8, 2005(incorporated by
      reference to Exhibit 10.5 to Registrant’s Form 10-K filed March 31,
      2006)10.5
              
              Confidential
      Separation Agreement and General Release with Philip W. Kinley, dated June
      30, 2007 (incorporated by reference to Exhibit 10.5 to Registrant’s Form
      10-K filed March 31, 2008)10.6
              
              Commercial
      Bancshares Inc. Supplemental Executive Retirement Plan (incorporated by
      reference to Exhibit 10.3 to Registrant’s Form 10-K filed March 31,
      2005)10.7
              
              Executive
      Employment Contract with Steven M. Strine dated March 3, 2008
      (incorporated by reference to Exhibit 10 to Registrant’s Form 8-K filed
      March 31, 2008) Annual Report to Shareholders for the Year Ended
      200921
              
              Subsidiaries
      of the Registrant23
              
              Consent
      of Independent Registered Public Accounting Firm31.1
              
              Rule
      13a-14(a) Certification (CEO)31.2
              
              Rule
      13a-14(a) Certification (CFO)32.1
              
              Section
      1350 Certification (CEO)32.2
              
              Section
      1350 Certification (CFO)




All of
such previously filed documents are hereby incorporated by reference in
accordance with Item 601 of Regulation S-K.  Such documents are
available to shareholders without charge upon request from the
Issuer.
  21





SIGNATURES




In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the under signed, thereunto duly
authorized.




COMMERCIAL
      BANCSHARES, INC.03/31/2010Date
              By:
              /s/ Robert
      E. BeachRobert
      E. Beach,President
      and CEO


In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities indicated on
March 31, 2010.




Signatures
          
          Signatures





/s/
      Robert E. Beach
              
              
              /s/
      Mark DillonRobert
      E. Beach
              
              
              Mark
      DillonPresident
      and Principal Executive Officer
              
              
              Director




/s/
      Scott
      A. Oboy
            
            
            /s/
      Deborah J. GrafmillerScott
      A. Oboy
            
            
            Deborah
      J. GrafmillerExecutive
      Vice President and Chief Financial Officer
            
            
            Director




/s/
      Michael A. Shope
              
              
              /s/
      Kurt D. KimmelStanley
      K. Kinnett
              
              
              Kurt
      D. KimmelDirector,
      Vice Chairman of the Board
              
              
              Director




/s/
      Stanley K. Kinnett
            
            
            /s/
      Richard SheafferStanley
      K. Kinnett
            
            
            Richard
      SheafferDirector,
      Vice Chairman of the Board
            
            
            Director




/s/
      Daniel E. Berg
              
              
              /s/
      Lynn R. ChildDaniel
      E. Berg
              
              
              Lynn
      R. ChildDirector
              
              
              Director




/s/
      J. William Bremyer
            
            
            /s/
      Lee M. SislerJ.
      William Bremyer
            
            
            Lee
      M. SislerDirector
            
            
            Director






22