##### Table of Contents

---

SECURITIES AND EXCHANGE COMMISSION Washington, D.C.
20549

---

FORM 10-Q

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------
|  |                                                                                         
|  | For Quarter Ended June 30, 2003                                                         
|  |                                                                                         
|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF SECURITIES EXCHANGE ACT OF 1934   

Commission File Number
000-24147

---

KILLBUCK BANCSHARES, INC.(Exact name of registrant as
specified in its Charter)

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

| | 165 N. Main Street, Killbuck, OH 44637                | 
| | ----------------------------------------------------- | 
| | (Address of principal executive offices and zip code) | 
| |                                                       | 
| |                                                       | 
| | (330) 276-2771                                        | 
| | (Registrants telephone number, including area code)  | 

---

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

Yes  x     No  o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).

Yes  o     No  x

The aggregate market value of the
voting stock held by nonaffiliates of the registrant, calculated by reference to the stock valuation done on Killbuck Bancshares, Inc. common stock as of December 31, 2002 was $61,536,891 and was $62,190,895 as of June 30, 2003 (Registrant has
assumed that all of its executive officers and directors are affiliates. Such assumption shall not be deemed to be conclusive for any other purpose):

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

Class:  Common Stock, no par value
Outstanding at July 31, 2003: 676,788

---



---

##### Table of Contents

KILLBUCK BANCSHARES, INC.Index

|                              |                                                                                                   | Page Number
|----------------------------- | ------------------------------------------------------------------------------------------------- | -----------
|PART I. FINANCIAL INFORMATION |                                                                                                  
|Item 1.                       | Financial Statements (Unaudited):                                                                
|                              |                                                                                                   |            
|                              | Consolidated Balance Sheet as of June 30, 2003 and December 31, 2002                              | 3          
|                              |                                                                                                   |            
|                              | Consolidated Statements of Income for the six months ended June 30, 2003 and 2002                 | 4          
|                              |                                                                                                   |            
|                              | Consolidated Statements of Income for the three months ended June 30, 2003 and 2002               | 5          
|                              |                                                                                                   |            
|                              | Consolidated Statements of Changes In Shareholders Equity for the six months ended June 30, 2003 | 6          
|                              |                                                                                                   |            
|                              | Consolidated Statements of Cash Flows for the six months ended June 30, 2003 and 2002             | 7          
|                              |                                                                                                   |            
|                              | Notes to Unaudited Consolidated Financial Statements                                              | 8-10       
|                              |                                                                                                   |            
|Item 2.                       | Managements Discussion and Analysis of Financial Condition and Results of Operations             | 11-20      
|                              |                                                                                                   |            
|Item 3.                       | Quantitative and Qualitative Disclosures About Market Risk                                        | 21-22      
|                              |                                                                                                   |            
|Item 4.                       | Controls and Procedures                                                                           | 23         
|                              |                                                                                                   |            
|PART II. OTHER INFORMATION   
|Item 1.                       | Legal Proceedings                                                                                 | 24         
|                              |                                                                                                   |            
|Item 2.                       | Changes in Securities                                                                             | 24         
|                              |                                                                                                   |            
|Item 3.                       | Default Upon Senior Securities                                                                    | 24         
|                              |                                                                                                   |            
|Item 4.                       | Submissions of Matters to a Vote of Security Holders                                              | 24         
|                              |                                                                                                   |            
|Item 5.                       | Other Information                                                                                 | 24         
|                              |                                                                                                   |            
|Item 6.                       | Exhibits and Reports on Form 8-K                                                                  | 24-25      
|                              |                                                                                                   |            
|SIGNATURES                    | 26                                                                                               

-2-



---

##### Table of Contents

Killbuck Bancshares, Inc. CONSOLIDATED BALANCE SHEET (UNAUDITED)

|                                                                          |               |  |                   |             |   |   |             |  
|------------------------------------------------------------------------- | ------------- |  | ----------------- | ----------- | - | - | ----------- | -
|                                                                          | June 30, 2003 |  | December 31, 2002 |            
|ASSETS                                                                    |               |  |                   |             |   |   |             |  
|Cash and cash equivalents:                                                |               |  |                   |             |   |   |             |  
|Cash and amounts due from depository institutions                         |               |  | $                 | 8,357,775   |   | $ | 8,007,448   |  
|Federal funds sold                                                        |               |  |                   | 12,900,000  |   |   | 12,300,000  |  
|                                                                          |               |  |                   |             |   |  
|Total cash and cash equivalents                                           |               |  |                   | 21,257,775  |   |   | 20,307,448  |  
|                                                                          |               |  |                   |             |   |  
|Investment securities:                                                    |               |  |                   |             |   |   |             |  
|Securities available for sale                                             |               |  |                   | 29,008,619  |   |   | 39,048,024  |  
|Securities held to maturity (market value of $45,944,395 and $44,201,169) |               |  |                   | 42,480,302  |   |   | 41,578,062  |  
|                                                                          |               |  |                   |             |   |  
|Total investment securities                                               |               |  |                   | 71,488,921  |   |   | 80,626,086  |  
|                                                                          |               |  |                   |             |   |  
|Loans (net of allowance for loan losses of $2,488,995 and $2,325,560)     |               |  |                   | 181,615,267 |   |   | 172,482,506 |  
|Loans held for sale                                                       |               |  |                   | 514,400     |   |   | 419,750     |  
|Premises and equipment, net                                               |               |  |                   | 5,064,366   |   |   | 5,203,954   |  
|Accrued interest receivable                                               |               |  |                   | 1,064,274   |   |   | 1,134,183   |  
|Goodwill, net                                                             |               |  |                   | 1,329,249   |   |   | 1,329,249   |  
|Other assets                                                              |               |  |                   | 2,019,386   |   |   | 1,671,219   |  
|                                                                          |               |  |                   |             |   |  
|Total assets                                                              |               |  | $                 | 284,353,638 |   | $ | 283,174,395 |  
|                                                                          |               |  |                   |             |   |  
|LIABILITIES                                                               |               |  |                   |             |   |   |             |  
|Deposits:                                                                 |               |  |                   |             |   |   |             |  
|Noninterest bearing demand                                                |               |  | $                 | 37,250,895  |   | $ | 35,745,364  |  
|Interest bearing demand                                                   |               |  |                   | 32,693,434  |   |   | 31,755,668  |  
|Money market                                                              |               |  |                   | 18,219,611  |   |   | 16,090,756  |  
|Savings                                                                   |               |  |                   | 40,872,412  |   |   | 38,819,993  |  
|Time                                                                      |               |  |                   | 113,244,228 |   |   | 116,626,850 |  
|                                                                          |               |  |                   |             |   |  
|Total deposits                                                            |               |  |                   | 242,280,580 |   |   | 239,038,631 |  
|Federal Home Loan Bank advances                                           |               |  |                   | 3,833,908   |   |   | 4,267,666   |  
|Short-term borrowings                                                     |               |  |                   | 3,170,000   |   |   | 4,929,993   |  
|Accrued interest and other liabilities                                    |               |  |                   | 756,368     |   |   | 734,446     |  
|                                                                          |               |  |                   |             |   |  
|Total liabilities                                                         |               |  |                   | 250,040,856 |   |   | 248,970,736 |  
|                                                                          |               |  |                   |             |   |  
|SHAREHOLDERS EQUITY                                                      |               |  |                   |             |   |   |             |  
|Common stock  No par value: 1,000,000 shares authorized, 718,431 issued  |               |  |                   | 8,846,670   |   |   | 8,846,670   |  
|Retained earnings                                                         |               |  |                   | 28,374,843  |   |   | 27,462,762  |  
|Accumulated other comprehensive income                                    |               |  |                   | 378,566     |   |   | 534,990     |  
|Treasury stock, at cost (41,643 and 34,771 shares)                        |               |  |                   | (3,287,297  | ) |   | (2,640,763  | )
|                                                                          |               |  |                   |             |   |  
|Total shareholders equity                                                |               |  |                   | 34,312,782  |   |   | 34,203,659  |  
|                                                                          |               |  |                   |             |   |  
|Total liabilities and shareholders equity                                |               |  | $                 | 284,353,638 |   | $ | 283,174,395 |  
|                                                                          |               |  |                   |             |   |  

See accompanying notes to the unaudited consolidated financial statements.

-3-



---

##### Table of Contents

Killbuck Bancshares, Inc. and Subsidiary CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

|                                                    |                           |  |      |           |  |   |           | 
|--------------------------------------------------- | ------------------------- |  | ---- | --------- |  | - | --------- | 
|                                                    | Six Months Ended June 30,
|                                                    |                           | 
|                                                    | 2003                      |  | 2002 |          
|INTEREST INCOME                                     |                           |  |      |           |  |   |           | 
|Interest and fees on loans                          |                           |  | $    | 5,503,404 |  | $ | 5,784,539 | 
|Federal funds sold                                  |                           |  |      | 62,172    |  |   | 111,317   | 
|Investment securities:                              |                           |  |      |           |  |   |           | 
|Taxable                                             |                           |  |      | 783,021   |  |   | 1,429,132 | 
|Exempt from federal income tax                      |                           |  |      | 908,817   |  |   | 905,869   | 
|                                                    |                           |  |      |          
|Total interest income                               |                           |  |      | 7,257,414 |  |   | 8,230,857 | 
|                                                    |                           |  |      |          
|INTEREST EXPENSE                                    |                           |  |      |           |  |   |           | 
|Deposits                                            |                           |  |      | 2,031,193 |  |   | 3,025,635 | 
|Federal Home Loan Bank advances                     |                           |  |      | 135,943   |  |   | 168,607   | 
|Short term borrowings                               |                           |  |      | 2,575     |  |   | 2,476     | 
|                                                    |                           |  |      |          
|Total interest expense                              |                           |  |      | 2,169,711 |  |   | 3,196,718 | 
|                                                    |                           |  |      |          
|NET INTEREST INCOME                                 |                           |  |      | 5,087,703 |  |   | 5,034,139 | 
|Provision for loan losses                           |                           |  |      | 210,000   |  |   | 90,000    | 
|                                                    |                           |  |      |          
|NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES |                           |  |      | 4,877,703 |  |   | 4,944,139 | 
|                                                    |                           |  |      |           |  |  
|OTHER INCOME                                        |                           |  |      |           |  |   |           | 
|Service charges on deposit accounts                 |                           |  |      | 345,558   |  |   | 299,135   | 
|Gain on sale of loans, net                          |                           |  |      | 157,543   |  |   | 29,780    | 
|Other income                                        |                           |  |      | 70,209    |  |   | 54,386    | 
|                                                    |                           |  |      |          
|Total other income                                  |                           |  |      | 573,310   |  |   | 383,301   | 
|                                                    |                           |  |      |          
|OTHER EXPENSE                                       |                           |  |      |           |  |   |           | 
|Salaries and employee benefits                      |                           |  |      | 1,876,393 |  |   | 1,683,029 | 
|Occupancy and equipment expense                     |                           |  |      | 522,312   |  |   | 475,744   | 
|Professional fees                                   |                           |  |      | 131,346   |  |   | 142,577   | 
|Franchise tax                                       |                           |  |      | 191,031   |  |   | 196,981   | 
|Other expenses                                      |                           |  |      | 805,234   |  |   | 815,959   | 
|                                                    |                           |  |      |           |  |  
|Total other expense                                 |                           |  |      | 3,526,316 |  |   | 3,314,290 | 
|                                                    |                           |  |      |           |  |   |           | 
|INCOME BEFORE INCOME TAXES                          |                           |  |      | 1,924,697 |  |   | 2,013,150 | 
|Income taxes                                        |                           |  |      | 403,293   |  |   | 455,046   | 
|                                                    |                           |  |      |          
|NET INCOME                                          |                           |  | $    | 1,521,404 |  | $ | 1,558,104 | 
|                                                    |                           |  |      |          
|Earning per common share                            |                           |  | $    | 2.24      |  | $ | 2.26      | 
|                                                    |                           |  |      |          
|Weighted Average shares outstanding                 |                           |  |      | 679,624   |  |   | 689,912   | 
|                                                    |                           |  |      |          

See accompanying notes to the unaudited consolidated financial statements.

-4-



---

##### Table of Contents

Killbuck Bancshares, Inc. and Subsidiary  CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

|                                                    |                             |  |      |           |  |   |           | 
|--------------------------------------------------- | --------------------------- |  | ---- | --------- |  | - | --------- | 
|                                                    | Three Months Ended June 30, | 
|                                                    |                             | 
|                                                    | 2003                        |  | 2002 |          
|INTEREST INCOME                                     |                             |  |      |           |  |   |           | 
|Interest and fees on loans                          |                             |  | $    | 2,749,960 |  | $ | 2,852,996 | 
|Federal funds sold                                  |                             |  |      | 26,976    |  |   | 49,873    | 
|Investment securities:                              |                             |  |      |           |  |   |           | 
|Taxable                                             |                             |  |      | 372,355   |  |   | 691,323   | 
|Exempt from federal income tax                      |                             |  |      | 455,320   |  |   | 461,321   | 
|                                                    |                             |  |      |           |  |   |           | 
|Total interest income                               |                             |  |      | 3,604,611 |  |   | 4,055,513 | 
|                                                    |                             |  |      |           |  |   |           | 
|INTEREST EXPENSE                                    |                             |  |      |           |  |   |           | 
|Deposits                                            |                             |  |      | 977,902   |  |   | 1,437,709 | 
|Federal Home Loan Bank advances                     |                             |  |      | 66,397    |  |   | 82,583    | 
|Short term borrowings                               |                             |  |      | 1,133     |  |   | 1,146     | 
|                                                    |                             |  |      |           |  |   |           | 
|Total interest expense                              |                             |  |      | 1,045,432 |  |   | 1,521,438 | 
|                                                    |                             |  |      |           |  |   |           | 
|NET INTEREST INCOME                                 |                             |  |      | 2,559,179 |  |   | 2,534,075 | 
|Provision for loan losses                           |                             |  |      | 105,000   |  |   | 45,000    | 
|                                                    |                             |  |      |           |  |   |           | 
|NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES |                             |  |      | 2,454,179 |  |   | 2,489,075 | 
|                                                    |                             |  |      |           |  |   |           | 
|OTHER INCOME                                        |                             |  |      |           |  |   |           | 
|Service charges on deposit accounts                 |                             |  |      | 196,825   |  |   | 157,007   | 
|Gain on sale of loans, net                          |                             |  |      | 96,935    |  |   | 8,371     | 
|Other income                                        |                             |  |      | 34,724    |  |   | 27,615    | 
|                                                    |                             |  |      |           |  |   |           | 
|Total other income                                  |                             |  |      | 328,484   |  |   | 192,993   | 
|                                                    |                             |  |      |           |  |   |           | 
|OTHER EXPENSE                                       |                             |  |      |           |  |   |           | 
|Salaries and employee benefits                      |                             |  |      | 996,226   |  |   | 895,570   | 
|Occupancy and equipment expense                     |                             |  |      | 248,989   |  |   | 231,349   | 
|Professional fees                                   |                             |  |      | 60,457    |  |   | 68,412    | 
|Franchise tax                                       |                             |  |      | 86,769    |  |   | 98,955    | 
|Other expenses                                      |                             |  |      | 413,663   |  |   | 430,657   | 
|                                                    |                             |  |      |           |  |   |           | 
|Total other expense                                 |                             |  |      | 1,806,104 |  |   | 1,724,943 | 
|                                                    |                             |  |      |           |  |   |           | 
|INCOME BEFORE INCOME TAXES                          |                             |  |      | 976,559   |  |   | 957,125   | 
|Income taxes                                        |                             |  |      | 206,886   |  |   | 201,484   | 
|                                                    |                             |  |      |           |  |   |           | 
|NET INCOME                                          |                             |  | $    | 769,673   |  | $ | 755,641   | 
|                                                    |                             |  |      |           |  |   |           | 
|Earning per common share                            |                             |  | $    | 1.14      |  | $ | 1.09      | 
|                                                    |                             |  |      |           |  |   |           | 
|Weighted Average shares outstanding                 |                             |  |      | 677,089   |  |   | 691,251   | 
|                                                    |                             |  |      |           |  |   |           | 

See accompanying notes to the unaudited consolidated financial statements.

-5-



---

##### Table of Contents

Killbuck Bancshares, Inc. and SubsidiaryCONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY (UNAUDITED)SIX MONTHS ENDED
JUNE 30, 2003

|                                     |              |  |                   |           |                                       |   |                |   |                            |          |                     |   |            |   |   |            |   |   |           |  
|------------------------------------ | ------------ |  | ----------------- | --------- | ------------------------------------- | - | -------------- | - | -------------------------- | -------- | ------------------- | - | ---------- | - | - | ---------- | - | - | --------- | -
|                                     | Common Stock |  | Retained Earnings |           | AccumulatedOther Comprehensive Income |   | Treasury Stock |   | Total Shareholders Equity |          | ComprehensiveIncome |  
|Balance, December 31, 2002           |              |  | $                 | 8,846,670 |                                       | $ | 27,462,762     |   | $                          | 534,990  |                     | $ | (2,640,763 | ) | $ | 34,203,659 |   |   |           |  
|Net income                           |              |  |                   |           |                                       |   | 1,521,404      |   |                            |          |                     |   |            |   |   | 1,521,404  |   | $ | 1,521,404 |  
|Purchase of Treasury stock           |              |  |                   |           |                                       |   |                |   |                            |          |                     |   | (646,534   | ) |   | (646,534   | ) |   |           |  
|Other comprehensive income:          |              |  |                   |           |                                       |   |                |   |                            |          |                     |   |            |   |   |            |   |   |           |  
|Net unrealized loss on securities    |              |  |                   |           |                                       |   |                |   |                            | (156,424 | )                   |   |            |   |   | (156,424   | ) |   | (156,424  | )
|                                     |              |  |                   |           |                                       |   |                |   |                            |          |                     |   |            |   |   |            |   |   |           |  
|Comprehensive income                 |              |  |                   |           |                                       |   |                |   |                            |          |                     |   |            |   |   |            |   | $ | 1,364,980 |  
|                                     |              |  |                   |           |                                       |   |                |   |                            |          |                     |   |            |   |   |            |   |   |           |  
|Cash Dividends paid ($.90 per share) |              |  |                   |           |                                       |   | (609,323       | ) |                            |          |                     |   |            |   |   | (609,323   | ) |   |           |  
|                                     |              |  |                   |           |                                       |   |                |   |                            |          |                     |   |            |   |   |            |   |   |           |  
|Balance, June 30, 2003               |              |  | $                 | 8,846,670 |                                       | $ | 28,374,843     |   | $                          | 378,566  |                     | $ | (3,287,297 | ) | $ | 34,312,782 |   |   |           |  
|                                     |              |  |                   |           |                                       |   |                |   |                            |          |                     |   |            |   |   |            |   |   |           |  

See accompanying notes to the unaudited consolidated financial statements.

-6-



---

##### Table of Contents

Killbuck Bancshares, Inc. and SubsidiaryCONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

|                                                            |      |  |      |                            |   |   |             |  
|----------------------------------------------------------- | ---- |  | ---- | -------------------------- | - | - | ----------- | -
|                                                            |      |  |      | Six Months Ended  June 30, |  
|                                                            |     
|                                                            | 2003 |  | 2002
|OPERATING ACTIVITIES                                        |      |  |      |                            |   |   |             |  
|Net income                                                  |      |  | $    | 1,521,404                  |   | $ | 1,558,104   |  
|Adjustments to reconcile net income to net cash provided by |      |  |      |                            |   |   |             |  
|Operating activities:                                       |      |  |      |                            |   |   |             |  
|Provision for loan losses                                   |      |  |      | 210,000                    |   |   | 90,000      |  
|Gain on sale of loans                                       |      |  |      | (157,543                   | ) |   | (29,780     | )
|Provision for depreciation and amortization                 |      |  |      | 284,660                    |   |   | 290,502     |  
|Origination of loans held for sale                          |      |  |      | (13,484,042                | ) |   | (6,096,613  | )
|Proceeds from the sale of loans                             |      |  |      | 13,546,935                 |   |   | 6,287,442   |  
|Federal Home Loan Bank stock dividend                       |      |  |      | (23,100                    | ) |   | (33,958     | )
|Net change in:                                              |      |  |      |                            |   |   |             |  
|Accrued interest and other assets                           |      |  |      | (174,576                   | ) |   | (4,401      | )
|Accrued expenses and other liabilities                      |      |  |      | 21,923                     |   |   | (195,862    | )
|                                                            |      |  |      |                           
|Net cash provided by operating activities                   |      |  |      | 1,745,661                  |   |   | 1,865,434   |  
|                                                            |      |  |      |                           
|INVESTING ACTIVITIES                                        |      |  |      |                            |   |   |             |  
|Investment securities available for sale:                   |      |  |      |                            |   |   |             |  
|Proceeds from maturities and repayments                     |      |  |      | 16,866,126                 |   |   | 16,033,150  |  
|Purchases                                                   |      |  |      | (7,054,142                 | ) |   | (7,987,046  | )
|Investment securities held to maturity:                     |      |  |      |                            |   |   |             |  
|Proceeds from maturities and repayments                     |      |  |      | 1,619,361                  |   |   | 897,348     |  
|Purchases                                                   |      |  |      | (2,561,875                 | ) |   | (4,202,433  | )
|Net increase in loans                                       |      |  |      | (9,342,761                 | ) |   | (11,238,557 | )
|Purchase of premises and equipment                          |      |  |      | (114,383                   | ) |   | (99,478     | )
|                                                            |      |  |      |                           
|Net cash used in investing activities                       |      |  |      | (587,674                   | ) |   | (6,597,016  | )
|                                                            |      |  |      |                           
|FINANCING ACTIVITIES                                        |      |  |      |                            |   |   |             |  
|Net increase in demand, money market and savings deposits   |      |  |      | 6,624,571                  |   |   | 7,700,780   |  
|Net decrease in time deposits                               |      |  |      | (3,382,622                 | ) |   | (8,583,412  | )
|Repayment of Federal Home Loan Bank advances                |      |  |      | (433,759                   | ) |   | (473,941    | )
|Net decrease in short term borrowings                       |      |  |      | (1,759,993                 | ) |   | (950,000    | )
|Purchase of Treasury stock                                  |      |  |      | (646,534                   | ) |   | (591,415    | )
|Dividends paid                                              |      |  |      | (609,323                   | ) |   | (584,627    | )
|                                                            |      |  |      |                           
|Net cash used in financing activities                       |      |  |      | (207,660                   | ) |   | (3,482,615  | )
|                                                            |      |  |      |                           
|Net increase (decrease) in cash and cash equivalents        |      |  |      | 950,327                    |   |   | (8,214,197  | )
|Cash and cash equivalents at beginning of period            |      |  |      | 20,307,448                 |   |   | 30,268,070  |  
|                                                            |      |  |      |                           
|Cash and cash equivalents at end of period                  |      |  | $    | 21,257,775                 |   | $ | 22,053,873  |  
|                                                            |      |  |      |                           
|Supplemental Disclosures of Cash Flows Information          |      |  |      |                            |   |   |             |  
|Cash Paid During the Period For:                            |      |  |      |                            |   |   |             |  
|Interest on deposits and borrowings                         |      |  | $    | 2,212,698                  |   | $ | 3,291,580   |  
|                                                            |      |  |      |                           
|Income taxes                                                |      |  | $    | 440,517                    |   | $ | 480,358     |  
|                                                            |      |  |      |                           

See accompanying notes to the unaudited consolidated financial statements.

-7-



---

##### Table of Contents



Killbuck Bancshares, Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1  BASIS OF
PRESENTATION

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

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

These statements should be read in conjunction with the consolidated statements of and for the year ended December 31, 2002 and related notes which are included on the Form 10-K (file no.
000-24147)

NOTE 2  EARNINGS PER SHARE

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

NOTE 3  COMPREHENSIVE INCOME

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

|                                         |                                |  |                                |           |   |   |           |  
|---------------------------------------- | ------------------------------ |  | ------------------------------ | --------- | - | - | --------- | -
|                                         | Six Months Ended June 30, 2003 |  | Six Months Ended June 30, 2002
|Net income                               |                                |  | $                              | 1,521,404 |   | $ | 1,558,104 |  
|Other comprehensive income:              |                                |  |                                |           |   |   |           |  
|Net unrealized (loss) gain on securities |                                |  |                                | (237,006  | ) |   | 3,181     |  
|Tax effect                               |                                |  |                                | 80,582    |   |   | (1,082    | )
|                                         |                                |  |                                |          
|Total comprehensive income               |                                |  | $                              | 1,364,980 |   | $ | 1,560,203 |  
|                                         |                                |  |                                |          



|                                         |                                  |  |                                  |         |   |   |           |  
|---------------------------------------- | -------------------------------- |  | -------------------------------- | ------- | - | - | --------- | -
|                                         | Three Months Ended June 30, 2003 |  | Three Months Ended June 30, 2002
|Net income                               |                                  |  | $                                | 769,673 |   | $ | 755,641   |  
|Other comprehensive income:              |                                  |  |                                  |         |   |   |           |  
|Net unrealized (loss) gain on securities |                                  |  |                                  | (34,819 | ) |   | 551,711   |  
|Tax effect                               |                                  |  |                                  | 11,838  |   |   | (187,582  | )
|                                         |                                  |  |                                  |        
|Total comprehensive income               |                                  |  | $                                | 746,692 |   | $ | 1,119,770 |  
|                                         |                                  |  |                                  |        

-8-



---

##### Table of Contents

NOTE 4  NEW ACCOUNTING STANDARDS

In August 2001, the Financial Accounting Standards Board (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 was effective January 1, 2003, did not have a
material effect on the Companys financial position or results of operations.

In April 2002, the FASB issued FAS No. 145, Rescission of FASB Statement No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections. FAS No. 145 rescinds FAS No. 4, which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax
effect. As a result, the criteria in APB Opinion No. 30 will now be used to classify those gains and losses. This statement also amends FAS No. 13 to require that certain lease modifications that have economic effects similar to sale-leaseback
transactions be accounted for in the same manner as sale-leaseback transactions. This statement also makes technical corrections to existing pronouncements, which are not substantive but in some cases may change accounting practice. The provisions
of this statement related to the rescission of FAS No. 4 shall be applied in fiscal years beginning after May 15, 2002. Any gain or loss on extinguishments of debt that was classified as an extraordinary item in prior periods presented that does not
meet the criteria in APB Opinion No. 30 for classification as an extraordinary item shall be reclassified. Early adoption of the provisions of this statement related to FAS No. 13 shall be effective for transactions occurring after May 15, 2002. All
other provisions of this statement shall be effective for financial statements issued on or after May 15, 2002. The adoption of this statement did not have a material effect on the Companys financial position or results of
operations.

In July 2002, the FASB issued FAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, which requires companies to recognize costs associated with exit or disposal
activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. This statement replaces EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (Including Certain Costs Incurred in a Restructuring). The new statement is effective for exit or disposal activities initiated after December 31, 2002. The adoption of this statement did not have a material effect on the Companys
financial position or results of operations.

On December 31, 2002, the FASB issued FAS No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure, which amends FAS No. 123,
Accounting for Stock-Based Compensation. FAS No. 148 amends the disclosure requirements of FAS No. 123 to require more prominent and more frequent disclosures in financial statements about the effects of stock-based compensation. Under the
provisions of FAS No. 123, companies that adopted the preferable, fair value based method were required to apply that method prospectively for new stock option awards. This contributed to a ramp-up effect on stock-based compensation
expense in the first few years following adoption, which caused concern for companies and investors because of the lack of consistency in reported results. To address that concern, FAS No. 148 provides two additional methods of transition that
reflect an entitys full complement of stock-based compensation expense immediately upon adoption, thereby eliminating the ramp-up effect. FAS No. 148 also improves the clarity and prominence of disclosures about the pro forma effects of using
the fair value based method of accounting for stock-based compensation for all companiesregardless of the accounting method usedby requiring that the data be presented more prominently and in a more user-friendly format in the footnotes
to the financial statements. In addition, the statement improves the timeliness of those disclosures by requiring that this information be included in interim as well as annual financial statements. The transition guidance and annual disclosure
provisions of FAS No. 148 are effective for fiscal years ending after December 15, 2002, with earlier application permitted in certain circumstances. The interim disclosure provisions are effective for financial reports containing financial
statements for interim periods beginning after December 15, 2002. The adoption of this statement did not have a material effect on the Companys financial statements.

In April, 2003, the FASB issued
FAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. This statement amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for
hedging activities under FAS No. 133. The amendments set forth in FAS No. 149 improve financial reporting by requiring that contracts with comparable characteristics be accounted for similarly. In particular, this statement clarifies under what
circumstances a contract with an initial net investment meets the characteristic of a derivative as discussed in FAS No. 133.

-9-



---

##### Table of Contents

NOTE 4  NEW ACCOUNTING STANDARDS (Continued)

In addition, it clarifies when a derivative contains a financing component that
warrants special reporting in the statement of cash flows. FAS No. 149 amends certain other existing pronouncements. Those changes will result in more consistent reporting of contracts that are derivatives in their entirety or that contain embedded
derivatives that warrant separate accounting. This statement is effective for contracts entered into or modified after June 30, 2003, except as stated below and for hedging relationships designated after June 30, 2003. The guidance should be applied
prospectively. The provisions of this statement that relate to FAS No. 133 Implementation Issues that have been effective for fiscal quarters that began prior to June 15, 2003, should continue to be applied in accordance with their respective
effective dates. In addition, certain provisions relating to forward purchases or sales of when-issued securities or other securities that do not yet exist, should be applied to existing contracts as well as new contracts entered into after June 30,
2003.

In May 2003, the FASB issued FAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.   This statement establishes standards for
how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some
circumstances). Such instruments may have been previously classified as equity. This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. The adoption of this statement has not and is not expected to have a material effect on the Companys reported equity.

In November, 2002, the FASB issued
Interpretation No. 45, Guarantors Accounting and Disclosure requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.  This interpretation elaborates on the disclosures to be made by a guarantor in
its interim and annual financial statements about its obligations under certain guarantees that it has issued. This interpretation clarifies that a guarantor is required to disclose (a) the nature of the guarantee, including the approximate term of
the guarantee, how the guarantee arose, and the events or circumstances that would require the guarantor to perform under the guarantee; (b) the maximum potential amount of future payments under the guarantee; (c) the carrying amount of the
liability, if any, for the guarantors obligations under the guarantee; and (d) the nature and extent of any recourse provisions or available collateral that would enable the guarantor to recover the amounts paid under the guarantee. This
interpretation also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the obligations it has undertaken in issuing the guarantee, including its ongoing obligation to stand ready to perform over the
term of the guarantee in the event that the specified triggering events or conditions occur. The objective of the initial measurement of that liability is the fair value of the guarantee at its inception. The initial recognition and initial
measurement provisions of this interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantors fiscal year-end. The disclosure requirements in this interpretation
are effective for financial statements of interim or annual periods ending after December 15, 2002. The adoption of this interpretation did not have a material effect on the Companys financial position or results of operations.

In January, 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities, in an effort to expand upon and strengthen existing accounting guidance that addresses when a company should
include in its financial statements the assets, liabilities and activities of another entity. The objective of this interpretation is not to restrict the use of variable interest entities but to improve financial reporting by companies involved with
variable interest entities. Until now, one company generally has included another entity in its consolidated financial statements only if it controlled the entity through voting interests. This interpretation changes that by requiring a variable
interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entitys activities or entitled to receive a majority of the entitys residual returns or both. The
consolidation requirements of this interpretation apply immediately to variable interest entities created after January 31, 2003. The consolidation requirements apply to older entities in the first fiscal year or interim period beginning after June
15, 2003. Certain of the disclosure requirements apply in all financial statements issued after January 31, 2003, regardless of when the variable interest entity was established. The adoption of this interpretation has not and is not expected to
have a material effect on the Companys financial position or results of operations.

-10-



---

##### Table of Contents

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND RESULTS OF OPERATIONS

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

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

Financial Condition

Total assets at June 30, 2003 were $284,354,000 compared to $283,174,000 at December 31, 2002.

Cash and cash
equivalents increased by $950,000 or 4.7% from December 31, 2002, to June 30, 2003, with federal funds sold increasing $600,000.

Investment securities available for sale decreased by $10,039,000 or 25.7%
from December 31, 2002, due to maturities, calls, and repayments. Investments held to maturity increased $902,000 or 2.2%.

Net loans increased by $9,133,000 or 5.3% from December 31, 2002, to June 30, 2003.
An increase of $6,806,000 occurred in the real estate loan category, which is attributable primarily to residential and commercial lending activity. The increases in real estate lending are primarily attributable to the historically low interest
rates. Commercial and other loan balances increased by $3,449,000 and consumer loan balances decreased by $967,000. The increase in the commercial category is primarily attributable to normal seasonal draw downs on lines of credit for inventory
build ups. Due to the increase in net loans, the provision for loan losses increased $120,000.

Total deposits at June 30, 2003 were $242,281,000 compared to $239,039,000 at December 31, 2002, an increase of
$3,242,000 or 1.4%. Time deposits decreased $3,383,000, demand accounts increased $2,443,000 and money market and savings accounts increased $4,181,000. Management attributes these changes to maturing time deposits, the volatility of interest rates,
consumer expectations of rising rates, and new products.

Federal Home Loan Bank advances and short-term borrowings decreased $434,000 and $1,760,000 respectively at June 30, 2003 from December 31,
2002.

-11-



---

##### Table of Contents

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

Financial Condition (Continued)

Shareholders Equity increased by $109,000 or .3%, which was mainly due to earnings of $1,521,000 for the first six months of 2003
decreased by a $156,000 unrealized loss on securities included in other comprehensive income, dividends paid totaling $609,000, and by the purchase of Treasury stock for $647,000. Treasury stock purchases are monitored against the Companys
Strategic Plan and the goals set forth in the plan. The Treasury stock purchases have been within the Strategic Plans guidelines for the first six months of 2003. Management monitors risk-based capital and leveraged capital ratios in order to
assess compliance of the regulatory guidelines. At June 30, 2003, the total capital ratio was 17.20%; the Tier I capital ratio was 15.98%, and the leverage ratio was 11.48%, compared to regulatory capital requirements of 8.00%, 4.00% and 4.00%
respectively. These ratios are well in excess of regulatory capital requirements.

-12-



---

##### Table of Contents

RESULTS OF OPERATIONS

Comparison of the Six Months Ended June 30, 2003 and 2002

Net income for the six-month period ended June 30, 2003, was $1,521,000, a decrease of $37,000 or 2.4% from the $1,558,000 reported at June 30, 2002.

Total interest income of
approximately $7,258,000 for the six-month period ended June 30, 2003, compares to $8,231,000 for the same period in 2002, a decrease of $973,000 or 11.8%. The majority of the overall decrease in total interest income is attributed to a decrease in
investment securities  taxable of $646,000 or 66.4% of the overall decrease. Investment income decreased $643,000 or 27.5% for the six-month period ended June 30, 2003 compared to the same period for 2002. The decrease in investment income is
due to a decrease in volume. Average investment balances were $77,533,000 compared to $93,961,000 and the yields were 4.4% compared to 5.0% for the first six months of 2003 and 2002 respectively. See Average Balance Sheet for the
six-month periods ended June 30, 2003 and 2002. Interest and fees on loans decreased $281,000 or 4.9% for the six-month period ended June 30, 2003 compared to the same period for 2002. The decrease in interest and fees on loans is due to a decrease
in the yield on loans. Average loan balances were $180,187,000 for the first six months of 2003 compared to $156,898,000 for the first six months of 2002 and the yield on loans decreased to 6.1% for the first six months of 2003 compared to 7.3% for
the first six months of 2002.

Total interest expense of $2,170,000 for the six-month period ending June 30, 2003 represents a decrease of $1,027,000 from the $3,197,000 reported for the same six-month
period in 2002. The decrease in interest expense on deposits of $995,000 is due mainly to the decreases in the rates of deposit accounts. Average interest bearing deposits were $204,809,000 for the first six months of 2003 compared to $203,609,000
for the first six months of 2002. The cost on interest bearing deposits was 2.0%, compared to 3.0% for the six-month periods of 2003 and 2002 respectively. See Average Balance Sheet for the six-month periods ended June 30, 2003 and
2002.

Net interest income of $5,088,000 for the six months ended June 30, 2003, compares to $5,034,000 for the same six-month period in 2002, an increase of $54,000 or 1.1%.

Total other income for the six month period ended June 30, 2003, of $573,000 compares to $383,000 for the same six month period in 2002, an increase of $190,000 or 49.6%. Gains on sale of loans increased $128,000 due to
increased activity caused by declining fixed loan rates. The increase of $47,000 in service charges on deposit accounts was attributable to normal activity within the deposit accounts due to an increase in non-time deposit accounts. Also various
service charges were increased effective April 1, 2003. Other income increased $16,000 due to the increases in miscellaneous other service charges.

Total other expense of $3,526,000 for the six months ended
June 30, 2003, compares to $3,314,000 for the same six-month period in 2002. This represents an increase of $212,000 or 6.4%. Salary and employee benefits increased approximately $193,000 due to normal increases in salaries and employee benefits and
additional business development staff being hired. The changes in the remaining expense accounts were attributable to increases in items that are normal and recurring in nature.

According to the Financial
Accounting Standards Boards (FASB) Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, Management periodically evaluates goodwill for impairment. At this time, no impairment has been
recognized.

-13-



---

##### Table of Contents

RESULTS OF OPERATIONS

Comparison of the Three Months Ended June 30, 2003 and
2002

Net income for the three-month period ended June 30, 2003, was $770,000, an increase of $14,000 or 1.9% from the $756,000 reported at June 30, 2002.

Total interest income of approximately $3,604,000 for the three-month period ended June 30, 2003, compares to $4,056,000 for the same period in 2002, a decrease of $452,000 or 11.1%. The majority of the overall decrease in
total interest income is attributed to a decrease in investment securities  taxable of $319,000 or 70.6% of the overall decrease. The decrease in interest on investment securities of $325,000 was due to a decrease in the average balances
outstanding of $76,449,000 for 2003 compared to $93,073,000 for 2002 and the yield was 4.3% compared to 5.0% for this three-month period of 2003 and 2002 respectively. See Average Balance Sheet for the three-month periods ended June 30,
2003 and 2002. Interest and fees on loans decreased $103,000 or 3.6% for the three-month period ended June 30, 2003 compared to the same period for 2003. The decrease in interest and fees on loans is due to a decrease in the yield on the loan
portfolio. Average loan balances were $183,342,000 compared to $160,158,000 and the yield was 6.0% compared to 7.1% for this three-month period of 2003 and 2002 respectively.

Total interest expense of
$1,045,000 for the three-month period ending June 30, 2003, represents a decrease of $477,000 from the $1,522,000 reported for the same three-month period in 2002. The decrease in interest expense on deposits of $460,000 is due mainly to a decrease
in yield. Average interest bearing deposits were $205,758,000 for this three-month period of 2003 compared to $202,725,000 for the same three months of 2002. The cost of interest bearing deposits was 1.9% compared to 2.8% for this three-month period
of 2003 and 2002 respectively. See Average Balance Sheet for the three-month periods ended June 30, 2003 and 2002.

Net interest income of $2,559,000 for the three months ended June 30, 2003,
compares to $2,534,000 for the same three-month period in 2002, an increase of $25,000 or 1.0%.

Total other income for the three month period ended June 30, 2003, of $328,000 compares to $193,000 for the
same three month period in 2002, an increase of $135,000 or 69.9%. Gains on sale of loans increased $89,000 due to the Banks increased activity caused by declining fixed loan rates. The service fee income on deposits increased $40,000 due to
an increase in the accounts being serviced and various service charges that were increased effective April 1, 2003.

Total other expense of $1,806,000 for the three months ended June 30, 2003, compares to
$1,725,000 for the same three-month period in 2002. This represents an increase of $81,000 or 4.7%. Salary and employee benefits increased $100,000 in part to new business development staff being hired and normal recurring employee cost increases
for salary and employee benefits.

-14-



---

##### Table of Contents

Liquidity

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

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

Cash and amounts due from depository institutions and federal funds sold totaled $21,258,000 at June 30, 2003. These
assets provide the primary source of liquidity for the Company. In addition, management has designated a substantial portion of the investment portfolio, $29,009,000 as available for sale and has an available unused line of credit of $30,907,000
with the Federal Home Loan Bank of Cincinnati to provide additional sources of liquidity at June 30, 2003. As of June 30, 2003, the Company had commitments to fund loans of approximately $6,495,000 and unused lines of credit totaling
$19,984,000.

Cash was provided during the six month period ended June 30, 2003, mainly from operating activities of $1.7 million, the maturities and repayments of investment securities of $18.5 million, and
net increase in deposits of $3.2 million. Cash was used during the six month period ended June 30, 2003, mainly to fund a net increase in loans of $9.4 million, and for the purchase of investment securities of $9.6 million. In addition $2.2 million
was also used to reduce Federal Home Loan Bank advances and short-term borrowings during the first six months of 2003 and $.6 million was used to purchase Treasury Stock, and $.6 million was used to pay dividends to shareholders. Cash and cash
equivalents totaled $21.3 million at June 30, 2003, an increase of $1.0 million from $20.3 million at December 31, 2002.

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

-15-



---

##### Table of Contents

Risk Elements

The table below presents information concerning nonperforming assets including nonaccrual loans,
renegotiated loans, loans 90 days or more past due, other real estate loans and repossessed assets at June 30, 2003, and December 31, 2002. A loan is classified as nonaccrual when, in the opinion of management, there are doubts about collectibility
of interest and principal. At the time the accrual of interest is discontinued, future income is recognized only when cash is received. Renegotiated loans are those loans which terms have been renegotiated to provide a reduction or deferral of
principal or interest as of result of the deterioration of the borrower.

|                                                  |               |  |                   |      |   |   |      |  
|------------------------------------------------- | ------------- |  | ----------------- | ---- | - | - | ---- | -
|                                                  | June 30, 2003 |  | December 31, 2002 |     
|                                                 
|Loans on nonaccrual basis                         |               |  | $                 | 171  |   | $ | 149  |  
|Loans past due 90 days or more                    |               |  |                   | 126  |   |   |     |  
|Renegotiated loans                                |               |  |                   |     |   |   |     |  
|                                                  |               |  |                   |     
|Total nonperforming loans                         |               |  |                   | 297  |   |   | 149  |  
|Other real estate                                 |               |  |                   |     |   |   |     |  
|Repossessed assets                                |               |  |                   |     |   |   |     |  
|                                                  |               |  |                   |     
|Total nonperforming assets                        |               |  | $                 | 297  |   | $ | 149  |  
|Nonperforming loans as a percent of total loans   |               |  |                   | 0.16 | % |   | 0.08 | %
|Nonperforming loans as a percent of total assets  |               |  |                   | 0.10 | % |   | 0.05 | %
|Nonperforming assets as a percent of total assets |               |  |                   | 0.10 | % |   | 0.05 | %

Management monitors impaired loans on a continual basis. As of June 2003, impaired loans had no material effect on the Companys
financial position or results from operations.

The allowance for loan losses at June 30, 2003, totaled $2,489,000 or 1.35% of total loans as compared to $2,326,000 or 1.33% at December 31, 2002. Provisions
for loan losses were $210,000 for the six months ended June 30, 2003 and $90,000 for the six months ended June 30, 2002. The provisions were increased due to the $9.1 million increase in net loans.

The
level of funding for the provision is a reflection of the overall loan portfolio. Nonperforming loans consist of approximately $151,000 in commercial real estate, $20,000 in one to four family residential mortgages, and $126,000 in consumer loans.
The collateral requirements on such loans reduce the risk of potential losses to an acceptable level in managements opinion.

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

-16-



---

##### Table of Contents

AVERAGE BALANCE SHEET

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

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

|                                           |                 |  |          |             |             |   |                 |  |          |      |             |   |             |   |   |           |  |  |      |  
|------------------------------------------ | --------------- |  | -------- | ----------- | ----------- | - | --------------- |  | -------- | ---- | ----------- | - | ----------- | - | - | --------- |  |  | ---- | -
|                                           | Period Ended    | 
|                                           | 2003            |  |          | 2002        |            
|                                           | Average Balance |  | Interest |             | Yield/ Rate |   | Average Balance |  | Interest |      | Yield/ Rate |  
|Assets                                     |                 |  |          |             |             |   |                 |  |          |      |             |   |             |   |   |           |  |  |      |  
|Interest Earnings Assets:                  |                 |  |          |             |             |   |                 |  |          |      |             |   |             |   |   |           |  |  |      |  
|Loans (1)(2)(3)                            |                 |  | $        | 180,186,763 |             | $ | 5,503,404       |  |          | 6.11 | %           | $ | 156,897,784 |   | $ | 5,784,539 |  |  | 7.37 | %
|Securities-taxable (4)                     |                 |  |          | 35,273,285  |             |   | 748,890         |  |          | 4.25 | %           |   | 52,842,288  |   |   | 1,395,174 |  |  | 5.28 | %
|Securities-nontaxable (4)                  |                 |  |          | 40,801,313  |             |   | 908,817         |  |          | 4.45 | %           |   | 39,709,104  |   |   | 905,869   |  |  | 4.56 | %
|Securities-Equity (4,5)                    |                 |  |          | 1,458,767   |             |   | 34,131          |  |          | 4.68 | %           |   | 1,410,127   |   |   | 33,958    |  |  | 4.82 | %
|Federal funds sold                         |                 |  |          | 11,130,352  |             |   | 62,172          |  |          | 1.12 | %           |   | 13,429,790  |   |   | 111,317   |  |  | 1.66 | %
|                                           |                 |  |          |             |             |   |                 |  |          |      |             |  
|Total interest earnings assets             |                 |  |          | 268,850,480 |             |   | 7,257,414       |  |          | 5.40 | %           |   | 264,289,093 |   |   | 8,230,857 |  |  | 6.23 | %
|                                           |                 |  |          |             |             |   |                 |  |          |      |             |  
|Noninterest earning assets:                |                 |  |          |             |             |   |                 |  |          |      |             |   |             |   |   |           |  |  |      |  
|Cash and due from other institutions       |                 |  |          | 8,177,798   |             |   |                 |  |          |      |             |   | 8,534,509   |   |   |           |  |  |      |  
|Premises and equipment, net                |                 |  |          | 5,119,569   |             |   |                 |  |          |      |             |   | 5,099,309   |   |   |           |  |  |      |  
|Accrued interest                           |                 |  |          | 1,038,991   |             |   |                 |  |          |      |             |   | 1,400,137   |   |   |           |  |  |      |  
|Other assets                               |                 |  |          | 2,337,291   |             |   |                 |  |          |      |             |   | 2,307,067   |   |   |           |  |  |      |  
|Less allowance for loan losses             |                 |  |          | (2,435,771  | )           |   |                 |  |          |      |             |   | (2,277,064  | ) |   |           |  |  |      |  
|                                           |                 |  |          |             |             |   |                 |  |          |      |             |  
|Total noninterest earnings assets          |                 |  |          | 14,237,878  |             |   |                 |  |          |      |             |   | 15,063,958  |   |   |           |  |  |      |  
|                                           |                 |  |          |             |             |   |                 |  |          |      |             |  
|Total Assets                               |                 |  | $        | 283,088,358 |             |   |                 |  |          |      |             | $ | 279,353,051 |   |   |           |  |  |      |  
|                                           |                 |  |          |             |             |   |                 |  |          |      |             |  
|Liabilities and Shareholders Equity       |                 |  |          |             |             |   |                 |  |          |      |             |   |             |   |   |           |  |  |      |  
|Interest bearing liabilities:              |                 |  |          |             |             |   |                 |  |          |      |             |   |             |   |   |           |  |  |      |  
|Interest bearing demand                    |                 |  | $        | 32,438,775  |             |   | 89,926          |  |          | .55  | %           | $ | 31,367,645  |   | $ | 164,797   |  |  | 1.05 | %
|Money market accounts                      |                 |  |          | 17,586,300  |             |   | 98,743          |  |          | 1.12 | %           |   | 16,466,469  |   |   | 164,738   |  |  | 2.00 | %
|Savings deposits                           |                 |  |          | 40,399,803  |             |   | 227,017         |  |          | 1.12 | %           |   | 34,931,071  |   |   | 295,340   |  |  | 1.69 | %
|Time deposits                              |                 |  |          | 114,383,956 |             |   | 1,615,507       |  |          | 2.82 | %           |   | 120,843,771 |   |   | 2,400,760 |  |  | 3.97 | %
|Short term borrowings                      |                 |  |          | 3,999,073   |             |   | 2,575           |  |          | .13  | %           |   | 3,860,092   |   |   | 2,476     |  |  | .13  | %
|Federal Home Loan Advances                 |                 |  |          | 4,044,101   |             |   | 135,943         |  |          | 6.72 | %           |   | 4,979,332   |   |   | 168,607   |  |  | 6.77 | %
|                                           |                 |  |          |             |             |   |                 |  |          |      |             |  
|Total interest bearing liabilities         |                 |  |          | 212,852,008 |             |   | 2,169,711       |  |          | 2.04 | %           |   | 212,448,380 |   |   | 3,196,718 |  |  | 3.01 | %
|                                           |                 |  |          |             |             |   |                 |  |          |      |             |  
|Noninterest bearing liabilities:           |                 |  |          |             |             |   |                 |  |          |      |             |   |             |   |   |           |  |  |      |  
|Demand deposits                            |                 |  |          | 34,818,065  |             |   |                 |  |          |      |             |   | 32,569,889  |   |   |           |  |  |      |  
|Accrued expenses and other liabilities     |                 |  |          | 1,949,884   |             |   |                 |  |          |      |             |   | 1,985,540   |   |   |           |  |  |      |  
|                                           |                 |  |          |             |             |   |                 |  |          |      |             |  
|Total noninterest bearing liabilities      |                 |  |          | 36,767,949  |             |   |                 |  |          |      |             |   | 34,555,429  |   |   |           |  |  |      |  
|                                           |                 |  |          |             |             |   |                 |  |          |      |             |  
|Shareholders equity                       |                 |  |          | 33,468,401  |             |   |                 |  |          |      |             |   | 32,349,242  |   |   |           |  |  |      |  
|                                           |                 |  |          |             |             |   |                 |  |          |      |             |  
|Total Liabilities and Shareholders Equity |                 |  | $        | 283,088,358 |             |   |                 |  |          |      |             | $ | 279,353,051 |   |   |           |  |  |      |  
|                                           |                 |  |          |             |             |   |                 |  |          |      |             |  
|Net interest income                        |                 |  |          |             |             | $ | 5,087,703       |  |          |      |             |   |             |   | $ | 5,034,139 |  |  |      |  
|                                           |                 |  |          |             |             |   |                 |  |          |      |             |  
|Interest rate spread (6)                   |                 |  |          |             |             |   |                 |  |          | 3.36 | %           |   |             |   |   |           |  |  | 3.22 | %
|                                           |                 |  |          |             |             |   |                 |  |          |      |             |  
|Net yield on interest earning assets (7)   |                 |  |          |             |             |   |                 |  |          | 3.78 | %           |   |             |   |   |           |  |  | 3.81 | %
|                                           |                 |  |          |             |             |   |                 |  |          |      |             |  

|    |                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 $185,413 and $211,056 in 2003 and 2002, respectively.                                                            
|(3) | Nonaccrual loans are included in loan totals and do not have a material impact on the information presented.                                                               
|(4) | Average balance is computed using the carrying value of securities. The average yield has been computed using the historical amortized cost average balance for securities.
|(5) | Equity securities are comprised of common stock of the Federal Home Loan Bank, Federal Reserve Bank, and Great Lakes Bankers Bank.                                         
|(6) | Interest rate spread represents the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities.                  
|(7) | Net yield on interest earning assets represents net interest income as a percentage of average interest earning assets.                                                    

-17-



---

##### Table of Contents

AVERAGE BALANCE SHEET

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

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

|                                           |                 |  |          |             |             |   |                 |  |          |      |             |   |             |   |   |           |  |  |      |  
|------------------------------------------ | --------------- |  | -------- | ----------- | ----------- | - | --------------- |  | -------- | ---- | ----------- | - | ----------- | - | - | --------- |  |  | ---- | -
|                                           | Period Ended    | 
|                                           | 2003            |  |          | 2002        |            
|                                           | Average Balance |  | Interest |             | Yield/ Rate |   | Average Balance |  | Interest |      | Yield/ Rate |  
|Assets                                     |                 |  |          |             |             |   |                 |  |          |      |             |   |             |   |   |           |  |  |      |  
|Interest Earnings Assets:                  |                 |  |          |             |             |   |                 |  |          |      |             |   |             |   |   |           |  |  |      |  
|Loans (1)(2)(3)                            |                 |  | $        | 183,342,348 |             | $ | 2,749,960       |  |          | 6.00 | %           | $ | 160,158,176 |   | $ | 2,852,996 |  |  | 7.13 | %
|Securities-taxable (4)                     |                 |  |          | 33,894,622  |             |   | 353,127         |  |          | 4.17 | %           |   | 51,021,029  |   |   | 671,716   |  |  | 5.27 | %
|Securities-nontaxable (4)                  |                 |  |          | 41,090,320  |             |   | 455,320         |  |          | 4.43 | %           |   | 40,636,054  |   |   | 461,321   |  |  | 4.54 | %
|Securities-Equity (4,5)                    |                 |  |          | 1,464,150   |             |   | 19,228          |  |          | 5.25 | %           |   | 1,416,066   |   |   | 19,607    |  |  | 5.54 | %
|Federal funds sold                         |                 |  |          | 9,790,072   |             |   | 26,976          |  |          | 1.10 | %           |   | 11,029,915  |   |   | 49,873    |  |  | 1.81 | %
|                                           |                 |  |          |             |             |   |                 |  |          |      |             |  
|Total interest earnings assets             |                 |  |          | 269,581,512 |             |   | 3,604,611       |  |          | 5.35 | %           |   | 264,261,240 |   |   | 4,055,513 |  |  | 6.14 | %
|                                           |                 |  |          |             |             |   |                 |  |          |      |             |  
|Noninterest earning assets:                |                 |  |          |             |             |   |                 |  |          |      |             |   |             |   |   |           |  |  |      |  
|Cash and due from other institutions       |                 |  |          | 8,435,794   |             |   |                 |  |          |      |             |   | 8,361,875   |   |   |           |  |  |      |  
|Premises and equipment, net                |                 |  |          | 5,073,841   |             |   |                 |  |          |      |             |   | 5,057,604   |   |   |           |  |  |      |  
|Accrued interest                           |                 |  |          | 1,115,144   |             |   |                 |  |          |      |             |   | 1,506,728   |   |   |           |  |  |      |  
|Other assets                               |                 |  |          | 2,422,625   |             |   |                 |  |          |      |             |   | 2,386,842   |   |   |           |  |  |      |  
|Less allowance for loan losses             |                 |  |          | (2,496,023  | )           |   |                 |  |          |      |             |   | (2,264,831  | ) |   |           |  |  |      |  
|                                           |                 |  |          |             |             |   |                 |  |          |      |             |  
|Total noninterest earnings assets          |                 |  |          | 14,551,381  |             |   |                 |  |          |      |             |   | 15,048,218  |   |   |           |  |  |      |  
|                                           |                 |  |          |             |             |   |                 |  |          |      |             |  
|Total Assets                               |                 |  | $        | 284,132,893 |             |   |                 |  |          |      |             | $ | 279,309,458 |   |   |           |  |  |      |  
|                                           |                 |  |          |             |             |   |                 |  |          |      |             |  
|Liabilities and Shareholders Equity       |                 |  |          |             |             |   |                 |  |          |      |             |   |             |   |   |           |  |  |      |  
|Interest bearing liabilities:              |                 |  |          |             |             |   |                 |  |          |      |             |   |             |   |   |           |  |  |      |  
|Interest bearing demand                    |                 |  | $        | 33,692,098  |             |   | 43,874          |  |          | .52  | %           | $ | 31,724,543  |   | $ | 83,859    |  |  | 1.06 | %
|Money market accounts                      |                 |  |          | 17,671,574  |             |   | 47,479          |  |          | 1.07 | %           |   | 16,129,221  |   |   | 81,010    |  |  | 2.01 | %
|Savings deposits                           |                 |  |          | 40,957,562  |             |   | 105,556         |  |          | 1.03 | %           |   | 35,863,658  |   |   | 152,628   |  |  | 1.70 | %
|Time deposits                              |                 |  |          | 113,435,681 |             |   | 780,993         |  |          | 2.75 | %           |   | 119,007,658 |   |   | 1,120,212 |  |  | 3.77 | %
|Short term borrowings                      |                 |  |          | 3,495,358   |             |   | 1,133           |  |          | .13  | %           |   | 3,572,209   |   |   | 1,146     |  |  | .13  | %
|Federal Home Loan Advances                 |                 |  |          | 3,948,580   |             |   | 66,397          |  |          | 6.73 | %           |   | 4,871,742   |   |   | 82,583    |  |  | 6.78 | %
|                                           |                 |  |          |             |             |   |                 |  |          |      |             |  
|Total interest bearing liabilities         |                 |  |          | 213,200,853 |             |   | 1,045,432       |  |          | 1.96 | %           |   | 211,169,031 |   |   | 1,521,438 |  |  | 2.88 | %
|                                           |                 |  |          |             |             |   |                 |  |          |      |             |  
|Noninterest bearing liabilities:           |                 |  |          |             |             |   |                 |  |          |      |             |   |             |   |   |           |  |  |      |  
|Demand deposits                            |                 |  |          | 35,537,012  |             |   |                 |  |          |      |             |   | 33,657,391  |   |   |           |  |  |      |  
|Accrued expenses and other liabilities     |                 |  |          | 2,296,319   |             |   |                 |  |          |      |             |   | 2,397,810   |   |   |           |  |  |      |  
|                                           |                 |  |          |             |             |   |                 |  |          |      |             |  
|Total noninterest bearing liabilities      |                 |  |          | 37,833,331  |             |   |                 |  |          |      |             |   | 36,055,201  |   |   |           |  |  |      |  
|                                           |                 |  |          |             |             |   |                 |  |          |      |             |  
|Shareholders equity                       |                 |  |          | 33,098,709  |             |   |                 |  |          |      |             |   | 32,085,226  |   |   |           |  |  |      |  
|                                           |                 |  |          |             |             |   |                 |  |          |      |             |  
|Total Liabilities and Shareholders Equity |                 |  | $        | 284,132,893 |             |   |                 |  |          |      |             | $ | 279,309,458 |   |   |           |  |  |      |  
|                                           |                 |  |          |             |             |   |                 |  |          |      |             |  
|Net interest income                        |                 |  |          |             |             | $ | 2,559,179       |  |          |      |             |   |             |   | $ | 2,534,075 |  |  |      |  
|                                           |                 |  |          |             |             |   |                 |  |          |      |             |  
|Interest rate spread (6)                   |                 |  |          |             |             |   |                 |  |          | 3.39 | %           |   |             |   |   |           |  |  | 3.26 | %
|                                           |                 |  |          |             |             |   |                 |  |          |      |             |  
|Net yield on interest earning assets (7)   |                 |  |          |             |             |   |                 |  |          | 3.80 | %           |   |             |   |   |           |  |  | 3.84 | %
|                                           |                 |  |          |             |             |   |                 |  |          |      |             |  

|    |                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 $98,203 and $91,180 in 2003 and 2002, respectively.                                                              
|(3) | Nonaccrual loans are include in loan totals and do not have a material impact on the information presented.                                                                
|(4) | Average balance is computed using the carrying value of securities. The average yield has been computed using the historical amortized cost average balance for securities.
|(5) | Equity securities are comprised of common stock of the Federal Home Loan Bank, Federal Reserve Bank, and Great Lakes Bankers Bank.                                         
|(6) | Interest rate spread represents the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities.                  
|(7) | Net yield on interest earning assets represents net interest income as a percentage of average interest earning assets.                                                    

-18-



---

##### Table of Contents

Rate/Volume Analysis

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

|                                   |                                                  |  |      |       |     |   |        |   |   |        |  
|---------------------------------- | ------------------------------------------------ |  | ---- | ----- | --- | - | ------ | - | - | ------ | -
|                                   | Six-Month Period Ended June2003 Compared to 2002 |  |     
|                                   | Increase (Decrease) Due To                       |  |     
|                                   | Volume                                           |  | Rate |       | Net |  
|Interest income                    |                                                  |  |      |       |     |   |        |   |   |        |  
|Loans                              |                                                  |  | $    | 1,717 |     | $ | (1,998 | ) | $ | (281   | )
|Securities-taxable                 |                                                  |  |      | (928  | )   |   | 282    |   |   | (646   | )
|Securities-nontaxable              |                                                  |  |      | 50    |     |   | (47    | ) |   | 3      |  
|Securities-equities                |                                                  |  |      | 2     |     |   | (2     | ) |   |       |  
|Federal funds sold                 |                                                  |  |      | (38   | )   |   | (11    | ) |   | (49    | )
|                                   |                                                  |  |      |       |     |  
|Total interest earning Assets      |                                                  |  |      | 803   |     |   | (1,776 | ) |   | (973   | )
|                                   |                                                  |  |      |       |     |  
|Interest expense                   |                                                  |  |      |       |     |   |        |   |   |        |  
|Interest bearing demand            |                                                  |  |      | 11    |     |   | (86    | ) |   | (75    | )
|Money market accounts              |                                                  |  |      | 22    |     |   | (88    | ) |   | (66    | )
|Savings deposits                   |                                                  |  |      | 92    |     |   | (160   | ) |   | (68    | )
|Time deposits                      |                                                  |  |      | (257  | )   |   | (529   | ) |   | (786   | )
|Short-term borrowing               |                                                  |  |      |      |     |   | 1      |   |   | 1      |  
|Federal Home Loan Bank Advances    |                                                  |  |      | (63   | )   |   | 30     |   |   | (33    | )
|                                   |                                                  |  |      |       |     |  
|Total interest bearing Liabilities |                                                  |  |      | (195  | )   |   | (832   | ) |   | (1,027 | )
|                                   |                                                  |  |      |       |     |  
|Net change in net interest income  |                                                  |  | $    | 998   |     | $ | (944   | ) | $ | 54     |  
|                                   |                                                  |  |      |       |     |  

-19-



---

##### Table of Contents

Rate/Volume Analysis

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

|                                   |                                                     |  |      |       |     |   |        |   |   |      |  
|---------------------------------- | --------------------------------------------------- |  | ---- | ----- | --- | - | ------ | - | - | ---- | -
|                                   | Three-Month Period Ended June 2003 Compared to 2002 |  |     
|                                   | Increase (Decrease) Due To                          |  |     
|                                   | Volume                                              |  | Rate |       | Net |  
|Interest income                    |                                                     |  |      |       |     |   |        |   |   |      |  
|Loans                              |                                                     |  | $    | 1,652 |     | $ | (1,755 | ) | $ | (103 | )
|Securities-taxable                 |                                                     |  |      | (902  | )   |   | 583    |   |   | (319 | )
|Securities-nontaxable              |                                                     |  |      | 21    |     |   | (27    | ) |   | (6   | )
|Securities-equities                |                                                     |  |      | 3     |     |   | (4     | ) |   | (1   | )
|Federal funds sold                 |                                                     |  |      | (22   | )   |   | (1     | ) |   | (23  | )
|                                   |                                                     |  |      |       |     |  
|Total interest earning Assets      |                                                     |  |      | 752   |     |   | (1,204 | ) |   | (452 | )
|                                   |                                                     |  |      |       |     |  
|Interest expense                   |                                                     |  |      |       |     |   |        |   |   |      |  
|Interest bearing demand            |                                                     |  |      | 21    |     |   | (61    | ) |   | (40  | )
|Money market accounts              |                                                     |  |      | 31    |     |   | (65    | ) |   | (34  | )
|Savings deposits                   |                                                     |  |      | 87    |     |   | (134   | ) |   | (47  | )
|Time deposits                      |                                                     |  |      | (210  | )   |   | (129   | ) |   | (339 | )
|Short-term borrowing               |                                                     |  |      |      |     |   |       |   |   |     |  
|Federal Home Loan Bank Advances    |                                                     |  |      | (63   | )   |   | 46     |   |   | (17  | )
|                                   |                                                     |  |      |       |     |  
|Total interest bearing Liabilities |                                                     |  |      | (134  | )   |   | (343   | ) |   | (477 | )
|                                   |                                                     |  |      |       |     |  
|Net change in net interest income  |                                                     |  | $    | 886   |     | $ | (861   | ) | $ | 25   |  
|                                   |                                                     |  |      |       |     |  

-20-



---

##### Table of Contents

Item 3 
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk for the Company is comprised primarily from interest rate risk exposure and liquidity risk. Since virtually
all of the interest-earning assets and paying liabilities are at the Bank, virtually all of the interest rate risk and liquidity risk lies at the Bank level. The Bank is not subject to any trading risk. In addition, the Bank does not participate in
hedging transactions such as interest rate swaps and caps. Changes in interest rates will impact both income and expense recorded and also the market values of long-term interest-earnings assets. Interest rate risk and liquidity risk managements is
performed at the Bank level. Although the Bank has a diversified loan portfolio, loans outstanding to individuals and businesses are dependent upon the local economic conditions in the immediate trade area.

One of the principal functions of the Companys asset/liability management program is to monitor the level to which the balance sheet is subject to interest rate risk. The goal of the asset/liability program is to manage
the relationship between interest rate sensitive assets and liabilities, thereby minimizing the fluctuations in the net interest margin, which achieves consistent growth of net interest income during periods of changing interest rates.

Interest rate sensitivity is the result of differences in the amounts and repricing dates of a banks rate sensitive assets and rate sensitive liabilities. These differences, or interest rate repricing
gap provide an indication of the extent that the Companys net interest income is affected by future changes in interest rates. During a period of rising interest rates, a positive gap, a position of more rate sensitive assets than
rate sensitive liabilities, is desired. During a falling interest rate environment, a negative gap is desired, that is, a position in which rate sensitive liabilities exceed rate sensitive assets.

At June
30, 2003, the Company had a cumulative positive gap of $75.1 million or 26.11% at the one-year horizon. The gap analysis indicates that if interest rates were to rise 200 basis points (2.00%), the Companys net interest income would improve at
the one-year horizon because the Companys rate sensitive assets would reprice faster than rate sensitive liabilities. Conversely, if rates were to fall 200 basis points, the Companys net interest income would decline.

Management also manages interest rate risk with the use of simulation modeling which measures the sensitivity of future net interest income as a result of changes in interest rates. The analysis is based on repricing
opportunities for variable rate assets and liabilities and upon contractual maturities of fixed rate instruments.

The simulation also calculates net interest income based upon rate increases or decrease of
+ or  200 basis points (or 2.00%) in 100 basis point (or 1.00%) increments. The analysis reprices the balance sheet and forecasts future cash flows over a one-year horizon at the net interest rate levels. The cash flows are then totaled to
calculate net interest income. Assumptions are made for loan and investment pre-payment speeds and are incorporated into the simulation as well. Loan and investment pre-payment speeds will increase as interest rates decrease and slow as interest
rates rise. The current analysis indicates that, given a 200 basis point overnight decrease in interest rates, the Company would experience a potential $475,000 or 16.19% decline in net interest income. If rates were to increase 200 basis points,
the analysis indicates that the Companys net interest income would increase $480,000 or 16.04%. It is important to note, however, that this exercise would be a worst-case scenario. It would be more likely to have incremental changes in
interest rates, rather than a single significant increase or decrease.

When management believes interest rate movements will occur, it can restructure the balance sheet and thereby the ratio of rate
sensitive assets to rate sensitive liabilities which in turn will effect the net interest income. It is important to note; however, that in gap analysis and simulation modeling not all assets and liabilities with similar maturities and repricing
opportunities will reprice at the same time or to the same degree and therefore, could effect forecasted results.

-21-



---

##### Table of Contents

Much of the Banks deposits have the ability to reprice immediately, however, deposit rates are not tied to an external index. As a result, although changing market interest rates
impact repricing, the Bank retains much of the control over repricing by determining itself the extent and timing of repricing deposit products. In addition, the Bank maintains a significant portion of its investment portfolio as available for sale
securities and also has a significant variable rate loan portfolio, which is used to offset rate sensitive liabilities.

Changes in market interest rates can also affect the Banks liquidity position
through the impact rate change may have on the market value of the available for sale portion of the investment portfolio. Increase in market rates can adversely impact the market values and therefore, make it more difficult for the Bank to sell
available for sale securities needed for general liquidity purposes without incurring a loss on the sale. This issue is addressed by the Bank with the use of borrowings from the Federal Home Loan Bank (FHLB) and the selling of fixed rate
mortgages as a source of liquidity to the Bank.

The Companys liquidity plan allows for the use of long-term advances or short-term lines of credit with the FHLB as a source of funds. Borrowing from
FHLB not only provides a source of liquidity for the Company, but also serves as a tool to reduce interest risk as well. The Company may structure borrowings from FHLB to match those of customers credit requests, and therefore, lock in
interest rate spreads over the lives of the loans.

In addition to borrowing from the FHLB as a source for liquidity, the Company also participates in the secondary mortgage market. Specifically, the Company
sells fixed rate, residential real estate mortgages to the Federal Home Loan Mortgage Corporation (Freddie Mac). The sales to Freddie Mac not only provide an opportunity for the Bank to remain competitive in the market place, by allowing
it to offer a fixed rate mortgage product, but also provide an additional source of liquidity and an additional tool for management to limit interest rate risk exposure. The Bank continues to service all loans sold to Freddie Mac.

-22-



---

##### Table of Contents

Item 4 
CONTROLS AND PROCEDURES

The Company carried out an evaluation, under the supervision and with the participation of the Companys management, including the Companys Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures as of June 30, 2003, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures were effective as of June 30, 2003, in timely alerting them to material information relating to the Company (including its
consolidated subsidiaries) required to be included in the Companys periodic SEC filings.

There was no change in the Companys internal control over financial reporting that occurred during the
Companys fiscal quarter ended June 30, 2003, that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.

-23-



---

##### Table of Contents

Part II  OTHER INFORMATION

Item 1  -  
Legal Proceedings

None

Item
2  -  
Changes in the rights of the Companys security holders

None

Item 3  -  
Defaults by the Company on its senior securities

None

Item 4  -  
Results of votes of security holders

| |                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------
| | The following represent the results of matters submitted to a vote of the shareholders at the annual meeting held on April 28, 2003.

Affixing the number of directors at nine for 2003:

| |         |         | 
| | ------- | ------- | 
| | For     | 538,857 | 
| | Abstain | 0       | 
| | Absent  | 179,574 | 

Election of Directors:

The following directors were elected with terms to expire 2006:

|              |  |         |  |          | 
|------------- |  | ------- |  | -------- | 
|              |  | For     |  | Withheld | 
|              |  |         |  |          | 
|Allan Mast    |  | 537,733 |  | 180,698  | 
|              |  |         |  |          | 
|Dean Mullet   |  | 537,733 |  | 180,698  | 
|              |  |         |  |          | 
|Luther Proper |  | 537,733 |  | 180,698  | 
|              |  |         |  |          | 

Item 5  -  
Other Information

None

Item
6  -  
Exhibits and Reports on Form 8-K

| |    |                                                                                        
| | -- | ---------------------------------------------------------------------------------------
| | a) | The following exhibits are included in this report or incorporated herein by reference:

| |       |                                                                                                                        
| | ----- | -----------------------------------------------------------------------------------------------------------------------
| | 3(i)  | Articles of Incorporation of Killbuck Bancshares, Inc.*                                                                
| | 3(ii) | Code of Regulations of Killbuck Bancshares, Inc.*                                                                      
| | 10.1  | Employment Contract                                                                                                    
| | 10.2  | Employment Contract                                                                                                    
| | 10.3  | Employment Contract                                                                                                    
| | 21    | Subsidiaries of Registrant*                                                                                            
| | 31.1  | Section 302 Certification                                                                                              
| | 31.2  | Section 302 Certification                                                                                              
| | 32.1  | Certification pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
| | 32.2  | Certification pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
| | 99.1  | Independent Accountants Report                                                                                        

| |    |                                                                                           
| | -- | ------------------------------------------------------------------------------------------
| | b) | No reports on Form 8-K were filed during the quarter of the period covered by this report.

-24-



---

##### Table of Contents

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

-25-



---

##### Table of Contents

Signatures

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

|                       |                           |                                       |                      
|---------------------- | ------------------------- | ------------------------------------- | ---------------------
|                       | KILLBUCK BANCSHARES, INC.
|                       |                           |                                       |                      
|Date:  August 12, 2003 |                           | By:                                   | /s/  LUTHER E. PROPER
|                       |                           |                                      
|                       |                           | Luther E. Proper                     
|                       |                           | President and Chief Executive Officer
|                       |                           |                                       |                      
|                       |                           |                                       |                      
|Date:  August 12, 2003 |                           | By:                                   | /s/  DIANE KNOWLES   
|                       |                           |                                      
|                       |                           | Diane Knowles                        
|                       |                           | Chief Financial Officer              

-26-