U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



<R> FORM 10-KSB/A

Amendment No. 1 </R>



ANNUAL REPORT Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934



For the fiscal year ended December 31, 2004

Commission File Number 33-54566



EXCHANGE BANCSHARES, INC.

(Name of small business issuer in its charter)



Ohio    34-1721453

(State or other jurisdiction of incorporation) (IRS employer identification number)



237 Main Street, PO Box 177, Luckey, Ohio 43443

(Address of principal executive offices) (Zip code)



Issuers telephone number (419) 833-3401



Securities registered under Section 12(b) of the Exchange Act:

None

Securities registered under Section 12(g) of the Exchange Act:

Common shares ($5.00 par value)

Preferred shares ($25.00 par value)



Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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.

YesXNo.



Check if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-KSB or any amendment to this Form 10-KSB.  [  ]



State issuers revenues for the most recent fiscal year.  $5,442,000.



State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked prices of such common equity, as of a specified date within the past 60 days.  The aggregate market value of the voting stock held by non-affiliates was $6,457,965 based upon the trading price of $12.40 per share as of March 16, 2005.

<R>

The number of common shares outstanding as of June 30, 2005 was 586,644 shares, par value $5.00 per share. </R>



Documents Incorporated by Reference



Portions of registrants Annual Report to Shareholders for the fiscal year ended December 31, 2004  Parts I and II of Form 10-KSB.





Transitional Small Business Disclosure Format   YesNoX    .

1



<R>

EXCHANGE BANCSHARES, INC.

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004





Explanatory Note



This Amendment to Exchange Bancshares, Inc.s (the Company) Annual Report on Form 10-KSB for the year ended December 31, 2004 includes restated financial statements as of December 31, 2004 and 2003, and for the years then ended.  This restatement relates to our application of Statement of Financial Accounting Standard No. 109. Accounting for Income Taxes (Statement 109).



The principal application of Statement 109 to the Companys consolidated financial statements relates to the accounting for the Companys net operating loss carryforwards and the valuation allowance for deferred tax assets.  As a result of an updated review and analysis of the requirements of Statement 109 and the consideration of various factors, including the Companys recent losses and decreases in loans, deposits and net interest income, the Company has restated the 2004 and 2003 consolidated financial statements to reflect an increase in the valuation allowance for deferred tax assets of $196,000 in 2004 and $129,000 in 2003.



This application of Statement 109 results in the following changes in reported net income (loss) for the periods presented in this report:



·

an increase of $196,000 in the net loss for the year ended December 31, 2004;



·

a decrease of $129,000 in net income for the year ended December 31, 2003.



This application of Statement 109 also results in changes to comprehensive income and the consolidated statements of cash flows and balance sheets.



The following tables summarize the effect of the restatement on the Companys consolidated financial statements for the years ended December 31, 2004 and 2003:</R>



<R>

2004

2003



As

As

previously

As

previously

As

reported

restated

reported

restated

(Dollars in thousands, except per share data)

Statements of Operations

Federal income tax provision

(credit)

$

(196)

$

-

$

(59)

$

70

Net income (loss)

(368)

(564)

301

172

Net income (loss) per share

(0.63)

(0.96)

0.51

0.29



Comprehensive Income

Net income (loss)

(368)

(564)

301

172

Total comprehensive income (loss)

(575)

(771)

122

(7)



Statements of Cash Flows

Net income (loss)

(368)

(564)

301

172

Deferred federal income taxes

(203)

(7)

(59)

70

2



Balance Sheets

Accrued interest receivable and

other assets

1,285

960

1,273

1,144

Total assets

91,044

90,719

101,948

101,819

Total shareholders equity

8,623

8,298

9,198

9,069

Total liabilities and shareholders

equity

91,044

90,719

101,948

101,819



In addition, the restatement was reflected, where applicable, in the Five-Year Summary of Selected Financial Data and various discussions and tables included in Managements Discussion and Analysis of Financial Condition and Results of Operations.



The restatement had no impact on cash flow from operations and as shown in Note 11, the Bank continues to be classified as well capitalized under the regulatory framework for prompt corrective action.



This Report, as amended, covers the year ended December 31, 2004 and was originally filed on March 31, 2005.  This Report has been amended to restate certain financial statements and related financial results only and does not reflect events after the filing of the original report and does not modify or update disclosures as originally filed, except as required to reflect the effect of the restatement.  Contemporaneously with the filing of this Report, we have also filed an amended Quarterly Report on Form 10-QSB/A for the quarter ended March 31, 2005.</R>

3



EXCHANGE BANCSHARES, INC.



For the Year Ended December 31, 2004





TABLE OF CONTENTS

<R>

Page

PART I.

|Item 1. | Description of Business                             | 5
|------- | --------------------------------------------------- | -
|Item 2. | Description of Property                             | 6
|Item 3. | Legal Proceedings                                   | 6
|Item 4. | Submission of Matters to a Vote of Security Holders | 6





PART II.

|Item 5. | Market for Common Equity and Related Stockholder Matters                              | 6
|------- | ------------------------------------------------------------------------------------- | -
|Item 6. | Managements Discussion and Analysis of Financial Condition
and Results of Operations | 7
|Item 7. | Financial Statements                                                                  | 7
|Item 8. | Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure  | 7
|Item 8A | Controls and Procedures                                                               | 8
|Item 8B | Other Information                                                                     | 8





PART III.

|Item 9.  | Directors and Executive Officers of the Registrant                                             | 8 
|-------- | ---------------------------------------------------------------------------------------------- | --
|Item 10. | Executive Compensation                                                                         | 10
|Item 11. | Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters | 11
|Item 12. | Certain Relationships and Related Transactions                                                 | 12
|Item 13. | Exhibits                                                                                       | 12
|Item 14. | Principal Accountant Fees and Services                                                         | 13





|SIGNATURES |  | 14
|---------- |  | --

</R>

4



PART  I





ITEM 1.  Description of Business



Exchange Bancshares, Inc. (the Company) was incorporated in 1992 in the State of Ohio as a one-bank holding company for its wholly-owned subsidiary, The Exchange Bank (the Bank).  The Company, through its subsidiary, operates in one industry segment, the commercial banking industry.



The Company has authorized 750,000 common shares, par value $5.00 per share of which 586,644 are currently outstanding.  The Company also has authorized 750 preferred shares, par value $25.00 per share without designating the terms of the preferred shares.  No preferred shares are currently outstanding or presently intended to be issued.



The Company is subject to regulation by the Board of Governors of the Federal Reserve System, which limits the activities in which the Company and the Bank may engage.  The Bank is supervised by the State of Ohio, Division of Financial Institutions.  The Bank is a member of the Federal Reserve System and is subject to its supervision.  Deposits of the Bank are insured, up to applicable limits, by the Federal Deposit Insurance Corporation (the FDIC).  As such, the Bank is subject to periodic examination by the Division of Financial Institutions of the State of Ohio and the Federal Reserve Board.  The Company and the Bank must file with the U.S. Securities and Exchange Commission, the Federal Reserve Board and Ohio Division of Financial Institutions the prescribed periodic reports containing full and accurate statements of its affairs.



The Bank, an Ohio chartered bank organized in 1906, provides financial services through its five branches located in Luckey, Ohio, and nearby communities.  These communities are the source of substantially all deposit and loan activities.  The majority of the Banks income is derived from commercial and retail lending activities and investments in securities.  Its primary deposit products are checking, savings, and term certificate accounts, and its primary lending products are residential mortgage, commercial, and installment loans.  Substantially all loans are secured by specific items of collateral including business assets, consumer assets and real estate.  Commercial loans are expected to be repaid from cash flow from operations of business.  Real estate loans are secured by both residential and commercial real estate.



Fiscal and Monetary Policies



The earnings of the Bank are affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies.  The Federal Reserve Board, through its monetary policies, regulates the money supply, credit conditions and interest rates in order to influence the general economic conditions.  This is accomplished primarily by their open market operations through the acquisition and disposition of United States Government securities, varying the discount rate (rate charged on member bank borrowings), targeting Federal Funds rates, and adjusting the reserve requirements of member and nonmember bank deposits.  As a result the Federal Reserve Boards monetary policies have had a significant effect on the net interest income and interest expense of commercial banks and are expected to continue to do so in the future.



Employees



As of December 31, 2004, the Bank had 46 full-time and 7 part-time employees.  The Company has no employees, however, personnel costs incurred by the Company are reimbursed to the Bank.



Competition



The Bank has five banking offices located in Wood and Lucas Counties, Ohio.  The primary market of the Bank is Northwest Ohio, which includes Wood, Lucas and contiguous counties in Ohio and Michigan.  The Bank competes with several area banks and savings and loan associations, as well as, various credit unions, finance companies, large retail stores, credit corporations and both Federal and local governments for sources of funds.  The Company is the second largest holding company headquartered in Wood County, Ohio.

5



The competitive factors within the financial services industry can be classified into two categories, competitive rates and competitive services.  With recent interest rates being at a forty year low, there is increased competition for quality loans and deposits.  From a service standpoint, financial institutions compete against each other in types of services such as service costs, banking hours and similar features.  The Bank is generally competitive with competing financial institutions in its primary service area with respect to interest rates paid on time and savings deposits, charges on deposit accounts and interest rates charged on loans.  With respect to services, the Bank offers extended banking hours and operates five ATMs (automated teller machines).



Pursuant to state regulations, the Bank is limited to the amount that it may lend to a single borrower.  As of December 31, 2004 and 2003 the legal lending limits were approximately $1,394,000 and $1,463,000 respectively.  As of December 31, 2004 and 2003, no loans were over the legal lending limit.



ITEM 2.  Description of Property



The Banks principal office is located at 235 Main Street, Luckey, Ohio 43443.  The Banks four branches are located in Walbridge, Holland, Perrysburg and Sylvania, Ohio.  The Bank owns all of the above properties and all are considered in good condition and suitable for their intended use.  The Company operates out of the Banks main office although it has a separate mailing address.



ITEM 3.  Legal Proceedings



In the opinion of management of the Company, there are no legal proceedings pending to which the Company is a party or to which its property is subject, which, if determined adversely to the Company, would be material in relation to the Companys undivided profits or financial condition, nor are there any proceedings pending other than ordinary routine litigation incident to the business of the Company or the Bank.  In addition, no material proceedings are pending or are known to be threatened or contemplated against the Company or the Bank by government authorities or others.



ITEM 4.  Submission of Matters to a Vote of Security Holders



Not applicable.





PART  II





ITEM 5.  Market for Common Equity and Related Stockholder Matters



At December 31, 2004, the Company had approximately 783 shareholders of record.  Sweney Cartwright & Co. and McDonald & Company, broker-dealers, make a limited over-the-counter market in shares of the Company Common Stock.  There are no plans to list the shares of the Company Common Stock on any stock exchange.  In 2004, Sweney Cartwright & Co. and McDonald & Company purchased and sold shares of stock of the Company at prices ranging from $16.00 to $18.75 per share.  The offer to purchase shares, in some instances, was conditional upon their ability to sell the shares at a predetermined price.  The following represents a summary of the quarterly high and low prices based on transactions reported to the Company.



March 31, 2004

June 30, 2004

September 30, 2004

December 31, 2004

High

$18.75

$18.35

$17.00

$17.00

Low

18.00

17.00

16.00

16.00

Dividend

0.00

0.00

0.00

0.00



March 31, 2003

June 30, 2003

September 30, 2003

December 31, 2003

High

$19.75

$18.75

$18.25

$19.75

Low

18.10

17.25

17.35

17.55

Dividend

0.00

0.20

0.00

0.05

6



Dividends by the Company depend upon earnings, financial condition, appropriate legal restrictions and other factors relevant at the time the Board of Directors of the Company considers dividend policy.  Under Ohio Revised Code, the Company is prohibited from paying dividends if the Company would be unable to pay its debts as they come due, or the Companys total assets would be less than its liabilities plus an amount needed to satisfy any preferential rights of shareholders.  The Company may only pay dividends out of surplus.  Surplus is defined as the excess of a corporations assets over its liabilities plus stated capital.  Total assets and liabilities are determined by the Board of Directors, which may base its determination on such factors as it considers relevant, including without limitation:  (i) the book values of assets and liabilities of the Company, as reflected on its books and records; and (ii) unrealized appreciation and depreciation of the assets of the Company.



The Company is subject to the dividend restrictions set forth by the Federal Reserve Board.  The Bank, as a state bank, is subject to the dividend restrictions set forth by the State of Ohio Division of Financial Institutions.  Under such restrictions, the Bank may not, without prior approval of the Superintendent of Financial Institutions, declare dividends in excess of the sum of the current years earnings plus the retained earnings from the prior two years.  At December 31, 2004, neither the Company nor the Bank may pay a dividend without the approval of regulators.



At December 31, 2004, there were no securities authorized for issuance under equity compensation plans.



The Company has not sold any of its equity securities within the past three years and there has been no repurchase of any of its equity shares.





ITEM 6.  Managements Discussion and Analysis of Financial Condition and Results of Operations

Information is contained in the 2004 Annual Report, under the caption MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, and is incorporated herein by reference.





ITEM 7.  Financial Statements

The following information required by this item is contained in the 2004 Annual Report and is incorporated herein by reference:



Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets  December 31, 2004 and 2003

Consolidated Statements of Operations  Years ended December 31, 2004, 2003 and 2002

Consolidated Statements of Shareholders Equity  Years ended December 31, 2004, 2003 and 2002

Consolidated Statements of Cash Flows  Years ended December 31, 2004, 2003 and 2002

Summary of Significant Accounting Policies

Notes to Consolidated Financial Statements





ITEM 8.  Changes In and Disagreements With Accountants on Accounting and Financial Disclosure



During the fiscal year 2003, the Audit Committee of the Board of Directors of the Company determined to replace the Companys accountant, Dixon, Francis, Davis & Company (Dixon) with Clifton Gunderson LLP (Clifton).  The engagement of Dixon as the Companys certifying accountant terminated on June 9, 2003.



During the period from January 1, 2003 to June 9, 2003, there were no disagreements with Dixon on any matter of accounting principles or practices, financial statement disclosures or audit scope or procedures.



The Audit Committee of the Board of Directors of the Company, on July 16, 2003, engaged Clifton as the principal accountant of the Company to audit the Companys financial statements.



The above information was reported by the Company on Form 8-K filed on June 27, 2003 and July 16, 2003.



There were no disagreements with Clifton for the years ended December 31, 2004 or 2003.

7





ITEM 8A.  Controls and Procedures



(a)  Disclosure controls and procedures



The Chief Executive Officer and the Chief Financial Officer of the Company have carried out an evaluation of the effectiveness of the Companys disclosure controls and procedures as of the end of the period covered by this Annual Report that are designed to ensure that information relating to the Company required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Commissions rules and forms.  Based upon this evaluation, these officers have concluded that as of December 31, 2004 the Companys disclosure controls and procedures are effective.



(b)  Changes in internal control over financial reporting



During the quarter ended December 31, 2004, there were no significant changes in the Companys internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.  The U.S. Securities and Exchange Commission has extended the non-accelerated filers compliance dates for Section 404 of the Sarbanes-Oxley Act.  Under the latest extension, non-accelerated filers must begin to comply with the internal control over financial reporting requirements for their first fiscal year ending on or after July 15, 2006.  This is a one-year extension from the previously established July 15, 2005 compliance date and is applicable to the Company.





ITEM 8B.  Other Information



None









PART III







ITEM 9.  Directors and Executive Officers of the Registrant



The following table sets forth information concerning the directors of the Company and the executive officers of the Company.  Included in the table is information regarding each persons principal occupation or employment during the past five years.

<R>

|Name            | Age | Director
Since | Term to
Expire | Principal Occupation for the Last Five Years                                                                                                                                                                   
|--------------- | --- | -------------- | -------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                |     |                |                |                                                                                                                                                                                                                
|Cecil R. Adkins | 76  | 1989           | 2006           | Mr. Adkins has served on the Board of Directors of the Bank since 1989 and the Company since 1993.  He is owner of mobile home parks and is a developer.                                                       
|                |     |                |                |                                                                                                                                                                                                                
|Mark S. Derkin  | 56  | 1994           | 2006           | Mr. Derkin has served on the Board of Directors of the Bank since 1994 and the Company since 2001.  Mr. Derkin is president and chief executive officer of Derkin & Wise, a Specialized Industrial Distributor.

8





|Name             | Age | Director
Since | Term to
Expire | Principal Occupation for the Last Five Years                                                                                                                                                                                                                  
|---------------- | --- | -------------- | -------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Donald P. Gerke  | 62  | 1994           | 2005           | Mr. Gerke has served on the Board of Directors of the Bank since 1994 and the Company since 1995.  He is an educator, having taught high school mathematics and has been an adjunct college instructor at Bowling Green State University and Bluffton College.
|                 |     |                |                |                                                                                                                                                                                                                                                               
|Joseph R. Hirzel | 67  | 1989           | 2006           | Mr. Hirzel has served on the Board of Directors of the Bank since 1989 and the Company since 1993.  He is the Corporate Secretary of the Hirzel Canning Company and serves as Secretary of the Company.                                                       
|                 |     |                |                |                                                                                                                                                                                                                                                               
|Rolland I. Huss  | 75  | 1977           | 2007           | Mr. Huss has served on the Board of Directors of the Bank since 1977 and the Company since 1993.  Mr. Huss is a farm owner and operator and serves as Chairman of the Bank.                                                                                   
|                 |     |                |                |                                                                                                                                                                                                                                                               
|Marion Layman    | 79  | 1962           | 2007           | Mr. Layman has served on the Board of Directors of the Bank since 1962 and the Company since 1993.  Mr. Layman is Chairman Emeritus of The Exchange Bank and Chairman of the Company.                                                                         
|                 |     |                |                |                                                                                                                                                                                                                                                               
|David G. Marsh   | 47  | 1993           | 2005           | Mr. Marsh has served on the Board of Directors of the Bank since 1993 and the Company since 1994.  Mr. Marsh is owner, embalmer and president of Marsh Funeral Home, Inc.; owner of Marsh Stone Co. and Marsh Insurance Agency.                               
|                 |     |                |                |                                                                                                                                                                                                                                                               
|Edmund J. Miller | 62  | 1995           | 2005           | Mr. Miller has served on the Board of Directors of the Company since 1995 and the Bank since 1996.  He is a television engineer with Liberty Corporation, WTOL television.                                                                                    
|                 |     |                |                |                                                                                                                                                                                                                                                               
|Thomas E. Funk   | 50  | N/A            | N/A            | Mr. Funk has served as the Vice President, Treasurer and CFO of the Company since March 1, 2002.  Prior to March 1, 2002, Mr. Funk was Assistant V.P./Finance for Sky Financial Group, Inc.                                                                   

</R>

9





No family relationships exist between the Companys Directors, nominees and executive officers.  There are no arrangements or understandings between any Director or nominee and any other person concerning service or nomination as a Director.



The Companys Code of Ethics is applicable to all directors and employees.  A copy of the Code of Ethics is included as Exhibit 14 to this Annual Report on Form 10-KSB.



Audit Committee



The Audit Committee met 14 times to review the previous fiscal year results, the scope of the internal and external audits and internal accounting procedures and controls.  Members of the Audit Committee are Messrs. Derkin, Gerke, Marsh and Miller.  The Companys board adopted an amended written charter for the Audit Committee on February 17, 2004.  The Board of Directors has determined that Mark S. Derkin is an audit committee financial expert as defined by the SEC rules and regulations.



Compliance with Section 16(a) of the Securities Exchange Act of 1934



Section 16(a) of the Securities and Exchange Act of 1934 requires the Companys officers and Directors and persons who own 10% or more of the Companys common stock to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission.  Officers, Directors and 10% or greater shareholders are required by the Commissions regulations to furnish the Company with copies of all Forms 3, 4 and 5 they file.  The same requirements applied to Officers, Directors and 10% shareholders of the Bank prior to the holding company reorganization on January 3, 1994, except that such Form 3, 4 and 5 reports were previously filed with the Board of governors of the Federal Reserve System.  All such forms were filed in a timely manner as required, except for one Form 4 of David G. Marsh and two Forms 4 of Edmund J. Miller.  The late filings for David G. Marsh and Edmund J. Miller were due to timing issues for shares purchased under the optional cash purchase provisions of the Companys Dividend Reinvestment Plan.





ITEM 10.  Executive Compensation



Director Compensation



As a result of the lack of earnings, the directors agreed to forego the payment of any director fees for the year 2004.





Executive Compensation



The following table summarizes, for the fiscal years indicated, all annual compensation earned by or granted to the Chief Executive Officer and the most highly compensated executive officers whose salary exceeds $100,000, for all services rendered to the company in all capacities.  For fiscal year 2004, no other officer of the Company or the Bank received compensation in excess of $100,000.



Summary Compensation Table



Annual Compensation

Long Term Compensation Awards

Securities

Other

Underlying

All Other

Name / Title

Year

Salary

Bonus

Compensation(1)

Options/SARs

Compensation



Victor A. Proffitt (2)

2004

$150,808

$0

$7,663 (2)

N/A

N/A

President and CEO



Jeffery A. Robb (3)

2003

111,875

4,000

15,065 (3)

N/A

N/A

President and CEO

2002

32,125

0

5,025 (3)

N/A

N/A

10



<R>

(1)  Other annual compensation consists of amounts representing the allocation to each named executive under the

401(k) Deferred Compensation Plan, Director/Committee fees, and other employee benefits.

(2)  Mr. Proffitt became President and Chief Executive Officer effective January 1, 2004 and resigned June 17, 2005.

(3)  Mr. Robb served the Company as President and Chief Executive Officer from July, 2002 until December 31,

2003.  Other compensation includes $13,500 directors fees.

</R>

ITEM 11.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters



For purposes of these tables, a person is considered to beneficially own any shares over which he or she exercises sole or shared investment power or of which he or she have the right to acquire beneficial ownership within 60 days.  Unless otherwise indicated, voting power and investment power are exercised solely by the person named in the tables or shared with members of his or her household.  Shares deemed outstanding for purposes of computing Percent of Common Stock are calculated based on 586,644 shares outstanding.  None of the principal holders has the right to acquire beneficial ownership of the Company's common stock within 60 days.



|Name and Address of
Beneficial Owner | Number of Shares of Common
Stock Beneficially Owned(1) | Percent of Common
Stock Outstanding
|------------------------------------ | ------------------------------------------------------ | -----------------------------------
|                                     |                                                        |                                    
|Joanne R. Moran
Toledo, OH  43623    | 35,695(2)                                              | 6.08%                              



(1)  All shares are held of record with sole voting and investment power unless otherwise indicted.  Beneficial

Ownership numbers are as of December 31, 2004.

(2)  Includes 4,273 shares owned by Mrs. Morans husband.

<R>

|Name, Position(s) of Beneficial Owner
or Director            | Number of Shares of
Common Stock
Beneficially Owned(1) | Percent of Common
Stock Outstanding
|------------------------------------------------------------ | ------------------------------------------------------ | -----------------------------------
|                                                             |                                                        |                                    
|Cecil R. Adkins, Director                                    | 4,624                                                  | (2)                                
|Mark S. Derkin, Director                                     | 279                                                    |                                    
|Donald P. Gerke, Director                                    | 4,411                                                  | (3)                                
|Joseph R. Hirzel, Director, Secretary                        | 3,276                                                  | (4)                                
|Rolland I. Huss, Director                                    | 29,306                                                 | (5)                                
|Marion Layman, Director, Chairman                            | 14,817                                                 | (6)                                
|David G. Marsh, Director                                     | 992                                                    | (7)                                
|Edmund J. Miller, Director                                   | 7,136                                                  | (8)                                
|Victor J. Proffitt, Former Director, President & CEO         | 1,000                                                  | (9)                                
|Thomas E. Funk, Vice President & CFO                         | 0                                                      |                                    
|                                                             |                                                        |                                    
|All Directors and Executive Officers as a Group (10 Persons) | 65,841                                                 |                                    



(1)  All shares are held of record with sole voting and investment power unless otherwise indicated.  Beneficial

Ownership numbers are as of December 31, 2004.

(2)Includes 4,100 shares jointly owned by Mr. Adkins wife.

(3)  Includes 4,189 shares owned by The Gerke Family Trust.

(4)Includes 186 shares owned by Mr. Hirzels wife.

(5)  Includes 609 shares owned by Mr. Husss wife and 99 shares owned jointly with two grandchildren.

(6)  Includes 9,329 shares owned by the Marion Layman Trust and 5,388 shares owned by the Naomi Layman Trust.

(7)  Owned jointly with Mr. Marshs wife.

(8)  Includes 708 owned jointly with two children, 1,265 owned jointly with wife and 394 owned by Mr. Millers wife.

(9)  Mr. Proffitt resigned June 17, 2005. </R>

11







ITEM 12.  Certain Relationships and Related Transactions



The Company has engaged and intends to continue to engage in the lending of money through The Exchange Bank (the Bank), its wholly-owned subsidiary, to various directors and officers of the Company.  These loans to such persons were made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as prevailing at the time for comparable transactions with other persons and did not involve more than a normal risk of collectibility or other unfavorable features.







ITEM 13.  Exhibits



(a)     Exhibits

Reference to Prior

Filing of Exhibit or

of Exhibits Inclusion

Exhibit No.

Document

in this Filing

<R>

|3(i)  | The Amended and Restated Articles of Incorporation of
Exchange Bancshares, Inc.                                         | (1)
|----- | ----------------------------------------------------------------------------------------------------------------------- | ---
|3(ii) | Code of Regulations of Exchange Bancshares, Inc.                                                                        | (2)
|10    | Change of Control Agreement  Thomas E. Funk                                                                            | (3)
|13    | 2004 Annual Report to Shareholders                                                                                      | (3)
|14    | Code of Ethics                                                                                                          | (3)
|21    | Subsidiaries of the Company                                                                                             | (3)
|23    | Consent of Accountants - Dixon, Davis, Bagent & Company                                                                 | (3)
|23.1  | Consent of Accountants - Clifton Gunderson LLP                                                                          |    
|31.1  | Rule 13(a)  14(a) / 15d  14(a) CEOs Certification                                                                    | (3)
|31.2  | Rule 13(a)  14(a) / 15d  14(a) CFOs Certification                                                                    | (3)
|32.1  | Section 1350 CEOs Certification                                                                                        | (3)
|32.2  | Section 1350 CFOs Certification                                                                                        | (3)
|99    | Safe Harbor Under the Private Securities Litigation Reform Act of 1995                                                  | (3)
|      |                                                                                                                         |    
|      |                                                                                                                         |    
|      |                                                                                                                         |    
|      |                                                                                                                         |    
|      |                                                                                                                         |    
|(1)   | Incorporated herein by reference from the Companys quarterly report on
Form 10-QSB for the quarter ended June 30, 1995 |    
|      |                                                                                                                         |    
|(2)   | Incorporated herein by reference from the Companys quarterly report on
Form 10-QSB for the quarter ended June 30, 2002 |    
|      |                                                                                                                         |    
|(3)   | Included herein                                                                                                         |    
|      |                                                                                                                         |    
|      |                                                                                                                         |    

</R>



12



ITEM 14.  Principal Accountant Fees and Services



The Audit Committee engaged Clifton Gunderson LLP as the independent public accountants of the Company to audit the Company's 2004 consolidated financial statements and intends to appoint them for the 2005 fiscal year.  Clifton Gunderson LLP has served as independent auditors of the Company since 2003.



Audit Fees



The aggregate fees of Clifton Gunderson LLP for professional services rendered for the audit of the Companys consolidated financial statements and the review of the financial statements included in the Companys Forms 10-QSB were $61,000 for fiscal year 2004 and were $51,000 for fiscal year2003.



Audit-Related Fees



There were no Audit-Related Fees billed by Clifton Gunderson LLP for fiscal year 2004 or fiscal year 2003.



Tax Fees



The aggregate fees of Clifton Gunderson LLP for professional services rendered for federal income tax return, quarterly estimated tax payments, state franchise taxes and state personal property taxes were $7,000 for fiscal year 2004.  There were no Tax Fees billed by Clifton Gunderson LLP for fiscal year 2003.



All Other Fees



There were no fees billed by Clifton Gunderson LLP for all other services not included in Audit Fees, Audit-Related Fees or Tax Fees for fiscal year 2004.  The aggregate fees of Clifton Gunderson LLP for all other services not included in Audit Fees, Audit-Related Fees or Tax Fees were $2,975 for fiscal year 2003, for a review of the interest rate risk analysis model.



As required by the Sarbanes-Oxley Act of 2002, the Audit Committee is responsible for the approval of all audit and permitted non-audit services performed by the independent public accountants for the Company.  The Audit Committee pre-approved 100% of the audit and permitted non-audit services performed by Clifton Gunderson LLP for fiscal year 2004.  The Audit Committee has considered and ultimately determined that the provision of any of the non-audit or other services provided by Clifton Gunderson LLP to the Company is compatible with maintaining their independence.





13



SIGNATURES

<R>

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 6th day of July 2005.



EXCHANGE BANCSHARES, INC.

EXCHANGE BANCSHARES, INC.





/s/  Marion Layman

/s/  Thomas E. Funk



Marion Layman

Thomas E. Funk

President and Chief Executive Officer

Vice President, Treasurer and Chief Financial Officer

Principal Executive Officer

Principal Financial Officer





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





/s/  Cecil R. Adkins

/s/  Marion Layman



Cecil R. Adkins, Director

Marion Layman, Chairman

Date:  July 6, 2005

Date:  July 6, 2005





/s/  Mark S. Derkin

_________________________________



Mark S. Derkin, Director

David G. Marsh, Director

Date:  July 6, 2005

Date:  July 6, 2005





/s/  Donald P. Gerke

/s/  Edmund J. Miller



Donald P. Gerke, Director

Edmund J. Miller, Director

Date:  July 6, 2005

Date:  July 6, 2005





/s/  Joseph R. Hirzel

/s/  Rolland I. Huss



Joseph R. Hirzel, Director

Rolland I. Huss, Director

Date:  July 6, 2005

Date:  July 6, 2005







</R>

14



INDEX TO EXHIBITS





Reference to Prior

Filing of Exhibit or

of Exhibits Inclusion

Exhibit No.

Document

in this Filing

<R>

|3(i)  | The Amended and Restated Articles of Incorporation                                                                      | (1)
|----- | ----------------------------------------------------------------------------------------------------------------------- | ---
|      |                                                                                                                         |    
|3(ii) | Code of Regulations of Exchange Bancshares, Inc.                                                                        | (2)
|      |                                                                                                                         |    
|10    | Change of Control Agreement  Thomas E. Funk                                                                            | (3)
|      |                                                                                                                         |    
|13    | 2004 Annual Report to Shareholders                                                                                      | (3)
|      |                                                                                                                         |    
|14    | Code of Ethics                                                                                                          | (3)
|      |                                                                                                                         |    
|21    | Subsidiaries of the Company                                                                                             | (3)
|      |                                                                                                                         |    
|23    | Consent of Accountants - Dixon, Davis, Bagent & Company                                                                 | (3)
|      |                                                                                                                         |    
|23.1  | Consent of Accountants - Clifton Gunderson LLP                                                                          | (3)
|      |                                                                                                                         |    
|31.1  | Rule 13(a)  14(a) / 15d  14(a) CEOs Certification                                                                    | (3)
|      |                                                                                                                         |    
|31.2  | Rule 13(a)  14(a) / 15d  14(a) CFOs Certification                                                                    | (3)
|      |                                                                                                                         |    
|32.1  | Section 1350 CEOs Certification                                                                                        | (3)
|      |                                                                                                                         |    
|32.2  | Section 1350 CFOs Certification                                                                                        | (3)
|      |                                                                                                                         |    
|99    | Safe Harbor Under the Private Securities Litigation Reform Act if 1995                                                  | (3)
|      |                                                                                                                         |    
|      |                                                                                                                         |    
|      |                                                                                                                         |    
|      |                                                                                                                         |    
|      |                                                                                                                         |    
|(1)   | Incorporated herein by reference from the Companys quarterly report on
Form 10-QSB for the quarter ended June 30, 1995 |    
|      |                                                                                                                         |    
|(2)   | Incorporated herein by reference from the Companys quarterly report on
Form 10-QSB for the quarter ended June 30, 2002 |    
|      |                                                                                                                         |    
|(3)   | Included herein                                                                                                         |    
|      |                                                                                                                         |    
|      |                                                                                                                         |    

</R>





15