UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT of 1934 [FEE REQUIRED]
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For the Fiscal Year Ended December 31, 2008
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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For the transition period from
to
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Commission File No. 000-24147
Killbuck Bancshares, Inc.
(Exact name of registrant as specified in its
charter)
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Ohio
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34-1700284
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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165 North Main Street Killbuck, Ohio 44637
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(Address of principal executive offices)
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Registrant’s telephone number, including area code: (330) 276-2771
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
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Title of each class
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Name of each exchange on which registered
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Common Stock No Par Value
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None
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Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
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No
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Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange
Act. Yes
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No
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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 than the registrant was required to file such report(s), and (2) has been subject to such filing requirements for the past 90 days.
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Yes
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No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in part III of this Form 10-K or any amendment to this Form
10-K.
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Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a small reporting company (Check one):
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting Company
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x
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes
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No
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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 June 30, 2008 was
$71,358,478 (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):
There were 621,482 shares of no par value common stock outstanding as of December 31, 2008.
DOCUMENTS INCORPORATED
BY REFERENCE
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1.
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Portions of the Annual Report to Shareholders for the Year ended December 31, 2008. (Part II, III and IV)
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2.
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Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held on April 27, 2009 for the Year ended December 31, 2008. (Part III)
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FORM 10-K INDEX
PART I
Killbuck Bancshares, Inc. (the “Company”) may from time to time make written or oral “forward-looking statements”, including statements contained in the Company’s filings with the securities
and exchange commission (including this annual report on Form 10-K and the exhibits thereto), in its report to shareholders and in other communications by the Company, which are made in good faith by the Company pursuant to the “safe
harbor” provisions of the private securities litigation reform act of 1995.
These forward-looking statements involve risks and uncertainties, such as
statements of the Company’s plans, objectives, expectations, estimates and intentions that are subject to change based on various important factors (some of which are beyond the Company’s control). The following factors, among others,
could cause the Company’s financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements: the strength of the United States economy in general and the
strength of the local economies in which the Company conducts operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the board of governors of the federal reserve system,
inflation, interest rate, market and monetary fluctuations; the timely development of and acceptance of new products and services of the Company and the perceived overall value of these products and services by users, including the features, pricing
and quality compared to competitors’ products and services; the willingness of users to substitute competitors’ products and services for the Company’s products and services; the success of the Company in gaining regulatory approval
of its products and services, when required; the impact of changes in financial services’ laws and regulations (including laws concerning taxes, banking, securities and insurance); technological changes, acquisitions; changes in consumer
spending and savings habits; and the success of the Company at managing the risks involved in the foregoing.
The Company cautions that the foregoing list
of important factors is not exclusive. The Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company.
Killbuck Bancshares, Inc. (the “Company”) was
incorporated under the laws of the State of Ohio on November 29, 1991 at the direction of management of the Killbuck Savings Bank Company (the “Bank,”) for the purpose of becoming a bank holding company by acquiring all of the
outstanding shares of the Bank. In November 1992, the Company became the sole shareholder of the Bank. The Bank carries on business under the name “The Killbuck Savings Bank Company.” The principal office of the Company is located at 165
N. Main Street, Killbuck, Ohio. The Killbuck Savings Bank Company was established under the banking laws of the State of Ohio in September, 1900.
The Bank
is headquartered in Killbuck, Ohio, which is located in the northeast portion of Ohio, in the County of Holmes. Holmes County has a population of approximately 38,000.
The Bank provides a wide range of retail banking services to individuals and small to medium-sized businesses. These services include various deposit products, business and personal loans, credit cards, residential
mortgage loans, home equity loans, internet banking, bill payment, and other consumer oriented financial services including IRA accounts, Health Savings Accounts (HSA), safe deposit and night depository facilities. The Bank also has automatic teller
machines located at all locations providing 24 hour banking service to our customers. The Bank belongs to STAR, a national ATM network with thousands of locations nationwide. Neither the Company nor the Bank has any foreign operations, assets,
investments or deposits.
The Company has one wholly owned subsidiary, The Killbuck Savings Bank Company. The Bank has ten offices, with seven in Holmes
County including a loan production office, two in Knox County and one in Tuscarawas County.
The Company, through its subsidiary, The Killbuck Savings Bank Company, conducts the business of a commercial banking
organization. At December 31, 2008, the Company and its subsidiary had consolidated total assets of $341,337,823 and consolidated total equity of $42,935,598. The capital of the Company consists of 1,000,000 authorized shares of capital stock,
no par value of which 621,482 shares were outstanding at December 31, 2008 to 1,001 shareholders.
The Bank is a state banking Company. The Bank is
regulated by the Ohio Division of Financial Institutions (“ODFI”) and its deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”) to the extent permitted by law and, as a subsidiary of the Company, is regulated
by the Federal Reserve Board.
Employees
As of
December 31, 2008, the Bank had 100 full-time and 28 part-time employees. The Company had no employees. The Bank provides a number of benefits for its full-time employees, including health and life insurance, pension, workers’
compensation, social security, paid vacations, and numerous bank services. No employees are union participants or subject to a collective bargaining agreement.
Competition
The commercial banking business in the market areas served by the Bank is very competitive. The Company and the Bank are
in competition with commercial banks located in their own service areas. Some competitors of the Company and the Bank are substantially larger than the Bank. In addition to local bank competition, the Bank competes with larger commercial banks
located in metropolitan areas, savings banks, savings and loan associations, credit unions, finance companies and other financial institutions for loans and deposits.
There are eight financial institutions operating in Holmes County. As of June 30, 2008 (the most recent date for which information is available), the Bank had the largest market share with $233.4 million in total
deposits as of such date, representing a market share of 43.3%. The institution with the second largest market share had deposits of $193.3 million as of such date, representing a market share of 35.9%. The Bank had total assets as of
December 31, 2008, of $341.3 million compared to the other institution’s total assets of $425 million as of such date.
Certain Regulatory
Considerations
The following is a summary of certain statutes and regulations affecting the Company and its subsidiary. This summary is qualified
in its entirety by such statutes and regulations.
The Company
The Company is a registered bank holding company under the Bank Holding Company Act of 1956, as amended, (“BHC Act”) and as such is subject to regulation by the Federal Reserve Board. A bank holding company
is required to file with the Federal Reserve Board quarterly reports and other information regarding its business operations and those of its subsidiaries. A bank holding company and its subsidiary banks are also subject to examination by the
Federal Reserve Board.
The BHC Act requires every bank holding company to obtain the prior approval of the Federal Reserve Board before acquiring
substantially all the assets of any bank or bank holding company or ownership or control of any voting shares of any bank or bank holding company, if, after such acquisition, it would own or control, directly or indirectly, more than five percent
(5%) of the voting shares of such bank or bank holding company.
In approving acquisitions by bank holding companies of companies engaged in banking-related activities, the Federal
Reserve Board considers whether the performance of any such activity by a subsidiary of the holding company reasonably can be expected to produce benefits to the public, such as greater convenience, increased competition, or gains in efficiency,
which outweigh possible adverse effects, such as over concentration of resources, decrease of competition, conflicts of interest, or unsound banking practices.
Bank holding companies are restricted in, and subject to, limitations regarding transactions with subsidiaries and other affiliates.
In addition,
bank holding companies and their subsidiaries are prohibited from engaging in certain “tie in” arrangements in connection with any extensions of credit, leases, sales of property, or furnishing of services.
The Company Subsidiary
The Company operates a single bank,
namely, The Killbuck Savings Bank Company. As an Ohio state chartered commercial bank, the Bank is supervised and regulated by the ODFI, and subject to laws and regulations applicable to Ohio banks.
Capital
The Federal Reserve Board, ODFI, and FDIC require
banks and holding companies to maintain minimum capital ratios.
The Federal Reserve Board adopted final “risk-adjusted” capital guidelines for
bank holding companies. The guidelines became fully implemented as of December 31, 1992. The ODFI and FDIC have adopted substantially similar risk-based capital guidelines. These ratios involve a mathematical process of assigning various risk
weights to different classes of assets, then evaluating the sum of the risk-weighted balance sheet structure against the Company’s capital base. The rules set the minimum guidelines for the ratio of capital to risk-weighted assets (including
certain off-balance sheet activities, such as standby letters of credit) at 8%. At least half of the total capital is to be composed of common equity, retained earnings, and a limited amount of perpetual preferred stock less certain goodwill items
(“Tier 1 Capital”). The remainder may consist of a limited amount of subordinated debt, other preferred stock, or a limited amount of loan loss reserves.
In addition, the federal banking regulatory agencies have adopted leverage capital guidelines for banks and bank holding companies. Under these guidelines, banks and bank holding companies must maintain a minimum ratio of three percent
(3%) Tier 1 Capital (as defined for purposes of the year-end 1992 risk-based capital guidelines) to total assets. The Federal Reserve Board has indicated, however, that banking organizations that are experiencing or anticipating significant
growth, are expected to maintain capital ratios well in excess of the minimum levels.
Regulatory authorities may increase such minimum requirements for
all banks and bank holding companies or for specified banks or bank holding companies. Increases in the minimum required ratios could adversely affect the Company and the Bank, including their ability to pay dividends.
At December 31, 2008, the Company’s respective total and Tier 1 risk-based capital ratios and leverage ratios exceeded the minimum regulatory requirements. See
Note 17 in the audited consolidated financial statements included in the Annual Report and incorporated herein by reference in the report as Exhibit 13.
Additional Regulation
The Bank is also subject to federal regulation as to such matters as required reserves, limitation as to the nature and amount of its loans and investments, regulatory approval of any merger or consolidation, issuance or retirement of their
own securities, limitations upon the payment of dividends and other aspects of banking operations. In addition, the activities and operations of the Bank are subject to a number of additional detailed, complex and sometimes overlapping laws and
regulations. These include state usury and consumer credit laws, state laws relating to fiduciaries, the Federal Truth-in-Lending Act and Regulation Z, the Federal Equal Credit Opportunity Act and Regulation B, the Fair Credit Reporting Act, the
Truth in Savings Act, the Community Reinvestment Act, anti-redlining legislation and antitrust laws.
Dividend Regulation
The ability of the Company to obtain funds for the payment of dividends and for other cash requirements is largely dependent on the amount of dividends that may be
declared by the Bank. Generally, the Bank may not declare a dividend, without the approval of the ODFI, if the total of dividends declared in a calendar year exceeds the total of its net profits for that year combined with its retained profits of
the preceding two years.
Government Policies and Legislation
The policies of regulatory authorities, including the ODFI, Federal Reserve Board, FDIC and the Depository Institutions Deregulation Committee, have had a significant effect on the operating results of commercial
banks in the past and are expected to do so in the future. An important function of the Federal Reserve System is to regulate aggregate national credit and money supply through such means as open market dealings in securities, establishment of the
discount rate on member bank borrowings, and changes in reserve requirements against member bank deposits. Policies of these agencies may be influenced by many factors, including inflation, unemployment, short-term and long-term changes in the
international trade balance and fiscal policies of the United States government.
Financial Services Modernization Act of 1999
Under the Gramm-Leach-Bliley Act (better known as the Financial Services Modernization Act of 1999), bank holding companies can become financial holding companies and
thereby affiliate with securities firms and insurance companies and engage in other activities that are financial in nature. A bank holding company may become a financial holding company if each of its subsidiary banks is well capitalized under the
Federal Deposit Insurance Corporation Act of 1991 prompt corrective action provisions, is well managed, and has at least a satisfactory rating under the Community Reinvestment Act by filing a declaration that the bank holding company wishes to
become a financial holding company. No regulatory approval will be required for a financial holding company to acquire a company, other than a bank or savings association, engaged in activities that are financial in nature or incidental to
activities that are financial in nature, as determined by the Federal Reserve Board.
The Financial Services Modernization Act defines “financial in
nature” to include”
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securities underwriting, dealing and market making;
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sponsoring mutual funds and investment companies;
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insurance underwriting and agency;
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merchant bank activities and activities that the Federal Reserve Board has determined to be closely relating to banking.
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In addition, a financial holding company may not acquire a company that is engaged in activities that are financial in
nature unless each of the subsidiary banks of the financial holding company has a Community Reinvestment Act rating of satisfactory or better.
The United
States Congress has periodically considered and adopted legislation, such as the Gramm-Leach-Bliley Act, which has resulted in further deregulation of both banks and other financial institutions, including mutual funds, securities brokerage firms
and investment banking firms. No assurance can be given as to whether any additional legislation will be adopted or as to the effect such legislation would have on the business of the Bank or the Company.
FDIC Deposit Insurance and Assessments
The Federal Deposit
Insurance Company Improvement Act of 1991 (“FDICIA”) requires federal bank regulatory authorities to take “prompt corrective action” with respect to banks that do not meet minimum capital requirements. For these purposes, FDICIA
establishes five capital tiers: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized.
The FDIC may terminate the deposit insurance of any insured depository institution if the FDIC determines, after a hearing, that the institution has engaged or is engaging in unsafe or unsound practices, is in an unsafe or unsound condition
to continue operations or has violated any applicable law, regulation, order, or any condition imposed in writing by, or written agreement with, the FDIC. The FDIC may also suspend deposit insurance temporarily during the hearing process for a
permanent termination of insurance if the institution has no tangible capital. Management of the Company is not aware of any activity or condition that could result in termination of the deposit insurance of the Bank.
The FDIC imposes an assessment against all depository institutions for deposit insurance. This assessment is based on the risk category of the institution and, prior to
2009, ranged from five to 43 basis points of an institution’s deposits. Institutions classified as well capitalized (as defined by the FDIC) and considered healthy pay the lowest premium while institutions that are less than adequately
capitalized (as defined by the FDIC) and considered substantial supervisory concerns pay the highest premium. Because the Bank is presently “well capitalized” it pays the minimum deposit insurance premiums.
On October 7, 2008, as a result of decreases in the reserve ratio of the DIF, the FDIC issued a proposed rule establishing a Restoration Plan for the DIF. The
rulemaking proposed that, effective January 1, 2009, assessment rates would increase uniformly by seven basis for the first quarter 2009 assessment period. The rulemaking proposed to alter the way in which the FDIC’s risk-based assessment
system differentiates for risk and set new deposit insurance assessment rates, effective April 1, 2009. Under the proposed rule, the FDIC would first establish an institution’s initial base assessment rate. This initial base assessment
rate would range, depending on the risk category of the institution, from 10 to 45 basis points. The FDIC would then adjust the initial base assessment (higher or lower) to obtain the total base assessment rate. The adjustment to the initial base
assessment rate would be based upon an institution’s levels of unsecured debt, secured liabilities, and brokered deposits. The total base assessment rate would range from eight to 77.5 basis points of the institution’s deposits. On
December 22, 2008, the FDIC published a final rule raising the current deposit insurance assessment rates uniformly for all institutions by seven basis points (to a range from 12 to 50 basis points) for the first quarter of 2009. However, the
FDIC approved an extension of the comment period on the parts of the proposed rulemaking that would become effective on April 1, 2009. The FDIC expects to issue a second final rule early in 2009, to be effective April 1, 2009, to change
the way that the FDIC’s assessment differentiates for risk and to set new assessment rates beginning with the second quarter of 2009. On February 27, 2009, the FDIC proposed an emergency assessment charged to all financial institutions of
0.20% of insured deposits as of June 30, 2009, payable on September 30, 2009. In March of 2009, the FDIC reduced the amount the proposed assessment to 0.10% of insured deposits as of June 30, 2009.
Recent Legislation
In response to recent unprecedented financial market turmoil, the Emergency Economic Stabilization Act of 2008 (“EESA”) was enacted on October 3, 2008. EESA authorizes the U.S. Treasury Department to provide up to $700
billion in funding for the financial services industry. Pursuant to the EESA, the Treasury was initially authorized to use $350 billion for the Troubled Asset Relief Program (TARP). Of this amount, Treasury allocated $250 billion to the TARP Capital
Purchase Program. On January 15, 2009, the second $350 billion of TARP monies was released to the Treasury. The Secretary’s authority under TARP expires on December 31, 2009 unless the Secretary certifies to Congress that extension is
necessary provided that his authority may not be extended beyond October 3, 2010. The Company has determined to not participate in the TARP Capital Purchase Program.
Before and after EESA, there have been numerous actions by the Federal Reserve Board, Congress, the Treasury, the FDIC, the SEC and others to further the economic and banking industry stabilization efforts, including
the American Recovery and Reinvestment Act. In addition, there is a potential for new federal or state laws and regulations regarding lending and funding practices and liquidity standards, and bank regulatory agencies are expected to be very
aggressive in responding to concerns and trends identified in examinations. This increased governmental action may increase our costs and limit our ability to pursue certain business opportunities.
Monetary Policies
The earnings of the Company are dependent
upon the earnings of its wholly owned subsidiary bank. The earnings of the subsidiary bank are affected by the policies of regulatory authorities, including the Ohio Division of Financial Institutions, the Board of Governors of the Federal Reserve
System and the Federal Deposit Insurance Corporation. The policies and regulations of the regulatory agencies have had and will continue to have a significant effect on deposits, loans and investment growth, as well as the rate of interest earned
and paid, and therefore will affect the earnings of the subsidiary bank and the Company in the future, although the degree of such impact cannot accurately be predicted.
Securities Laws and Compliance
As of June 30, 1998, the Company’s common stock was registered with
the Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of 1934, as amended (“1934 Act”). This registration requires ongoing compliance with the 1934 Act and its periodic filing requirements as well as a
wide range of Federal and State securities laws. These requirements include, but are not limited to, the filing of annual, quarterly and other reports with the SEC, certain requirements as to the solicitation of proxies from shareholders as well as
other proxy rules, and compliance with the reporting requirements and “short-swing” profit rules imposed by section 16 of the 1934 Act.
Reports to Security Holders
The Company files annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K and proxy solicitation materials, as applicable, under Commission Regulation 14A. The public may read and copy any materials the Company files with the Commission at the SEC’s Public Reference Room at 100 F. Street, NE, Washington, DC
20549, on official business days during the hours of 10:00 am to 3:00 pm. The public may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The Commission maintains an Internet site that
contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission at
http://www.sec.gov
. The Company’s Internet website is
http://www.killbuckbank.com
. The
proxy statement and annual report to security holders are available at
http://materials.proxyvote.com/494113
.
Not applicable to Smaller Reporting Companies.
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Item 1B
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Unresolved Staff Comments
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None
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Item 2
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Description of Property
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Properties
The Company owns no real property but utilizes the main office of the Bank. The Company’s and the Bank’s executive offices are located at 165 North Main Street,
Killbuck, Ohio. The Company pays no rent or other form of consideration for the use of this facility. All offices are owned by the Bank. The Bank has seven offices located in Holmes County (1), two in Knox County (2), and one in Tuscarawas County
(3). The Berlin Office relocated in November 2007, and an ATM remains at the old Berlin Branch location. The Bank’s total investment in office property and equipment was $11.3 million with a net book value $6.3 million at December 31,
2008. The offices are at the following locations.
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Main Office: (1)
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ATM Location Berlin (1)
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Mt. Hope Branch (1)
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165 North Main Street
Killbuck, Ohio
44637
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4853 East Main Street
Berlin Ohio 44610
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8115 State Rt. 241
Mt. Hope, Ohio
44660
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Millersburg North Branch (1)
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Millersburg South Branch (1)
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Millersburg Loan Annex (1)
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181 N. Washington Street
Millersburg, Ohio
44654
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1642 S. Washington Street
Millersburg, Ohio
44654
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164 N. Clay Street
Millersburg, Ohio
44654
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German Village Branch (1)
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Sugarcreek Branch (3)
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Apple Valley Branch (2)
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4900 Oak Street
Berlin, Ohio 44610
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1035 W. Main Street
Sugarcreek, Ohio
44681
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21841 Plank Road
Howard, Ohio 43028
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Danville Branch (2)
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Berlin Branch (1)
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701 S. Market Street
Danville, Ohio
43014
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4790 Township Road 366
Millersburg, Ohio
44654
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Neither the Bank nor the Company is
involved in any material legal proceedings. The Bank, from time to time, is a party to litigation, which arises in the ordinary course of business, such as claims to enforce liens, claims involving the origination and servicing of loans, and other
issues related to the business of the Bank. In the opinion of management the resolution of any such issues would not have a material adverse impact on the financial position, results of operation, or liquidity of the Bank or the Company.
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Item 4
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Submission of Matters to Vote of Security Holders
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No
matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.
PART
II
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Item 5
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Market for Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchase of Equity Securities
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As of December 31, 2008, the Company had 1,001 shareholders of record, as calculated by excluding individual participants in securities positions listings, who
collectively held 621,482 of the 1,000,000 authorized shares of the Company’s no par value stock.
Our common shares are currently quoted by a number
of quotation services, including the Over the Counter Bulletin Board (the “OTCBB”) and the Pink Sheets Electronic Quotation Service (the “Pink Sheets”), as well as by Community Banc Investments, New Concord, Ohio
(“CBI”), each of which handles a limited amount of the Corporation’s stock transactions. The OTCBB and the Pink Sheets are both quotation services for “over-the-counter securities,” which are generally considered to be any
equity securities not otherwise listed on a national exchange, such as NASDAQ, NYSE or Amex. CBI is a licensed intrastate securities dealer that specializes in marketing the stock of independent banks in Ohio.
The Company’s common shares are quoted on the OTCBB and the Pink Sheets under the trading symbol “KLIB.”
The common stock of the Company trades infrequently. Parties interested in buying or selling the Company’s stock are generally referred to Community
Banc Investments, New Concord, Ohio (“CBI”). The quarterly high and low price information in the table below was obtained from CBI and the OTCBB.
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Quarter Ended
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High
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Low
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Cash
Dividends
Paid
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2008
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March 31
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$
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119.74
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$
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114.44
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N/A
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June 30
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115.40
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113.77
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$
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1.45
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September 30
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116.36
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113.91
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N/A
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December 31
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116.36
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115.48
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$
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1.50
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2007
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March 31
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$
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113.47
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$
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111.17
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N/A
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June 30
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114.56
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113.13
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$
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1.35
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September 30
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117.76
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115.43
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N/A
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December 31
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119.14
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116.49
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$
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2.40
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Management does not have knowledge of the prices paid in all transactions and has not verified the accuracy of
those prices that have been reported. Because of the lack of an established market for the Company’s stock, these prices may not reflect the prices at which the stock would trade in a more active market.
Cash dividends are paid on a semi-annual basis. The Company has paid regular semi-annual cash dividends since it became a bank holding company in 1992, and assuming the
ability to do so, it is anticipated that the Company will continue to declare regular semi-annual cash dividends.
For information on dividends per share,
net income per share and ratio of dividends to net income per share see the Selected Financial Data of the Annual Report to Shareholders of Killbuck Bancshares, Inc. for the year ended December 31, 2008, included in this report as Exhibit 13
and is incorporated herein by reference.
The ability of the Company to pay dividends will depend on the earnings of its subsidiary bank and its financial
condition, as well as other factors such as market conditions, interest rates and regulatory requirements. Therefore, no assurances may be given as to the continuation of the Company’s ability to pay dividends or maintain its present level of
earnings. For a discussion on subsidiary dividends see Note 16 to the audited Consolidated Financial Statements of the Annual Report to Shareholders of Killbuck Bancshares, Inc. for the year ended December 31, 2008, included in this report as
Exhibit 13 and is incorporated herein by reference.
The common stock of the Company is not subject to any redemption provisions or restrictions on
alienability. The common stock is entitled to share pro rata in dividends and in distributions in the event of dissolution or liquidation. There are not any options, warrants, privileges nor other rights with respect to Company stock at the present
time, nor are any such rights proposed to be issued.
Unregistered Sales of Equity Securities and Use of Proceeds
None
Issuer Purchases of Equity Securities
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|
Period
|
|
(a) Total
Number of
Shares (or
Units)
Purchased
|
|
(b)
Average Price
Paid per Share
(or
Unit)
|
|
(c) Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs
|
|
(d) Maximum Number
(or Approximate Dollar
Value) of Shares (or
Units) that May Yet Be
Purchased Under the
Plans or Programs
|
|
October 1 – 31, 2008
|
|
2,957
|
|
$
|
116.16
|
|
N/A
|
|
N/A
|
|
November 1 – 30, 2008
|
|
30
|
|
$
|
116.36
|
|
N/A
|
|
N/A
|
|
December 1 – 31, 2008
|
|
919
|
|
$
|
115.48
|
|
N/A
|
|
N/A
|
|
Total (1)
|
|
3,906
|
|
$
|
116.00
|
|
N/A
|
|
N/A
|
|
(1)
|
3,906 shares of common stock were purchased by Killbuck Bancshares in open-market transactions.
|
|
Item 6
|
Selected Financial Data
|
Selected Financial Data of the
annual report to shareholders of Killbuck Bancshares, Inc. for the year ended December 31, 2008, included in this report as part of Exhibit 13, is incorporated herein by reference.
|
Item 7
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Annual Report to Shareholders of Killbuck Bancshares, Inc. for the year ended December 31, 2008, included in this
report as Exhibit 13, and is incorporated herein by reference. Additional statistical information noted below is provided pursuant to SEC’s Industry Guide 3, Statistical Disclosure by Bank Holding Companies.
Investment Portfolio
Book Value of Investments
Book values of investment securities at December 31 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
2004
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. Government Agencies and Corporations
|
|
$
|
50,939
|
|
$
|
53,116
|
|
$
|
34,753
|
|
$
|
14,307
|
|
$
|
9,754
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual Funds
|
|
|
611
|
|
|
1,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available for sale
|
|
|
51,550
|
|
|
54,116
|
|
|
34,753
|
|
|
14,307
|
|
|
9,754
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of States and Political subdivisions
|
|
|
32,169
|
|
|
29,552
|
|
|
29,993
|
|
|
30,771
|
|
|
35,564
|
|
Corporate securities
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
451
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held to maturity
|
|
|
32,169
|
|
|
29,552
|
|
|
29,993
|
|
|
30,771
|
|
|
36,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
83,719
|
|
$
|
83,668
|
|
$
|
64,746
|
|
$
|
45,078
|
|
$
|
45,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MATURITY SCHEDULE OF INVESTMENTS
The following table presents the investment portfolio, the weighted average yield and maturities at December 31, 2008 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within three months
|
|
|
After three months but
Within one year
|
|
|
After one year but
Within five years
|
|
|
After five but
Within ten years
|
|
|
After 10 years
|
|
|
|
|
|
|
Amount
|
|
Yield
|
|
|
Amount
|
|
Yield
|
|
|
Amount
|
|
Yield
|
|
|
Amount
|
|
Yield
|
|
|
Amount
|
|
Yield
|
|
|
Total
|
|
Available for Sale (1) MBS
|
|
$
|
20
|
|
5.00
|
%
|
|
$
|
96
|
|
5.50
|
%
|
|
$
|
797
|
|
4.21
|
%
|
|
$
|
1,000
|
|
5.60
|
%
|
|
$
|
287
|
|
5.31
|
%
|
|
$
|
2,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. Government Agencies and Corporations
|
|
$
|
—
|
|
0.00
|
%
|
|
$
|
2,062
|
|
4.50
|
%
|
|
$
|
31,759
|
|
4.82
|
%
|
|
$
|
14,917
|
|
4.87
|
%
|
|
$
|
—
|
|
0.00
|
%
|
|
$
|
48,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual Funds
|
|
$
|
—
|
|
0.00
|
%
|
|
$
|
611
|
|
0.00
|
%
|
|
$
|
—
|
|
0.00
|
%
|
|
$
|
—
|
|
0.00
|
%
|
|
$
|
—
|
|
0.00
|
%
|
|
$
|
611
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
20
|
|
5.00
|
%
|
|
$
|
2,769
|
|
3.54
|
%
|
|
$
|
32,556
|
|
4.81
|
%
|
|
$
|
15,917
|
|
4.92
|
%
|
|
$
|
287
|
|
5.31
|
%
|
|
$
|
51,549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to Maturity Obligations of States and Political subdivisions (2)
|
|
$
|
200
|
|
3.49
|
%
|
|
$
|
4,131
|
|
6.04
|
%
|
|
$
|
13,870
|
|
4.38
|
%
|
|
$
|
13,307
|
|
3.99
|
%
|
|
$
|
661
|
|
4.18
|
%
|
|
$
|
32,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
200
|
|
3.49
|
%
|
|
$
|
4,131
|
|
6.04
|
%
|
|
$
|
13,870
|
|
4.38
|
%
|
|
$
|
13,307
|
|
3.99
|
%
|
|
$
|
661
|
|
4.18
|
%
|
|
$
|
32,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The weighted average yield has been computed using the historical amortized cost for available for sale securities.
|
|
(2)
|
Weighted average yields on nontaxable obligations have been computed based on actual yield stated on the security.
|
Excluding holdings of U.S. Treasury and other agencies and corporations of the U.S. Government, there were no investments in securities of any one issuer that exceeded
10% of the Bank’s shareholder equity at December 31, 2008.
TYPES OF LOANS
The
following table presents the composition of the loan portfolio and the percentage of loans by type as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
|
Amount
|
|
% of
Total Loans
|
|
|
Amount
|
|
% of
Total Loans
|
|
|
Amount
|
|
% of
Total Loans
|
|
|
Amount
|
|
% of
Total Loans
|
|
|
Amount
|
|
% of
Total Loans
|
|
|
Real estate-residential
|
|
$
|
72,663
|
|
35.8
|
%
|
|
$
|
72,858
|
|
36.6
|
%
|
|
$
|
77,025
|
|
39.6
|
%
|
|
$
|
90,976
|
|
43.5
|
%
|
|
$
|
97,811
|
|
45.0
|
%
|
|
Real estate-farm
|
|
|
8,843
|
|
4.4
|
|
|
|
9,967
|
|
5.0
|
|
|
|
13,368
|
|
6.9
|
|
|
|
14,550
|
|
7.0
|
|
|
|
12,309
|
|
5.6
|
|
|
Real estate-commercial
|
|
|
59,505
|
|
29.3
|
|
|
|
59,817
|
|
30.0
|
|
|
|
50,147
|
|
25.8
|
|
|
|
47,312
|
|
22.7
|
|
|
|
47,226
|
|
21.8
|
|
|
Real estate-construction
|
|
|
12,077
|
|
5.9
|
|
|
|
7,778
|
|
3.9
|
|
|
|
10,917
|
|
5.6
|
|
|
|
9,447
|
|
4.5
|
|
|
|
11,000
|
|
5.1
|
|
|
Commercial and other
|
|
|
43,239
|
|
21.3
|
|
|
|
41,678
|
|
20.9
|
|
|
|
36,225
|
|
18.6
|
|
|
|
38,399
|
|
18.4
|
|
|
|
40,752
|
|
18.8
|
|
|
Consumer and credit card
|
|
|
6,901
|
|
3.3
|
|
|
|
7,201
|
|
3.6
|
|
|
|
6,941
|
|
3.5
|
|
|
|
8,217
|
|
3.9
|
|
|
|
8,075
|
|
3.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
203,228
|
|
100.0
|
%
|
|
$
|
199,299
|
|
100.0
|
%
|
|
$
|
194,623
|
|
100.0
|
%
|
|
$
|
208,901
|
|
100.0
|
%
|
|
$
|
217,173
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The largest category of loans comprising the Bank’s loan portfolio is residential real estate loans. These loans are
primarily single-family residential real estate loans secured by a first mortgage on the dwelling. The risks associated with these loans are primarily the risk of default in repayment and inadequate collateral. Real estate commercial loans represent
the second largest category and include development loans as well as investment commercial real estate loans. These loans have risks, which include the risk of default in the repayment of principal and inadequate collateral as well as the risk of
cash flow interruption due to, in the case of rental real estate, the inability to obtain or collect adequate rental rates. The next largest loan segment of the Bank’s loan portfolio is the commercial and other category. The loans comprising
this category represent loans to business interest located primarily within the Bank’s defined market areas, with no significant industry concentration. Commercial loans include both secured and unsecured loans. The risks associated with these
loans are principally the risk in default of the repayment of principal resulting from economic problems of the commercial customer, economic downturn affecting the market in general and in the case of secured loans, inadequate collateral.
MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATE
The following table presents maturity distribution and interest rate sensitivity of real estate – commercial, real estate – construction and commercial and other loans at December 31, 2008 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within
1 Year
|
|
After 1 Year
Within
5 Years
|
|
After 5 Years
|
|
Total
|
|
Real estate – commercial
|
|
$
|
23,673
|
|
$
|
30,650
|
|
$
|
5,182
|
|
$
|
59,505
|
|
Real estate – construction
|
|
|
8,877
|
|
|
3,007
|
|
|
193
|
|
|
12,077
|
|
Commercial and other
|
|
|
31,198
|
|
|
9,853
|
|
|
2,188
|
|
|
43,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
63,748
|
|
$
|
43,510
|
|
$
|
7,563
|
|
$
|
114,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed interest rates
|
|
$
|
7,382
|
|
$
|
13,007
|
|
$
|
5,655
|
|
$
|
26,044
|
|
Variable interest rates
|
|
|
56,366
|
|
|
30,503
|
|
|
1,908
|
|
|
88,777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
63,748
|
|
$
|
43,510
|
|
$
|
7,563
|
|
$
|
114,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RISK ELEMENTS
Loans
are subject to ongoing periodic monitoring by management and the board of directors. The Company ceases accruing interest on residential mortgages secured by real estate and consumer loans when principal or interest payments are delinquent 90 days
or more. Commercial loans that are 90 days or more past due are reviewed by the Executive Vice President and the loan officer to determine whether they will be classified as nonperforming. These officers review various factors which include, but are
not limited to, the timing of the maturity of the loan in relation to the ability to collect, whether the loan is deemed to be well secured, whether the loan is in the process of collection, and the favorable results of the analysis of customer
financial data. A nonperforming loan will only be re-classified as a performing loan when stringent criteria have been met. At the time the accrual of interest is discontinued, future income is recognized only when cash is received or the loan has
been returned to performing loan status. Renegotiated loans are those loans which terms have been renegotiated to provide a reduction or deferral of principal or interest as a result of the deterioration of the borrower. At December 31, 2008,
the non-accrual loans are comprised of two loans. The commercial loan is approximately $51,000 secured by equipment and real estate. The residential loan is approximately $22,000; it is secured by real estate. The following table presents
information concerning nonperforming assets including nonaccrual loans, loans 90 days or more past due, renegotiated loans, other real estate and repossessed assets at December 31, (dollars in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Loans on nonaccrual basis
|
|
$
|
73
|
|
|
$
|
839
|
|
|
$
|
471
|
|
|
$
|
632
|
|
|
$
|
1,095
|
|
|
|
|
|
|
|
|
|
Loans past due 90 days or more
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Renegotiated loans
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming loans
|
|
|
73
|
|
|
|
839
|
|
|
|
471
|
|
|
|
632
|
|
|
|
1,095
|
|
|
|
|
|
|
|
|
|
Other real estate
|
|
|
—
|
|
|
|
—
|
|
|
|
80
|
|
|
|
700
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Repossessed assets
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming assets
|
|
$
|
73
|
|
|
$
|
839
|
|
|
$
|
551
|
|
|
$
|
1,332
|
|
|
$
|
1,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans as a percent of total loans
|
|
|
.04
|
%
|
|
|
.42
|
%
|
|
|
.24
|
%
|
|
|
.30
|
%
|
|
|
.50
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans as a percent of total assets
|
|
|
.02
|
%
|
|
|
.25
|
%
|
|
|
.15
|
%
|
|
|
.21
|
%
|
|
|
.37
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming assets as a percent of total assets
|
|
|
.02
|
%
|
|
|
.25
|
%
|
|
|
.18
|
%
|
|
|
.45
|
%
|
|
|
.37
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amount of interest income that would have been recognized had the loans performed in accordance with their original
terms was approximately $14,000 and the amount of interest income that was recognized was $0 for the year ended December 31, 2008.
There are not any
loans as of December 31, 2008, other than those disclosed above, where known information about the borrower caused management to have serious doubts about the borrower’s ability to comply with their contractual repayment obligations. There
are no concentrations of loans to borrowers engaged in similar activities, which exceed 10% of total loans of which management is aware. Based upon the ongoing quarterly review and assessment of credit quality, management is not aware of any trends
or uncertainties related to any accounts which might have a material adverse effect on future earnings, liquidity or capital resources.
There are no other
interest bearing assets that would be subject to disclosure as either nonperforming or impaired if such interest bearing assets were loans.
LOAN LOSS
EXPERIENCE
Management makes periodic provisions to the allowance for loan losses to maintain the allowance at an acceptable level commensurate with the
credit risks inherent in the loan portfolio. There can be no assurances, however, that additional provisions will not be required in future periods. The following table presents a summary of loan losses by loan type and changes in the allowance for
loan losses for the years ended December 31, (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Allowance for loan losses at beginning of year
|
|
$
|
2,510
|
|
|
$
|
2,394
|
|
|
$
|
2,313
|
|
|
$
|
2,646
|
|
|
$
|
2,702
|
|
|
Provision charged to expense
|
|
|
61
|
|
|
|
127
|
|
|
|
215
|
|
|
|
377
|
|
|
|
225
|
|
|
Charge-offs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate-residential
|
|
|
19
|
|
|
|
6
|
|
|
|
212
|
|
|
|
4
|
|
|
|
17
|
|
|
Real estate-farm
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Real estate-commercial
|
|
|
33
|
|
|
|
71
|
|
|
|
92
|
|
|
|
500
|
|
|
|
—
|
|
|
Real estate-construction
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Commercial and other
|
|
|
37
|
|
|
|
16
|
|
|
|
181
|
|
|
|
228
|
|
|
|
311
|
|
|
Consumer and credit card
|
|
|
24
|
|
|
|
39
|
|
|
|
9
|
|
|
|
52
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total charge-offs
|
|
|
113
|
|
|
|
132
|
|
|
|
494
|
|
|
|
784
|
|
|
|
356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate-residential
|
|
|
—
|
|
|
|
57
|
|
|
|
32
|
|
|
|
—
|
|
|
|
1
|
|
|
Real estate-farm
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Real estate-commercial
|
|
|
42
|
|
|
|
27
|
|
|
|
308
|
|
|
|
—
|
|
|
|
—
|
|
|
Real estate-construction
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Commercial and other
|
|
|
14
|
|
|
|
16
|
|
|
|
—
|
|
|
|
25
|
|
|
|
13
|
|
|
Consumer and credit card
|
|
|
11
|
|
|
|
21
|
|
|
|
20
|
|
|
|
49
|
|
|
|
61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recoveries
|
|
|
67
|
|
|
|
121
|
|
|
|
360
|
|
|
|
74
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs
|
|
|
46
|
|
|
|
11
|
|
|
|
134
|
|
|
|
710
|
|
|
|
281
|
|
|
|
|
|
|
|
|
|
Business acquisition
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses at end of period
|
|
$
|
2,525
|
|
|
$
|
2,510
|
|
|
$
|
2,394
|
|
|
$
|
2,313
|
|
|
$
|
2,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans outstanding
|
|
$
|
203,228
|
|
|
$
|
199,299
|
|
|
$
|
194,623
|
|
|
$
|
208,901
|
|
|
$
|
217,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average loans outstanding
|
|
$
|
201,179
|
|
|
$
|
202,692
|
|
|
$
|
202,525
|
|
|
$
|
215,486
|
|
|
$
|
213,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses as a percent of total loans
|
|
|
1.24
|
%
|
|
|
1.26
|
%
|
|
|
1.23
|
%
|
|
|
1.11
|
%
|
|
|
1.22
|
%
|
|
|
|
|
|
|
|
|
Net charge-offs as a percent of average loans
|
|
|
.02
|
%
|
|
|
.01
|
%
|
|
|
.07
|
%
|
|
|
.33
|
%
|
|
|
.13
|
%
|
The Bank reviews the adequacy of its allowance for loan losses on a quarterly basis. In determining the adequacy of its
allowance account the Bank makes general allocations based upon loan categories, nonaccrual, past due and classified loans. After general allocations, the Bank makes specific allocations for individual credits. The Bank has determined that the
reserve is adequate as of December 31, 2008, based upon its analysis and experience. However, there can be no assurance that the current allowance for loan losses will be adequate to absorb all future loan losses.
The following table presents management’s estimate of the allocation of the allowance for loan losses among the loan categories, although the entire allowance
balance is available to absorb any actual charge-offs that may occur, along with the percentage of loans in each category to total loans for the years ended December 31 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
|
Allowance
|
|
% of
Loans
to
Total
Loans
|
|
|
Allowance
|
|
% of
Loans
to
Total
Loans
|
|
|
Allowance
|
|
% of
Loans
to
Total
Loans
|
|
|
Allowance
|
|
% of
Loans
to
Total
Loans
|
|
|
Allowance
|
|
% of
Loans
to Total
Loans
|
|
|
Real estate – residential
|
|
$
|
524
|
|
35.8
|
%
|
|
$
|
621
|
|
36.6
|
%
|
|
$
|
540
|
|
39.6
|
%
|
|
$
|
323
|
|
43.5
|
%
|
|
$
|
478
|
|
45.0
|
%
|
|
Real estate – farm
|
|
|
212
|
|
4.4
|
|
|
|
21
|
|
5.0
|
|
|
|
60
|
|
6.9
|
|
|
|
—
|
|
7.0
|
|
|
|
58
|
|
5.7
|
|
|
Real estate – commercial
|
|
|
990
|
|
29.3
|
|
|
|
566
|
|
30.0
|
|
|
|
451
|
|
25.8
|
|
|
|
257
|
|
22.7
|
|
|
|
755
|
|
21.7
|
|
|
Real estate – construction
|
|
|
—
|
|
5.9
|
|
|
|
—
|
|
3.9
|
|
|
|
—
|
|
5.6
|
|
|
|
—
|
|
4.5
|
|
|
|
—
|
|
5.1
|
|
|
Commercial and other loans
|
|
|
544
|
|
21.3
|
|
|
|
1,191
|
|
20.9
|
|
|
|
1,181
|
|
18.6
|
|
|
|
1,598
|
|
18.4
|
|
|
|
1,034
|
|
18.8
|
|
|
Consumer and credit loans
|
|
|
255
|
|
3.3
|
|
|
|
111
|
|
3.6
|
|
|
|
162
|
|
3.5
|
|
|
|
135
|
|
3.9
|
|
|
|
321
|
|
3.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,525
|
|
100.0
|
%
|
|
$
|
2,510
|
|
100.0
|
%
|
|
$
|
2,394
|
|
100.0
|
%
|
|
$
|
2,313
|
|
100.0
|
%
|
|
$
|
2,646
|
|
100.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTRACTUAL OBLIGATIONS
The following table presents, as of December 31, 2008, significant fixed and determinable contractual obligations to third parties by payment date. Further discussion of the nature of each obligation is included in the referenced note
to the financial statements for December 31, 2008, attached hereto as Exhibit 13 to this Form 10K.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Note
Reference
|
|
One Year
or Less
|
|
One to
Three
Years
|
|
Three to
Five
Years
|
|
Over Five
Years
|
|
Total
|
|
Borrowed funds
|
|
9,10
|
|
7,085
|
|
752
|
|
262
|
|
149
|
|
8,248
|
|
|
|
|
|
|
|
|
|
Certificates of Deposit
|
|
8
|
|
112,743
|
|
23,556
|
|
7,968
|
|
5
|
|
144,272
|
|
|
|
|
|
|
|
|
|
Operating Leases
|
|
13
|
|
19
|
|
40
|
|
41
|
|
233
|
|
333
|
|
|
|
|
|
|
|
|
|
Deposits without a stated maturity
|
|
|
|
144,675
|
|
|
|
|
|
|
|
144,675
|
The Company entered into an operating lease to lease 1,600 square feet with a drive-thru facility within the
German Village Store in Berlin, Ohio, which began in April 2004 and expires in the year 2024 with an additional ten-year option.
COMMITMENTS
The following table details the amounts and expected maturities of significant commitments as of December 31, 2008. Further discussion of these
commitments is included in Note 15 to the financial statements as of December 31, 2008, attached hereto as Exhibit 13 to this Form 10K.
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
One Year
or Less
|
|
One to
Three
Years
|
|
Three to
Five Years
|
|
Over Five
Years
|
|
Total
|
|
Commitments to extend credit Commercial
|
|
20,673
|
|
556
|
|
—
|
|
—
|
|
21,229
|
|
Residential real estate
|
|
4,390
|
|
|
|
|
|
|
|
4,390
|
|
Revolving home equity
|
|
|
|
|
|
|
|
13,506
|
|
13,506
|
|
and credit card lines
|
|
3,063
|
|
|
|
|
|
|
|
3,063
|
|
Standby letters of credit
|
|
895
|
|
|
|
|
|
|
|
895
|
|
Item 7A
|
Quantitative and Qualitative Disclosures About Market Risk
|
Not applicable to Smaller Reporting Companies.
|
Item 8
|
Financial Statements and Supplementary Data
|
The report of
independent auditors and consolidated financial statements included in the Annual Report to shareholders of Killbuck Bancshares, Inc. for the year ended December 31, 2008, included in this report as Exhibit 13, are incorporated herein by
reference.
|
Item 9
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
None
|
Item 9A.
|
Controls and Procedures
|
The Company has carried out an
evaluation, under the supervision and with the participation of the Company’s management, including the Company’s President and Chief Executive Officer and Vice President and Chief Financial Officer, of the effectiveness of the design and
operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the President and Chief Executive Officer and Vice President and Chief Financial Officer concluded that the
Company’s disclosure controls and procedures are effective, as of the end of the period covered by this report, in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be
included in the Company’s periodic SEC filings.
There was no change in the Company’s internal control over financial reporting that occurred
during the Company’s fiscal quarter ended December 31, 2008 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for the preparation and fair presentation of the financial statements included in this annual report. The financial statements have been prepared in conformity with accounting principles generally accepted in the
United States of America and reflect management’s judgments and estimates concerning effects of events and transactions that are accounted for or disclosed.
Management is also responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting includes those policies and procedures that pertain to the
Company’s ability to record, process, summarize and report reliable financial data. Management recognizes that there are inherent limitations in the effectiveness of any internal control over financial reporting, including the possibility of
human error and the circumvention or overriding of internal control. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Further, because of
changes in conditions, the effectiveness of internal control over financial reporting may vary over time.
In order to ensure that the Company’s
internal control over financial reporting is effective, management is required to evaluate, with the participation of the Company’s principal executive and principal financial officers, the effectiveness of the Company’s internal control
over financial reporting as of the end of each fiscal year and did so most recently for its financial reporting as of December 31, 2008. Management’s assessment of the effectiveness of the Company’s internal control over financial
reporting was based on criteria for effective internal control over financial reporting described in
Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. Based on this
assessment, management has concluded that the internal control over financial reporting was effective as of December 31, 2008. This annual report does not include an attestation report of the Company’s registered public accounting firm
regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit
the Company to provide only management’s report in this annual report.
The Board of Directors, acting through its Audit Committee, is responsible for
the oversight of the Company’s accounting policies, financial reporting and internal control. The Audit Committee of the Board of Directors is comprised entirely of outside directors who are independent of management. The Audit Committee is
responsible for the appointment and compensation of the independent auditor and approves decisions regarding the appointment or removal of the Company’s Internal Auditor. It meets periodically with management, the independent auditors and the
internal auditors to ensure that they are carrying out their responsibilities. The Audit Committee is also responsible for performing an oversight role by reviewing and monitoring the financial, accounting and auditing procedures of the Company in
addition to reviewing the
Company’s financial reports. The independent auditors and the internal auditor have full and unlimited access to the Audit Committee, with or without
management, to discuss the adequacy of internal control over financial reporting, and any other matter which they believe should be brought to the attention of the Audit Committee.
PART III
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Item 10
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Directors and Executive Officers of Registrant
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The
following table lists the Executive Officers of the Company and its subsidiary, Killbuck Savings Bank Company, and certain other information with respect to each individual, as of December 31, 2008. The information required by this item with
respect to Directors and other executive officers of the Company and its subsidiary, Killbuck Savings Bank Company, is incorporated herein by reference to the information under the heading “Election of Directors and Information with Respect to
Directors and Officers” in the Proxy Statement of the Company. The information required regarding disclosure of any known late filings or failure by an insider to file a report required by Section 16(a) of the Securities Exchange Act is
incorporated herein by reference to the information under the heading “Compliance with Section 16(a) of the Securities Exchange Act of 1934” in the Proxy Statement of the Company.
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Name
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Age
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All Positions with Company and Bank
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Luther E. Proper
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59
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President and CEO of the Company and the Bank since 1991. Vice-chairman of the Board of Directors of both the Company and the Bank since 2001.
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Craig A. Lawhead
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51
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Vice president and treasurer of Company since 1992; Executive vice president of bank since 1991.
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Diane S. Knowles
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46
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Vice president and secretary of Company since July, 2000; Senior vice president and Chief Financial Officer of Bank since June, 2000.
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The Company has adopted a code of ethics that applies to its principal executive, financial and accounting
officers. A copy of the code of ethics is posted on the Company’s web site at
http://www.killbuckbank.com
. In the event we make any amendment to, or grant any waiver of, a provision of the code of ethics that applies to the principal
executive, financial or accounting officer, or any person performing similar functions, that requires disclosure under applicable SEC rules, we intend to disclose such amendment or waiver, the nature of and reasons for it, along with the name of the
person to whom it was granted and the date, on our internet website.
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Item 11
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Executive Compensation
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Information required by this item is
incorporated herein by reference to the information under the heading “Executive Compensation and Other Information” in the Proxy Statement of the Company.
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Item 12
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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Information required by this item is incorporated herein by reference to the information under the heading “Principal Shareholders” and “Security Ownership
of Management” in the Proxy Statement of the Company. The Company currently has no equity compensation plans or arrangements, such as stock option or restricted stock arrangements, pursuant to which equity securities of the Company are
authorized for issuance.
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Item 13
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Certain Relationships and Related Transactions
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Information
required by this item is incorporated herein by reference to the information under the heading “Director Independence and Related Party Transactions” in the Proxy Statement of the Company and in Note 4 of the Notes to Consolidated
Financial statements included in the Annual Report to Shareholders for the year ended December 31, 2008, included in this report as Exhibit 13, and incorporated herein by reference.
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Item 14
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Principal Accountant Fees and Services
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Information required
by this item is incorporated here in by reference to the information under the heading “Audit Committee Report” in the Proxy Statement of the Company.
PART IV
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Item 15
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Exhibits, Financial Statement Schedules and Reports on Form 8
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Financial Statements and Schedules
The following consolidated financial statements of Killbuck Bancshares, Inc. and subsidiary,
included in the Annual Report to Shareholders for the year ended December 31, 2008, are incorporated by reference in item 8:
Report of Independent
Registered Public Accounting Firm
Consolidated Balance Sheet at December 31, 2008 and 2007
Consolidated Statement of Income for the Years ended December 31, 2008, 2007 and 2006
Consolidated Statement of Changes in Shareholders’ Equity for the Years ended December 31, 2008, 2007 and 2006
Consolidated Statement of Cash Flows for the Years ended December 31, 2008, 2007 and 2006
Notes to Consolidated Financial Statements
Schedules are omitted because they are inapplicable, not required, or the information is included in the consolidated financial statements or notes
thereto.
Exhibits
The
following exhibits are filed herewith and/or are incorporated herein by reference.
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Exhibit
Number
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Description
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3(i)
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Certificate and Articles of Incorporation of Killbuck Bancshares, Inc.*
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3(ii)
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Code of regulations of Killbuck Bancshares, Inc.*
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10.1
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Employment Agreement dated April 23, 2007 between Killbuck Savings Bank Company and Luther E. Proper. **
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10.2
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Employment Agreement dated April 23, 2007 between Killbuck Savings Bank Company and Craig A. Lawhead. **
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10.3
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Employment Agreement dated April 23, 2007 between Killbuck Savings Bank Company and Diane S. Knowles. **
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12
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Statement regarding computation of ratios.
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13
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Portions of the 2009 Annual Report to Shareholders
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21
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Subsidiary of the Holding Company.*
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31.1
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Rule 13a-14(a) Certification
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31.2
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Rule 13a-14(a) Certification
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32.1
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Certification pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2003.
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32.2
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Certification pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2003.
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*
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Incorporated by reference to an identically numbered exhibit to the Form 10 (File No. 000-24147) filed with the SEC on April 30, 1998 and subsequently amended on July 8,
1998 and July 31, 1998.
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**
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Incorporated by reference to an identically numbered exhibit to the Form 8-K filed with the SEC on April 27, 2007.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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Killbuck Bancshares, Inc.
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(Registrant)
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By:
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/s/ Luther E. Proper
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Luther E. Proper
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President and Chief Executive Officer/Director
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(Duly authorized representative)
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Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated.
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Signatures
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Description
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Date
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/s/ Luther E. Proper
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President, Chief Executive Officer and Director
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March 25, 2009
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Luther E. Proper
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/s/ John W. Baker
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Director
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March 25, 2009
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John W. Baker
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/s/ Ted Bratton
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Director
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March 23, 2009
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Ted Bratton
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/s/ Gail E. Patterson
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Director
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March 25, 2009
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Gail E. Patterson
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/s/ Allan R. Mast
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Director
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March 23, 2009
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Allan R. Mast
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/s/ Max A. Miller
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Director
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March 23, 2009
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Max A. Miller
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/s/ Dean J. Mullet
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Director
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March 25, 2009
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Dean J. Mullet
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/s/ Kenneth E. Taylor
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Director
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March 25, 2009
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Kenneth E. Taylor
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/s/ Michael S. Yoder
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Director
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March 25, 2009
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Michael S. Yoder
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/s/ Diane S. Knowles
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Chief Financial and Chief Accounting Officer
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March 25, 2009
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Diane S. Knowles
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