UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2010.
 Or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from to.
 No. 0-19028
 (Commission file number)
 CCFNB BANCORP, INC.
  PENNSYLVANIA
(State or other jurisdiction of 
incorporation or organization)
    
    23-2254643
(I.R.S. Employer
           Identification Number)232 East Street, Bloomsburg, PA
(Address of principal executive offices)
    
    17815
(Zip Code)
 Registrants telephone number, including area code:
(570) 784-4400
 þ o
 o þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
  o þ




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##### 



CCFNB Bancorp, Inc. and Subsidiary
Index to Quarterly Report on Form 10-Q
 Page NumberPart I Financial InformationItem1. Financial StatementsConsolidated Balance Sheets as of June 30, 2010 (unaudited) and December 31, 2009
    
    
    3Consolidated Statements of Income (unaudited) for the three and six months ended June 30, 2010 and 2009
    
    
    4Consolidated Statement of Changes in Stockholders Equity (unaudited) for the six months ended June 30, 2010 and 2009
    
    
    5Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2010 and 2009
    
    
    6Notes to Consolidated Financial Statements (unaudited)
    
    
    7Report of Independent Registered Public Accounting Firm
    
    
    23Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    34Item 4. Controls and Procedures
    
    
    34Part II Other Information
    
    
    34Item 1. Legal Proceedings
    
    
    34Item 1A. Risk Factors
    
    
    34Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    35Item 3. Defaults Upon Senior Securities
    
    
    35Item 5. Other Information
    
    
    35Item 6. Exhibits
    
    
    35Signatures
    
    
    36Exhibits
    
    
    37
 2




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##### 



PART I Financial Information
 Item 1. Financial Statements
 CCFNB Bancorp, Inc.
Consolidated Balance Sheets
 (Unaudited)June 30,
    
    
    December 31,(In Thousands)
    
    2010
    
    
    2009ASSETSCash and due from banks
    
    $
    26,249
    
    
    $
    10,751Interest-bearing deposits in other banks
    
    
    32
    
    
    
    116Federal funds sold
    
    
    2,431
    
    
    
    592Total cash and cash equivalents
    
    
    28,712
    
    
    
    11,459Investment securities, available for sale, at fair value
    
    
    196,953
    
    
    
    220,266Restricted securities, at cost
    
    
    3,168
    
    
    
    2,984Loans, net of unearned income
    
    
    344,804
    
    
    
    330,489Less: Allowance for loan losses
    
    
    4,175
    
    
    
    4,210Loans, net
    
    
    340,629
    
    
    
    326,279Premises and equipment, net
    
    
    12,428
    
    
    
    12,583Accrued interest receivable
    
    
    1,834
    
    
    
    2,006Cash surrender value of bank-owned life insurance
    
    
    11,721
    
    
    
    11,440Investment in limited partnerships
    
    
    1,689
    
    
    
    687Intangible Assets:Core deposit
    
    
    2,466
    
    
    
    2,768Goodwill
    
    
    7,937
    
    
    
    7,937Prepaid FDIC assessment
    
    
    1,765
    
    
    
    2,037Other assets
    
    
    2,251
    
    
    
    2,043TOTAL ASSETS
    
    $
    611,553
    
    
    $
    602,489LIABILITIESInterest-bearing deposits
    
    $
    413,769
    
    
    $
    406,554Noninterest-bearing deposits
    
    
    58,200
    
    
    
    55,734Total deposits
    
    
    471,969
    
    
    
    462,288Short-term borrowings
    
    
    49,044
    
    
    
    51,997Long-term borrowings
    
    
    10,126
    
    
    
    15,128Junior subordinate debentures
    
    
    4,640
    
    
    
    4,640Accrued interest payable
    
    
    732
    
    
    
    859Other liabilities
    
    
    7,878
    
    
    
    2,491TOTAL LIABILITIES
    
    
    544,389
    
    
    
    537,403STOCKHOLDERS EQUITYCommon stock, par value $1.25 per share; authorized
5,000,000 shares; issued 2,279,053 shares
in 2010 and 2 ,270,850 shares in 2009
    
    
    2,849
    
    
    
    2,838Surplus
    
    
    27,749
    
    
    
    27,539Retained earnings
    
    
    34,627
    
    
    
    32,723Accumulated other comprehensive income
    
    
    3,101
    
    
    
    2,523Treasury stock, at cost; 45,500 shares in 2010 and 22,500 shares in 2009
    
    
    (1,162
    )
    
    
    (537
    )TOTAL STOCKHOLDERS EQUITY
    
    
    67,164
    
    
    
    65,086TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    611,553
    
    
    $
    602,489
  3




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##### 



CCFNB Bancorp, Inc.
Consolidated Statements of Income
(Unaudited)
 For the Three Months Ended June 30,
    
    
    For the Six Months Ended June 30,(In Thousands, Except Per Share Data)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009INTEREST AND DIVIDEND INCOMEInterest and fees on loans:Taxable
    
    $
    4,756
    
    
    $
    4,671
    
    
    $
    9,433
    
    
    $
    9,404Tax-exempt
    
    
    231
    
    
    
    204
    
    
    
    443
    
    
    
    407Interest and dividends on investment securities:Taxable
    
    
    1,677
    
    
    
    2,015
    
    
    
    3,538
    
    
    
    4,227Tax-exempt
    
    
    100
    
    
    
    105
    
    
    
    205
    
    
    
    192Dividend and other interest income
    
    
    11
    
    
    
    11
    
    
    
    21
    
    
    
    37Federal funds sold
    
    
    
    
    
    
    1
    
    
    
    1
    
    
    
    6Deposits in other banks
    
    
    11
    
    
    
    1
    
    
    
    13
    
    
    
    1TOTAL INTEREST AND DIVIDEND INCOME
    
    
    6,786
    
    
    
    7,008
    
    
    
    13,654
    
    
    
    14,274INTEREST EXPENSEDeposits
    
    
    1,499
    
    
    
    1,920
    
    
    
    3,036
    
    
    
    3,933Short-term borrowings
    
    
    99
    
    
    
    78
    
    
    
    205
    
    
    
    159Long-term borrowings
    
    
    101
    
    
    
    150
    
    
    
    226
    
    
    
    287Junior subordinate debentures
    
    
    24
    
    
    
    34
    
    
    
    47
    
    
    
    76TOTAL INTEREST EXPENSE
    
    
    1,723
    
    
    
    2,182
    
    
    
    3,514
    
    
    
    4,455NET INTEREST INCOME
    
    
    5,063
    
    
    
    4,826
    
    
    
    10,140
    
    
    
    9,819PROVISION FOR LOAN LOSSES
    
    
    160
    
    
    
    160
    
    
    
    470
    
    
    
    220NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES
    
    
    4,903
    
    
    
    4,666
    
    
    
    9,670
    
    
    
    9,599NON-INTEREST INCOMEService charges and fees
    
    
    447
    
    
    
    426
    
    
    
    873
    
    
    
    824Gain on sale of loans
    
    
    174
    
    
    
    179
    
    
    
    304
    
    
    
    275Earnings on bank-owned life insurance
    
    
    107
    
    
    
    114
    
    
    
    223
    
    
    
    217Brokerage
    
    
    73
    
    
    
    51
    
    
    
    162
    
    
    
    107Trust
    
    
    168
    
    
    
    160
    
    
    
    339
    
    
    
    312Investment security losses
    
    
    
    
    
    
    (61
    )
    
    
    
    
    
    
    (61
    )Interchange fees
    
    
    213
    
    
    
    184
    
    
    
    408
    
    
    
    348Other
    
    
    211
    
    
    
    308
    
    
    
    382
    
    
    
    505TOTAL NON-INTEREST INCOME
    
    
    1,393
    
    
    
    1,361
    
    
    
    2,691
    
    
    
    2,527NON-INTEREST EXPENSESalaries
    
    
    1,588
    
    
    
    1,543
    
    
    
    3,164
    
    
    
    3,144Employee benefits
    
    
    427
    
    
    
    400
    
    
    
    898
    
    
    
    834Occupancy
    
    
    276
    
    
    
    254
    
    
    
    569
    
    
    
    561Furniture and equipment
    
    
    335
    
    
    
    302
    
    
    
    646
    
    
    
    625State shares tax
    
    
    143
    
    
    
    129
    
    
    
    276
    
    
    
    272Professional fees
    
    
    149
    
    
    
    108
    
    
    
    294
    
    
    
    275Directors fees
    
    
    65
    
    
    
    70
    
    
    
    132
    
    
    
    141FDIC assessments
    
    
    150
    
    
    
    364
    
    
    
    297
    
    
    
    438Telecommunications
    
    
    81
    
    
    
    93
    
    
    
    177
    
    
    
    179Amortization of core deposit intangible
    
    
    151
    
    
    
    168
    
    
    
    302
    
    
    
    336Automated teller machine and interchange
    
    
    138
    
    
    
    115
    
    
    
    268
    
    
    
    242Other
    
    
    503
    
    
    
    558
    
    
    
    958
    
    
    
    1,025TOTAL NON-INTEREST EXPENSE
    
    
    4,006
    
    
    
    4,104
    
    
    
    7,981
    
    
    
    8,072INCOME BEFORE INCOME TAX PROVISION
    
    
    2,290
    
    
    
    1,923
    
    
    
    4,380
    
    
    
    4,054INCOME TAX PROVISION
    
    
    629
    
    
    
    372
    
    
    
    1,179
    
    
    
    960NET INCOME
    
    $
    1,661
    
    
    $
    1,551
    
    
    $
    3,201
    
    
    $
    3,094EARNINGS PER SHARE
    
    $
    0.74
    
    
    $
    0.68
    
    
    $
    1.43
    
    
    $
    1.37CASH DIVIDENDS PER SHARE
    
    $
    0.29
    
    
    $
    0.24
    
    
    $
    0.58
    
    
    $
    0.48WEIGHTED AVERAGE SHARES OUTSTANDING
    
    
    2,233,227
    
    
    
    2,256,348
    
    
    
    2,238,305
    
    
    
    2,255,202
  4




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##### 



CCFNB Bancorp, Inc.
Consolidated Statements of Changes in Stockholders Equity
(Unaudited)
 AccumulatedCommon
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    TotalStock
    
    
    
    
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury
    
    
    Stockholders(In Thousands Except Per Share Data)
    
    Shares
    
    
    Amount
    
    
    Surplus
    
    
    Earnngs
    
    
    Income (Loss)
    
    
    Stock
    
    
    EquityBalance, December 31, 2008
    
    
    2,253,080
    
    
    $
    2,816
    
    
    $
    27,173
    
    
    $
    29,164
    
    
    $
    1,622
    
    
    $
    
    
    
    $
    60,775Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,094
    
    
    
    
    
    
    
    
    
    
    
    3,094Change in net unrealized gain on
investment securities available-for-sale,
net of reclassification adjustment and
tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    93
    
    
    
    
    
    
    
    93Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,187Common stock issuance under dividend
reinvestment and stock purchase plans
    
    
    8,685
    
    
    
    11
    
    
    
    157
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    168Recognition of employee stock purchase
plan expense
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Purchase of treasury stock (7,000 shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (151
    )
    
    
    (151
    )Cash dividends, ($0.48 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,082
    )
    
    
    
    
    
    
    
    
    
    
    (1,082
    )Balance, June 30, 2009
    
    
    2,261,765
    
    
    $
    2,827
    
    
    $
    27,332
    
    
    $
    31,176
    
    
    $
    1,715
    
    
    $
    (151
    )
    
    $
    62,899Balance, December 31, 2009
    
    
    2,270,850
    
    
    $
    2,838
    
    
    $
    27,539
    
    
    $
    32,723
    
    
    $
    2,523
    
    
    $
    (537
    )
    
    $
    65,086Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,201
    
    
    
    
    
    
    
    
    
    
    
    3,201Change in net unrealized gain on
investment securities available-for-sale,
net of reclassification adjustment and
tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    578
    
    
    
    
    
    
    
    578Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,779Common stock issuance under dividend
reinvestment and stock purchase plans
    
    
    8,203
    
    
    
    11
    
    
    
    208
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    219Recognition
of employee stock purchase plan expense
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Purchase of treasury stock (23,000 shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (625
    )
    
    
    (625
    )Cash dividends, ($0.58 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,297
    )
    
    
    
    
    
    
    
    
    
    
    (1,297
    )Balance, June 30, 2010
    
    
    2,279,053
    
    
    $
    2,849
    
    
    $
    27,749
    
    
    $
    34,627
    
    
    $
    3,101
    
    
    $
    (1,162
    )
    
    $
    67,164
  5




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##### 



CCFNB
Bancorp, Inc.

 Consolidated Statements of Cash Flows
(Unaudited)
 For The Six Months Ended June 30,(In Thousands)
    
    2010
    
    
    2009OPERATING ACTIVITIESNet income
    
    $
    3,201
    
    
    $
    3,094Adjustments to reconcile net income to net cashprovided by operating activities:Provision for loan losses
    
    
    470
    
    
    
    220Depreciation and amortization of premises and equipment
    
    
    468
    
    
    
    507Amortization and accretion on investment securities
    
    
    481
    
    
    
    189Impairment loss on securities
    
    
    
    
    
    
    61Gain on sale of premises and equipment
    
    
    
    
    
    
    (183
    )Deferred income taxes (benefit) provision
    
    
    (83
    )
    
    
    178Gain on sale of loans
    
    
    (304
    )
    
    
    (275
    )Proceeds from sale of mortgage loans
    
    
    10,578
    
    
    
    10,045Originations of mortgage loans held for resale
    
    
    (11,879
    )
    
    
    (11,326
    )Loss on sale of other real estate
    
    
    11
    
    
    
    81Amortization of intangibles and invesment in limited partnerships
    
    
    384
    
    
    
    414Decrease in accrued interest receivable
    
    
    172
    
    
    
    312Increases in cash surrender value of bank-owned life insurance
    
    
    (281
    )
    
    
    (269
    )Decrease in accrued interest payable
    
    
    (127
    )
    
    
    (144
    )Other, net
    
    
    210
    
    
    
    (1,159
    )Net cash provided by operating activities
    
    
    3,301
    
    
    
    1,745INVESTING ACTIVITIESInvestment securities available for sale:Purchases
    
    
    (33,107
    )
    
    
    (54,929
    )Proceeds from sales, maturities and redemptions
    
    
    61,814
    
    
    
    54,186Proceeds from redemption of restricted securities
    
    
    
    
    
    
    Purchase of restricted securities
    
    
    (184
    )
    
    
    (817
    )Net increase in loans
    
    
    (13,515
    )
    
    
    (7,173
    )Proceeds from sale of premises and equipment
    
    
    
    
    
    
    1,294Proceeds from sale of other real estate owned
    
    
    318
    
    
    
    343Purchase of investment in limited partnership
    
    
    (1,084
    )
    
    
    Acquisition of premises and equipment
    
    
    (313
    )
    
    
    (880
    )Net cash provided by (used for) investing activities
    
    
    13,929
    
    
    
    (7,976
    )FINANCING ACTIVITIESNet increase in deposits
    
    
    9,681
    
    
    
    7,519Net decrease in short-term borrowings
    
    
    (2,953
    )
    
    
    (10,080
    )Proceeds from long-term borrowings
    
    
    
    
    
    
    3,000Repayment of long-term borrowings
    
    
    (5,002
    )
    
    
    (3
    )Acquisition of treasury stock
    
    
    (625
    )
    
    
    (151
    )Proceeds from issuance of common stock
    
    
    219
    
    
    
    168Cash dividends paid
    
    
    (1,297
    )
    
    
    (1,082
    )Net cash provided by (used for) financing activities
    
    
    23
    
    
    
    (629
    )NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    17,253
    
    
    
    (6,860
    )CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    11,459
    
    
    
    15,485CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    28,712
    
    
    $
    8,625SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATIONInterest paid
    
    $
    3,641
    
    
    $
    4,599Income taxes paid
    
    
    1,010
    
    
    
    871Loans transferred to other real estate owned
    
    
    300
    
    
    
    412
  6




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##### 



CCFNB BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  PRINCIPLES OF CONSOLIDATION
  NATURE OF OPERATIONS
   SEGMENT REPORTING
   USE OF ESTIMATES
  INVESTMENT SECURITIES
    7




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##### 



RESTRICTED SECURITIES
   LOANS
   Past
Due Loans
 Non-Accrual Loans
 Impaired Loans
 Allowance for Loan Losses
   8




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##### 



PREMISES AND EQUIPMENT
  MORTGAGE SERVICING RIGHTS
  JUNIOR SUBORDINATE DEBENTURES
  INTANGIBLE ASSETS  GOODWILL
  INTANGIBLE ASSETS  CORE DEPOSIT
   For the Year Ended:Remainder of 2010
    
    $
    274,0002011
    
    
    509,0002012
    
    
    442,0002013
    
    
    374,0002014
    
    
    308,000Thereafter
    
    
    559,000Total
    
    $
    2,466,000
 OTHER REAL ESTATE OWNED
  9




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##### 



BANK OWNED LIFE INSURANCE
  INVESTMENTS IN LIMITED PARTNERSHIPS
  INVESTMENT IN INSURANCE AGENCY
  INCOME TAXES
  PER SHARE DATA
  CASH FLOW INFORMATION
  TREASURY STOCK
  TRUST ASSETS AND INCOME
  ACCUMULATED OTHER COMPREHENSIVE INCOME
  10




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##### 



ADVERTISING COSTS
  SUBSEQUENT EVENTS
  RECENT ACCOUNTING PRONOUNCEMENTS
 FASB
ASC 105-10 -  The FASB Accounting Standards Codification and the Hierarchy of Generally
Accepted Accounting Principles
 FASB
ASC 805 Business Combinations
  FASB ASC 810-10 Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB 51
 FASB ASC 815-10 Disclosures about Derivative Instruments and Hedging Activities an amendment
of FASB Statement No. 133
 FASB ASC 855 Subsequent Events)
 11




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##### 



FASB ASC 860 Accounting for Transfers of Financial Assets an amendment of
FASB Statement No. 140
 FASB ASC 810-10 Amendments to FASB Interpretation No. 46 (R
 FASB ASC 715-20-50 Employers Disclosures about Postretirement Benefit Plan Assets
 FASB ASC 825-10-50  Interim Disclosures about
Fair Value of Financial Instruments
 FASB ASC 320-10 Recognition and Presentation of Other-Than-Temporary Impairments
 FASB ASC 820 , Determining Fair Value When the
Volume and Level of Activity for the Asset or iability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly
 SAB 111 Other Than Temporary Impairment of Certain Investments in Debt and Equity Securities Recognition and Presentation of
Other-Than-Temporary Impairments
 12




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##### 



SAB 112
 FASB ASC 323 Equity Method
Investment Accounting Considerations
 FASB ASC 350 Accounting for Defensive Intangible
Assets
 FASB ASC 260-10 Determining Whether Instruments Granted in Share-Based
Payment Transactions are Participating Securities
 FASB ASC 820-10
 FASB ASC 820-10
 FASB ASC 505-20 
 13




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##### 



FASB ASC 810-10 
 FASB ASC 820-10-
 RECLASSIFICATIONS
  2. INVESTMENT SECURITIES AVAILABLE-FOR-SALE
  June 30, 2010Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair(In Thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueObligation
of U.S. Government Corporations
and Agencies:Mortgage- backed
    
    $
    117,803
    
    
    $
    4,424
    
    
    $
    (27
    )
    
    $
    122,200Other
    
    
    62,031
    
    
    
    529
    
    
    
    
    
    
    
    62,560Obligations of state and political subdivisions
    
    
    10,249
    
    
    
    140
    
    
    
    
    
    
    
    10,389Total debt securities
    
    
    190,083
    
    
    
    5,093
    
    
    
    (27
    )
    
    
    195,149Marketable equity securities
    
    
    2,172
    
    
    
    35
    
    
    
    (403
    )
    
    
    1,804Total investment securities A F S
    
    $
    192,255
    
    
    $
    5,128
    
    
    $
    (430
    )
    
    $
    196,953
 December 31, 2009Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair(In Thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueObligation
of U.S. Government Corporations
and Agencies:Mortgage- backed
    
    $
    134,762
    
    
    $
    4,212
    
    
    $
    (118
    )
    
    $
    138,856Other
    
    
    68,323
    
    
    
    421
    
    
    
    (405
    )
    
    
    68,339Obligations of state and political subdivisions
    
    
    11,265
    
    
    
    116
    
    
    
    (7
    )
    
    
    11,374Total debt securities
    
    
    214,350
    
    
    
    4,749
    
    
    
    (530
    )
    
    
    218,569Marketable equity securities
    
    
    2,093
    
    
    
    41
    
    
    
    (437
    )
    
    
    1,697Total investment securities A F S
    
    $
    216,443
    
    
    $
    4,790
    
    
    $
    (967
    )
    
    $
    220,266
  14




---



##### 



WeightedAmortized
    
    
    Estimated
    
    
    Average(In Thousands)
    
    Cost
    
    
    Fair Value
    
    
    YieldDue in one year or less
    
    $
    970
    
    
    $
    982
    
    
    
    3.79
    %Due after one year to five years
    
    
    52,401
    
    
    
    52,774
    
    
    
    2.49
    %Due after five years to ten years
    
    
    28,583
    
    
    
    29,395
    
    
    
    4.13
    %Due after ten years
    
    
    110,301
    
    
    
    113,802
    
    
    
    4.26
    %Total
    
    $
    192,255
    
    
    $
    196,953
    June 30, 2010Less than Twelve Months
    
    
    Twelve Months or Greater
    
    
    TotalEstimated
    
    
    Gross
    
    
    Estimated
    
    
    Gross
    
    
    Estimated
    
    
    GrossFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized(In Thousands)
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesObligations of U.S.
Government
Corporations
and Agencies:Mortgage-backed
    
    $
    5,368
    
    
    $
    27
    
    
    $
    
    
    
    $
    
    
    
    $
    5,368
    
    
    $
    27Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Obligations of state
and political
subdivisions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total debt securities
    
    
    5,368
    
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    5,368
    
    
    
    27Equity securities
    
    
    978
    
    
    
    161
    
    
    
    501
    
    
    
    242
    
    
    
    1,479
    
    
    
    403Total
    
    $
    6,346
    
    
    $
    188
    
    
    $
    501
    
    
    $
    242
    
    
    $
    6,847
    
    
    $
    430
 15




---



##### 



December 31, 2009Less than Twelve Months
    
    
    Twelve Months or Greater
    
    
    TotalEstimated
    
    
    Gross
    
    
    Estimated
    
    
    Gross
    
    
    Estimated
    
    
    GrossFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized(In Thousands)
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesObligations of U.S. Government Corporations
and Agencies:Mortgage-backed
    
    $
    8,105
    
    
    $
    117
    
    
    $
    51
    
    
    $
    1
    
    
    $
    8,156
    
    
    $
    118Other
    
    
    28,876
    
    
    
    405
    
    
    
    
    
    
    
    
    
    
    
    28,876
    
    
    
    405Obligations of state and political subdivisions
    
    
    1,856
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    1,856
    
    
    
    7Total debt securities
    
    
    38,837
    
    
    
    529
    
    
    
    51
    
    
    
    1
    
    
    
    38,888
    
    
    
    530Equity securities
    
    
    366
    
    
    
    159
    
    
    
    806
    
    
    
    278
    
    
    
    1,172
    
    
    
    437Total
    
    $
    39,203
    
    
    $
    688
    
    
    $
    857
    
    
    $
    279
    
    
    $
    40,060
    
    
    $
    967
    June 30, 2010Gross
    
    
    Gross
    
    
    Estimated(In Thousands)
    
    Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairAsset size($)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueUnder $1 Billion
    
    $
    493
    
    
    $
    7
    
    
    $
    (89
    )
    
    $
    411$1 to $5 Billion
    
    
    213
    
    
    
    
    
    
    
    (44
    )
    
    
    169$6 to $100 billion
    
    
    780
    
    
    
    23
    
    
    
    (200
    )
    
    
    603Over $100 Billion
    
    
    686
    
    
    
    5
    
    
    
    (70
    )
    
    
    621$
    2,172
    
    
    $
    35
    
    
    $
    (403
    )
    
    $
    1,804
 June 30, 2010Gross
    
    
    Gross
    
    
    Estimated(In Thousands)
    
    Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairGeographic Region
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueEastern U.S.
    
    $
    1,082
    
    
    $
    19
    
    
    $
    (231
    )
    
    $
    870Southeastern U.S.
    
    
    110
    
    
    
    
    
    
    
    (12
    )
    
    
    98Western U.S.
    
    
    53
    
    
    
    
    
    
    
    (6
    )
    
    
    47National
    
    
    927
    
    
    
    16
    
    
    
    (154
    )
    
    
    789$
    2,172
    
    
    $
    35
    
    
    $
    (403
    )
    
    $
    1,804
  16




---



##### 



3. ALLOWANCE FOR LOAN LOSSES
  (In Thousands)
    
    2010
    
    
    2009Balance, beginning of year
    
    $
    4,210
    
    
    $
    3,758Provision charged to operations
    
    
    470
    
    
    
    220Loans charged off
    
    
    (557
    )
    
    
    (233
    )Recoveries
    
    
    52
    
    
    
    17Balance, June 30,
    
    $
    4,175
    
    
    $
    3,762
  4. SHORT-TERM BORROWINGS
  5. LONG-TERM BORROWINGS
  6. DEFERRED COMPENSATION PLANS
  7. ACQUISITION
   17




---



##### 



(In Thousands)Purchase price
    
    $
    26,316Carrying value of net assets acquired
    
    
    (17,855
    )Excess of purchase price over carrying value
of net assets acquired
    
    
    8,461Purchase accounting adjustments:Loans
    
    
    30Premises and equipment
    
    
    853Deposits
    
    
    1,235Severance and related costs
    
    
    840Deferred taxes
    
    
    208Subtotal
    
    
    11,627Core deposit intangibles
    
    
    (3,690
    )Goodwill
    
    $
    7,937
  (In Thousands)Assets
Cash and cash equivalents
    
    $
    5,157Interest-bearing deposits in other banks
    
    
    129Federal funds sold
    
    
    517Investment securities
    
    
    138,257Loans, net of allowance for loan losses
    
    
    160,724Premises and equipment
    
    
    6,492Accrued interest receivable
    
    
    1,534Bank-owned life insurance
    
    
    3,462Investment in limited partnerships
    
    
    919Goodwill and other intangibles
    
    
    11,627Other assets
    
    
    564Total assets
    
    $
    329,382LiabilitiesDeposits
    
    $
    264,692Borrowings
    
    
    31,883Junior subordinate debentures
    
    
    4,640Accrued interest payable
    
    
    764Other liabilities
    
    
    1,087Total liabilities
    
    $
    303,066Fair value of net assets acquired
    
    $
    26,316
 8. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF
CREDIT RISK
   18




---



##### 



(In Thousands)
    
    2010
    
    
    2009Financial instruments whose contract amounts represent credit risk:Commitments to extend credit
    
    $
    78,740
    
    
    $
    71,868Standby letters of credit
    
    
    3,750
    
    
    
    3,393Dealer floor plans
    
    
    916
    
    
    
    932Loans held for sale
    
    
    1,871
    
    
    
    267
     9. FAIR VALUE MEASUREMENTS
  Level I:
    
    Quoted prices are available in active markets for identical assets or liabilities as of
the reported date.
 Level II:
    
    Pricing inputs are other than quoted prices in active markets, which are either
directly or indirectly observable as of the reported date. The nature of these assets and liabilities include
items for which quoted prices are available but traded less frequently, and items that are
fair valued using other financial instruments of which can be directly observed.
 Level III:
    
    Assets and liabilities that have little or no pricing observability as of the
reported date. These items do not have two-way markets and are measured using
managements best estimate of fair value, where the inputs into determination of fair
value require significant management judgment or estimation.
  June 30, 2010(In Thousands)
    
    Level I
    
    
    Level II
    
    
    Level III
    
    
    TotalAssets Measured on a Recurring Basis:Investment Securities, available-for-sale
    
    $
    1,804
    
    
    $
    195,149
    
    
    $
    
    
    
    $
    196,953
 19




---



##### 



December 31, 2009(In Thousands)
    
    Level I
    
    
    Level II
    
    
    Level III
    
    
    TotalAssets Measured on a Recurring Basis:Investment Securities, available-for-sale
    
    $
    1,697
    
    
    $
    218,569
    
    
    $
    
    
    
    $
    220,266
  June 30, 2010(In Thousands)
    
    Level I
    
    
    Level II
    
    
    Level III
    
    
    TotalAvailable for sale securitiesObligation of US Government AgenciesMortgage-backed
    
    $
    
    
    
    $
    122,200
    
    
    $
    
    
    
    $
    122,200Other
    
    
    
    
    
    
    62,560
    
    
    
    
    
    
    
    62,560Obligations of state and political subdivisions
    
    
    
    
    
    
    10,389
    
    
    
    
    
    
    
    10,389Equity securities
    
    
    1,804
    
    
    
    
    
    
    
    
    
    
    
    1,804$
    1,804
    
    
    $
    195,149
    
    
    $
    
    
    
    $
    196,953
 December 31, 2009(In Thousands)
    
    Level I
    
    
    Level II
    
    
    Level III
    
    
    TotalAvailable for sale securitiesObligation of US Government AgenciesMortgage-backed
    
    $
    
    
    
    $
    138,856
    
    
    $
    
    
    
    $
    138,856Other
    
    
    
    
    
    
    68,339
    
    
    
    
    
    
    
    68,339Obligations of state and political subdivisions
    
    
    
    
    
    
    11,374
    
    
    
    
    
    
    
    11,374Equity securities
    
    
    1,697
    
    
    
    
    
    
    
    
    
    
    
    1,697$
    1,697
    
    
    $
    218,569
    
    
    $
    
    
    
    $
    220,266
   June 30, 2010(In Thousands)
    
    Level I
    
    
    Level II
    
    
    Level III
    
    
    TotalAssets Measured on a Non-recurring Basis:Impaired Loans
    
    $
    
    
    
    $
    4,674
    
    
    $
    
    
    
    $
    4,674Loans Held for Sale
    
    
    
    
    
    
    1,871
    
    
    
    
    
    
    
    1,871Mortgage Servicing Rights
    
    
    
    
    
    
    382
    
    
    
    
    
    
    
    382Other Real Estate Owned
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    6,927
    
    
    $
    
    
    
    $
    6,927
 20




---



##### 



December 31, 2009(In Thousands)
    
    Level I
    
    
    Level II
    
    
    Level III
    
    
    TotalAssets Measured on a Non-recurring Basis:Impaired Loans
    
    $
    
    
    
    $
    4,839
    
    
    $
    
    
    
    $
    4,839Loans Held for Sale
    
    
    
    
    
    
    267
    
    
    
    
    
    
    
    267Mortgage Servicing Rights
    
    
    
    
    
    
    344
    
    
    
    
    
    
    
    344Other Real Estate Owned
    
    
    
    
    
    
    29
    
    
    
    
    
    
    
    29$
    
    
    
    $
    5,479
    
    
    $
    
    
    
    $
    5,479
 10. ESTIMATED FAIR VALUES OF FINANCIAL INSTRUMENTS
   June 30, 2010
    
    December 31, 2009Carrying
    
    Estimated
    
    Carrying
    
    Estimated(In Thousands)
    
    Amount
    
    Fair Value
    
    Amount
    
    Fair ValueFinancial Assets:Cash and short-term instruments
    
    $
    28,712
    
    
    $
    28,712
    
    
    $
    11,459
    
    
    $
    11,459Investment securities
    
    
    196,953
    
    
    
    196,953
    
    
    
    220,266
    
    
    
    220,266Restricted securities
    
    
    3,168
    
    
    
    3,168
    
    
    
    2,984
    
    
    
    2,984Loans, net
    
    
    340,629
    
    
    
    347,315
    
    
    
    326,279
    
    
    
    329,726Cash surrender value of bank owned life insurance
    
    
    11,721
    
    
    
    11,721
    
    
    
    11,440
    
    
    
    11,440Accrued interest receivable
    
    
    1,834
    
    
    
    1,834
    
    
    
    2,006
    
    
    
    2,006Financial Liabilities:Interest-bearing deposits
    
    
    413,769
    
    
    
    417,448
    
    
    
    406,554
    
    
    
    410,168Noninterest- bearing deposits
    
    
    58,200
    
    
    
    58,200
    
    
    
    55,734
    
    
    
    55,734Short-term borrowings
    
    
    49,044
    
    
    
    49,044
    
    
    
    51,997
    
    
    
    51,997Long-term borrowings
    
    
    10,126
    
    
    
    10,351
    
    
    
    15,128
    
    
    
    15,375Junior subordinate debentures
    
    
    4,640
    
    
    
    4,640
    
    
    
    4,640
    
    
    
    4,640Accrued interest payable
    
    
    732
    
    
    
    732
    
    
    
    859
    
    
    
    859Off-Balance Sheet Assets (Liabilities):Commitments to extend credit
    
    
    
    
    
    $
    78,740
    
    
    
    
    
    
    $
    71,868Standby letters of credit
    
    
    
    
    
    
    3,750
    
    
    
    
    
    
    
    3,393Dealer floor plans
    
    
    
    
    
    
    961
    
    
    
    
    
    
    
    932
      21




---



##### 



11. MANAGEMENTS ASSERTIONS AND COMMENTS REQUIRED TO BE PROVIDED WITH FORM 10-Q
FILING
   22




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      /s/ J. H. Williams & Co., LLPJ.H. Williams & Co., LLP 
Kingston, Pennsylvania 
August 12, 2010
 23




---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 CAUTIONARY STATEMENT
  
    
    Our business and financial results are affected by business and economic
conditions, both generally and specifically in the Northcentral Pennsylvania market
in which we operate. In particular, our business and financial results may be
impacted by:
 
    
    Changes in interest rates and valuations in the debt, equity and other financial
markets.
 
    
    Disruptions in the liquidity and other functioning of financial markets,
including such disruptions in the market for real estate and other assets commonly
securing financial products.
 
    
    Actions by the Federal Reserve Board and other government agencies, including
those that impact money supply and market interest rates.
 
    
    Changes in our customers and suppliers performance in general and their
creditworthiness in particular.
 
    
    Changes in customer preferences and behavior, whether as a result of changing
business and economic conditions or other factors.
 
    
    Changes resulting from the newly enacted Dodd-Frank Wall Street Reform and
Consumer Protection Act and regulation rulemaking yet to occur.
 
    
    A continuation of recent turbulence in significant segments of the United States
and global financial markets, particularly if it worsens, could impact our
performance, both directly by affecting our revenues and the value of our assets and
liabilities and indirectly by affecting our customers and suppliers and the economy
generally.
 
    
    Our business and financial performance could be impacted as the financial
industry restructures in the current environment by changes in the competitive
landscape.
 
    
    Given current economic and financial market conditions, our forward-looking
financial statements are subject to the risk that these conditions will be
substantially different than we are currently expecting. These statements are based
on our current expectations that interest rates will remain low through 2010 with
continued wide market credit spreads and our view that national economic trends
currently point to a subdued recovery through the end of 2010.
 
    
    Legal and regulatory developments could have an impact on our ability to operate
our business or our financial condition or results of operations or our competitive
position or reputation. Reputational impacts, in turn, could affect matters such as
business generation and retention, our ability to attract and retain management,
liquidity and funding. These legal and regulatory developments could include: (a)
the unfavorable resolution of legal proceedings or regulatory and other governmental
inquiries; (b) increased litigation risk from recent regulatory and other
governmental developments; (c) the results of the regulatory examination process,
and regulators future use of supervisory and enforcement tools; (d) legislative and regulatory reforms, including
changes to laws and regulations involving tax, pension, education and mortgage
lending, the protection of confidential customer information, and other aspects of the
financial institution industry; and (e) changes in accounting policies and principles.
 
    
    Our business and operating results are affected by our ability to identify and
effectively manage risks inherent in our businesses, including, where appropriate,
through the effective use of third-party insurance and capital management
techniques.
 24




---



##### 




    
    Our ability to anticipate and respond to technological changes can have an impact
on our ability to respond to customer needs and to meet competitive demands.
 
    
    Our ability to implement our business initiatives and strategies could affect our
financial performance over the next several years.
 
    
    Competition can have an impact on customer acquisition, growth and retention, as
well as on our credit spreads and product pricing, which can affect market share,
deposits and revenues.
 
    
    Our business and operating results can also be affected by widespread natural
disasters, terrorist activities or international hostilities, either as a result of
the impact on the economy and capital and other financial markets generally or on us
or on our customers and suppliers.
   RESULTS OF OPERATIONS
 NET INTEREST INCOME
 2010 vs. 2009
    25




---



##### 



AVERAGE BALANCE SHEET AND RATE ANALYSIS
SIX MONTHS ENDED JUNE 30,
 2010
    
    
    2009Average Balance
    
    
    Interest
    
    
    Average Rate
    
    
    Average Balance
    
    
    Interest
    
    
    Average Rate(In Thousands)
    
    
    (1)

    
    
    
    
    
    
    
    
    
    
    (1)ASSETS:Tax-exempt loans
    
    $
    21,051
    
    
    $
    671
    
    
    
    6.43
    %
    
    $
    19,643
    
    
    $
    546
    
    
    
    5.61
    %All other loans
    
    
    316,710
    
    
    
    9,433
    
    
    
    6.01
    %
    
    
    304,794
    
    
    
    9,403
    
    
    
    6.22
    %Total loans (2)(3)(4)
    
    
    337,761
    
    
    
    10,104
    
    
    
    6.03
    %
    
    
    324,437
    
    
    
    9,949
    
    
    
    6.18
    %Taxable securities
    
    
    197,841
    
    
    
    3,559
    
    
    
    3.60
    %
    
    
    182,479
    
    
    
    4,264
    
    
    
    4.67
    %Tax-exempt securitites (3)
    
    
    10,730
    
    
    
    311
    
    
    
    5.80
    %
    
    
    9,126
    
    
    
    258
    
    
    
    5.65
    %Total securities
    
    
    208,571
    
    
    
    3,870
    
    
    
    3.71
    %
    
    
    191,605
    
    
    
    4,522
    
    
    
    4.72
    %Federal funds sold
    
    
    1,250
    
    
    
    1
    
    
    
    0.16
    %
    
    
    7,989
    
    
    
    6
    
    
    
    0.15
    %Interest-bearing deposits
    
    
    10,896
    
    
    
    13
    
    
    
    0.24
    %
    
    
    667
    
    
    
    1
    
    
    
    0.30
    %Total interest-earning assets
    
    
    558,478
    
    
    
    13,988
    
    
    
    5.04
    %
    
    
    524,698
    
    
    
    14,478
    
    
    
    5.55
    %Other assets
    
    
    45,555
    
    
    
    
    
    
    
    
    
    
    
    43,676TOTAL ASSETS
    
    $
    604,033
    
    
    
    
    
    
    
    
    
    
    $
    568,374LIABILITIES:Savings
    
    $
    61,091
    
    
    
    121
    
    
    
    0.40
    %
    
    $
    56,204
    
    
    
    111
    
    
    
    0.40
    %Now deposits
    
    
    70,759
    
    
    
    50
    
    
    
    0.14
    %
    
    
    68,076
    
    
    
    50
    
    
    
    0.15
    %Money market deposits
    
    
    42,596
    
    
    
    165
    
    
    
    0.78
    %
    
    
    44,900
    
    
    
    249
    
    
    
    1.12
    %Time deposits
    
    
    235,616
    
    
    
    2,700
    
    
    
    2.31
    %
    
    
    225,833
    
    
    
    3,523
    
    
    
    3.15
    %Total deposits
    
    
    410,062
    
    
    
    3,036
    
    
    
    1.49
    %
    
    
    395,013
    
    
    
    3,933
    
    
    
    2.01
    %Short-term borrowings
    
    
    50,717
    
    
    
    205
    
    
    
    0.82
    %
    
    
    43,716
    
    
    
    159
    
    
    
    0.73
    %Long-term borrowings
    
    
    10,983
    
    
    
    226
    
    
    
    4.15
    %
    
    
    10,043
    
    
    
    287
    
    
    
    5.76
    %Junior subordinate debentures
    
    
    4,640
    
    
    
    47
    
    
    
    2.04
    %
    
    
    4,640
    
    
    
    76
    
    
    
    3.30
    %Total borrowings
    
    
    66,340
    
    
    
    478
    
    
    
    1.45
    %
    
    
    58,399
    
    
    
    522
    
    
    
    1.80
    %Total interest-bearing liabilities
    
    
    476,402
    
    
    
    3,514
    
    
    
    1.49
    %
    
    
    453,412
    
    
    
    4,455
    
    
    
    1.98
    %Demand deposits
    
    
    56,544
    
    
    
    
    
    
    
    
    
    
    
    50,201Other liabilities
    
    
    4,464
    
    
    
    
    
    
    
    
    
    
    
    2,554Stockholders equity
    
    
    66,623
    
    
    
    
    
    
    
    
    
    
    
    62,207TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY
    
    $
    604,033
    
    
    
    
    
    
    
    
    
    
    $
    568,374Interest
rate spread (6)
    
    
    
    
    
    
    
    
    
    
    3.55
    %
    
    
    
    
    
    
    
    
    
    
    3.57
    %Net
interest income/margin (5)
    
    
    
    
    
    $
    10,474
    
    
    
    3.77
    %
    
    
    
    
    
    $
    10,023
    
    
    
    3.84
    %
 
 (1)
    
    Average volume information was compared using daily (or monthly) averages for interest-earning and bearing
accounts.
Certain balance sheet items utilized quarter-end balances
for averages.(2)
    
    Interest on loans includes
fee income.(3)
    
    Tax exempt interest revenue is shown on a tax-equivalent basis using a statutory federal income tax rate of 34 percent for 2010 and 2009.(4)
    
    Nonaccrual loans have been included with loans for the purpose of analyzing net
interest earnings.(5)
    
    Net interest margin is computed by dividing annualized net interest income by total interest earning
assets.(6)
    
    Interest rate spread represents the difference between the average rate earned on interest-earning assets
and the average
rate paid on
interest-bearing
liabilities. 26




---



##### 



Reconcilement of Taxable Equivalent Net Interest Income
For the Six Months Ended June 30,
 (In Thousands)
    
    2010
    
    
    2009Total interest income
    
    $
    13,654
    
    
    $
    14,274Total interest expense
    
    
    3,514
    
    
    
    4,455Net interest income
    
    
    10,140
    
    
    
    9,819Tax equivalent adjustment
    
    
    334
    
    
    
    204Net interest
income (fully taxable equivalent)
    
    $
    10,474
    
    
    $
    10,023
 Rate/Volume Analysis
  Six Months Ended June 30,2010 vs 2009Increase (Decrease)Due to(In Thousands)
    
    Volume
    
    
    Rate
    
    
    NetInterest income:Loans, tax-exempt
    
    $
    45
    
    
    $
    80
    
    
    $
    125Loans
    
    
    355
    
    
    
    (324
    )
    
    
    31Taxable investment securities
    
    
    276
    
    
    
    (981
    )
    
    
    (705
    )Tax-exempt investment securities
    
    
    46
    
    
    
    7
    
    
    
    53Federal funds sold
    
    
    (5
    )
    
    
    
    
    
    
    (5
    )Interest bearing deposits
    
    
    12
    
    
    
    
    
    
    
    12Total interest-earning assets
    
    
    729
    
    
    
    (1,218
    )
    
    
    (489
    )Interest expense:Savings
    
    
    10
    
    
    
    
    
    
    
    10NOW deposits
    
    
    2
    
    
    
    (2
    )
    
    
    Money market deposits
    
    
    (9
    )
    
    
    (75
    )
    
    
    (84
    )Time deposits
    
    
    112
    
    
    
    (935
    )
    
    
    (823
    )Short-term borrowings
    
    
    28
    
    
    
    19
    
    
    
    47Long-term borrowings, FHLB
    
    
    19
    
    
    
    (80
    )
    
    
    (61
    )Junior subordinate debentures
    
    
    
    
    
    
    (29
    )
    
    
    (29
    )Total interest-bearing liabilities
    
    
    162
    
    
    
    (1,102
    )
    
    
    (940
    )Change in net interest income
    
    $
    567
    
    
    $
    (116
    )
    
    $
    451
 PROVISION FOR LOAN LOSSES
 2010 vs. 2009
  27




---



##### 



NON-INTEREST INCOME
 2010 vs. 2009
  For The Six Months EndedJune 30, 2010
    
    
    June 30, 2009
    
    
    Change(In Thousands)
    
    Amount
    
    
    % Total
    
    
    Amount
    
    
    % Total
    
    
    Amount
    
    
    %Service charges and fees
    
    $
    873
    
    
    
    32.4
    %
    
    $
    824
    
    
    
    32.6
    %
    
    $
    49
    
    
    
    5.9
    %Gain on sale of loans
    
    
    304
    
    
    
    11.3
    
    
    
    275
    
    
    
    10.9
    
    
    
    29
    
    
    
    10.5Earnings on bank-owned life insurance
    
    
    223
    
    
    
    8.3
    
    
    
    217
    
    
    
    8.6
    
    
    
    6
    
    
    
    2.8Brokerage
    
    
    162
    
    
    
    6.0
    
    
    
    107
    
    
    
    4.2
    
    
    
    55
    
    
    
    51.4Trust
    
    
    339
    
    
    
    12.6
    
    
    
    312
    
    
    
    12.3
    
    
    
    27
    
    
    
    8.7Investment security losses
    
    
    
    
    
    
    
    
    
    
    (61
    )
    
    
    (2.4
    )
    
    
    61
    
    
    
    (100.0
    )Interchange fees
    
    
    408
    
    
    
    15.2
    
    
    
    348
    
    
    
    13.8
    
    
    
    60
    
    
    
    17.2Other
    
    
    382
    
    
    
    14.2
    
    
    
    505
    
    
    
    20.0
    
    
    
    (123
    )
    
    
    (24.4
    )Total non-interest income
    
    $
    2,691
    
    
    
    100.0
    %
    
    $
    2,527
    
    
    
    100.0
    %
    
    $
    164
    
    
    
    6.5
    %
 NON-INTEREST EXPENSE
 2010 vs. 2009
   28




---



##### 



For The Six Months EndedJune 30, 2010
    
    
    June 30, 2009
    
    
    Change(In Thousands)
    
    Amount
    
    
    % Total
    
    
    Amount
    
    
    % Total
    
    
    Amount
    
    
    %Salaries
    
    $
    3,164
    
    
    
    39.5
    %
    
    $
    3,144
    
    
    
    39.0
    %
    
    $
    20
    
    
    
    0.6
    %Employee benefits
    
    
    898
    
    
    
    11.3
    
    
    
    834
    
    
    
    10.3
    
    
    
    64
    
    
    
    7.7Occupancy
    
    
    569
    
    
    
    7.1
    
    
    
    561
    
    
    
    6.9
    
    
    
    8
    
    
    
    1.4Furniture and equipment
    
    
    646
    
    
    
    8.1
    
    
    
    625
    
    
    
    7.7
    
    
    
    21
    
    
    
    3.4State shares tax
    
    
    276
    
    
    
    3.5
    
    
    
    272
    
    
    
    3.4
    
    
    
    4
    
    
    
    1.5Professional fees
    
    
    294
    
    
    
    3.7
    
    
    
    275
    
    
    
    3.4
    
    
    
    19
    
    
    
    6.9Directors fees
    
    
    132
    
    
    
    1.7
    
    
    
    141
    
    
    
    1.7
    
    
    
    (9
    )
    
    
    (6.4
    )FDIC assessments
    
    
    297
    
    
    
    3.7
    
    
    
    438
    
    
    
    5.4
    
    
    
    (141
    )
    
    
    (32.2
    )Telecommunications
    
    
    177
    
    
    
    2.2
    
    
    
    179
    
    
    
    2.2
    
    
    
    (2
    )
    
    
    (1.1
    )Amortization of core deposit intangible
    
    
    302
    
    
    
    3.8
    
    
    
    336
    
    
    
    4.2
    
    
    
    (34
    )
    
    
    (10.1
    )Automated teller machine and interchange
    
    
    268
    
    
    
    3.4
    
    
    
    242
    
    
    
    3.0
    
    
    
    26
    
    
    
    10.7Other
    
    
    958
    
    
    
    12.0
    
    
    
    1,025
    
    
    
    12.8
    
    
    
    (67
    )
    
    
    (6.5
    )Total non-interest expense
    
    $
    7,981
    
    
    
    100.0
    %
    
    $
    8,072
    
    
    
    100.0
    %
    
    $
    (91
    )
    
    
    (1.1
    )%
 FINANCIAL CONDITION
    INVESTMENTS
  June 30, 2010EstimatedAmortized
    
    
    Fair(In Thousands)
    
    Cost
    
    
    ValueObligation of U.S.Government Corporations
and Agencies:Mortgage-backed
    
    $
    117,803
    
    
    $
    122,200Other
    
    
    62,031
    
    
    
    62,560Obligations of state and political subdivisions
    
    
    10,249
    
    
    
    10,389Total debt securities
    
    
    190,083
    
    
    
    195,149Marketable equity securities
    
    
    2,172
    
    
    
    1,804Total investment securities AFS
    
    $
    192,255
    
    
    $
    196,953
 29




---



##### 



December 31, 2009EstimatedAmortized
    
    
    Fair(In Thousands)
    
    Cost
    
    
    ValueObligation
of U.S. Government Corporations
and Agencies:Mortgage-backed
    
    $
    134,762
    
    
    $
    138,856Other
    
    
    68,323
    
    
    
    68,339Obligations of state and political subdivisions
    
    
    11,265
    
    
    
    11,374Total debt securities
    
    
    214,350
    
    
    
    218,569Marketable equity securities
    
    
    2,093
    
    
    
    1,697Total investment securities AFS
    
    $
    216,443
    
    
    $
    220,266
 LOANS
   Change(In Thousands)
    
    June 30, 2010
    
    
    December 31, 2009
    
    
    Amount
    
    
    %Commercial, financial and agricultural
    
    $
    44,307
    
    
    $
    37,642
    
    
    $
    6,665
    
    
    
    17.7
    %Tax-exempt
    
    
    20,797
    
    
    
    18,055
    
    
    
    2,742
    
    
    
    15.2Real estate
    
    
    251,480
    
    
    
    253,463
    
    
    
    (1,983
    )
    
    
    (0.8
    )Real estate construction
    
    
    20,594
    
    
    
    13,526
    
    
    
    7,068
    
    
    
    52.3Installment loans to individuals
    
    
    7,480
    
    
    
    7,725
    
    
    
    (245
    )
    
    
    (3.2
    )Add (deduct): Unearned discount
    
    
    (10
    )
    
    
    (15
    )
    
    
    5
    
    
    
    (33.3
    )Unamortized loan costs, net of fees
    
    
    156
    
    
    
    93
    
    
    
    63
    
    
    
    67.7Gross loans
    
    $
    344,804
    
    
    $
    330,489
    
    
    $
    14,315
    
    
    
    4.3
    %
  June 30, 2010
    
    
    December 31, 2009Commercial, financial and agricultural
    
    
    12.8
    %
    
    
    11.4
    %Tax-exempt
    
    
    6.0
    
    
    
    5.5Real estate
    
    
    73.0
    
    
    
    76.7Real estate construction
    
    
    6.0
    
    
    
    4.1Installment loans to individuals
    
    
    2.2
    
    
    
    2.3Gross loans
    
    
    100.0
    %
    
    
    100.0
    %
 ALLOWANCE FOR LOAN LOSSES
  30




---



##### 



For the Six Months Ended June 30,(In Thousands)
    
    2010
    
    
    2009Average Loans Outstanding during
the period
    
    $
    337,761
    
    
    $
    324,437Balance, beginning of year
    
    $
    4,210
    
    
    $
    3,758Provision charged to operations
    
    
    470
    
    
    
    220Loans charged off:Commercial, financial, and agricultural
    
    
    (4
    )
    
    
    (220
    )Real estate mortgages
    
    
    (535
    )
    
    
    Installment loans to indiviuals
    
    
    (18
    )
    
    
    (13
    )Recoveries:Commercial, financial, and agricultural
    
    
    32
    
    
    
    Real estate mortgages
    
    
    11
    
    
    
    8Installment loans to indiviuals
    
    
    9
    
    
    
    9Balance, end of period
    
    $
    4,175
    
    
    $
    3,762Ratio of net charge-offs to Average loans
outstanding during the period
    
    
    0.15
    %
    
    
    0.07
    %
 NON-PERFORMING LOANS
   (In Thousands)
    
    June 30, 2010
    
    
    December 31, 2009Commercial, financial and agriculturalDays 30-89
    
    $
    299
    
    
    $
    14Days 90 plus
    
    
    107
    
    
    
    Non-accrual
    
    
    42
    
    
    
    145Real estateDays 30-89
    
    
    6,082
    
    
    
    1,632Days 90 plus
    
    
    
    
    
    
    Non-accrual
    
    
    3,667
    
    
    
    4,216Installment loans to individualsDays 30-89
    
    
    58
    
    
    
    49Days 90 plus
    
    
    
    
    
    
    Non-accrual
    
    
    3
    
    
    
    $
    10,258
    
    
    $
    6,056Days 30-89
    
    $
    6,439
    
    
    $
    1,695Days 90 plus
    
    
    107
    
    
    
    Non-accrual
    
    
    3,712
    
    
    
    4,361$
    10,258
    
    
    $
    6,056Restructured loans still accruing
    
    $
    321
    
    
    $
    323Other real estate owned
    
    $
    
    
    
    $
    29
 31




---



##### 



DEPOSITS
 .
  June 30, 2010
    
    
    December 31, 2009Average
    
    
    
    
    
    
    Average
    
    
    Change(In Thousands)
    
    Balance
    
    
    Rate
    
    
    Balance
    
    
    Rate
    
    
    Amount
    
    
    %Non-interest bearing
    
    $
    56,544
    
    
    
    
    %
    
    $
    51,908
    
    
    
    
    %
    
    $
    4,636
    
    
    
    8.9
    %Savings
    
    
    61,091
    
    
    
    0.40
    
    
    
    56,493
    
    
    
    0.40
    
    
    
    4,598
    
    
    
    8.1Now deposits
    
    
    70,759
    
    
    
    0.14
    
    
    
    68,650
    
    
    
    0.15
    
    
    
    2,109
    
    
    
    3.1Money market deposits
    
    
    42,596
    
    
    
    0.78
    
    
    
    43,906
    
    
    
    1.03
    
    
    
    (1,310
    )
    
    
    (3.0
    )Time deposits
    
    
    235,616
    
    
    
    2.31
    
    
    
    228,005
    
    
    
    2.94
    
    
    
    7,611
    
    
    
    3.3Total deposits
    
    $
    466,606
    
    
    
    1.31
    %
    
    $
    448,962
    
    
    
    1.67
    %
    
    $
    17,644
    
    
    
    3.9
    %
 BORROWED FUNDS
   June 30, 2010
    
    
    December 31, 2009
    
    
    Change(In Thousands)
    
    Amount
    
    
    % Total
    
    
    Amount
    
    
    % Total
    
    
    Amount
    
    
    %Short-term borrowings:Securities sold under agreement to repurchase
    
    $
    48,585
    
    
    
    73.2
    %
    
    $
    47,873
    
    
    
    72.6
    %
    
    $
    712
    
    
    
    1.5
    %Short-term borrowings, FHLB
    
    
    1,559
    
    
    
    2.4
    
    
    
    352
    
    
    
    0.5
    
    
    
    1,207
    
    
    
    342.9U.S. Treasury tax and loan notes
    
    
    573
    
    
    
    0.9
    
    
    
    601
    
    
    
    0.9
    
    
    
    (28
    )
    
    
    (4.7
    )Total short-term borrowings
    
    
    50,717
    
    
    
    76.5
    %
    
    
    48,826
    
    
    
    74.0
    %
    
    
    1,891
    
    
    
    3.9Long-term borrowings, FHLB
    
    
    10,983
    
    
    
    16.6
    
    
    
    12,492
    
    
    
    18.9
    
    
    
    (1,509
    )
    
    
    (12.1
    )Junior subordinate debentures
    
    
    4,640
    
    
    
    7.0
    
    
    
    4,640
    
    
    
    7.0
    
    
    
    
    
    
    
    Total borrowed funds
    
    $
    66,340
    
    
    
    100.0
    %
    
    $
    65,958
    
    
    
    100.0
    %
    
    $
    382
    
    
    
    0.6
    %
 LIQUIDITY
   CAPITAL RESOURCES
    32




---



##### 



2010
    
    
    2009(In Thousands)
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioTotal Capital(to Risk-weighted Assets)Actual
    
    $
    62,242
    
    
    
    17.6
    %
    
    $
    60,322
    
    
    
    17.6
    %For Capital Adequacy Purposes
    
    
    28,330
    
    
    
    8.0
    
    
    
    27,394
    
    
    
    8.0To Be Well-Capitalized
    
    
    35,412
    
    
    
    10.0
    
    
    
    34,243
    
    
    
    10.0Tier I Capital(to Risk-weighted Assets)Actual
    
    $
    58,057
    
    
    
    16.4
    %
    
    $
    56,102
    
    
    
    16.4
    %For Capital Adequacy Purposes
    
    
    14,164
    
    
    
    4.0
    
    
    
    13,697
    
    
    
    4.0To Be Well-Capitalized
    
    
    21,247
    
    
    
    6.0
    
    
    
    20,546
    
    
    
    6.0Tier I Capital(to Average Assets)Actual
    
    $
    58,057
    
    
    
    9.8
    %
    
    $
    56,102
    
    
    
    9.8
    %For Capital Adequacy Purposes
    
    
    23,745
    
    
    
    4.0
    
    
    
    22,861
    
    
    
    4.0To Be Well-Capitalized
    
    
    29,682
    
    
    
    5.0
    
    
    
    28,577
    
    
    
    5.0
  INTEREST RATE RISK MANAGEMENT
        33




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##### 



Item 3. Quantitative and Qualitative Disclosures about Market Risk
   Item 4. Controls and Procedures
    PART II Other Information
 Item 1. Legal Proceedings
  Item 1A. Risk Factors
     34




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##### 



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Total
    
    Average
    
    Total Number of
    
    Maximum Number (orNumber of
    
    Price Paid
    
    Shares (or Units)
    
    Approximate Dollar Value)Shares (or
    
    per Share
    
    Purchased as Part of
    
    of Shares (or Units) thatUnits)
    
    (or Units)
    
    Publicly Announced
    
    May Yet Be PurchasedPeriod
    
    Purchased
    
    Purchased
    
    Plans or Programs (1)
    
    Under the Plans or ProgramsMonth #1 (April 1  April 30, 2010)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    160,000Month #2 (May 1  May 31, 2010)
    
    
    5,500
    
    
    $
    26.75
    
    
    
    5,500
    
    
    
    154,500Month #3 (June 1  June 30, 2010)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    154,500
 
 (1)
    
    This program was announced in 2009 and represents the third buy-back program. The
Board of Directors approved the purchase of 200,000 shares. There was no expiration date
associated with this program.  Item 3. Defaults Upon Senior Securities
  Item 5. Other Information
  Item 6. Exhibits
 3.1.1
    
    Amended and Restated Articles of Incorporation-incorporated by reference to Registrants
Current Report on Form 8-K, dated May 9, 2005, filed with the Commission on May 10, 2005.
 3.2
    
    Amended Bylaws-incorporated by reference to Registrants Annual Report on Form 10-K, filed
with the commission on March 26, 2010.
 31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer
 31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer
 32
    
    Section 906 Certification of Principal Executive Officer and Principal Financial Officer
 35




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##### 



SIGNATURES
  CCFNB BANCORP, INC.
(Registrant)By
    /s/ Lance O. DiehlLance O. DiehlPresident and CEO
(Principal Executive Officer)Date: August 12, 2010By

    /s/ Jeffrey T. ArnoldJeffrey T. Arnold, CPA, CIAChief Financial Officer and Treasurer
(Principal Financial Officer)Date: August 12, 2010 36