--------------------------------------------------------------------------------

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)
[ x ]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 2008
                                               ------------------
                                       or

[   ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

          For the transition period from _____________ to _____________

                        Commission File Number: 000-18464
                                                ---------


                            EMCLAIRE FINANCIAL CORP.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


Pennsylvania                                                          25-1606091
--------------------------------------------------------------------------------
(State or other                                                    (IRS Employer
jurisdiction of incorporation                                Identification No.)
or organization)


612 Main Street, Emlenton, Pennsylvania                                    16373
--------------------------------------------------------------------------------
(Address of principal executive offices)                              (Zip Code)


                                 (724) 867-2311
--------------------------------------------------------------------------------
                         (Registrant's telephone number)


--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|

     Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated  filer or a smaller reporting company as
defined in Rule 12b-2 of the Exchange Act.

  Large accelerated filer |_| Accelerated filer |_| Non-accelerated filer |_|
                         Smaller reporting company |X|

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

     The  number of shares  outstanding  of the  Registrant's  common  stock was
1,431,404 at November 14, 2008.
--------------------------------------------------------------------------------


<PAGE>

<TABLE>
<CAPTION>

                                            EMCLAIRE FINANCIAL CORP.

                                    INDEX TO QUARTERLY REPORT ON FORM 10-Q



                                        PART I - FINANCIAL INFORMATION
                                        ------------------------------

<S>           <C>                                                                            <C>
Item 1.       Interim Financial Statements (Unaudited)

              Consolidated Balance Sheets as of
              September 30, 2008 and December 31, 2007........................................1

              Consolidated Statements of Income for the three and nine
              months ended September 30, 2008 and 2007........................................2

              Condensed Consolidated Statements of Cash Flows for the nine
              months ended September 30, 2008 and 2007........................................3

              Consolidated Statements of Changes in Stockholders'
              Equity for the three and nine months ended September 30, 2008 and 2007..........4

              Notes to Consolidated Financial Statements......................................5

Item 2.       Management's Discussion and Analysis
              of Financial Condition and Results of Operations...............................12

Item 3.       Quantitative and Qualitative Disclosures About Market Risk.....................23

Item 4T.      Controls and Procedures........................................................24

                                         PART II - OTHER INFORMATION
                                         ---------------------------

Item 1.       Legal Proceedings..............................................................25

Item 1A.      Risk Factors...................................................................25

Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds....................25

Item 3.       Defaults Upon Senior Securities................................................25

Item 4.       Submission of Matters to a Vote of Security Holders............................25

Item 5.       Other Information..............................................................25

Item 6.       Exhibits.......................................................................25

Signatures    ...............................................................................26

</TABLE>


<PAGE>

                         PART I - FINANCIAL INFORMATION
                         ------------------------------

Item 1.  Interim Financial Statements
-------------------------------------

<TABLE>
<CAPTION>

                          Emclaire Financial Corp. and Subsidiary
                                Consolidated Balance Sheets
                As of September 30, 2008 (Unaudited) and December 31, 2007
                     (Dollar amounts in thousands, except share data)


                                                                          September 30,    December 31,
                                                                              2008             2007
                                                                          -------------    -------------

                              Assets
                              ------

<S>                                                                       <C>              <C>
Cash and due from banks                                                   $       5,916    $      10,288
Interest earning deposits with banks                                             21,637              195
                                                                          -------------    -------------
     Cash and cash equivalents                                                   27,553           10,483
Securities available for sale, at fair value                                     57,798           51,919
Loans receivable, net of allowance for loan losses of $2,363 and $2,157         251,043          229,819
Federal bank stocks, at cost                                                      2,890            2,662
Bank-owned life insurance                                                         5,137            4,987
Accrued interest receivable                                                       1,373            1,365
Premises and equipment, net                                                       8,157            7,904
Goodwill                                                                          1,422            1,422
Prepaid expenses and other assets                                                 1,535            1,159
                                                                          -------------    -------------

         Total Assets                                                     $     356,908    $     311,720
                                                                          =============    =============

               Liabilities and Stockholders' Equity
               ------------------------------------

Liabilities:
   Deposits:
     Non-interest bearing                                                 $      48,316    $      47,111
     Interest bearing                                                           230,035          197,151
                                                                          -------------    -------------
         Total deposits                                                         278,351          244,262
   Short-term borrowed funds                                                     13,260            5,400
   Long-term borrowed funds                                                      35,000           35,000
   Accrued interest payable                                                         841              771
   Common stock subscriptions payable                                             3,114               --
   Accrued expenses and other liabilities                                           963            1,584
                                                                          -------------    -------------

       Total Liabilities                                                        331,529          287,017
                                                                          -------------    -------------

Commitments and Contingencies                                                        --               --

Stockholders' Equity:
   Preferred stock, $1.00 par value, 3,000,000 shares authorized;
     none issued                                                                     --               --
   Common stock, $1.25 par value, 12,000,000 shares authorized;
     1,395,852 shares issued; 1,267,835 shares outstanding                        1,745            1,745
   Additional paid-in capital                                                    10,984           10,902
   Treasury stock, at cost; 128,017 shares                                       (2,653)          (2,653)
   Retained earnings                                                             15,713           15,114
   Accumulated other comprehensive loss                                            (410)            (405)
                                                                          -------------    -------------

       Total Stockholders' Equity                                                25,379           24,703
                                                                          -------------    -------------

         Total Liabilities and Stockholders' Equity                       $     356,908    $     311,720
                                                                          =============    =============

</TABLE>


See accompanying notes to consolidated financial statements.


                                                     1
<PAGE>

<TABLE>
<CAPTION>

                                     Emclaire Financial Corp. and Subsidiary
                                        Consolidated Statements of Income
                   For the three and nine months ended September 30, 2008 and 2007 (Unaudited)
                              (Dollar amounts in thousands, except per share data)


                                                         For the three months ended        For the nine months ended
                                                                September 30,                     September 30,
                                                        ------------------------------   ------------------------------
                                                             2008             2007           2008              2007
                                                        -------------    -------------   -------------    -------------

<S>                                                     <C>              <C>             <C>              <C>
Interest and dividend income:
     Loans receivable, including fees                   $       4,059    $       3,937   $      11,916    $      11,329
     Securities:
           Taxable                                                550              388           1,339            1,171
           Exempt from federal income tax                         159              169             482              514
     Federal bank stocks                                           26               35              82              106
     Deposits with banks                                           53                6             112              143
                                                        -------------    -------------   -------------    -------------
        Total interest and dividend income                      4,847            4,535          13,931           13,263
                                                        -------------    -------------   -------------    -------------

Interest expense:
     Deposits                                                   1,650            1,578           4,776            4,813
     Borrowed funds                                               467              361           1,318            1,047
                                                        -------------    -------------   -------------    -------------
        Total interest expense                                  2,117            1,939           6,094            5,860
                                                        -------------    -------------   -------------    -------------

Net interest income                                             2,730            2,596           7,837            7,403
     Provision for loan losses                                    140               45             285              120
                                                        -------------    -------------   -------------    -------------

Net interest income after provision for loan losses             2,590            2,551           7,552            7,283
                                                        -------------    -------------   -------------    -------------

Noninterest income:
     Fees and service charges                                     446              412           1,211            1,128
     Commissions on financial services                            108               83             354              325
     Net gain (loss) on available for sale securities            (116)              18            (391)             194
     Net gain on sales of loans                                    --               15               8               22
     Earnings on bank-owned life insurance                         58               55             171              163
     Other                                                        124              113             424              366
                                                        -------------    -------------   -------------    -------------
        Total noninterest income                                  620              696           1,777            2,198
                                                        -------------    -------------   -------------    -------------

Noninterest expense:
     Compensation and employee benefits                         1,261            1,241           3,961            3,791
     Premises and equipment                                       409              404           1,247            1,205
     Other                                                        626              610           1,795            1,904
                                                        -------------    -------------   -------------    -------------
        Total noninterest expense                               2,296            2,255           7,003            6,900
                                                        -------------    -------------   -------------    -------------

Income before provision for income taxes                          914              992           2,326            2,581
     Provision for income taxes                                   198              238             510              569
                                                        -------------    -------------   -------------    -------------

Net income                                              $         716    $         754   $       1,816    $       2,012
                                                        =============    =============   =============    =============

     Basic and diluted earnings per share               $        0.56    $        0.59   $        1.43    $        1.59

     Average common shares outstanding                      1,267,835        1,267,835       1,267,835        1,267,835

     Dilutive Shares                                               --               --              --               --

</TABLE>


See accompanying notes to consolidated financial statements.


                                                                2
<PAGE>

<TABLE>
<CAPTION>

                                Emclaire Financial Corp. and Subsidiary
                            Condensed Consolidated Statements of Cash Flows
                   For the nine months ended September 30, 2008 and 2007 (Unaudited)
                                     (Dollar amounts in thousands)

                                                                                     For the nine months ended
                                                                                            September 30,
                                                                                       2008              2007
                                                                                   -------------    -------------

<S>                                                                                <C>              <C>
Cash flows from operating activities
    Net income                                                                     $       1,816    $       2,012
    Adjustments to reconcile net income to net cash provided
       by operating activities:
          Depreciation and amortization of premises and equipment                            518              497
          Provision for loan losses                                                          285              120
          Amortization of premiums and accretion of discounts, net                          (124)               9
          Amortization of intangible assets and mortgage servicing rights                     13               12
          Amortization of deferred loan costs                                                209              197
          Realized (gains) losses on sales of available for sale securities, net             391             (194)
          Net gains on sales of loans                                                         (8)             (22)
          Originations of loans sold                                                      (1,263)          (1,617)
          Proceeds from the sale of loans                                                  1,261            1,615
          Stock compensation expense                                                          83               16
          Earnings on bank owned life insurance, net                                        (150)            (144)
          Increase in accrued interest receivable                                             (8)            (107)
          Increase in prepaid expenses and other assets                                     (387)            (225)
          Increase (decrease) in accrued interest payable                                     70              (93)
          Increase in accrued expenses and other liabilities                               2,493              324
                                                                                   -------------    -------------
       Net cash provided by operating activities                                           5,199            2,400
                                                                                   -------------    -------------

Cash flows from investing activities
    Loan originations and principal collections, net                                     (21,716)         (13,155)
    Available for sale securities:
             Sales                                                                            --            1,275
             Maturities, repayments and calls                                             61,518           13,869
             Purchases                                                                   (67,664)         (12,136)
    Purchase of federal bank stocks                                                         (228)            (391)
    Purchases of premises and equipment                                                     (771)            (324)
                                                                                   -------------    -------------
       Net cash used in investing activities                                             (28,861)         (10,862)
                                                                                   -------------    -------------

Cash flows from financing activities
    Net increase (decrease) in deposits                                                   34,089           (8,345)
    Net increase in short-term borrowed funds                                              7,860            7,600
    Dividends paid on common stock                                                        (1,217)          (1,103)
                                                                                   -------------    -------------
       Net cash provided by (used in) financing activities                                40,732           (1,848)
                                                                                   -------------    -------------

Net increase (decrease) in cash and cash equivalents                                      17,070          (10,310)
Cash and cash equivalents at beginning of period                                          10,483           16,717
                                                                                   -------------    -------------
Cash and cash equivalents at end of period                                         $      27,553    $       6,407
                                                                                   =============    =============

Supplemental information:
    Interest paid                                                                  $       6,024    $       5,953
    Income taxes paid                                                                        270              366
Supplemental noncash disclosure:
    Transfers from loans to foreclosed real estate                                           130               --

</TABLE>


See accompanying notes to consolidated financial statements.


                                                            3
<PAGE>

<TABLE>
<CAPTION>

                                       Emclaire Financial Corp. and Subsidiary
                             Consolidated Statements of Changes in Stockholders' Equity
                    For the three and nine months ended September 30, 2008 and 2007 (Unaudited)
                                (Dollar amounts in thousands, except per share data)


                                                               For the three months ended        For the nine months ended
                                                                      September 30,                    September 30,
                                                             ------------------------------    ------------------------------
                                                                 2008             2007             2008             2007
                                                             -------------    -------------    -------------    -------------

<S>                                                          <C>              <C>              <C>              <C>
Balance at beginning of period                               $      25,005    $      23,990    $      24,703    $      23,917

Net income                                                             716              754            1,816            2,012

Other comprehensive income (loss):
      Change in net unrealized gains (losses) on available
        for sale securities, net of taxes                              (43)             381             (263)              47
      Less reclassification adjustment for (gains) losses
        included in net income, net of taxes                            76              (12)             257             (128)
                                                             -------------    -------------    -------------    -------------
      Other comprehensive income (loss)                                 33              369               (6)             (81)
                                                             -------------    -------------    -------------    -------------

Total comprehensive income                                             749            1,123            1,810            1,930

Stock compensation expense                                              31               15               83               16

Dividends declared                                                    (406)            (368)          (1,217)          (1,103)
                                                             -------------    -----------------------------------------------

Balance at end of period                                     $      25,379    $      24,760    $      25,379    $      24,760
                                                             =============    =============    =============    =============

Common cash dividend per share                               $        0.32    $        0.29    $        0.96    $        0.87
                                                             =============    =============    =============    =============

</TABLE>


See accompanying notes to consolidated financial statements.


                                                                   4
<PAGE>

                     Emclaire Financial Corp. and Subsidiary
             Notes to Consolidated Financial Statements (Unaudited)

1.       Nature of Operations and Basis of Presentation.

         Emclaire Financial Corp. (the "Corporation") is a Pennsylvania  company
         organized as the holding  company of Farmers  National Bank of Emlenton
         (the "Bank").  The Corporation provides a variety of financial services
         to  individuals   and   businesses   through  its  offices  in  western
         Pennsylvania.  Its primary deposit  products are checking,  savings and
         certificate of deposit  accounts and its primary  lending  products are
         residential and commercial mortgages,  commercial business and consumer
         loans.

         The  consolidated  financial  statements  include  the  accounts of the
         Corporation and its wholly owned subsidiary, the Bank. All intercompany
         transactions  and  balances  have  been  eliminated  in  preparing  the
         consolidated financial statements.

         The accompanying  unaudited  consolidated  financial statements for the
         interim periods include all adjustments, consisting of normal recurring
         accruals, which are necessary, in the opinion of management,  to fairly
         reflect the Corporation's  consolidated  financial position and results
         of operations.  Additionally,  these consolidated  financial statements
         for  the  interim   periods  have  been  prepared  in  accordance  with
         instructions for the Securities and Exchange Commission's Form 10-Q and
         therefore do not include all  information or footnotes  necessary for a
         complete presentation of financial condition, results of operations and
         cash flows in conformity with accounting  principles generally accepted
         in the United States of America. For further information,  refer to the
         audited consolidated financial statements and footnotes thereto for the
         year ended  December 31, 2007, as contained in the  Corporation's  2007
         Annual  Report of Form 10-K  filed  with the  Securities  and  Exchange
         Commission.

         The  balance  sheet at  December  31,  2007 has been  derived  from the
         audited financial  statements at that date but does not include all the
         information  and footnotes  required by generally  accepted  accounting
         principles for complete financial statements.

         The preparation of financial statements,  in conformity with accounting
         principles generally accepted in the United States of America, requires
         management to make estimates and  assumptions  that affect the reported
         amounts  in the  consolidated  financial  statements  and  accompanying
         notes.  Actual  results  could  differ from those  estimates.  Material
         estimates that are  particularly  susceptible to significant  change in
         the near term relate to the  determination  of the  allowance  for loan
         losses. The results of operations for interim quarterly or year to date
         periods  are not  necessarily  indicative  of the  results  that may be
         expected  for the  entire  year or any other  period.  Certain  amounts
         previously  reported  may have  been  reclassified  to  conform  to the
         current year's financial statement presentation.

2.       Earnings per Common Share.

         Basic earnings per common share (EPS) excludes dilution and is computed
         by dividing net income by the weighted  average number of common shares
         outstanding  during the period.  Diluted  EPS  reflects  the  potential
         dilution  that could occur if  securities  or contracts to issue common
         stock were  exercised or converted into common stock or resulted in the
         issuance  of common  stock  that then  shared  in the  earnings  of the
         Corporation. Options on 85,000 shares of common stock were not included
         in computing  diluted earnings per share because their effects were not
         dilutive for the three and nine months periods ended September 30, 2008
         and 2007.


                                       5
<PAGE>

3.       Securities.

         The Corporation's  securities as of the respective dates are summarized
         as follows:

<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)                          Amortized     Unrealized       Unrealized         Fair
                                                         cost           gains           losses           value
-----------------------------------------------------------------------------------------------------------------
<S>                                                   <C>            <C>             <C>             <C>
Available for sale:
-------------------
   September 30, 2008:
      U.S. Government agencies and related entities   $     17,988   $         42    $       (113)   $     17,917
      Mortgage-backed securities                            19,801            124             (70)         19,855
      Municipal securities                                  13,297            366              --          13,663
      Corporate securities                                   2,994             --              --           2,994
      Equity securities                                      3,874             --            (505)          3,369
                                                      ------------   ------------    ------------    ------------
                                                      $     57,954   $        531    $       (687)   $     57,798
                                                      ============   ============    ============    ============
   December 31, 2007:
      U.S. Government agencies and related entities   $     29,356   $         37    $        (59)   $     29,334
      Mortgage-backed securities                             1,932             --             (48)          1,884
      Municipal securities                                  13,685            566              --          14,251
      Corporate securities                                   2,939             --              --           2,939
      Equity securities                                      4,156             --            (645)          3,511
                                                      ------------   ------------    ------------    ------------
                                                      $     52,068   $        603    $       (752)   $     51,919
                                                      ============   ============    ============    ============
-----------------------------------------------------------------------------------------------------------------

</TABLE>

         Management  evaluates securities for other than temporary impairment at
         least on a quarterly basis,  and more frequently when economic,  market
         or other concerns  warrant such  evaluation.  Consideration is given to
         (1) the  length of time and the extent to which the fair value has been
         less than cost, (2) the financial  condition and near-term prospects of
         the issuer and (3) the intent and ability of the  Corporation to retain
         its  investment in the issuer for a period of time  sufficient to allow
         for any anticipated recovery in fair value.

         Effective  September 30, 2008,  management  evaluated the Corporation's
         investment portfolio and determined that a $51,322 other than temporary
         impairment  existed  on  Fannie  Mae stock  and a  $65,047  other  than
         temporary  impairment  existed on Freddie Mac stock.  The impairment of
         these  securities  was  considered  to be other than  temporary  due to
         continued  concerns  related to the  financial  condition and near-term
         prospects of the issuers, economic conditions of the financial services
         industry and deteriorating market values. These securities were written
         down to their  fair  market  value  as of  September  30,  2008 and the
         resulting  impairment  losses were  recognized  in earnings  during the
         third  quarter of 2008.  This  impairment  charge was in  addition to a
         $275,000 other than temporary  impairment charge recorded at the end of
         the second quarter of 2008.

         There were no other  unrealized  losses that were considered other than
         temporary at September 30, 2008.


                                       6
<PAGE>

4.       Loans Receivable.

         The  Corporation's  loans  receivable  as of the  respective  dates are
         summarized as follows:

<TABLE>
<CAPTION>

         ------------------------------------------------------------------------------
         (Dollar amounts in thousands)                   September 30,   December 31,
                                                             2008            2007
         ------------------------------------------------------------------------------
<S>                                                       <C>             <C>
         Mortgage loans on real estate:
               Residential first mortgages                $      67,529   $      65,706
               Home equity loans and lines of credit             56,859          49,426
               Commercial real estate                            79,684          71,599
                                                          -------------   -------------
                                                                204,072         186,731
         Other loans:
               Commercial business                               40,171          35,566
               Consumer                                           9,163           9,679
                                                          -------------   -------------
                                                                 49,334          45,245
                                                          -------------   -------------

         Total loans, gross                                     253,406         231,976

         Less allowance for loan losses                           2,363           2,157
                                                          -------------   -------------

         Total loans, net                                 $     251,043   $     229,819
                                                          =============   =============
         ------------------------------------------------------------------------------

</TABLE>

5.       Deposits.

<TABLE>
<CAPTION>

         The Corporation's deposits as of the respective dates are summarized as
         follows:

         --------------------------------------------------------------------------------
         (Dollar amounts in thousands)        September 30, 2008      December 31, 2007
         --------------------------------------------------------------------------------
               Type of accounts               Amount        %         Amount         %
         --------------------------------------------------------------------------------
         <S>                                 <C>            <C>      <C>            <C>
         Non-interest bearing deposits       $ 48,316       17.3%    $ 47,111       19.3%
         Interest bearing demand deposits     103,487       37.2%      77,614       31.8%
         Time deposits                        126,548       45.5%     119,537       48.9%
                                             --------    --------    --------    --------

                                             $278,351      100.0%    $244,262      100.0%
                                             ========    ========    ========    ========
         --------------------------------------------------------------------------------

</TABLE>

6.       Guarantees.

         The  Corporation  does not  issue any  guarantees  that  would  require
         liability recognition or disclosure,  other than its standby letters of
         credit. Standby letters of credit are conditional commitments issued by
         the  Corporation to guarantee the  performance of a customer to a third
         party.  Of these letters of credit at September 30, 2008,  $81,000 will
         expire within the next seven months,  $684,000 will automatically renew
         within the next twelve  months and $305,000  will  automatically  renew
         within thirteen to seventeen months. The Corporation,  generally, holds
         collateral  and/or personal  guarantees  supporting these  commitments.
         Management believes that the proceeds obtained through a liquidation of
         collateral  and the  enforcement  of guarantees  would be sufficient to
         cover  the  potential  amount  of future  payments  required  under the
         corresponding  guarantees.  The credit risk involved in issuing letters
         of  credit  is  essentially  the same as those  that  are  involved  in
         extending  loan  facilities  to  customers.  The current  amount of the
         liability as of September 30, 2008 for guarantees under standby letters
         of credit issued is not material.


                                       7
<PAGE>

7.       Employee Benefit Plans.

         The Corporation  maintains a defined contribution 401(k) Plan. Eligible
         employees participate by providing tax-deferred contributions up to 20%
         of qualified  compensation.  Employee  contributions  are vested at all
         times. The Corporation provides a matching  contribution of up to 4% of
         the participant's  salary.  Matching  contributions for the nine months
         ended  September  30, 2008 and 2007  amounted to $113,000 and $100,000,
         respectively.

         The  Corporation  provides  pension  benefits  for  eligible  employees
         through a defined  benefit  pension plan.  Substantially  all full-time
         employees  participate  in the  retirement  plan on a  non-contributing
         basis and are fully vested after three years of service.

         The Corporation uses December 31 as the measurement date for its plans.

         The components of the periodic pension cost are as follows:

<TABLE>
<CAPTION>

         ------------------------------------------------------------------------------------------------------------------------
         (Dollar amounts in thousands)            For the three months ended        For the nine months ended        Year ended
                                                         September 30,                     September 30,            December 31,
                                                ------------------------------    ------------------------------    -------------
                                                    2008             2007             2008             2007             2007
         ----------------------------------------------------    -------------    -------------    -------------    -------------
         <S>                                    <C>              <C>              <C>              <C>              <C>
         Service cost                           $          73    $          66    $         199    $         180    $         238
         Interest cost                                     71               68              213              198              262
         Expected return on plan assets                   (79)             (74)            (237)            (228)            (303)
         Transition asset                                  --                4               --               --               --
         Prior service costs                               (8)              (8)             (24)             (24)             (31)
         Recognized net actuarial (gain) loss               4               10               12               24               31
                                                -------------    -------------    -------------    -------------    -------------

         Net periodic pension cost              $          61    $          66    $         163    $         150    $         197
                                                =============    =============    =============    =============    =============
         ------------------------------------------------------------------------------------------------------------------------

</TABLE>

         The  expected  rate of return on plan  assets was 8.50% for the periods
         ended September 30, 2008 and 2007. The Corporation contributed $335,000
         to its pension  plan for the 2008 plan year  during the  quarter  ended
         September 30, 2008.

8.       Stock Compensation Plans.

         In May 2007, the Corporation  adopted the 2007 Stock Incentive Plan and
         Trust.  Under the  Plan,  the  Corporation  may  grant  options  to its
         directors,  officers and employees  for up to 177,496  shares of common
         stock.  Incentive stock options,  non-incentive  or compensatory  stock
         options and share  awards may be granted  under the Plan.  The exercise
         price of each option  shall at least equal the market  price of a share
         of common stock on the date of grant and have a contractual term of ten
         years.  Options shall vest and become  exercisable  at the rate, to the
         extent  and  subject to such  limitations  as may be  specified  by the
         Corporation.  Effective  May 2007,  the  Corporation  adopted  SFAS No.
         123(R),  Share-Based  Payment,  which requires that  compensation  cost
         related  to  share-based  payment  transactions  be  recognized  in the
         financial  statements with measurement based upon the fair value of the
         equity or liability  instruments  issued.  For the  nine-month  periods
         ended September 30, 2008 and 2007, the Corporation  recognized  $83,000
         and $16,000, respectively, in compensation expense for stock options.

         The fair value of each option  grant is  estimated on the date of grant
         using  the  Black-Scholes   option-pricing  model  with  the  following
         weighted average assumptions:

         --------------------------------------------------------------
                                              For the nine months ended
                                                 September 30, 2008
         --------------------------------------------------------------
         Dividend yield                                  4.46%
         Expected life                                 10 years
         Expected volatility                            14.09%
         Risk-free interest rate                         5.10%
         --------------------------------------------------------------


                                       8
<PAGE>

8.       Stock Compensation Plans (continued).

         The   expected   volatility   is  based  on   historical   stock  price
         fluctuations.  The  risk-free  interest  rates for  periods  within the
         contractual  life of the  awards are based on the U.S.  Treasury  yield
         curve in effect at the time of the grant. The expected life is based on
         the maximum term of the options. The dividend yield assumption is based
         on the Corporation's history and expectation of dividend payouts.

         A summary of option  activity  under the Plan as of September 30, 2008,
         and changes during the period then ended is presented below:


<TABLE>
<CAPTION>

         ----------------------------------------------------------------------------------------------------------------------
                                                                                                               Weighted-Average
                                                                         Weighted-Average      Aggregate        Remaining Term
                                                          Options         Exercise Price    Intrinsic Value       (in years)
                                                      ----------------   ----------------   ----------------   ----------------
         <S>                                          <C>                <C>                <C>                <C>
         Outstanding at the beginning of the year               84,000   $          26.00                                   8.7
         Granted                                                 5,500              25.90                                   9.6
         Exercised                                                  --                 --                                    --
         Forfeited                                               4,500              26.00                                    --
                                                      ----------------   ----------------   ----------------   ----------------
         Outstanding as of September 30, 2008                   85,000   $          25.99   $             --                8.8
                                                      ================   ================   ================   ================

         Exercisable as of Septemer 30, 2008                        --   $             --   $             --                 --
                                                      ================   ================   ================   ================

         ----------------------------------------------------------------------------------------------------------------------

</TABLE>

         A summary of the  status of the  Corporation's  nonvested  shares as of
         September  30,  2008,  and  changes  during  the  period  then ended is
         presented below:

<TABLE>
<CAPTION>

            -----------------------------------------------------------------------------------------------------
                                                                                              Weighted-Average
                                                                           Options          Grant-date Fair Value
                                                                    ---------------------   ---------------------
            <S>                                                     <C>                     <C>
            Nonvested at the beginning of the year                                 84,000   $                3.39
            Granted                                                                 5,500                    2.90
            Vested                                                                     --                      --
            Forfeited                                                               4,500                      --
                                                                    ---------------------   ---------------------
            Nonvested as of September 30, 2008                                     85,000   $                3.36
                                                                    =====================   =====================
            -----------------------------------------------------------------------------------------------------

</TABLE>

         As of  September  30, 2008,  there was  $172,000 of total  unrecognized
         compensation  cost  related  to  nonvested   share-based   compensation
         arrangements  granted  under the  Plan.  That  cost is  expected  to be
         recognized over an average period of 1.8 years.

9.       Fair Values of Financial Instruments.

         In September  2006,  the Financial  Accounting  Standards  Board (FASB)
         issued Statement of Financial Accounting Standards (SFAS) No. 157, Fair
         Value Measurements (SFAS 157), which defines fair value,  establishes a
         framework for measuring fair value under generally accepted  accounting
         principles   (GAAP),   and   expands   disclosures   about  fair  value
         measurements.  SFAS 157 applies to other accounting pronouncements that
         require  or  permit  fair  value  measurements.  The  new  guidance  is
         effective for financial  statements  issued for fiscal years  beginning
         after  November 15, 2007,  and for interim  periods within those fiscal
         years. The Corporation  adopted SFAS 157 effective  January 1, 2008 for
         financial assets and liabilities that are measured and reported at fair
         value. There was no impact from the adoption of SFAS 157 on the amounts
         reported in the consolidated  financial statements.  The primary effect
         of SFAS 157 on the Corporation  was to expand the required  disclosures
         pertaining to the methods used to determine fair values.

         SFAS 157 establishes a fair value hierarchy that prioritizes the inputs
         to valuation  methods used to measure fair value.  The hierarchy  gives
         the highest priority to unadjusted  quoted prices in active markets for
         identical assets or liabilities  (Level 1 measurements)  and the lowest
         priority  to  unobservable  inputs  (Level 3  measurements).  The three
         levels of the fair value hierarchy under SFAS 157 are as follows:


                                       9
<PAGE>

9.       Fair Values of Financial Instruments (continued).

                  Level 1:  Unadjusted  quoted prices in active markets that are
                  accessible at the measurement date for identical, unrestricted
                  assets or liabilities.

                  Level 2:  Quoted  prices in markets  that are not  active,  or
                  inputs that are observable either directly or indirectly,  for
                  substantially the full term of the asset or liability.

                  Level 3: Prices or valuation  techniques  that require  inputs
                  that are both  significant to the fair value  measurement  and
                  unobservable   (i.e.   supported  with  little  or  no  market
                  activity).

         An asset or liability's  level within the fair value hierarchy is based
         on the  lowest  level of input  that is  significant  to the fair value
         measurement.

         For assets measured at fair value on a recurring  basis, the fair value
         measurements by level within the fair value hierarchy used at September
         30, 2008 are as follows:

<TABLE>
<CAPTION>

      ------------------------------------------------------------------------------------------------------------------------
      (Dollar amounts in thousands)                                   (Level 1)            (Level 2)
                                                                   Quoted Prices in       Significant           (Level 3)
                                                                    Active Markets           Other             Significant
                                                                    for Identical          Observable          Unobservable
      Description                            September 30, 2008         Assets               Inputs               Inputs
                                             ------------------   ------------------   ------------------   ------------------
      <S>                                    <C>                  <C>                  <C>                  <C>
      Securities available for sale          $           57,798   $            3,369   $           54,428   $               --

                                             ------------------   ------------------   ------------------   ------------------
                                             $           57,798   $            3,369   $           54,428   $               --
                                             ==================   ==================   ==================   ==================
      ------------------------------------------------------------------------------------------------------------------------

</TABLE>

         The  Corporation's  adoption of SFAS 157 applies only to its  financial
         instruments  required to be reported at fair value.  The adoption  does
         not apply to non-financial  assets and non-financial  liabilities until
         January  1,  2009 in  accordance  with  FSP FAS  157-2.  The  following
         valuation  technique  was used to  measure  fair value of assets in the
         table above on a recurring basis as of September 30, 2008:

         Available  for  sale  securities  - Fair  value on  available  for sale
         securities  were based upon a market  approach.  Prices for  securities
         that are fixed income  instruments  that are not quoted on an exchange,
         but are traded in active markets, are obtained through third party data
         service providers or dealer market  participants  which the Corporation
         has  historically  transacted  both  purchases  and sales of investment
         securities.  As of September 30, 2008, all fair values on available for
         sale  securities  were based on prices  obtained from these sources and
         were based on actual market quotations for each specific security.

10.      Adoption of New Accounting Standards.

         The Corporation adopted the Financial Accounting Standards Board (FASB)
         Statement of Financial  Accounting Standards (SFAS) No. 157, Fair Value
         Measurements  (SFAS 157) effective January 1, 2008 for financial assets
         and liabilities that are measured and reported at fair value. There was
         no impact from the adoption of SFAS 157 on the amounts  reported in the
         consolidated  financial  statements.  The primary effect of SFAS 157 on
         the Corporation was to expand  required  disclosures  pertaining to the
         methods used to determine fair values. See note 9 for further detail.

11.      Merger Conversion.

         On October 17, 2008, the Corporation completed a merger conversion with
         Elk  County   Savings   and  Loan   Association   (ECSLA)  in  Ridgway,
         Pennsylvania. ECSLA merged with and into the Bank, with the Bank as the
         surviving institution. As a result of the merger, the Corporation added
         approximately   $7.4   million,   $6.2   million,   and  $4.5  million,
         respectively,  in loans,  deposits and equity.  In connection with this
         transaction,  the  Corporation  offered between a minimum of 92,435 and
         maximum of 200,000  shares of its common  stock to eligible  depositors
         and borrowers of ECSLA and to the general public. Orders for a total of
         163,569 shares of the  Corporation's  common stock at a price of $21.15
         were  accepted  in  the  offering,   resulting  in  gross  proceeds  of
         $3,459,484.  Proceeds received prior to the merger date were classified
         as a liability on the  Corporation's  consolidated  balance sheet as of
         September 30, 2008.  These funds were  reclassified  to equity upon the
         issuance of common shares on October 17, 2008. The Corporation  intends
         to use the proceeds to support future loan and asset growth,  to expand
         its business operations and for general corporate purposes.


                                       10
<PAGE>

12.      Effect of Recently Issued Accounting Standards.

         In February  2007,  the FASB issued SFAS No. 159, The Fair Value Option
         for Financial Assets and Financial Liabilities - Including an amendment
         of FASB  Statement  No. 115 (SFAS 159).  SFAS 159  permits  entities to
         choose to measure many financial instruments and certain other items at
         fair  value.  Unrealized  gains and  losses on items for which the fair
         value option has been elected  will be  recognized  in earnings at each
         subsequent  reporting  date.  SFAS 159 is effective for the Corporation
         January 1, 2008. This new accounting pronouncement had no effect on the
         Corporation's  consolidated  financial  statements  as the  Corporation
         elected not to adopt SFAS 159.

         In  December  2007,   the  FASB  issued  SFAS  No.   141(R),   Business
         Combinations   (SFAS  141R).  SFAS  141R  establishes   principles  and
         requirements for how the acquirer of a business recognizes and measures
         in its financial  statements  the  identifiable  assets  acquired,  the
         liabilities assumed,  and any noncontrolling  interest in the acquiree.
         SFAS 141R also  provides  guidance for  recognizing  and  measuring the
         goodwill  acquired in the  business  combination  and  determines  what
         information to disclose to enable users of the financial  statements to
         evaluate the nature and financial effects of the business  combination.
         The guidance  will become  effective for fiscal years  beginning  after
         December 15, 2008. This new pronouncement will impact the Corporation's
         accounting for business  combinations  completed  beginning  January 1,
         2009.

         In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interest
         in Consolidated Financial Statements - An Amendment of ARB No. 51 (SFAS
         160). SFAS 160 establishes  accounting and reporting  standards for the
         noncontrolling  interest in a subsidiary and for the deconsolidation of
         a  subsidiary.  The  guidance  will become  effective  for fiscal years
         beginning after December 15, 2008,  which for the  Corporation  will be
         January 1, 2009. The Corporation  believes that this new  pronouncement
         will  have  an  immaterial   impact  on  its   consolidated   financial
         statements.

         In April 2008,  the FASB issued FASB Staff  Position  (FSP) SFAS 142-3,
         Determination of the Useful Life of Intangible Assets.  This FSP amends
         the  factors  that  should  be  considered  in  developing  renewal  or
         extension assumptions used to determine the useful life of a recognized
         intangible asset under SFAS 142, Goodwill and Other Intangible  Assets.
         The intent of this FSP is to improve the consistency between the useful
         life of a recognized  intangible asset under SFAS 142 and the period of
         expected  cash flows used to measure  the fair value of the asset under
         SFAS  141R  and  other  GAAP.  This  FSP  is  effective  for  financial
         statements  issued for fiscal years  beginning after December 15, 2008,
         and interim  periods  within  those  fiscal  years.  Early  adoption is
         prohibited.  The  Corporation  is currently  evaluating  the  potential
         impact the new  pronouncement  will have on its consolidated  financial
         statements.

         In May 2008,  the FASB issued SFAS No. 162, The  Hierarchy of Generally
         Accepted  Accounting  Principles  (SFAS 162).  SFAS 162  identifies the
         sources of  accounting  principles  and the framework for selecting the
         principles  used  in the  preparation  of  financial  statements.  This
         Statement  is  effective 60 days  following  the SEC's  approval of the
         Public Company Accounting Oversight Board amendments to AU Section 411,
         The Meaning of Present  Fairly in Conformity  with  Generally  Accepted
         Accounting  Principles.  The  Corporation  is currently  evaluating the
         potential  impact the new  pronouncement  will have on its consolidated
         financial statements.

         In June  2008,  the FASB  ratified  EITF  Issue No.  07-5,  Determining
         Whether  an  Instrument  (or an  Embedded  Feature)  is  Indexed  to an
         Entity's  Own Stock  (EITF  07-5).  EITF 07-5  provides  that an entity
         should use a two step  approach  to evaluate  whether an  equity-linked
         financial instrument (or embedded feature) is indexed to its own stock,
         including   evaluating  the   instrument's   contingent   exercise  and
         settlement provisions. It also clarifies the impact of foreign currency
         denominated  strike  prices  and  market-based  employee  stock  option
         valuation  instruments on the evaluation.  EITF is effective for fiscal
         years  beginning  after December 15, 2008. The Corporation is currently
         evaluating the potential impact the new pronouncement  will have on its
         consolidated financial statements.


                                       11
<PAGE>

12.      Effect of Recently Issued Accounting Standards (continued).

         In October 2008,  the FASB issued FSP SFAS No. 157-3,  Determining  the
         Fair Value of a  Financial  Asset When the Market for That Asset Is Not
         Active  (FSP  157-3).   This  FSP  clarifies  the  application  of  the
         provisions  of SFAS 157 in an inactive  market and how an entity  would
         determine  fair value in an  inactive  market.  FSP 157-3 is  effective
         immediately  and  applies  to  the  Corporation's  September  30,  2008
         financial statements. The application of the provisions of FSP157-3 did
         not  materially   affect  the  Corporation's   consolidated   financial
         statements.

Item 2. Management's  Discussion and Analysis of Financial Condition and Results
--------------------------------------------------------------------------------
of Operations
-------------

This section  discusses  the  consolidated  financial  condition  and results of
operations of Emclaire Financial Corp. (the  "Corporation") and its wholly owned
subsidiary  bank,  the Farmers  National Bank of Emlenton (the "Bank"),  for the
three and nine months ended  September  30, 2008 compared to the same periods in
2007 and should be read in conjunction with the Corporation's  December 31, 2007
Annual Report on Form 10-K filed with the Securities and Exchange Commission and
with the accompanying  consolidated  financial statements and notes presented on
pages 1 through 11 of this Form 10-Q.

The  Private  Securities  Litigation  Reform Act of 1995  contains  safe  harbor
provisions regarding forward-looking  statements.  When used in this discussion,
the words "believes," "anticipates,"  "contemplates" and similar expressions are
intended to identify forward-looking  statements. Such statements are subject to
certain  risks and  uncertainties  that  could  cause  actual  results to differ
materially from those projected.  Those risks and uncertainties  include changes
in  interest  rates,  the  ability to control  costs and  expenses  and  general
economic  conditions.  The  Corporation  does not  undertake,  and  specifically
disclaims any obligation,  to update any  forward-looking  statements to reflect
occurrences  or  unanticipated  events or  circumstances  after the date of such
statements.

CHANGES IN FINANCIAL CONDITION

Total assets  increased  $45.2  million to $356.9  million at September 30, 2008
from $311.7  million at December 31, 2007.  This 14.5%  increase  resulted  from
increases in cash and cash equivalents,  securities and loans receivable, net of
allowance for loan losses,  of $17.1  million,  $5.9 million and $21.2  million,
respectively.  The increase in the Corporation's  assets was primarily funded by
increases in customer deposits and borrowed funds.

Non-performing  assets to total assets  decreased to 0.22% at September 30, 2008
compared to 0.33% at December  31, 2007.  The Bank has a $2.3  million  personal
loan  that was not  included  as a  non-performing  asset  for  purposes  of the
September 30, 2008 calculation that has exhibited credit weaknesses and has been
classified as substandard.  This loan is secured by local real property  pledged
by an  associate  of the  borrower  as well as  proceeds  from a life  insurance
policy. The Bank is in negotiations with the borrower, who has continued to make
scheduled  payments.  Due to the low loan to value ratio at the time of the loan
origination  in March 2006, the Bank does not believe it will incur any material
losses on this loan.

Total  liabilities  increased  $44.5 million to $331.5  million at September 30,
2008 from $287.0 million at December 31, 2007, while total stockholders'  equity
increased  $676,000 to $25.4 million at September 30, 2008 from $24.7 million at
December 31, 2007. This 15.5% increase in total liabilities  resulted  primarily
from increases in customer deposits and borrowed funds of $34.1 million and $7.9
million, respectively.

RESULTS OF OPERATIONS

Comparison of Results for the Three Month  Periods Ended  September 30, 2008 and
2007

General.  Net income decreased  $38,000 or 5.1% to $716,000 for the three months
ended  September  30,  2008 from  $754,000  for the same  period  in 2007.  This
decrease  was the  result of  increases  in the  provision  for loan  losses and
noninterest  expense of $95,000  and  $41,000,  respectively,  and a decrease in
noninterest  income of $76,000,  partially offset by an increase in net interest
income of $134,000 and a decrease in the provision for income taxes of $40,000.


                                       12
<PAGE>

The decrease in noninterest income resulted as the Corporation realized security
losses of $116,000 for the three months ended  September 30, 2008 related to two
marketable equity securities that were determined to be impaired.

Net interest  income.  Net interest  income on a tax equivalent  basis increased
$125,000 or 4.6% to $2.8 million for the three months ended  September  30, 2008
from  $2.7  million  for the same  period  in 2007.  This  net  increase  can be
attributed  to an  increase  in tax  equivalent  interest  income  of  $303,000,
partially offset by an increase in interest expense of $178,000.

Interest income. Interest income on a tax equivalent basis increased $303,000 or
6.5% to $4.9 million for the three months ended September 30, 2008,  compared to
$4.6  million  for the same  period  in the prior  year.  This  increase  can be
attributed to increases in interest on loans,  securities  and  interest-earning
deposits with banks of $122,000, $152,000 and $47,000,  respectively,  partially
offset by a decrease in interest on federal bank stocks of $9,000.

Tax equivalent interest earned on loans receivable increased $119,000 or 3.0% to
$4.1  million for the three months ended  September  30, 2008,  compared to $3.9
million for the same  period in 2007.  This  increase  resulted  primarily  from
average  loans  increasing  $23.2 million or 10.3%,  accounting  for $394,000 in
additional loan interest  income.  This increase can be primarily  attributed to
growth in the Corporation's  commercial loan portfolios.  Offsetting this volume
increase,  the yield on loans receivable  decreased 45 basis points to 6.56% for
the three months ended  September 30, 2008,  versus 7.01% for the same period in
2007,  accounting for a $275,000  decrease in interest  income.  Contributing to
this decrease in the average yield on loans receivable were the recent decreases
in short-term market interest rates.

In addition,  the Corporation  collected $60,000 of interest due associated with
the  payoff of a  commercial  loan in August  2007 that had been on  non-accrual
status.  In  connection  with the loan  payoff,  the  Corporation  received  all
principal and interest due under the contractual terms of the loan agreement and
interest  collected was recorded as loan interest income during the three months
ended September 30, 2007.

Tax  equivalent  interest  earned on securities  increased  $147,000 or 23.2% to
$780,000 for the three months ended September 30, 2008, compared to $633,000 for
the same  period in 2007.  The  average  volume of  securities  increased  $14.2
million,  accounting for a $173,000 increase in interest income. Offsetting this
volume  increase,  the average yield on securities  decreased 19 basis points to
4.84% for the three months ended  September 30, 2008,  versus 5.03% for the same
period in 2007, as a result of certain higher yielding securities maturing. This
unfavorable yield variance accounted for a $26,000 decrease in interest income.

Interest earned on interest-earning deposit accounts increased $47,000 or 783.3%
to $53,000 for the three  months  ended  September  30, 2008 from $6,000 for the
same period in 2007. The average  volume of these assets  increased $8.2 million
or 180.4%, primarily as a result of an increase in customer deposits, increasing
interest income by $52,000.  Offsetting this volume increase,  the average yield
on interest-earning deposit accounts decreased 314 basis points to 2.44% for the
three months ended September 30, 2008,  compared to 5.58% for the same period in
the prior  year,  accounting  for a $6,000  decrease  in  interest  income.  The
decrease in the average yield reflects the recent decreases in short-term market
interest rates.  Dividends on federal bank stocks  decreased  $9,000 or 25.7% to
$26,000 for the three month period ended September 30, 2008 from $35,000 for the
same  period in 2007.  The average  yield on these  assets  decreased  250 basis
points to 3.58% for the three months ended September 30, 2008, compared to 6.08%
for the same  period  the  prior  year,  accounting  for a $17,000  decrease  in
interest income.  Offsetting this rate decrease, the average volume of dividends
on bank stock  increased  $609,000 or 26.7% to $2.9 million for the three months
ended September 30, 2008, compared to $2.3 million for the same period the prior
year, accounting for an $8,000 increase in interest income.

Interest expense.  Interest expense  increased  $178,000 or 9.2% to $2.1 million
for the three months ended September 30, 2008,  compared to $1.9 million for the
same period in 2007.  This increase in interest  expense can be attributed to an
increase in interest  incurred on  deposits  and  borrowed  funds of $72,000 and
$106,000, respectively.


                                       13
<PAGE>

Interest  expense  incurred on  borrowed  funds  increased  $106,000 or 29.4% to
$467,000 for the three months ended September 30, 2008, compared to $361,000 for
the same period in the prior  year.  This  increase  in interest  expense can be
attributed  to the  increase in the average  balance of borrowed  funds of $13.8
million or 43.0% to $45.9 million for the three months ended September 30, 2008,
compared to $32.1  million  for the same  period in the prior year  contributing
$143,000 in  additional  expense.  This volume  increase  was the result of $5.0
million of FHLB long-term  borrowings  placed in the fourth quarter of 2007 used
primarily  to  fund  loan  growth  and a $8.8  million  increase  in  short-term
borrowings  used to fund security  purchases.  Partially  offsetting this volume
increase,  the cost of borrowed funds decreased 41 basis points to 4.05% for the
three months ended September 30, 2008,  compared to 4.46% for the same period in
2007 causing a $37,000 decrease in interest expense.

Interest expense incurred on deposits  increased $72,000 or 4.6% to $1.7 million
for the three months ended September 30, 2008 compared $1.6 million for the same
period in 2007. The average volume of interest-bearing  deposits increased $28.5
million  to $220.8  million  for the three  months  ended  September  30,  2008,
compared  to  $192.3  million  for the same  period in 2007  causing a  $221,000
increase  in  interest  expense.  Partially  offsetting  this  favorable  volume
variance,  the cost of  interest-bearing  deposits  decreased 29 basis points to
2.97% for the three months ended  September 30, 2008,  compared to 3.26% for the
same period in 2007 causing a $149,000 decrease in interest expense.


                                       14
<PAGE>

Average Balance Sheet and Yield/Rate  Analysis.  The following table sets forth,
for the periods  indicated,  information  concerning the total dollar amounts of
interest income from  interest-earning  assets and the resulting average yields,
the total dollar amounts of interest expense on interest-bearing liabilities and
the resulting  average costs, net interest income,  interest rate spread and the
net interest margin earned on average  interest-earning  assets. For purposes of
this table,  average loan  balances  include  non-accrual  loans and exclude the
allowance for loan losses and interest income includes accretion of net deferred
loan fees.  Interest and yields on tax-exempt  loans and securities  (tax-exempt
for federal income tax purposes) are shown on a fully tax equivalent  basis. The
information is based on average daily balances during the periods presented.

<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)                                              Three months ended September 30,
                                                     ------------------------------------------------------------------------------

                                                                       2008                                    2007
                                                     --------------------------------------  --------------------------------------
                                                        Average                   Yield /       Average                   Yield /
                                                        Balance      Interest      Rate         Balance      Interest      Rate
-----------------------------------------------------------------------------------------------------------------------------------

<S>                                                  <C>           <C>           <C>         <C>           <C>           <C>
Interest-earning assets:
------------------------
    Loans, taxable                                   $    241,985  $      3,995      6.57%   $    218,421  $      3,867      7.02%
    Loans, tax exempt                                       5,919            92      6.15%          6,255           102      6.46%
                                                     ------------- -------------             ------------- -------------
        Total loans receivable                            247,904         4,087      6.56%        224,676         3,969      7.01%
                                                     ------------- -------------             ------------- -------------
    Securities, taxable                                    50,196           550      4.36%         35,401           388      4.35%
    Securities, tax exempt                                 13,914           230      6.58%         14,543           245      6.68%
                                                     ------------- -------------             ------------- -------------
        Total securities                                   64,110           780      4.84%         49,944           633      5.03%
                                                     ------------- -------------             ------------- -------------
    Interest-earning deposits with banks                    8,644            53      2.44%            454             6      5.58%
    Federal bank stocks                                     2,892            26      3.58%          2,283            35      6.08%
                                                     ------------- -------------             ------------- -------------
        Total interest-earning cash equivalents            11,536            79      2.72%          2,737            41      6.00%
                                                     ------------- -------------             ------------- -------------
    Total interest-earning assets                         323,550         4,946      6.08%         277,357        4,643      6.64%
        Cash and due from banks                             5,935                                   5,770
        Other noninterest-earning assets                   15,082                                  14,774
                                                     -------------                           -------------
        Total Assets                                 $    344,567                            $    297,901
                                                     =============                           =============

Interest-bearing liabilities:
-----------------------------
    Interest-bearing demand deposits                 $     95,121           355      1.48%   $     73,740           240      1.29%
    Time deposits                                         125,711         1,295      4.10%        118,585         1,338      4.48%
                                                     ------------- -------------             ------------- -------------
        Total interest-bearing deposits                   220,832         1,650      2.97%        192,325         1,578      3.26%
                                                     ------------- -------------             ------------- -------------
    Borrowed funds, short-term                             10,894            72      2.63%          2,086            21      3.99%
    Borrowed funds, long-term                              35,000           395      4.49%         30,000           340      4.50%
                                                     ------------- -------------             ------------- -------------
        Total borrowed funds                               45,894           467      4.05%         32,086           361      4.46%
                                                     ------------- -------------             ------------- -------------
    Total interest-bearing liabilities                    266,726         2,117      3.16%        224,411         1,939      3.43%
                                                     ------------- -------------             ------------- -------------
        Noninterest-bearing demand deposits                50,064            --        --          46,334            --        --
                                                     ------------- -------------             ------------- -------------
           Funding and cost of funds                      316,790         2,117      2.66%        270,745         1,939      2.84%
        Other noninterest-bearing liabilities               2,723                                   2,930
                                                     -------------                           -------------
        Total Liabilities                                 319,513                                 273,675
        Stockholders' Equity                               25,054                                  24,226
                                                     -------------                           -------------
        Total Liabilities and Stockholders' Equity   $    344,567                            $    297,901
                                                     ============= -------------             ============= -------------
Net interest income                                                $      2,829                            $      2,704
                                                                   =============                           =============
Interest rate spread (difference between                                             2.92%                                   3.21%
                                                                                 ==========                              ==========
    weighted average rate on interest-earning
    assets and interest-bearing liabilities)
Net interest margin (net interest                                                    3.48%                                   3.87%
                                                                                 ==========                              ==========
    income as a percentage of average
    interest-earning assets)
-----------------------------------------------------------------------------------------------------------------------------------

</TABLE>


                                                                   15
<PAGE>

Analysis of Changes in Net Interest  Income.  The following  table  analyzes the
changes in  interest  income and  interest  expense in terms of: (1)  changes in
volume of  interest-earning  assets  and  interest-bearing  liabilities  and (2)
changes in yields and rates.  The table  reflects the extent to which changes in
the  Corporation's  interest  income and interest  expense are  attributable  to
changes in rate (change in rate  multiplied  by prior year  volume),  changes in
volume   (changes  in  volume   multiplied  by  prior  year  rate)  and  changes
attributable to the combined impact of volume/rate (change in rate multiplied by
change  in  volume).   The  changes  attributable  to  the  combined  impact  of
volume/rate  are  allocated  on a consistent  basis  between the volume and rate
variances.  Changes  in  interest  income on loans and  securities  reflect  the
changes in interest income on a fully tax equivalent basis.

<TABLE>
<CAPTION>

   ----------------------------------------------------------------------------------------------
    (Dollar amounts in thousands)                           Three months ended September 30,
                                                                   2008 versus 2007
                                                              Increase (Decrease) due to
                                                      -------------------------------------------
                                                         Volume          Rate            Total
   ----------------------------------------------------------------------------------------------
   <S>                                                <C>            <C>             <C>
   Interest income:
      Loans                                           $        394   $       (275)   $        119
      Securities                                               173            (26)            147
      Interest-earning deposits with banks                      52             (6)             46
      Federal bank stocks                                        8            (17)             (9)
                                                      ------------   ------------    ------------

     Total interest-earning assets                             627           (324)            303
                                                      ------------   ------------    ------------

   Interest expense:
      Deposits                                                 221           (149)             72
      Borrowed funds                                           143            (37)            106
                                                      ------------   ------------    ------------

     Total interest-bearing liabilities                        364           (186)            178
                                                      ------------   ------------    ------------

   Net interest income                                $        263   $       (138)   $        125
                                                      ============   ============    ============
   ----------------------------------------------------------------------------------------------

</TABLE>

Provision for loan losses. The Corporation records provisions for loan losses to
maintain a level of total allowance for loan losses that management believes, to
the best of its  knowledge,  covers all known and inherent  losses that are both
probable and reasonably  estimable at each reporting date.  Management considers
historical loss experience,  the present and prospective  financial condition of
borrowers,  current conditions (particularly as they relate to markets where the
Corporation   originates  loans),  the  status  of  non-performing  assets,  the
estimated  underlying  value of the collateral and other factors  related to the
collectibility of the loan portfolio.

Information  pertaining  to the  allowance  for loan  losses and  non-performing
assets for the quarters ended September 30, 2008 and 2007 is as follows:

<TABLE>
<CAPTION>

   --------------------------------------------------------------------------------------------------
   (Dollar amounts in thousands)                                At or for the three months ended
                                                                         September 30,
                                                            -----------------------------------------
                                                                   2008                   2007
   --------------------------------------------------------------------------------------------------
<S>                                                         <C>                    <C>
   Balance at the beginning of the period                   $            2,301     $            2,086
    Provision for loan losses                                              140                     45
    Charge-offs                                                            (86)                   (16)
    Recoveries                                                               8                      3
                                                            ------------------     ------------------
   Balance at the end of the period                         $            2,363     $            2,118
                                                            ==================     ==================

   Non-performing loans                                     $              783     $              931
   Non-performing assets                                                   797                  1,015
   Non-performing loans to total loans                                    0.31%                  0.41%
   Non-performing assets to total assets                                  0.22%                  0.34%
   Allowance for loan losses to total loans                               0.93%                  0.93%
   Allowance for loan losses to non-performing loans                    301.79%                227.48%
   --------------------------------------------------------------------------------------------------

</TABLE>


                                                   16
<PAGE>

The  provision for loan losses  increased  $95,000 or 211.1% to $140,000 for the
three month period ended  September 30, 2008 from $45,000 for the same period in
the prior year.  Management's  evaluation of the loan  portfolio,  including the
changing  composition  of the portfolio as well as economic  trends,  regulatory
considerations  and other factors  contributed to the recognition of $140,000 in
the provision for loan losses during the three months ended September 30, 2008.

Noninterest  income.  Noninterest  income decreased $76,000 or 10.9% to $620,000
during the three months ended  September 30, 2008,  compared to $696,000  during
the same  period in the prior  year.  This  decrease  can be  attributed  to the
decreases  in gains and losses on  securities  and gains on the sale of loans of
$134,000  and  $15,000,  respectively.  Partially  offsetting  this  decrease in
noninterest  income were increases in fees and service  charges,  commissions on
financial services,  earnings on bank-owned life insurance and other noninterest
income of $34,000, $25,000, $3,000 and $11,000, respectively.

The  Corporation  realized  security  losses of $116,000 in the third quarter of
2008  compared  to gains of  $18,000  for the same  period  in 2007.  Management
determined that two marketable equity  securities were impaired.  The impairment
of  these  financial  industry  securities  were  considered  to be  other  than
temporary due to recent  developments  in the financial  condition and near-term
prospects of the issuers,  a downturn in the economic  conditions  affecting the
industry and  declining  book values of the  securities.  At September 30, 2008,
these securities were written down to their current fair value.

Noninterest  expense.  Noninterest  expense  increased  $41,000  or 1.8% to $2.3
million  during the three months ended  September  30, 2008 compared to the same
period in 2007.  This  increase  in  noninterest  expense can be  attributed  to
increases in  compensation  and employee  benefits,  premises and  equipment and
other noninterest expense of $20,000, $5,000 and $16,000, respectively.

Compensation and employee benefits increased $20,000 or 1.6% to $1.3 million for
the three  months ended  September  30, 2008.  This  increase can be  attributed
primarily to normal salary and wage increases, partially offset by a decrease in
incentive expense.

Premises and equipment increased $5,000 or 1.2% to $409,000 for the three months
ended September 30, 2008,  compared to $404,000 for the same period in the prior
year.  This increase can be  attributed  primarily to costs  associated  with an
additional  branch  office which was opened in Grove City,  Pennsylvania  during
April 2008.

Other noninterest expense increased $16,000 or 2.6% to $626,000 during the three
months ended September 30, 2008, compared to $610,000 for the same period in the
prior year.  This  increase  can be  attributed  primarily  to increases in FDIC
insurance  and  internet  banking  expense,  partially  offset by  decreases  in
marketing and professional fees.

The  Corporation  anticipates  a  significant  increase  in the cost of  federal
deposit  insurance from current  levels of five to seven basis points.  The FDIC
has recently  proposed to increase the assessment rate for the most highly rated
institutions to between 12 and 14 basis points for the first quarter of 2009 and
to between 10 and 14 basis points thereafter.  Assessment rates could be further
increased if an institution's FHLB advances exceed 15% of deposits. The FDIC has
also  established a program  under which it fully  guarantees  all  non-interest
bearing transaction  accounts and senior unsecured debt of a bank or its holding
company.  Institutions  that do not opt out of the  program by  December 5, 2008
will be assessed ten basis points for non-interest  bearing  transaction account
balances in excess of $250,000 and 75 basis points of the amount of debt issued.

Provision for income taxes. The provision for income taxes decreased  $40,000 or
16.8% to $198,000  for the three months ended  September  30, 2008,  compared to
$238,000  for the same period in the prior  year.  This was due to a decrease in
pre-tax  earnings  of $79,000 or 7.9% to  $914,000  for the three  months  ended
September  30, 2008,  compared to $992,000 for the same period in the prior year
and a decrease in the  effective  tax rate to 21.7% for the three  months  ended
September  30,  2008,  compared  to 24.0%  for the  same  period  in  2007.  The
difference between the statutory rate of 34% and the Corporation's effective tax
rate is due to tax-exempt income earned on certain tax-free loans and securities
and bank-owned life insurance.


                                       17
<PAGE>

Comparison of Results for the Nine Month  Periods  Ended  September 30, 2008 and
2007

General.  Net income  decreased  $196,000  or 9.7% to $1.8  million for the nine
months ended  September  30, 2008 from $2.0 million for the same period in 2007.
This  decrease was a result of increases in the  provision  for loans losses and
noninterest  expense of $165,000 and $103,000,  respectively,  and a decrease in
noninterest  income of  $421,000.  Partially  offsetting  this  decrease  was an
increase in net interest  income of $434,000 and a decrease in the provision for
income taxes of $59,000.

Net interest  income.  Net interest  income on a tax equivalent  basis increased
$411,000 or 5.3% to $8.1  million for the nine months ended  September  30, 2008
from  $7.7  million  for the same  period  in 2007.  This  net  increase  can be
attributed  to an  increase  in tax  equivalent  interest  income  of  $645,000,
partially offset by a $234,000 increase in interest expense.

Interest income. Interest income on a tax equivalent basis increased $645,000 or
4.7% to $14.2 million for the nine months ended September 30, 2008,  compared to
$13.6  million  for the same  period in the prior  year.  This  increase  can be
attributed to an increase in interest earned on loans and securities of $579,000
and $121,000, respectively,  partially offset by decreases in interest earned on
federal bank stocks,  and  interest-earning  deposits  with banks of $24,000 and
$31,000, respectively.

Tax equivalent interest earned on loans receivable increased $579,000 or 5.1% to
$12.0 million for the nine months ended  September  30, 2008,  compared to $11.4
million for the same period in 2007.  During that time,  average loans increased
$20.8 million or 9.5%,  accounting for $1.1 million in additional  loan interest
income. This increase can be primarily attributed to growth in the Corporation's
commercial loan portfolios. Partially offsetting this volume increase, the yield
on loans  decreased 29 basis points to 6.66% for the nine months ended September
30, 2008,  versus 6.95% for the same period in 2007,  accounting  for a $473,000
decrease in interest  income.  Contributing to this  unfavorable  yield variance
were the recent decreases in short-term market interest rates. In addition,  the
Corporation  collected  $120,000 of interest  due as a result of the payoff of a
commercial loan in April and August 2007 that had been on non-accrual status. In
connection  with the loan payoff,  the  Corporation  received all  principal and
interest  due under the  contractual  terms of the loan  agreement  and interest
collected  was  recorded as loan  interest  income  during the nine months ended
September 30, 2007.

Tax equivalent interest earned on securities  increased $121,000 or 6.4% to $2.0
million for the nine months ended  September 30, 2008,  compared to $1.9 million
for the same period in 2007.  The average  volume of securities  increased  $3.1
million to $55.2 million for the nine months ended September 30, 2008,  compared
to $52.1 million for the nine months ended  September 30, 2007. This resulted in
a $113,000  increase in interest  income.  In addition to this favorable  volume
variance, the average yield on securities increased one basis point to 4.93% for
the nine months ended  September  30, 2008,  versus 4.92% for the same period in
2007, accounting for an additional $8,000 in interest income.

Interest earned on interest-earning  deposit accounts decreased $31,000 or 21.7%
to $112,000 for the nine months ended  September  30, 2008 from $143,000 for the
same period in 2007.  The average  yield on  interest-earning  deposit  accounts
decreased  291 basis  points to 2.35% for the nine months  ended  September  30,
2008,  compared to 5.26% for the same period in the prior year,  accounting  for
the decline in interest  income.  The decrease in the average yield reflects the
recent decreases in short-term market interest rates. Interest earned on federal
bank  stocks  decreased  $24,000 to  $82,000  for the nine  month  period  ended
September  30,  2008 from  $106,000  for the same  period in the prior year as a
result of a lower yield.  The lower yield  resulted  from the  recognition  of a
special  dividend on FHLB capital  stock during the nine months ended  September
30, 2007.

Interest expense.  Interest expense  increased  $234,000 or 4.0% to $6.1 million
for the nine months ended  September 30, 2008,  compared to $5.9 million for the
same  period in the  prior  year.  This  increase  in  interest  expense  can be
attributed  to an increase in interest  incurred on borrowed  funds of $271,000,
partially offset by a decrease in interest incurred on deposits of $37,000.


                                       18
<PAGE>

Interest expense incurred on borrowed funds increased  $271,000 or 25.9% to $1.3
million for the nine months ended  September 30, 2008,  compared to $1.0 million
for the same period in the prior year. This increase in interest  expense can be
attributed  to the  increase in the average  balance of borrowed  funds of $11.4
million to $42.7 million for the nine months ended September 30, 2008,  compared
to $31.3 million for the same period in the prior year. This volume increase was
the result of $5.0  million of FHLB  long-term  borrowings  placed in the fourth
quarter of 2007 used  primarily to fund loan growth and a $6.4 million  increase
in average short-term borrowings used primarily to fund security purchases. This
volume variance contributed $358,000 in additional expense. Partially offsetting
this volume  increase,  the cost of borrowed funds  decreased 35 basis points to
4.12% for the nine months ended  September  30, 2008,  compared to 4.47% for the
same period in 2007 causing a $87,000 decrease in interest expense.

Interest expense incurred on deposits  decreased $37,000 or 1.0% at $4.8 million
for the nine months  ended  September  30, 2008 and 2007.  This  decrease can be
attributed to the cost of  interest-bearing  deposits decreasing 21 basis points
to 3.08% for the nine months ended September 30, 2008, compared to 3.29% for the
same period in 2007 accounting for a $317,000 decline in interest  expense.  The
decrease  in the  rate  paid  on  deposits  reflects  the  recent  decreases  in
short-term  market  interest  rates.  Partially  offsetting this favorable yield
variance,  the average  volume of deposits  increased  $11.7  million or 6.0% to
$207.0 million for the nine months ended September 30, 2008,  compared to $195.3
million for the same period in 2007 contributing $280,000 in additional expense.


                                       19
<PAGE>

Average Balance Sheet and Yield/Rate  Analysis.  The following table sets forth,
for the periods  indicated,  information  concerning the total dollar amounts of
interest income from  interest-earning  assets and the resulting average yields,
the total dollar amounts of interest expense on interest-bearing liabilities and
the resulting  average costs, net interest income,  interest rate spread and the
net interest margin earned on average  interest-earning  assets. For purposes of
this table,  average loan  balances  include  non-accrual  loans and exclude the
allowance for loan losses and interest income includes accretion of net deferred
loan fees.  Interest and yields on tax-exempt  loans and securities  (tax-exempt
for federal income tax purposes) are shown on a fully tax equivalent  basis. The
information is based on average daily balances during the periods presented.


<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)                                              Nine months ended September 30,
                                                     ------------------------------------------------------------------------------

                                                                       2008                                   2007
                                                     -------------------------------------- ---------------------------------------
                                                        Average                   Yield /      Average                     Yield /
                                                        Balance      Interest      Rate        Balance        Interest      Rate
-----------------------------------------------------------------------------------------------------------------------------------

<S>                                                  <C>           <C>            <C>        <C>            <C>           <C>
Interest-earning assets:
------------------------
    Loans, taxable                                   $    234,642  $     11,722       6.67% $     213,477  $    11,116       6.96%
    Loans, tax exempt                                       6,024           281       6.24%         6,364          308       6.46%
                                                     ------------- -------------            -------------- ------------
         Total loans receivable                           240,666        12,003       6.66%       219,841       11,424       6.95%
                                                     ------------- -------------            -------------- ------------
    Securities, taxable                                    40,970         1,339       4.37%        37,241        1,171       4.20%
    Securities, tax exempt                                 14,201           698       6.57%        14,877          745       6.70%
                                                     ------------- -------------            -------------- ------------
         Total securities                                  55,171         2,037       4.93%        52,118        1,916       4.92%
                                                     ------------- -------------            -------------- ------------
    Interest-earning deposits with banks                    6,374           112       2.35%         3,633          143       5.26%
    Federal bank stocks                                     2,721            82       4.00%         2,271          106       6.24%
                                                     ------------- -------------            -------------- ------------
         Total interest-earning cash equivalents            9,095           194       2.84%         5,904          249       5.64%
                                                     ------------- -------------            -------------- ------------
    Total interest-earning assets                         304,932        14,234       6.24%       277,863       13,589       6.54%
         Cash and due from banks                            5,578                                   5,865
         Other noninterest-earning assets                  14,762                                  14,659
                                                     -------------                          --------------
         Total assets                                $    325,272                           $     298,387
                                                     =============                          ==============

Interest-bearing liabilities:
-----------------------------
    Interest-bearing demand deposits                 $     87,077           949       1.46% $      72,925          697       1.28%
    Time deposits                                         119,933         3,827       4.26%       122,372        4,116       4.50%
                                                     ------------- -------------            -------------- ------------
         Total interest-bearing deposits                  207,010         4,776       3.08%       195,297        4,813       3.29%
                                                     ------------- -------------            -------------- ------------
    Borrowed funds, long-term                              35,000         1,177       4.49%        30,000          995       4.43%
    Borrowed funds, short-term                              7,728           141       2.44%         1,297           52       5.36%
                                                     ------------- -------------            -------------- ------------
         Total borrowed funds                              42,728         1,318       4.12%        31,297        1,047       4.47%
                                                     ------------- -------------            -------------- ------------
    Total interest-bearing liabilities                    249,738         6,094       3.26%       226,594        5,860       3.46%
         Noninterest-bearing demand deposits               48,041            --         --         44,939           --         --
                                                     ------------- -------------            -------------- ------------
      Funding and cost of funds                           297,779         6,094       2.73%       271,533        5,860       2.89%
         Other noninterest-bearing liabilities              2,525                                   2,785
                                                     -------------                          --------------
         Total liabilities                                300,304                                 274,318
         Stockholders' equity                              24,968                                  24,069
                                                     -------------                          --------------
         Total liabilities and stockholders' equity  $    325,272                           $     298,387
                                                     ============= -------------            ============== ------------
Net interest income                                                $      8,140                            $     7,729
                                                                   =============                           ============
Interest rate spread (difference between                                              2.98%                                  3.08%
                                                                                 ===========                            ===========
    weighted average rate on interest-earning
    assets and interest-bearing liabilities)
Net interest margin (net interest                                                     3.57%                                  3.72%
                                                                                 ===========                            ===========
    income as a percentage of average
    interest-earning assets)
-----------------------------------------------------------------------------------------------------------------------------------

</TABLE>


                                                                  20
<PAGE>

Analysis of Changes in Net Interest  Income.  The following  table  analyzes the
changes in  interest  income and  interest  expense in terms of: (1)  changes in
volume of  interest-earning  assets  and  interest-bearing  liabilities  and (2)
changes in yields and rates.  The table  reflects the extent to which changes in
the  Corporation's  interest  income and interest  expense are  attributable  to
changes in rate (change in rate  multiplied  by prior year  volume),  changes in
volume   (changes  in  volume   multiplied  by  prior  year  rate)  and  changes
attributable to the combined impact of volume/rate (change in rate multiplied by
change  in  volume).   The  changes  attributable  to  the  combined  impact  of
volume/rate  are  allocated  on a consistent  basis  between the volume and rate
variances.  Changes  in  interest  income on loans and  securities  reflect  the
changes in interest income on a fully tax equivalent basis.

<TABLE>
<CAPTION>

   ----------------------------------------------------------------------------------------
    (Dollar amounts in thousands)                       Nine months ended September 30,
                                                               2008 versus 2007
                                                          Increase (Decrease) due to
                                                   ----------------------------------------
                                                     Volume         Rate           Total
   ----------------------------------------------------------------------------------------
   <S>                                             <C>           <C>            <C>
    Interest income:
       Loans                                       $     1,052   $      (473)   $       579
       Securities                                          113             8            121
       Interest-earning deposits with banks                 73          (104)           (31)
       Federal bank stocks                                  18           (42)           (24)
                                                   -----------   -----------    -----------

       Total interest-earning assets                     1,256          (611)           645
                                                   -----------   -----------    -----------

    Interest expense:
       Deposits                                            280          (317)           (37)
       Borrowed funds                                      358           (87)           271
                                                   -----------   -----------    -----------

       Total interest-bearing liabilities                  638          (404)           234
                                                   -----------   -----------    -----------

    Net interest income                            $       618   $      (207)   $       411
                                                   ===========   ===========    ===========
   ----------------------------------------------------------------------------------------

</TABLE>

Provision for loan losses. The Corporation records provisions for loan losses to
maintain a level of total allowance for loan losses that management believes, to
the best of its  knowledge,  covers all known and inherent  losses that are both
probable and reasonably  estimable at each reporting date.  Management considers
historical loss experience,  the present and prospective  financial condition of
borrowers,  current conditions (particularly as they relate to markets where the
Corporation   originates  loans),  the  status  of  non-performing  assets,  the
estimated  underlying  value of the collateral and other factors  related to the
collectibility of the loan portfolio.

Information  pertaining  to the  allowance  for loan  losses and  non-performing
assets for the nine months ended September 30, 2008 and 2007, and the year ended
December 31, 2007 is as follows:

<TABLE>
<CAPTION>

    --------------------------------------------------------------------------------------------------------------------
                                                                                                        At or for the
                                                             At or for the nine months ended              year ended
                                                                       September 30,                     December 31,
                                                        -----------------------------------------     ------------------
                                                               2008                   2007                   2007
    --------------------------------------------------------------------------------------------------------------------
    <S>                                                 <C>                    <C>                    <C>
    Balance at the beginning of the period              $            2,157     $            2,035     $            2,035
     Provision for loan losses                                         285                    120                    256
     Charge-offs                                                      (113)                   (63)                  (164)
     Recoveries                                                         34                     26                     30
                                                        ------------------     ------------------     ------------------
    Balance at the end of the period                    $            2,363     $            2,118     $            2,157
                                                        ==================     ==================     ==================

    Non-performing loans                                $              783     $              931     $              931
    Non-performing assets                                              797                  1,015                  1,015
    Non-performing loans to total loans                               0.31%                  0.41%                  0.41%
    Non-performing assets to total assets                             0.22%                  0.34%                  0.33%
    Allowance for loan losses to total loans                          0.93%                  0.93%                  0.93%
    Allowance for loan losses to non-performing loans               301.79%                227.48%                231.69%
    --------------------------------------------------------------------------------------------------------------------

</TABLE>


                                                          21
<PAGE>

The provision for loan losses  increased  $165,000 or 137.5% to $285,000 for the
nine month period ended  September 30, 2008 from $120,000 for the same period in
the prior year.  Management's  evaluation of the loan  portfolio,  including the
changing  composition  of the portfolio as well as economic  trends,  regulatory
considerations  and other factors  contributed to the recognition of $285,000 in
the provision for loan losses during the nine months ended September 30, 2008.

Noninterest  income.  Noninterest  income decreased $421,000 to $1.8 million for
the nine months ended September 30, 2008,  compared to $2.2 million for the same
period in the prior year.  This decrease can be attributed to decreases in gains
on securities  and loan sales of $585,000 and $14,000,  respectively,  partially
offset by increases in fees and service charges, commissions earned on financial
services,  earnings on bank-owned life insurance and other noninterest income of
$83,000, $29,000, $8,000 and $59,000, respectively.

The  Corporation  realized  security  losses of $391,000  during the nine months
ended  September  30, 2008  compared to gains of $194,000 for the same period in
2007. During the second and third quarters of 2008,  management determined there
were other than  temporary  impairment  losses related to Fannie Mae and Freddie
Mac stock due to financial and economic  condition  concerns and declining  book
values of the securities.  The gain during the nine month period ended September
30, 2007,  was  primarily  due to gains from the sale of a community  bank stock
investment  as  a  result  of  that  bank's  merger  with  a  larger   financial
institution.

Noninterest  expense.  Noninterest  expense  increased  $103,000 or 1.5% to $7.0
million  during the nine  months  ended  September  30,  2008,  compared to $6.9
million  during the same period in the prior year.  This increase in noninterest
expense can be attributed to increases in compensation and benefits and premises
and  equipment  of $170,000  and $42,000,  respectively,  partially  offset by a
decrease in other noninterest expense of $109,000.

Compensation and benefits  increased $170,000 or 4.5% to $4.0 million during the
nine months  ended  September  30,  2008,  compared to $3.8 million for the same
period in the prior year.  This increase can be  attributed  primarily to normal
salary and wage increases and the addition of staff  associated with the opening
of the Grove City office in April 2008.

Premises and equipment increased $42,000 or 3.5% to $1.2 million during the nine
months  ended  September  30,  2008..  This  increase  is  primarily  related to
increased building and equipment depreciation,  utilities,  and general building
expense  associated with the additional  branch office which was opened in April
2008.

Other noninterest  expense decreased $109,000 or 5.7% to $1.8 million during the
nine months  ended  September  30,  2008,  compared to $1.9 million for the same
period in the prior year.  This  decrease  can be  attributed  to  decreases  in
professional  fees  relating  to  Sarbanes-Oxley   Section  404  compliance  and
marketing and courier expense  decreases.  Partially  offsetting these decreases
were increases in FDIC  insurance,  membership and  subscription,  postage,  and
printing and office supplies.

Provision for income taxes. The provision for income taxes decreased  $59,000 or
10.4% to $510,000 for the nine months  ended  September  30,  2008,  compared to
$569,000 for the same period in the prior year due  primarily to the decrease in
pre-tax  earnings of $255,000 or 9.9% to $2.3  million for the nine months ended
September  30,  2008,  compared to $2.6 million for the same period in the prior
year.  In addition,  the  effective tax rate was 21.9% for the nine months ended
September  30,  2008,  compared  to 22.0%  for the  same  period  in  2007.  The
difference between the statutory rate of 34% and the Corporation's effective tax
rate is due to tax-exempt income earned on loans, securities and bank-owned life
insurance.

LIQUIDITY

The Corporation's primary sources of funds generally have been deposits obtained
through the offices of the Bank,  borrowings from the FHLB and  amortization and
prepayments of outstanding loans and maturing securities. During the nine months
ended September 30, 2008, the Corporation used its sources of funds primarily to
fund loan originations and security purchases.  As of such date, the Corporation
had  outstanding  loan  commitments,  including  undisbursed  loans and  amounts
available  under credit lines,  totaling $27.3 million,  and standby  letters of
credit totaling $1.1 million.


                                       22
<PAGE>

At September 30, 2008, time deposits  amounted to $126.5 million or 45.5% of the
Corporation's total consolidated deposits, including approximately $51.9 million
of which are  scheduled  to  mature  within  the next  year.  Management  of the
Corporation  believes  that  it  has  adequate  resources  to  fund  all  of its
commitments,  that all of its commitments  will be funded as required by related
maturity  dates and  that,  based  upon  past  experience  and  current  pricing
policies,  it can  adjust  the rates of time  deposits  to retain a  substantial
portion of maturing liabilities.

Aside from  liquidity  available  from  customer  deposits or through  sales and
maturities of securities,  the Corporation has alternative sources of funds such
as a term  borrowing  capacity  from the FHLB and, to a limited and rare extent,
the sale of loans. At September 30, 2008, the Corporation's  borrowing  capacity
with the FHLB, net of funds borrowed, was $122.8 million.

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

CRITICAL ACCOUNTING POLICIES

Management  views  critical  accounting  policies  to be those  which are highly
dependent on subjective or complex  judgments,  estimates  and  assumptions  and
where changes in those estimates and assumptions could have a significant impact
on the financial statements. Management currently views the determination of the
allowance  for loan  losses  and the  evaluation  of  securities  for other than
temporary impairment as critical accounting policies.

The allowance for loan losses provides for an estimate of probable losses in the
loan portfolio.  In determining the appropriate  level of the allowance for loan
losses,  the loan portfolio is separated into risk-rated and homogeneous  pools.
Migration  analysis/historical  loss rates,  adjusted for relevant trends,  have
been applied to these  pools.  Qualitative  adjustments  are then applied to the
portfolio to allow for quality of lending policies and procedures,  national and
local economic and business conditions,  changes in the nature and volume of the
portfolio,  experience,  ability and depth of lending management, changes in the
trends,  volumes and severity of past due,  non-accrual and classified loans and
loss and  recovery  trends,  quality of the  Corporation's  loan review  system,
concentrations  of  credit,  and  external  factors.  The  methodology  used  to
determine  the  adequacy  of the  Corporation's  allowance  for loan  losses  is
comprehensive  and  meets  regulatory  and  accounting  industry  standards  for
assessing  the  allowance,  however,  it is still an  estimate.  Loan losses are
charged against the allowance while recoveries of amounts previously charged-off
are credited to the allowance.  Loan loss provisions are charged against current
earnings  based on  management's  periodic  evaluation and review of the factors
indicated above.

Management  evaluates securities for other than temporary impairment at least on
a quarterly basis,  and more frequently when economic,  market or other concerns
warrant such  evaluation.  Consideration  is given to (1) the length of time and
the extent to which the fair value has been less than  cost,  (2) the  financial
condition and  near-term  prospects of the issuer and (3) the intent and ability
of the  Corporation  to retain its investment in the issuer for a period of time
sufficient to allow for any anticipated recovery in fair value.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk
-------------------------------------------------------------------

Market  risk for the  Corporation  consists  primarily  of  interest  rate  risk
exposure and liquidity risk. Since virtually all of the interest-earning  assets
and interest-bearing  liabilities are at the Bank, virtually all of the interest
rate risk and liquidity risk lies at the Bank level.  The Bank is not subject to
currency  exchange risk or commodity  price risk, and has no trading  portfolio,
and  therefore,  is not subject to any trading risk. In addition,  the Bank does
not  participate in hedging  transactions  such as interest rate swaps and caps.
Changes in interest rates will impact both income and expense  recorded and also
the market  value of  long-term  interest-earning  assets  and  interest-bearing
liabilities.  Interest rate risk and liquidity  risk  management is performed at
the Bank  level.  Although  the Bank has a  diversified  loan  portfolio,  loans
outstanding  to  individuals  and  businesses  depend  upon the  local  economic
conditions in the immediate trade area.


                                       23
<PAGE>

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

Interest  rate  sensitivity  is the result of  differences  in the  amounts  and
repricing  dates  of  the  Bank's  rate  sensitive  assets  and  rate  sensitive
liabilities.  These  differences,  or interest rate repricing "gap",  provide an
indication of the extent that the  Corporation's net interest income is affected
by future  changes in interest  rates.  A gap is  considered  positive  when the
amount  of  interest  rate-sensitive  assets  exceeds  the  amount  of  interest
rate-sensitive  liabilities  and is  considered  negative  when  the  amount  of
interest   rate-sensitive   liabilities   exceeds   the   amount   of   interest
rate-sensitive  assets.  Generally,  during a period of rising interest rates, a
negative gap would  adversely  affect net  interest  income while a positive gap
would result in an increase in net interest income. Conversely,  during a period
of falling  interest  rates,  a negative  gap would result in an increase in net
interest income and a positive gap would adversely  affect net interest  income.
The closer to zero that gap is maintained,  generally,  the lesser the impact of
market interest rate changes on net interest income.

Based on certain  assumptions  provided by a federal  regulatory  agency,  which
management   believes  most   accurately   represents  the  sensitivity  of  the
Corporation's  assets and liabilities to interest rate changes, at September 30,
2008, the Corporation's interest-earning assets maturing or repricing within one
year totaled $112.2 million while the Corporation's interest-bearing liabilities
maturing or repricing  within  one-year  totaled  $111.8  million,  providing an
excess of interest-earning assets over interest-bearing liabilities of $400,000.
At September 30, 2008, the percentage of the Corporation's assets to liabilities
maturing or repricing within one year was 100.4%.

For  more  information,  see  "Market  Risk  Management"  in  Exhibit  13 to the
Corporation's Annual Report on Form 10-K for the year ended December 31, 2007.

Item 4T.  Controls and Procedures
---------------------------------

The Corporation  maintains  disclosure controls and procedures that are designed
to  ensure  that  information  required  to be  disclosed  in the  Corporation's
Exchange Act reports is recorded, processed,  summarized and reported within the
time periods  specified in the SEC's rules and forms,  and that such information
is accumulated and communicated to the Corporation's  management,  including its
Chief Executive Officer and Chief Financial  Officer,  as appropriate,  to allow
timely  decisions  regarding  required  disclosure  based on the  definition  of
"disclosure controls and procedures" in Rule 13a-15(e).

There  has  been no  change  made in the  Corporation's  internal  control  over
financial reporting during the period covered by this report that has materially
affected,  or is  reasonably  likely to  materially  affect,  the  Corporation's
internal control over financial reporting.

As of September 30, 2008, the Corporation  carried out an evaluation,  under the
supervision  and  with  the  participation  of  the  Corporation's   management,
including the Corporation's Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of the Corporation's disclosure
controls  and  procedures.  Based  on the  foregoing,  the  Corporation's  Chief
Executive  Officer and Chief Financial  Officer concluded that the Corporation's
disclosure   controls  and  procedures  were  effective.   There  have  been  no
significant  changes in the Corporation's  internal controls or in other factors
that could significantly affect the internal controls subsequent to the date the
Corporation completed its evaluation.


                                       24
<PAGE>

PART II - OTHER INFORMATION
---------------------------

Item 1.  Legal Proceedings
--------------------------

The  Corporation  is  involved in various  legal  proceedings  occurring  in the
ordinary course of business. It is the opinion of management, after consultation
with  legal  counsel,   that  these  matters  will  not  materially  effect  the
Corporation's consolidated financial position or results of operations.

Item 1A.  Risk Factors
----------------------

There have been no material changes in the Corporation's risk factors from those
previously disclosed in the 2007 Form 10-K.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
--------------------------------------------------------------------

None.

Item 3.  Defaults Upon Senior Securities
----------------------------------------

None.

Item 4.  Submission of Matters to a Vote of Security Holders
------------------------------------------------------------

None.

Item 5.  Other Information
--------------------------

(a) Not applicable.

(b) Not applicable.

Item 6.  Exhibits
-----------------

Exhibit 31.1 Rule 13a-14(a)  Certification  of Chief  Executive  Officer
Exhibit 31.2 Rule 13a-14(a)  Certification  of Chief Financial  Officer
Exhibit 32.1 CEO Certification  Pursuant to 18 U.S.C. Section 1350
Exhibit 32.2 CFO Certification Pursuant to 18 U.S.C. Section 1350


                                       25
<PAGE>

Signatures
----------

Pursuant  to the  requirements  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.


EMCLAIRE FINANCIAL CORP. AND SUBSIDIARY



Date:  November 14, 2008                   By:      /s/ David L. Cox
                                           -------------------------------------
                                           David L. Cox
                                           Chairman of the Board,
                                           President and Chief Executive Officer

Date:  November 14, 2008                   By:      /s/ William C. Marsh
                                           -------------------------------------
                                           William C. Marsh
                                           Treasurer and Chief Financial Officer


                                       26