THE
      WILBER CORPORATION
                              
                              ANNUAL
      REPORT ON SECURITIES AND EXCHANGE
                              COMMISSION FORM 10-K
                              
                              
                              for
      the Year-Ended December 31, 2008











The
Annual Report on Form 10-K that follows is not part of the proxy solicitation
material.













UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-K





T ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934


For the
fiscal year ended December 31, 2008





Commission
file number: 001-31896





The
Wilber Corporation


(Exact
name of registrant as specified in its charter)





New
      York
                (State
      or other jurisdiction of incorporation or organization)
              15-6018501
                (I.R.S.
      Employer Identification No.)245
      Main Street, P.O. Box 430, Oneonta, NY
                (Address
      of principal executive offices)
              13820
                (Zip
      Code)




607-432-1700


(Registrant’s telephone number,
including area code)





None


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





Securities
registered pursuant to Section 12(b) of the Act:








Title
      of each class
              Common
      Stock, $0.01 par value per share
            Name
      of each exchange on which registered
              NYSE
      Alternext U.S.Securities
      registered pursuant to Section 12(g) of the
      Act:   None





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.


Yes     £
            No     T





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act.


Yes     £
            No     T





Indicate
by check mark whether 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 if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of the registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.  £





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See definition of “Large accelerated filer,” “accelerated
filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.  (Check one).





Large
      accelerated filer  £
            Accelerated
      filer  T
            Non-accelerated
      filer  £
            Smaller
      Reporting Company T


1-K


Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


Yes     £
            No     T





As of
June 30, 2008, the aggregate market value of the registrant’s common stock held
by non-affiliates of the registrant was $53.2 million, based upon the closing
price as reported on the NYSE Alternext U.S. [formerly the American Stock
Exchange].  Although Directors and Executive Officers of the
registrant were assumed to be “affiliates” for the purposes of this calculation,
the classification is not to be interpreted as an admission of such
status.  There were no classes of non-voting common stock authorized
on June 30, 2008.





Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.





Common
      Stock
                    (Common
      Stock, $0.01 par value per share)
                  Outstanding
      at March 9, 2009
                    10,503,704
      shares





Documents
Incorporated by Reference


Portions
of the registrant’s definitive Proxy Statement for the registrant’s Annual
Meeting of Shareholders to be held on April 24, 2009 are incorporated by
reference.






2-K





This
page intentionally left blank






3-K




THE WILBER CORPORATION


FORM
10-K


INDEX





FORWARD-LOOKING
STATEMENTS





RECENT
DEVELOPMENTS








PART I





ITEM 1:
                      BUSINESSA.
                      GeneralB.
                      Market
      AreaC.
                      Lending
      Activitiesi.
                      Loan
      Products and Servicesii.
                      Loan
      Approval Procedures and Authorityiii.
                      Credit
      Quality PracticesD.
                      Investment
      Securities ActivitiesE.
                      Sources
      of FundsF.
                      Electronic
      and Payment ServicesG.
                      Trust
      and Investment ServicesH.
                      Insurance
      ServicesI.
                      Supervision
      and Regulationi.
                      The
      Companyii.
                      The
      BankJ.
                      CompetitionK.
                      Legislative
      and Regulatory DevelopmentsITEM 1A:
                      RISK
      FACTORSITEM 1B:
                      UNRESOLVED
      STAFF COMMENTSITEM 2:
                      PROPERTIESITEM 3:
                      LEGAL
      PROCEEDINGSITEM 4:
                      SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY
HOLDERS








PART II





ITEM 5:
                    MARKET
      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIESA.
                    Market
      Information; Dividends on Common Stock; and Recent Sales of Unregistered
      SecuritiesB.
                    Use
      of Proceeds from Registered SecuritiesC.
                    Purchases
      of Equity Securities by Issuer and Affiliated
PurchasersITEM 6:
                    SELECTED
      FINANCIAL DATAITEM 7:
                    MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONSA.
                    GeneralB.
                    Performance
      OverviewC.
                    Financial
      Conditioni.
                    Comparison
      of Financial Condition at December 31, 2008 and December 31,
      2007


4-K




D.
                      Results
      of Operationsi.
                      Comparison
      of Operating Results for the Years Ended December 31, 2008 and December
      31, 2007E.
                      LiquidityF.
                      Capital
      Resources and DividendsITEM 8:
                      FINANCIAL
      STATEMENTSITEM 9:
                      CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSUREITEM 9A:
                      CONTROLS
      AND PROCEDURESITEM 9B:
                      OTHER
      INFORMATION







PART III





ITEM 10:
                                  DIRECTORS,
      EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEA.
                                  Directors
      of the RegistrantB.
                                  Executive
      Officers of the Registrant Who Are Not DirectorsC.
                                  Compliance
      With Section 16(a) of the Exchange ActD.
                                  Code
      of EthicsE.
                                  Corporate
      GovernanceITEM 11:
                                  EXECUTIVE
      COMPENSATIONITEM 12:
                                  SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERSITEM 13:
                                  CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCEA.
                                  Related
      TransactionsB.
                                  Director
      IndependenceITEM 14:
                                  PRINCIPAL
      ACCOUNTING FEES AND
SERVICES







PART IV





ITEM
    15:
              EXHIBITS
      AND FINANCIAL STATEMENT
SCHEDULES


5-K
 Index


FORWARD-LOOKING
STATEMENTS








When we
use words or phrases like "will probably result," "we expect," "will continue,"
"we anticipate," "estimate," "project," "should cause," or similar expressions
in this report or in any press releases, public announcements, filings with the
Securities and Exchange Commission (the "SEC"), or other disclosures, we are
making "forward-looking statements" as described in the Private Securities
Litigation Reform Act of 1995.  In addition, certain information we
provide, such as analysis of the adequacy of our allowance for loan losses or an
analysis of the interest rate sensitivity of our assets and liabilities, is
always based on predictions of the future.  From time to time, we may
also publish other forward-looking statements about anticipated financial
performance, business prospects, and similar matters.





The
Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements.  We want you to know that a variety of
future events and uncertainties could cause our actual results and experience to
differ materially from what we anticipate when we make our forward-looking
statements.  Factors that could cause future results to vary from
current management expectations include, but are not limited to, general
economic conditions, including volatility and disruption in national and
international financial markets, legislative and regulatory changes, government
intervention in the U.S. financial system, monetary and fiscal policies of the
federal government, changes in tax policies, tax rates and regulations of
federal, state and local tax authorities, changes in consumer preferences,
changes in interest rates, deposit flows, cost of funds, demand for loan
products, demand for financial services, competition, changes in the quality or
composition of the Company’s loan and investment portfolios, changes in
accounting principles, policies or guidelines, and other economic, competitive,
governmental, and technological factors affecting the Company’s operations,
markets, products, services and fees.





Please do
not rely unduly on any forward-looking statements, which are valid only as of
the date made.  Many factors, including those described above, could
affect our financial performance and could cause our actual results or
circumstances for future periods to differ materially from what we anticipate or
project.  We have no obligation to update any forward-looking
statements to reflect future events that occur after the statements are made and
we specifically disclaim such obligation.


6-K
 Index


RECENT
DEVELOPMENTS








Emergency Economic Stabilization Act
of 2008.In response to the current financial crisis, on
October 3, 2008, Congress enacted the Emergency Economic Stabilization Act of
2008 (“EESA”), which includes the Troubled Asset Relief Program (“TARP”). On
October 14, 2008, the U.S. Department of the Treasury (the “Treasury”) announced
that, using the authority granted to it under TARP, it would make equity
investments in healthy banks and bank holding companies pursuant to its Capital
Purchase Program (“CPP”). The purpose of the CPP is to increase the flow of
financing to businesses and consumers, support the national economy, strengthen
market stability and improve the strength of financial institutions. Under the
CPP, the Treasury purchases preferred stock in companies that choose to
participate, in amounts ranging from a minimum of 1% to a maximum of 3% of each
participating institution’s risk-weighted assets. Qualifying institutions that
sell preferred stock to the Treasury are expected to use the cash proceeds they
receive primarily to fund additional lending activities, though proceeds also
may be used by companies for other corporate purposes





The
Company applied to participate in the CPP on November 7, 2008. Participation in
the CPP required the Company to authorize and issue preferred stock to the
Treasury. On December 11, 2008, the Treasury notified the Company that its
application to participate in the CPP had been preliminarily approved for $12
million, or approximately 2% of the Company’s risk-weighted assets. At a special
meeting held on February 27, 2009, the Company’s shareholders approved an
amendment to the Company’s certificate of incorporation authorizing the issuance
of up to 100,000 shares of preferred stock.





Although
the amendment to the certificate of incorporation permits our Board of Directors
to issue preferred stock to the Treasury under CPP, a final decision to do so
has not yet been rendered.  Furthermore, the amendment to the
certificate of incorporation permits our Board of Directors to issue preferred
stock from time to time in the future for other purposes, and in other
transactions, up to the total number of shares authorized by our restated
certificate of incorporation.





Federal Deposit Insurance
Corporation (“FDIC”) Deposit Insurance Fund Assessments.  The
FDIC approved an interim rule in February 2009 that will institute a one-time
special assessment of 20 cents per $100 of domestic deposits on the banking
industry in order to quickly restore its Deposit Insurance Fund.  The
FDIC’s Deposit Insurance Fund reserve ratio is required to be maintained at
1.15%.  Due to the high number of bank failures during 2008, the
Deposit Insurance Fund’s reserve ratio stood at 0.40% at December 31,
2008.  The Company estimates that this one-time special assessment
would result in the recording of approximately $1.500 million in additional
non-interest expense during 2009.  Immediately following the FDIC’s
special assessment announcement several comments were provided by member
institutions and banking industry advocates, including the American Bankers
Association, recommending that the FDIC consider alternative Deposit Insurance
Fund funding options including an increase in the FDIC’s line of credit with the
U.S. Department of Treasury.  The FDIC’s chair person followed with a
public statement indicating the special assessment could be reduced to 10 basis
points if an increase in the line of credit with the U.S. Treasury Department
were granted.  In the event the special assessment were reduced from
20 basis points to 10 basis points, we estimate that the Company would record
approximately $750 thousand in additional non-interest expense during
2009.





In
addition, the FDIC increased the annual assessment rate to between 12 and 16
basis points for well capitalized banks, which we anticipate will increase our
annual FDIC premiums by $800 thousand to $1.000 million during 2009 as compared
to 2008.  The interim rule also reserves the right of the FDIC to
charge up to 10 cents per $100 of domestic deposits in the form of a special
premium if the reserve ratio continues to fall.





Other
recently enacted or adopted laws, regulations and policy initiatives affecting
financial institutions are discussed in Part I, Item 1,K., entitled “Legislative and
Regulatory Developments” of this
document.


7-K
 Index


PART
I





ITEM 1: BUSINESS





A.
General





The
Wilber Corporation (“the Company”), a New York corporation, was originally
incorporated in 1928.  The Company held and disposed of various real
estate assets until 1974.  In 1974, the Company and its real estate
assets were sold to Wilber National Bank (the “Bank”), a national bank
established in 1874.  The Company’s real estate assets were used to
expand the banking house of Wilber National Bank.  The Company was an
inactive subsidiary of the Bank until 1982.  In 1983, under a plan of
reorganization, the Company was re-capitalized, acquired 100% of the voting
stock of the Bank, and registered as a bank holding company within the meaning
of the Bank Holding Company Act of 1956 (“BHCA”).





The
business of the Company consists primarily of the ownership, supervision, and
control of the Bank.  The Bank is chartered by the Office of the
Comptroller of the Currency (“the OCC”), and its deposits are insured up to
applicable limits by the Federal Deposit Insurance Corporation (“the
FDIC”).  The Company, through the Bank and the Bank’s subsidiaries,
offers a full range of commercial and consumer financial products, including
business, municipal, and consumer loans, deposits, trust and investment
services, and credit-related insurances.  The Bank serves its
customers through twenty- three full-service branch banking offices located in
Otsego, Delaware, Schoharie, Chenango, Ulster, Broome, Saratoga and Onondaga
counties, New York, an ATM network, and electronic / Internet banking
services.  In addition, the Bank operates representative loan
production offices in Oneonta, New York (Otsego County) and Clifton Park, New
York (Saratoga County).  The Bank’s main office is located at 245 Main
Street, Oneonta, New York, 13820 (Otsego County).  The Bank employed
295 full-time equivalent employees at December 31, 2008.  The Bank’s
website address, which also serves as the Company’s main website address, is
www.wilberbank.com.





The
Bank’s subsidiaries include Wilber REIT, Inc. and Western Catskill Realty,
LLC.  Wilber REIT, Inc. is wholly - owned by the Bank and primarily
holds mortgage related assets.  Western Catskill Realty, LLC is a
wholly - owned real estate holding company, which primarily holds foreclosed
real estate.





In 2007,
the Company acquired Provantage Funding Corporation a New York State licensed
mortgage banking company based in Clifton Park, New York (Saratoga
County).  In 2008 Provantage Funding Corporation was merged into the
Bank and now operates as Provantage Home Loans (“Provantage”), a division of the
Bank.





During
2008, the Bank sold its 62% ownership interest in Mang–Wilber
LLC.  Prior to its sale, Mang-Wilber LLC was operated as the Bank’s
insurance agency subsidiary and provided a full range of personal and commercial
property and casualty, life, and health insurance products to the Bank’s
customers.  Mang-Wilber LLC was dissolved following the sale of the
Bank’s interest to its former joint venture partner.





The
Company and its subsidiaries’ (collectively “we” or “our”) principal business is
to act as a financial intermediary and lending institution in the communities
they serve by obtaining funds through customer deposits and institutional
borrowings, lending the proceeds of those funds to our customers, and investing
excess funds in debt securities and short-term liquid
investments.  Our funding base consists of deposits derived
principally from the central and upstate New York communities that we
serve.  To a lesser extent, we borrow funds from institutional
sources, principally the Federal Home Loan Bank of New York
(“FHLBNY”).  We target our lending activities to consumers and
municipalities in the immediate geographic areas we serve and to small and
mid-sized businesses in the immediate geographic areas we serve as well as a
broader statewide region.  Our investment activities primarily consist
of purchases of U.S. Treasury, U.S. Government Agency, and U.S. Government
Sponsored Entities obligations, as well as municipal, mortgage-backed, and high
quality corporate debt instruments.  Through our Trust and Investment
Division, we provide personal trust, agency, estate administration, and
retirement planning services for individuals, as well as custodial and
investment management services to institutions.  We also offer stocks,
bonds, and mutual funds through a third party broker-dealer firm.





B. Market
Area





The
Company’s market area is generally defined as central and upstate New York
State.  The Company’s principal office and the Bank’s main office are
located in Oneonta, New York, which is approximately 70 miles southwest of
Albany, New York, the state’s capital, and 170 miles northwest of New York
City.  Eighteen of the Company’s twenty-three full-service branch
offices and one of its loan production offices are located in four rural
counties north and west of the Catskill Mountains, namely Otsego, Delaware,
Schoharie and Chenango.  The economies in this market are driven by
small not-for-profit organizations; farming; hospitals; small, independently
owned retailers, restaurants and motels; light





8-K
 Index








The
remaining five full-service offices and one representative loan production
office are located in select, more densely populated markets in central New
York.  In particular, we have a full-service branch office located in
Broome County, a full-service branch office in Onondaga County, a full-service
branch office and loan production office in Saratoga County and two full-service
branch offices in Ulster County.  The estimated median family income
in Onondaga, Saratoga and Ulster Counties exceeds the national average median
family income, while Broome County is slightly below the national
average.  The total estimated population of these four counties is
1,047,700 persons.  Based on June 30, 2008 FDIC deposit summary
reports, the combined deposits of these four counties was $14.837
billion.





In 2007
we adopted a strategic plan to increase the Company’s geographic market area
into more densely populated markets in central and upstate New York
State.  In accordance with this plan, we acquired Provantage Funding
Corporation in 2007, which is based in Saratoga County with offices throughout
the Capital District of New York.  In addition, during 2008 we opened
a full-service branch office in Halfmoon, New York (Saratoga County) and a loan
production office in Cicero, New York (Onondaga County), which now serves as a
full-service branch office.  The markets in which we operate have
generally not been significantly impacted by the sub-prime mortgage crisis and
high rates of foreclosure experienced in other sections of the United
States.  In conjunction with our strategic plan, we anticipate that
our expansion into the more densely populated markets throughout New York State
will continue during 2009.





C.
Lending Activities





General.  The
Company, through the Bank, engages in a wide range of lending activities,
including commercial lending, primarily to small and mid-sized businesses;
mortgage lending for 1-4 family and multi-family properties including home
equity loans; mortgage lending for commercial properties; consumer installment
and automobile lending; and to a lesser extent, agricultural
lending.





Over the
last several decades we have implemented lending strategies and policies that
are designed to provide flexibility to meet customer needs while minimizing
losses associated with borrowers’ inability or unwillingness to repay
loans.  The loan portfolio, in general, is fully collateralized, and
many commercial loans are further secured by personal guarantees.  We
do not commonly grant unsecured loans to our customers.  Annually, we
utilize the services of an outside consultant to conduct reviews of the larger,
more complex commercial real estate and commercial loan portfolios to evidence
adherence to underwriting standards and loan policy guidelines.





We
periodically engage in loan participations with other banks or financial
institutions both as an originator and as a participant.  A
participation loan is generally formed when the aggregate size of a single loan
exceeds the originating bank’s regulatory maximum loan size or a self-imposed
loan limit.  We typically make participation loans for commercial or
commercial real estate purposes.  Although we do not maintain direct
contact with the borrower when we are not the lead bank, credit underwriting
procedures and credit monitoring practices associated with participation loans
are identical in all material respects to those practices and procedures
followed for loans that we originate, service, and hold for our own
account.  We typically buy participation loans from other commercial
banks operating within New York State with whose management we are
familiar.  Our total participation loans represent less than 10% of
our total loans outstanding and are comprised of approximately twenty-four
borrowers.





If deemed
appropriate for the borrower and for the Bank, we place certain loans in
federal, state, or local government agency or government sponsored loan
programs.  These placements often help reduce our exposure to credit
losses and often provide our borrowers with lower interest rates on their
loans.





i. Loan
Products and Services





Residential Real
Estate.We originate 1-4 family residential mortgage loans,
principally through Provantage.  Some of these loans are sold into the
secondary market to third party investors, while others are retained for our
loan portfolio.  The terms on these loans are typically 15 – 30 years
and are usually secured by a first lien position on the home of the
borrower.  We offer both adjustable rate and fixed rate loans and
provide monthly and bi-weekly payment options.  Our 1-4 family
residential loan portfolio consists principally of owner-occupied, primary
residence properties and, to a lesser extent, rental properties for off-campus
student housing, which surround each of the local colleges within our
market.  Our property appraisal process, debt-to-income limits for
borrowers, and established loan-to-value limits dictate our residential




9-K
 Index








We
originate and retain home equity loans.  Our home equity loans are
typically granted as adjustable rate lines of credit.  The interest
rate on the line of credit adjusts periodically and is tied to the Wall Street Journal Prime
loan rate.  The loan terms generally include a second lien position on
the borrower’s residence and a 10-year interest only repayment
period.  At the end of a 10-year term, the home equity line of credit
is either renewed by the borrower or placed on a scheduled principal and
interest payment plan by the Bank.





Commercial Real
Estate.We originate commercial real estate loans to finance
the purchase of developed real estate.  To a lesser extent, we will
also provide financing for the construction of commercial real estate.Our commercial real
estate loans are typically larger than those made for residential real
estate.  The loans are often secured by properties whose tenants
include “Main Street” type small businesses, local retailers, developers and
landlords for national retail chains and motels.  We also finance
properties for commercial office and owner-occupied manufacturing
space.  Our commercial real estate loans are usually limited to a
maximum repayment period of 20 years.  Most of our commercial real
estate loans are fully collateralized and further secured by the personal
guarantees of the property owners.  Construction loans are generally
granted as a line of credit whose terms are 12-18 month.  We typically
advance funds on construction loans based upon an advance schedule, to which the
borrower agrees, and physical inspection of the premises.





Commercial
Loans.In addition to commercial real estate loans, we also
make various types of commercial loans to qualified borrowers, including
business installment and term loans, lines-of-credit, demand loans, time notes,
automobile dealer floor-plan financing, and accounts receivable
financing.





Business
installment and term loans are typically provided to borrowers for long-term
working capital or to finance the purchase of a piece of equipment, trucks, or
automobiles utilized in their business.  We generally limit the term
of the borrowing to a period shorter than the estimated useful life of the
equipment being purchased.  We also place a lien on the equipment
being financed by the borrower.





Lines of
credit are typically provided to meet the short-term working capital needs of
the borrowers for inventory and other seasonal aspects of their
business.  We also offer a cash management line of credit that is tied
to a borrower’s primary demand deposit operating account.  Each day,
on an automated basis, the borrower’s line of credit is paid down with the
excess operating funds available in the primary operating
account.  Upon complete repayment of the line of credit, excess
operating funds may be invested in investment securities on a short-term basis,
usually overnight, through a securities repurchase agreement between the Bank
and the customer.





Demand
loans and time notes are often granted to borrowers to provide short term or
“bridge” financing for special orders, contracts, or projects.  These
loans are often secured with a lien on business assets, liquid collateral,
and/or personal guarantees.





On a
limited basis we also provide inventory financing or “floor plans” for
automobile dealers.  Floor plan lines of credit create unique risks
that require close oversight by the Bank’s lending
personnel.  Accordingly, we have developed special procedures for
floor plan lines of credit to ensure that the borrower maintains sufficient
inventory collateral at all times.





We offer
accounts receivable financing to qualified borrowers through affiliation with a
third party vendor specializing in this type of financing.  The
program allows business customers to borrow funds from the Bank by assigning
their accounts receivable to the Bank for billing and collection.  The
program is supported by limited fraud and credit insurance.





Commercial
loans and commercial real estate loans generally involve a higher degree of risk
and are more complex than residential mortgages and consumer
loans.  Such loans typically involve large loan balances to single
borrowers or groups of related borrowers.  Commercial loan repayment
and interest terms are often established to meet the unique needs of the
borrower and the characteristics of the business.  Typically, payments
on commercial real estate are dependent upon leases whose terms are shorter than
the borrower’s repayment period.  This places significant reliance
upon the owner’s successful operation and management of the
property.  Accordingly, the borrower and we must be aware of the risks
that affect the underlying business including, but not limited to, economic
conditions, competition, product obsolescence, inventory cycles, seasonality,
and the business owner’s experience and expertise.





Stand-by and Commercial Letters of
Credit.We offer stand-by and commercial letters of credit for
our business customers.  Stand-by letters of credit are not
loans.  They are guarantees to pay other creditors of the customer
should the customer fail to meet certain payment obligations required by the
third party creditor.  Those guarantees are primarily issued to
support public and private borrowing arrangements, including bond financing and
similar transactions.  Because




10-K
 Index







Consumer Loans.We
offer a variety of consumer loans to our customers.  These loans are
usually provided to purchase a new or used automobile, motorcycle or
recreational vehicle, or to make a home improvement.  We also make
personal loans to finance the purchase of consumer durables or other needs of
our customers.  The consumer loans are generally offered for a shorter
term than residential mortgages because the collateral typically has an
estimated useful life of 5 to 10 years and tends to depreciate
rapidly.  Automobile loans comprise the largest portion of our
consumer loan portfolio.  The financial terms of our automobile loans
are determined by the age and condition of the vehicle, and the ability of the
borrower to make scheduled principal and interest payments on the
loan.  We obtain a lien on the vehicle and collision insurance
policies are required on these loans.  Although we lend directly to
borrowers, the majority of our automobile loans are originated through auto
dealerships within our primary market area.  We commonly refer to
these as indirect automobile or indirect installment loans.





We also
provide an overdraft line of credit product called ChequeMate, which provides
our customers with an option to eliminate overdraft fees should they overdraw
their checking account.  Our ChequeMate lines of credit are typically
unsecured and are generally limited to less than $4,000 per
account.





ii. Loan
Approval Procedures and Authority





General.  The
Bank’s Board of Directors delegates the authority to provide loans to borrowers
through the Bank’s loan policies.  The policies are modified, reviewed
and approved on an annual basis to assure that lending policies and practices
meet the needs of borrowers, mitigate perceived credit risk, comply with
applicable laws and regulations and reflect current economic
conditions.  Currently, we use a five tier structure to approve
loans.  All lending authorities within this tiered structure are based
on the borrower’s aggregate credit relationship, rather than on individual loan
requests.





First,
the full Board of Directors of the Bank has authority to approve single loans or
loans to any one borrower up to the Bank’s legal lending limit, which was $10.2
million for loans not fully secured by readily marketable collateral and $17.0
million for loans secured by readily marketable collateral at December 31,
2008.  The full Board of Directors also approves loans made to members
of the Board of Directors, their family members, and their related businesses
when the total loans exceed $500 thousand.  If conditions merit, the
Board of Directors may authorize exceptions to our loan policy.





Second,
the Board of Directors, as required by the Bank’s by-laws, appoints a Loan and
Investment Committee.  The Loan and Investment Committee must be
comprised of at least three outside directors and meets on an as-needed basis,
generally two times per month.  Its lending authority for loans not
secured by readily marketable collateral is limited to $6.0 million or
approximately 60% of the Bank’s legal lending limit.  The Committee
may also approve loans up to 100% of the Bank’s legal lending limit if the loan
is secured by readily marketable collateral such as stocks and
bonds.  The Loan and Investment Committee is also responsible for
ratifying and affirming all loans made that exceed $25 thousand, approving
collateral releases, authorizing charge-offs in excess of $25 thousand, and
annually reviewing all lines of credit that exceed the lending limit of the
Officers’ Loan Committee.  The actions of the Loan and Investment
Committee are reported to and ratified by the full Board of Directors each
month.





Third,
the Board of Directors has created of the Officers’ Loan
Committee.  The Officers’ Loan Committee is comprised of four voting
members, including the Bank’s Chief Executive Officer, the Regional President
(Southern Tier and Hudson Valley) and Senior Loan Officer, the Regional
President (Northern Tier) and the Senior Vice President of Mortgage Lending. A
Regional Vice President can substitute for any of the voting members in their
absence.  The Officers’ Loan Committee may approve secured and
unsecured loans up to $3.75 million and up to 100% of the Bank’s legal lending
limit if the loan is secured by readily marketable collateral.  The
Committee also has the authority to adjust loan rates from time to time as
market conditions dictate.  Loan charge-offs up to $25thousand and
collateral releases within prescribed limits established by the Board of
Directors are also approved by the Officers’ Loan Committee.  All
actions of the Officers’ Loan Committee are reported to the Loan and Investment
Committee for ratification.





Fourth,
the loan officers may combine their lending authority under a two signature
requirement within predetermined limits established in the Bank’s loan
policy.  Under the two signature requirement, the Bank’s Chief
Executive Officer, Regional President (Southern Tier and Hudson Valley) and
Senior Loan Officer and / or Regional President (Northern Tier) may approve
extensions of credit up to $2.50 million.  In addition, any of these
three officers may combine his authority under the dual signature requirement
with a lower level loan officer at predetermined limits.  More
specifically, any one of these three officers can combine his or her authority
with a “B-level” loan officer for credit relationships not exceeding $1.75
million or a “C-level” loan officer for credit relationships not exceeding $1.55
million.


11-K
 Index


Fifth,
through the loan policy, individual loan officers are provided specific loan
limits by category of loan.  Each officer’s lending limits are
determined based on the individual officer’s experience, past credit decisions,
and expertise.





Any new
credit relationship or individual loan request that is rated a high risk on the
Bank’s internal risk grading system must be approved by the committee or
officer(s) with a higher level of lending authority.





Our goal
for the loan approval process is to provide adequate review of loan proposals
while at the same time responding quickly to customer requests.  We
complete a credit review and maintain a credit file for each
borrower.  The purpose of the file is to provide the history and
current status of each borrower’s relationship and credit standing, so that a
loan officer can quickly understand the borrower’s status and make a fully
informed decision on a new loan request.  We require that all business
borrowers submit audited, reviewed, or compiled internal financial statements or
tax returns no less than annually.





Loans to Directors and Executive
Officers.  Loans to members of the Board of Directors (and
their related interests) are granted under the same terms and conditions as
loans made to unaffiliated borrowers.  Any fee that is normally
charged to other borrowers is also charged to the members of the Board of
Directors.  Loans to executive officers are limited by banking
regulations.  There is no regulatory loan limit established for
executive officers to purchase, construct, maintain or improve a residence, or
to finance the education of a dependent.  However, any loans to
executive officers which are not for the construction, improvement, or purchase
of a residence, not used to finance a dependent’s education, or not secured by
readily marketable collateral, are limited to a maximum of
$100,000.  In addition, we require that all loans made to executive
officers be reported to the Board of Directors at the next Board of Directors
meeting.





iii.
Credit Quality Practices





General.One of our key
objectives is to maintain strong credit quality of the Bank’s loan
portfolio.  We strive to accomplish this objective by maintaining a
diversified mix of loan types, limiting industry concentrations, and monitoring
regional economic conditions.  In addition, we use a variety of
strategies to protect the quality of individual loans within the loan portfolio
during the credit review and approval process.  We evaluate both the
primary and secondary sources of repayment and complete a financial statement
review and cash flow analysis for commercial borrowers.  We also
generally require personal guarantees on small business loans,
cross-collateralize loan obligations, complete on-site inspections of the
business, and require the company to adhere to financial
covenants.  Similarly, in the event a modification to an outstanding
loan is requested, we reevaluate the loan under the proposed terms prior to
making the modification.  If we approve the modification, we often
secure additional collateral or impose stricter financial
covenants.  In the event a loan becomes delinquent, we follow
collection procedures to ensure repayment.  If it becomes necessary to
repossess or foreclose on collateral, we strive to execute the proceedings in a
timely manner and dispose of the repossessed or foreclosed property quickly to
minimize the level of non-performing assets, subsequent asset deterioration, and
costs associated with monitoring the collateral.





Delinquent Loans and Collection
Procedures.When a borrower fails to make a required payment
on a loan, we take a number of steps to induce the borrower to cure the
delinquency and restore the loan to current status.  Our management
continuously monitors the past due status of the loan
portfolio.  Criticized and non-performing loans are reported to the
Directors’ Loan and Investment Committee quarterly, and the overall delinquency
levels are reported to the Board of Directors on a monthly
basis.  Separate collection procedures have been established for
residential mortgage, consumer, and real estate loans (consumer and
commercial).





On
residential mortgage loans 15 days past due, we send the borrower a notice that
requests immediate payment.  At 20 days past due, the borrower is
usually contacted by telephone by an employee of the Bank.  The
borrower’s response and promise to pay is recorded.  At 60 days or
more past due, if satisfactory repayment arrangements are not made with the
borrower, generally an attorney letter will be sent and foreclosure procedures
will begin.





On
consumer loans 10 days past due, we send the borrower a notice that requests
immediate payment.  If the loan remains past due, an employee of the
Bank’s Collection Department or the approving Loan Officer will usually contact
the borrower before day 30 of past due status.  Loans 60 – 90 days
past due are generally subject to repossession of collateral.





We send
past due notices to borrowers with commercial term loans, demand notes, and time
notes (including commercial real estate) when the loan reaches 10 days past
due.  Between days 15 – 30, borrowers are contacted by telephone by an
employee of the Bank’s Collection Department or by the approving Loan Officer to
attempt to return the account to current status.  After 30 days past
due, the loan officer and the supervising Regional President decide whether to
pursue further action against the borrower.


12-K
 Index


Loan Portfolio Monitoring
Practices.  Our loan policy requires that the management
continually monitor the status of the loan portfolio, by regularly reviewing and
analyzing reports that include information on delinquent loans, criticized loans
and foreclosed real estate.  We risk rate our loan portfolios and
individual loans based on their perceived risks and historical
losses.  For commercial borrowers whose aggregate loans exceed
$50,000, we assign an individual risk rating annually.  We arrive at a
risk rating based on current payment performance and payment history, the
current financial strength of the borrower, and the value of the collateral and
personal guarantee.  Loans classified as “substandard” typically
exhibit some or all of the following characteristics:





• the
borrower lacks current financial information;


• the
business of the borrower is poorly managed;


• the
borrower’s business becomes highly-leveraged or appears to be
insolvent;


• the
borrower exhibits inadequate cash flow to support the debt service;


• the
loan is chronically delinquent; or


• the
industry in which the business operates has become unstable or
volatile.





Loans we
classify as “special mention” are loans that are generally performing, but the
borrower’s financial strength appears to be deteriorating.  Loans we
categorize as a “pass” are generally performing per contractual terms and do not
exhibit the characteristics of special mention or substandard
loans.





Allowance for Loan
Losses.  The allowance for loan losses is an amount which in
the opinion of management, is necessary to absorb probable losses inherent in
the loan portfolio.  We continually monitor the allowance for loan
losses to determine its reasonableness.  On a quarterly basis, our
management prepares a formal assessment of the allowance for loan losses and
submits it to senior management and the full Board of Directors to determine the
adequacy of the allowance.  The allowance is determined based upon
numerous considerations.  For the consumer, residential mortgage, and
small commercial loan portfolios, we consider local economic conditions, the
growth and composition of these loan portfolios, the trend in delinquencies,
changes in underwriting standards, the trend in loan charge-offs and other
relevant economic and market factors to estimate the probable losses in the loan
portfolio.  For large commercial loans, we evaluate specific
characteristics of each loan, including, the borrower’s current cash flow, debt
service coverage and payment history, business conditions in the borrower’s
industry, the collateral and guarantees securing the loan, and our historical
experience with similarly structured loans to arrive at a risk
rating.  We then determine probable losses for these loans based on
these characteristics, risk ratings and other economic factors.  And
finally, we specifically estimate probable losses on non-performing loans
through impairment testing.  The adequacy of our allowance for loan
losses is also reviewed by the OCC on a periodic basis. Its comments and
recommendations are factored into the determination of the allowance for loan
losses.





The
allowance for loan losses is increased by the provision for loan losses, which
is recorded as an expense on our consolidated statement of
income.  Loan charge-offs are recorded as a reduction in the allowance
for loan losses.  Loan recoveries are recorded as an increase in the
allowance for loan losses.





Non-Performing
Loans.  There are three categories of non-performing loans: (i)
those 90 or more days delinquent and still accruing interest, (ii) non-accrual
loans, and (iii) troubled debt restructured loans (“TDR”).  We place
individual loans on non-accrual status when timely collection of contractual
principal and interest payments appears unlikely.  This generally
occurs when a loan becomes 90 days delinquent.  When deemed prudent,
however, we may place loans on non-accrual status before they become 90 days
delinquent.  Upon being placed on non-accrual status, we reverse all
interest accrued in the current year against interest
income.  Interest accrued and not collected from a prior year is
charged-off through the allowance for loan losses.  If ultimate
repayment of a non-accrual loan is expected, any payments received may be
applied in accordance with contractual terms.  If ultimate repayment
of principal is not expected, any payment received on the non-accrual loan is
applied to principal until ultimate repayment becomes expected.





Commercial
loans are considered impaired when it is probable that the borrower will not
repay the loan according to the original contractual terms of the loan
agreement, and all loan types are considered impaired if the loan is
restructured in a TDR.





A loan is
considered to be a TDR when we grant a special concession to the borrower
because the borrower’s financial condition has deteriorated to the point where
servicing the loan under the original terms becomes difficult or challenges the
financial viability of the business.  Such concessions include the
reduction of interest rates, forgiveness of principal or interest, extension of
time for repayment, or other similar modifications to the original
terms.  TDR loans that are in compliance with their modified terms and
that yield a market rate may be removed from TDR status in the calendar year
after the year in which the restructuring took place.


13-K
 Index







Foreclosure and
Repossession.  At times it becomes necessary to foreclose or
repossess property that a delinquent borrower pledged as collateral on a
loan.  Upon concluding foreclosure or repossession procedures, we take
title to the collateral and attempt to dispose of it in the most efficient
manner possible.  Real estate properties formerly pledged as
collateral on loans, that we have acquired through foreclosure proceedings or
acceptance of a deed in lieu of foreclosure are called Other Real Estate Owned
(“OREO”).  OREO is carried at the lower of the recorded investment in
the loan or the fair value of the real estate, less estimated costs to
sell.  Write-downs from the unpaid loan balance to fair value are
charged to the allowance for loan losses.





Loan
Charge-Offs.  We charge off loans or portions of loans that we
deem non-collectible and can no longer justify carrying as an asset on the
Bank’s balance sheet.  We determine if a loan should be charged-off by
analyzing all possible sources of repayment.  Once the responsible
loan officer or designated Collections Department personnel determines that the
loan is not collectible, he/she completes a “Recommendation for Charge-off”
form, which is subsequently reviewed and approved by the Bank’s Loan and
Investment Committee (or by the Officers’ Loan Committee for charge-offs less
than $25,000).





D.
Investment Securities Activities





General.Our Board
of Directors has final authority and responsibility for all aspects of the
Company’s investment activities.  It exercises this authority by
setting the Investment Policy each year and appointing the Loan and Investment
Committee to monitor adherence to the policy.   The Board of
Directors delegates its powers by appointing designated investment officers to
purchase and sell investment securities for the account of the
Company.  The Chief Executive Officer and the Senior Vice President of
Bank Investments have the authority to make investment purchases within the
limits set by the Board of Directors.  All investment securities
transactions are reviewed monthly by the Loan and Investment Committee and the
Board of Directors.





The
Bank’s investment securities portfolio is primarily comprised of high-grade
fixed income debt instruments.  Investment purchases are generally
made when we have funds that exceed the present demand for loans.  Our
primary investment objectives are to:





(i)   
minimize risk through strong credit quality;


(ii)  
provide liquidity to fund loans and meet deposit run-off;


(iii) 
diversify the Bank’s assets;


(iv) 
generate a favorable investment return;


(v)  
meet the pledging requirements of State, County and Municipal
depositors;


(vi) 
manage the risk associated with changing interest rates; and


(vii)
match the maturities of securities with deposit and borrowing
maturities.





Our
current investment policy generally limits securities investments to U.S.
government, U.S. agency and U.S. sponsored entity securities, corporate debt:
municipal bonds, pass-through mortgage backed securities issued by Government
National Mortgage Association (“Ginnie Mae”).  Federal National
Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation
(“Freddie Mac”), and collateralized mortgage obligations issued by these same
entities.





The
investment securities we hold are classified as held-to-maturity, trading, or
available-for-sale depending on the purposes for which the investment securities
were acquired and are being held.  Securities held to maturity are
debt securities that the Company has both the positive intent and ability to
hold to maturity.  These securities are stated at amortized
cost.  Debt and equity securities that are bought and held principally
for the purpose of sale in the near term are classified as trading securities
and are reported at fair value with unrealized gains and losses included in
earnings.  Debt and equity securities not classified as either
held-to-maturity or trading securities are classified as available-for-sale and
are reported at fair value with unrealized gains and losses excluded from
earnings and reported net of taxes in accumulated other comprehensive income or
loss.  We hold the majority of our investment securities in the
available-for-sale category.





On a
daily basis we buy and sell overnight federal funds from and to our
correspondent banks.  Federal funds are unsecured general obligations
of the purchasing bank and are therefore subject to credit risk.  To
mitigate this risk, we monitor the financial strength of our correspondent banks
on a continuous basis.  Financial strength rating reports of each
correspondent bank are formally reviewed by our management on a quarterly basis.


14-K
 Index







On a
limited basis, we also invest in permissible types of equity
securities.





E.
Sources of Funds





General.Our
lending and investment activities are highly dependent upon our ability to
obtain funds.  Our primary source of funds is customer
deposits.  To a lesser extent we have borrowed funds from the FHLBNY
and entered into repurchase agreements to fund our loan and investment
activities.





Deposits.We offer
a variety of deposit accounts to our customers.  The fees, interest
rates, and terms of each deposit product vary to meet the unique needs and
requirements of our depositors.  Presently, we offer a variety of
accounts for consumers, businesses, not-for-profit organizations and
municipalities including: demand deposit accounts, interest bearing transaction
accounts, money market accounts, statement savings accounts, passbook savings
accounts, and fixed and variable rate certificates of deposit.  The
majority of our deposit accounts are owned by individuals and businesses who
reside near our branch locations.  Municipal deposits are generally
derived from the local and county taxing authorities, school districts near our
branch locations, and, to a limited degree, New York State public
funds.  Accordingly, deposit levels are dependent upon the speed and
volume of tax collections, regional economic conditions, as well as more general
national and statewide economic conditions, local competition, and our pricing
decisions.





Borrowed
Funds.From time to time we borrow funds to finance our loan
and investment activities.  Most of our borrowings are with the
FHLBNY.  These advances are secured by a general lien on our eligible
1-4 family residential mortgage portfolio or specific investment securities
collateral.  We determine the maturity and structure of each advance
based on market conditions at the time of borrowing and the interest rate risk
profile of the loans or investments being funded.





We also
utilize repurchase and resale agreements to fund our loan and investment
activities.  Repurchase / resale agreements are contracts for sale of
securities owned or borrowed by us, with an agreement with the counter party to
repurchase those securities at an agreed upon price and date.  In
addition, when necessary, we borrow overnight federal funds from other banks or
borrow monies from the Federal Reserve Bank’s discount window.





Deposit
account structures, fees and interest rates, as well as funding strategies, are
determined by the Bank’s Asset and Liability Committee (“ALCO”).  The
ALCO is comprised of the Bank’s senior managers and meets on a bi-weekly
basis.  The ALCO reviews general economic conditions, the Bank’s need
for funds, and local competitive conditions prior to establishing funding
strategies and interest rates to be paid.  The actions of the ALCO are
reported to the Directors’ Loan and Investment Committee and the full Board of
Directors at their regularly scheduled meetings.





F.
Electronic and Payment Services





General.We offer
a variety of electronic services to our customers.  Most of the
services are provided for convenience purposes and are typically offered in
conjunction with a deposit or loan account.  Certain electronic and
payment services are provided using marketing arrangements and third party
services, branded with the Bank’s name.  These services often provide
us with additional sources of fee income or reduce our operating and transaction
expenses.  Our menu of electronic and payment services include point
of sale transactions, debit card payments, ATMs, merchant credit and debit card
processing, Internet banking, Internet bill pay services, voice response, wire
transfer services, remote deposit capture services, automated clearing house
services, direct deposit of Social Security and other payments, loan auto-draft
payments, and cash management services.





G. Trust
and Investment Services





General.We offer
various personal trust and investment services through our Trust and Investment
Division, including both fiduciary and custodial services.  At
December 31, 2008 and December 31, 2007, we had $300.840 million and $316.692
million, respectively, of assets under management in the Bank’s Trust and
Investment Division.  The following chart summarizes the Trust and
Investment Division assets under management or held for safekeeping as of the
dates noted:


15-K
 Index





Trust
Assets Summary Table:





December
      31,2008
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  2007dollars in thousands
                                                                                                                                  
                                                                                                                                  Number
      of Accounts
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  Estimated
      Market Value
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  Number
      of Accounts
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  Estimated
      Market ValueTrusts
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  348
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  $
                                                                                                                                  140,413
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  338
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  $
                                                                                                                                  160,268Estates
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  2
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  519
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  9
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  4,108Custodian,
      Investment Management and Others
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  245
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  159,908
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  230
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  152,316Total
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  595
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  $
                                                                                                                                  300,840
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  577
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  $
                                                                                                                                  316,692





We also
provide investment services through a third party provider, INVEST Financial
Corp., for the purchase of mutual funds and annuities.





H.
Insurance Services





General.  We
offer credit life and disability insurance through an affiliation with the New
York Bankers Association.  The insurance is typically offered to and
purchased by consumers securing a mortgage or consumer loan through the
Bank.  In addition, we offer title insurance through Land Record
Services.  Title insurance is sold in conjunction with origination of
residential and commercial mortgages.  We own an interest in Land
Record Services and receive profit distributions based upon the overall
performance of the agency.





From 1998
through the second quarter of 2008, the Bank operated an insurance agency
through a joint venture with a regional independent insurance
agency.  The agency, Mang–Wilber LLC, was licensed to sell, within New
York State, various insurance products including life, health, property, and
casualty insurance products to both consumers and businesses.  The
Bank sold their interest in the agency in June 2008 recognizing a gain on the
sale of $628 thousand.





I.
Supervision and Regulation





Set forth
below is a brief description of certain laws and regulations governing the
Company, the Bank, and its subsidiaries.  The description does not
purport to be complete, and is qualified in its entirety by reference to
applicable laws and regulations.





i. The
Company





Bank Holding Company Act. The
Company is a bank holding company registered with, and subject to regulation and
examination by, the Board of Governors of the Federal Reserve System ("Federal
Reserve Board") pursuant to the BHCA, as amended. The Federal Reserve Board
regulates and requires the filing of reports describing the activities of bank
holding companies, and conducts periodic examinations to test compliance with
applicable regulatory requirements. The Federal Reserve Board has enforcement
authority over bank holding companies, including, among other things, the
ability to assess civil money penalties, to issue cease and desist or removal
orders, and to require a bank holding company to divest
subsidiaries.





The BHCA
prohibits a bank holding company from acquiring direct or indirect ownership or
control of more than 5% of the voting shares of any bank, or increasing such
ownership or control of any bank, without the prior approval of the Federal
Reserve Board. The BHCA further generally precludes a bank holding company from
acquiring direct or indirect ownership or control of any non-banking entity
engaged in any activities other than those which the Federal Reserve Board has
determined to be so closely related to banking or managing and controlling banks
as to be a proper incident thereto.  Some of the activities that have
been found to be closely related to banking are: operating a savings
association, mortgage company, finance company, credit card company, factoring
company, or collection agency; performing certain data processing services;
providing investment and financial advice; underwriting and acting as an
insurance agent for certain types of credit-related insurance; real and personal
property leasing; selling money orders, travelers' checks, and United States
Savings Bonds; real estate and personal property appraising; and providing tax
planning and preparation and check guarantee services.





Under
provisions of the BHCA enacted as part of the Gramm-Leach-Bliley Act of 1999
(“GLBA”), a bank holding company may elect to become a financial holding company
(“FHC”) if all of its depository institution subsidiaries are well-capitalized




16-K
 Index







The BHCA
generally permits a bank holding company to acquire a bank located outside of
the state in which the existing bank subsidiaries of the bank holding company
are located, subject to deposit concentration limits and state laws prescribing
minimum periods of time an acquired bank must have been in existence prior to
the acquisition.





A bank
holding company must serve as a source of strength for its subsidiary
bank.  The Federal Reserve Board may require a bank holding company to
contribute additional capital to an undercapitalized subsidiary
bank.  The Company is subject to capital adequacy guidelines for bank
holding companies (on a consolidated basis), which are substantially similar to
the FDIC-mandated capital adequacy guidelines applicable to the
Bank.





Federal Securities Law. The
Company is subject to the information, reporting, proxy solicitation, insider
trading, and other rules contained in the Securities Exchange Act of 1934 (the
"Exchange Act") and the regulations of the SEC thereunder.  In
addition, the Company must comply with the corporate governance and listing
standards of the NYSE Alternext U.S. to maintain the listing of its common stock
on the exchange.





Sarbanes-Oxley Act of
2002.  The Company is subject to the Sarbanes-Oxley Act of 2002
(the “Sarbanes-Oxley Act”). The Sarbanes-Oxley Act revised the laws affecting
public companies’ corporate
governance, accounting obligations, and corporate reporting by: (i) creating a
new federal accounting oversight body; (ii) revamping auditor independence
rules; (iii) enacting new corporate responsibility and governance measures; (iv)
enhancing disclosures by public companies, their directors, and their executive
officers; (v) strengthening the powers and resources of the SEC; and (vi)
imposing new criminal and civil penalties for securities fraud and related
wrongful conduct.





The SEC
has adopted regulations under the Sarbanes-Oxley Act, including: executive
compensation disclosure rules, standards of independence for directors who serve
on the Company’s Audit Committee; disclosure requirements as to whether at least
one member of the Company’s Audit Committee qualifies as a “financial expert” as
defined in the SEC regulations; whether the Company has adopted a code of ethics
applicable to its chief executive officer, chief financial officer, or those
persons performing similar functions and disclosure requirements regarding
the operations of board nominating committees and the means, if any, by which
security holders may communicate with directors.





ii. The
Bank





The
following discussion is not, and does not purport to be, a complete description
of the laws and regulations applicable to the Bank. Such statutes and
regulations relate to required reserves, investments, loans, deposits, issuances
of securities, payments of dividends, establishment of branches, and other
aspects of the Bank’s operations.  Any change in such laws or
regulations by the OCC, the FDIC, or Congress could materially adversely affect
the Bank.





General.  The Bank
is a national bank subject to extensive regulation, examination, and supervision
by the OCC, as its primary federal regulator, and by the FDIC, as its deposit
insurer.  The Bank's deposit accounts are insured up to applicable
limits by the Deposit Insurance Fund of the FDIC.  The Bank must file
reports with the Federal Financial Institution Examination Council (“FFIEC”),
OCC and the FDIC concerning its activities and financial condition and must
obtain regulatory approval before commencing certain activities or engaging in
transactions such as mergers and other business combinations or the
establishment, closing, purchase or sale of branch offices. This regulatory
structure gives the regulatory authorities extensive discretion in the
enforcement of laws and regulations and the supervision of the
Bank.





Business
Activities.  The Bank's lending, investment, deposit, and other
powers derive from the National Bank Act, FFIEC Interagency and OCC
regulations.  These powers are also governed to some extent by the
FDIC under the Federal Deposit Insurance Act and FDIC
regulations.  The Bank may make mortgage loans, commercial loans and
consumer loans, and may invest in certain types of debt securities and other
assets.  The Bank may offer a variety of deposit accounts including
savings, certificate (time), demand, and NOW accounts.





Standards for Safety and
Soundness. The OCC has adopted guidelines prescribing safety and
soundness standards. These guidelines establish general standards relating to
capital adequacy, asset quality, management, earnings performance, liquidity and
sensitivity to market risk.  In evaluating these safety and soundness
standards, the OCC also evaluates internal controls and information systems,
internal audit systems, loan documentation, credit underwriting, exposure to
changes in interest rates, asset growth, compensation, fees, and
benefits.  In general, the guidelines require




17-K
 Index







Branching.  Generally,
national banks may establish branch offices within New York to the same extend
as New York chartered banks may do so.  Additionally, national banks
may branch into other states that permit interstate branching to  the
same extent as commercial banks chartered under the laws of that
state.





Transactions with Related
Parties.  The Federal Reserve Act governs transactions between
the Bank and its affiliates.  In general, an affiliate of the Bank is
any company that controls, is controlled by, or is under common control with the
Bank. Generally, the Federal Reserve Act limits the extent to which the Bank or
its subsidiaries may engage in “covered transactions” with any one affiliate to
10% of the Bank’s capital stock and surplus, and contains an aggregate limit of
20% of capital stock and surplus for covered transactions with all affiliates.
Covered transactions include loans, asset purchases, the issuance of guarantees,
and similar transactions. The Bank's loans to insiders must be made on terms
that are substantially the same as, and follow credit underwriting procedures
that are not less stringent than, those prevailing for comparable transactions
with unaffiliated persons and that do not involve more than the normal risk of
repayment or present other unfavorable features.  The loans are also
subject to maximum dollar limits and must generally be approved by the
Board.





Capital Requirements. Capital
adequacy is measured within guidelines defined as either tier 1 capital
(primarily shareholders’ equity) or tier 2 capital (certain debt instruments and
a portion of the reserve for loan losses).  There are two measures of
capital adequacy for banks:  i) the tier 1 leverage ratio and ii) the
risk-based requirements. Most banks must maintain a minimum tier 1 leverage
ratio of 4%.  In addition, tier 1 capital must equal 4% of
risk-weighted assets, and total capital (tier 1 plus tier 2) must equal 8% of
risk-weighted assets.  Federal banking agencies are required to take
prompt corrective action, such as imposing restrictions, conditions, and
prohibitions, to deal with banks that fail to meet their minimum capital
requirements or are otherwise in troubled condition.  The regulators
have also established different capital classifications for banking
institutions, the highest being “well capitalized.”  Under regulations
adopted by the federal bank regulators, a banking institution is considered well
capitalized if it has a total risk adjusted capital ratio of 10% or greater, a
tier 1 risk adjusted capital ratio of 6% or greater and a leverage ratio of 5%
or greater, and is not subject to any regulatory order or written directive
regarding capital maintenance.  The Bank qualified as well capitalized
at December 31, 2008 and 2007.  See Part II, Item 7.F. entitled
"Capital Resources and Dividends" and Note 13 of the Consolidated Financial
Statements contained in Part II, Item 8, of this document for additional
information regarding the Bank’s capital levels.





Payment of
Dividends.  The OCC regulates the amount of dividends and other
capital distributions that the Bank may pay to its shareholders. A national bank
may not pay dividends from its capital.  All dividends must be paid
out of undivided profits.  In general, if the Bank satisfies all OCC
capital requirements both before and after a dividend payment, the Bank may pay
a dividend to shareholders in any year equal to the current year's net income
plus retained net income for the preceding two years.  A Bank may not
declare or pay any dividend if it is “undercapitalized” under OCC regulations.
The OCC also may restrict the Bank’s ability to pay dividends if the OCC has
reasonable cause to believe that such payment would constitute an unsafe and
unsound practice.  The Bank is not undercapitalized nor under any
special restrictions regarding the payment of dividends.





Insurance of Deposit
Accounts. The Bank is an insured depository institution subject to
assessment by, and the payment of deposit insurance premiums to, the FDIC.
Deposit insurance premiums are determined by a number of factors, including the
insured depository’s supervisory condition and several of its financial
ratios.  During 2007, the FDIC implemented certain provisions of the
Federal Deposit Insurance Reform Act of 2005 (“FDIRA”), which provided a one
time credit to qualified insured depositories, including the Bank, to offset
future FDIC deposit insurance assessments.  The Bank’s one time credit
totaling approximately $580 thousand was initially granted in the second quarter
of 2007.  At December 31, 2008 none of the FDIRA credit
remained.





Due to an
increase in bank failures during 2008, we anticipate incurring a significant
increase in our FDIC premium during 2009 and beyond. In particular, we
anticipate recording an FDIC premium expense at an annual rate of 12 to 16 basis
points on eligible insured deposits during 2009, the FDIC’s stated premium rate
for well-capitalized banks, which is expected to increase our annual FDIC
premiums by $800 thousand to $1.000 million during 2009 as compared to
2008.  Under FDIRA, when the FDIC Deposit Insurance Fund to insured
deposits or reserve ratio falls below 1.15% the FDIC is required to establish a
plan to restore the fund to 1.15% within five years.  At December 31,
2008, the Deposit Insurance Fund reserve ratio was
0.40%.


18-K
 Index


Furthermore,
the FDIC approved an interim rule in February 2009 that will institute a
one-time special assessment of 20 cents per $100 of domestic deposits on the
banking industry in order to quickly restore its Deposit Insurance
Fund.  We estimate that this one-time special assessment would result
in approximately $1.500 million in additional non-interest expense during
2009.  Immediately following the FDIC’s special assessment
announcement several comments were provided by member institutions and banking
industry advocates, including the American Bankers Association, recommending
that the FDIC consider alternative Deposit Insurance Fund funding options
including an increase in the FDIC’s line of credit with the U.S. Department of
Treasury.  The FDIC’s chair person followed with a public statement
indicating the special assessment could be reduced to 10 basis points if an
increase in the line of credit with the U.S. Treasury Department were
granted.  In the event, the special assessment were reduced from 20
basis points to 10 basis points, we estimate that the Company would record
approximately $750 thousand in additional non-interest expense during
2009.  The interim rule also reserves the right of the FDIC to charge
up to 10 cents per $100 of domestic deposits in the form of a special premium if
the reserve ratio continues to fall.





In
addition to the Deposit Insurance Fund premiums, the FDIC levies an assessment
based on the Bank’s deposit accounts under the Deposit Insurance Funds Act of
1996.  Under the Deposit Insurance Funds Act, deposits that
were insured by the Bank Insurance Fund (“BIF”), such as the deposits of
the Bank, were subject to an assessment for payment on bond obligations
financing the FDIC’s Savings Association Insurance Fund
(“SAIF”).  The assessment rate is adjusted quarterly, depending on the
need of the fund.  At December 31, 2008 and 2007, the assessment rate
was 1.14% cents per $100 of insured deposits.





Federal Reserve System. All
depository institutions must maintain with a Federal Reserve Bank reserves
against their transaction accounts (primarily checking, NOW, and Super NOW
accounts) and non-personal time accounts. In all years preceding 2008, these
reserves were maintained as vault cash or non-interest-bearing accounts, thereby
reducing the Bank’s earnings potential.  In the fourth quarter of 2008
the Federal Reserve Banks announced that they would begin to pay interest on
member banks, required reserve balances, as well as excess reserve
balances.  As of December 31, 2008, the Bank was in compliance with
applicable reserve requirements.





Loans to One
Borrower.  The Bank generally may not make a loan or extend
credit to a single or related group of borrowers in excess of 15% of its
unimpaired capital and surplus.  Up to an additional 10% of unimpaired
capital and surplus can be lent if the additional amount is fully secured by
readily marketable collateral.  At December 31, 2008, the Bank’s legal
lending limit on loans to one borrower was $10.2 million for loans not fully
secured by readily marketable collateral and $17.0 million for loans secured by
readily marketable collateral.  At that date, the Bank did not have
any loans or agreements to extend credit to a single or related group of
borrowers in excess of its legal lending limit.





Real Estate Lending Standards.OCC regulations generally require each national bank to establish and
maintain written internal real estate lending standards that are consistent with
safe and sound banking practices and appropriate to the size of the bank and the
nature and scope of its real estate lending activities. The standards also must
be consistent with accompanying OCC guidelines, which include loan-to-value
ratios for the different types of real estate loans.





Community Reinvestment
Act.  Under the federal Community Reinvestment Act (the “CRA”),
the Bank, consistent with its safe and sound operation, must help meet the
credit needs of its entire community, including low and moderate income
neighborhoods.  The OCC periodically assesses the Bank's compliance
with CRA requirements.  The Bank received a satisfactory rating for
CRA on its last performance evaluation conducted by the OCC as of March 20,
2006.





Fair Lending and Consumer Protection
Laws.  The Bank must also comply with the federal Equal Credit
Opportunity Act and the New York Executive Law, which prohibit creditors
from discrimination in their lending practices on bases specified in these
statutes. In addition, the Bank is subject to a number of federal statutes and
regulations implementing them, which are designed to protect the general public,
borrowers, depositors, and other customers of depository institutions. These
include the Bank Secrecy Act, the Truth in Lending Act, the Home Ownership and
Equity Protection Act, the Truth in Savings Act, the Home Mortgage Disclosure
Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the
Electronic Funds Transfers Act, the Fair Credit Reporting Act, the Right to
Financial Privacy Act, the Expedited Funds Availability Act, the Flood Disaster
Protection Act, the Fair Debt Collection Practices Act and the Consumer
Protection for Depository Institutions Sales of Insurance
regulation.  The OCC and, in some instances, other regulators,
including the Justice Department, may take enforcement action against
institutions that fail to comply with these laws.





Prohibitions Against Tying
Arrangements. National banks are prohibited, subject to some exceptions,
from extending credit to or offering any other service, or fixing or varying the
consideration for such extension of credit or service, on the condition that the
customer obtain some additional service from the bank or its affiliates or not
obtain services of a competitor of the bank.


19-K
 Index


Privacy Regulations.OCC
regulations generally require the Bank to disclose its privacy
policy.  The policy must identify with whom the Bank shares its
customers’ “non-public personal information,” at the time of establishing the
customer relationship and annually thereafter.  In addition, the Bank
must provide its customers with the ability to “opt out” of having their
personal information shared with unaffiliated third parties and not to disclose
account numbers or access codes to non-affiliated third parties for marketing
purposes.  We believe that the Bank’s privacy policy complies with OCC
regulations.





The USA PATRIOT Act.The Bank
is subject to the USA PATRIOT Act, which gives the federal government powers to
address terrorist threats through enhanced domestic security measures, expanded
surveillance powers, increased information sharing, and broadened anti-money
laundering requirements. The USA PATRIOT Act imposes affirmative obligations on
financial institutions, including the Bank, to establish anti-money laundering
programs which require: (i) the establishment of internal policies, procedures,
and controls; (ii) the designation of an anti-money laundering compliance
officer; (iii) ongoing employee training programs; and (iv) an independent audit
function to test the anti-money laundering program. The OCC must consider the
Bank’s effectiveness in combating money laundering when ruling on merger and
other applications.





J.
Competition





We face
competition in all the markets we serve.  Traditional competitors are
other local commercial banks, savings banks, savings and loan institutions, and
credit unions, as well as local offices of major regional and money center
banks.  Also, non-banking financial organizations, such as consumer
finance companies, mortgage brokers, insurance companies, securities firms,
money market funds, mutual funds and credit card companies offer substantive
equivalents of transaction accounts and various loan and financial
products.  As a result of the enactment of the GLBA (discussed further
in Item 1. I (i) above), other non-banking financial organizations now may offer
comparable products to those offered by the Company and establish, acquire, or
affiliate with commercial banks themselves.





K.
Legislative and Regulatory Developments





Financial Stability
Plan.On February 10, 2009, the Treasury and the federal bank
regulators announced the Financial Stability Plan. Among other measures, this
plan includes: i) a Capital Assistance Program for the nation’s largest banks,
using EESA funds; ii) stress testing of these banks’ balance sheets to assess
the adequacy of their capital to absorb losses; iii) the development of new
disclosures for banks and their holding companies that report under the Exchange
Act; iv) a Public-Private Investment Fund to purchase troubled assets from
banks; v) a Consumer and Business Lending Initiative, implemented through the
Term Asset-Backed Securities Loan Facility, to facilitate the purchase of small
business and consumer loans; and vi) increased disclosure and government
monitoring of the use of funds for lending, limits on executive compensation,
dividend and stock repurchase restrictions for participating  banks.
The Company does not expect these programs to materially impact its business or
financial condition.





Homeowner Affordability and
Stability Plan.On February 18, 2009, President Obama
announced the Homeowner Affordability and Stability Plan, the purpose of which
is to help borrowers avoid foreclosure by restructuring or refinancing their
mortgages. Under the plan: i) Fannie Mae and Freddie Mac will refinance
mortgages they own or guarantee for approximately 5 million homeowners; ii) the
Treasury will implement a Homeowner Stability Initiative, which will use $75
billion in TARP funds to reduce the rates on mortgage loans for borrowers in
imminent risk of default, and which will employ financial incentives for
lenders, servicers and borrowers to reduce loan rates and principal balances, in
accordance with uniform guidelines for loan modifications developed by the
federal bank regulators; and iii) the Treasury will increase to $200 billion its
pledge to support Fannie Mae and Freddie Mac. Pursuant to this plan, legislation
will be sought which will allow judicial modification of residential mortgage
loans in borrower bankruptcies, under certain circumstances. As the Treasury
begins to implement this plan, the Company’s management and Board of Directors
will assess its potential impact, if any, on the Company’s mortgage loan
portfolio.





New Legislative
Developments.  Various federal bills that would significantly
affect banks are introduced in Congress from time to time.  The
Company cannot estimate the likelihood of any currently pending banking bills
being enacted into law, or the ultimate effect that any such potential
legislation, if enacted, would have upon its financial condition or results of
operations.





ITEM 1A:  RISK FACTORS





The
investment performance of our common shares is affected by several material risk
factors.  These factors (summarized below) can affect our financial
condition or results of operations.  Accordingly, you should be aware
of these risk factors and how each may potentially affect your investment in our
common stock.


20-K
 Index


Global Financial
Crisis.  During 2008 there was a rapid deterioration in the
financial condition of many large domestic and international commercial banks,
investment banks, insurance companies and U.S. government sponsored enterprises,
including Fannie Mae and Freddie Mac, due to a general collapse of the United
States housing market and the value of the financial assets tied to those
markets.  Over the last several years there was significant growth in
the level of sub-prime and Alt-A residential mortgage loan originations in the
United States.  These loans were originated by mortgage banks and
brokers, savings institutions and commercial banks.  Some were sold
into the secondary market, but all ultimately resided on the balance sheets of
many large domestic and international commercial banks, investment banks and
insurance companies, causing a significant deterioration in their financial
condition or in some cases their collapse.  The rapid deterioration in
the value of the financial assets held by these institutions caused the domestic
and international credit market to seize, further exacerbating the financial
crises and pushing many of the world’s economies into recession.





This
crisis has and is expected to continue to affect our financial condition and
results of operations, as well as potential returns to
shareholders.  A significant decline in the equity markets and the
stock value of financial companies in general could negatively impact
shareholder returns.  A general decline in credit market conditions
may limit our access to capital and borrowed funds.  An increase in
FDIC insurance premiums in 2009 and beyond is expected to increase our
non-interest expense.  The funded status of the Company’s defined
benefit pension plan has and will continue to be affected by market
conditions.  The financial performance of our customers may weaken if
the domestic and international recession persists for an extended period of
time, which, in turn, could require additional provision for loan
losses.  The value of certain investment securities could become other
than temporarily impaired, which would negatively affect our results of
operations.





Other General Economic and
Competitive Conditions.  Regional and local economic factors
including employment and unemployment conditions, population growth, and price
and wage scale changes, may impact the demand for our products and services, the
level of customer deposits, or credit status of our
borrowers.  National and international economic conditions including
credit markets, equity markets, raw materials costs, oil prices, consumer
demand, and consumer trends, may impact the demand for our commercial borrower’s
products and services, which, in turn, can affect our financial condition and
results of operation.  Although the national economy has slid into
recession due to the global financial crisis, the central and upstate New York
market place that we operate within has not experienced the rapid decline in
housing prices experienced in other parts of the country.





National,
regional, and local competitive conditions can negatively impact our financial
condition or results of operations.  Our existing competition may
begin offering new products and services, change the price for existing products
and services, or open a new office in direct competition with one of our
offices.  In addition, new competitors can establish a physical
presence in our market or begin offering products and services through the
Internet or other remote channels that compete directly with our products and
services.  All of these factors are dynamic and may affect the demand
for our products and services, and, in turn, our financial condition and results
of operations.





Real Estate Market
Conditions.  At December 31, 2008, real estate served as
the principal source of collateral with respect to approximately 68.7% of the
Bank’s loan portfolio.  While the Bank is not a sub-prime lender, a
prolonged depression in the value of residential and commercial real estate
securing its loans could adversely impact our consolidated financial condition
and results of operations.  Given our heavy reliance on real estate
lending, this could have a significant adverse affect on our financial condition
and results of operations.





Credit Risk.  One
of our main functions as a financial intermediary is to extend credit, in the
form of loans, commitments and investments, to individuals, businesses, state,
local and federal government and government sponsored entities within and
outside of our primary market area.  The risk associated with these
extensions of credit pose significant risks to earnings and capital that need to
be controlled and monitored by management.  Losses incurred by us due
to the failure by borrowers to repay loans or other extensions of credit will
negatively affect our financial condition and results of
operations.





The Financial Performance of Large
Borrowers.  Our financial condition and results of operations
are highly dependent upon the credit worthiness and financial performance of our
borrowers.  The Bank has many borrowers or groups of related borrowers
whose total indebtedness with the Bank exceeds $1.0 million.  The
financial performance of these borrowers is a material risk factor that may
affect our financial condition or results of operations.





Allowance for Loan Losses May Not Be
Sufficient to Cover Actual Loan Losses.  The Bank’s management,
under the control and supervision of the Board of Directors, continually
monitors the credit status of the Bank’s loan portfolio.  The adequacy
of the Allowance for Loan Losses is reviewed quarterly by the Board of
Directors, and periodically by an independent loan review firm under the
direction of the Bank’s Audit Committee, the Bank’s regulators, and the
Company’s external auditors.  However, because the Allowance for Loan
Losses is an estimate of probable losses and is based on management’s experience
and assumptions, there is no certainty that the Allowance for Loan Losses will
be




21-K
 Index







Changes in Interest Rates and
Capital Markets.  Our financial condition and results of
operations are highly dependent upon the amount of the interest income we
receive on our earning assets and the interest we pay for our funding and
capital resources.  Accordingly, changes in interest rates and capital
markets can affect our financial condition and results of
operations.





Fraud
Risk.  Financial institutions are inherently exposed to fraud
risk.  A fraud can be perpetrated by a customer of the Bank, an
employee, a vendor, or members of the general public.  A loss due to
fraud that is determined not to be insured under our fidelity insurance coverage
could negatively affect our financial condition or results of
operations.





Changes in Laws, Regulations, and
Policies.Financial institutions are highly regulated
companies and are subject to numerous laws and regulations.  Changes
to these laws or regulations, particularly at the federal and state level, may
materially impact the business climate we operate within, which, in turn, may
impact the economic return on our common shares, financial condition, or results
of operations.





Changes in the Financial Condition
of Government Agencies, Government Sponsored Enterprises, and Local and State
Governments.  We invest substantially in debt instruments
backed or issued by U.S. Government Agencies, U.S. Government Sponsored
Enterprises, and local and state governments.  A deterioration of the
credit standing of any of these issuers of debt may materially impact our
financial condition or results of operations.





Actions of Regulatory
Authorities.The Company and the Bank are subject to the
supervision of several federal and state regulatory bodies.  These
regulatory bodies have authority to issue, change, and enforce rules and
regulations including the authority to assess fines.  Changes to these
regulations may impact the financial condition or results of operations of the
Company or the Bank.  See Item 1 I. of this Annual Report on Form 10-K
for additional explanation regarding the regulations to which the Company and
the Bank are subject.





Changes in the Company’s Policies or
Management.Our financial condition and results of operations
depend upon the policies approved by the Board of Directors and the practices of
management.  Changes in our policies or management practices,
particularly credit policies and practices of the Bank, may affect our financial
condition or results of operations.





Incidents Affecting Our
Reputation.The demand for our products and services is
influenced by our reputation and the reputation of our management and
employees.  Public incidents that negatively affect the reputation of
the Company or the Bank, including, but not limited to, breaches in the security
of customer information or unfair or deceptive practices, or violations of law
may adversely impact our financial condition, results of operations, or economic
performance of the Company’s common stock.





Technology
Risk.We deploy various forms of technology to facilitate and
process customer and internal transactions.  In addition, we gather,
store and summarize various forms of computer generated data to analyze the
Company’s services, business processes and financial
performance.  Although we maintain various policies and procedures,
including data back-up and recovery procedures to mitigate technology risk, in
the event one of our systems were to fail it could have an adverse impact on our
financial condition or results of operations.





Liquidity of the Company’s Common
Shares.  The Company’s common stock is lightly traded on the
NYSE Alternext U.S.  This condition may make it difficult for
shareholders with large common stock ownership positions to sell or liquidate
shares at a suitable price.





Dividend
Policy.  The Company historically has paid a quarterly dividend
to its common stockholders.  A reduction or discontinuation of this
practice could negatively affect the value of our common stock.





Changes to the Markets or Exchanges
On Which the Company’s Common Shares Are Traded.  The Company’s
common shares trade on the NYSE Alternext U.S.  Changes to the NYSE
Alternext U.S. trading practices or systems, reputation or financial condition,
or rules which govern trading on the NYSE Alternext U.S. may impact our
shareholders’ ability to buy or sell their common shares at a suitable
price.





Goodwill
Impairment  The current global financial crisis has depressed
stock market trading values, particularly those of financial
institutions.  Should our common stock value trade consistently below
our book value, we would re-evaluate the amount of goodwill through an
impairment test.  If impairment is warranted, the amount would be
recorded through the income statement as a reduction to current period
earnings.


22-K
 Index


ITEM 1B:  UNRESOLVED STAFF COMMENTS





The
Company has not been subject to any comments by the SEC during the period
covered by this Annual Report on Form 10-K that remain unresolved.





ITEM 2:  PROPERTIES





The
Company and the Bank are headquartered at 245 Main Street, Oneonta, New
York.  The three buildings that comprise our headquarters are owned by
the Bank and also serve as our main office.  In addition to our main
office, we own eighteen branch offices and lease four branch offices and one
loan production office at market rates.





In the
opinion of management, the physical properties of the Company are suitable and
adequate.  All of our properties are insured at full replacement
cost.





ITEM 3:  LEGAL PROCEEDINGS





From time
to time, the Company becomes subject to various legal claims that arise in the
normal course of business.  At December 31, 2008, the Company was not
the subject of any material pending legal proceedings, other than ordinary
routine litigation occurring in the normal course of its
business.  The various pending legal claims against the Company will
not, in the opinion of management based upon consultation with legal counsel,
result in any material liability to the Company and will not materially affect
our financial position, results of operations or cash flow.





Neither
the Company, the Bank, nor any of the Bank’s subsidiaries have been subject to
review by the Internal Revenue Service of any transactions that have been
identified as abusive or that have a significant tax avoidance
purpose.





ITEM 4:  SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS





There
were no matters submitted to a vote of the security holders of the Company
during the fourth quarter of the fiscal year ended December 31,
2008.




PART II





ITEM
      5:
            MARKET
      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER
      PURCHASES OF EQUITY SECURITIES





A. Market
Information; Dividends on Common Stock; and Recent Sales of Unregistered
Securities





The
common stock of the Company ($0.01 par value per share) trades on the NYSE
Alternext U.S. (formerly the American Stock Exchange) under the symbol
“GIW.”  The following table shows the high and low trading prices for
the common stock and quarterly dividend paid to our security holders for the
periods presented:





Common
Stock Market Price and Dividend Table:





2008
                                                                                      
                                                                                      
                                                                                      2007High
                                                                                      
                                                                                      
                                                                                      Low
                                                                                      
                                                                                      
                                                                                      Dividend
                                                                                      
                                                                                      
                                                                                      High
                                                                                      
                                                                                      
                                                                                      Low
                                                                                      
                                                                                      
                                                                                      Dividend4th
      Quarter
                                                                                      
                                                                                      $
                                                                                      7.90
                                                                                      
                                                                                      
                                                                                      $
                                                                                      5.54
                                                                                      
                                                                                      
                                                                                      $
                                                                                      0.0950
                                                                                      
                                                                                      
                                                                                      $
                                                                                      9.50
                                                                                      
                                                                                      
                                                                                      $
                                                                                      8.65
                                                                                      
                                                                                      
                                                                                      $
                                                                                      0.09503rd
      Quarter
                                                                                      
                                                                                      $
                                                                                      8.98
                                                                                      
                                                                                      
                                                                                      $
                                                                                      7.70
                                                                                      
                                                                                      
                                                                                      $
                                                                                      0.0950
                                                                                      
                                                                                      
                                                                                      $
                                                                                      12.00
                                                                                      
                                                                                      
                                                                                      $
                                                                                      8.20
                                                                                      
                                                                                      
                                                                                      $
                                                                                      0.09502nd
      Quarter
                                                                                      
                                                                                      $
                                                                                      9.00
                                                                                      
                                                                                      
                                                                                      $
                                                                                      8.31
                                                                                      
                                                                                      
                                                                                      $
                                                                                      0.0950
                                                                                      
                                                                                      
                                                                                      $
                                                                                      9.89
                                                                                      
                                                                                      
                                                                                      $
                                                                                      8.85
                                                                                      
                                                                                      
                                                                                      $
                                                                                      0.09501st
      Quarter
                                                                                      
                                                                                      $
                                                                                      9.10
                                                                                      
                                                                                      
                                                                                      $
                                                                                      8.52
                                                                                      
                                                                                      
                                                                                      $
                                                                                      0.0950
                                                                                      
                                                                                      
                                                                                      $
                                                                                      10.29
                                                                                      
                                                                                      
                                                                                      $
                                                                                      9.17
                                                                                      
                                                                                      
                                                                                      $
                                                                                      0.0950Source:  The
      NYSE Alternext U.S. Monthly Market Statistics
Report.




At March
10, 2009, there were 478 holders of record of our common stock (excluding
beneficial owners who hold their shares in nominee name through brokerage
accounts).  The closing price of the common stock at March 10, 2009
was $7.36 per share.





We have
not sold any unregistered securities in the past five years.


23-K
 Index


B. Use of
Proceeds from Registered Securities





None.





C.
Purchases of Equity Securities by Issuer and Affiliated Purchasers





On July
26, 2005, we announced that the Company’s Board of Directors authorized
management to purchase up to $1.5 million of the Company’s common stock under a
stock repurchase program.  At September 30, 2008 management’s
remaining share repurchase authority was $283 thousand due to the purchase of
treasury shares totaling $1.217 million under this program since its
inception.  During the fourth quarter of 2008 no additional stock
repurchases were transacted by the Company and the plan was terminated by the
Company’s Board of Directors.





ITEM 6:  SELECTED FINANCIAL DATA





The
comparability of the information provided in the following 5-Year Summary Table
of Selected Financial Data and the Table of Selected Quarterly Financial Data
have not been materially impacted by any significant business combinations,
dispositions of business operations, or accounting changes other than those
provided in the footnotes to our financial statements provided in PART II, Item
8, of this document.





5-Year
Summary Table of Selected Financial Data:





The
      Wilber Corporation and Subsidiaries
                                                                                                      
                                                                                                      As
      of and for the Year Ended December 31, (1)2008
                                                                                                      
                                                                                                      
                                                                                                      2007
                                                                                                      
                                                                                                      
                                                                                                      2006
                                                                                                      
                                                                                                      
                                                                                                      2005
                                                                                                      
                                                                                                      2004(dollars
      in thousands, except per share data)Consolidated
      Statements of Income Data:Interest
      and Dividend Income
                                                                                                      
                                                                                                      $
                                                                                                      46,392
                                                                                                      
                                                                                                      
                                                                                                      $
                                                                                                      46,030
                                                                                                      
                                                                                                      
                                                                                                      $
                                                                                                      43,341
                                                                                                      
                                                                                                      
                                                                                                      $
                                                                                                      40,310
                                                                                                      
                                                                                                      $
                                                                                                      37,165Interest
      Expense
                                                                                                      
                                                                                                      
                                                                                                      19,958
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      21,474
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      18,360
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      14,930
                                                                                                      
                                                                                                      
                                                                                                      12,761Net
      Interest Income
                                                                                                      
                                                                                                      
                                                                                                      26,434
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      24,556
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      24,981
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      25,380
                                                                                                      
                                                                                                      
                                                                                                      24,404Provision
      for Loan Losses
                                                                                                      
                                                                                                      
                                                                                                      1,530
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      900
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      1,560
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      1,580
                                                                                                      
                                                                                                      
                                                                                                      1,200Net
      Interest Income After Provision for Loan Losses
                                                                                                      
                                                                                                      
                                                                                                      24,904
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      23,656
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      23,421
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      23,800
                                                                                                      
                                                                                                      
                                                                                                      23,204Non-Interest
      Income (Excl. Investment Securities Gains, Net)
                                                                                                      
                                                                                                      
                                                                                                      6,227
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      6,956
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      5,455
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      5,156
                                                                                                      
                                                                                                      
                                                                                                      4,692Investment
      Securities Gains, Net
                                                                                                      
                                                                                                      
                                                                                                      82
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      80
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      514
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      469
                                                                                                      
                                                                                                      
                                                                                                      1,031Non-Interest
      Expense
                                                                                                      
                                                                                                      
                                                                                                      23,724
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      20,857
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      20,032
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      18,966
                                                                                                      
                                                                                                      
                                                                                                      17,307Income
      Before Provision for Income Taxes
                                                                                                      
                                                                                                      
                                                                                                      7,489
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      9,835
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      9,358
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      10,459
                                                                                                      
                                                                                                      
                                                                                                      11,620Provision
      for Income Taxes
                                                                                                      
                                                                                                      
                                                                                                      1,673
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      2,128
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      2,206
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      2,715
                                                                                                      
                                                                                                      
                                                                                                      3,002Net
      Income
                                                                                                      
                                                                                                      $
                                                                                                      5,816
                                                                                                      
                                                                                                      
                                                                                                      $
                                                                                                      7,707
                                                                                                      
                                                                                                      
                                                                                                      $
                                                                                                      7,152
                                                                                                      
                                                                                                      
                                                                                                      $
                                                                                                      7,744
                                                                                                      
                                                                                                      $
                                                                                                      8,618Per
      Common Share:Earnings
      (Basic)
                                                                                                      
                                                                                                      $
                                                                                                      0.55
                                                                                                      
                                                                                                      
                                                                                                      $
                                                                                                      0.73
                                                                                                      
                                                                                                      
                                                                                                      $
                                                                                                      0.66
                                                                                                      
                                                                                                      
                                                                                                      $
                                                                                                      0.69
                                                                                                      
                                                                                                      $
                                                                                                      0.77Cash
      Dividends
                                                                                                      
                                                                                                      
                                                                                                      0.38
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      0.38
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      0.38
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      0.38
                                                                                                      
                                                                                                      
                                                                                                      0.38Book
      Value
                                                                                                      
                                                                                                      
                                                                                                      6.42
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      6.61
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      5.99
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      6.08
                                                                                                      
                                                                                                      
                                                                                                      6.04Tangible
      Book Value (2)
                                                                                                      
                                                                                                      
                                                                                                      5.97
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      6.13
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      5.52
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      5.61
                                                                                                      
                                                                                                      
                                                                                                      5.77Consolidated
      Period-End Balance Sheet Data:Total
      Assets
                                                                                                      
                                                                                                      $
                                                                                                      924,874
                                                                                                      
                                                                                                      
                                                                                                      $
                                                                                                      793,680
                                                                                                      
                                                                                                      
                                                                                                      $
                                                                                                      761,981
                                                                                                      
                                                                                                      
                                                                                                      $
                                                                                                      752,728
                                                                                                      
                                                                                                      $
                                                                                                      750,861Securities
      Available-for-Sale
                                                                                                      
                                                                                                      
                                                                                                      216,744
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      237,274
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      228,959
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      235,097
                                                                                                      
                                                                                                      
                                                                                                      243,998Securities
      Held-to-Maturity
                                                                                                      
                                                                                                      
                                                                                                      44,454
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      52,202
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      62,358
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      54,939
                                                                                                      
                                                                                                      
                                                                                                      59,463Gross
      Loans
                                                                                                      
                                                                                                      
                                                                                                      583,861
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      445,105
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      406,920
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      404,958
                                                                                                      
                                                                                                      
                                                                                                      392,325Allowance
      for Loan Losses
                                                                                                      
                                                                                                      
                                                                                                      7,564
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      6,977
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      6,680
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      6,640
                                                                                                      
                                                                                                      
                                                                                                      6,250Deposits
                                                                                                      
                                                                                                      
                                                                                                      765,873
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      657,494
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      629,044
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      604,958
                                                                                                      
                                                                                                      
                                                                                                      571,929Long-Term
      Borrowings
                                                                                                      
                                                                                                      
                                                                                                      59,970
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      41,538
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      42,204
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      52,472
                                                                                                      
                                                                                                      
                                                                                                      65,379Short-Term
      Borrowings
                                                                                                      
                                                                                                      
                                                                                                      21,428
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      15,786
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      18,459
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      19,357
                                                                                                      
                                                                                                      
                                                                                                      37,559Shareholder's
      Equity
                                                                                                      
                                                                                                      
                                                                                                      67,459
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      69,399
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      63,332
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      67,717
                                                                                                      
                                                                                                      
                                                                                                      67,605Selected
      Key Ratios:Return
      on Average Assets
                                                                                                      
                                                                                                      
                                                                                                      0.67
                                                                                                      %
                                                                                                      
                                                                                                      
                                                                                                      0.99
                                                                                                      %
                                                                                                      
                                                                                                      
                                                                                                      0.95
                                                                                                      %
                                                                                                      
                                                                                                      
                                                                                                      1.02
                                                                                                      %
                                                                                                      
                                                                                                      1.17
                                                                                                      %Return
      on Average Equity
                                                                                                      
                                                                                                      
                                                                                                      8.35
                                                                                                      %
                                                                                                      
                                                                                                      
                                                                                                      11.84
                                                                                                      %
                                                                                                      
                                                                                                      
                                                                                                      11.20
                                                                                                      %
                                                                                                      
                                                                                                      
                                                                                                      11.40
                                                                                                      %
                                                                                                      
                                                                                                      13.08
                                                                                                      %Net
      Interest Margin (tax-equivalent)
                                                                                                      
                                                                                                      
                                                                                                      3.46
                                                                                                      %
                                                                                                      
                                                                                                      
                                                                                                      3.62
                                                                                                      %
                                                                                                      
                                                                                                      
                                                                                                      3.81
                                                                                                      %
                                                                                                      
                                                                                                      
                                                                                                      3.82
                                                                                                      %
                                                                                                      
                                                                                                      3.76
                                                                                                      %Efficiency
      Ratio (3)
                                                                                                      
                                                                                                      
                                                                                                      68.42
                                                                                                      %
                                                                                                      
                                                                                                      
                                                                                                      61.76
                                                                                                      %
                                                                                                      
                                                                                                      
                                                                                                      61.14
                                                                                                      %
                                                                                                      
                                                                                                      
                                                                                                      57.67
                                                                                                      %
                                                                                                      
                                                                                                      55.50
                                                                                                      %Dividend
      Payout
                                                                                                      
                                                                                                      
                                                                                                      69.09
                                                                                                      %
                                                                                                      
                                                                                                      
                                                                                                      52.05
                                                                                                      %
                                                                                                      
                                                                                                      
                                                                                                      57.58
                                                                                                      %
                                                                                                      
                                                                                                      
                                                                                                      55.07
                                                                                                      %
                                                                                                      
                                                                                                      49.35
                                                                                                      %






24-K
 Index




5-Year Summary Table of
Selected Financial Data, Continued:




The
      Wilber Corporation and Subsidiaries
                  
                  As
      of and for the Year Ended December 31, (1)2008
                  
                  
                  2007
                  
                  
                  2006
                  
                  
                  2005
                  
                  
                  2004(dollars
      in thousands, except per share data)Asset
      Quality:Non-Performing
      Loans
                  
                  $
                  7,211
                  
                  
                  $
                  6,136
                  
                  
                  $
                  2,529
                  
                  
                  $
                  4,918
                  
                  
                  $
                  2,751Non-Performing
      Assets
                  
                  
                  7,369
                  
                  
                  
                  6,383
                  
                  
                  
                  2,632
                  
                  
                  
                  4,938
                  
                  
                  
                  2,829Net
      Loan Charge-Offs to Average Loans
                  
                  
                  0.19
                  %
                  
                  
                  0.14
                  %
                  
                  
                  0.38
                  %
                  
                  
                  0.30
                  %
                  
                  
                  0.19
                  %Allowance
      for Loan Losses to Period-End Loans
                  
                  
                  1.30
                  %
                  
                  
                  1.57
                  %
                  
                  
                  1.64
                  %
                  
                  
                  1.64
                  %
                  
                  
                  1.60
                  %Allowance
      for Loan Losses to Non-Performing Loans (4)
                  
                  
                  105
                  %
                  
                  
                  114
                  %
                  
                  
                  264
                  %
                  
                  
                  135
                  %
                  
                  
                  227
                  %Non-Performing
      Loans to Period-End Loans
                  
                  
                  1.24
                  %
                  
                  
                  1.38
                  %
                  
                  
                  0.62
                  %
                  
                  
                  1.21
                  %
                  
                  
                  0.70
                  %





(1)
Certain figures have been reclassified to conform with the current period
presentation.


(2)
Tangible book value numbers exclude goodwill and intangible assets associated
with prior business combinations.


(3) The
efficiency ratio is calculated by dividing total non-interest expense less
amortization of intangibles and other real estate expense by tax-equivalent net
interest income plus non-interest income other than securities gains and
losses.


(4)
Non-performing loans include non-accrual loans, troubled debt restructured loans
and accruing loans 90 days or more delinquent.




Table of
Selected Quarterly Financial Data:





2008
                      
                      
                      2007Selected
      Unaudited Quarterly Financial Data
                      
                      Fourth
                      
                      
                      Third
                      
                      
                      Second
                      
                      
                      First
                      
                      
                      Fourth
                      
                      
                      Third
                      
                      
                      Second
                      
                      
                      First(Dollars
      in Thousands)Interest
      income
                      
                      $
                      11,890
                      
                      
                      $
                      11,804
                      
                      
                      $
                      11,298
                      
                      
                      $
                      11,400
                      
                      
                      $
                      11,768
                      
                      
                      $
                      11,736
                      
                      
                      $
                      11,412
                      
                      
                      $
                      11,114Interest
      expense
                      
                      
                      4,804
                      
                      
                      
                      4,960
                      
                      
                      
                      4,939
                      
                      
                      
                      5,255
                      
                      
                      
                      5,604
                      
                      
                      
                      5,485
                      
                      
                      
                      5,335
                      
                      
                      
                      5,050Net
      interest income
                      
                      
                      7,086
                      
                      
                      
                      6,844
                      
                      
                      
                      6,359
                      
                      
                      
                      6,145
                      
                      
                      
                      6,164
                      
                      
                      
                      6,251
                      
                      
                      
                      6,077
                      
                      
                      
                      6,064Provision
      for loan losses
                      
                      
                      630
                      
                      
                      
                      500
                      
                      
                      
                      175
                      
                      
                      
                      225
                      
                      
                      
                      250
                      
                      
                      
                      150
                      
                      
                      
                      240
                      
                      
                      
                      260Net
      interest income after provision for loan losses
                      
                      
                      6,456
                      
                      
                      
                      6,344
                      
                      
                      
                      6,184
                      
                      
                      
                      5,920
                      
                      
                      
                      5,914
                      
                      
                      
                      6,101
                      
                      
                      
                      5,837
                      
                      
                      
                      5,804Investment
      security gains (losses), net
                      
                      
                      4
                      
                      
                      
                      (86
                      )
                      
                      
                      (19
                      )
                      
                      
                      183
                      
                      
                      
                      (68
                      )
                      
                      
                      22
                      
                      
                      
                      79
                      
                      
                      
                      47Other
      non-interest income
                      
                      
                      1,298
                      
                      
                      
                      1,460
                      
                      
                      
                      2,122
                      
                      
                      
                      1,347
                      
                      
                      
                      1,433
                      
                      
                      
                      1,546
                      
                      
                      
                      2,267
                      
                      
                      
                      1,710Non-interest
      expense
                      
                      
                      5,719
                      
                      
                      
                      6,001
                      
                      
                      
                      6,381
                      
                      
                      
                      5,623
                      
                      
                      
                      5,570
                      
                      
                      
                      5,102
                      
                      
                      
                      5,221
                      
                      
                      
                      4,964Income
      before income tax expense
                      
                      
                      2,039
                      
                      
                      
                      1,717
                      
                      
                      
                      1,906
                      
                      
                      
                      1,827
                      
                      
                      
                      1,709
                      
                      
                      
                      2,567
                      
                      
                      
                      2,962
                      
                      
                      
                      2,597Income
      tax expense
                      
                      
                      451
                      
                      
                      
                      334
                      
                      
                      
                      499
                      
                      
                      
                      389
                      
                      
                      
                      349
                      
                      
                      
                      576
                      
                      
                      
                      555
                      
                      
                      
                      648Net
      income
                      
                      $
                      1,588
                      
                      
                      $
                      1,383
                      
                      
                      $
                      1,407
                      
                      
                      $
                      1,438
                      
                      
                      $
                      1,360
                      
                      
                      $
                      1,991
                      
                      
                      $
                      2,407
                      
                      
                      $
                      1,949Basic
      earnings per share
                      
                      $
                      0.15
                      
                      
                      $
                      0.13
                      
                      
                      $
                      0.13
                      
                      
                      $
                      0.14
                      
                      
                      $
                      0.13
                      
                      
                      $
                      0.19
                      
                      
                      $
                      0.23
                      
                      
                      $
                      0.18Basic
      weighted average shares outstanding
                      
                      
                      10,503,704
                      
                      
                      
                      10,503,704
                      
                      
                      
                      10,503,704
                      
                      
                      
                      10,503,704
                      
                      
                      
                      10,503,704
                      
                      
                      
                      10,537,801
                      
                      
                      
                      10,569,182
                      
                      
                      
                      10,569,182Net
      interest margin (tax equivalent) (1)
                      
                      
                      3.54
                      %
                      
                      
                      3.49
                      %
                      
                      
                      3.38
                      %
                      
                      
                      3.44
                      %
                      
                      
                      3.52
                      %
                      
                      
                      3.67
                      %
                      
                      
                      3.63
                      %
                      
                      
                      3.68
                      %Return
      on average assets
                      
                      
                      0.70
                      %
                      
                      
                      0.62
                      %
                      
                      
                      0.66
                      %
                      
                      
                      0.71
                      %
                      
                      
                      0.68
                      %
                      
                      
                      1.01
                      %
                      
                      
                      1.26
                      %
                      
                      
                      1.04
                      %Return
      on average equity
                      
                      
                      9.09
                      %
                      
                      
                      7.93
                      %
                      
                      
                      8.08
                      %
                      
                      
                      8.30
                      %
                      
                      
                      7.96
                      %
                      
                      
                      12.15
                      %
                      
                      
                      14.92
                      %
                      
                      
                      12.57
                      %Efficiency
      ratio (2)
                      
                      
                      64.64
                      %
                      
                      
                      68.16
                      %
                      
                      
                      70.88
                      %
                      
                      
                      70.10
                      %
                      
                      
                      68.52
                      %
                      
                      
                      61.02
                      %
                      
                      
                      58.52
                      %
                      
                      
                      59.36
                      %





(1) Net
interest margin (tax-equivalent) is tax-equivalent net interest income divided
by average earning assets.


(2) The
efficiency ratio is calculated by dividing total non-interest expense less
amortization of intangibles and other real estate expense by tax-equivalent net
interest income plus non-interest income other than securities gains and
losses


25-K
 Index





ITEM
      7:
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS





A.
General





The
primary objective of this financial review is to provide an overview of the
financial condition and results of operations of The Wilber Corporation and its
subsidiaries for each of the years in the two-year period ended December 31,
2008.  This discussion and tabular presentations should be read in
conjunction with the accompanying Consolidated Financial Statements and Notes
presented in PART II, Item 8, of this document.





Our
financial performance is heavily dependent upon net interest income, which is
the difference between the interest and dividend income earned on our loans and
investment securities less the interest paid on our deposits and
borrowings.  Results of operations are also affected by the provision
for loan losses, investment securities gains (losses), service charges on
deposit accounts, trust and investment service fees, insurance commission
income, the net gain on sale of loans, the increase on the cash surrender value
on bank owned life insurance, gain on life insurance, other service fees and
other income.  Our non-interest expenses consist of salaries, employee
benefits, occupancy expense, furniture and equipment expense, computer service
fees, advertising and marketing, professional fees, other miscellaneous expenses
and taxes.  Results of operations are also influenced by general
economic conditions (particularly changes in financial markets and interest
rates), competitive conditions, government policies, changes in federal or state
tax law, and the actions of our regulatory authorities.





Critical Accounting Policies.
Management of the Company considers the accounting policy relating to the
allowance for loan losses to be a critical accounting policy given the
uncertainty in evaluating the level of the allowance required to cover credit
losses inherent in the loan portfolio and the material effect that such
judgments can have on the results of operations.  While management’s
current evaluation of the allowance for loan losses indicates that the allowance
is adequate, under adversely different conditions or assumptions, the allowance
would need to be increased.  For example, if historical loan loss
experience significantly worsened or if current economic conditions deteriorated
further, additional provisions for loan losses would be required to increase the
allowance for loan losses.  In addition, the assumptions and estimates
used in the internal reviews of the Company’s non-performing loans and potential
problem loans have a significant impact on the overall analysis of the adequacy
of the allowance for loan losses.  While management has concluded that
the evaluation of collateral values was reasonable under the circumstances for
each of the reported periods, if collateral valuations were significantly
lowered, the Company’s allowance for loan losses would also require an
additional provision for loan losses.





Our
policy on the allowance for loan losses is disclosed in Note 1 of the
Consolidated Financial Statements.  A more detailed description of the
allowance for loan losses is included in PART II, Item 7 C.i., of this
document.  All accounting policies are important, and as such, we
encourage the reader to review each of the policies included in Note 1 of the
Consolidated Financial Statements (provided in PART II, Item 8, of this
document) to obtain a better understanding of how our financial performance is
reported.





Recent Accounting
Pronouncements.  In December 2008, the FASB issued FASB Staff
Position FAS 132(R)1 which amends SFAS No 132(R), “Employers’ Disclosures about
Pensions and Other Postretirement Benefits” (FSP 132(R)1).  Beginning
with financial statements issued for December 31, 2009, FSP 132(R)1 will require
additional disclosures about our defined benefit pension plan.  Under
FSP 132(R)1, the Company must comply with the following
requirements::





·
            Objectives
      of the Disclosures about Postretirement Benefit Plan
  Assets


i)
            The
      objectives of the disclosures about plan assets in an employer’s defined
      benefit pension or other postretirement plan are to provide users of
      financial statements with an understanding
of:


a)
      How investment allocation decisions are made, including the factors that
      are pertinent to an understanding of investment policies and
      strategies;b)
      The major categories of plan assets;c)
      The inputs and valuation techniques used to measure the fair value of plan
      assets;


d)
      The effect of fair value measurements using significant unobservable
      inputs (Level 3) on changes in plan assets for the
  period;e)
      Significant concentrations of risk within plan
    assets.


·
            An
      employer shall disclose information about how investment allocation
      decisions are made, including factors that are pertinent to an
      understanding of investment policies and
  strategies.


·
            An
      employer shall disclose separately for pension plans and other
      postretirement benefit plans the fair value of each major category of plan
      assets as of each annual reporting date for which a statement of financial
      position is presented. Asset categories shall be based on the nature and
      risks of assets in an employer’s
plan.


26-K
 Index


·
            An
      employer shall disclose information that enables users of financial
      statements to assess the inputs and valuation techniques used to develop
      fair value measurements of plan assets at the annual reporting
      date.  For fair value measurements using significant
      unobservable inputs (Level 3), an employer shall disclose the effect of
      the measurements on changes in plan assets for the
  period.


·
            An
      employer shall provide users of financial statements with an understanding
      of significant concentrations of risk in plan
  assets.





The
requirements of FSP 132(R)1 are disclosure requirements and will not have an
impact on our financial condition or results of operations.





In June
2008, the FASB Emerging Issues Task Force (“EITF”) reached a consensus on EITF
Issue No. 07-5, “Determining Whether an Instrument (or Embedded Feature) is
Indexed to an Entity’s Own Stock” (“EITF 07-5”).  EITF 07-5 will be
effective for fiscal years beginning after December 15, 2008.  We are
currently evaluating the disclosure requirements under EITF 07-5.  We
do not expect EITF 07-5 to have a material impact on our financial condition or
results of operations.





In May
2008, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No.
162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS No.
162”).  The new standard is intended to improve financial reporting by
identifying a consistent framework, or hierarchy, for selecting accounting
principles to be used in preparing financial statements that are presented in
conformity with U.S. generally accepted accounting principles for
nongovernmental entities.  The hierarchy under SFAS No. 162 is as
follows:  A) FASB Statements of Financial Accounting Standards and
Interpretations, FASB Statement 133 Implementation Issues, FASB Staff Positions,
and American Institute of Certified Public Accountants (“AICPA”) Accounting
Research Bulletins and Accounting Principles Board Opinions that are not
superseded by actions of the FASB; B) FASB Technical Bulletins and, if cleared
by the FASB, AICPA Industry Audit and Accounting Guides and Statements of
Position; C) AICPA Accounting Standards Executive Committee Practice Bulletins
that have been cleared by the FASB, consensus positions of the FASB EITF, and
the Topics discussed in Appendix D of “EITF Abstracts”(“EITF D-Topics”); and
D) Implementation guides (“Q&As”) published by the FASB staff, AICPA
Accounting Interpretations, AICPA Industry Audit and Accounting Guides and
Statements of Position not cleared by the FASB, and practices that are widely
recognized and prevalent either generally or in the industry.  SFAS
No. 162 will be effective 60 days following the SEC’s approval of the Public
Company Accounting Oversight Board (“PCAOB”) amendments to AU Section 411, “The
Meaning of Present Fairly in Conformity With Generally Accepted Accounting
Principles.”  SFAS No. 162 is not expected to have a material impact
on our financial condition or results of operations.





In April
2008, the FASB issued FASB Staff Position 142-3, “Determination of the Useful
Life of Intangible Assets” (“FSP 142-3”).  FSP 142-3 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 FASB
SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS No.
142”).  The intent of FSP 142-3 is to improve the consistency between
the useful life of a recognized intangible asset under SFAS No. 142 and the
period of expected cash flows used to measure the fair value of the asset under
revised FASB SFAS No. 141, “Business Combinations” (“SFAS No. 141(R)”) and other
U.S. generally accepted accounting principles.  FSP 142-3 will be
effective for fiscal years and interim periods within those fiscal years
beginning after December 15, 2008.  We are currently evaluating the
disclosure requirements under FSP 142-3.  We do not expect FSP 142-3
to have a material impact on our financial condition or results of
operations.





In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities” (“SFAS No. 161”).  The new standard is
intended to improve financial reporting about derivative instruments and hedging
activities by requiring enhanced disclosures to enable investors to better
understand their effects on an entity’s financial position, financial
performance, and cash flows.  The new standard also improves
transparency about the location and amounts of derivative instruments in an
entity’s financial statements; how derivative instruments and related hedged
items are accounted for under SFAS No. 133, “Accounting for Derivative
Instruments and Hedging Activities;” and how derivative instruments and related
hedged items affect an entity’s financial position, financial performance, and
cash flows.  SFAS No. 161 achieves these improvements by requiring
disclosure of the fair values of derivative instruments and their gains and
losses in a tabular format.  It also provides more information about
an entity’s liquidity by requiring disclosure of derivative features that are
credit risk–related.  Finally, it requires cross-referencing within
footnotes to enable financial statement users to locate important information
about derivative instruments.  SFAS No. 161 is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged.  SFAS No. 161 is not
expected to have a material impact on our financial condition or results of
operations.





In
December 2007, FASB issued SFAS No. 141(R).  SFAS No. 141(R) retains
the fundamental requirements of SFAS No. 141 that the acquisition method of
accounting (formerly the purchase method) be used for all business combinations,
that an acquirer be identified for each business combination, and that
intangible assets be identified and recognized




27-K
 Index




separately from
goodwill.  SFAS No. 141(R) requires the acquiring entity in a business
combination to recognize the assets acquired, the liabilities assumed, and any
non-controlling interest in the acquiree at the acquisition date, measured at
their fair values as of that date, with limited
exceptions.  Additionally, SFAS No. 141(R) changes the requirements
for recognizing assets acquired and liabilities assumed arising from
contingencies and recognizing and measuring contingent
consideration.  SFAS No. 141(R) also enhances the disclosure
requirements for business combinations.  SFAS No. 141(R) applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008 and may not be applied before that date


In
December 2007, FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51,” (“SFAS No.
160”).  SFAS No. 160 amends Accounting Research Bulletin No. 51,
“Consolidated Financial Statements,” to establish accounting and reporting
standards for the non-controlling interest in a subsidiary and for the
deconsolidation of a subsidiary.  Among other things, SFAS No. 160
clarifies that a non-controlling interest in a subsidiary is an ownership
interest in the consolidated entity that should be reported as equity in the
consolidated financial statements and requires consolidated net income to be
reported at amounts that include the amounts attributable to both the parent and
the non-controlling interest.  SFAS No. 160 also amends SFAS No. 128,
“Earnings per Share,” so that earnings per share calculations in consolidated
financial statements will continue to be based on amounts attributable to the
parent.  SFAS No. 160 is effective for fiscal years and interim
periods within those fiscal years beginning on or after December 15, 2008 and is
applied prospectively as of the beginning of the fiscal year in which it is
initially applied except for the presentation and disclosure requirements, which
are to be applied retrospectively for all periods presented.  SFAS No.
160 is not expected to have a material impact on our financial condition or
results of operations.







B.
Performance Overview for the Year Ended December 31, 2008





During
2008 several of our key performance measures decreased as compared to
2007.  Net income, earnings per share, return on assets, and return on
equity all decreased in 2008.  Specifically, net income decreased from
$7.707 million in 2007 to $5.816 million in 2008, a $1.891 million or 24.5%
decrease.  Earnings per share, return on assets, and return on equity
decreased from $0.73, 0.99%, and 11.84%, respectively, in 2007 to $0.55, 0.67%,
and 8.35%, respectively, in 2008.  During 2008, net income was
negatively affected by significant increases in non-interest expense and the
provision for loan losses, as well as a decrease in non-interest
income.  These items were offset, in part by a significant increase in
net interest income and lower income taxes.





In 2008,
we implemented several aspects of our strategic plan to grow the earning assets
of the Company.  This included expanding the Company’s geographic
markets into larger, more densely populated markets throughout central and
upstate New York State, including the Capital District and the greater Syracuse,
New York marketplace.  Accordingly, we established a full-service
branch office within the Capital District, namely our Halfmoon Office in
Saratoga County, and opened a representative loan production office in the
greater Syracuse market, namely our Cicero Office in Onondaga
County.  In addition, during 2008 we hired new personnel, purchased
new computer systems and upgraded our communications infrastructure to support a
larger organization, causing a significant increase in non-interest
expense.  In addition, due to significant growth in loans outstanding,
weakening national economic conditions and the related weakening in some of our
credit quality metrics, we increased the provision for loan losses by $630
thousand or 70.0%.  And finally, non-interest income decreased $727
thousand between 2008 and 2007 due principally to various distinct
events.  The combination of these factors caused the significant
reduction in net income in 2008.  Although we recorded decreases in
net income and other earnings performance metrics during 2008, the underlying
factors were generally different than the sub-prime mortgage related factors
that affected many of our peer banks and bank holding companies throughout the
United States.





The
information provided in ITEM 7, Parts C through F that follow provide
additional information as to the financial condition, results of operations,
liquidity, and capital resources of the Company.







C.
Financial Condition





i.
Comparison of Financial Condition at December 31, 2008, and December 31,
2007





Please
refer to the Consolidated Financial Statements presented in PART II, Item 8, of
this document.





Summary of Financial
Condition


At
December 31, 2008, we remained a well capitalized financial
institution.  We do not originate or hold in the normal course of our
business sub-prime or Alt-




28-K
 Index







Asset
Composition


Our
assets are comprised of earning and non-earning assets.  Earning
assets include our investment securities, loans, interest-bearing deposits at
other banks and federal funds sold.  Non-earning assets include our
real estate and other assets acquired as the result of foreclosure, facilities,
equipment, goodwill and other intangibles, non-interest bearing deposits at
other banks and cash.  We generally maintain approximately 92% to 95%
of our total assets in earning assets.   During 2008 the
composition of our assets changed significantly.  In particular, we
significantly increased total loans outstanding due to our market expansion
efforts and a significant increase in loan origination personnel.  The
total loans to total assets ratio was 63.2% at December 31, 2008, as compared to
56.1% at December 31, 2007.





Total
Assets


Total
assets increased significantly during 2008 due to our expansion into new markets
throughout the central and upstate New York marketplace and company-wide focus
on growth.  Total assets increased from $793.680 million at December
31, 2007 to $924.874 million at December 31, 2008, a $131.194 million or 16.5%
increase.  The growth in total assets was principally funded by an
increase in deposit liabilities, and, to a lesser extent,
borrowings.  During 2008, deposit liabilities increased $108.379
million or 16.5%, from $657.494 million at December 31, 2007 to $765.873 million
at December 31, 2008.  On a combined basis, short-term and long-term
borrowings also increased $24.074 million or 42.0% between December 31, 2007 and
December 31, 2008 as we funded new loans.





Investment
Securities


Our
investment securities portfolio consists of trading, available-for-sale, and
held-to-maturity securities.  The following table summarizes our
trading, available-for-sale, and held-to-maturity investment securities
portfolio for the periods indicated.





Summary
of Investment Securities:





At
      December 31,2008
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              2007
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              2006Amortized
                                                                                                                                                                                Cost
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              Estimated
                                                                                                                                                                                Fair
      Value
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              Amortized
                                                                                                                                                                                Cost
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              Estimated
                                                                                                                                                                                Fair
      Value
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              Amortized
                                                                                                                                                                                Cost
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              Estimated
                                                                                                                                                                                Fair
      Value(In
      thousands)Trading
      (1):
                                                                                                                                                                              
                                                                                                                                                                              $
                                                                                                                                                                              1,391
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              $
                                                                                                                                                                              1,155
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              $
                                                                                                                                                                              1,167
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              $
                                                                                                                                                                              1,430
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              $
                                                                                                                                                                              1,296
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              $
                                                                                                                                                                              1,625Available-for-Sale:U.S.
      Treasuries
                                                                                                                                                                              
                                                                                                                                                                              $
                                                                                                                                                                              0
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              $
                                                                                                                                                                              0
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              $
                                                                                                                                                                              5,997
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              $
                                                                                                                                                                              6,070
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              $
                                                                                                                                                                              10,963
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              $
                                                                                                                                                                              10,807Obligations
      of U.S. GovernmentCorporations
      and Agencies
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              0
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              0
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              7,997
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              8,015
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              21,486
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              21,336Obligations
      of States and PoliticalSubdivisions
      (Municipal Bonds)
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              36,205
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              36,776
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              48,861
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              48,718
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              47,985
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              47,544Mortgage
      - Backed Securities
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              176,116
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              178,828
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              172,719
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              171,395
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              149,400
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              146,086Corporate
      Securities
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              1,047
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              1,012
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              2,294
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              2,293
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              2,274
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              2,267Equity
      Securities (2)
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              128
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              128
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              866
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              783
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              825
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              919Total
      Available-for-Sale
                                                                                                                                                                              
                                                                                                                                                                              $
                                                                                                                                                                              213,496
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              $
                                                                                                                                                                              216,744
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              $
                                                                                                                                                                              238,734
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              $
                                                                                                                                                                              237,274
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              $
                                                                                                                                                                              232,933
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              $
                                                                                                                                                                              228,959Held-to-Maturity:Obligations
      of States and Political Subdivisions (Municipal Bonds)
                                                                                                                                                                              
                                                                                                                                                                              $
                                                                                                                                                                              13,961
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              $
                                                                                                                                                                              14,146
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              $
                                                                                                                                                                              17,874
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              $
                                                                                                                                                                              18,018
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              $
                                                                                                                                                                              22,903
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              $
                                                                                                                                                                              22,916Mortgage-Backed
      Securities
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              30,493
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              30,863
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              34,328
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              33,725
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              39,455
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              38,394Total
      Held-to-Maturity
                                                                                                                                                                              
                                                                                                                                                                              $
                                                                                                                                                                              44,454
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              $
                                                                                                                                                                              45,009
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              $
                                                                                                                                                                              52,202
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              $
                                                                                                                                                                              51,743
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              $
                                                                                                                                                                              62,358
                                                                                                                                                                              
                                                                                                                                                                              
                                                                                                                                                                              $
                                                                                                                                                                              61,310





(1) These securities are held by the
Company for its non-qualified Executive Deferred Compensation plan.


(2) Certain figures have been
reclassified to conform with the current period presentation.


29-K
 Index


Between
December 31, 2008 and December 31, 2007, our total investment securities
portfolio (including trading, available-for-sale, and held-to-maturity)
decreased $28.553 million or 9.8%.  During 2008 we received proceeds
from sales and maturities of securities totaling $90.909 million, versus new
purchases of $57.866 million.  Proceeds from the sale or maturity of
holdings in the investment securities portfolio were principally used to
purchase new investment securities, and, to a lesser extent, loan
growth.





The
estimated fair value of the investment portfolio is largely dependent upon the
interest rate environment at the time the market price is
determined.  As interest rates decline, the estimated fair value of
bonds generally increases, and conversely, as interest rates increase, the
estimated fair value of bonds generally decreases.  At December 31,
2008, the net unrealized gain on the available-for-sale investment securities
portfolio was $3.248 million.  By comparison, at December 31, 2007,
the net unrealized loss on the available-for-sale investment securities
portfolio was $1.460 million.  The general level of interest rates was
significantly lower at December 31, 2008 due to an ailing economy, as compared
to the general level of interest rates at December 31, 2007.  This
caused the available-for-sale portfolio to move from a $1.460 million unrealized
loss position at December 31, 2007 to a $3.248 million unrealized gain position
at December 31, 2008.





During
2008 we continued to maintain a concentration in mortgage-backed
securities.  These included both mortgage pass-through securities and
collateralized mortgage obligations.  At the end of 2008, our
mortgage-backed securities portfolio comprised 79.8% of the carrying value of
our investment securities portfolio.  This compares to 70.7% and 63.3%
at the end of 2007 and 2006, respectively.  Approximately 83.3% of our
mortgage-backed securities are backed by the full faith and credit of the United
States government through a Ginnie Mae guarantee.  The remaining 16.7%
of our mortgage-backed securities portfolio (or $34.427 million at par value)
are guaranteed by Fannie Mae and Freddie Mac, which are government sponsored
enterprises.  During 2008 Fannie Mae and Freddie Mac experienced a
significant deterioration in their financial condition.  This prompted
the U.S. Treasury Department to bail out the two enterprises, which, in effect,
reaffirmed the implied U.S. Government guarantee and supported the AAA rating of
our mortgage-backed securities holdings.  Furthermore, during 2008 we
did not hold any Fannie Mae or Freddie Mac preferred stock or any debt
securities that were determined to be other than temporarily
impaired.





The
credit quality of our debt securities is strong.  At December 31,
2008, 99.8% of the securities held in our available-for-sale and
held-to-maturity investment securities portfolios (excluding notes issued
directly by the Bank to local municipalities) were rated “A” or better by
Moody’s credit rating services; 85.8% were rated “AAA.”  This compares
to 99.5% and 95.5%, respectively, at December 31, 2007.  The decrease
in “AAA” rated investment securities was principally due to the downgrade of
several municipal investment securities from “AAA” to “AA” during 2008, due
principally to mono-line insurance company downgrades.





Obligations
of States and Political Subdivisions (Municipal Bonds) Credit Quality
Table:




December
      31, 2008dollars in
      thousandsAAA
      (1)
                                                                                                
                                                                                                
                                                                                                AA
                                                                                                
                                                                                                
                                                                                                A
                                                                                                
                                                                                                
                                                                                                BAA
                                                                                                
                                                                                                
                                                                                                Not
      RatedUninsured
      / Un-enhanced
                                                                                                
                                                                                                
                                                                                                Insured
      / Enhanced
                                                                                                
                                                                                                
                                                                                                Uninsured
      / Un-enhanced
                                                                                                
                                                                                                
                                                                                                Insured
      / Enhanced
                                                                                                
                                                                                                
                                                                                                Un-Enhanced
                                                                                                
                                                                                                
                                                                                                Enhanced
                                                                                                
                                                                                                
                                                                                                Enhanced
                                                                                                
                                                                                                
                                                                                                Un-Enhanced
                                                                                                
                                                                                                
                                                                                                Total$
                                                                                                4,960
                                                                                                
                                                                                                
                                                                                                $
                                                                                                800
                                                                                                
                                                                                                
                                                                                                $
                                                                                                6,850
                                                                                                
                                                                                                
                                                                                                $
                                                                                                20,910
                                                                                                
                                                                                                
                                                                                                $
                                                                                                1,270
                                                                                                
                                                                                                
                                                                                                $
                                                                                                4,655
                                                                                                
                                                                                                
                                                                                                $
                                                                                                1,105
                                                                                                
                                                                                                
                                                                                                $
                                                                                                445
                                                                                                
                                                                                                
                                                                                                $
                                                                                                40,9959.4
                                                                                                %
                                                                                                
                                                                                                
                                                                                                1.5
                                                                                                %
                                                                                                
                                                                                                
                                                                                                13.0
                                                                                                %
                                                                                                
                                                                                                
                                                                                                39.6
                                                                                                %
                                                                                                
                                                                                                
                                                                                                2.4
                                                                                                %
                                                                                                
                                                                                                
                                                                                                8.8
                                                                                                %
                                                                                                
                                                                                                
                                                                                                2.1
                                                                                                %
                                                                                                
                                                                                                
                                                                                                0.8
                                                                                                %Total
      AAA
                                                                                                
                                                                                                
                                                                                                $
                                                                                                5,760
                                                                                                
                                                                                                
                                                                                                Total
      AA
                                                                                                
                                                                                                
                                                                                                $
                                                                                                27,760
                                                                                                
                                                                                                
                                                                                                Total
      A
                                                                                                
                                                                                                
                                                                                                $
                                                                                                5,92510.9
                                                                                                %
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                52.5
                                                                                                %
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                11.2
                                                                                                %




(1)  Moody's
ratings





We
purchase our municipal securities based on the underlying creditworthiness of
the issuing municipality and have not relied on the insurance enhancement
attached to the security.





Although
our mortgage-backed securities are guaranteed by U.S. government agencies and
U.S. government sponsored enterprises, they are susceptible to prepayment
risk.  For example, residential mortgage interest rates dropped
significantly in the second half of 2008, which, in turn, may cause the yield on
our mortgage-backed securities to decline in 2009.  When mortgage
rates are low, homeowners often refinance their existing mortgage loans or
purchase new homes.  This increases the amount of principal payments
we receive on our mortgage-backed securities, which, in turn,




30-K
 Index







The
following table sets forth information regarding the carrying value, weighted
average yields and anticipated principal repayments of the Bank’s investment
securities portfolio as of December 31, 2008.  All amortizing security
principal payments, including collateralized mortgage obligations and mortgage
pass-through securities, are included based on their expected average
lives.  Callable securities, primarily callable agency securities, and
municipal bonds are assumed to mature on their maturity
date.  Available-for-sale securities are shown at fair
value.  Held-to-maturity securities are shown at their amortized
cost.  The yields on debt securities shown in the table below are
calculated by dividing annual interest, including accretion of discounts and
amortization of premiums, by the amortized cost of the securities at December
31, 2008.  Yields on obligations of states and municipalities exempt
from federal taxation were not tax-effected.





Investment
Securities Maturity Table:





In
      One Year or Less
                                
                                
                                After
      One Year through Five Years
                                
                                
                                After
      Five Years through Ten Years
                                
                                
                                After
      Ten Years
                                
                                
                                TotalDollars
      in Thousands
                                
                                Carrying
                                  Value
                                
                                
                                Weighted
                                  Average
                                  Yield
                                
                                
                                Carrying
                                  Value
                                
                                
                                Weighted
                                  Average
                                  Yield
                                
                                
                                Carrying
                                  Value
                                
                                
                                Weighted
                                  Average
                                  Yield
                                
                                
                                Carrying
                                  Value
                                
                                
                                Weighted
                                  Average
                                  Yield
                                
                                
                                Carrying
                                  Value
                                
                                
                                Weighted
                                  Average
                                  YieldObligations
      of States and Political Subdivisions (Municipal Bonds)
                                
                                
                                8,882
                                
                                
                                
                                3.26
                                %
                                
                                
                                19,067
                                
                                
                                
                                3.43
                                %
                                
                                
                                22,497
                                
                                
                                
                                3.78
                                %
                                
                                
                                291
                                
                                
                                
                                3.85
                                %
                                
                                
                                50,737
                                
                                
                                
                                3.56
                                %Mortgage-Backed
      Securities
                                
                                
                                49,110
                                
                                
                                
                                4.64
                                %
                                
                                
                                157,791
                                
                                
                                
                                4.53
                                %
                                
                                
                                471
                                
                                
                                
                                6.11
                                %
                                
                                
                                1,949
                                
                                
                                
                                5.27
                                %
                                
                                
                                209,321
                                
                                
                                
                                4.57
                                %Corporate
      Securities
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                1,012
                                
                                
                                
                                4.48
                                %
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                1,012
                                
                                
                                
                                4.48
                                %Total
      Securities (1)
                                
                                $
                                57,992
                                
                                
                                
                                4.43
                                %
                                
                                $
                                177,870
                                
                                
                                
                                4.41
                                %
                                
                                $
                                22,968
                                
                                
                                
                                3.83
                                %
                                
                                $
                                2,240
                                
                                
                                
                                5.09
                                %
                                
                                $
                                261,070
                                
                                
                                
                                4.37
                                %





(1) This
table excludes trading securities totaling $1.155 million and equity securities
totaling $128 thousand at December 31, 2008.





At
December 31, 2008, the approximate weighted average life for all of the Bank’s
available-for-sale and held-to-maturity debt securities was 2.4
years.  By comparison, at December 31, 2007 the approximate weighted
average life for the Bank’s available-for-sale and held-to-maturity debt
securities was 3.5 years.  These estimates were provided by a third
party investment securities analyst and are used to provide comparisons with
other companies in the banking industry.  The estimates were based
upon the projected cash flows (to the most likely call date) of our investment
securities portfolio taking into consideration the unique characteristics of the
individual securities held by us.  The decrease in the weighted
average life of the portfolio between the comparable periods was principally due
to an increase in anticipated cash flows from our mortgage-backed securities
portfolio and an increase in anticipated calls of municipal
securities.  Our estimate may fluctuate significantly from period to
period due to our concentration in mortgage-backed securities.





At
December 31, 2008, the equity securities in our available-for-sale portfolio had
a fair value of $128 thousand.  By comparison, the market value of
this portfolio was $783 thousand at December 31, 2007.  Due to the
pending financial markets crisis and management’s desire to retain the Bank’s
equity capital, during the third quarter of 2008 we sold most of the common
stocks of other banking institutions held in this portfolio.





Other
Investments


At
December 31, 2008 we held $5.693 million of non-marketable equity securities
including: $3.667 million in FHLBNY stock; a $1.833 million equity interest in a
small business investment company, Meridian Venture Partners II, L.P; $135
thousand of Federal Reserve Bank of New York stock; $34 thousand in New York
Business Development Corporation stock; and $24 thousand in a small title
insurance agency.  By comparison, at December 31, 2007; the estimated
fair value of our non-marketable equity securities totaled $4.782 million, a
$911 thousand or 19.1% net increase between the periods.  Due to
minimum membership stock requirements, we increased our capital stock in the
FHLBNY from $2.759 million at December 31, 2007 to $3.667 million at December
31, 2008, a $908 thousand increase.





We own
common stock of FHLBNY which enables us to borrow funds under the FHLBNY advance
program and qualify for membership.  Recent published reports indicate
that certain member banks of the Federal Home Loan Bank system, which include
eleven other regionally based Federal Home Loan Banks, may be subject to
accounting rules and asset quality risks that could result in materially lower
regulatory capital levels.  In an extreme situation, it is possible
that the capitalization of one of the banks in the Federal Home Loan Bank
system, including FHLBNY could be substantially diminished or reduced to
zero.  Consequently, given that there is no market for our FHLBNY
common stock, we believe




31-K
 Index




Federal Funds Sold and
Interest Bearing Deposits with Other Banks


In the
normal course of business, we sell and purchase federal funds to and from other
banks to meet our daily liquidity needs.  We generally target an
overnight funds sold position of $10 million to $30 million.  We
believe these levels provide us ample levels of short-term liquidity to meet
loan funding needs and other working capital requirements.  Because
federal funds sold are generally an unsecured obligation of the counter party,
we only sell federal funds to well-capitalized banks that carry strong credit
ratings.  However, due to the global financial crisis and related
tightness in the inter-bank credit markets, during the fourth quarter of 2008
the Federal Reserve Banks announced a program whereby they would begin to pay
interest on  members’ required and excess reserves.  Due to
the safety of the Federal Reserve Bank of New York, we began leaving excess
reserves on deposit, in lieu of selling unsecured federal funds to other
commercial banks.  For this reason, at December 31, 2008 we held
$35.475 million in interest bearing balances at other banks versus only $519
thousand at December 31, 2007.  Due to significant volatility in our
daily overnight funds position it is most appropriate to compare our average
outstanding balances.  During 2008 our average overnight funds
position, including federal funds sold and interest bearing balances at other
banks, was $23.376 million or 2.7% of average total assets.  By
comparison, during 2007 our average overnight funds position was $25.702 million
or 3.3% of average total assets.  The slight decrease in our average
overnight position between 2007 and 2008 was due principally to our effort to
reduce overnight funds balances as the yield on overnight funds decreased
precipitously during 2008.





Loan
Portfolio


General.  The total loan portfolio increased
significantly during 2008 in line with our strategy to increase the Company’s
earning assets, particularly loans outstanding.  Total loans
outstanding increased from $445.105 million at December 31, 2007 to $583.861
million at December 31, 2008, a $138.756 million or 31.2%
increase.  During 2008, we continued to expand our geographic market
for loans.  In particular, we established a representative loan
production office in Cicero, New York (Onondaga County) and continued to
originate new commercial and residential mortgage loans in Saratoga County, a
market we entered in 2007.  We also continued to aggressively market
our small business, consumer, and residential mortgage loans in both our core
rural markets and more densely populated markets including Johnson City, New
York (Broome County) and Kingston, New York (Ulster County).  Due to
these efforts, all categories of loans increased during 2008.  The
following table summarizes the composition of our loan portfolio over the prior
five-year period.





Distribution
of Loans Table:





At
      December 31,2008
                                                                                                          
                                                                                                          
                                                                                                          2007
                                                                                                          
                                                                                                          
                                                                                                          2006
                                                                                                          
                                                                                                          
                                                                                                          2005
                                                                                                          
                                                                                                          
                                                                                                          2004Amount
                                                                                                          
                                                                                                          
                                                                                                          Percent
                                                                                                          
                                                                                                          
                                                                                                          Amount
                                                                                                          
                                                                                                          
                                                                                                          Percent
                                                                                                          
                                                                                                          
                                                                                                          Amount
                                                                                                          
                                                                                                          
                                                                                                          Percent
                                                                                                          
                                                                                                          
                                                                                                          Amount
                                                                                                          
                                                                                                          
                                                                                                          Percent
                                                                                                          
                                                                                                          
                                                                                                          Amount
                                                                                                          
                                                                                                          
                                                                                                          Percent(Dollars
      in thousands)Residential
      real estate (1)
                                                                                                          
                                                                                                          $
                                                                                                          171,061
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          29.3
                                                                                                          %
                                                                                                          
                                                                                                          $
                                                                                                          127,113
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          28.6
                                                                                                          %
                                                                                                          
                                                                                                          $
                                                                                                          117,815
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          29.0
                                                                                                          %
                                                                                                          
                                                                                                          $
                                                                                                          124,367
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          30.7
                                                                                                          %
                                                                                                          
                                                                                                          $
                                                                                                          119,103
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          30.4
                                                                                                          %Commercial
      real estate
                                                                                                          
                                                                                                          
                                                                                                          229,867
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          39.4
                                                                                                          %
                                                                                                          
                                                                                                          
                                                                                                          161,071
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          36.2
                                                                                                          %
                                                                                                          
                                                                                                          
                                                                                                          152,128
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          37.4
                                                                                                          %
                                                                                                          
                                                                                                          
                                                                                                          143,552
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          35.4
                                                                                                          %
                                                                                                          
                                                                                                          
                                                                                                          129,516
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          33.0
                                                                                                          %Commercial
      (2)
                                                                                                          
                                                                                                          
                                                                                                          99,397
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          17.0
                                                                                                          %
                                                                                                          
                                                                                                          
                                                                                                          83,622
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          18.8
                                                                                                          %
                                                                                                          
                                                                                                          
                                                                                                          74,033
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          18.2
                                                                                                          %
                                                                                                          
                                                                                                          
                                                                                                          69,651
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          17.2
                                                                                                          %
                                                                                                          
                                                                                                          
                                                                                                          78,003
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          19.9
                                                                                                          %Consumer  
      (3)
                                                                                                          
                                                                                                          
                                                                                                          83,536
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          14.3
                                                                                                          %
                                                                                                          
                                                                                                          
                                                                                                          73,299
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          16.5
                                                                                                          %
                                                                                                          
                                                                                                          
                                                                                                          62,944
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          15.5
                                                                                                          %
                                                                                                          
                                                                                                          
                                                                                                          67,388
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          16.6
                                                                                                          %
                                                                                                          
                                                                                                          
                                                                                                          65,703
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          16.7
                                                                                                          %Total
      loans
                                                                                                          
                                                                                                          
                                                                                                          583,861
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          100.0
                                                                                                          %
                                                                                                          
                                                                                                          
                                                                                                          445,105
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          100.0
                                                                                                          %
                                                                                                          
                                                                                                          
                                                                                                          406,920
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          100.0
                                                                                                          %
                                                                                                          
                                                                                                          
                                                                                                          404,958
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          100.0
                                                                                                          %
                                                                                                          
                                                                                                          
                                                                                                          392,325
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          100.0
                                                                                                          %Less:Allowance
      for loan losses
                                                                                                          
                                                                                                          
                                                                                                          (7,564
                                                                                                          )
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          (6,977
                                                                                                          )
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          (6,680
                                                                                                          )
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          (6,640
                                                                                                          )
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          (6,250
                                                                                                          )Net
      loans
                                                                                                          
                                                                                                          $
                                                                                                          576,297
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          438,128
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          400,240
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          398,318
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          386,075





(1)
      Includes loans secured by 1-4 family residential dwellings, 5+ family
      residential dwellings, home equity loans and residential construction
      loans.


(2)
      Includes commercial and industrial loans, agricultural loans and
      obligations (other than securities and leases) of states and political
      subdivisions in the United States


(3) Certain figures have been
      reclassified to conform with the current period presentation.





Between
December 31, 2004 and December 31, 2008 our commercial real estate portfolio
increased $100.351 million or 77.5%.  At December 31, 2008, commercial
real estate loans comprised 39.4% of our total loan portfolio.  This
compares to 33.0% at December 31, 2004.  Throughout the period covered
in the table above, we concentrated our efforts on





32-K
 Index







In
addition, during the first quarter of 2007 we acquired Provantage Funding
Corporation, a New York State licensed mortgage bank headquartered in Saratoga
County with several offices located in the Capital District of New
York.  We acquired Provantage Funding Corporation to improve our
residential mortgage lending capabilities and increase the outstanding balances
in our residential mortgage portfolio.  At December 31, 2008, the
outstanding balance of our residential mortgage portfolio was
$171.061 million.  This compares to $117.815 million at December
31, 2006, a $53.246 million or 45.2% increase over the two-year
period.





During
2008, we competitively priced and marketed our consumer loan products,
principally installment-type automobile loans, which increased the consumer loan
portfolio to $83.536 million at December 31, 2008.  This represents a
$10.237 million or 14.0% increase over the December 31, 2007 consumer loan
portfolio balance of $73.299 million.  At December 31, 2007, our
indirect automobile loan portfolio was comprised of 4,710 accounts, totaling
$51.299 million.  This compares to 5,576 accounts totaling $62.713
million at December 31, 2008, an 18.4% net increase in accounts and a 22.3% net
increase in indirect automobile loans outstanding.





The
following table sets forth the amount of loans maturing in our
portfolio.  The full principal amounts outstanding for all loans are
shown based on their final maturity date.  The full principal amounts
outstanding on demand loans without a repayment schedule and no stated maturity,
financed accounts receivable, and overdrafts are reported as due within one
year.  The table has not been adjusted for scheduled principal
payments or anticipated principal prepayments.





Maturity
and Repricing of Loans Table:





Within
      One
                                                                                                  Year
      (1)
                                                                                                
                                                                                                
                                                                                                One
                                                                                                  Through
                                                                                                  Five
      Years
                                                                                                
                                                                                                
                                                                                                More
                                                                                                  Than
                                                                                                  Five
      Years
                                                                                                
                                                                                                
                                                                                                TotalResidential
      real estate (1)
                                                                                                
                                                                                                $
                                                                                                51,403
                                                                                                
                                                                                                
                                                                                                $
                                                                                                13,205
                                                                                                
                                                                                                
                                                                                                $
                                                                                                106,453
                                                                                                
                                                                                                
                                                                                                $
                                                                                                171,061Commercial
      real estate
                                                                                                
                                                                                                
                                                                                                60,871
                                                                                                
                                                                                                
                                                                                                
                                                                                                50,434
                                                                                                
                                                                                                
                                                                                                
                                                                                                118,562
                                                                                                
                                                                                                
                                                                                                
                                                                                                229,867Commercial
      (2)
                                                                                                
                                                                                                
                                                                                                60,947
                                                                                                
                                                                                                
                                                                                                
                                                                                                17,200
                                                                                                
                                                                                                
                                                                                                
                                                                                                21,250
                                                                                                
                                                                                                
                                                                                                
                                                                                                99,397Consumer
                                                                                                
                                                                                                
                                                                                                7,858
                                                                                                
                                                                                                
                                                                                                
                                                                                                54,522
                                                                                                
                                                                                                
                                                                                                
                                                                                                21,156
                                                                                                
                                                                                                
                                                                                                
                                                                                                83,536Total
      loans receivable
                                                                                                
                                                                                                $
                                                                                                181,079
                                                                                                
                                                                                                
                                                                                                $
                                                                                                135,361
                                                                                                
                                                                                                
                                                                                                $
                                                                                                267,421
                                                                                                
                                                                                                
                                                                                                $
                                                                                                583,861(1)
      Includes loans secured by 1-4 family residential dwellings, 5+ family
      residential dwellings, home equity loans and residential construction
      loans.(2)
      Includes commercial and industrial loans, agricultural loans and
      obligations (other than securities and leases) of states and political
      subdivisions in the United States











The
following table sets forth fixed and adjustable rate loans with maturity dates
after December 31, 2009.





Table of
Fixed and Adjustable Rate Loans:





Due
      After December 31, 2009Fixed
                                                                                          
                                                                                          
                                                                                          Adjustable
                                                                                          
                                                                                          
                                                                                          TotalResidential
      real estate (1)
                                                                                          
                                                                                          $
                                                                                          109,630
                                                                                          
                                                                                          
                                                                                          $
                                                                                          55,715
                                                                                          
                                                                                          
                                                                                          $
                                                                                          165,345Commercial
      real estate
                                                                                          
                                                                                          
                                                                                          111,721
                                                                                          
                                                                                          
                                                                                          
                                                                                          106,364
                                                                                          
                                                                                          
                                                                                          
                                                                                          218,085Commercial  (2)
                                                                                          
                                                                                          
                                                                                          37,822
                                                                                          
                                                                                          
                                                                                          
                                                                                          21,514
                                                                                          
                                                                                          
                                                                                          
                                                                                          59,336Consumer
                                                                                          
                                                                                          
                                                                                          76,840
                                                                                          
                                                                                          
                                                                                          
                                                                                          1,414
                                                                                          
                                                                                          
                                                                                          
                                                                                          78,254Total
      loans
                                                                                          
                                                                                          $
                                                                                          336,013
                                                                                          
                                                                                          
                                                                                          $
                                                                                          185,007
                                                                                          
                                                                                          
                                                                                          $
                                                                                          521,020(1)
      Includes loans secured by 1-4 family residential dwellings, 5+ family
      residential dwellings, home equity loans and residential construction
      loans.(2)
      Includes commercial and industrial loans, agricultural loans and
      obligations (other than securities and leases) of states and political
      subdivisions in the United States


33-K
 Index





Commitments and Lines of
Credit.  Standby and commercial letters of credit are
conditional commitments issued by us to guarantee the performance of a customer
to a third party.  Those guarantees are primarily issued to support
public and private borrowing arrangements, including bond financing and similar
transactions.  The credit risk involved in issuing standby and
commercial letters of credit are essentially the same as that involved in
extending loans to customers.  Since most of the standby letters of
credit are expected to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements.  At
December 31, 2008 and December 31, 2007, stand-by and commercial letters of
credit totaled $12.779 million and $6.988 million, respectively.  At
December 31, 2008 and December 31, 2007, the fair value of the Bank’s stand-by
letters of credit was not significant.  The following table summarizes
the expirations of our stand-by and commercial letters of credit as of December
31, 2008.





Standby
and Commercial Letters of Credit Expiration Table:





Commitment Expiration of Standby Letters of
      Credit(dollars
      in thousands)Within
      one year
                      
                      $
                      622After
      one but within three years
                      
                      
                      279After
      three but within five years
                      
                      
                      5,520Five
      years or greater
                      
                      
                      6,358Total
                      
                      $
                      12,779





In
addition to standby letters of credit, we have issued lines of credit and other
commitments to lend to our customers.  Commitments to extend credit
are agreements to lend to a customer as long as there is no violation of any
condition established in the loan agreement.  Commitments generally
have fixed expiration dates or other termination clauses and may require payment
of a fee.  These include home equity lines of credit, commitments for
residential and commercial construction loans, commercial letters of credit, and
other personal and commercial lines of credit.  At December 31, 2008
and December 31, 2007, we had outstanding unfunded loan commitments of $126.717
million and $90.555 million, respectively, representing a $36.162 million or
39.9% increase period over period.  The significant increase in the
unfunded loan commitments was primarily due to growth in commercial real estate
and other construction loans, and to a lesser extent, the unused portion of
commercial lines of credit.





Asset Quality and Risk
Elements





General.One of
our key objectives is to maintain strong credit quality of the Bank’s loan
portfolio.  The following narrative provides summary information and
describes our experience regarding the quality and risk elements of our loan
portfolio.





Delinquent
Loans.  At December 31, 2008, we had $6.095 million of loans
that were 30 to 89 days past due (excluding non-performing
loans).  This equaled 1.04% of total loans outstanding.  By
comparison, at December 31, 2007 we had $3.917 million of loans that were 30 to
89 days past due (excluding non-performing loans).  This equaled 0.88%
of total loans outstanding.  The increase in delinquent loans between
the periods was principally due to increases in the level of delinquent loans in
the commercial loan portfolio, home equity line of credit portfolio and consumer
loan portfolio, offset, in part, by decreases in the commercial real estate and
1-4 family closed-end residential real estate portfolios.  We
considered the level of delinquent loans at December 31, 2008 to be manageable
and well within management’s targeted guideline of less than 2.0% of loans
outstanding.





Non-Accrual, Past Due and
Restructured Loans.The following chart sets forth information
regarding non-performing assets for the periods stated.


34-K
 Index





Table of
Non-Performing Assets:





At
      December 31,Dollars
      in Thousands
                                                                        
                                                                        2008
                                                                        
                                                                        
                                                                        2007
                                                                        
                                                                        
                                                                        2006
                                                                        
                                                                        
                                                                        2005
                                                                        
                                                                        
                                                                        2004Loans
      in Non-Accrual Status:Residential
      real estate (1)
                                                                        
                                                                        $
                                                                        439
                                                                        
                                                                        
                                                                        $
                                                                        895
                                                                        
                                                                        
                                                                        $
                                                                        450
                                                                        
                                                                        
                                                                        $
                                                                        327
                                                                        
                                                                        
                                                                        $
                                                                        141Commercial
      real estate
                                                                        
                                                                        
                                                                        4,516
                                                                        
                                                                        
                                                                        
                                                                        4,341
                                                                        
                                                                        
                                                                        
                                                                        1,626
                                                                        
                                                                        
                                                                        
                                                                        2,287
                                                                        
                                                                        
                                                                        
                                                                        2,168Commercial
      (2)
                                                                        
                                                                        
                                                                        843
                                                                        
                                                                        
                                                                        
                                                                        843
                                                                        
                                                                        
                                                                        
                                                                        271
                                                                        
                                                                        
                                                                        
                                                                        1,191
                                                                        
                                                                        
                                                                        
                                                                        243Consumer
                                                                        
                                                                        
                                                                        47
                                                                        
                                                                        
                                                                        
                                                                        7
                                                                        
                                                                        
                                                                        
                                                                        0
                                                                        
                                                                        
                                                                        
                                                                        61
                                                                        
                                                                        
                                                                        
                                                                        9Total
      non-accruing loans
                                                                        
                                                                        
                                                                        5,845
                                                                        
                                                                        
                                                                        
                                                                        6,086
                                                                        
                                                                        
                                                                        
                                                                        2,347
                                                                        
                                                                        
                                                                        
                                                                        3,866
                                                                        
                                                                        
                                                                        
                                                                        2,561Loans
      Contractually Past Due 90 Days or More and Still Accruing
      Interest
                                                                        
                                                                        
                                                                        1,366
                                                                        
                                                                        
                                                                        
                                                                        50
                                                                        
                                                                        
                                                                        
                                                                        182
                                                                        
                                                                        
                                                                        
                                                                        181
                                                                        
                                                                        
                                                                        
                                                                        190Troubled
      Debt Restructured Loans
                                                                        
                                                                        
                                                                        0
                                                                        
                                                                        
                                                                        
                                                                        0
                                                                        
                                                                        
                                                                        
                                                                        0
                                                                        
                                                                        
                                                                        
                                                                        871
                                                                        
                                                                        
                                                                        
                                                                        0Total
      non-performing loans
                                                                        
                                                                        
                                                                        7,211
                                                                        
                                                                        
                                                                        
                                                                        6,136
                                                                        
                                                                        
                                                                        
                                                                        2,529
                                                                        
                                                                        
                                                                        
                                                                        4,918
                                                                        
                                                                        
                                                                        
                                                                        2,751Other
      Real Estate Owned (3)
                                                                        
                                                                        
                                                                        158
                                                                        
                                                                        
                                                                        
                                                                        247
                                                                        
                                                                        
                                                                        
                                                                        103
                                                                        
                                                                        
                                                                        
                                                                        20
                                                                        
                                                                        
                                                                        
                                                                        78Total
      non-performing assets
                                                                        
                                                                        $
                                                                        7,369
                                                                        
                                                                        
                                                                        $
                                                                        6,383
                                                                        
                                                                        
                                                                        $
                                                                        2,632
                                                                        
                                                                        
                                                                        $
                                                                        4,938
                                                                        
                                                                        
                                                                        $
                                                                        2,829Total
      non-performing assets as a percentage of total assets
                                                                        
                                                                        
                                                                        0.80
                                                                        %
                                                                        
                                                                        
                                                                        0.80
                                                                        %
                                                                        
                                                                        
                                                                        0.35
                                                                        %
                                                                        
                                                                        
                                                                        0.66
                                                                        %
                                                                        
                                                                        
                                                                        0.38
                                                                        %Total
      non-performing loans as a percentage of total loans (4)
                                                                        
                                                                        
                                                                        1.24
                                                                        %
                                                                        
                                                                        
                                                                        1.38
                                                                        %
                                                                        
                                                                        
                                                                        0.62
                                                                        %
                                                                        
                                                                        
                                                                        1.21
                                                                        %
                                                                        
                                                                        
                                                                        0.70
                                                                        %(1)
      Includes loans secured by 1-4 family residential dwellings, 5+ family
      residential dwellings, home equity loans and residential construction
      loans.(2)
      Includes commercial and industrial loans, agricultural loans and
      obligations (other than securities and leases) of states and political
      subdivisions in the United States(3)
      Includes properties acquired through foreclosure or similar
      proceedings.(4)
      Certain figures have been reclassified to conform with the current period
      presentation.




Total
non-performing loans, including non-accruing loans and loans 90 days or more
past due and still accruing interest, increased $1.075 million between December
31, 2007 and December 31, 2008, from $6.136 million to $7.211
million.  The increase in non-performing loans between the comparable
periods were principally due to an increase in commercial real estate and
residential real estate loans 90 days past due and still accruing
interest.  Total loans in non-accrual status decreased period over
period, from $6.086 million at December 31, 2007 to $5.845 million at December
31, 2008.





Non-performing
loans were 1.24% of total loans outstanding at December 31, 2008, as compared to
1.38% of total loans outstanding at December 31, 2007, a 14 basis point decrease
between the periods.  The decrease in non-performing loans to total
loans was principally due to significant growth in loans outstanding between
comparable periods.  The non-performing loans were not concentrated in
any single industry or closely-related group of industries.  We have,
however, identified an increase in substandard loans made to borrowers operating
in the automotive and other vehicle dealership industry.





Impaired
Loans.The following table provides information on impaired
loans for the periods presented:





As
      of and for the Year Ended December 31,dollars
      in thousands
                        
                        2008
                        
                        
                        2007Impaired
      Loans
                        
                        $
                        8,620
                        
                        
                        $
                        5,701Allowance
      for Impaired Loans
                        
                        
                        1,160
                        
                        
                        
                        1,382Average
      Recorded Investment in Impaired Loans
                        
                        
                        7,327
                        
                        
                        
                        4,858





The level
of impaired loans increased from $5.701 million at December 31, 2007 to $8.620
million at December 31, 2008.  In spite of the increase in total
impaired loans, only $5.120 million of the impaired loans required specific
reserve allocations totaling $1.160 million.  By comparison, at
December 31, 2007, $4.365 million of the impaired loans had a specific reserve
allocation of $1.382 million.  We attribute the decrease in specific
reserve allocations to management’s general practice of obtaining strong
collateral positions in the loans it originates.


35-K
 Index


Other Real Estate Owned and
Repossessed Assets.Other Real Estate Owned (“OREO”) consists of
properties formerly pledged as collateral on loans, that have been acquired by
us through foreclosure proceedings or acceptance of a deed in lieu of
foreclosure.  OREO is carried at the lower of the recorded investment
in the loan or the fair value of the real estate, less estimated costs to
sell.  At both December 31, 2008 and December 31, 2007 we held modest
amounts of OREO property totaling $158 thousand and $247 thousand,
respectively.





Potential Problem
Loans.Potential problem loans are loans that are currently
performing, but where known information about possible credit problems of the
related borrowers causes management to have doubts as to the ability of such
borrowers to comply with the present loan repayment terms and  may
result in disclosure of such loans as non-performing at some time in the
future.  Potential problem loans are typically loans classified by our
loan rating system as “substandard.”  Potential problem loans may
fluctuate significantly from period to period due to a rating upgrade of loans
previously classified as substandard or a rating downgrade of loans previously
carried in a less risky credit classification particularly those with balances
in excess of $1.000 million.We have identified
through normal credit review procedures potential problem loans totaling $11.599
million or 2.0% of total loans outstanding at December 31, 2008.  By
comparison, at December 31, 2007, potential problem loans totaled $6.325 million
or 1.4% of total loans outstanding.  This represents a $5.274 million
increase in potential problem loans between December 31, 2007 and December 31,
2008.  We generally attribute the increase in potential problem loans
to the identification of sub-standard performance of the operating companies of
a few large borrowers and a weakening economy.  Management cannot
predict economic conditions or other factors that may impact each potential
problem loan.  Accordingly, there can be no assurance that other loans
will not become 90 days or more past due, be placed on non-accrual status,
become restructured, or require increased allowance coverage and provision for
loan losses.





Loan
Concentrations.We classify our loan portfolio by collateral
type and industry to determine and monitor the level of our loan
concentrations.  We generally consider industry concentrations to
exist when the total loan obligations (outstanding loans and unfunded
commitments) to the industry exceed 25% of the Bank’s Tier II
capital.  The Bank’s Tier II capital at December 31, 2008 was $72.465
million, which established our industry concentration threshold at $18.116
million.  We also review the geographic concentration and economic
trends within each industry concentration to further segment and analyze the
risk.  The following narrative summarizes our concentrations of
credit.





At
December 31, 2008, we had $82.274 million in total loan obligations or 113.5% of
the Bank’s Tier II capital secured by non-owner occupied commercial rental
properties, including strip malls, office complexes, warehouse, storage, and
manufacturing facilities.  At December 31, 2008, the portfolio
consisted of approximately 97 loans with an average loan size of $848
thousand.  The geographic locations and types of properties securing
this portfolio were very diverse.  Two of the loans in this portfolio
totaling $608 thousand were classified as substandard at December 31,
2008.





At
December 31, 2008, we had $38.689 million in total loan obligations or 53.4% of
the Bank’s Tier II capital secured by residential rental properties, including
1-4 family units, 5+ family units, and mobile home parks.  At December
31, 2008, the portfolio consisted of approximately 93 loans with an average loan
size of $416 thousand.  The geographic locations and types of
properties securing this portfolio were fairly diverse.  Five of the
loans in this portfolio totaling $542 thousand were classified as substandard at
December 31, 2008.





At
December 31, 2008 we had 94 loans with $37.454 million in total loan obligations
to borrowers who operate in the automotive and other vehicle dealership
industry.  The total loan obligations to this industry sector
represent 51.7% of the Bank’s Tier II capital and consists of more than 40
borrowers whose primary revenue is derived from the retail sale and servicing of
new and used motor vehicles, motor cycles, and/or recreational
vehicles.  Loans to this industry consist of commercial real estate
mortgages, equipment financing, working capital lines of credit, and inventory
lines (dealer floor plans).  We maintain 21 dealer floor plan lines
within this portfolio totaling $16.720 million, $11.013 million of which was
outstanding at December 31, 2008.  Due to the significant risk posed
by dealer floor plan lending, management monitors the dealer floor plan loans by
conducting inventory reviews on a monthly basis.  At December 31,
2008, there were five borrowers within this area of industry concentration with
$4.750 million in aggregate loan obligations outstanding that were classified as
substandard.  The substantial majority of our loan obligations in this
area of concentration were made to dealerships that primarily sell American
automobiles.  In 2008, American automobile manufacturers lost
substantial market share to foreign automobile retailers.





At
December 31, 2008, we had 70 loans with $35.800 million in total loan
obligations or 49.4% of the Bank’s Tier II capital to borrowers who operate in
the hotel/motel industry, including lodges, bed and breakfast inns, and a
limited number of campgrounds and boarding houses.  The single largest
borrower has $6.323 million in total loans outstanding on six separate motel
properties.  Another twelve borrowers have loans exceeding $1.000
million.  The hotel/motel properties that we finance are
geographically dispersed throughout our market area and the broader statewide
region.  Many of these properties, however, are dependent upon tourism
and have a seasonality that peaks in July and August.  At December 31,
2008, $33.434 million of these loans were deemed to be of acceptable risk (“pass
rated”) by our




36-K
 Index







At
December 31, 2008, loan obligations to the healthcare industry,including hospitals,
medical practices, and residential and independent care facilities, totaled
$33.162 million or 45.8% of the Bank’s Tier II capital.  This
portfolio was comprised of approximately 136 loans with an average size of $244
thousand.  This portfolio presently contains four of the largest
borrowers in the Bank with loan obligations totaling $19.823
million.  All of these loans were pass rated at December 31, 2008 and
were performing in compliance with contractual terms.  Only one loan
obligation in this portfolio was identified as substandard at December 31,
2008.  The borrower is a small hospital with an unused line of credit
totaling $200 thousand.





At
December 31, 2008, we had 25 borrowers whose total loan obligations were equal
to or exceeded $4.000 million.  In aggregate, these borrowers’ total
loan obligations were $138.769 million.  Although these large
relationships were dispersed among borrowers who operate in various industries,
the decline in the financial condition of one of our large borrowers could
significantly impact the credit quality of our loan portfolio.  At
December 31, 2008, one of our large borrowers, with total loans outstanding of
$4.418 million, was classified as substandard.





Summary of Loss Experience
(Charge-Offs) and Allowance for Loan Losses.   The
following table sets forth the analysis of the activity in the allowance for
loan losses, including charge-offs and recoveries, for the periods
indicated.





Analysis
of the Allowance for Loan Losses Table:





Years
      Ended December 31,2008
                                                                        
                                                                        
                                                                        2007
                                                                        
                                                                        
                                                                        2006
                                                                        
                                                                        
                                                                        2005
                                                                        
                                                                        
                                                                        2004(Dollars
      in thousands)Balance
      at beginning of year
                                                                        
                                                                        $
                                                                        6,977
                                                                        
                                                                        
                                                                        $
                                                                        6,680
                                                                        
                                                                        
                                                                        $
                                                                        6,640
                                                                        
                                                                        
                                                                        $
                                                                        6,250
                                                                        
                                                                        
                                                                        $
                                                                        5,757Charge
      offs:Residential
      real estate (1)
                                                                        
                                                                        
                                                                        37
                                                                        
                                                                        
                                                                        
                                                                        109
                                                                        
                                                                        
                                                                        
                                                                        56
                                                                        
                                                                        
                                                                        
                                                                        20
                                                                        
                                                                        
                                                                        
                                                                        133Commercial
      real estate
                                                                        
                                                                        
                                                                        87
                                                                        
                                                                        
                                                                        
                                                                        120
                                                                        
                                                                        
                                                                        
                                                                        2
                                                                        
                                                                        
                                                                        
                                                                        0
                                                                        
                                                                        
                                                                        
                                                                        51Commercial
      (2)
                                                                        
                                                                        
                                                                        234
                                                                        
                                                                        
                                                                        
                                                                        216
                                                                        
                                                                        
                                                                        
                                                                        1,161
                                                                        
                                                                        
                                                                        
                                                                        364
                                                                        
                                                                        
                                                                        
                                                                        121Consumer
                                                                        
                                                                        
                                                                        1,028
                                                                        
                                                                        
                                                                        
                                                                        721
                                                                        
                                                                        
                                                                        
                                                                        887
                                                                        
                                                                        
                                                                        
                                                                        1,091
                                                                        
                                                                        
                                                                        
                                                                        639Total
      charge offs
                                                                        
                                                                        
                                                                        1,386
                                                                        
                                                                        
                                                                        
                                                                        1,166
                                                                        
                                                                        
                                                                        
                                                                        2,106
                                                                        
                                                                        
                                                                        
                                                                        1,475
                                                                        
                                                                        
                                                                        
                                                                        944Recoveries:Residential
      real estate (1)
                                                                        
                                                                        
                                                                        104
                                                                        
                                                                        
                                                                        
                                                                        22
                                                                        
                                                                        
                                                                        
                                                                        31
                                                                        
                                                                        
                                                                        
                                                                        39
                                                                        
                                                                        
                                                                        
                                                                        20Commercial
      real estate
                                                                        
                                                                        
                                                                        43
                                                                        
                                                                        
                                                                        
                                                                        105
                                                                        
                                                                        
                                                                        
                                                                        73
                                                                        
                                                                        
                                                                        
                                                                        0
                                                                        
                                                                        
                                                                        
                                                                        0Commercial
      (2)
                                                                        
                                                                        
                                                                        41
                                                                        
                                                                        
                                                                        
                                                                        137
                                                                        
                                                                        
                                                                        
                                                                        143
                                                                        
                                                                        
                                                                        
                                                                        29
                                                                        
                                                                        
                                                                        
                                                                        51Consumer
                                                                        
                                                                        
                                                                        255
                                                                        
                                                                        
                                                                        
                                                                        299
                                                                        
                                                                        
                                                                        
                                                                        339
                                                                        
                                                                        
                                                                        
                                                                        217
                                                                        
                                                                        
                                                                        
                                                                        166Total
      recoveries
                                                                        
                                                                        
                                                                        443
                                                                        
                                                                        
                                                                        
                                                                        563
                                                                        
                                                                        
                                                                        
                                                                        586
                                                                        
                                                                        
                                                                        
                                                                        285
                                                                        
                                                                        
                                                                        
                                                                        237Net
      charge-offs
                                                                        
                                                                        
                                                                        943
                                                                        
                                                                        
                                                                        
                                                                        603
                                                                        
                                                                        
                                                                        
                                                                        1,520
                                                                        
                                                                        
                                                                        
                                                                        1,190
                                                                        
                                                                        
                                                                        
                                                                        707Provision
      for loan losses
                                                                        
                                                                        
                                                                        1,530
                                                                        
                                                                        
                                                                        
                                                                        900
                                                                        
                                                                        
                                                                        
                                                                        1,560
                                                                        
                                                                        
                                                                        
                                                                        1,580
                                                                        
                                                                        
                                                                        
                                                                        1,200Balance
      at end of year
                                                                        
                                                                        $
                                                                        7,564
                                                                        
                                                                        
                                                                        $
                                                                        6,977
                                                                        
                                                                        
                                                                        $
                                                                        6,680
                                                                        
                                                                        
                                                                        $
                                                                        6,640
                                                                        
                                                                        
                                                                        $
                                                                        6,250Ratio
      of net charge-offs during the year to average loans outstanding during the
      year
                                                                        
                                                                        
                                                                        0.19
                                                                        %
                                                                        
                                                                        
                                                                        0.14
                                                                        %
                                                                        
                                                                        
                                                                        0.38
                                                                        %
                                                                        
                                                                        
                                                                        0.30
                                                                        %
                                                                        
                                                                        
                                                                        0.19
                                                                        %Allowance
      for loan losses to total loans
                                                                        
                                                                        
                                                                        1.30
                                                                        %
                                                                        
                                                                        
                                                                        1.57
                                                                        %
                                                                        
                                                                        
                                                                        1.64
                                                                        %
                                                                        
                                                                        
                                                                        1.64
                                                                        %
                                                                        
                                                                        
                                                                        1.59
                                                                        %Allowance
      for loan losses to non-performing loans
                                                                        
                                                                        
                                                                        105
                                                                        %
                                                                        
                                                                        
                                                                        114
                                                                        %
                                                                        
                                                                        
                                                                        264
                                                                        %
                                                                        
                                                                        
                                                                        135
                                                                        %
                                                                        
                                                                        
                                                                        227
                                                                        %(1)
      Includes loans secured by 1-4 family residential dwellings, 5+ family
      residential dwellings, home equity loans and residential construction
      loans.(2)
      Includes commercial and industrial loans, agricultural loans and
      obligations (other than securities and leases) of states and political
      subdivisions in the United
States




37-K
 Index





There was
significant disruption and volatility in the financial and capital markets
during 2008.  Turmoil in the energy, housing, and mortgage markets
adversely impacted both domestic and global markets and had significant negative
impacts on the credit markets, financial institution liquidity and global
economic activity.  These market conditions were attributable to a
variety of factors, in particular the fallout associated with subprime mortgage
loans (a type of lending we have never actively pursued).  The
disruption has been exacerbated by the continued decline of the real estate and
housing market.  While we continue to adhere to prudent underwriting
standards, in the event that there was a sharp downturn in the housing market in
our central and upstate New York market areas, it could adversely affect the
value of property used as collateral for our loans.  Adverse changes
in the economy may have a negative effect on the ability of our borrowers to
make timely loan payments, which would have a negative impact on our
earnings.  An increase in loan delinquencies could adversely impact
our loan loss experience, causing increases in our provision and allowance for
loan losses in future periods.





During
2008 the allowance for loan losses increased $587 thousand or 8.4%, from $6.977
million at December 31, 2007 to $7.564 million at December 31,
2008.  During 2008 we recorded $1.530 million in the provision for
loan losses, while net loan charge-offs totaled $943 thousand.  By
comparison, during 2007 we recorded $900 thousand in the provision for loan
losses and $603 thousand in net charge-offs.  The increase in the
allowance for loan losses was principally due to significant loan growth in the
third and fourth quarters of 2008, a modest deterioration in some of our credit
quality metrics and deteriorating economic conditions.  More
specifically, due to growth in the loan portfolio and the weakening state of the
national economy during the second half of 2008 and a decline in some of our
credit quality metrics in the fourth quarter of 2008, we significantly increased
the provision for loan losses, and in turn, the allowance for loan
losses.  In particular, during the second half of 2008 we recorded
$1.130 million in the provision for loan losses versus $400 thousand in the
first half of 2008, a $730 thousand or 282% increase in the second half of the
year.  The allowance for loan losses was $6.965 million at June 30,
2008 versus $7.564 million at December 31, 2008, a $599 thousand or 8.6%
increase in the last six months of the year.





The
allowance for loan losses to total loans outstanding was 1.30% at December 31,
2008.  This compares to 1.57% at December 31, 2007.  The 27
basis point decrease in this measure was principally due to significant loan
growth in 2008, partially offset by a modest deterioration in credit quality and
deteriorating economic conditions.  During 2008 we expanded into the
greater Syracuse and Capital District markets of New York.  Most of
our commercial and consumer real estate loan growth was originated in these new
markets with a special focus on credit quality given current economic
conditions.   The loans originated in the new markets were
originated at lower rates of interest than loans originated in our traditional
markets given their lower risk profile.  Newly originated loans
generally require a lower level of allowance for loan losses.





The
allowance for loan losses to non-performing loans and the non-performing loans
to total loans both remained relatively stable on a comparable period
basis.  In particular, the allowance for loan losses to non-performing
totaled 105% at December 31, 2008, as compared to 114% at December 31,
2007.  The non-performing loans to total loans outstanding decreased
from 1.38% at December 31, 2007 to 1.24% at December 31, 2008. Both our
management and Board of Directors deemed the allowance for loan losses adequate
at December 31, 2008 and December 31, 2007.





Allocation of the Allowance for Loan
Losses.  We allocate our allowance for loan losses among the
loan categories indicated in the following table.  Although we
estimate and allocate probable losses by category of loan, this allocation
should not be interpreted as the precise amount of future charge-offs or a
proportional distribution of future charge-offs among loan
categories.  Additionally, since management regards the allowance for
loan losses as a general balance, the amounts presented do not represent the
total balance available to absorb future charge-offs that might occur within the
designated categories.





Subject
to the qualifications noted above, an allocation of the allowance for loan
losses by principal classification and the proportion of the related loan
balance represented by the allocation is presented below for the periods
indicated.


38-K
 Index





Loan Loss
Summary Allocation Table:





At
      December 31,2008
                                                        
                                                        
                                                        2007
                                                        
                                                        
                                                        2006
                                                        
                                                        
                                                        2005
                                                        
                                                        
                                                        2004Dollars
      in Thousands
                                                        
                                                        Amount
      of
                                                          Allowance
                                                          for
      Loan
                                                          Losses
                                                        
                                                        
                                                        Percent
      of
                                                          Allowance
      for Loan Losses in
                                                          Each
                                                          Category
                                                        
                                                        
                                                        Amount
      of
                                                          Allowance
                                                          for
      Loan
                                                          Losses
                                                        
                                                        
                                                        Percent
      of
                                                          Allowance
      for Loan Losses in
                                                          Each
                                                          Category
                                                        
                                                        
                                                        Amount
      of
                                                          Allowance
                                                          for
      Loan
                                                          Losses
                                                        
                                                        
                                                        Percent
      of
                                                          Allowance
      for Loan Losses in
                                                          Each
                                                          Category
                                                        
                                                        
                                                        Amount
      of
                                                          Allowance
                                                          for
      Loan
                                                          Losses
                                                        
                                                        
                                                        Percent
      of
                                                          Allowance
      for Loan Losses in
                                                          Each
                                                          Category
                                                        
                                                        
                                                        Amount
      of
                                                          Allowance
                                                          for
      Loan
                                                          Losses
                                                        
                                                        
                                                        Percent
      of
                                                          Allowance
      for Loan Losses in
                                                          Each
                                                          CategoryResidential
      real estate (1)
                                                        
                                                        $
                                                        538
                                                        
                                                        
                                                        
                                                        7.1
                                                        %
                                                        
                                                        $
                                                        607
                                                        
                                                        
                                                        
                                                        8.7
                                                        %
                                                        
                                                        $
                                                        501
                                                        
                                                        
                                                        
                                                        7.5
                                                        %
                                                        
                                                        $
                                                        595
                                                        
                                                        
                                                        
                                                        9.0
                                                        %
                                                        
                                                        $
                                                        670
                                                        
                                                        
                                                        
                                                        10.7
                                                        %Commercial
      real estate
                                                        
                                                        
                                                        3,143
                                                        
                                                        
                                                        
                                                        41.6
                                                        %
                                                        
                                                        
                                                        2,969
                                                        
                                                        
                                                        
                                                        42.6
                                                        %
                                                        
                                                        
                                                        3,083
                                                        
                                                        
                                                        
                                                        46.2
                                                        %
                                                        
                                                        
                                                        3,171
                                                        
                                                        
                                                        
                                                        47.8
                                                        %
                                                        
                                                        
                                                        2,454
                                                        
                                                        
                                                        
                                                        39.3
                                                        %Commercial
      (2)
                                                        
                                                        
                                                        2,108
                                                        
                                                        
                                                        
                                                        27.9
                                                        %
                                                        
                                                        
                                                        1,799
                                                        
                                                        
                                                        
                                                        25.8
                                                        %
                                                        
                                                        
                                                        1,462
                                                        
                                                        
                                                        
                                                        21.9
                                                        %
                                                        
                                                        
                                                        1,512
                                                        
                                                        
                                                        
                                                        22.8
                                                        %
                                                        
                                                        
                                                        1,435
                                                        
                                                        
                                                        
                                                        23.0
                                                        %Consumer
                                                        
                                                        
                                                        1,540
                                                        
                                                        
                                                        
                                                        20.4
                                                        %
                                                        
                                                        
                                                        1,383
                                                        
                                                        
                                                        
                                                        19.8
                                                        %
                                                        
                                                        
                                                        1,114
                                                        
                                                        
                                                        
                                                        16.7
                                                        %
                                                        
                                                        
                                                        1,114
                                                        
                                                        
                                                        
                                                        16.8
                                                        %
                                                        
                                                        
                                                        1,080
                                                        
                                                        
                                                        
                                                        17.3
                                                        %Unallocated
                                                        
                                                        
                                                        235
                                                        
                                                        
                                                        
                                                        3.1
                                                        %
                                                        
                                                        
                                                        219
                                                        
                                                        
                                                        
                                                        3.1
                                                        %
                                                        
                                                        
                                                        520
                                                        
                                                        
                                                        
                                                        7.8
                                                        %
                                                        
                                                        
                                                        248
                                                        
                                                        
                                                        
                                                        3.7
                                                        %
                                                        
                                                        
                                                        611
                                                        
                                                        
                                                        
                                                        9.8
                                                        %Total
                                                        
                                                        $
                                                        7,564
                                                        
                                                        
                                                        
                                                        100.0
                                                        %
                                                        
                                                        $
                                                        6,977
                                                        
                                                        
                                                        
                                                        100.0
                                                        %
                                                        
                                                        $
                                                        6,680
                                                        
                                                        
                                                        
                                                        100.0
                                                        %
                                                        
                                                        $
                                                        6,640
                                                        
                                                        
                                                        
                                                        100.0
                                                        %
                                                        
                                                        $
                                                        6,250
                                                        
                                                        
                                                        
                                                        100.0
                                                        %





(1)
      Includes loans secured by 1-4 family residential dwellings, 5+ family
      residential dwellings, home equity loans and residential construction
      loans.(2)
      Includes commercial and industrial loans, agricultural loans and
      obligations (other than securities and leases) of states and political
      subdivisions in the United States





Other Non-earning Assets and
Bank Owned Life Insurance





Cash and Due from
Banks.  In order to operate the Bank on a daily basis, it is
necessary for us to maintain a limited amount of cash at our teller stations and
within our vaults and ATMs to meet customers’ demands.  In addition,
we always maintain an amount of check and other presentment items in the process
of collection (or float).   We are also required to maintain
minimum target balances at our correspondent banks.  At December 31,
2008, we maintained $8.467 million or 0.9% of total assets in these categories
of non-earning assets.  This compares to $11.378 million or 1.4% of
total assets at December 31, 2007.  We are also required to maintain a
clearing / reserve balance at the Federal Reserve Bank of New York and minimum
target balances at our correspondent banks.  At December 31, 2007 we
also maintained a clearing / reserve balance at the Federal Reserve Bank of New
York totaling $231 thousand which was included in cash and due from
banks.  At December 31, 2008, this clearing balance totaling $34.889
million was classified in interest bearing balances with banks due to the
Federal Reserve’s fourth quarter 2008 policy change to pay interest on these
balances.





Premises and
Equipment.The net book value of premises and equipment
increased $170 thousand or 2.7%, from $6.312 million at December 31, 2007 to
$6.482 million at December 31, 2008.  During 2008 we opened a
full-service office in Halfmoon, New York (Saratoga County) and a representative
loan production office in Cicero, New York (Onondaga County).  The
increase in premises and equipment associated with these new offices and other
various building improvements and equipment purchases were offset, in part, by
depreciation of existing premises and equipment.





Bank-Owned Life
Insurance.The cash surrender value of bank-owned life
insurance at December 31, 2008 was $16.402 million, as compared to $15.785
million at December 31, 2007, a $617 thousand or 3.9%
increase.  During 2008, we recorded a $617 thousand increase in cash
surrender of bank owned life insurance.  Throughout 2008, the Bank
held policies on 15 former and current members of the Bank’s senior
management.  The cash surrender value on each policy was increased
throughout the year at the net crediting rate applied by the various insurance
carriers.  The policies’ were issued by five life insurance companies
who all carry strong financial strength ratings.  The net crediting
rates applied on each policy were determined by each insurance carrier based on
the performance of their general account.





Goodwill and Other Intangible
Assets.Goodwill was unchanged between December 31, 2007 and
December 31, 2008.  During 2008 we did not acquire any new businesses,
nor did we incur any impairment on previous acquisitions.  Goodwill
totaled $4.619 million at December 31, 2008 and 2007.





The
current global financial crisis has depressed stock market trading values,
particularly those of financial institutions.  As of December 31,
2008, the Company’s stock price was above the Company’s book value and therefore
no impairment test of goodwill was warranted.  Should our common stock
value trade consistently below our book value, we would reevaluate the amount of
goodwill through an impairment test.  If impairment is warranted, the
amount would be recorded through the income statement as a reduction to current
period earnings.




39-K
 Index







During
2008 other intangible assets decreased $287 thousand, from $394 thousand at
December 31, 2007 to $107 thousand at December 31, 2008.  The decrease
was due, in part to the amortization of core the deposit intangible asset
recorded in prior period bank branch acquisitions.  In addition,
during 2008 we sold our ownership interest in Mang-Wilber LLC, our former
insurance agency subsidiary.  In connection with the sale, we recorded
a decrease in the customer list intangible asset associated with prior period
agency acquisitions.





Pension Asset.  At
December 31, 2007, our pension plan was over-funded due to strong plan asset
performance.  More specifically, at December 31, 2007 our pension
asset was $4.872 million.  By comparison, during 2008 the investment
securities held by the pension plan generated significant losses due principally
to the global economic crisis and related financial market
performance.  In addition, the plan liability increased between the
2007 and 2008 plan measurement dates, due to a decrease in the discount rate on
plan liabilities.  These conditions prompted us to contribute $2.000
million toward the plan assets.  In spite of this contribution, at
December 31, 2008 the plan was under-funded by $869 thousand at December 31,
2008, this amount was recorded as a liability at December 31,
2008.  We expect to continue to fund this plan on an as needed basis
and do not foresee any issues or conditions that could negatively impact the
payment of benefit obligations to plan participants.





Other
Assets.  Other assets decreased $102 thousand or 1.2%, from
$8.484 million at December 31, 2007 to $8.382 million at December 31,
2008.  Other assets are principally comprised of other real estate
owned, interest receivable,  prepaid taxes, prepaid insurance,
computer software, net deferred tax assets, deferred taxes on investment
securities, deferred taxes on the pension plan, other assets, return/rejected
check items, other prepaid items, and other accounts
receivable.  Other assets represented approximately 1.0% of total
assets in both periods.





Composition of
Liabilities





Deposits.  Deposits
are our primary funding source.  At December 31, 2008 and December 31,
2007 deposits represented approximately 90% of our total
liabilities.  Total deposits at December 31, 2008 were $765.873
million.  This compares to $657.494 million at December 31, 2007, a
$108.379 million or 16.5% increase.  The increase in total deposits
between December 31, 2007 and December 31, 2008 was attributable to significant
increases in money market deposit accounts, NOW accounts and certificates of
deposit (over $100 thousand) totaling $113.502 million, as well as modest
increases in demand deposits and other deposits totaling $1.382 million, offset,
in part, by decreases in savings accounts and certificates of deposit (under
$100 thousand) totaling $6.505 million.  During 2008, we successfully
marketed our Wealth Management money market deposit account and attracted new
municipal customer deposits increasing outstanding balances in money market
deposit accounts, NOW accounts and certificates of deposit (over $100
thousand).  Conversely, due to a generally declining interest rate
environment we lowered the interest rate paid on savings accounts and retail
certificates of deposit, prompting deposit customers to seek out higher yielding
alternatives.





The
following table indicates the amount of our time accounts by time remaining
until maturity as of December 31, 2008.





Time
Accounts Maturity Table:





Maturity
      as of December 31, 2008Dollars
      in Thousands
                
                3
      Months or Less
                
                
                Over
      3 to 6 Months
                
                
                Over
      6 to 12 Months
                
                
                Over
      12 Months
                
                
                TotalCertificates
      of Deposit of $100,000 or more
                
                $
                69,407
                
                
                $
                32,128
                
                
                $
                32,037
                
                
                $
                15,760
                
                
                $
                149,332Certificates
      of Deposit less than $100,000
                
                
                38,437
                
                
                
                59,573
                
                
                
                40,904
                
                
                
                53,205
                
                
                
                192,119Total
      of time accounts
                
                $
                107,844
                
                
                $
                91,701
                
                
                $
                72,941
                
                
                $
                68,965
                
                
                $
                341,451





Borrowings and Other Contractual
Obligations.  Total borrowed funds consist of short-term and
long-term borrowings.  Short-term borrowings include treasury, tax,
and loan notes held for the benefit of the U.S. Treasury Department, and
securities sold under agreements to repurchase with our customers and other
third parties.  Long-term borrowings consist of monies we borrowed
from the FHLBNY for various asset funding requirements and wholesale funding
strategies.  Total borrowed funds were $81.398 million or 9.5% of
total liabilities at December 31, 2008, as compared to $57.324 million or 7.9%
of total liabilities at December 31, 2007, a $24.074 million, or 42.0% increase
between the periods.


40-K
 Index


Short-term
borrowings increased from $15.786 million at December 31, 2007 to $21.428
million at December 31, 2008, a $5.642 million or 35.7% increase.  The
increase was principally due to an increase in customer repurchase agreement
balances.





Long-term
borrowings increased $18.432 million between December 31, 2007 and December 31,
2008.  During 2008 we secured $22.000 million of new long-term
advances at the FHLBNY, principally to fund the origination of new fixed-rate
commercial and residential mortgage loans.  This increase was offset,
in part, by the repayment of $3.568 million in amortizing FHLBNY advances
originated during the current and prior periods.  See Note 8 of the
Consolidated Financial Statements contained in PART II, Item 8, of this document
for additional detail on our borrowed funds.





In
connection with our financing and operating activities, we have entered into
certain contractual obligations.  At December 31, 2008, our future
minimum cash payments, excluding interest, associated with these contractual
obligations, which include borrowed funds and operating leases, were as
follows:





Payments
      Due by Period(In
      thousands)
                        
                        2009
                        
                        
                        2010
                        
                        
                        2011
                        
                        
                        2012
                        
                        
                        2013
                        
                        
                        Thereafter
                        
                        
                        TotalLong-term
      debt obligations
                        
                        $
                        4,343
                        
                        
                        $
                        4,291
                        
                        
                        $
                        3,995
                        
                        
                        $
                        25,951
                        
                        
                        $
                        6,835
                        
                        
                        $
                        14,555
                        
                        
                        $
                        59,970Operating
      lease obligations
                        
                        
                        354
                        
                        
                        
                        353
                        
                        
                        
                        337
                        
                        
                        
                        306
                        
                        
                        
                        158
                        
                        
                        
                        996
                        
                        
                        
                        2,504Total
      contractual obligations
                        
                        $
                        4,697
                        
                        
                        $
                        4,644
                        
                        
                        $
                        4,332
                        
                        
                        $
                        26,257
                        
                        
                        $
                        6,993
                        
                        
                        $
                        15,551
                        
                        
                        $
                        62,474




D.  Results
of Operations





i.
Comparison of Operating Results for the Years Ended December 31, 2008 and
December 31, 2007





Please
refer to the Consolidated Financial Statements presented in PART II, Item 8, of
this document.





Summary.  Net
income for 2008 was $5.816 million.  This compares to $7.707 million
in 2007, a $1.891 million or 24.5% decrease year over year.  The
significant decrease in net income between comparable periods was attributable
to a few primary factors, namely a significant increase in total non-interest
expense, a decrease in total non-interest income, and an increase in the
provision for loan losses.  More specifically, during 2008 we recorded
a $2.867 million increase in non-interest expense, a $727 thousand decease in
non-interest income and a $630 thousand increase in the provision for loan
losses.  These reductions in income were offset, in part, by a $1.878
million increase in net interest income and a $455 thousand decrease in income
taxes.  Earnings per share decreased from $0.73 in 2007 to $0.55 in
2008, an $0.18 per share or 24.7% decrease.





During
2008, we adopted a strategic plan to accelerate the growth of the Company’s
earning assets, particularly loans.  To fulfill our growth objectives,
we expanded into new geographic markets and opened a loan production office in
Cicero, New York (Onondaga County) in the first quarter of 2008 and a
full-service branch office in Halfmoon, New York (Saratoga County) in the second
quarter of 2008.  We also hired additional sales, branch, and
operations personnel and outsourced our core computer operating system to
accommodate both the current and anticipated growth.  These activities
caused a significant increase in total non-interest expense.  Due to
the loan growth and an increase in the associated probable estimated losses in
the loan portfolio, it was also necessary to increase the provision for loan
losses during 2008, particularly in the second half of the year.





Net Interest
Income.  Net interest income is our most significant source of
revenue.  Net interest income is comprised of the interest and
dividend income generated on our earning assets, including, but not limited to,
loans and investment securities, less interest expense on our interest bearing
liabilities, including, customer deposits and borrowings.  During
2008, net interest income comprised 81% of our total revenues (net interest
income plus non-interest income).  The other 19% was due to
non-interest income.  This compares to 78% and 22%, respectively, for
2007.





The
following Asset and Yield
Summary Table, Interest
Rate Table and Rate and
Volume Table and the associated narrative provide detailed net interest
income information and analysis that are important to understanding our results
of operations.





The
following table summarizes the total dollar amount of interest income from
average earning assets and the resultant yields, as well as the interest expense
and rate paid on average interest bearing liabilities.  The average
balances presented are calculated using daily totals and averaging them for the
period indicated.


41-K
 Index





Asset and
Yield Summary Table:


2008
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                2007Average
                                                                                                                                                                                                                                                                                                                                  Outstanding
                                                                                                                                                                                                                                                                                                                                  Balance
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                Interest
                                                                                                                                                                                                                                                                                                                                  Earned
      /Paid
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                Yield
      / Rate
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                Average
                                                                                                                                                                                                                                                                                                                                  Outstanding
                                                                                                                                                                                                                                                                                                                                  Balance
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                Interest
                                                                                                                                                                                                                                                                                                                                  Earned
      /Paid
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                Yield
      / Rate(Dollars
      in thousands)Earning
      Assets:Federal
      funds sold
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                                                                                                                16,399
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                                                                                                                391
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                2.38
                                                                                                                                                                                                                                                                                                                                %
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                                                                                                                19,026
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                                                                                                                952
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                5.00
                                                                                                                                                                                                                                                                                                                                %Interest-
      bearing deposits
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                6,977
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                193
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                2.77
                                                                                                                                                                                                                                                                                                                                %
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                6,676
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                314
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                4.70
                                                                                                                                                                                                                                                                                                                                %Securities
      (1)
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                296,988
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                13,002
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                4.38
                                                                                                                                                                                                                                                                                                                                %
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                286,160
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                12,592
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                4.40
                                                                                                                                                                                                                                                                                                                                %Loans
      (2)
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                499,163
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                32,806
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                6.57
                                                                                                                                                                                                                                                                                                                                %
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                424,954
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                32,172
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                7.57
                                                                                                                                                                                                                                                                                                                                %Total
      earning assets
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                819,527
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                46,392
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                5.66
                                                                                                                                                                                                                                                                                                                                %
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                736,816
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                46,030
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                6.25
                                                                                                                                                                                                                                                                                                                                %Non-earning
      assets
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                43,050
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                39,588Total
      assets
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                                                                                                                862,577
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                                                                                                                776,404Liabilities:Savings
      accounts
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                                                                                                                69,557
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                                                                                                                291
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                0.42
                                                                                                                                                                                                                                                                                                                                %
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                                                                                                                76,815
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                                                                                                                467
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                0.61
                                                                                                                                                                                                                                                                                                                                %Money
      market accounts
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                135,770
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                2,802
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                2.06
                                                                                                                                                                                                                                                                                                                                %
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                98,213
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                3,741
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                3.81
                                                                                                                                                                                                                                                                                                                                %NOW
      accounts
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                87,680
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                1,021
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                1.16
                                                                                                                                                                                                                                                                                                                                %
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                77,316
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                996
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                1.29
                                                                                                                                                                                                                                                                                                                                %Time
      & other deposit accounts
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                347,238
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                13,126
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                3.78
                                                                                                                                                                                                                                                                                                                                %
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                318,692
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                13,756
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                4.32
                                                                                                                                                                                                                                                                                                                                %Borrowings
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                71,557
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                2,718
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                3.80
                                                                                                                                                                                                                                                                                                                                %
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                63,146
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                2,514
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                3.98
                                                                                                                                                                                                                                                                                                                                %Total
      interest-bearing liabilities
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                711,802
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                19,958
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                2.80
                                                                                                                                                                                                                                                                                                                                %
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                634,182
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                21,474
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                3.39
                                                                                                                                                                                                                                                                                                                                %Non-interest
      bearing deposits
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                73,770
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                72,350Other
      non-interest bearing liabilities
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                7,330
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                4,758Total
      liabilities
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                792,902
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                711,290Shareholders'
      equity
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                69,675
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                65,114Total
      liabilities and shareholders' equity
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                                                                                                                862,577
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                                                                                                                776,404Net
      interest income
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                                                                                                                26,434
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                                                                                                                24,556Net
      interest rate spread (3)
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                2.86
                                                                                                                                                                                                                                                                                                                                %
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                2.86
                                                                                                                                                                                                                                                                                                                                %Net
      earning assets
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                                                                                                                107,725
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                                                                                                                102,634Net
      interest margin (4)
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                3.23
                                                                                                                                                                                                                                                                                                                                %
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                3.33
                                                                                                                                                                                                                                                                                                                                %Net
      interest margin (tax-equivalent)
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                3.46
                                                                                                                                                                                                                                                                                                                                %
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                3.62
                                                                                                                                                                                                                                                                                                                                %Ratio
      of earning assets to interest-bearing liabilities115.13
                                                                                                                                                                                                                                                                                                                                %
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                116.18
                                                                                                                                                                                                                                                                                                                                %




(1)
      Securities include trading, available-for-sale, held-to-maturity and other
      investments.  They are shown at average amortized cost with net
      unrealized gains or losses on securities available-for-sale included as a
      component of non-earning assets.(2)
      Average loans include loans held for sale, net deferred loan fees and
      costs, non-accrual loans and excludes the allowance for loan
      losses.(3)
      Net interest rate spread represents the difference between the weighted
      average yield on interest-earning assets and the weighted average cost of
      interest-bearing liabilities.(4)
      The net interest margin, also known as the net yield on average
      interest-earning assets, represents net interest income as a percentage of
      average interest earning assets.




42-K
 Index





The level
of our net interest income is dependent on several factors including, but not
limited to: our ability to attract and retain deposits, our ability to generate
and retain loans, regional and local economic conditions, regional competition,
capital market conditions, the national interest rate environment, as well as
our tolerance for risk.  Throughout 2008 and 2007, our net interest
income was affected by all of these factors.





Net
interest income increased significantly during 2008.  In particular,
we recorded $26.434 million of net interest income during 2008 versus $24.556
million during 2007.  The $1.878 million or 7.6% increase in net
interest income between comparable periods was due to a significant increase in
our earning asset balances, in particularly loans outstanding, and substantial
reductions in our cost of funding as the level of interest rates dropped
throughout the year.  During 2008 we recorded $46.392 million in
interest income versus $46.030 million in 2007, a $362 thousand or 0.8% increase
in spite of significant decreases in the yield on all categories of earning
assets.  Interest expense, by comparison, decreased $1.516 million or
7.1%, from $21.474 million in 2007 to $19.958 million in 2008.





During
2008, average earning assets increased $82.711 million or 11.2%, from $736.816
million in 2007 to $819.527 million in 2008, while the average yield on earning
assets dropped from 6.25% in 2007 to 5.66% in 2008.  The growth in our
average earning assets was consistent with our strategic plan to increase the
overall earning asset base.  The decrease in our interest expense and
cost of funding was principally due to a decrease in the general level of
interest rates throughout 2008 as the national economy slid into
recession.  In spite of decreasing the interest rates paid on deposits
and borrowings and significantly increasing average loans outstanding, our
tax-equivalent net interest margin declined between 2007 and
2008.  During 2008, our tax-equivalent net interest margin was
3.46%.  This compares to 3.62% in 2007, a 16 basis point decrease
between comparable years.





The yield
on our earning assets decreased 59 basis points between comparable periods, from
6.25% in 2007 to 5.66% in 2008.  Between September 2007 and December
2008, the Federal Open Market Committee lowered the target federal funds
interest rate by 500 basis points, from 5.25% to 0.25%, due to a rapidly slowing
national economy.  This, in turn, caused a decrease in the national
prime lending rate, an interest rate to which a significant portion of our loan
portfolio is indexed.  These actions, along with decreases in other
short-term interest rates, reduced the yield on all categories of our earning
assets between comparable periods, including federal funds sold, interest
bearing deposits (at other banks), investment securities and
loans.  Our strategy to grow the earning assets, with a special
emphasis on loans, our highest yielding portfolio, counteracted the precipitous
drop in earning assets yields.





We
recorded $32.806 million of interest income on loans during 2008, as compared to
$32.172 million in 2007, a $634 thousand or 2.0% increase despite a 100 basis
point decrease in yield between the periods.  The average outstanding
balance of our loan portfolio was $499.163 million in 2008, as compared to
$424.954 million 2007, a $74.209 million or 17.5% increase, while loan yields
decreased from 7.57% in 2007 to 6.57% in 2008.  During 2008, we hired
several experienced commercial lenders to staff our Cicero, New York loan
production office and continued to originate new loans in our core markets and
the Capital District, which resulted in substantial loan portfolio growth,
particularly in the second half of 2008.





Similarly,
we recorded an increase in interest income on investment securities despite a
drop in interest rates during 2008.  The substantial majority of our
investment securities are fixed-rate instruments.  Although market
interest rates dropped significantly throughout 2008, we only recorded a 2 basis
point decrease in yield on our investment securities portfolio, while increasing
the average outstanding balance from $286.160 million in 2007 to $296.988
million in 2008.  Interest income on the investment securities
portfolio increased $410 thousand or 3.3%, from $12.592 million in 2007 to
$13.002 million in 2008 due to the combination of these factors.





On a
combined basis, we recorded $584 thousand in interest income on federal funds
sold and interest-bearing deposits (at other banks) during 2008.  This
compares to $1.266 million in interest income during 2007.  The
decrease in interest income on federal funds sold and interest-bearing deposits
(at other banks) between comparable years was principally due to a precipitous
drop in market interest rates during 2008.





We
recorded $19.958 million in total interest expense during 2008, as compared to
$21.474 million during 2007, a $1.516 million or 7.1% decrease between the
periods.  The significant decrease in market interest rates between
comparable periods allowed us to reduce the average rate paid on all categories
of our interest-bearing liabilities.  Between periods, however, the
average outstanding balance in savings accounts, the least expensive category of
interest-bearing deposits, decreased, while the average outstanding balances in
time accounts and money market accounts, our more expensive categories of
interest-bearing deposits, increased.  This change in the composition
of interest-bearing deposits reduced the potential cost savings of our deposit
rate actions between the periods.


43-K
 Index


Between
comparable years, the average rate paid on savings accounts decreased from 0.61%
in 2007 to 0.42% in 2008.  In addition, due to the low rate of
interest offered on savings accounts, the average outstanding balance in savings
accounts declined from $76.815 million during 2007 to $69.557 million during
2008, a $7.258 million or 9.4% decrease.  Correspondingly, interest
expense on savings accounts decreased from $467 thousand in 2007 to $291
thousand in 2008.





The
average outstanding balances in NOW accounts, money market accounts, and time
and other deposit accounts all increased between 2007 and 2008.  On a
combined basis, the average outstanding balances in these interest-bearing
deposit categories increased $76.467 million or 15.5% despite declining interest
rates.





The
average rate paid on money market accounts decreased from 3.81% during 2007 to
2.06% during 2008, but average outstanding balances increased from $98.213
million to $135.770 million between these same periods.  We recorded
interest expense on money market accounts of $2.802 million during 2008 versus
$3.741 million during 2007, a $939 thousand or 25.1% decrease between
periods.  The increase in money market balances was principally due to
growth in municipal customer deposits and significant growth in our Wealth
Management deposit account.





Similarly,
the average rate paid on time and other deposit accounts decreased from 4.32%
during 2007 to 3.78% during 2008, but average outstanding balances increased
from $318.692 million to $347.238 million between these same
periods.  We recorded interest expense on time and other deposit
accounts of $13.126 million during 2008 versus $13.756 million during 2007, a
$630 thousand or 4.6% decrease between periods.  As market interest
rates declined throughout 2008 our maturing certificates of deposit were renewed
or replaced by new certificates at lower rates of interest.  The
increase in the average outstanding balance of time and other deposit accounts
was principally due to an increase in certificates of deposit (over $100,000)
held by municipal depositors.





Between
2007 and 2008, the average outstanding balance of NOW accounts increased by
$10.364 million or 13.4%, but the average interest rate paid decreased by only
13 basis points, from 1.29% during 2007 to 1.16% during 2008.  As a
result of these changes, interest expense on NOW accounts increased from $996
thousand in 2007 to $1.021 million in 2008, a $25 thousand or 2.5% increase
between comparable periods.  The increase in average outstanding
balances between the periods was principally due to an increase in municipal
deposits, which was consistent with our strategy to secure more deposits from
this customer segment.





Interest
on borrowings increased from $2.514 million during 2007 to $2.718 million during
2008, a $204 thousand or 8.1% increase.  Although the average rate
paid for borrowings decreased 18 basis points, from 3.98% to 3.80%, between
comparable periods, interest expense increased due to an increase in the average
outstanding balance in borrowings.  To fund long-term fixed-rate
residential and commercial real estate loans, we borrowed long term funds at the
FHLBNY between periods, resulting in an $8.411 million net increase in average
outstanding borrowings between comparable periods, from $63.146 million in 2007
to $71.557 million in 2008.





Rate and
Volume Analysis





The
following table presents changes in interest income and interest expense
attributable to changes in volume (change in average balance multiplied by prior
year rate), changes in rate (change in rate multiplied by prior year volume),
and the net change in net interest income.  The net change
attributable to the combined impact of volume and rate has been allocated to
each in proportion to the absolute dollar amount of change.  The table
has not been adjusted for tax-exempt interest.


44-K
 Index





Rate and
Volume Table:





Year
      Ended December 31,2008
      vs. 2007Rate
                              
                              
                              Volume
                              
                              
                              TotalEarning
      assets:Federal
      funds sold
                              
                              $
                              (444
                              )
                              
                              $
                              (117
                              )
                              
                              $
                              (561
                              )Interest-bearing
      deposits
                              
                              
                              (134
                              )
                              
                              
                              13
                              
                              
                              
                              (121
                              )Securities
                              
                              
                              (65
                              )
                              
                              
                              475
                              
                              
                              
                              410Loans
                              
                              
                              (4,649
                              )
                              
                              
                              5,283
                              
                              
                              
                              634Total
      earning assets
                              
                              
                              (5,292
                              )
                              
                              
                              5,654
                              
                              
                              
                              362Interest
      bearing liabilities:Savings
      accounts
                              
                              
                              (135
                              )
                              
                              
                              (41
                              )
                              
                              
                              (176
                              )Money
      market accounts
                              
                              
                              (2,069
                              )
                              
                              
                              1,130
                              
                              
                              
                              (939
                              )NOW
      accounts
                              
                              
                              (104
                              )
                              
                              
                              129
                              
                              
                              
                              25Time
      & other deposit accounts
                              
                              
                              (1,762
                              )
                              
                              
                              1,132
                              
                              
                              
                              (630
                              )Borrowings
                              
                              
                              (119
                              )
                              
                              
                              323
                              
                              
                              
                              204Total
      interest bearing liabilities
                              
                              
                              (4,189
                              )
                              
                              
                              2,673
                              
                              
                              
                              (1,516
                              )Change
      in net interest income
                              
                              $
                              (1,103
                              )
                              
                              $
                              2,981
                              
                              
                              $
                              1,878





Rate and Volume
Analysis:The purpose of a rate volume analysis is to identify
the dollar amount of change in net interest income due to changes in interest
rates versus changes in the volume of earning assets and interest bearing
liabilities.





Net
interest income increased $1.878 million between 2007 and
2008.  Between the periods, we recorded a $362 thousand increase in
interest income and a $1.516 million decrease in interest
expense.  The increase in interest income between 2007 and 2008 was
principally driven by a significant increase in the average loan balances
outstanding, offset, in part, by a decrease in the yield on all categories of
earning assets.  The decrease in interest expense was driven by a
reduction in the average interest paid on all categories of interest-bearing
liabilities, offset, in part, by an increase in the average volume in all
categories of interest-bearing liabilities except savings accounts.





Between
2007 and 2008 there was a significant drop in the federal funds rate and other
market interest rates.  This helped drive a significant reduction in
both our earning asset yields and interest-bearing liability costs, resulting in
a $1.103 million decrease in net interest income due to rate
factors.  Conversely, our strategy to increase the Company’s size
drove increases in both interest income and interest expense, resulting in a
$2.981 million increase in net interest income due to volume
factors.  More specifically, total interest income increased $362
thousand between 2007 and 2008 due to a significant increase in the volume of
earning assets, offset, in part, by a decrease in the average yield on earning
assets.  Between 2007 and 2008 the volume of earning assets increased
$82.711 million, which contributed $5.654 million of additional interest
income.  Between the same periods, the interest income generated on
earning assets decreased $5.292 million due to rate factors.





Throughout
2008 and 2007, we focused our personnel and marketing resources on increasing
the outstanding balances in our loan portfolio with the goal of increasing
interest income.  Due to these efforts, we increased the average
outstanding balances in our loan portfolio from $424.954 million during 2007 to
$499.163 during 2008.  The growth in the loan portfolio contributed
$5.283 million of additional interest income between comparable
periods.  This improvement, however, was offset by a $4.649 million
decrease in interest income due to a decrease in the average yield on loans
between comparable periods as market interest rates dropped.  Due to
these two factors, the interest income recorded on loans increased $634 thousand
between 2007 and 2008.





We
recorded a $561 thousand decrease in interest income on federal funds sold
between 2007 and 2008, due to both rate factors and volume
factors.  Throughout the first three quarters of 2007, the Federal
Open Market Committee set the target federal funds rate at
5.25%.  This was followed by ten separate reductions in the target
federal funds rate leaving the target rate at 0.00% to 0.25% at December 31,
2008.  These actions resulted in an a 262 basis point decrease in the
average yield on federal funds sold between 2007 and 2008, or a $444 thousand
decrease in interest income due to




45-K
 Index







The
interest income recorded on the investment securities portfolio increased $410
thousand between 2007 and 2008.  We recorded $475 thousand of
additional interest income due to volume factors, offset, in part, by a $65
thousand decrease in interest income due to rate factors.  As we
increased deposit liabilities and borrowings between comparable periods, we
invested a portion of these funds in investment securities.  These
actions reduced slightly the yield on the investment securities portfolio
decreased slightly from 4.40% in 2007 to 4.38% in 2008.





The
average outstanding balances in our interest-bearing deposits at other banks
increased from $6.676 million in  2007 to $6.977 million
in  2008.  Due to a decrease in short-term interest rates
between periods, the average yield on this portfolio declined from 4.70% in 2007
to 2.77% in  2008.  These factors resulted in a $121
thousand decrease in interest income on this portfolio between the
periods.  A $134 thousand decrease in interest income due to a
decrease in rate of the portfolio was offset, in part, by a $13 thousand
increase in interest income due to volume.





We
recorded $13.126 million in interest expense on time and other accounts during
2008 as compared to $13.756 million during 2007, a $630 thousand or 4.6%
decrease in interest expense between periods.  Due primarily to an
increase in municipal customer certificates of deposit, the average outstanding
balances in time and other deposit accounts increased $28.546 million between
2007 and 2008.  This increase in the volume of time and other deposit
accounts increased interest expense by $1.132 million between comparable
periods.  As short-term interest rates dropped in late 2007 and 2008,
we lowered the interest rates offered on new and renewed certificates of
deposit.  These factors decreased interest expense on time and other
deposit accounts by $1.762 million between 2007 and 2008.





Interest
expense on money market deposit accounts decreased $939 thousand between 2007
and 2008.  As short-term interest rates trended downward between June
2007 and December 2008, we lowered the interest rate paid on money market
deposit accounts.  Although this decreased interest expense on money
market deposit accounts by $2.069 million between 2007 and 2008, the decrease
was offset, in part, by a $1.130 million increase in interest expense on money
market deposit accounts due to volume.





During
2008 we decreased the interest rates paid on our statement savings and passbook
savings accounts.  The low interest rates offered on these accounts
caused a decrease in the average outstanding balances.  These factors
resulted in a $176 thousand decrease in interest expense between 2007 and 2008,
$135 thousand due to rate and $41 thousand due to volume.





Between
2007 and 2008, the average outstanding balances in NOW accounts increased
$10.364 million or 13.4%.  This growth in the volume of the portfolio
increased interest expense $129 thousand between comparable
years.  However, due to a 13 basis point decrease in the average rate
paid on these deposits between 2007 and 2008,  interest expense on NOW
accounts decreased $104 thousand due to rate.  The increase in
interest expense due to these factors totaled $25 thousand between comparable
periods.





Between
the second quarter of 2007 and the third quarter of 2008, we secured long-term
borrowings to fund our long-term fixed-rate residential mortgage and commercial
real estate loans.  The rates of interest on these new long-term
borrowings were generally slightly less than the rates of interest on maturing
long-term borrowings, which dropped our average cost on borrowings from 3.98% in
2007 to 3.80% in 2008.  Interest expense on borrowings, however,
increased $204 thousand between comparable years due to an increase in the
average volume of borrowings outstanding.  More specifically, between
2007 and 2008, an increase in the average volume of borrowings increased
interest expense $323 thousand, while the decrease in the average rate paid on
borrowings decreased interest expense $119 thousand.





Provision for Loan
Losses.During 2008, we recorded $1.530 million in the
provision for loan losses.  This represents a $630 thousand or 70.0%
increase over the $900 thousand we recorded in the provision for loan losses
during 2007.  The increase in the provision for loan losses between
comparable years was principally due to a modest deterioration in most of our
credit quality metrics and significant growth in loans outstanding between the
periods.  The amount of net charge offs, delinquent loans,
non-performing loans, impaired loans and potential problem loans increased
between December 31, 2007 and December 31, 2008; while the allowance for
impaired loans and non-performing loans to period loans decreased.  We
recorded $943 thousand in net charge-offs during 2008 versus $603 thousand in
net charge-offs in 2007.  Net charge-offs to average loans outstanding
totaled 0.19% in 2008, as compared to 0.14% in 2007, a 5 basis point
increase.  Loans 30 to 89 days delinquent increased from $3.917
million or 0.88% of total loans outstanding at December 31, 2007 to $6.095
million or 1.04% of total loans outstanding at December 31,
2008.  Non-performing loans totaled $7.211 million or 1.24% of total
loans outstanding at December 31, 2008, as compared to $6.136 million or 1.38%
of total loans outstanding at December 31, 2007.  This represents a
$1.075 million increase in non-performing loans and 14 basis point decrease in
non-performing loans to total loans outstanding between the
periods.  Although total impaired loans increased from $5.701 million
at December 31, 2007 to $8.620 million at December 31, 2008, the allowance for
impaired




46-K
 Index







Due to
declining national economic conditions and the continued growth in total loans
outstanding, management anticipates recording a significant increase in the
provision for loan losses during the first and second quarters of 2009 as
compared to the comparable quarters in 2008.





Non-Interest
Income.Non-interest income is comprised of trust fees,
service charges on deposit accounts, commission income, net investment security
gains, net gain on sale of loans, income and gains on bank-owned life insurance,
other service fees, gain on sale of insurance subsidiary and other
income.  Non-interest income decreased between 2007 and
2008.  In particular, total non-interest income decreased from $7.036
million in 2007 to $6.309 million in 2008, a $727 thousand or 10.3%
decrease.  The decrease in non-interest income between comparable
periods was significantly influenced by four distinct events that in total were
responsible for an $801 thousand decrease in non-interest income between
comparable years, offset, in part, by a $74 thousand net increase in other
categories of non-interest income.  First, during 2008 we recorded a
$628 thousand gain on the sale of our membership interest in our former
insurance agency subsidiary, Mang–Wilber LLC.  This positive
contribution toward 2008 non-interest income was offset, in part, by a $230
thousand decrease in commission income due to cessation of insurance sales
activities.  2007 was effected by the following three distinct events:
(i) a $615 thousand (non-taxable) gain on life insurance coverage due to the
unexpected death of a senior executive, (ii) $232 thousand in flood-recovery
grant income in connection with certain flood-related impairment charges we
incurred in 2006, and (iii) a $352 thousand deferred gain on the sale of our
Norwich Town branch office building and related equipment to the
landowner.





In
addition to these four distinct events, we recorded a significant increase in
service charges on deposit accounts and slight increases in trust service fees,
other service fees and the cash surrender value of bank-owned life
insurance.  These improvements were offset by significant decreases in
commission income, net gain on sale of loans and other income.





During
2008 we recorded $2.148 million in service charges on deposit
accounts.  This compares to $1.891 million during 2007, a $257
thousand or 13.6% increase.  The net increase in service charges on
deposit accounts was primarily due to two factors: an increase in penalty
charges on checking accounts and an increase in deposit service charges on
business checking accounts.  During 2007 we began offering our
courtesy overdraft service to an increased number of our checking account
customers, which caused an increase in the product’s usage and increasing
penalty charges on checking accounts.  Also, in the first quarter of
2008 we increased the monthly and per item fees across our business checking
account product line.





The
commission earned on the sale of insurance policies and products through our
former insurance agency subsidiary, Mang-Wilber LLC, was recorded in commission
income.  In the second quarter of 2008 we sold our membership interest
in Mang-Wilber LLC and effectively exited the insurance sales line of
business.  Consequently, we did not record any commission income
during the second half of 2008, which was the primary reason commission income
decreased $230 thousand between comparable years.  During 2008 we
recorded $246 thousand of commission income, as compared to $476 thousand during
2007.





During
the first quarter of 2007 we acquired Provantage Funding Corporation, a New York
State licensed mortgage banker, to gain a foothold in the New York State Capital
District market and provide additional residential mortgage options to our
borrowers.  During the third quarter of 2008 we merged Provantage
Funding Corporation into the Company’s principal subsidiary, Wilber National
Bank, to improve the overall efficiency of our mortgage origination
process.  We now operate Provantage Funding Corporation as a division
of Wilber National Bank.  In the normal course of its business, our
Provantage Home Loan division sells a portion of the loans it originates to
third party financial institutions.  These mortgages are recorded in
loans held for sale and sold to these third parties at a premium (less the costs
to sell), which is recorded as a component of net gain on sale of
loans.  During 2008 we recorded a $112 thousand net gain on the sale
of these loans.  This compares to $196 thousand during the
2007.  Although total residential mortgage loan originations increased
period over period, the net gain recorded on the sale of these loans decreased
because we retained more of these loans  for our own loan portfolio
during 2008.





Other
income is comprised of numerous types of fee income including investment
services income, lease income, safe deposit box income, gain on sale of fixed
assets, title insurance agency income, and income from the rental of foreclosed
real estate.  Other income decreased from $1.310 million 2007 to $606
thousand in 2008, a $704 thousand or 53.7% decrease between comparable
periods.  During 2007 we recorded a $352 thousand gain on the sale of
our Norwich Town branch facility (and related equipment) and $232 thousand in
flood recovery grants.  On a comparative basis, these factors were
responsible for $584 thousand or 83.0% of the $704 thousand net decrease in
other income between




47-K
 Index







During
2008 we recorded net investment securities gains of $82 thousand, which included
$428 thousand in net losses on trading securities.  The remaining sale
of investment securities resulted in gain of $510 thousand.  By
comparison, during 2007, we recorded net investment securities gains of $80
thousand, including $16 thousand in gains on the sale of investment securities
and $64 thousand in net gains on trading securities.  Our trading
securities portfolio consists of mutual funds and individual equity and debt
securities held by the Company’s executive deferred compensation
plan.  Gains recorded on trading securities are offset by equal
amounts of salaries expense due because the executive deferred compensation plan
is not a funded plan.  Similarly, losses recorded on trading
securities are offset by equal amounts of decreases in salaries
expense.





During
2008 we recorded a $617 thousand increase in the cash surrender value of
bank-owned life insurance.  This compares to a $606 thousand increase
during 2007, an $11 thousand or 1.8% increase.  Although the net
crediting rates on our bank-owned life insurance policies decreased between
periods, we recorded a larger increase in the cash surrender value during 2008
as compared to 2007, due to an increase in the principal amount invested in the
policies between periods.





Other
service fees are comprised of numerous types of fee income including merchant
credit card processing fees, commissions on residential mortgages, official
check and check cashing fees, travelers’ check sales, wire transfer fees, letter
of credit fees, U.S. government bond sales, certificate of deposit account
registry service fees, and other miscellaneous service charges and
fees.  Other service fees increased $2 thousand or 0.9% between 2007
and 2008.  During 2008 we recorded a $19 thousand decrease in
commissions on residential mortgages.  Through the first quarter of
2007, we originated residential mortgages as an agent for a large regional bank
based in the Southeast.  In the first quarter of 2007, we acquired
Provantage Funding Corporation and terminated our agency relationship with the
large regional bank.  Accordingly, during 2008 we did not record any
revenue from this line of business compared to $19 thousand in
2007.  This decrease was offset by an increase in other miscellaneous
service fees and letter of credit fees during 2008.





During
2008 we recorded $1.647 million in trust service fees.  This compares
to $1.641 million during 2007, a $6 thousand or 0.4% increase between the
periods.  During 2008 we recorded $182 thousand in executor fees, as
compared to $121 thousand in executor fees in 2007, a $61 thousand
increase.  This improvement was offset by a $52 thousand decrease in
account termination fees between the periods.





Non-Interest
Expense.Non-interest expense is comprised of salaries,
employee benefits, occupancy expense, furniture and equipment expense, computer
service fees, advertising and marketing expense, professional fees, and other
miscellaneous expenses.  Total non-interest expense increased $2.867
million or 13.7% on a comparable period basis, from $20.857 million during 2007
to $23.724 million during 2008.  The substantial increase in total
non-interest expense between comparable periods was principally due to various
market expansion, product enhancement, and bank operating system
enhancements.





Salaries
expense increased $1.458 million or 14.8% between comparable periods, from
$9.823 million in 2007 to $11.281 million during 2008.  New staff
salaries and increases in the base salaries of existing staff, overtime,
incentive, and commission pay totaling $1.906 million was offset, in part, by a
$448 thousand decrease in executive deferred compensation expense between the
periods.  In the first quarter of 2008 we hired eight banking
professionals from the Syracuse, New York marketplace to staff our Cicero, New
York (Onondaga County) loan representative office, and in the second quarter of
2008 we opened a full-service branch office in Halfmoon, New York (Saratoga
County).  In addition, during the first quarter of 2007 we acquired
Provantage Funding Corporation and began recording additional salaries expense
relating to their staff.  Finally, throughout 2007 and 2008 we hired
additional sales and operations staff and provided merit pay raises to existing
staff.





We
recorded employee benefits expense of $2.449 million during 2008, as compared to
$2.672 million during 2007, a $223 thousand or 8.3% decrease.  This
net decrease was caused by increases in some components of employee benefits
expense and decreases in others.  Between comparable periods, we
recorded a $234 thousand decrease in our defined benefit retirement plan cost, a
$48 thousand decrease in our 401(k) plan expense, an $11 thousand decrease in
workers compensation insurance expense, a $16 thousand decrease in other
benefits expense and a $5 thousand decrease in group health insurance
expense.  These decreases were offset, in part, by an $84 thousand
increase in FICA expense, a $32 thousand increase in group life insurance, a $10
thousand increase in group disability insurance, a $12 thousand increase in
unemployment insurance and a $2 thousand increase in employee education
expense.


48-K
 Index


During
2008 we recorded a $393 thousand benefit on the Company’s defined benefit
retirement plan.  This compares to a $159 thousand benefit during
2007.  Our defined benefit plan was frozen in 2006, and the plan
assets performed well for several years preceding 2008, resulting in the
recording of a net benefit in 2008 and 2007.





During
2008 the investment securities held by the pension plan generated significant
losses due principally to the global economic crises and related financial
market performance.  In addition, the plan liability increased between
the 2007 and 2008 plan measurement dates due to a decrease in the discount rate
on plan liabilities.  These factors will require us to record a $469
thousand expense in pension expense during 2009.  This compares to a
$392 thousand benefit recorded in 2008 or and $861 thousand increase in
expense.





Due to
weaker Company earnings in 2008, a bonus contribution was not awarded to the
Company’s 401(k) plan participants resulting in a net decrease in plan expense
between comparable periods





The
increases in FICA expense, group life insurance, group disability insurance,
unemployment insurance and employee education were generally due to an increase
in the number of persons employed by us between December 31, 2007 and December
31, 2008.





On a
combined basis, occupancy expense of Company premises and furniture and fixture
expense increased $394 thousand or 14.6%, from $2.696 million in 2007 to $3.090
million in 2008.  During 2008 we began incurring lease expenses on two
new facilities, namely our representative loan office in Cicero, New York
(Onondaga County) and our full-service branch office facility in Halfmoon, New
York (Saratoga County).  In addition, during 2007 we made various
investments in our premises and equipment and assumed certain lease agreements
in connection with the Provantage Funding Corporation
acquisition.  The combination of these endeavors increased
depreciation expense, equipment maintenance costs, building repairs, insurance
costs, property taxes, and rents.





Computer
service fees increased $672 thousand or 86.7% between 2007 and 2008, from $775
thousand during 2007 to $1.447 million during 2008.  In the first
quarter of 2008 we transferred our core computer system from our main office
location in Oneonta, New York to a service bureau environment in Albany, New
York to enhance our business continuity plan and minimize disruption of customer
service.  We also converted our payroll system from proprietary
software to a third party software provider.  On a combined basis,
these two computer system changes were responsible for $642 thousand or 95.5% of
the net increase in computer service fees period over period, $568 thousand due
to the core system migration and $74 thousand due to the payroll
system.





Advertising
and marketing expenses increased $31 thousand or 5.0% between comparable
periods, from $625 thousand during 2007 to $656 thousand during
2008.  To support our market expansion efforts into the Capital
District of New York and the Greater Syracuse market, we engaged a professional
public relations firm and purchased additional newspaper and other advertising
media spots during 2008.





Professional
fees decreased from $976 thousand in 2007 to $871 thousand in 2008, a $105
thousand or 10.8% decrease.  We recorded an $83 thousand decrease in
audit expenses and a $30 thousand decrease in employee placement fees between
periods.  These decreases were offset, in part, by an $8 thousand net
increase in other miscellaneous legal and professional fees.





Other
miscellaneous expenses include directors’ fees, fidelity insurance, the Bank’s
OCC assessment, FDIC premiums and assessments, bad debt collection expenses,
correspondent bank services, service expenses related to the Bank’s accounts
receivable financing services, charitable donations and customer relations,
other losses, dues and memberships, office supplies, postage and shipping,
subscriptions, telephone expense, employee travel and entertainment, software
amortization, intangible asset amortization expense, OREO expenses, net losses
on the disposal / impairment or sale of fixed assets and other real estate,
minority interest expense, stock exchange listing fees, and several other
miscellaneous expenses.  During 2008, other miscellaneous expenses
increased $640 thousand or 19.5%, from $3.290 million during 2007 to $3.930
million during 2008.  The following table itemizes the individual
components of other miscellaneous expenses that increased (or decreased)
significantly between comparable periods:


49-K
 Index





Table of
Other Miscellaneous Expenses:





YearDescription
      of Other Miscellaneous Expense
                                
                                2008
                                
                                
                                2007
                                
                                
                                Increase
      / (Decrease)dollars
      in thousandsFidelity
      insurance
                                
                                $
                                109
                                
                                
                                $
                                85
                                
                                
                                $
                                24FDIC
      assessment
                                
                                
                                99
                                
                                
                                
                                76
                                
                                
                                
                                23Correspondent
      bank services
                                
                                
                                152
                                
                                
                                
                                128
                                
                                
                                
                                24Accounts
      receivable financing servicing expense
                                
                                
                                81
                                
                                
                                
                                131
                                
                                
                                
                                (50
                                )Miscellaneous
      loan  costs
                                
                                
                                71
                                
                                
                                
                                51
                                
                                
                                
                                20Donations
                                
                                
                                112
                                
                                
                                
                                144
                                
                                
                                
                                (32
                                )Dues
      and memberships
                                
                                
                                123
                                
                                
                                
                                75
                                
                                
                                
                                48Postage
      and shipping
                                
                                
                                328
                                
                                
                                
                                278
                                
                                
                                
                                50Telephone
      and data communications
                                
                                
                                447
                                
                                
                                
                                205
                                
                                
                                
                                242Travel
      and entertainment
                                
                                
                                264
                                
                                
                                
                                217
                                
                                
                                
                                47Software
      amortization
                                
                                
                                249
                                
                                
                                
                                180
                                
                                
                                
                                69Other
      losses
                                
                                
                                136
                                
                                
                                
                                88
                                
                                
                                
                                48Deferred
      reserves for unfunded loan commitments
                                
                                
                                (2
                                )
                                
                                
                                43
                                
                                
                                
                                (45
                                )Minority
      interest for Mang-Wilber LLC insurance agency subsidiary
                                
                                
                                34
                                
                                
                                
                                69
                                
                                
                                
                                (35
                                )Loss
      on disposal / impairment or sale of fixed assets and other real
      estate
                                
                                
                                283
                                
                                
                                
                                42
                                
                                
                                
                                241All
      other miscellaneous expense items, net
                                
                                
                                1,444
                                
                                
                                
                                1,478
                                
                                
                                
                                (66
                                )Total
      Other Miscellaneous Expense
                                
                                $
                                3,930
                                
                                
                                $
                                3,290
                                
                                
                                $
                                640





During
2008 we incurred $447 thousand in telephone and data communication expenses, as
compared to $205 thousand in data and communication expenses during
2007.  The $242 thousand increase in data and communication expense
was principally due to the installation of a state of the art data communication
protocol for all of our branch offices during the first quarter of
2008.





During
2008 we recorded $283 thousand in losses on the impairment and sale of fixed
assets, most of which was due to the abandonment of a plan to build a branch
office.  Specifically, we abandoned the development of a branch office
in Dewitt, New York (Onondaga County) and recorded a $178 thousand expense for
site planning, architectural design, and engineering studies in the second
quarter of 2008.  The remaining losses totaling $105 thousand were due
to losses incurred on the sale of other real estate owned.  By
comparison, during 2007 we recorded $42 thousand in losses on the disposal /
impairment or sale of fixed assets and other real estate due principally to
losses recorded on the sale of other real estate.





Due to
the recent global financial crisis and the related losses incurred by the FDIC
deposit insurance fund, we were recently advised that during 2009 there will be
a substantial increase in the FDIC insurance premium rates charged to member
banks.  Based on preliminary estimates, our FDIC related expense could
increase between $200 thousand and $250 thousand per quarter, or $800thousand to $1.000 million
annually.  The FDIC also approved an interim rule inFebruary 2009
that will institute a one-time special assessment of 20 cents per $100 of
domestic deposits on the banking industry in order to quickly restore its
Deposit Insurance Fund.  The FDIC’s Deposit Insurance Fund reserve
ratio is required to be maintained at 1.15%.  Due to the high number
of bank failures during 2008, the Deposit Insurance Fund’s reserve ratio stood
at 0.40% at December 31, 2008.  The Company estimates that this
one-time special assessment that was announced would result in approximately
$1.500 million in additional non-interest expense during
2009.  Immediately following the FDIC’s special assessment
announcement several comments were provided by member institutions and banking
industry advocates, including the American Bankers Association, recommending
that the FDIC consider alternative Deposit Insurance Fund funding options
including an increase in the FDIC’s line of credit with the U.S. Department of
Treasury.  The FDIC’s chair person followed with a public statement
indicating the special assessment could be reduced to 10 basis points if an
increase in the line of credit with the U.S. Treasury Department were
granted.  In the event, the special assessment were reduced from 20
basis points to 10 basis points, we estimate that the Company would record
approximately $750 thousand in additional non-interest expense during
2009.


50-K
 Index





Income
Taxes.Income tax expense decreased from $2.128 million during
2007 to $1.673 million during 2008.  The decrease in income tax
expense was primarily due to a decrease in income before tax.  Our
effective tax rates for 2008 and 2007 were 21.6% and 22.3%,
respectively.  In both periods, our effective tax rate was below
statutory tax rates because approximately 38% of our pre-tax income was
generated from non-taxable revenues including interest income on state and
municipal investment securities, increases in the cash surrender value of
bank-owned life insurance and  gains on life insurance
coverage.  In addition, 60% of the dividends paid by our real estate
investment trust subsidiary to its shareholders are deductible for New York
State tax purposes.  This decreases our New York State effective tax
rate to the alternative minimum tax rate of 3%.





E.
Liquidity





Liquidity
describes our ability to meet financial obligations in the normal course of
business.  Liquidity is primarily needed to meet the borrowing and
deposit withdrawal requirements of our customers and to fund our current and
planned expenditures.  We are committed to maintaining a strong
liquidity position.  Accordingly, we monitor our liquidity position on
a daily basis through our daily funds management process.  This
includes:





●
      maintaining the appropriate levels of currency throughout our branch
      system to meet the daily cash needs of our
  customers,


●
      balancing our mandated deposit or “reserve” requirements at the Federal
      Reserve Bank of New York,


●
      maintaining adequate cash balances at our correspondent banks,
      and


●
      assuring that adequate levels of federal funds sold, liquid assets, and
      borrowing resources are available to meet obligations, including
      reasonably anticipated daily
fluctuations.





The
following list represents the sources of funds available to meet our liquidity
requirements.  Our primary sources of funds are denoted by an asterisk
(*).





Sources
      of Funding•
      Currency*•
      Federal Reserve and Correspondent Bank Balances*•
      Federal Funds Sold*•
      Loan and Investment Principal and Interest Payments*•
      Investment Security Maturities and Calls*•
      Demand Deposits and NOW Accounts*•
      Savings and Money Market Deposits*•
      Certificates of Deposit and Other Time Deposits*•
      Repurchase Agreements*•
      FHLBNY Advances / Lines of Credit*•
      Sale of Available-for-Sale Investment Securities•
      Brokered Deposits•
      Correspondent Lines of Credit•
      Federal Reserve Discount Window Borrowings•
      Sale of Loans•
      Proceeds from Issuance of Equity Securities•
      Branch
Acquisition





In
addition to the daily funds management process, we also monitor certain
liquidity ratios and complete a liquidity assessment on a monthly
basis.  The monthly evaluation report, known as the Liquidity
Contingency Scorecard, is reviewed by the Asset and Liability Committee (“ALCO”)
and the Bank’s Board of Directors.  The report provides management
with various ratios and financial market data that are compared to limits
established within the Bank’s Asset and Liability Management
Policy.  It was designed to provide an early warning signal for a
potential liquidity crisis.  Based on the limits established in our
Asset and Liability Management Policy, we determined that at December 31, 2008
and 2007 the Bank was in a “1B” liquidity position.  Based on
management’s internal rating system, a “1B” liquidity position means management
can continue operating the Company in the normal course of business, but
liquidity risk merits heightened attention.


51-K
 Index




The
following table summarizes several of our key liquidity measures for the periods
stated:





Table of
Liquidity Measures:





Liquidity
      Measure
                                                    
                                                    December
      31,Dollars
      in Thousands
                                                    
                                                    2008
                                                    
                                                    
                                                    2007Cash
      and Cash Equivalents
                                                    
                                                    $
                                                    44,421
                                                    
                                                    
                                                    $
                                                    18,942Available-for-Sale
      and Held-to-Maturity Investment Securities at Estimated Fair Value Less
      Securities Pledged for State and Municipal Deposits and
      Borrowings
                                                    
                                                    $
                                                    29,404
                                                    
                                                    
                                                    $
                                                    101,253Total
      Loan to Total Asset Ratio
                                                    
                                                    
                                                    63.1
                                                    %
                                                    
                                                    
                                                    56.1
                                                    %FHLBNY
      Remaining Borrowing Capacity
                                                    
                                                    $
                                                    7,032
                                                    
                                                    
                                                    $
                                                    14,294Available
      Correspondent Bank Lines of Credit
                                                    
                                                    $
                                                    15,000
                                                    
                                                    
                                                    $
                                                    15,000Federal
      Reserve Bank Discount Window
                                                    
                                                    $
                                                    8,435
                                                    
                                                    
                                                    $
                                                    10,882





Our
overall liquidity position decreased between December 31, 2007 and December 31,
2008.  At December 31, 2008 we maintained $44.421 million in cash and
cash equivalents, $29.404 million in unpledged available-for-sale (at estimated
fair value) and held-to-maturity investment securities, and $30.467 million of
readily available lines of credit at other banks to fund any anticipated or
unanticipated growth in earning assets.  This compares to $18.942
million in cash and cash equivalents, $101.253 million in unpledged
available-for-sale (at estimated fair value) and held-to-maturity investment
securities, and $40.176 million of readily available lines of credit at other
banks on December 31, 2007.  In aggregate, these potential funding
sources provided $104.292 million of short- and long-term liquidity at December
31, 2008, as compared to $160.371 million at December 31, 2007, a $56.079
million decrease between periods.  The decrease in our liquidity is
largely due to a significant increase in loans outstanding between
periods.  Despite our significant loan growth between periods, our
total loan to total asset ratios of 63.1% at December 31, 2008 and 56.1% at
December 31, 2007 were low relative to those of our comparative peer group of
financial institutions.





Our
commitments to extend credit and stand-by letters of credit increased
significantly between December 31, 2007 and December 31,
2008.  Commitments to extend credit and stand-by letters of credit
totaled $139.496 million at December 31, 2008 versus $97.543 million at December
31, 2007, a $41.953 million or 43.0% increase.  The increase between
periods was principally due to increases in unused portions of commercial lines
of credit and commitments to fund commercial construction loans.  Our
experience indicates that draws on the commitments to extend credit and stand-by
letters of credit do not fluctuate significantly from quarter to quarter and
therefore are not expected to materially impact our liquidity
prospectively.





On a
quarterly basis we prepare a forward-looking 90-day sources and uses report to
determine future liquidity needs.  Based on this report, our deposit
retention experience, anticipated loan and investment funding and prepayment
activity, the product offerings of our competitors, the level of interest rates,
the level of regional economic activity, and our current pricing strategies, we
anticipate that we will have sufficient levels of liquidity to meet our funding
commitments over the next several quarters prospectively.





Although
our internal liquidity measurement systems portend adequate amounts of liquidity
and we generally rely on customer deposits to fund our operation, during the
second half of 2008 one of our important funding sources, the FHLBNY,
experienced a significant decrease in its ability to extend credit to its member
banks.  The Federal Home Loan Bank system relies heavily on foreign
creditors.  Due to the global financial crisis, these creditors have
withdrawn significantly from the credit market, which has directly affected the
FHLBNY’s ability to provide long-term advances (loans) to its member banks,
including us.  Historically, we have relied on FHLBNY advances to fund
select loans and investments.  Although we ultimately expect the
FHLBNY to resume its credit and lending practices, this situation has negatively
affected our ability to fund certain aspects of our operation, in particular
long term fixed rate commercial and residential loans, at a reasonable
cost.





F.
Capital Resources and Dividends





The
maintenance of appropriate capital levels is a management
priority.  Overall capital adequacy is monitored on an ongoing basis
by our management and reviewed regularly by the Board of
Directors.  Our principal capital planning goal is





52-K
 Index









Due to
the significant growth in total assets during 2008, total shareholders’ equity
to total assets decreased from 8.74% at December 31, 2007 to 7.29% at December
31, 2008.  Between December 31, 2007 and December 31, 2008, total
shareholders’ equity decreased $1.940 million or 2.8%.  Total
shareholders’ equity was $67.459 million at December 31, 2008 as compared to
$69.399 million at December 31, 2007.  The net decrease in
shareholders’ equity between periods was due to a few factors, some positive and
some negative.  During 2008 we recorded net income of $5.816
million.  We also recorded a $2.886 million positive change in net
unrealized loss on investment securities, net of tax, due to a general decrease
in the level of interest rates, and a $60 thousand positive adjustment to
retained earnings to recognize the effect of the change in the measurement date
of our defined benefit pension plan.  These factors were offset by
cash dividend payments totaling $3.991 million in 2008, a change in the funded
status of our defined benefit plan, net of taxes, a change in the net unrealized
loss on our split-dollar life insurance plan and the adoption of a new
accounting standard.  During 2008, our pension plan recorded a
significant decrease in the value of its plan assets due to weak capital markets
performance, as well as a significant increase in the plan’s projected benefit
obligation.  This change in the funded status of this plan required us
to decrease shareholders equity by $5.047 million at the end of
2008.  Similarly, we revalued our split-dollar life insurance plan at
December 31 2008 resulting in a $127 thousand decrease in shareholders’
equity.  And finally, in 2008 the FASB EITF issued new accounting
guidance, EITF 06-4, “Accounting for Deferred Compensation and Postretirement
Benefit Aspects of Endorsement Split-Dollar Life Insurance
Arrangements,”   that required us to record an estimated
liability for our executive split-dollar life insurance benefit plan through
retained earnings.  Accordingly, we recorded a $1.537 million decrease
in retained earnings, due to the adoption of this standard.





The
Company and the Bank are both subject to regulatory capital guidelines as
established by federal bank regulators.  Under these guidelines, in
order to be “adequately capitalized” the Company and the Bank must both maintain
a minimum ratio of tier 1 capital to risk-weighted assets of 4.0% and a minimum
ratio of total capital to risk-weighted assets of 8.0%.  Tier 1
capital is comprised of shareholders’ equity less intangible assets and
accumulated other comprehensive income.  Total capital for this
risk-based capital standard includes tier 1 capital plus allowable portions of
the Company’s allowance for loan losses.  Similarly, for the Bank to
be considered “well capitalized,” it must maintain a tier 1 capital to
risk-weighted assets ratio of 6.0% and a total capital to risk-weighted assets
ratio of 10.0%.  The Company exceeded all capital adequacy guidelines,
and the Bank exceeded all “well capitalized” guidelines at December 31, 2008 and
December 31, 2007.  In addition, the Bank’s Board of Directors has
established a minimum capital policy that exceeds “well capitalized” regulatory
standards to ensure the safety and soundness of the Company’s banking
subsidiary.  The Company’s tier 1 capital to risk-weighted assets
ratio and total capital to risk-weighted assets ratio at December 31, 2008 were
10.26% and 11.46%, respectively.  This compares to 12.04% and 13.29%,
respectively, at December 31, 2007.





The
principal source of funds for the payment of shareholder dividends by the
Company has been dividends declared and paid to the Company by its subsidiary
bank.  There are various legal and regulatory limitations applicable
to the payment of dividends to the Company by its subsidiaries, as well as the
payment of dividends by the Company to its shareholders.  At December
31, 2008, under these statutory limitations, the maximum amount that could have
been paid by the Bank subsidiary to the Company without special regulatory
approval was approximately $5.254 million.  The ability of the Company
and the Bank to pay dividends in the future is and will continue to be
influenced by regulatory policies, capital guidelines, and applicable
laws.





See PART
II, Item 5 of this document, "Market for Registrant’s Common Equity, Related
Stockholder Matters, and Issuers Purchases of Equity Securities," for a recent
history of the Company's cash dividend payments and stock sale and repurchase
activities.





We
applied to participate in the Treasury’s CPP on November 7,
2008.  Participation in the CPP required the Company to authorize and
issue preferred stock to the Treasury.  On December 11, 2008, the
Treasury notified the Company that its application to participate in the CPP had
been preliminarily approved for $12 million, or approximately 2% of the
Company’s risk-weighted assets.  At a special meeting held on February
27, 2009, the Company’s shareholders approved an amendment to the Company’s
certificate of incorporation authorizing the issuance of up to 100,000 shares of
preferred stock.  Although the amendment to the certificate of
incorporation permits our Board of Directors to issue preferred stock to the
Treasury under CPP, a final decision to do so has not yet been
rendered.  Furthermore, the amendment to the certificate of
incorporation permits our Board of Directors to issue preferred stock from time
to time in the future for other purposes, and in other transactions, up to the
total number of shares authorized by our restated certificate of
incorporation.


53-K
 Index


In the
event the shares were issued as of December 31, 2008, the Company’s and the
Bank’s resultant capital ratios would be as follows. For the purposes of this
table, we assume the net proceeds obtained under the CPP program would be used
to purchase Ginnie Mae mortgage backed securities, which carry a 0% risk weight
under current regulatory standards.




The Company
                                          
                                          
                                          Subsidiary BankTotal
      Capital to Risk-Weighted Assets
                                          
                                          13.35%
                                          
                                          
                                          13.28%Tier
      1 Capital to Average Assets
                                          
                                          8.68%
                                          
                                          
                                          8.63%


54-K
 Index


ITEM8:  FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA








Report
of Independent Registered Public Accounting Firm








The Board
of Directors and Shareholders of The Wilber Corporaion:





We have
audited the accompanying consolidated statements of condition of The Wilber
Corporation and subsidiaries (“the Company”) as of December 31, 2008 and
2007,and the
related consolidated statements of income, change in shareholders' equity and
comprehensive income, and cash flows for each of the years then ended.These
consolidated financial statements are the responsibility of the Company’s
management.  Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.





In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of The Wilber Corporation and
subsidiaries as of December 31, 2008 and 2007, and the results of their
operations and their cash flows for each of the years then ended, in conformity
with U.S. generally accepted accounting principles.





We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), The Wilber Corporation and subsidiaries’
internal control over financial reporting as of December 31, 2008,based on
criteria established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO), and our report dated March 10, 2009 expressed an
unqualified opinion on the effectiveness of the Company’s internal control over
financial reporting.











/s/ KPMG
      LLP


Albany,
New York


March 10,
2009


55-K
 Index


The
Wilber Corporation


Consolidated
Statements of Condition





December
      31,
                                                                          
                                                                          
                                                                          December
      31,in
      thousands except share and per share data
                                                                          
                                                                          2008
                                                                          
                                                                          
                                                                          2007AssetsCash
      and Due from Banks
                                                                          
                                                                          $
                                                                          8,467
                                                                          
                                                                          
                                                                          $
                                                                          11,378Interest-Bearing
      Balances with Banks
                                                                          
                                                                          
                                                                          35,475
                                                                          
                                                                          
                                                                          
                                                                          519Federal
      Funds Sold
                                                                          
                                                                          
                                                                          479
                                                                          
                                                                          
                                                                          
                                                                          7,045Total
      Cash and Cash Equivalents
                                                                          
                                                                          
                                                                          44,421
                                                                          
                                                                          
                                                                          
                                                                          18,942SecuritiesTrading,
      at Fair Value
                                                                          
                                                                          
                                                                          1,155
                                                                          
                                                                          
                                                                          
                                                                          1,430Available-for-Sale,
      at Fair Value
                                                                          
                                                                          
                                                                          216,744
                                                                          
                                                                          
                                                                          
                                                                          237,274Held-to-Maturity,
      Fair Value of $45,009 at December 31, 2008 and $51,743 at December 31,
      2007
                                                                          
                                                                          
                                                                          44,454
                                                                          
                                                                          
                                                                          
                                                                          52,202Other
      Investments
                                                                          
                                                                          
                                                                          5,693
                                                                          
                                                                          
                                                                          
                                                                          4,782Loans
      Held for Sale
                                                                          
                                                                          
                                                                          118
                                                                          
                                                                          
                                                                          
                                                                          456Loans
                                                                          
                                                                          
                                                                          583,861
                                                                          
                                                                          
                                                                          
                                                                          445,105Allowance
      for Loan Losses
                                                                          
                                                                          
                                                                          (7,564
                                                                          )
                                                                          
                                                                          
                                                                          (6,977
                                                                          )Loans,
      Net
                                                                          
                                                                          
                                                                          576,297
                                                                          
                                                                          
                                                                          
                                                                          438,128Premises
      and Equipment, Net
                                                                          
                                                                          
                                                                          6,482
                                                                          
                                                                          
                                                                          
                                                                          6,312Bank
      Owned Life Insurance
                                                                          
                                                                          
                                                                          16,402
                                                                          
                                                                          
                                                                          
                                                                          15,785Goodwill
                                                                          
                                                                          
                                                                          4,619
                                                                          
                                                                          
                                                                          
                                                                          4,619Intangible
      Assets, Net
                                                                          
                                                                          
                                                                          107
                                                                          
                                                                          
                                                                          
                                                                          394Pension
      Asset
                                                                          
                                                                          
                                                                          0
                                                                          
                                                                          
                                                                          
                                                                          4,872Other
      Assets
                                                                          
                                                                          
                                                                          8,382
                                                                          
                                                                          
                                                                          
                                                                          8,484TotalAssets
                                                                          
                                                                          $
                                                                          924,874
                                                                          
                                                                          
                                                                          $
                                                                          793,680Liabilities
      and Shareholders’ EquityDeposits:Demand
                                                                          
                                                                          $
                                                                          72,168
                                                                          
                                                                          
                                                                          $
                                                                          71,145Savings,
      NOW and Money Market Deposit Accounts
                                                                          
                                                                          
                                                                          330,158
                                                                          
                                                                          
                                                                          
                                                                          254,196Certificates
      of Deposit (Over $100M)
                                                                          
                                                                          
                                                                          149,332
                                                                          
                                                                          
                                                                          
                                                                          111,949Certificates
      of Deposit (Under $100M)
                                                                          
                                                                          
                                                                          192,119
                                                                          
                                                                          
                                                                          
                                                                          198,467Other
      Deposits
                                                                          
                                                                          
                                                                          22,096
                                                                          
                                                                          
                                                                          
                                                                          21,737Total
      Deposits
                                                                          
                                                                          
                                                                          765,873
                                                                          
                                                                          
                                                                          
                                                                          657,494Short-Term
      Borrowings
                                                                          
                                                                          
                                                                          21,428
                                                                          
                                                                          
                                                                          
                                                                          15,786Long-Term
      Borrowings
                                                                          
                                                                          
                                                                          59,970
                                                                          
                                                                          
                                                                          
                                                                          41,538Pension
      Liability
                                                                          
                                                                          
                                                                          869
                                                                          
                                                                          
                                                                          
                                                                          0Other
      Liabilities
                                                                          
                                                                          
                                                                          9,275
                                                                          
                                                                          
                                                                          
                                                                          9,463Total
      Liabilities
                                                                          
                                                                          
                                                                          857,415
                                                                          
                                                                          
                                                                          
                                                                          724,281Shareholders’
      Equity:Common
      Stock, $.01 Par Value, 16,000,000 Shares Authorized, and 13,961,664 Shares
      Issued at December 31, 2008, and December 31, 2007
                                                                          
                                                                          
                                                                          140
                                                                          
                                                                          
                                                                          
                                                                          140Additional
      Paid in Capital
                                                                          
                                                                          
                                                                          4,224
                                                                          
                                                                          
                                                                          
                                                                          4,224Retained
      Earnings
                                                                          
                                                                          
                                                                          93,966
                                                                          
                                                                          
                                                                          
                                                                          93,618Accumulated
      Other Comprehensive Loss
                                                                          
                                                                          
                                                                          (2,560
                                                                          )
                                                                          
                                                                          
                                                                          (272
                                                                          )Treasury
      Stock at Cost, 3,457,960 Shares at December 31,2008 and December
      31, 2007
                                                                          
                                                                          
                                                                          (28,311
                                                                          )
                                                                          
                                                                          
                                                                          (28,311
                                                                          )Total
      Shareholders’ Equity
                                                                          
                                                                          
                                                                          67,459
                                                                          
                                                                          
                                                                          
                                                                          69,399Total
      Liabilities and Shareholders’ Equity
                                                                          
                                                                          $
                                                                          924,874
                                                                          
                                                                          
                                                                          $
                                                                          793,680


See
accompanying notes to Consolidated Financial Statements


56-K
 Index


The
Wilber Corporation


Consolidated
Statements of Income





Year
      Ended December 31,in
      thousands except share and per share data
                                  
                                  2008
                                  
                                  
                                  2007Interest
      and Dividend IncomeInterest
      and Fees on Loans
                                  
                                  $
                                  32,806
                                  
                                  
                                  $
                                  32,172Interest
      and Dividends on Securities:U.S.
      Government and Agency Obligations
                                  
                                  
                                  10,396
                                  
                                  
                                  
                                  9,654State
      and Municipal Obligations
                                  
                                  
                                  2,286
                                  
                                  
                                  
                                  2,513Other
                                  
                                  
                                  320
                                  
                                  
                                  
                                  425Interest
      on Federal Funds Sold and Interest-Bearing Balances at Other
      Banks
                                  
                                  
                                  584
                                  
                                  
                                  
                                  1,266Total
      Interest and Dividend Income
                                  
                                  
                                  46,392
                                  
                                  
                                  
                                  46,030Interest
      ExpenseInterest
      on Deposits:Savings,
      NOW and Money Market Deposit Accounts
                                  
                                  
                                  4,114
                                  
                                  
                                  
                                  5,204Certificates
      of Deposit (Over $100M)
                                  
                                  
                                  4,653
                                  
                                  
                                  
                                  4,761Certificates
      of Deposit (Under $100M)
                                  
                                  
                                  7,903
                                  
                                  
                                  
                                  8,168Other
      Deposits
                                  
                                  
                                  570
                                  
                                  
                                  
                                  827Interest
      on Short-Term Borrowings
                                  
                                  
                                  268
                                  
                                  
                                  
                                  581Interest
      on Long-Term Borrowings
                                  
                                  
                                  2,450
                                  
                                  
                                  
                                  1,933Total
      Interest Expense
                                  
                                  
                                  19,958
                                  
                                  
                                  
                                  21,474Net
      Interest Income
                                  
                                  
                                  26,434
                                  
                                  
                                  
                                  24,556Provision
      for Loan Losses
                                  
                                  
                                  1,530
                                  
                                  
                                  
                                  900Net
      Interest Income After Provision for Loan Losses
                                  
                                  
                                  24,904
                                  
                                  
                                  
                                  23,656Non-Interest
      IncomeTrust
      Fees
                                  
                                  
                                  1,647
                                  
                                  
                                  
                                  1,641Service
      Charges on Deposit Accounts
                                  
                                  
                                  2,148
                                  
                                  
                                  
                                  1,891Commission
      Income
                                  
                                  
                                  246
                                  
                                  
                                  
                                  476Investment
      Security Gains, Net
                                  
                                  
                                  82
                                  
                                  
                                  
                                  80Net
      Gain on Sale of Loans
                                  
                                  
                                  112
                                  
                                  
                                  
                                  196Increase
      in Cash Surrender Value of Bank Owned Life Insurance
                                  
                                  
                                  617
                                  
                                  
                                  
                                  606Gain
      on Life Insurance Coverage
                                  
                                  
                                  0
                                  
                                  
                                  
                                  615Other
      Service Fees
                                  
                                  
                                  223
                                  
                                  
                                  
                                  221Gain
      on Sale of Insurance Subsidiary
                                  
                                  
                                  628
                                  
                                  
                                  
                                  0Other
      Income
                                  
                                  
                                  606
                                  
                                  
                                  
                                  1,310Total
      Non-Interest Income
                                  
                                  
                                  6,309
                                  
                                  
                                  
                                  7,036Non-Interest
      ExpenseSalaries
                                  
                                  
                                  11,281
                                  
                                  
                                  
                                  9,823Employee
      Benefits
                                  
                                  
                                  2,449
                                  
                                  
                                  
                                  2,672Occupancy
      Expense of Company Premises
                                  
                                  
                                  1,994
                                  
                                  
                                  
                                  1,769Furniture
      and Equipment Expense
                                  
                                  
                                  1,096
                                  
                                  
                                  
                                  927Computer
      Service Fees
                                  
                                  
                                  1,447
                                  
                                  
                                  
                                  775Advertising
      and Marketing
                                  
                                  
                                  656
                                  
                                  
                                  
                                  625Professional
      Fees
                                  
                                  
                                  871
                                  
                                  
                                  
                                  976Other
      Miscellaneous Expenses
                                  
                                  
                                  3,930
                                  
                                  
                                  
                                  3,290Total
      Non-Interest Expense
                                  
                                  
                                  23,724
                                  
                                  
                                  
                                  20,857Income
      Before Taxes
                                  
                                  
                                  7,489
                                  
                                  
                                  
                                  9,835Income
      Taxes
                                  
                                  
                                  (1,673
                                  )
                                  
                                  
                                  (2,128
                                  )Net
      Income
                                  
                                  $
                                  5,816
                                  
                                  
                                  $
                                  7,707Weighted
      Average Shares Outstanding
                                  
                                  
                                  10,503,704
                                  
                                  
                                  
                                  10,544,768Basic
      Earnings Per Share
                                  
                                  $
                                  0.55
                                  
                                  
                                  $
                                  0.73





See
accompanying notes to Consolidated Financial Statements


57-K
 Index


Consolidated
Statements of Changes in Shareholders' Equity and Comprehensive
Income





AccumulatedAdditional
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        OtherCommon
                                                        
                                                        
                                                        Paid
      in
                                                        
                                                        
                                                        Retained
                                                        
                                                        
                                                        Comprehensive
                                                        
                                                        
                                                        Treasuryin
      thousands except share and per share data
                                                        
                                                        Stock
                                                        
                                                        
                                                        Capital
                                                        
                                                        
                                                        Earnings
                                                        
                                                        
                                                        Income
      (Loss)
                                                        
                                                        
                                                        Stock
                                                        
                                                        
                                                        TotalBalance
      December 31, 2006
                                                        
                                                        $
                                                        140
                                                        
                                                        
                                                        $
                                                        4,224
                                                        
                                                        
                                                        $
                                                        89,921
                                                        
                                                        
                                                        $
                                                        (3,247
                                                        )
                                                        
                                                        $
                                                        (27,706
                                                        )
                                                        
                                                        $
                                                        63,332Comprehensive
      Income:Net
      Income
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        7,707
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        7,707Change
      in Net Unrealized Gain (Loss) on Securities, Net of Taxes
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        1,533
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        1,533Change
      in the Funded Status of Defined Benefit Plan, Net of Taxes
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        1,442
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        1,442Total
      Comprehensive Income
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        10,682Cash
      Dividends ($.38 per share)
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (4,010
                                                        )
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (4,010
                                                        )Purchase
      of Treasury Stock (65,478 shares)
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (605
                                                        )
                                                        
                                                        
                                                        (605
                                                        )Balance
      December 31, 2007
                                                        
                                                        $
                                                        140
                                                        
                                                        
                                                        $
                                                        4,224
                                                        
                                                        
                                                        $
                                                        93,618
                                                        
                                                        
                                                        $
                                                        (272
                                                        )
                                                        
                                                        $
                                                        (28,311
                                                        )
                                                        
                                                        $
                                                        69,399Comprehensive
      Income:Net
      Income
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        $
                                                        5,816
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        5,816Change
      in Net Unrealized Gain (Loss) on Securities, Net of Taxes
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        2,886
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        2,886Change
      in the Net Actuarial Loss of Defined Benefit Plan, Net of
      Taxes
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        (5,047
                                                        )
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (5,047
                                                        )Change
      in Net Actuarial Loss  on Split-Dollar Life Insurance
      Plan
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (127
                                                        )
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (127
                                                        )Total
      Comprehensive Income
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        3,528Effect
      of Change in Measurement Date of Pension Plan
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        60
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        60Adoption
      of EITF Issue No. 06-4, "Accounting for Deferred Compensation and
      Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance
      Agreements"
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (1,537
                                                        )
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (1,537
                                                        )Cash
      Dividends ($.38 per share)
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (3,991
                                                        )
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (3,991
                                                        )Balance
      December 31, 2008
                                                        
                                                        $
                                                        140
                                                        
                                                        
                                                        $
                                                        4,224
                                                        
                                                        
                                                        $
                                                        93,966
                                                        
                                                        
                                                        $
                                                        (2,560
                                                        )
                                                        
                                                        $
                                                        (28,311
                                                        )
                                                        
                                                        $
                                                        67,459





See accompanying notes to
Consolidated Financial Statements.


58-K
 Index


The
Wilber Corporation


Consolidated
Statements of Cash Flows





Year
      Ended December 31,in
      thousands
                                              
                                              2008
                                              
                                              
                                              2007Cash
      Flows from Operating Activities:Net
      Income
                                              
                                              $
                                              5,816
                                              
                                              
                                              $
                                              7,707Adjustments
      to Reconcile Net Income to Net CashProvided
      by Operating Activities:Provision
      for Loan Losses
                                              
                                              
                                              1,530
                                              
                                              
                                              
                                              900Depreciation
      and Amortization
                                              
                                              
                                              1,596
                                              
                                              
                                              
                                              1,210Net
      Amortization of Premiums and Accretion of Discounts on
      Investments
                                              
                                              
                                              452
                                              
                                              
                                              
                                              485Net
      Loss (Gain) on Disposal of Fixed Assets
                                              
                                              
                                              192
                                              
                                              
                                              
                                              (374
                                              )Gain
      on Life Insurance Coverage
                                              
                                              
                                              0
                                              
                                              
                                              
                                              (615
                                              )Investment
      Security Gains, net
                                              
                                              
                                              (510
                                              )
                                              
                                              
                                              (16
                                              )Deferred
      Income Tax Expense
                                              
                                              
                                              831
                                              
                                              
                                              
                                              215Other
      Real Estate Losses
                                              
                                              
                                              91
                                              
                                              
                                              
                                              29Increase
      in Cash Surrender Value of Bank Owned Life Insurance
                                              
                                              
                                              (617
                                              )
                                              
                                              
                                              (606
                                              )Net
      (Increase) Decrease in Trading Securities
                                              
                                              
                                              (153
                                              )
                                              
                                              
                                              259Net
      Losses (Gains) on Trading Securities
                                              
                                              
                                              428
                                              
                                              
                                              
                                              (64
                                              )Gain
      on Sale of Insurance Agency Subsidiary
                                              
                                              
                                              (628
                                              )
                                              
                                              
                                              0Net
      Gain on Sale of Mortgage Loans
                                              
                                              
                                              (112
                                              )
                                              
                                              
                                              (196
                                              )Originations
      of Mortgage Loans Held for Sale
                                              
                                              
                                              (6,179
                                              )
                                              
                                              
                                              (10,479
                                              )Proceeds
      from Sale of Mortgage Loans Held for Sale
                                              
                                              
                                              6,629
                                              
                                              
                                              
                                              10,219Increase
      in Other Assets
                                              
                                              
                                              (2,387
                                              )
                                              
                                              
                                              (1,648
                                              )(Decrease)
      Increase in Other Liabilities
                                              
                                              
                                              (1,658
                                              )
                                              
                                              
                                              308Net
      Cash Provided by Operating Activities
                                              
                                              
                                              5,321
                                              
                                              
                                              
                                              7,334Cash
      Flows from Investing Activities:Net
      Cash Paid for Provantage Funding Corporation
                                              
                                              
                                              0
                                              
                                              
                                              
                                              (165
                                              )Proceeds
      from Maturities of Held-to-Maturity Investment Securities
                                              
                                              
                                              12,627
                                              
                                              
                                              
                                              10,048Proceeds
      from Maturities of Available-for-Sale Investment
Securities
                                              
                                              
                                              45,650
                                              
                                              
                                              
                                              43,662Proceeds
      from Sales and Calls of Available-for-Sale and Held-to-Maturity Investment
      Securities
                                              
                                              
                                              32,632
                                              
                                              
                                              
                                              6,119Purchases
      of Held-to-Maturity Investment Securities
                                              
                                              
                                              (5,305
                                              )
                                              
                                              
                                              0Purchases
      of Available-for-Sale Investment Securities
                                              
                                              
                                              (52,561
                                              )
                                              
                                              
                                              (55,943
                                              )Net
      Increase in Other Investments
                                              
                                              
                                              (911
                                              )
                                              
                                              
                                              (182
                                              )Cash
      Received from Death Benefit
                                              
                                              
                                              0
                                              
                                              
                                              
                                              1,544Net
      Increase in Loans
                                              
                                              
                                              (140,073
                                              )
                                              
                                              
                                              (38,266
                                              )Purchase
      of Premises and Equipment
                                              
                                              
                                              (1,720
                                              )
                                              
                                              
                                              (1,728
                                              )Proceeds
      from Sale of Premises and Equipment
                                              
                                              
                                              31
                                              
                                              
                                              
                                              87Proceeds
      from Sale of Insurance Agency Subsidiary
                                              
                                              
                                              1,258
                                              
                                              
                                              
                                              0Proceeds
      from Sale of Other Real Estate
                                              
                                              
                                              68
                                              
                                              
                                              
                                              77Net
      Cash Used by Investing Activities
                                              
                                              
                                              (108,304
                                              )
                                              
                                              
                                              (34,747
                                              )Cash
      Flows from Financing Activities:Net
      Increase in Demand Deposits, Savings, NOW,Money Market and
      Other Time Deposits
                                              
                                              
                                              77,344
                                              
                                              
                                              
                                              7,445Net
      Increase in Certificates of Deposit
                                              
                                              
                                              31,035
                                              
                                              
                                              
                                              21,005Net
      Increase (Decrease) in Short-Term Borrowings
                                              
                                              
                                              5,642
                                              
                                              
                                              
                                              (2,673
                                              )Increase
      in Long-Term Borrowings
                                              
                                              
                                              22,000
                                              
                                              
                                              
                                              25,000Repayment
      of Long-Term Borrowings
                                              
                                              
                                              (3,568
                                              )
                                              
                                              
                                              (25,666
                                              )Purchase
      of Treasury Stock
                                              
                                              
                                              0
                                              
                                              
                                              
                                              (605
                                              )Cash
      Dividends Paid
                                              
                                              
                                              (3,991
                                              )
                                              
                                              
                                              (4,010
                                              )Net
      Cash Provided by Financing Activities
                                              
                                              
                                              128,462
                                              
                                              
                                              
                                              20,496Net
      Increase (Decrease) in Cash and Cash Equivalents
                                              
                                              
                                              25,479
                                              
                                              
                                              
                                              (6,917
                                              )Cash
      and Cash Equivalents at Beginning of Year
                                              
                                              
                                              18,942
                                              
                                              
                                              
                                              25,859Cash and Cash Equivalents
      at End of Year
                                              
                                              $
                                              44,421
                                              
                                              
                                              $
                                              18,942




59-K
 Index


The
Wilber Corporation


Consolidated
Statements of Cash Flows, Continued





Year
      Ended December 31,in
      thousands
                        
                        2008
                        
                        
                        2007Supplemental
      Disclosures of Cash Flow Information:Cash
      Paid during Period for:Interest
                        
                        $
                        19,781
                        
                        
                        $
                        21,247Income
      Taxes
                        
                        
                        2,025
                        
                        
                        
                        2,210Non-Cash
      Investing Activities:Change
      in Unrealized Gain on Securities
                        
                        
                        4,707
                        
                        
                        
                        2,514Transfer
      of Loans to Other Real Estate
                        
                        
                        70
                        
                        
                        
                        334Fair
      Value of Assets Acquired
                        
                        
                        0
                        
                        
                        
                        504Carrying
      Value of Net Assets Disposed of
                        
                        
                        630
                        
                        
                        
                        0Goodwill
      and Identifiable Intangible Assets Recognized in Purchase
      Combination
                        
                        
                        0
                        
                        
                        
                        105Fair
      Value of Liabilities Assumed
                        
                        
                        0
                        
                        
                        
                        444




See
accompanying notes to Consolidated Financial Statements


60-K
 Index


Note
1. Summary of Significant Accounting Policies





The
Wilber Corporation (“the Parent Company”) operates 23 branches serving Otsego,
Delaware, Schoharie, Ulster, Chenango, Onondaga, Saratoga and Broome Counties
through its wholly-owned subsidiary Wilber National Bank (“the Bank”), and also
operates 2 loan production offices located in Otsego, and Saratoga
Counties.  The Parent Company's primary source of revenue is interest
earned on commercial, mortgage, and consumer loans to customers of the Bank who
are predominately individuals and small and middle-market
businesses.  Collectively, the Parent Company and the Bank are
referred to herein as “the Company.”





The
Consolidated Financial Statements of the Company conform to accounting
principles generally accepted in the United States of America (“GAAP”). The
following is a summary of the more significant policies:





Principles
of Consolidation — The Consolidated Financial Statements include the accounts of
the Parent Company and its wholly owned subsidiary after elimination of
inter-company accounts and transactions. In the “Parent Company Only Financial
Statements,” the investment in subsidiary is carried under the equity method of
accounting.





Management’s
Use of Estimates — The preparation of the Consolidated Financial Statements in
conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the Consolidated Financial
Statements and the reported amounts of revenue and expense during the reporting
period.  Actual results could differ from those
estimates.





Reclassifications
— Whenever necessary, reclassifications are made to prior period amounts to
conform to current year presentation.





Fair
Value Measurements — The Company adopted Statement of Financial Accounting
Standards No. 157, "Fair Value Measurements" ("SFAS No. 157"), effective January
1, 2008.  SFAS No. 157 clarifies that fair value is an exit price,
representing the amount that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market
participants.  Under SFAS No. 157, fair value measurements are not
adjusted for transaction costs.  SFAS No. 157 establishes a fair value
hierarchy that prioritizes the inputs to valuation techniques 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 No. 157 are described below:





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 for similar assets or liabilities in active markets, 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 by little or no
market activity).




A
financial instrument's level within the fair value hierarchy is based on the
lowest level of input that is significant to the fair value
measurement.





The types
of instruments valued based on quoted market prices in active markets include
most U.S. government and agency securities, many other sovereign government
obligations, liquid mortgage products, active listed equities, and most money
market securities.  Such instruments are generally classified within
level 1 or level 2 of the fair value hierarchy.  As required by SFAS
No. 157, the Company does not adjust the quoted price for such
instruments.





The types
of instruments valued based on quoted prices in markets that are not active,
broker or dealer quotations, or alternative pricing sources with reasonable
levels of price transparency include most investment-grade and high-yield
corporate bonds; less liquid mortgage products; less liquid agency securities;
less liquid listed equities; state, municipal, and provincial obligations; and
certain physical commodities.  Such instruments are generally
classified within level 2 of the fair value hierarchy.





Level 3
is for positions that are not traded in active markets or are subject to
transfer restrictions, valuations are adjusted to reflect illiquidity and/or
non-transferability, and such adjustments are generally based on available
market evidence.  In the absence of such evidence, management's best
estimate will be used.  Management's best estimate consists of
both


61-K
 Index





Note
1. Summary of Significant Accounting Policies, Continued





internal
and external support on certain level 3 investments.  Subsequent to
inception, management only changes level 3 inputs
and assumptions when corroborated by evidence such as transactions in similar
instruments, completed or pending third party transactions in the underlying
investment or comparable entities, subsequent rounds of financing,
recapitalizations and other transactions across the capital structure, offerings
in the equity or debt markets, and changes in financial ratios or cash
flows.





Simultaneously
with the adoption of SFAS No. 157, the Company adopted Statement of Financial
Accounting Standards No. 159, "The Fair Value Option for Financial Assets and
Financial Liabilities" ("SFAS No. 159"), effective January 1,
2008.  SFAS No. 159 gives entities the option to measure eligible
financial assets, financial liabilities, and Company commitments at fair value
(i.e., the fair value option), on an instrument-by-instrument basis, that are
otherwise not permitted to be accounted for at fair value under other accounting
standards.  The election to use the fair value option is available
when an entity first recognizes a financial asset or financial liability or upon
entering into a Company commitment.  Subsequent changes in fair value
must be recorded in earnings.  Additionally, SFAS No. 159 allows for a
one-time election for existing positions upon adoption, with the transition
adjustment recorded to beginning retained earnings.  SFAS No. 159 does
not affect any existing accounting literature that requires certain assets and
liabilities to be carried at fair value and does not eliminate disclosure
requirements included in other accounting standards.  As of December
31, 2008, the Company has not elected the fair value option for any eligible
items.





In
accordance with Financial Accounting Standards Board Staff Position No. 157-2,
"Effective Date of FASB Statement No. 157," we have delayed the application of
SFAS No. 157 for non-financial assets such as goodwill, real property held for
sale, loans held for sale, and non-financial liabilities until January 1,
2009.





Cash
Equivalents — The Company considers amounts due from correspondent banks, cash
items in process of collection, federal funds sold and time deposit balances
with other banks to be cash equivalents for purposes of the consolidated
statements of cash flows.





Securities
— The Company classifies its investment securities at date of purchase as either
held-to-maturity, available-for-sale, or trading.  Held-to-maturity
securities are those which the Company has the intent and ability to hold to
maturity, and are reported at amortized cost.  Available-for-sale
securities are reported at fair value, with net unrealized gains and losses
reflected in shareholders' equity as a component of accumulated other
comprehensive income (loss), net of the applicable income tax
effect.  Trading securities are reported at fair value, with
unrealized gains and losses reflected in the income statement.





Non-marketable
equity securities, including Federal Reserve Bank and Federal Home Loan Bank of
New York stock required for membership in those organizations, are carried at
cost.





Premiums
and discounts are amortized or accreted over the life of the related security as
an adjustment to yield using the level yield method.  Dividend and
interest income are recognized when earned.  Realized gains and losses
on the sale of securities are included in securities gains
(losses).  The cost of securities sold is based on the specific
identification method.





A decline
in the fair value of any available-for-sale or held-to-maturity security below
cost that is deemed to be other than temporary is charged to earnings, resulting
in the establishment of a new cost basis for the security.





Loans —
Loans are reported at their outstanding principal balance.  Interest
income on loans is accrued based upon the principal amount
outstanding.





Loans are
placed on non-accrual status when timely collection of principal and interest in
accordance with contractual terms is doubtful.  Loans are transferred
to non-accrual status generally when principal or interest payments become 90
days delinquent unless the loan is well secured and in the process of
collection, or sooner when management concludes circumstances indicate that
borrowers may be unable to meet contractual principal or interest
payments.  When a loan is transferred to non-accrual status, all
interest previously accrued in the current period but not collected is reversed
against interest income in that period.  Interest accrued in a prior
period and not collected is charged off against the allowance for loan
losses.





If
ultimate repayment of a non-accrual loan is expected, any payments received are
applied in accordance with contractual terms.  If ultimate repayment
of principal is not expected, any payment received on a non-accrual loan is
applied to principal until ultimate repayment becomes
expected.  Non-accrual loans are returned to accrual status when  62-K
 Index





Note
1. Summary of Significant Accounting Policies, Continued





they become current as to
principal and interest or demonstrate a period of performance under the
contractual terms and, in the opinion of management, are fully collectible as to
principal and interest.  The previously applied cash interest payments
to principal are recognized over the remaining maturity of the
loan.  When in the opinion of management the collection of principal
appears unlikely, the loan balance is charged off in total or in
part.




Commercial
type loans are considered impaired when it is probable that the borrower will
not repay the loan according to the original contractual terms of the loan
agreement, and all loan types are considered impaired if the loan is
restructured in a troubled debt restructuring.





A loan is
considered to be a troubled debt restructured loan (“TDR”) when the Company
grants a concession to the borrower because of the borrower’s financial
condition that it would not otherwise consider.  Such concessions
include the reduction of interest rates, forgiveness of principal or interest,
or other modifications of interest rates that are less than the current market
rate for new obligations with similar risk.  TDR loans that are in
compliance with their modified terms and that yield a market rate may be removed
from TDR status after a period of performance.





Allowance
for Loan Losses — The allowance for loan losses is the amount which, in the
opinion of management, is necessary to absorb probable losses inherent in the
loan portfolio.  The allowance is determined based upon numerous
considerations including local economic conditions; the growth and composition
of the loan portfolio with respect to the mix between the various types of loans
and their related risk characteristics; a review of the value of collateral
supporting the loans; comprehensive reviews of the loan portfolio by the
external loan review function and management; as well as consideration of volume
and trends of delinquencies, non-performing loans, and loan
charge-offs.  As a result of the test of adequacy, required additions
to the allowance for loan losses are made periodically by charges to the
provision for loan losses.





The
allowance for loan losses related to impaired loans is based on discounted cash
flows using the loan’s initial effective interest rate or the fair value of the
collateral for certain loans where repayment of the loan is expected to be
provided solely by the underlying collateral (collateral dependent
loans).  The Company’s impaired loans are generally collateral
dependent.  The Company considers the estimated cost to sell, on a
discounted basis, when determining the fair value of collateral in the
measurement of impairment if those costs are expected to reduce the cash flows
available to repay or otherwise satisfy the loans.





Management
believes that the allowance for loan losses is adequate.  While
management uses available information to recognize loan losses, future additions
to the allowance for loan losses may be necessary based on changes in economic
conditions or changes in the values of properties securing loans in the process
of foreclosure.  In addition, various regulatory agencies, as an
integral part of their examination process, periodically review the Company’s
allowance for loan losses.  Such agencies may require the Company to
recognize additions to the allowance for loan losses based on their judgments
about information available to them at the time of their examination, which may
not be currently available to management.





Other
Real Estate Owned — Other real estate owned consists of both properties formerly
pledged as collateral on loans that which have been acquired by the Company
through foreclosure proceedings or acceptance of a deed in lieu of foreclosure,
and properties acquired outside of foreclosure proceedings and pending final
disposition.  Other real estate owned is carried at the lower of the
recorded investment in the loan or the fair value of the real estate, less
estimated costs to sell. Upon transfer of a loan to foreclosure status, an
appraisal is obtained and any excess of the loan balance over the fair value,
less estimated costs to sell, is charged against the allowance for loan
losses.  Expenses and subsequent adjustments to the fair value are
treated as other operating expense.  Gains on the sale of other real
estate owned are included in income when title has passed and the sale has met
the minimum down payment requirements prescribed by GAAP.





Bank
Premises and Equipment — Land is carried at cost.  Premises and
equipment are stated at cost less accumulated depreciation computed principally
using accelerated methods over the estimated useful lives of the assets, which
range from 15 to 40 years for buildings and from 3 to 10 years for furniture and
equipment. Maintenance and repairs are charged to expense as
incurred.





Bank-Owned
Life Insurance (“BOLI”) —BOLI is stated on the Company's consolidated statements
of condition at its current cash surrender value.  Increases in BOLI's
cash surrender value are reported as other operating income in the Company's
consolidated statements of income.


63-K
 Index





Note
1. Summary of Significant Accounting Policies, Continued





Income
Taxes — Income taxes are accounted for under the asset and liability
method.  The Company files a consolidated tax return on the accrual
method.  Deferred tax assets and liabilities are recognized for future
tax consequences attributable to temporary differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carry
forwards.  Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
temporary differences are expected to be recovered or settled.  The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment
date.





Tax
benefits of uncertain tax positions are accounted for in accordance with FASB
Interpretation No. 48, “Accounting for Uncertainty in Income
Taxes – An Interpretation of FASB Statement No. 109” (“FIN
48”).  FIN 48 clarifies the accounting for uncertainty in income taxes
recognized in an enterprise’s financial statements in accordance with Statement
of Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income
Taxes.”  FIN 48 also prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return.  In
addition, FIN 48 provides guidance on derecognition, classification, interest
and penalties, accounting in interim periods, disclosure and
transition.  Interest and penalties related to income taxes are
classified as income tax expense on the consolidated statements of
income.





Pension —
The Company maintains a noncontributory, defined benefit pension plan that was
frozen effective February 28, 2006.  Under the frozen plan, no future
benefits will be accrued for plan participants, nor will any new participants be
enrolled in the plan. The Company also maintains supplemental employee
retirement plans covering certain executives.  Costs associated with
these plans, based on actuarial computations of current and future benefits for
employees, are charged to current operating expenses.  The Company
recognizes the over-funded or under-funded status of the defined benefit
postretirement plan as an asset or liability on its balance sheet and recognizes
changes in the funded status in comprehensive income in the year in which the
change occurred.  Gains and losses, prior service costs or credits,
and transition assets or obligations that had not yet been included in net
periodic benefit cost are recognized as components of the ending balance of
accumulated other comprehensive income, net of tax.





Split
Dollar Life Insurance Plan — In 2008, the Company adopted EITF 06-4, "Accounting
for Deferred Compensation and Postretirement Benefit Aspects of Endorsement
Split-Dollar Life Insurance Arrangements" ("EITF 06-4").  EITF 06-4
requires that the postretirement aspects of an endorsement-type split dollar
life insurance arrangement be recognized as a liability by the
employer.  The Company offers split-dollar life insurance benefits to
15 members of senior management.  The benefit obligation is
re-evaluated annually and is recorded as a change to the Company’s liability
with an offsetting amount recorded in other comprehensive income.  The
cost of insurance is recognized through the income statement.





Treasury
Stock — Treasury stock acquisitions are recorded at cost.  Subsequent
sales of treasury stock are recorded on an average cost basis.  Gains
on the sale of treasury stock are credited to additional
paid-in-capital.  Losses on the sale of treasury stock are charged to
additional paid-in-capital to the extent of previous gains, or otherwise charged
to retained earnings.





Earnings
Per Share — Basic earnings per share (“EPS”) is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding for the period.  Entities with complex capital structures
must also present diluted EPS, which reflect the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted into common shares.  The Company does not have a complex
capital structure and, accordingly, has presented only basic EPS.





Trust
Department — Assets held in fiduciary or agency capacities for customers are not
included in the accompanying consolidated statements of condition since such
items are not assets of the Company.





Financial
Instruments with Off-Balance Sheet Risk — The Bank is a party to other financial
instruments with off-balance sheet risk in the normal course of business to meet
the financing needs of its customers. These financial instruments include
commitments to extend credit and stand-by letters of credit which involve, to
varying degrees, elements of credit and interest rate risk in excess of the
amount recognized in the statement of condition. The contract amounts of those
instruments reflect the extent of involvement the Bank has in particular classes
of financial instruments.





Comprehensive
Income — For the Company, comprehensive income represents net income plus other
comprehensive income (loss), which consists of three components: 1) the net
change in unrealized gains or losses on securities available for sale, recorded
net of income taxes, for the period; 2) the change in the net actuarial gain or
loss of defined benefit plans, recorded net of tax, for the period and 3) the
change in net actuarial gain or loss of split-dollar life insurance





64-K
 Index





Note
1. Summary of Significant Accounting Policies, Continued









Segment
Reporting — The Company's operations are solely in the banking industry and
include the provision of traditional commercial banking services.  The
Company operates solely in the geographical region of central and upstate New
York State.  The Company has identified separate operating segments;
however, these segments do not meet the quantitative thresholds for separate
disclosure.





Goodwill
and Other Intangible Assets —Acquired intangible assets (other than goodwill)
are amortized over their useful economic life, while goodwill and any acquired
intangible assets with an indefinite useful economic life are not amortized, but
are reviewed for impairment on an annual basis.





When
facts and circumstances indicate there may be an impairment of amortizable
intangible assets, the Company evaluates the recoverability of the asset
carrying value, using estimates of the undiscounted future cash flows over the
remaining asset life.  Any impairment loss is measured by the excess
of carrying value over fair value.





Goodwill
impairment tests are performed on an annual basis or when events or
circumstances dictate.  In these tests, the fair value of each
reporting unit is compared to the carrying amount of that reporting unit in
order to determine if impairment is indicated.  If so, the implied
fair value of the reporting unit’s goodwill is compared to its carrying amount
and the impairment loss is measured by the excess of carrying value over fair
value.


65-K
 Index


Note
2. Investment Securities





The
amortized cost and fair value of investment securities are shown in the table
below.  The trading securities are comprised of mutual funds and
individual equity and debt securities held for the Company’s executive deferred
compensation plan.





December
      31, 2008Gross
                                        
                                        
                                        Gross
                                        
                                        
                                        EstimatedAmortized
                                        
                                        
                                        Unrealized
                                        
                                        
                                        Unrealized
                                        
                                        
                                        Fairdollars
      in thousands
                                        
                                        Cost
                                        
                                        
                                        Gains
                                        
                                        
                                        Losses
                                        
                                        
                                        ValueAvailable-for-Sale
      PortfolioObligations
      of States and Political Subdivisions
                                        
                                        $
                                        36,205
                                        
                                        
                                        $
                                        582
                                        
                                        
                                        $
                                        11
                                        
                                        
                                        $
                                        36,776Mortgage-Backed
      Securities
                                        
                                        
                                        176,116
                                        
                                        
                                        
                                        2,815
                                        
                                        
                                        
                                        103
                                        
                                        
                                        $
                                        178,828Corporate
      Securities
                                        
                                        
                                        1,047
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        35
                                        
                                        
                                        $
                                        1,012Other
                                        
                                        
                                        128
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        0
                                        
                                        
                                        $
                                        128$
                                        213,496
                                        
                                        
                                        $
                                        3,397
                                        
                                        
                                        $
                                        149
                                        
                                        
                                        $
                                        216,744Trading
      Portfolio
                                        
                                        $
                                        1,391
                                        
                                        
                                        $
                                        0
                                        
                                        
                                        $
                                        236
                                        
                                        
                                        $
                                        1,155Held-to-Maturity
      PortfolioObligations
      of States and Political Subdivisions
                                        
                                        $
                                        13,961
                                        
                                        
                                        $
                                        194
                                        
                                        
                                        $
                                        9
                                        
                                        
                                        $
                                        14,146Mortgage-Backed
      Securities
                                        
                                        
                                        30,493
                                        
                                        
                                        
                                        430
                                        
                                        
                                        
                                        60
                                        
                                        
                                        
                                        30,863$
                                        44,454
                                        
                                        
                                        $
                                        624
                                        
                                        
                                        $
                                        69
                                        
                                        
                                        $
                                        45,009





December
      31, 2007Gross
                        
                        
                        Gross
                        
                        
                        EstimatedAmortized
                        
                        
                        Unrealized
                        
                        
                        Unrealized
                        
                        
                        Fairdollars
      in thousands
                        
                        Cost
                        
                        
                        Gains
                        
                        
                        Losses
                        
                        
                        ValueAvailable-for-Sale
      PortfolioU.S.
      Treasuries
                        
                        $
                        5,997
                        
                        
                        $
                        73
                        
                        
                        $
                        0
                        
                        
                        $
                        6,070Obligations
      of U.S. Government Corporations and Agencies
                        
                        
                        7,997
                        
                        
                        
                        18
                        
                        
                        
                        0
                        
                        
                        
                        8,015Obligations
      of States and Political Subdivisions
                        
                        
                        48,861
                        
                        
                        
                        215
                        
                        
                        
                        358
                        
                        
                        
                        48,718Mortgage-Backed
      Securities
                        
                        
                        172,719
                        
                        
                        
                        295
                        
                        
                        
                        1,619
                        
                        
                        
                        171,395Corporate
      Securities
                        
                        
                        2,294
                        
                        
                        
                        0
                        
                        
                        
                        1
                        
                        
                        
                        2,293Other
                        
                        
                        866
                        
                        
                        
                        0
                        
                        
                        
                        83
                        
                        
                        
                        783$
                        238,734
                        
                        
                        $
                        601
                        
                        
                        $
                        2,061
                        
                        
                        $
                        237,274Trading
      Portfolio
                        
                        $
                        1,167
                        
                        
                        $
                        263
                        
                        
                        $
                        0
                        
                        
                        $
                        1,430Held-to-Maturity
      PortfolioObligations
      of States and Political Subdivisions
                        
                        $
                        17,874
                        
                        
                        $
                        162
                        
                        
                        $
                        18
                        
                        
                        $
                        18,018Mortgage-Backed
      Securities
                        
                        
                        34,328
                        
                        
                        
                        8
                        
                        
                        
                        611
                        
                        
                        
                        33,725$
                        52,202
                        
                        
                        $
                        170
                        
                        
                        $
                        629
                        
                        
                        $
                        51,743





The
following tables provide information on temporarily impaired
securities:





December
      31, 2008Less
      Than 12 Months
                                                                                                                    
                                                                                                                    
                                                                                                                    12
      Months or Longer
                                                                                                                    
                                                                                                                    
                                                                                                                    TotalEstimated
                                                                                                                    
                                                                                                                    
                                                                                                                    Unrealized
                                                                                                                    
                                                                                                                    
                                                                                                                    Estimated
                                                                                                                    
                                                                                                                    
                                                                                                                    Unrealized
                                                                                                                    
                                                                                                                    
                                                                                                                    Estimated
                                                                                                                    
                                                                                                                    
                                                                                                                    Unrealizeddollars
      in thousands
                                                                                                                    
                                                                                                                    Fair
      Value
                                                                                                                    
                                                                                                                    
                                                                                                                    Losses
                                                                                                                    
                                                                                                                    
                                                                                                                    Fair
      Value
                                                                                                                    
                                                                                                                    
                                                                                                                    Losses
                                                                                                                    
                                                                                                                    
                                                                                                                    Fair
      Value
                                                                                                                    
                                                                                                                    
                                                                                                                    LossesObligations
      of States and Political Subdivisions
                                                                                                                    
                                                                                                                    $
                                                                                                                    1,625
                                                                                                                    
                                                                                                                    
                                                                                                                    $
                                                                                                                    21
                                                                                                                    
                                                                                                                    
                                                                                                                    $
                                                                                                                    0
                                                                                                                    
                                                                                                                    
                                                                                                                    $
                                                                                                                    0
                                                                                                                    
                                                                                                                    
                                                                                                                    $
                                                                                                                    1,625
                                                                                                                    
                                                                                                                    
                                                                                                                    $
                                                                                                                    20Mortgage-Backed
      Securities
                                                                                                                    
                                                                                                                    
                                                                                                                    32,052
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    106
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    1,976
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    57
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    34,028
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    163Corporate
      Securities
                                                                                                                    
                                                                                                                    
                                                                                                                    1,012
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    35
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    0
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    0
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    1,012
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    35$
                                                                                                                    34,689
                                                                                                                    
                                                                                                                    
                                                                                                                    $
                                                                                                                    162
                                                                                                                    
                                                                                                                    
                                                                                                                    $
                                                                                                                    1,976
                                                                                                                    
                                                                                                                    
                                                                                                                    $
                                                                                                                    57
                                                                                                                    
                                                                                                                    
                                                                                                                    $
                                                                                                                    36,665
                                                                                                                    
                                                                                                                    
                                                                                                                    $
                                                                                                                    218




66-K
 Index





Note
2. Investment Securities, Continued




December
      31, 2007Less
      Than 12 Months
                    
                    
                    12
      Months or Longer
                    
                    
                    TotalEstimated
                    
                    
                    Unrealized
                    
                    
                    Estimated
                    
                    
                    Unrealized
                    
                    
                    Estimated
                    
                    
                    Unrealizeddollars
      in thousands
                    
                    Fair
      Value
                    
                    
                    Losses
                    
                    
                    Fair
      Value
                    
                    
                    Losses
                    
                    
                    Fair
      Value
                    
                    
                    LossesObligations
      of States and Political Subdivisions
                    
                    $
                    1,861
                    
                    
                    $
                    4
                    
                    
                    $
                    24,336
                    
                    
                    $
                    372
                    
                    
                    $
                    26,197
                    
                    
                    $
                    376Mortgage-Backed
      Securities
                    
                    
                    47,042
                    
                    
                    
                    260
                    
                    
                    
                    101,020
                    
                    
                    
                    1,970
                    
                    
                    
                    148,062
                    
                    
                    
                    2,230Corporate
      Securities
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    2,293
                    
                    
                    
                    1
                    
                    
                    
                    2,293
                    
                    
                    
                    1Other
                    
                    
                    533
                    
                    
                    
                    24
                    
                    
                    
                    153
                    
                    
                    
                    59
                    
                    
                    
                    686
                    
                    
                    
                    83$
                    49,436
                    
                    
                    $
                    288
                    
                    
                    $
                    127,802
                    
                    
                    $
                    2,402
                    
                    
                    $
                    177,238
                    
                    
                    $
                    2,690





The above
unrealized losses are considered temporary based on the following:





Obligations
of states and political subdivisions and corporate securities: The unrealized
losses on these investments were caused by market interest rate increases since
the time of purchase.  The contractual terms of these investments
require the issuer to settle the securities at par upon maturity of the
investment.  Because the decline in fair value is attributed to market
interest rates and not credit quality, and because the Company has the ability
and intent to hold these investments until a market price recovery, which may be
to maturity, these investments are not considered other than temporarily
impaired.





Mortgage-backed
securities: The unrealized losses on investments in mortgage-backed securities
were caused by market interest rate differences between the time of purchase and
the measurement date.  All of the contractual cash flows of these
securities are issued or backed by various government agencies or government
sponsored enterprises such as GNMA, FNMA, and FHLMC.  Because the
decline in fair value is attributed to market interest rates and not credit
quality, and because the Company has the ability and intent to hold these
investments until a market price recovery or to maturity, these investments are
not considered other than temporarily impaired.





The
amortized cost and fair value of debt securities by contractual maturity are
shown below.  Expected maturities will differ from contractual
maturities because issuers may have the right to call or prepay obligations with
or without call or prepayment penalties.  Mortgage-backed securities
are included based on the final contractual maturity date, while equity
securities have no stated maturity and are excluded from the following
tables.





December
      31, 2008Amortized
                            
                            
                            Estimateddollars
      in thousands
                            
                            Cost
                            
                            
                            Fair
      ValueAvailable-for-Sale
      SecuritiesDue
      in One Year or Less
                            
                            $
                            5,778
                            
                            
                            $
                            5,797Due
      After One Year Through Five Years
                            
                            
                            39,687
                            
                            
                            
                            40,035Due
      After Five Years Through Ten Years
                            
                            
                            61,970
                            
                            
                            
                            63,379Due
      After Ten Years
                            
                            
                            105,933
                            
                            
                            
                            107,405$
                            213,368
                            
                            
                            $
                            216,616December
      31, 2008Amortized
                            
                            
                            Estimateddollars
      in thousands
                            
                            Cost
                            
                            
                            Fair
      ValueHeld-to-Maturity
      SecuritiesDue
      in One Year or Less
                            
                            $
                            5,932
                            
                            
                            $
                            6,058Due
      After One Year Through Five Years
                            
                            
                            6,032
                            
                            
                            
                            6,147Due
      After Five Years Through Ten Years
                            
                            
                            19,961
                            
                            
                            
                            20,351Due
      After Ten Years
                            
                            
                            12,529
                            
                            
                            
                            12,453$
                            44,454
                            
                            
                            $
                            45,009


67-K
 Index


Note
2. Investment Securities, Continued





The
following table sets forth information with regard to securities gains and
losses realized on sales or calls of available-for-sale and held-to-maturity
securities:





Year
      Ended December 31,dollars
      in thousands
                          
                          2008
                          
                          
                          2007Gross
      Gains
                          
                          $
                          565
                          
                          
                          $
                          16Gross
      Losses
                          
                          
                          55
                          
                          
                          
                          0Net
      Securities Gains
                          
                          $
                          510
                          
                          
                          $
                          16





The
proceeds from sales and calls of available-for sale and held-to-maturity
investment securities were $32.632 million and $6.119 million for the years
ended December 31, 2008 and 2007, respectively.





Federal
Home Loan Bank of New York and Federal Reserve Bank stock of $3.860 million at
December 31, 2008 and $2.949 million at December 31, 2007 is carried at cost as
fair values are not readily determinable.  Both investments are
classified in other investments on the Company’s consolidated statements of
condition and are required for membership.  The Federal Home Loan Bank
of New York common stock we own enables us to borrow funds under the Federal
Home Loan Bank of New York advance program and qualify for
membership.  Recent published reports indicate that certain member
banks of the Federal Home Loan Bank system, which include eleven other
regionally based Federal Home Loan Banks, may be subject to accounting rules and
asset quality risks that could result in materially lower regulatory capital
levels.  In an extreme situation, it is possible that the
capitalization of one of the banks in the Federal Home Loan Bank system,
including the Federal Home Loan Bank of New York could be substantially
diminished or reduced to zero.  Consequently, given that there is no
market for our Federal Home Loan Bank of New York common stock, we believe that
there is a risk that our investment could be deemed other than temporarily
impaired at some time in the future.  In addition, it is possible that
the Federal Home Loan Bank of New York will discontinue or suspends its dividend
payments to members in the event its regulatory capital levels
diminish.  If either of these events occur, it may adversely affect
our results of operations and financial condition.





At
December 31, 2008, investment securities with an amortized cost of $228.751
million and an estimated fair value of $232.290 million were pledged as
collateral for certain public deposits, borrowings, and other purposes as
required or permitted by law.


68-K
 Index


Note
3. Loans





December
      31,2008
                          
                          
                          2007Residential
      Real Estate
                          
                          $
                          171,061
                          
                          
                          $
                          127,113Commercial
      Real Estate
                          
                          
                          229,867
                          
                          
                          
                          161,071Commercial
                          
                          
                          99,397
                          
                          
                          
                          83,622Consumer
                          
                          
                          83,536
                          
                          
                          
                          73,299$
                          583,861
                          
                          
                          $
                          445,105Less:
      Allowance for Loan Losses
                          
                          
                          (7,564
                          )
                          
                          
                          (6,977
                          )Net
      Loans
                          
                          $
                          576,297
                          
                          
                          $
                          438,128





At
December 31, 2008, $64.761 million in residential real estate loans were pledged
as collateral for FHLBNY advances.





As of the
dates presented below, the subsidiary bank had loans to directors and executive
officers of the Company and its subsidiary, or company in which they have
ownership. Such loans are made in the ordinary course of business on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons and did
not involve more than normal risk of collectability or present other unfavorable
features.  Loan transactions with related parties are as
follows:





December
      31,dollars
      in thousands
                    
                    2008
                    
                    
                    2007Balance
      at Beginning of Year
                    
                    $
                    16,900
                    
                    
                    $
                    14,892Loan
      Payments
                    
                    
                    (6,073
                    )
                    
                    
                    (2,705
                    )Decreases
      Due to Director and Executive Officer Attrition
                    
                    
                    0
                    
                    
                    
                    (446
                    )New
      Loans and Advances
                    
                    
                    498
                    
                    
                    
                    5,083Increases
      Due to the Addition of Director and Executive Officers
                    
                    
                    0
                    
                    
                    
                    76Ending
      Balance
                    
                    $
                    11,325
                    
                    
                    $
                    16,900





Included
in the above December 31, 2008 balance  with related parties are two
potential problem loans in the outstanding amount of $4.418
million  to a Director of the Company.  Payments on these
loans are current.  These loans were not potential problem loans as of
December 31, 2007.





There was
significant disruption and volatility in the financial and capital markets
during 2008.  Turmoil in the energy, housing, and mortgage markets
adversely impacted both domestic and global markets and had significant negative
impacts on the credit markets, financial institution liquidity and global
economic activity.  These market conditions were attributable to a
variety of factors, in particular the fallout associated with subprime mortgage
loans (a type of lending we have never actively pursued).  The
disruption has been exacerbated by the continued decline of the real estate and
housing market.  While we continue to adhere to prudent underwriting
standards, in the event that there was a sharp downturn in the housing market in
our central and upstate New York market areas, it could adversely affect the
value of property used as collateral for our loans.  Adverse changes
in the economy may have a negative effect on the ability of our borrowers to
make timely loan payments, which would have a negative impact on our
earnings.  An increase in loan delinquencies could adversely impact
our loan loss experience, causing increases in our provision and allowance for
loan losses in future periods.


69-K
 Index


Note
4. Allowance for Loan Losses





Changes
in the allowance for loan losses are presented in the following
summary:





Year
      Ended December 31,dollars
      in thousands
                        
                        2008
                        
                        
                        2007Balance
      at Beginning of Year
                        
                        $
                        6,977
                        
                        
                        $
                        6,680Provision
      for Loan Losses
                        
                        
                        1,530
                        
                        
                        
                        900Recoveries
      Credited
                        
                        
                        443
                        
                        
                        
                        563Loans
      Charged Off
                        
                        
                        (1,386
                        )
                        
                        
                        (1,166
                        )Ending
      Balance
                        
                        $
                        7,564
                        
                        
                        $
                        6,977





The
following provides information on impaired loans for the periods
presented:





As
      of and For the YearEnded
      December 31,dollars in thousands
                  
                  2008
                  
                  
                  2007Impaired
      Loans
                  
                  $
                  8,620
                  
                  
                  $
                  5,701Allowance
      for Impaired Loans
                  
                  
                  1,160
                  
                  
                  
                  1,382Average
      Recorded Investment in Impaired Loans
                  
                  
                  7,327
                  
                  
                  
                  4,858





At
December 31, 2008, $5.120 million of the impaired loans had a specific reserve
allocation of $1.160 million compared to $4.365 million of impaired loans at
December 31, 2007 with a related reserve allocation of $1.382
million.





The
Company recorded interest income related to impaired loans of $215 thousand and
$0 for the years ended December 31, 2008 and 2007, respectively.





The
following table sets forth information with regard to non-performing
loans:





Year
      Ended December 31,dollars in thousands
                    
                    2008
                    
                    
                    2007Loans
      in Non-Accrual Status
                    
                    $
                    5,845
                    
                    
                    $
                    6,086Loans
      Contractually Past Due 90 Days or More and Still Accruing
      Interest
                    
                    
                    1,366
                    
                    
                    
                    50Total
      Non-Performing Loans
                    
                    $
                    7,211
                    
                    
                    $
                    6,136





The
Company did not record any interest income related to non-accrual loans for the
years ended December 31, 2008 and 2007.  Had the loans in non-accrual
status performed in accordance with their original terms, additional interest
income of $450 thousand and $259 thousand would have been recorded for the years
ended December 31, 2008 and 2007, respectively.





Note
5. Premises and Equipment





December
      31,dollars
      in thousands
                    
                    2008
                    
                    
                    2007Land
                    
                    $
                    589
                    
                    
                    $
                    1,001Buildings
                    
                    
                    8,094
                    
                    
                    
                    7,679Furniture,
      Fixtures and Equipment
                    
                    
                    6,350
                    
                    
                    
                    5,449Construction
      in Progress
                    
                    
                    0
                    
                    
                    
                    8$
                    15,033
                    
                    
                    $
                    14,137Less:
      Accumulated Depreciation
                    
                    
                    (8,551
                    )
                    
                    
                    (7,825
                    )$
                    6,482
                    
                    
                    $
                    6,312





Depreciation
expense was $930 thousand and $771 thousand for the years ended December 31,
2008 and 2007, respectively.


70-K
 Index


Note
6. Goodwill and Intangible Assets





Goodwill
and intangible assets are presented in the following table:





December
      31,dollars
      in thousands
                        
                        2008
                        
                        
                        2007Goodwill
                        
                        $
                        4,619
                        
                        
                        $
                        4,619Core
      Deposit Intangible
                        
                        $
                        777
                        
                        
                        $
                        777Other
      Intangible Assets
                        
                        
                        0
                        
                        
                        
                        354Total
      Intangible Assets
                        
                        $
                        777
                        
                        
                        $
                        1,131Accumulated
      Amortization
                        
                        
                        (670
                        )
                        
                        
                        (737
                        )Intangible
      Assets, Net
                        
                        $
                        107
                        
                        
                        $
                        394





In June
2008, the Company sold its ownership interest in its former insurance agency
subsidiary, Mang-Wilber LLC.  As a result of this sale, the Company
recorded a $173 thousand net decrease in the customer list intangible asset
associated with this company.





Amortization
expense on intangible assets was $114 thousand for 2008 and $130 thousand for
2007.  The core deposit intangible is amortized over a weighted
average period of approximately 5 years, while the customer list intangible
asset was amortized over a 15-year period.





Estimated
annual amortization expense of intangible assets, absent any impairment or
change in estimated useful lives is summarized as follows for each of the next
two years:





dollars
      in thousands2009
                  
                  $
                  982010
                  
                  
                  8





The
current global financial crisis has depressed stock market trading values,
particularly those of financial institutions.  Should our common stock
value trade consistently below our book value, we would re-evaluate the amount
of goodwill through an impairment test.  If impairment is warranted,
the amount would be recorded through the income statement as a reduction to
current period earnings.





Note
7. Time Deposits





Contractual
maturities of time deposits are as follows:





December
      31, 2008dollars
      in thousands
                                  
                                  Amount
                                  
                                  
                                  %2009
                                  
                                  $
                                  272,487
                                  
                                  
                                  
                                  79.802010
                                  
                                  
                                  27,767
                                  
                                  
                                  
                                  8.132011
                                  
                                  
                                  13,146
                                  
                                  
                                  
                                  3.852012
                                  
                                  
                                  10,867
                                  
                                  
                                  
                                  3.182013
                                  
                                  
                                  17,065
                                  
                                  
                                  
                                  5.00Thereafter
                                  
                                  
                                  119
                                  
                                  
                                  
                                  0.04$
                                  341,451
                                  
                                  
                                  
                                  100.00
                                  %




71-K
 Index




Note
8. Borrowings





The
following is a summary of borrowings:





December
      31,dollars
      in thousands
                                  
                                  2008
                                  
                                  
                                  2007Short-Term
      Borrowings:Securities
      Sold Under Agreements to Repurchase
                                  
                                  $
                                  19,337
                                  
                                  
                                  $
                                  14,189Treasury
      Tax and Loan Notes
                                  
                                  
                                  2,091
                                  
                                  
                                  
                                  1,597Total
      Short-Term Borrowings
                                  
                                  $
                                  21,428
                                  
                                  
                                  $
                                  15,786Long-Term
      Borrowings:Advances
      from Federal Home Loan Bank of New YorkBearing
      Interest at 5.56%, Due July 2008
                                  
                                  
                                  0
                                  
                                  
                                  
                                  113Bearing
      Interest at 4.31%, Due November 2015
                                  
                                  
                                  4,000
                                  
                                  
                                  
                                  4,000Bearing
      Interest at 5.03%, Due January 2009
                                  
                                  
                                  56
                                  
                                  
                                  
                                  384Bearing
      Interest at 3.85%, Due January 2010
                                  
                                  
                                  251
                                  
                                  
                                  
                                  457Bearing
      Interest at 3.12%, Due March 2011
                                  
                                  
                                  1,252
                                  
                                  
                                  
                                  1,762Bearing
      Interest at 5.89% to 5.95%, Due July 2011
                                  
                                  
                                  556
                                  
                                  
                                  
                                  742Bearing
      Interest at 5.30%, Due December 2011
                                  
                                  
                                  733
                                  
                                  
                                  
                                  946Bearing
      Interest at 4.11%, Due January 2012
                                  
                                  
                                  488
                                  
                                  
                                  
                                  629Bearing
      Interest at 4.42%, Due January 2015
                                  
                                  
                                  668
                                  
                                  
                                  
                                  760Bearing
      Interest at 6.26%, Due July 2016
                                  
                                  
                                  626
                                  
                                  
                                  
                                  687Bearing
      Interest at 5.77%, Due December 2016
                                  
                                  
                                  1,287
                                  
                                  
                                  
                                  1,408Bearing
      Interest at 6.04%, Due January 2017
                                  
                                  
                                  653
                                  
                                  
                                  
                                  713Bearing
      Interest at 6.46%, Due July 2021
                                  
                                  
                                  385
                                  
                                  
                                  
                                  404Bearing
      Interest at 5.07%, Due January 2025
                                  
                                  
                                  3,423
                                  
                                  
                                  
                                  3,558Bearing
      Interest at 4.97%, Due October 2014
                                  
                                  
                                  2,168
                                  
                                  
                                  
                                  2,475Bearing
      Interest at 4.69%, Due March 2012, Callable March 2010
                                  
                                  
                                  5,000
                                  
                                  
                                  
                                  5,000Bearing
      Interest at 4.34%, Due March 2012, Callable March 2009
                                  
                                  
                                  5,000
                                  
                                  
                                  
                                  5,000Bearing
      Interest at 4.33%, Due April 2012, Callable January 2009
                                  
                                  
                                  10,000
                                  
                                  
                                  
                                  10,000Bearing
      Interest at 4.45%, Due October 2012, Callable October 2010
                                  
                                  
                                  2,500
                                  
                                  
                                  
                                  2,500Bearing
      Interest at 4.12%, Due May 2018, Callable May 2013
                                  
                                  
                                  3,500
                                  
                                  
                                  
                                  0Bearing
      Interest at 3.85%, Due January 2015
                                  
                                  
                                  3,578
                                  
                                  
                                  
                                  0Bearing
      Interest at 3.91%, Due April 2015
                                  
                                  
                                  4,686
                                  
                                  
                                  
                                  0Bearing
      Interest at 4.80%, Due May 2015
                                  
                                  
                                  3,419
                                  
                                  
                                  
                                  0Bearing
      Interest at 4.17%, Due July 2013
                                  
                                  
                                  2,819
                                  
                                  
                                  
                                  0Bearing
      Interest at 4.94%, Due July 2018
                                  
                                  
                                  2,922
                                  
                                  
                                  
                                  0Total
      Long-Term Borrowings
                                  
                                  $
                                  59,970
                                  
                                  
                                  $
                                  41,538





Borrowings
from the Federal Home Loan Bank of New York ("FHLBNY") are collateralized by
mortgage loans, or mortgage-backed securities.  At December 31, 2008,
$16.000 million of the long-term borrowings were collateralized by securities
with an amortized cost and estimated fair value of $26.103 million and $26.298
million, respectively.  The remaining long term borrowings totaling
$43.970 million are collateralized by the Company's mortgage
loans.  At December 31, 2008, the Bank had a line of credit of $85.167
million with the FHLBNY.  However, based on outstanding borrowings at
FHLBNY, the total potential borrowing capacity on this line is reduced to $7.032
million at December 31, 2008.





At
December 31, 2007, $12.500 million of the long-term borrowings were
collateralized by securities with an amortized cost and estimated fair value of
$28.411 million and $28.158 million, respectively.  The remaining
long-term borrowings totaling $29.038 million are collateralized by the
Company's mortgage loans.  At December 31, 2007, the Bank had a line
of credit of $76.234 million with the FHLBNY.  However, based on
outstanding borrowings at FHLBNY, the total potential borrowing capacity on this
line was $14.294 million at December 31, 2007.


72-K
 Index




Note
8. Borrowings, Continued





Information
related to short-term borrowings is as follows:





As
      of and For the
                            Year
      Ended December 31,dollars
      in thousands
                          
                          2008
                          
                          
                          2007Outstanding
      Balance at End of Period
                          
                          $
                          21,428
                          
                          
                          $
                          15,786Average
      Interest Rate at End of Period
                          
                          
                          1.18
                          %
                          
                          
                          3.12
                          %Maximum
      Outstanding at any Month-End
                          
                          
                          30,508
                          
                          
                          
                          24,036Average
      Amount Outstanding during Period
                          
                          
                          19,383
                          
                          
                          
                          19,426Average
      Interest Rate during Period
                          
                          
                          1.50
                          %
                          
                          
                          3.13
                          %





Average
amounts outstanding and average interest rates are computed using weighted daily
averages.





Securities
sold under agreements to repurchase included in short-term borrowings represent
the purchase of interests in government securities by the Bank’s customers or
other third parties, which are repurchased by the Bank on the following business
day or at stated maturity.  The underlying securities are held in a
third party custodian account and are under the Company’s
control.  The amortized cost and estimated fair value of securities
pledged as collateral for repurchase agreements was $30.149 million and $30.700
million, respectively, at December 31, 2008.  The amortized cost and
estimated fair value of securities pledged as collateral for repurchase
agreements was $31.487 million and $31.175 million, respectively, at December
31, 2007. These amounts are included in the total of investment securities
pledged disclosed in Note 2.


73-K
 Index


Note
9. Income Taxes





Income
tax expense attributable to income before taxes is comprised of the
following:





Current:
                                      
                                      Year
      Ended December 31,dollars
      in thousands
                                      
                                      2008
                                      
                                      
                                      2007Federal
                                      
                                      $
                                      717
                                      
                                      
                                      $
                                      1,673State
                                      
                                      
                                      125
                                      
                                      
                                      
                                      240Total
      Current
                                      
                                      
                                      842
                                      
                                      
                                      
                                      1,913Deferred:Federal
                                      
                                      
                                      635
                                      
                                      
                                      
                                      169State
                                      
                                      
                                      196
                                      
                                      
                                      
                                      46Total
      Deferred
                                      
                                      
                                      831
                                      
                                      
                                      
                                      215Total
      Income Tax
      Expense
                                      
                                      $
                                      1,673
                                      
                                      
                                      $
                                      2,128





The
components of deferred income taxes, which are included in the consolidated
statements of condition, are:





Year
      Ended December 31,dollars
      in thousands
                                      
                                      2008
                                      
                                      
                                      2007Assets:Allowance
      for Loan Losses
                                      
                                      $
                                      2,823
                                      
                                      
                                      $
                                      2,666Deferred
      Compensation
                                      
                                      
                                      1,063
                                      
                                      
                                      
                                      1,303Net
      Unrealized Loss on Securities Available-for-Sale
                                      
                                      
                                      0
                                      
                                      
                                      
                                      565Pension
      Liability - SFAS No. 158
                                      
                                      
                                      2,797
                                      
                                      
                                      
                                      0Tax
      Attribute Carryforwards
                                      
                                      
                                      247
                                      
                                      
                                      
                                      74Other
                                      
                                      
                                      265
                                      
                                      
                                      
                                      2517,195
                                      
                                      
                                      
                                      4,859Liabilities:Securities
      Discount Accretion
                                      
                                      
                                      373
                                      
                                      
                                      
                                      351Defined
      Benefit Pension Plan
                                      
                                      
                                      2,457
                                      
                                      
                                      
                                      1,493Equity
      Investment
                                      
                                      
                                      520
                                      
                                      
                                      
                                      420Goodwill
      Amortization
                                      
                                      
                                      518
                                      
                                      
                                      
                                      423Pension
      Asset - SFAS No. 158
                                      
                                      
                                      0
                                      
                                      
                                      
                                      388Net
      Unrealized Gain on Securities Available-for-Sale
                                      
                                      
                                      1,256
                                      
                                      
                                      
                                      0Other
                                      
                                      
                                      0
                                      
                                      
                                      
                                      2465,124
                                      
                                      
                                      
                                      3,321Net
      Deferred Tax Assets at End of Year
                                      
                                      
                                      2,071
                                      
                                      
                                      
                                      1,538Net
      Deferred Tax Assets at Beginning of Year
                                      
                                      
                                      1,538
                                      
                                      
                                      
                                      3,583(Increase)
      Decrease in Net Deferred Tax Asset
                                      
                                      
                                      (533
                                      )
                                      
                                      
                                      2,045Prior
      Year Decrease in Net Adjustment to Accumulated Other Comprehensive
      Income
                                      
                                      
                                      (177
                                      )
                                      
                                      
                                      (2,072
                                      )Current
      Year Decrease in Net Adjustment to Accumulated Other Comprehensive
      Income
                                      
                                      
                                      1,541
                                      
                                      
                                      
                                      177Purchase
      Accounting Adjustments, Net
                                      
                                      
                                      0
                                      
                                      
                                      
                                      65Deferred
      Tax Expense
                                      
                                      $
                                      831
                                      
                                      
                                      $
                                      215


74-K
 Index




Note
9. Income Taxes, Continued





Realization
of deferred tax assets is dependent upon the generation of future taxable income
or the existence of sufficient taxable income within the carryback
period.  A valuation allowance is provided when it is more likely than
not that some portion of the deferred tax assets will not be
realized.  In assessing the need for a valuation allowance, management
considers the scheduled reversal of the deferred tax liabilities, the level of
historical taxable income, and projected future taxable income over the periods
in which the temporary differences comprising the deferred tax assets will be
deductible.  Based on its assessment, management determined that no
valuation allowance is necessary.





A
reconciliation of the statutory federal income tax rate to the effective income
tax rate is as follows:





Year
      Ended December 31,2008
                                            
                                            
                                            2007Statutory
      Federal Income Tax Rate
                                            
                                            
                                            34.0
                                            %
                                            
                                            
                                            34.0
                                            %Variances
      from Statutory Rate:State
      Income Tax, Net of Federal Tax Benefit
                                            
                                            
                                            2.8
                                            
                                            
                                            
                                            1.9Tax
      Exempt Income
                                            
                                            
                                            (15.2
                                            )
                                            
                                            
                                            (14.8
                                            )Other
                                            
                                            
                                            0.7
                                            
                                            
                                            
                                            0.5Effective
      Tax Rate
                                            
                                            
                                            22.3
                                            %
                                            
                                            
                                            21.6
                                            %




The
balance of the Company's unrecognized tax benefit was $0 at both December 31,
2008 and December 31, 2007.





The
Company is currently open to audit by the Internal Revenue Service for the years
ending December 31, 2005 through 2008 and by New York State for the year ending
December 31, 2008.


75-K
 Index


Note.
10. Employee Benefit Plans





Effective
February 28, 2006, the Company's defined benefit pension plan was
frozen.  Under the frozen plan, no future benefits will be accrued for
plan participants, nor will any new participants be enrolled in the
plan.  This plan is sponsored by the Company's bank
subsidiary.  The plan covers employees who had attained the age of 21
and completed one year of service prior to the plan being
frozen.  Although the plan is frozen, the Company maintains the
responsibility for funding the plan.  The Company's funding practice
is to contribute at least the minimum amount annually to meet minimum funding
requirements. The Company elected to make a contribution in the amount of $2.000
million in 2008.  Plan assets consist primarily of marketable fixed
income securities and common stocks.  Plan benefits are based on years
of service and the employee’s average compensation during the five highest
consecutive years of the last ten years of employment.








The
following table sets forth the changes in the plan’s projected benefit
obligation and plan assets and the plan’s funded status and amounts recognized
in the consolidated statements of condition based on a December 31 measurement
date.  Prior to December 31, 2008, the measurement date for plan
assets and the benefit obligation was as of September 30.  For the
year ended December 31, 2008, the Company recorded transition costs through a
$60 thousand, net of tax, adjustment to Retained Earnings for the fourth quarter
of 2007 in accordance with the new measurement date of December
31.  As such, for the year ended December 31, 2008, the change in the
plan's projected benefit obligation and plan assets in the following table
represent the fifteen month period beginning October 1, 2007 and ending December
31, 2008.





dollars
      in thousands
                        
                        2008
                        
                        
                        2007Change
      in Benefit Obligation:Benefit
      Obligation at Beginning of Year
                        
                        $
                        14,914
                        
                        
                        $
                        15,710Service
      Cost
                        
                        
                        193
                        
                        
                        
                        135Interest
      Cost
                        
                        
                        1,134
                        
                        
                        
                        901Actuarial
      Loss (Gain) and Expected Expenses
                        
                        
                        1,076
                        
                        
                        
                        (1,010
                        )Benefits
      Paid
                        
                        
                        (1,112
                        )
                        
                        
                        (822
                        )Projected
      Benefit Obligation at End of Year
                        
                        $
                        16,205
                        
                        
                        $
                        14,914Change
      in Plan Assets:Fair
      Value of Plan Assets at Beginning of Year
                        
                        $
                        19,786
                        
                        
                        $
                        18,068Actual
      (Loss) Gain on Plan Assets and Actual Expenses
                        
                        
                        (5,338
                        )
                        
                        
                        2,540Employer
      Contribution
                        
                        
                        2,000
                        
                        
                        
                        0Benefits
      Paid
                        
                        
                        (1,112
                        )
                        
                        
                        (822
                        )Fair
      Value of Plan Assets at End of Year
                        
                        $
                        15,336
                        
                        
                        $
                        19,786Funded
      Status at End of Year
                        
                        $
                        (869
                        )
                        
                        $
                        4,872





Amounts
recognized in accumulated other comprehensive income, pretax, consist of the
following at December 31.





dollars
      in thousands
                  
                  2008
                  
                  
                  2007Net  (Loss)
      Gain
                  
                  $
                  (7,220
                  )
                  
                  $
                  1,012





The
underfunded amount totaling $869 thousand at December 31, 2008 was recognized as
a liability (Pension Liability) in the consolidated statement of
condition.  The funded amount totaling $4.872 million at December 31,
2007 was recognized as an asset (Pension Asset) in the consolidated statement of
condition.





The
following table presents a comparison of the accumulated benefit obligation and
plan assets:





dollars
      in thousands
                  
                  2008
                  
                  
                  2007Projected
      Benefit Obligation
                  
                  $
                  16,205
                  
                  
                  $
                  14,914Accumulated
      Benefit Obligation
                  
                  
                  16,205
                  
                  
                  
                  14,914Fair
      Value of Plan Assets
                  
                  
                  15,336
                  
                  
                  
                  19,786


76-K
 Index


Note.
10. Employee Benefit Plans, Continued





Components
of Net Periodic Benefit Cost are:





dollars
      in thousands
                      
                      2008
                      
                      
                      2007Service
      Cost
                      
                      $
                      154
                      
                      
                      $
                      135Interest
      Cost
                      
                      
                      907
                      
                      
                      
                      901Expected
      Return on Plan Assets
                      
                      
                      (1,454
                      )
                      
                      
                      (1,325
                      )Net
      Amortization of prior service cost
                      
                      
                      0
                      
                      
                      
                      130$
                      (393
                      )
                      
                      $
                      (159
                      )





Amounts
recognized in other comprehensive income, pretax, during 2008 and 2007 consist
of the following:





dollars
      in thousands
                        
                        2008
                        
                        
                        2007Net
      actuarial Loss (Gain)
                        
                        $
                        8,232
                        
                        
                        $
                        (2,226
                        )Net
      Amortization of Prior Service Cost
                        
                        
                        0
                        
                        
                        
                        (130
                        )$
                        8,232
                        
                        
                        $
                        (2,356
                        )


Gains and
losses in excess of 10% of the greater of the benefit obligation or the fair
value of assets are amortized over the average remaining service period of
active participants.  We expect that $475 thousand of net actuarial
loss included in accumulated other comprehensive loss at December 31, 2008 will
be recognized as components of net periodic benefit cost in
2009.





The
following weighted-average assumptions were used to determine the benefit
obligation of the plan as of:





December
      31,
                      
                      
                      September
      30,2008
                      
                      
                      2007Discount
      Rate
                      
                      
                      6.10
                      %
                      
                      
                      6.25
                      %Expected
      Return on Plan Assets
                      
                      
                      7.50
                      %
                      
                      
                      7.50
                      %Rate
      of Compensation Increase
                      
                      
                      N/A
                      
                      
                      
                      N/A





The
following weighted-average assumptions were used to determine the net periodic
benefit cost of the plan for the years ended December 31:





2008
                  
                  
                  2007Discount
      Rate
                  
                  
                  6.25
                  %
                  
                  
                  5.80
                  %Expected
      Return on Plan Assets
                  
                  
                  7.50
                  %
                  
                  
                  7.50
                  %Rate
      of Compensation Increase
                  
                  
                  N/A
                  
                  
                  
                  N/A





The
following benefit payments, which reflect expected future service, as
appropriate, are expected to be paid over the next ten years:





dollars
      in thousands2009
                  
                  $
                  8892010
                  
                  
                  9112011
                  
                  
                  9512012
                  
                  
                  9902013
                  
                  
                  1,0542014-2018
                  
                  
                  5,868


77-K
 Index


Note.
10. Employee Benefit Plans, Continued





The
plan's weighted average asset allocations by asset category are as
follows:





Plan
      Assets atDecember
      31,
                  
                  
                  September
      30,2008
                  
                  
                  2007Equity
      Securities
                  
                  
                  50.0
                  %
                  
                  
                  58.0
                  %Debt
      Securities
                  
                  
                  43.0
                  %
                  
                  
                  40.0
                  %Other
                  
                  
                  7.0
                  %
                  
                  
                  2.0
                  %100.0
                  %
                  
                  
                  100.0
                  %





Investment
Strategy





The plan
assets are invested in the New York State Bankers Retirement System (the
"System"), which was established in 1938 to provide for the payment of benefits
to employees of participating banks.  The System is overseen by a
Board of Trustees who meet quarterly and set the investment policy
guidelines.  The System utilizes two investment management firms,
(which will be referred to as Firm I and Firm II).  Firm I is
investing approximately 70% of the total portfolio and Firm II is investing
approximately 30% of the portfolio.  The System's investment objective
is to exceed the investment benchmarks in each asset category.  Each
firm operates under a separate written investment policy approved by the Board
of Trustees and designed to achieve an allocation approximating 60% invested in
Equity Securities and 40% invested in Debt Securities.  Each firm
reports at least quarterly to the Investment Committee and semi-annually to the
Board.





The
equity portfolio consists of international securities and a diversified range of
securities in the U.S. equity markets.  The fixed income portfolio
focuses the purchase and sale of futures and options on futures on foreign
currencies and foreign and domestic bonds, bond indices and short-term
securities.





Discount
Rate





Annually,
the Company establishes a discount rate to determine the value of the plan's
benefit obligation.  The Company uses the Citigroup Pension Liability
Spot Rate Index (“CPLSRI”) as a basis for determining the discount rate for the
plan.  A weighted average CPLSRI is developed based on the anticipated
benefit payments to arrive at the plan's discount rate.





Expected
Long-Term Rate of Return





The
expected long-term rate of return on the plan assets reflects long-term earnings
expectations on existing plan assets and those contributions expected to be
received during the current plan year.  In estimating that rate,
appropriate consideration was given to historical returns earned by plan assets
in the fund and the rates of return expected to be available for
reinvestment.  Average rates of return over the past 1, 3, 5, and 10
year periods were determined and subsequently adjusted to reflect current
capital market assumptions and changes in investment allocations.





Supplemental
Retirement Income Agreement





In
addition to the Company’s noncontributory defined benefit pension plan, there
are two supplemental employee retirement plans for two former
executives.  The amount of the liabilities recognized in the Company’s
consolidated statements of condition associated with these plans was $989
thousand at December 31, 2008 and $1.013 million at December 31,
2007.  For the years ended December 31, 2008 and 2007, the Company
recognized $73 thousand and $206 thousand, respectively, of expense related to
those plans.  The discount rate used in determining the actuarial
present values of the projected benefit obligations was 5.66% at December 31,
2008.





Split-Dollar
Life Insurance Plan





In 2008,
the Company adopted EITF 06-4, "Accounting for Deferred Compensation and
Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance
Arrangements" ("EITF 06-4").  EITF 06-4 requires that the
postretirement aspects of an endorsement-type split dollar life insurance
arrangement be recognized as a liability by the employer.  Under the
Plan, the Company offers split-dollar life insurance benefits to fifteen members
of senior management and in accordance with the adoption of EITF 06-4 the
liability was $1.743 million  as of December 31, 2008 and the Company
recorded a net benefit cost of $122 thousand for the year ended December 31,
2008.


78-K
 Index


Note.
10. Employee Benefit Plans, Continued





The
following table sets forth the components of Split-Dollar Life Insurance expense
(benefit) as well as changes in the plan’s projected benefit obligation and plan
assets and the plan’s funded status and amounts recognized in the consolidated
statements of condition based on a December 31 measurement date.





dollars
      in thousands
                        
                        2008Change
      in Benefit Obligation:Benefit
      Obligation at Beginning of Year
                        
                        $
                        1,537Service
      Cost
                        
                        
                        22Interest
      Cost
                        
                        
                        100Cost
      of Insurance Payments
                        
                        
                        (43
                        )Actuarial
      Loss
                        
                        
                        127Projected
      Benefit Obligation at End of Year
                        
                        $
                        1,743Change
      in Plan Assets:Fair
      Value of Plan Assets at Beginning of Year
                        
                        $
                        0Employer
      Contribution
                        
                        
                        43Cost
      of Insurance Payments
                        
                        
                        (43
                        )Fair
      Value of Plan Assets at End of Year
                        
                        $
                        0Unfunded
      Status at End of Year
                        
                        $
                        (1,743
                        )





The
following weighted-average assumptions were used to determine the benefit
obligation of the plan as of:





December
      31,
                                
                                
                                January
      1,2008
                                
                                
                                2008Discount
      Rate
                                
                                
                                6.15
                                %
                                
                                
                                6.58
                                %Expected
      Return on Plan Assets
                                
                                
                                N/A
                                %
                                
                                
                                N/A
                                %Rate
      of Compensation Increase
                                
                                
                                N/A
                                %
                                
                                
                                N/A
                                %





The
following weighted-average assumptions were used to determine the net periodic
benefit cost of the plan for the year ended December 31, 2008:





2008Discount
      Rate
                    
                    
                    6.58
                    %Expected
      Return on Plan Assets
                    
                    
                    N/A
                    %Rate
      of Compensation Increase
                    
                    
                    N/A
                    %


79-K
 Index


Note
11. Commitments and Contingencies





Financial
instruments whose contract amounts represent credit risk consist of the
following:





December
      31,dollars
      in thousands
                  
                  2008
                  
                  
                  2007Commitments
      to Extend Credit
                  
                  $
                  126,717
                  
                  
                  $
                  90,555Commercial
      and Stand-by Letters of Credit
                  
                  
                  12,779
                  
                  
                  
                  6,988





Commitments
to extend credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Commitments generally
have fixed expiration dates or other termination clauses and may require payment
of a fee.  Since some of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements.





Stand-by
letters of credit are conditional commitments issued by the Bank to guarantee
the performance of a customer to a third party.  Those guarantees are
primarily issued to support public and private borrowing arrangements, including
bond financing and similar transactions.  Commercial letters of credit
are conditional commitments on the part of the Company to facilitate payment,
for the account of a borrower, for goods and services in the ordinary course of
business that become payable upon fulfillment of certain
conditions.  The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to
customers.  Since some of the letters of credit are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements.





The
estimated fair value of the Company’s stand-by letters of credit was $12
thousand and $16 thousand at December 31, 2008 and December 31, 2007,
respectively.  The estimated fair value of stand-by letters of credit
at their inception is equal to the fee that is charged to the customer by the
Company.  Generally, the Company’s stand-by letters of credit have a
term of one year.  In determining the fair values disclosed above, the
fees were reduced on a straight-line basis from the inception of each stand-by
letter of credit to the respective dates above.





The
amount of collateral obtained, if deemed necessary, by the Bank upon extension
of credit for commitments to extend credit and letters of credit is based upon
management's credit evaluation of the counter party.  Collateral held
varies but includes residential and commercial real estate.





Future
payments under operating lease obligations as of December 31, 2008 are as
follows:





dollars
      in thousands
                  
                  Amount2009
                  
                  $
                  3542010
                  
                  
                  3532011
                  
                  
                  3372012
                  
                  
                  3062013
                  
                  
                  158Thereafter
                  
                  
                  996





In the
ordinary course of business, there are various legal proceedings pending against
the Company.  After consultation with outside counsel, management
considers that the aggregate exposure, if any, arising from such litigation
would not have a material adverse effect on the Company's consolidated financial
position.


80-K
 Index





Note
12. Disclosures about Fair Value of Financial Instruments





The
following are the major categories of assets measured at fair value on a
recurring basis at December 31, 2008, using quoted prices in active markets for
identical assets (Level 1), significant other observable inputs (Level 2), and
significant unobservable inputs (Level 3).


Level
      1Quoted
                  
                  
                  Level
      2Prices
      in
                  
                  
                  Significant
                  
                  
                  Level
      3Active
      Markets
                  
                  
                  Other
                  
                  
                  Significant
                  
                  
                  Total
      atfor
      Identical
                  
                  
                  Observable
                  
                  
                  Unobservable
                  
                  
                  December
      31,dollars
      in thousands
                  
                  Assets
                  
                  
                  Inputs
                  
                  
                  Inputs
                  
                  
                  2008Trading
      Securities
                  
                  $
                  1,155
                  
                  
                  $
                  0
                  
                  
                  $
                  0
                  
                  
                  $
                  1,155Available-for-Sale
      Securities
                  
                  
                  0
                  
                  
                  
                  216,744
                  
                  
                  
                  0
                  
                  
                  
                  216,744Total
                  
                  $
                  1,155
                  
                  
                  $
                  216,744
                  
                  
                  $
                  0
                  
                  
                  $
                  217,899





Price
evaluations for our level 1 trading securities portfolio, consisting of mutual
funds and individual equity and debt securities held by the Company’s executive
deferred compensation plan, are obtained from national exchanges and active
secondary markets.





The price
evaluations for our level 2 available-for-sale securities are good faith
opinions as to what a buyer in the marketplace would pay for a security
(typically in an institutional round lot position) in a current
sale.  The evaluation considers interest rate movements, new issue
information, and other pertinent data.  Fair values for investments
were based on quoted market prices, where available, as provided by third party
vendors.  If quoted market prices were not available, fair values
provided by the vendors were based on quoted market prices of comparable
instruments in active markets and/or based on a matrix pricing methodology that
employs the Securities Industry and Financial Markets Association standard
calculations for cash flow and price/yield analysis, or live benchmark bond
pricing, or terms/conditions data available from major pricing
sources.




SFAS No.
157 requires disclosure of assets and liabilities measured and recorded at fair
value on a non-recurring basis.  In accordance with the provisions of
SFAS No. 114, “Accounting by Creditors for Impairment of a Loan - an amendment
of FASB Statements No. 5 and 15” (“SFAS No. 114”), the Company had
collateral-dependent impaired loans with a carrying value of approximately
$6.664 million, which had specific reserves included in the allowance for loan
and lease losses of $1.143 million at December 31, 2008.  The Company
uses the fair value of underlying collateral to estimate the specific reserves
for collateral-dependent impaired loans.  Based on the valuation
techniques used, the fair value measurements for collateral-dependent impaired
loans are classified as Level 3.





SFAS No.
107, "Disclosures about Fair Value of Financial Instruments," requires
disclosure of fair value information about financial instruments, whether or not
recognized in the consolidated statement of condition, for which it is
practicable to estimate that value. In cases where quoted market prices are not
available, fair values are based on estimates using present value or other
valuation techniques. Those techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and in many cases, could not be realized in
immediate settlement of the instruments. SFAS No. 107 excludes certain financial
instruments and all nonfinancial instruments from its disclosure requirements.
Accordingly, the aggregate fair value amounts presented do not represent the
underlying value of the Bank.





The
following methods and assumptions were used to estimate the fair value of each
class of financial instruments:





Short-Term
Financial Instruments





The fair
value of certain financial instruments is estimated to approximate their
carrying value because the remaining term to maturity of the financial
instrument is less than 90 days or the financial instrument reprices in 90 days
or less. Such financial instruments include cash and due from banks, Federal
Funds sold, accrued interest receivable and accrued interest
payable





The fair
value of time deposits with other banks is estimated using discounted cash flow
analysis based on the Company's current reinvestment rate for similar
deposits.


81-K
 Index





Note
12. Disclosures about Fair Value of Financial Instruments,
Continued





Securities





The price
evaluations for our available-for-sale securities are good faith opinions as to
what a buyer in the marketplace would pay for a security (typically in an
institutional round lot position) in a current sale.  The evaluation
considers interest rate movements, new issue information, and other pertinent
data.  Fair values for investments were based on quoted market prices,
where available, as provided by third party vendors.  If quoted market
prices were not available, fair values provided by the vendors were based on
quoted market prices of comparable instruments in active markets and/or based on
a matrix pricing methodology that employs the Securities Industry and Financial
Markets Association standard calculations for cash flow and price/yield
analysis, or live benchmark bond pricing, or terms/conditions data available
from major pricing sources.  The fair value of other investments is
estimated at their carrying value.





Loans





For
certain homogenous categories of loans, such as some residential mortgages and
other consumer loans, fair value is estimated using the quoted market prices for
securities backed by similar loans, adjusted for differences in loan
characteristics. The fair value of loans is estimated by discounting the future
cash flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining
maturities.





Deposits





The fair
value of demand deposits, savings accounts, and certain NOW and money market
deposits is the amount payable on demand at the reporting date. The fair value
of fixed-maturity time deposits is estimated using the rates currently offered
for deposits of similar remaining maturities.





Borrowings





The fair
value of repurchase agreements, short-term borrowings, and long-term borrowings
is estimated using discounted cash flow analysis based on the Company's current
incremental borrowing rate for similar borrowing arrangements.





Off-Balance
Sheet Instruments





The fair
value of outstanding loan commitments and standby letters of credit are based on
fees currently charged to enter into similar agreements, taking into account the
remaining terms of the agreements, the counter parties' credit standing and
discounted cash flow analysis. The fair value of these instruments approximates
the value of the related fees and is not material.





The
carrying values and estimated fair values of the Company’s financial instruments
are as follows:





December
      31, 2008
                  
                  
                  December
      31, 2007Carrying
                  
                  
                  Fair
                  
                  
                  Carrying
                  
                  
                  Fairdollars
      in thousands
                  
                  Value
                  
                  
                  Value
                  
                  
                  Value
                  
                  
                  ValueFinancial
      Assets:Cash
      and Cash Equivalents
                  
                  $
                  44,421
                  
                  
                  $
                  44,421
                  
                  
                  $
                  18,942
                  
                  
                  $
                  18,942Securities
                  
                  
                  268,046
                  
                  
                  
                  268,601
                  
                  
                  
                  295,688
                  
                  
                  
                  295,229Loans
      Held for Sale
                  
                  
                  118
                  
                  
                  
                  118
                  
                  
                  
                  456
                  
                  
                  
                  456Loans
                  
                  
                  583,861
                  
                  
                  
                  591,511
                  
                  
                  
                  443,870
                  
                  
                  
                  448,387Allowance
      for Loan Losses
                  
                  
                  (7,564
                  )
                  
                  
                  (7,564
                  )
                  
                  
                  (6,977
                  )
                  
                  
                  (6,977
                  )Net
      Loans
                  
                  
                  576,297
                  
                  
                  
                  583,947
                  
                  
                  
                  436,893
                  
                  
                  
                  441,410Accrued
      Interest Receivable
                  
                  
                  3,340
                  
                  
                  
                  3,340
                  
                  
                  
                  3,621
                  
                  
                  
                  3,621Financial
      Liabilities:Demand
                  
                  $
                  72,168
                  
                  
                  $
                  72,168
                  
                  
                  $
                  71,145
                  
                  
                  $
                  71,145Savings,
      NOW and MoneyMarket
      Deposit Accounts
                  
                  
                  330,158
                  
                  
                  
                  330,158
                  
                  
                  
                  254,196
                  
                  
                  
                  254,196Certificates
      of Deposit
                  
                  
                  341,451
                  
                  
                  
                  345,774
                  
                  
                  
                  310,416
                  
                  
                  
                  313,328Other
      Deposits
                  
                  
                  22,096
                  
                  
                  
                  22,096
                  
                  
                  
                  21,737
                  
                  
                  
                  21,737Borrowings
                  
                  
                  81,398
                  
                  
                  
                  83,269
                  
                  
                  
                  57,324
                  
                  
                  
                  57,702Accrued
      Interest Payable
                  
                  
                  1,195
                  
                  
                  
                  1,195
                  
                  
                  
                  1,195
                  
                  
                  
                  1,195


82-K
 Index


Note
13. Regulatory Matters





The
Company and the subsidiary bank are subject to various regulatory capital
requirements administered by the federal banking agencies.  Failure to
meet minimum capital requirements can initiate certain mandatory, and possibly
additional discretionary, actions by regulators that, if undertaken, could have
a direct material effect on the Company’s consolidated financial
statements.  Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the subsidiary bank must meet specific
capital guidelines that involve quantitative measures of assets, liabilities,
and certain off-balance sheet items as calculated under regulatory accounting
practices. The Company’s and subsidiary bank’s capital amounts and
classifications are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors.





For
      CapitalActual:
                          
                          
                          Adequacy
      Purposes:
                          
                          
                          Well
      Capitalized:dollars
      in thousands
                          
                          Amount
                          
                          
                          Ratio
                          
                          
                          Amount
                          
                          
                          Ratio
                          
                          
                          Amount
                          
                          
                          RatioAs ofDecember 31,
      2008Total
      Capital to Risk-Weighted Assets:The
      Company
                          
                          $
                          72,928
                          
                          
                          
                          11.46
                          %
                          
                          $
                          50,892
                          
                          
                          
                          8.00
                          %
                          
                          
                          N/A
                          
                          
                          
                          N/ASubsidiary
      Bank
                          
                          $
                          72,465
                          
                          
                          
                          11.39
                          %
                          
                          $
                          50,888
                          
                          
                          
                          8.00
                          %
                          
                          $
                          63,609
                          
                          
                          
                          10.00
                          %Tier
      1 Capital to Risk-Weighted Assets:The
      Company
                          
                          $
                          65,293
                          
                          
                          
                          10.26
                          %
                          
                          $
                          25,446
                          
                          
                          
                          4.00
                          %
                          
                          
                          N/A
                          
                          
                          
                          N/ASubsidiary
      Bank
                          
                          $
                          64,830
                          
                          
                          
                          10.19
                          %
                          
                          $
                          25,444
                          
                          
                          
                          4.00
                          %
                          
                          $
                          38,166
                          
                          
                          
                          6.00
                          %Tier
      1 Capital to Average Assets:The
      Company
                          
                          $
                          65,293
                          
                          
                          
                          7.33
                          %
                          
                          $
                          35,620
                          
                          
                          
                          4.00
                          %
                          
                          
                          N/A
                          
                          
                          
                          N/ASubsidiary
      Bank
                          
                          $
                          64,830
                          
                          
                          
                          7.28
                          %
                          
                          $
                          35,618
                          
                          
                          
                          4.00
                          %
                          
                          $
                          44,522
                          
                          
                          
                          5.00
                          %As
      of December 31, 2007Total
      Capital to Risk-Weighted Assets:The
      Company
                          
                          $
                          71,320
                          
                          
                          
                          13.29
                          %
                          
                          $
                          42,937
                          
                          
                          
                          8.00
                          %
                          
                          
                          N/A
                          
                          
                          
                          N/ASubsidiary
      Bank
                          
                          $
                          68,837
                          
                          
                          
                          12.84
                          %
                          
                          $
                          42,874
                          
                          
                          
                          8.00
                          %
                          
                          $
                          53,593
                          
                          
                          
                          10.00
                          %Tier
      1 Capital to Risk-Weighted Assets:The
      Company
                          
                          $
                          64,607
                          
                          
                          
                          12.04
                          %
                          
                          $
                          21,469
                          
                          
                          
                          4.00
                          %
                          
                          
                          N/A
                          
                          
                          
                          N/ASubsidiary
      Bank
                          
                          $
                          62,134
                          
                          
                          
                          11.59
                          %
                          
                          $
                          21,437
                          
                          
                          
                          4.00
                          %
                          
                          $
                          32,156
                          
                          
                          
                          6.00
                          %Tier
      1 Capital to Average Assets:The
      Company
                          
                          $
                          64,607
                          
                          
                          
                          8.15
                          %
                          
                          $
                          31,714
                          
                          
                          
                          4.00
                          %
                          
                          
                          N/A
                          
                          
                          
                          N/ASubsidiary
      Bank
                          
                          $
                          62,134
                          
                          
                          
                          7.85
                          %
                          
                          $
                          31,676
                          
                          
                          
                          4.00
                          %
                          
                          $
                          39,595
                          
                          
                          
                          5.00
                          %





Quantitative
measures established by regulation to ensure capital adequacy require the
maintenance of minimum amounts and ratios (set forth in the table below) of
total and Tier 1 capital (as defined in the regulations) to risk-weighted assets
(as defined), and of Tier 1 capital (as defined) to average assets (as
defined).  Management believes the Company and subsidiary bank meet
all capital adequacy requirements to which they are subject.





The most
recent notification from the Office of the Comptroller of the Currency
categorized the subsidiary bank as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well capitalized,
the Company and subsidiary bank must maintain minimum total risk-based, Tier 1
risk-based, and Tier 1 leverage ratios as set forth in the following table.
There have been no conditions or events since that notification that management
believes have changed the subsidiary institution’s
category.


83-K
 Index





Note
14. Other Comprehensive Income





The
following is a summary of changes in other comprehensive income for the periods
presented:





Year
      Ended December 31,dollars
      in thousands
                                  
                                  2008
                                  
                                  
                                  2007Unrealized
      Holding Gains Arising During the Period Net of Tax(Pre-tax
      Amount of $5,210 and $2,530)
                                  
                                  $
                                  3,194
                                  
                                  
                                  $
                                  1,542Reclassification
      Adjustment for Gains Realized in Net IncomeDuring
      the Period, Net of Tax (Pre-tax Amount of ($503) and
($16))
                                  
                                  
                                  (308
                                  )
                                  
                                  
                                  (9
                                  )Net
      Actuarial  Loss on Split-Dollar Life Insurance
      Benefits
                                  
                                  
                                  (127
                                  )
                                  
                                  
                                  0Change
      in Net Actuarial (Loss) Gain of Defined Benefit Plan (Pre-tax Amount of
      ($8,232) and $2,356), Net of Amortization
                                  
                                  
                                  (5,047
                                  )
                                  
                                  
                                  1,442Other
      Comprehensive (Loss) Income
                                  
                                  $
                                  (2,288
                                  )
                                  
                                  $
                                  2,975





Components
of Accumulated Other Comprehensive Loss are:





As
      of December 31,dollars
      in thousands
                  
                  2008
                  
                  
                  2007Unrealized
      Gain (Loss) on Securities, net of tax
                  
                  $
                  1,991
                  
                  
                  $
                  (895
                  )Net
      Actuarial Loss on Split-Dollar Life Insurance Benefits
                  
                  
                  (127
                  )
                  
                  
                  0Net
      Actuarial Pension (Loss) Gain, net of tax
                  
                  
                  (4,424
                  )
                  
                  
                  623Accumulated
      Other Comprehensive Loss
                  
                  $
                  (2,560
                  )
                  
                  $
                  (272
                  )




84-K
 Index





Note
15. Parent Company Only Financial Statements





Presented
below are the condensed statements of condition as of December 31, 2008 and 2007
and statements of income and cash flows for each of the years in the two-year
period ended December 31, 2008 for the Parent Company.  These
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto.





Condensed
Statements of Condition





December
      31,dollars
      in thousands
                      
                      2008
                      
                      
                      2007AssetsCash
      and Cash Equivalents
                      
                      $
                      95
                      
                      
                      $
                      923Securities
      Available for Sale, at Fair Value
                      
                      
                      50
                      
                      
                      
                      737Investment
      in Subsidiary
                      
                      
                      66,995
                      
                      
                      
                      67,659Other
      Assets
                      
                      
                      1,422
                      
                      
                      
                      1,435Total
      Assets
                      
                      $
                      68,562
                      
                      
                      $
                      70,754Liabilities
      and Shareholders’ EquityTotal
      Liabilities
                      
                      $
                      1,103
                      
                      
                      $
                      1,355Shareholders’
      Equity
                      
                      
                      67,459
                      
                      
                      
                      69,399Total
      Liabilities and Shareholders’ Equity
                      
                      $
                      68,562
                      
                      
                      $
                      70,754





Condensed
Statements of Income





December
      31,dollars
      in thousands
                    
                    2008
                    
                    
                    2007Dividends
      from Subsidiary
                    
                    $
                    3,103
                    
                    
                    $
                    6,356Interest
      and Other Dividend Income
                    
                    
                    51
                    
                    
                    
                    47Net
      Gain on Sale of Securities
                    
                    
                    36
                    
                    
                    
                    03,190
                    
                    
                    
                    6,403Operating
      Expense
                    
                    
                    637
                    
                    
                    
                    725Income
      Before Income Tax Benefit and Equity in Undistributed Income of
      Subsidiary
                    
                    
                    2,553
                    
                    
                    
                    5,678Income
      Tax Benefit
                    
                    
                    (211
                    )
                    
                    
                    (257
                    )Equity
      in Undistributed Income of Subsidiaries
                    
                    
                    3,052
                    
                    
                    
                    1,772Net
      Income
                    
                    $
                    5,816
                    
                    
                    $
                    7,707


85-K
 Index


Note
15. Parent Company Only Financial Statements, Continued





Condensed
Statements of Cash Flows


Year
      Ended
                            December
      31,dollars
      in thousands
                          
                          2008
                          
                          
                          2007Cash
      Flows from Operating Activities:Net
      Income
                          
                          $
                          5,816
                          
                          
                          $
                          7,707Adjustments
      to Reconcile Net Income to CashProvided
      by Operating Activities:Investment
      Security Gains, net
                          
                          
                          (36
                          )
                          
                          
                          0(Increase)
      Decrease in Other Assets
                          
                          
                          (261
                          )
                          
                          
                          2(Decrease)
      Increase in Other Liabilities
                          
                          
                          (9
                          )
                          
                          
                          55Equity
      in Undistributed Income of Subsidiaries
                          
                          
                          (3,052
                          )
                          
                          
                          (1,772
                          )Net
      Cash Provided by Operating Activities
                          
                          
                          2,458
                          
                          
                          
                          5,992Cash
      Flows from Investing Activities:Proceeds
      from Sales of Available-for-Sale Securities
                          
                          
                          805
                          
                          
                          
                          60Purchase
      of Available-for-Sale Securities
                          
                          
                          0
                          
                          
                          
                          (57
                          )Payments
      for Investments in and Advances to Subsidiaries
                          
                          
                          (100
                          )
                          
                          
                          (1,045
                          )Net
      Cash Provided by (Used by) Investing Activities
                          
                          
                          705
                          
                          
                          
                          (1,042
                          )Cash
      Flows from Financing Activities:Purchase
      of Treasury Stock
                          
                          
                          0
                          
                          
                          
                          (605
                          )Cash
      Dividends
                          
                          
                          (3,991
                          )
                          
                          
                          (4,010
                          )Net
      Cash Used in Financing Activities
                          
                          
                          (3,991
                          )
                          
                          
                          (4,615
                          )Net
      (Decrease) Increase in Cash Equivalents
                          
                          
                          (828
                          )
                          
                          
                          335Cash
      and Cash Equivalents at Beginning of Year
                          
                          
                          923
                          
                          
                          
                          588Cash
      and Cash Equivalents at End of Year
                          
                          $
                          95
                          
                          
                          $
                          923





Note
16. Federal Reserve Bank Requirement





The
Company is required to maintain a clearing balance with the Federal Reserve
Bank.  The required clearing balance for the 14-day maintenance period
ending December 31, 2008 was $1.3 million.





Note
17. Sale of Subsidiary





In June
2008, the Company sold its membership interest in its former insurance agency
subsidiary, Mang-Wilber LLC.  Total proceeds from the sale were $1.258
million.  The Company recorded a $628 thousand gain on sale of its
insurance agency subsidiary in non-interest income.


86-K
 Index


ITEM 9:
            CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE





None.





ITEM 9A: CONTROLS AND PROCEDURES





We have
established disclosure control procedures to ensure that material information
related to the Company, its financial condition, or results of operation is made
known to the officers that certify the Company’s financial reports and to other
members of senior management and the Board of Directors.  These
procedures have been formalized through the formation of a Management Disclosure
Committee and the adoption of a Management Disclosure Committee Charter and
related disclosure certification process.  The management disclosure
committee is comprised of our senior management and meets at least quarterly to
review periodic filings for full and proper disclosure of material
information.





Our
management, including the Chief Executive Officer and Chief Financial Officer,
evaluated the design and operational effectiveness of the Company’s disclosure
controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)–15(e) under
the Securities Exchange Act of 1934, as amended) as of December 31,
2008.  Based upon that evaluation, the Chief Executive Officer and
Chief Financial Officer concluded that the Company’s disclosure controls and
procedures were effective in ensuring that information required to be disclosed
by the Company in reports that it files or submits under the Securities Exchange
Act of 1934 are recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms.





It should
be noted that any system of internal controls, regardless of design, can provide
only reasonable, and not absolute, assurance that the objectives of the control
system are met.  In addition, the design of any control system is
based in part upon certain assumptions about the likelihood of future
events.  Because of these and other inherent limitations of control
systems, there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions, regardless of how
remote.





Management’s
Report on Internal Control Over Financial Reporting





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rules
13(a)-15(f).  Under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer,
we conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission.  Based on our evaluation under the framework in
Internal Control – Integrated
Framework, our management has reasonable assurance that our internal
control over financial reporting was effective as of December 31,
2008.  The independent registered public accounting firm of KMPG LLP,
as auditors of the Company’s Consolidated Financial Statements, has issued an
audit report on the effectiveness of the Company’s internal control over
financial reporting as of December 31, 2008.


87-K
 Index


Report
of Independent Registered Public Accounting Firm





The Board
of Directors and Shareholders of The Wilber Corporation:





We have
audited The Wilber Corporation and subsidiaries’ (the Company) internal control
over financial reporting as of December 31, 2008, based on criteria established
in Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO).  The Company's management is
responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Management's Report on Internal
Control Over Financial Reporting.  Our responsibility is to
express an opinion on the Company’s internal control over financial reporting
based on our audit.





We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects.  Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audit also
included performing such other procedures as we considered necessary in the
circumstances.  We believe that our audit provides a reasonable basis
for our opinion.





A
company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.  A company's internal
control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.





In our
opinion, The Wilber Corporation and subsidiaries maintained, in all material
respects, effective internal control over financial reporting as of December 31,
2008, based on criteria established in Internal Control - Integrated
Framework issued by COSO.





We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated statements of condition of The
Company as of December 31, 2008 and 2007, and the related consolidated
statements of income, shareholders’ equity and comprehensive income, and cash
flows for the years then ended, and our report dated March 10, 2009 expressed an
unqualified opinion on those consolidated financial statements.




/s/ KPMG
      LLP


Albany,
New York


March 10,
2009


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 Index


ITEM 9B: OTHER INFORMATION





None.








PART III








ITEM10:
            DIRECTORS,
      EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE





A.
Directors of the Registrant





Information
contained under the captions Proposal II, "Election of Directors;" "The Nominees
and Continuing Directors" and under "Corporate Governance;” “Board of
Directors;” “Executive Committee;” “Audit and Compliance Committee;”
“Compensation and Benefits Committee;” and “Corporate Governance and Nominating
Committee” in the definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on April 24, 2009, to be filed with the Commission
within 120 days after the end of the fiscal year covered by this Form 10-K, is
incorporated herein by this reference.





B.
Executive Officers of the Registrant Who Are Not Directors





Information
contained in Proposal II under the caption "Executive Officers Who Are Not
Directors" in the definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on April 24, 2009, to be filed with the Commission
within 120 days after the end of the fiscal year covered by this Form 10-K, is
incorporated herein by this reference.





C.
Compliance with Section 16(a) of the Exchange Act





Information
contained under the caption, “Section 16(a) Beneficial Ownership Reporting
Compliance” in the definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on April 24, 2009, to be filed with the Commission
within 120 days after the end of the fiscal year covered by this Form 10-K, is
incorporated herein by this reference.





D. Code
of Ethics





The
Company has adopted a Code of Ethics for adherence by its members of the Board
of Directors, Chief Executive Officer, Chief Financial Officer, Chief Accounting
Officer and other officers of the Company and its affiliates to ensure honest
and ethical conduct; full, fair and proper disclosure of financial information
in the Company's periodic reports; and compliance with applicable laws, rules,
and regulations. The text of the Company’s Code of Ethics, as amended, is posted
and available on the Bank’s website (http://www.wilberbank.com)
under 'About Us.'





E.
Corporate Governance





There
have been no material changes to the procedures by which shareholders of the
Company may recommend director nominees to the Company’s Board.





Information
contained under the captions “Corporate Governance – Audit and Compliance
Committee”, “Audit Committee Report” and “Audit Committee Financial Expert” in
the definitive Proxy Statement for the Annual Meeting of Shareholders to be held
on April 24, 2009, to be filed with the Commission within 120 days after the end
of the fiscal year covered by the Form 10-K, is incorporated herein by this
reference.





ITEM 11:  EXECUTIVE COMPENSATION





Information
contained under the captions “Compensation Committee Report” and "Compensation"
in the definitive Proxy Statement for the Annual Meeting of Shareholders to be
held on April 24, 2009, to be filed with the Commission within 120 days after
the end of the fiscal year covered by this Form 10-K, is incorporated herein by
this reference.


89-K
 Index


ITEM 12:
            SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS





Information
contained under the caption "Principal Owners of Our Common Stock" in the
definitive Proxy Statement for the Annual Meeting of Shareholders to be held on
April 24, 2009, to be filed with the Commission within 120 days after the end of
the fiscal year covered by this Form 10-K, is incorporated herein by this
reference.





ITEM13:
            CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE





A.
Related Transactions





Information
contained under the caption "Transactions with Directors and Executive Officers"
in the definitive Proxy Statement for the Annual Meeting of Shareholders to be
held on April 24, 2009, to be filed with the Commission within 120 days after
the end of the fiscal year covered by this Form 10-K, is incorporated herein by
this reference.





B.
Director Independence





Information
contained under the captions “Corporate Governance – Audit and Compliance
Committee,” “Compensation and Benefits Committee,” “Corporate Governance and
Nominating Committee,” “Compensation Committee Report” and “Director
Independence” in the definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on April 24, 2009, to be filed with the Commission
within 120 days after the end of the fiscal year covered by the Form 10-K, is
incorporated herein by this reference.





ITEM 14:  PRINCIPAL ACCOUNTING FEES AND SERVICES





Information
contained under the caption, "Independent Auditors' Fees – Audit and Non-Audit Fees,"
and “Independent Auditors' Fees – Pre-Approval Policies and
Procedures” in the definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on April 24, 2009, to be filed with the Commission
within 120 days after the end of the fiscal year covered by this Form 10-K, is
incorporated herein by this reference.








PART IV








ITEM15:  EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES





The
financial statement schedules and exhibits filed as part of this Form 10-K are
as follows:





(a)(1)
The following Consolidated Financial Statements are included in PART II, Item 8,
hereof:





-Independent
Auditors’ Report


-Consolidated
Statements of Condition at December 31, 2008 and 2007


-Consolidated
Statements of Income for the Years Ended December 31, 2008 and 2007


-Consolidated
Statements of Changes in Shareholders’ Equity and comprehensive Income for the
Years Ended December 31, 2008 and 2007


-Consolidated
Statements of Cash Flows for the Years Ended December 31, 2008 and
2007


-Notes to
Consolidated Financial Statements





(2)
      None.





(3)
      Exhibits:  See Exhibit Index to this Form
  10-K





(b) See
Exhibit Index to this Form 10-K





(c)
None.


90-K
 Index


SIGNATURES




Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.




THE
      WILBER CORPORATIONDate:
                                  March 10, 2009
                                  
                                  By:
                                  /s/ Douglas C.
    GulottyPresident
      and Chief Executive Officer
                                  
                                  
                                  Douglas
      C. Gulotty


Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.








Signatures
                      
                      Title
                      
                      Date/s/ Douglas C. Gulotty
                      
                      President
      and Chief Executive Officer
                      
                      March 10, 2009Douglas
      C. Gulotty/s/ Joseph E. Sutaris
                      
                      Executive
      Vice President, Chief Financial
                      
                      March 10, 2009Joseph
      E. Sutaris
                      
                      Officer,
      Treasurer & Secretary/s/ Brian R. Wright
                      
                      Director,
      Chairman
                      
                      March 10, 2009Brian
      R. Wright/s/ Alfred S. Whittet
                      
                      Director,
      Vice Chairman
                      
                      March 10, 2009Alfred
      S. Whittet/s/ Mary C. Albrecht
                      
                      Director
                      
                      March 10, 2009Mary
      C. Albrecht/s/ Olon T. Archer
                      
                      Director
                      
                      March 10, 2009Olon
      T. Archer/s/ Thomas J. Davis
                      
                      Director
                      
                      March 10, 2009Thomas
      J. Davis/s/ Joseph P. Mirabito
                      
                      Director
                      
                      March 10, 2009Joseph
      P. Mirabito/s/ James L. Seward
                      
                      Director
                      
                      March 10, 2009James
      L. Seward/s/ Geoffrey A. Smith
                      
                      Director
                      
                      March 10, 2009Geoffrey
      A. Smith/s/ David F. Wilber, III
                      
                      Director
                      
                      March 10, 2009David
      F. Wilber, III


91-K
 Index


EXHIBIT
INDEX





No.          Document





3.1
            Restated
      Certificate of Incorporation of The Wilber Corporation (incorporated by
      reference as Exhibit A of the Company’s Definitive Proxy Statement -
      Schedule 14A (File No. 001-31896) filed with the SEC on March 24,
      2005)





3.2
            Bylaws
      of The Wilber Corporation as Amended and Restated (incorporated by
      reference to Exhibit 3.2 of the Company’s Form 8-K Current Report (File
      No. 001-31896) filed with the SEC on January 28,
  2008)





10.1
            Deferred
      Compensation Agreement as Amended between Wilber National Bank and Alfred
      S. Whittet (incorporated by reference to Exhibit 10.1 of the Company’s
      Form 8-K Current Report (File No. 001-31896) filed with the SEC on January
      6, 2006)





10.2
            Amended
      and Restated Wilber National Bank Split-Dollar Policy Endorsement as of
      December 31, 2007 for Douglas C. Gulotty (replaces Exhibits 10.2 and 10.3
      of the Company’s Form 10/A Registration Statement (No. 001-31896) filed
      with the SEC on January 30, 2004)





10.8
            Retention
      Bonus Agreement as Amended between Wilber National Bank and Douglas C.
      Gulotty (incorporated by reference to Exhibit 10.8 of the Company’s Form
      8-K Current Report (File No. 001-31896) filed with the SEC on January 6,
      2006)





10.9
            Retention
      Bonus Agreement as Amended between Wilber National Bank and Joseph E.
      Sutaris (incorporated by reference to Exhibit 10.8 of the Company’s Form
      8-K Current Report (File No. 001-31896) filed with the SEC on January 6,
      2006)





10.11
            Employment
      Agreement between Wilber National Bank and Douglas C. Gulotty
      (incorporated by reference to Exhibit 10.11 of the Company’s Form 8-K
      Current Report (File No. 001-31896) filed with the SEC on January 6,
      2006)





10.12
            Employment
      Agreement between Wilber National Bank and Joseph E. Sutaris (incorporated
      by reference to Exhibit 10.12 of the Company’s Form 8-K Current Report
      (File No. 001-31896) filed with the SEC on January 6,
  2006)





10.13
            Deferred
      Compensation Agreement between Wilber National Bank and Alfred S.
      Whittet





13
            Annual
      Report to Shareholders (included in this annual report on Form
      10-K)





14
            Code
      of Ethics, as amended, incorporated by reference to Exhibit 14 of the
      Company’s Annual Report on Form 10-K, and available on the Company's
      website (http://www.wilberbank.com)
      under the link 'About Us.'





21
            Subsidiaries
      of the Registrant





31.1
            Certification
      of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
      Act





31.2
            Certification
      of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
      Act





32.1
            Certification
      of Chief Executive Officer Pursuant to 18 U.S.C.
  1350





32.2
            Certification
      of Chief Financial Officer Pursuant to 18 U.S.C.
  1350






92-K