----

delinquencystatistics, results of internal loan reviews, its borrowers' perceived financial and managerial strengths, the adequacy of the underlying collateral, if collateral dependent, or present value of future cash flows and other relevant factors. 

----

----

----

| Financial Comparisons                                                 |
|-----------------------------------------------------------------------|
| Consolidated Average Balance Sheet, Interest Income/Expense and Rates |
| (Dollars in Thousands)                                                |

|  2009 | 2008 |
|------------|------|

|   | Average Balance | Interest Income/Expense | Yield or Rate (a) | Average Balance | Interest Income/Expense | Yield or Rate (a) |
|--------|-----------------|-------------------------|-------------------|----------------------|-------------------------|-------------------|

|                                                                                               |                                                                                                       |                                                                                   |        |                                       |                                                                                                                                                                                                           |        |
|----------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------|-------------|--------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------|
|  Interest-earning assets                                                                      |                                                                                                       |                                                                                   |        |                                       |                                                                                                                                                                                                           |        |
|  Loans net of unearned income (b) (c)                                                    |  $207,972                                                                                             |      $12,221                                                       |  5.88% |  $219,000                             |  $13,277                                                                                                                                                                                                  |  6.06% |
|  Taxable securities (d)                                                                       |   114,970                                                                                             |    6,809                                                                     |  5.92  |   104,698                        | 6,349                                                                                                                                                                                                          |  6.06  |
|  Non-taxable securities (d)                                                                   |          15,048                                                    |           974                             | 6.47        | 3,182                                      |        192                                                                                                                                                                       | 6.03        |
|  Interest-bearing deposits with     banks                            |         301                                                             |  3                                                                                |  1.00  |  241                                  |             3                                                                                                                                           |  1.24  |
|  Federal funds sold                                                                           |                    97 |                - | 0.00        |        1,038 |          25                                                                                                                                                            | 2.41        |
|  Total earning assets                                                                         |            338,388                                       |      20,007                                                        | 5.91        |    328,159                  |  19,846                                                                                                                                                                                                   | 6.05        |
|                                                                                               |                                                                                                       |                                                                                   |        |                                       |                                                                                                                                                                                                           |        |
|  Non-interest-earning assets                                                                  |                                                                                                       |                                                                                   |        |                                       |                                                                                                                                                                                                           |        |
|  Cash                                                                                         |         6,952                                                           |                                                                                   |        | 6,958                                      |                                                                                                                                                                                                           |        |
|  Allowance for loan losses                                                                    |            (1,812)                                       |                                                                                   |        |    (1,836)                       |                                                                                                                                                                                                           |        |
|  Other assets                                                                                 |               26,718                      |                                                                                   |        |      22,738            |                                                                                                                                                                                                           |        |
|  Total non-interest-earning          assets |                31,858                |                                                                                   |        |       27,860      |                                                                                                                                                                                                           |        |
|                                                                                               |                                                                                                       |                                                                                   |        |                                       |                                                                                                                                                                                                           |        |
|  Total assets                                                                                 |           $370,246                                            |                                                                                   |        |   $356,019                            |                                                                                                                                                                                                           |        |
|                                                                                               |                                                                                                       |                                                                                   |        |                                       |                                                                                                                                                                                                           |        |
|  Liabilities and Shareholders’ Equity                                                   |                                                                                                       |                                                                                   |        |                                       |                                                                                                                                                                                                           |        |
|  Interest-bearing deposits                                                                    |                                                                                                       |                                                                                   |        |                                       |                                                                                                                                                                                                           |        |
|     NOW accounts                                                               | $           21,067                                       |   $         35                  | 0.17%       | $  21,256                        |   $         33                                                                                                                                          | 0.16%       |
|     Money Market accounts                                                      |           27,988                                              |   242                                                                             | 0.86        |  22,500                               |   235                                                                                                                                                                                                | 1.04        |
|     Savings deposits                                                           |           43,099                                         |   246                                                                        | 0.57        |  42,697                               |   257                                                                                                                                                                                                     | 0.60        |
|  Time deposits                                                                                |            101,298                                       |    2,560                                                                | 2.53        |   117,148                             |    4,144                                                                                                                                                                                             | 3.54        |
|  Short-term borrowings                                                                        |           36,401                                         |   200                                                                             | 0.55        |  24,480                               |   460                                                                                                                                                                                                     | 1.87        |
|  Long-term borrowings                                                                         |           24,411                                              |           899                        |  3.68  |     20,027                  |            921                                                                                                                                               |  4.60  |
|  Total interest-bearing  liabilities                                                |            254,264                                       |         4,182                                       |  1.64  |    248,108                       |          6,050                                                                                                                                                         |  2.44  |
|                                                                                               |                                                                                                       |                                                                                   |        |                                       |                                                                                                                                                                                                           |        |
| Non-interest-bearing deposits                                                                      |          70,873                                                    |                                                                                   |        |  67,250                               |                                                                                                                                                                                                           |        |
| Other liabilities                                                                                  |         3,724                                                           |                                                                                   |        | 2,628                                      |                                                                                                                                                                                                           |        |
| Shareholders' equity                                                                               |          41,385                                                    |                                                                                   |        |      38,033            | 55                                                                                                                                                                                                             |        |
| Total non-interest-bearing                                                                         |                                                                                                       |                                                                                   |        |                                       |                                                                                                                                                                                                           |        |
| Funding sources                                                                                    |           115,982                                             |                                                                                   |        |    107,911                  |                                                                                                                                                                                                           |        |
|                                                                                               |                                                                                                       |                                                                                   |        |                                       |                                                                                                                                                                                                           |        |
| Total liabilities and                                                                              |                                                                                                       |                                                                                   |        |                                       |                                                                                                                                                                                                           |        |
| shareholders' equity                                                                               |         $370,246                                                        |                                                                                   |        |  $356,019                             |                                                                                                                                                                                                           |        |
|                                                                                               |                                                                                                       |                                                                                   |        |                                       |                                                                                                                                                                                                           |        |
|   Net interest income and net                                                            |                                                                                                       |                                                                                   |        |                                       |                                                                                                                                                                                                           |        |
|   Yield on interest earning assets                                                       |                                                                                                       | $15,825                                                                                | 4.68%       |                                       | $13,796                                $12,055 | 4.20%       |
|                                                                                               |                                                                                                       |                                                                                   |        |                                       |                                                                                                                                                                                                           |        |

| (a)   | Yields on interest earning assets have been computed on a tax-equivalent basis using the 34% federal income tax statutory rate. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------|

| (b)   |  Income on non-accrual loans is accounted for on the cash basis, and the loan balances are included in interest earning assets. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------|

| (c)   |  Loan income includes net loan fees/costs. |
|-----------------|-------------------------------------------------|

| (d)   | The yield information does not give effect to changes in fair value that are reflected as a component of stockholders’ equity. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------|

----

|   |  following table illustrates the impact a |
|--------|------------------------------------------------|

|                                                    |
|---------------------------------------------------------|
| Analysis of Year-to-Year Changes in Net Interest Income |
| (Dollars in Thousands)                                  |

|                                                                           | 2009 Change from 2008                                                            |
|--------------------------------------------------------------------------------|----------------------------------------------------------------------------------|
|                                                                           | Total                                                                            | Change Due | Change Due |
|                                                                           | Change                                                                           | To Volume | To Rate |
|                                                                           |                                                                             |   |   |
|        Interest-earning assets              |                                                                             |   |   |
|        Loans net of unearned income         | $ (1,056)                                                                        | $ (669) | $  (387) |
|        Securities                           |                                                                             |   |   |
|          Taxable                  |           460                       |            623 |        (163) |
|          Non-taxable              |           782                       |            716 |           66 |
|        Interest-bearing deposits with banks |               - |                1 |            (1) |
|        Federal funds sold                   |           (25)                 |            (23) |            (2) |
|                                                                           |                                                                             |   |   |
|         Total interest income          |           161                       |            648 |         (487) |
|                                                                           |                                                                             |   |   |
|        Interest-bearing liabilities         |                                                                             |   |   |
|        Deposits                             |       (1,586)                                           |            (233) |   (1,353) |
|        Short-term borrowings                |          (260)                           |             224 | (484) |
|        Long-term borrowings                 |            (22)           |             202 |          (224) |
|                                                                           |                                                                             |   | 1,22 |
|         Total interest expense         |        (1,868)                                     |             193 |        (2,061) |
|                                                                           |                                                                             |   |   |
|        Net interest income                  | $ 2,029                                                                          |         $  455 | $ 1,574 |
|                                                                           |                                                                             |   |   |

----

|                                                                                                                           |                       |
|--------------------------------------------------------------------------------------------------------------------------------|----------------------------|
|                                                                                                                           |                       |
|                                                                                                                           | Amount                     | Percent |
|                                                                                                                           |   (in thousands) |
|                 Remainingmaturity:             |                       |   |
|                                                                                                                           |                       |   |
|                 3months or less                | $  14,235        |      39% |
|                 Over3 through 6 months         | 4,757                      | 13 |
|                 Over6 months through 12 months | 4,330                      | 12 |
|                 Over12 months                  |     13,304  |       36 |
|                                                                                                                           |                       |   |
|                                                                                                                           |                       |   |
|                     Total  |     $36,626 |     100% |
|                                                                                                                           |                       |   |

----

|                                                                       |   Within                                                          | One-Five           | After                                                                |                                                                                   |                           |
|----------------------------------------------------------------------------|------------------------------------------------------------------------|--------------------|----------------------------------------------------------------------|----------------------------------------------------------------------------------------|--------------------------------|
|                                                                       | One Year                                                               |    Years | Five Years                                                           | Total                                                                                  |                           |
|                                                                       |                                                                   |               |                                                                 |                                                                                   |                           |
|        Commercial and industrial        | $ 4,876                                                                |               | $ 10,914                                                             |      $ 1,596                                                       | $ 17,386                       |
|        Real estate-construction         |             730 |               |             - |            345                       |      1,075 |
|        Other                            |             730 |               |          1,293          |          6,543                            |      8,566 |
|                                                                       |                                                                   |               |                                                                 |                                                                                   |                           |
|         Totals                     |       $ 6,336                                 |               |      $ 12,207                                    |       $ 8,484                                                 |  $ 27,027                 |
|                                                                       |                                                                   |               |                                                                 |                                                                                   |                           |
|                                                                       |                                                                   |               |                                                                 |                                                                                   |                           |
|        Loans at fixed interest rates    |                                                                   |               | $   8,229                                             |      $ 8,448                                                       |                           |
|        Loans at variable interest rates |                                                                   |               |           3,978         |                - |                           |
|                                                                       |                                                                   |               |                                                                 |                                                                                   |                           |
|                                                                       |                                                                   |               |      $ 12,207                                    |       $ 8,448                                            |                           |

|                           | Loans by Classification at December 31,                    |
|--------------------------------|------------------------------------------------------------|
|                           | (in thousands)                                             |
|                           |                                                       |   |
|                           | 2009                                                       |   | 2008 |   | 2007 |   | 2006 |   | 2005 |   |
|                           |                                                       |   |   |   |   |   |   |   |   |   |
|                           |                                                       |   |   |   |   |   |   |   |   |   |
| Commercial                     | $   17,386                                  |   | $   15,484 |   | $   21,299 |   | $  18,188 |   | $  18,275 |   |
| Real estate – commercial |   61,359                                         |   |   61,408 |   |   62,779 |   |  65,786 |   |  60,794 |   |
| Real estate - construction     |    1,075                                         |   |    2,087 |   |    2,002 |   |   1,256 |   |      910 |   |
| Real estate – other      |    114,861                                       |   |    124,992 |   |    127,781 |   |   128,364 |   |   115,294 |   |
| Consumer - installment         |    1,674                                         |   |    2,350 |   |    3,265 |   |   3,704 |   |   2,929 |   |
| Municipal                      |  7,826                                                |   |  8,373 |   |  8,955 |   |  11,226 |   | 7,596 |   |
| Other                          |           726 |   |     1,056 |   |           733 |   |          805 |   |       1,019 |   |
|                           |                                                       |   |   |   |   |   |   |   |   |   |
| Total loans                    |    204,907                                  |   |    215,750 |   |   226,814 |   |  229,329 |   |   206,817 |   |
|                           |                                                       |   |   |   |   |   |   |   |   |   |
| Net unamortized                |                                                       |   |   |   |   |   |   |   |   |   |
| costs/(fees)                   |           185 |   |           183 |   |          191 |   |         199 |   |          222 |   |
|                           |                                                       |   |   |   |   |   |   |   |   |   |
| Total loans, net of            |                                                       |   |   |   |   |   |   |   |   |   |
|  costs/(fees)             | $205,092                                                   |   | $215,933 |   | $227,005 |   | $229,528 |   | $207,039 |   |
|                           |                                                       |   |   |   |   |   |   |   |   |   |

----

|                        | Maturity Distribution of Securities at December 31, 2009                                                                                                                         |                           |
|-----------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|
|                        | (in thousands)                                                                                                                                                                   |                           |
|                        |                                                                                                                                                                             |                           |   |
|                        | U.S                                                                                                                                                                              | State &                    | Total | Weighted |
|                        | Govt.                                                                                                                                                                            | Political                      | Amortized | Average |
|                        | Agencies (1)                                                                                                                                                                     | Subdivisions (2)               | Cost | Yield |
|                        |                                                                                                                                                                             |                           |   |   |
| Within 1 year               |                   $           - | $    1,700 |                           $    1,700 | 5.26% |
| After 1 but within 5 years  | -                                                                                                                                                                                |    -            | - |       0.00% |
| After 5 but within 10 years | -                                                                                                                                                                                | -                              | - | 0.00% |
| After 10 years              | 90,300                                                                                                                                                                           | 39,929                         | 130,229 | 6.19% |
|                        |                                                                                                                                                                             |                           |   |   |
|                        | $  90,300                                                                                                                                                              | $   41,629      | $ 131,929 |      6.18% |
|                        |                                                                                                                                                                             |                           |   |   |

|                                                               | Fair Values of Securities at December 31, |
|--------------------------------------------------------------------|-------------------------------------------|
|                                                               | (in thousands)                            |
|                                                               |                                      |   |
|                                                               | 2009                                      | 2008 | 2007 |
|                                                               |                                      |   |   |
| U.S. Govt. Agencies                                                | $  96,555                       | $112,028 | $104,625 |
|                                                               |                                      |   |   |
| Obligations of State &   Political Subdivisions | 42,363                                    | 2,743 | 5,335 |
|                                                               |                                      |   |   |
|                                                               | $138,918                                  | $114,771 | $109,960 |

----

|                            | 0-30 Days                                                           | 31-90 Days                                               | 91-180 Days                                               | 181-365 Days                                                                     | 1-5 Years                                                            | Over 5 Years                                              | Totals               |
|---------------------------------|---------------------------------------------------------------------|----------------------------------------------------------|-----------------------------------------------------------|----------------------------------------------------------------------------------|----------------------------------------------------------------------|-----------------------------------------------------------|----------------------|
| Interest-earning assets:        |                                                                |                                                     |                                                      |                                                                             |                                                                 |                                                      |                 |
| Securities                      | $    4,280                                      |  $    7,870                     | $8,136                                                    | $   13,011                                                        | $   39,257                                            | $ 59,375                                                  | $ 131,929            |
| Loans                           |    14,746                                                 |     10,771                                | 15,498                                                    |   29,649                                                                    |   124,668                                                  |    9,760                                        |    205,092 |
| Total interest-sensitive        |                                                                |                                                     |                                                      |                                                                             |                                                                 |                                                      |                 |
| Assets                          |     19,026                                           |     18,641                                | 23,634                                                    |   42,660                                                                    |   163,925                                                       |    69,135                                       |    337,021 |
|                            |                                                                |                                                     |                                                      |                                                                             |                                                                 |                                                      |                 |
|                            |                                                                |                                                     |                                                      |                                                                             |                                                                 |                                                      |                 |
|                            |                                                                |                                                     |                                                      |                                                                             |                                                                 |                                                      |                 |
| Interest-bearing liabilities:   |                                                                |                                                     |                                                      |                                                                             |                                                                 |                                                      |                 |
| Certificates of deposit         | 12,676                                                              | 15,224                                                   |  15,570                                              |  15,825                                                                     | 40,235                                                               |  338                                                 |  99,868         |
| Other interest-bearing deposits | 40,468                                                              |       249                       |       373                             |          746                             | 38,324                                                               |   15,443                                             |  95,603         |
| Short term borrowings           | 48,850                                                              |           - |            - |               -      |             - |            - |  48,850         |
| Long term borrowings            |            - |           - |            - |               - | 10,000                                                               |            - |  10,000         |
| Total interest-sensitive        |                                                                |                                                     |                                                      |                                                                             |                                                                 |                                                      |                 |
|    Liabilities   |  101,994                                                       |  15,473                                             |   15,943                                             |    16,571                                                              | 88,559                                                               |   15,781                                             |  254,321        |
|                            |                                                                |                                                     |                                                      |                                                                             |                                                                 |                                                      |                 |
| Interest sensitivity gap        | $(82,968)                                                           | $ 3,168                                             |  $  7,691                                       |   $ 26,089                                                                  |  $75,366                                                        | $53,354                                                   | $ 82,700        |
|                            |                                                                |                                                     |                                                      |                                                                             |                                                                 |                                                      |                 |
| Cumulative gap                  | $(82,968)                                                           | $(79,800)                                                | $(72,109)                                                 |   $(46,020)                                                                 |  $29,346                                                        | $82,700                                                   |                 |
|                            |                                                                |                                                     |                                                      |                                                                             |                                                                 |                                                      |                 |
| Ratio of cumulative gap to      |                                                                |                                                     |                                                      |                                                                             |                                                                 |                                                      |                 |
| Interest sensitive assets       | (24.62%)                                                            | (23.68%)                                                 |         21.40%)             |    (14.65%)                                                       |    8.716%                                             |  24.54%                                              |                 |
|                            |                                                                |                                                     |                                                      |                                                                             |                                                                 |                                                      |                 |

----

----

| Years Ended December 31,                                                      (Dollars in thousands) |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                               | 2009 | 2008 | 2007 | 2006 | 2005 |
|                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |
| Loans outstanding at end of the year,                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |
| net of unearned income                                                                                                                                                                                                                                                                                                                                                             | $205,092 | $215,933 | $227,005 | $229,528 | $207,039 |
|                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |
|  Average loans outstanding                                                                                                                                                                                                                                                                                                                                                    | $207,972 | $219,000 | $226,713 | $218,944 | $199,505 |
|                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |
| Allowance for loan losses:                                                                                                                                                                                                                                                                                                                                                         |   |   |   |   |   |
| Balance, beginning of year                                                                                                                                                                                                                                                                                                                                                         |  $   1,821 |  $   1,869 |  $   1,806 |  $   1,636 |  $   1,855 |
|                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |
| Loans charged off:                                                                                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |
| Commercial                                                                                                                                                                                                                                                                                                                                                                         |             9 |            39 |           48 |            47 |          105 |
| Consumer                                                                                                                                                                                                                                                                                                                                                                           |           42 |              5 |           18 |            13 |            30 |
| Real estate                                                                                                                                                                                                                                                                                                                                                                        |           49 |            31 |             0 |              0 |            20 |
| Total loans charged off                                                                                                                                                                                                                                                                                                                                                            |         100 |            75 |           66 |            60 |          155 |
|                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |
| Recoveries:                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |
| Commercial                                                                                                                                                                                                                                                                                                                                                                         |             0 |            10 |           29 |            11 |          296 |
| Consumer                                                                                                                                                                                                                                                                                                                                                                           |             1 |              2 |           10 |              9 |             5 |
| Real estate                                                                                                                                                                                                                                                                                                                                                                        |             0 |              0 |             0 |              0 |             0 |
| Total recoveries                                                                                                                                                                                                                                                                                                                                                                   |             1 |            12 |           39 |            20 |          301 |
|                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |
| Net loans charged off/(recovered)                                                                                                                                                                                                                                                                                                                                                  |           99 |            63 |           27 |            40 |        (146) |
| Provision charged/(credited) to expense                                                                                                                                                                                                                                                                                                                                            |            0 |            15 |           90 |          210 |         (365) |
|                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |
| Balance, end of year                                                                                                                                                                                                                                                                                                                                                               | $   1,722 | $   1,821 | $   1,869 | $   1,806 | $     1,636 |
|                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |
| Ratios:                                                                                                                                                                                                                                                                                                                                                                            |   |   |   |   |   |
| Net (recoveries)/charge-offs as a                                                                                                                                                                                                                                                                                                                                                  |   |   |   |   |   |
| percentage of average loans                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |
|         outstanding                                                                                                                                                                                                                                                                                                                        |      0.05% |     0.03% |     0.01% |      0.02% |     (0.07)% |
|                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |
| Allowance for loan losses                                                                                                                                                                                                                                                                                                                                                          |   |   |   |   |   |
| as a percentage of average loans                                                                                                                                                                                                                                                                                                                                                   |   |   |   |   |   |
| outstanding                                                                                                                                                                                                                                                                                                                                                                        |     0.83% |     0.83% |     0.82% |     0.83% |     0.82% |

----

|                   | 2009                                         | 2008                                                                                                           | 2007                                         | 2006                                                                                                           | 2005                                         |
|------------------------|----------------------------------------------|----------------------------------------------------------------------------------------------------------------|----------------------------------------------|----------------------------------------------------------------------------------------------------------------|----------------------------------------------|
| (Dollars in thousands) |
|                   |                                         | Percent                                                                                                        |                                         | Percent                                                                                                        |                                         | Percent |   | Percent |   | Percent |
|                   | Amount                                       | Of Loan                                                                                                        | Amount                                       | Of Loan                                                                                                        | Amount                                       | Of Loan | Amount | Of Loan | Amount | Of Loan |
|                   |                                         | Type                                                                                                           |                                         | Type                                                                                                           |                                         | Type |   | Type |   | Type |
| Commercial             | $1,553                                       | 49%                                                                                                            | $1,628                                       |      46%                                                                              | $1,731                                       |  47% | $1,668 |       47% |  $1,540 |       47% |
| Residential            | 134                                          |                   50      | 145                                          |                   53      | 104                                          |                  52 | 97 |               52 |            63 |                 52 |
| Consumer               |        35 |                    1 |        48 |                    1 |        34 |                    1 |             41 |                1 |            33 |                    1 |
|                   |                                         |                                                                                                           |                                         |                                                                                                           |                                         |   |   |   |   |   |
| Total                  | $1,722                                       |                100%                      | $1,821                                       |                100%                      | $1,869                                       |               100% | $1,806 |            100% |     $1,636 |                100% |

| Dec. 31, 2009                  |                                                 |
|--------------------------------|------------------------------------------------------|
| Loans on non-accrual basis     | $        261 |
| Loans past due 90 days or more | -                                                    |
| Renegotiated loans             |     979                          |
| Total                          | $  1,240                                   |
|                           |                                                 |
| Dec. 31, 2008                  |                                                 |
| Loans on non-accrual basis     | $        29  |
| Loans past due 90 days or more | -                                                    |
| Renegotiated loans             |       3,566            |
| Total                          | $   3,595                             |
|                           |                                                 |
| Dec. 31, 2007                  |                                                 |
| Loans on non-accrual basis     | $    156                         |
| Loans past due 90 days or more | -                                                    |
| Renegotiated loans             |       350              |
| Total                          | $    506                         |
|                           |                                                 |
| Dec. 31, 2006                  |                                                 |
| Loans on non-accrual basis     | $    561                         |
| Loans past due 90 days or more | -                                                    |
| Renegotiated loans             |    2,823                              |
| Total                          | $ 3,384                                              |
|                           |                                                 |
| Dec. 31, 2005                  |                                                 |
| Loans on non-accrual basis     | $ 1,308                                              |
| Loans past due 90 days or more | 2                                                    |
| Renegotiated loans             |    2,860                              |
| Total                          | $ 4,170                                              |

----

|                       |                                                                     | Percent     |
|----------------------------|--------------------------------------------------------------------------|-------------|
|                       |                                                                     | of Adjusted |
|                       | Amount                                                                   | Assets      |
|                       |                                                                     |        |
| Tier I Capital             | $  38,570                                                      | 18.2%       |
| Tier I Capital Requirement |             8,458 | 4.0         |
|                       |                                                                     |        |
| Total Equity Capital       | $  40,293                                                      | 19.1%       |
| Risk-Based Requirement     |          16,915             | 8.0         |
|                       |                                                                     |        |
|                       |                                                                     |        |
| Leverage Capital           | $  38,570                                                      | 10.5%       |
| Leverage Requirement       |          14,656                  | 4.0         |

----

| RBC Capital Markets          | Knight Securities             |
|------------------------------|-------------------------------|
| 200 Vesey Street             | 405 Lexington Ave             |
| 8th Floor                    | New York, NY  10017 |
| New York, NY 10281           | 800-544-7508 or 800-222-4910  |
| 800-285-4964 or 800-959-5951 |                          |
|                         |                          |
| Stifel Nicolaus              | Boenning & Scattergood    |
| 1 South Street               | 4 Tower Bridge, Suite 300     |
| Baltimore, MD 21202          | 200 Bar Harbor Drive          |
| 800-682-0300                 | West Conshohocken, PA 19428   |
|                         | 800-883-8383 or 800-842-8928  |
|                         |                          |
| UBS                          |                          |
| 1285 Avenue of Americas      |                          |
| 9th Floor                    |                          |
| New York, NY 10019           |                          |
| 203-719-7410                 |                          |

----

----

Consolidated Statements of Financial Condition 

|   | December 31,                                  |
|--------|-----------------------------------------------|
|   | 2009                                          |   | 2008 |
|   | (Dollars in Thousands, Except per Share Data) |

| Cash and due from banks                                                                 | $  6,610 |   | $  7,111 |
|-----------------------------------------------------------------------------------------|--------------------|--------|--------------------|
| Interest bearing deposits with banks                                                    | 131                |   | 21                 |
|                                                                                    |               |   |               |
| Cash and Cash Equivalents                                                               | 6,741              |   | 7,132              |
| Securities available for sale                                                           | 138,918            |   | 114,771            |
| Restricted investments in bank stock                                                    | 4,567              |   | 3,967              |
| Loans receivable, net of allowance for loan losses of $1,722 in 2009 and $1,821 in 2008 | 203,370            |   | 214,112            |
| Premises and equipment, net                                                             | 3,548              |   | 3,549              |
| Accrued interest receivable                                                             | 1,456              |   | 1,117              |
| Investment in life insurance                                                            | 14,921             |   | 14,555             |
| Other assets                                                                            | 2,483              |   | 1,296              |

| Total Assets | $376,004 |   | $360,499 |
|--------------|----------|--------|----------|

|   | Liabilities |
|--------|-------------|

| Deposits:             |                |   |                |
|-----------------------|---------------------|--------|---------------------|
| Non-interest bearing  | $  74,260 |   | $  67,067 |
| Interest bearing      | 195,470             |   | 190,020             |
|                  |                |   |                |
| Total Deposits        | 269,730             |   | 257,087             |
| Short-term borrowings | 48,850              |   | 31,175              |
| Long-term borrowings  | 10,000              |   | 30,000              |
| Other liabilities     | 3,932               |   | 3,169               |

| Total Liabilities | 332,512 |   | 321,431 |
|-------------------|---------|--------|---------|

|   | Shareholders’ Equity |
|--------|----------------------------|

| Common stock, par value $2 per share; authorized 10,000,000 shares; issued 3,600,000  shares; outstanding 2,860,953 and 2,880,953 shares in 2009 and 2008 | 7,200    |   | 7,200    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|--------|----------|
| Retained earnings                                                                                                                                                   | 44,223   |   | 41,616   |
| Accumulated other comprehensive income                                                                                                                              | 4,613    |   | 2,490    |
| Treasury stock, at cost, 739,047 and 719,047 shares in 2009 and 2008                                                                                                | (12,544) |   | (12,238) |

| Total Shareholders’ Equity | 43,492 |   | 39,068 |
|----------------------------------|--------|--------|--------|

| Total Liabilities and Shareholders’ Equity | $376,004 |   | $360,499 |
|--------------------------------------------------|----------|--------|----------|

----

|   |             Years Ended December 31, |
|--------|--------------------------------------------------------------------------------------------------|
|   | 2009                                                                                             |   | 2008 |   |
|   | (In Thousands, Except per Share Amounts)                                                         |

|   | Interest Income |
|--------|-----------------|

| Interest and fees on loans            | $12,041 |   | $13,083 |   |
|---------------------------------------|---------|--------|---------|--------|
| Interest and dividends on securities: |    |   |    |   |
| Taxable                               | 6,809   |   | 6,349   |   |
| Exempt from federal income taxes      | 643     |   | 127     |   |
| Other                                 | 3       |   | 28      |   |

| Total Interest Income | 19,496 |   | 19,587 |   |
|-----------------------|--------|--------|--------|--------|

|   | Interest Expense |
|--------|------------------|

| Deposits              | 3,083 |   | 4,669 |   |
|-----------------------|-------|--------|-------|--------|
| Short-term borrowings | 200   |   | 460   |   |
| Long-term borrowings  | 899   |   | 921   |   |

| Total Interest Expense | 4,182 |   | 6,050 |   |
|------------------------|-------|--------|-------|--------|

| Net Interest Income | 15,314 |   | 13,537 |   |
|---------------------|--------|--------|--------|--------|

| Provision for Loan Losses | - |   | 15 |   |
|---------------------------|---|--------|----|--------|

| Net Interest Income after Provisionfor Loan Losses | 15,314 |   | 13,522 |   |
|----------------------------------------------------|--------|--------|--------|--------|

|   | Other Operating Income |
|--------|------------------------|

| Service charges on deposit accounts      | 583 |   | 631   |   |
|------------------------------------------|-----|--------|-------|--------|
| Other service charges and fees           | 753 |   | 738   |   |
| Net security  losses           | -   |   | (76)  |   |
| Trust department income                  | 925 |   | 1,011 |   |
| Income from investment in life insurance | 586 |   | 601   |   |
| Other income                             | 221 |   | 190   |   |

| Total Other Operating Income | 3,068 |   | 3,095 |   |
|------------------------------|-------|--------|-------|--------|

|   | Other Operating Expenses |
|--------|--------------------------|

| Salaries and employee benefits | 5,724 |   | 5,745 |   |
|--------------------------------|-------|--------|-------|--------|
| Net occupancy                  | 819   |   | 741   |   |
| Furniture and equipment        | 525   |   | 551   |   |
| Professional fees              | 385   |   | 427   |   |
| Pennsylvania shares tax        | 507   |   | 530   |   |
| FDIC insurance expense         | 452   |   | 38    |   |
| ATM  expenses        | 367   |   | 335   |   |
| Director fees                  | 476   |   | 445   |   |
| Other expenses                 | 2,092 |   | 2,194 |   |

| Total Other Operating Expenses | 11,347 |   | 11,006 |   |
|--------------------------------|--------|--------|--------|--------|

| Income before Income Taxes | 7,035 |   | 5,611 |   |
|----------------------------|-------|--------|-------|--------|

| Income Tax Expense | 1,906 |   | 1,587 |   |
|--------------------|-------|--------|-------|--------|

| Net Income | $5,129 |   | $4,024 |   |
|------------|--------|--------|--------|--------|

| Earnings per Share, Basic | $1.79 |   | $1.36 |   |
|---------------------------|-------|--------|-------|--------|

----

|   |   | CommonStock                              |   |     Retained Earnings |   | AccumulatedOther Comprehensive Income |   | TreasuryStock |   | TotalShareholders’Equity |
|--------|--------|------------------------------------------|--------|-------------------------------------------|--------|---------------------------------------|--------|---------------|--------|--------------------------------|
|   |   | (In Thousands, Except per Share Amounts) |

| Balance - December 31, 2007                                                                                                                                                                                              |                                       | $7,200                                                               |                | $40,505                 |   | $1,437      |   | $(10,681) |   | $38,461 |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------|----------------------------------------------------------------------|---------------------|-------------------------|--------|-------------|--------|-----------|--------|---------|
| Comprehensive income:                                                                                                                                                                                                    |                                       |                                                                 |                |                    |   |        |   |      |   |    |
| Net income                                                                                                                                                                                                               |                                       | -                                                                    |                | 4,024                   |   | -           |   | -         |   | 4,024   |
| Change in unrealized net gains on securitiesavailable for sale, net  of deferred income taxes                                                                                                                  |                                       | -                                                                    |                | -                       |   | 1,053       |   | -         |   | 1,053   |
|                                                                                                                                                                                                                     |                                       |                                                                 |                |                    |   |        |   |      |   |    |
| Total Comprehensive Income                                                                                                                                                                                               |                                       | -                                                                    |                | -                       |   | -           |   | -         |   | 5,077   |
|                                                                                                                                                                                                                     |                                       |                                                                 |                |                    |   |        |   |      |   |    |
|                 Cumulative effect accounting adjustment                                                                                  |                                       |                                                                 |                |                    |   |        |   |      |   |    |
|                               on benefit plan reserve (See note 1) |         |           -   |    - |    (431) |   | -           |   | -         |   | (431)   |
| Cash dividends declared, $0.84 per share                                                                                                                                                                                 |                                       | -                                                                    |                | (2,482)                 |   | -           |   | -         |   | (2,482) |
| Purchases of treasury stock (147,860 shares)                                                                                                                                                                             |                                       | -                                                                    |                | -                       |   | -           |   | (1,557)   |   | (1,557) |
|                                                                                                                                                                                                                     |                                       |                                                                 |                |                    |   |        |   |      |   |    |
| Balance - December 31, 2008                                                                                                                                                                                         |                                       | 7,200                                                                |                | 41,616                  |   |  2,490 |   | (12,238)  |   | 39,068  |
| Comprehensive income:                                                                                                                                                                                                    |                                       |                                                                 |                |                    |   |        |   |      |   |    |
| Net income                                                                                                                                                                                                               |                                       | -                                                                    |                | 5,129                   |   | -           |   | -         |   | 5,129   |
| Change in unrealized net gains on securitiesavailable for sale, net of deferred income taxes                                                                                                                        |                                       | -                                                                    |                | -                       |   | 2,123       |   | -         |   | 2,123   |
|                                                                                                                                                                                                                     |                                       |                                                                 |                |                    |   |        |   |      |   |    |
| Total Comprehensive Income                                                                                                                                                                                               |                                       |                                                                 |                |                    |   |        |   |      |   | 7,252   |
|                                                                                                                                                                                                                     |                                       |                                                                 |                |                    |   |        |   |      |   |    |
| Cash dividends declared, $0.88 per share                                                                                                                                                                                 |                                       | -                                                                    |                | (2,521)                 |   | -           |   | -         |   | (2,521) |
| Purchases of treasury stock (20,000 shares)                                                                                                                                                                              |                                       | -                                                                    |                | -                       |   | -           |   | (307)     |   | (307)   |
|                                                                                                                                                                                                                     |                                       |                                                                 |                |                    |   |        |   |      |   |    |
| Balance - December 31, 2009                                                                                                                                                                                         |                                       | $7,200                                                               |                | $44,224                 |   | $4,613      |   | $(12,545) |   | $43,492 |

----

|   | Years Ended December 31, |   |
|--------|--------------------------|--------|
|   | 2009                     |   | 2008 |   |
|   | (In Thousands)           |   |

|   | Cash Flows from Operating Activities |
|--------|--------------------------------------|

| Net income                                                                             | $  5,129 |   | $  4,024 |   |
|----------------------------------------------------------------------------------------|--------------------|--------|--------------------|--------|
| Adjustments to reconcile net income to net cash provided by Operating activities: |               |   |               |   |
| Depreciation and amortization                                                          | 414                |   | 421                |   |
| Amortization of intangibles                                                            | 98                 |   | 98                 |   |
| Provision for loan losses                                                              | -                  |   | 15                 |   |
| Net accretion of securities and loan fees                                              | (308)              |   | (243)              |   |
| Net security losses                                                                    | -                  |   | 76                 |   |
| Gain  on sale of foreclosed real estate                                      | -                  |   | (2)                |   |
| Income from investment in life insurance                                               | (586)              |   | (601)              |   |
| Gain on life insurance death benefit                                                   | (21)               |   | -                  |   |
| Deferred tax expense (benefit)                                                         | 59                 |   | (17)               |   |
| (Increase) decrease in accrued interest receivable andother assets                     | (1,598)            |   | 62                 |   |
| Decrease in accrued interest payable and other  liabilities                  | (334)              |   | (376)              |   |

| Net Cash Provided by Operating Activities | 2,853 |   | 3,457 |   |
|-------------------------------------------|-------|--------|-------|--------|

|   | Cash Flows from Investing Activities |
|--------|--------------------------------------|

| Purchases of securities                                  | (59,889) |   | (39,902) |   |
|----------------------------------------------------------|----------|--------|----------|--------|
| Maturities, calls and principal repayments of securities | 39,268   |   | 15,653   |   |
| Proceeds from sales of securities                        | -        |   | 21,211   |   |
| Purchases of restricted bank stock                       | (600)    |   | (1,591)  |   |
| Net decrease in loans                                    | 10,710   |   | 10,998   |   |
| Proceeds from life insurance death benefit               | 185      |   | -        |   |
| Proceeds from sale of foreclosed assets                  | 5        |   | 90       |   |
| Purchases of premises and equipment                      | (413)    |   | (242)    |   |

| Net Cash Provided by (Used in) Investing Activities | (10,734) |   | 6,217 |   |
|-----------------------------------------------------|----------|--------|-------|--------|

|   | Cash Flows from Financing Activities |
|--------|--------------------------------------|

| Net increase (decrease) in deposits   | 12,643   |   | (36,432) |   |
|---------------------------------------|----------|--------|----------|--------|
| Net increase in short-term borrowings | 17,675   |   | 18,000   |   |
| Advances of long-term borrowings      | -        |   | 10,000   |   |
| Repayment of long-term borrowings     | (20,000) |   | -        |   |
| Dividends paid                        | (2,521)  |   | (2,482)  |   |
| Purchases of treasury stock           | (307)    |   | (1,557)  |   |

| Net Cash (Used in) Provided by Financing Activities | 7,490 |   | (12,471) |   |
|-----------------------------------------------------|-------|--------|----------|--------|

| Net Decrease in Cash and Cash Equivalents | (391) |   | (2,797) |   |
|-------------------------------------------|-------|--------|---------|--------|

| Cash and Cash Equivalents – Beginning | 7,132 |   | 9,929 |   |
|---------------------------------------------|-------|--------|-------|--------|

| Cash and Cash Equivalents – Ending | $  6,741 |   | $  7,132 |   |
|------------------------------------------|--------------------|--------|--------------------|--------|
|                                     |               |   |               |   |

|   | Supplementary Cash Flows Information |
|--------|--------------------------------------|

| Interest paid | $  4,456 |   | $  6,616 |   |
|---------------|--------------------|--------|--------------------|--------|

| Income taxes paid | $  1,985 |   | $  1,415 |   |
|-------------------|--------------------|--------|--------------------|--------|

| Loans transferred to foreclosed real estate | $       30 |   | $     148 |   |
|---------------------------------------------|-----------------------------------------------|--------|------------------------------------|--------|

----

|     | Note 1 – Summary of Significant Accounting Policies |
|--------------------|-----------------------------------------------------------|

----

|   | Note 1 – Summary of Significant Accounting Policies (Continued) |
|--------|-----------------------------------------------------------------------|

----

|   | Note 1 – Summary of Significant Accounting Policies (Continued) |
|--------|-----------------------------------------------------------------------|

|   | Allowance for Loan Losses  (Continued) |
|--------|--------------------------------------------------|

----

|   | Note 1 – Summary of Significant Accounting Policies (Continued) |
|--------|-----------------------------------------------------------------------|

----

|   | Note 1 – Summary of Significant Accounting Policies (Continued) |
|--------|-----------------------------------------------------------------------|

| a.   | A reporting entity to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers; and |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | In the reconciliation for fair value measurements using significant unobservable inputs, a reporting entity should present separately information about purchases, sales, issuances, and settlements. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| a.   | For purposes of reporting fair value measurement for each class of assets and liabilities, a reporting entity needs to use judgment in determining the appropriate classes of assets and liabilities; and |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | A reporting entity should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| a.   | The quoted price of the identical liability when traded as an asset. |
|----------------|----------------------------------------------------------------------|

| b.   | Quoted prices for similar liabilities or similar liabilities when traded as assets. |
|----------------|-------------------------------------------------------------------------------------|

----

|   | Note 1 – Summary of Significant Accounting Policies (Continued) |
|--------|-----------------------------------------------------------------------|

|   | Note 2 - Cash and Due from Banks |
|--------|----------------------------------|

----

|   | Note 3 - Securities |
|--------|---------------------|

|   | AmortizedCost  |   | GrossUnrealizedGains |   | GrossUnrealizedLosses |   | FairValue |
|--------|----------------|--------|----------------------|--------|-----------------------|--------|-----------|
|   | (In Thousands) |

| December 31, 2009:                              |                |   |                         |   |                     |   |                      |
|-------------------------------------------------|---------------------|--------|------------------------------|--------|--------------------------|--------|---------------------------|
|                                            |                |   |                         |   |                     |   |                      |
| Obligations of states and politicalsubdivisions | $  41,629 |   | $    975 |   | $   (241) |   | $   42,363 |
| Mortgage-backed securities                      | 90,300              |   | 6,255                        |   | -                        |   | 96,555                    |

|   | $131,929 |   | $7,230 |   | $  (241) |   | $138,918 |
|--------|----------|--------|--------|--------|--------------------|--------|----------|

| December 31, 2008:                              |                           |   |                              |   |                                               |   |                           |
|-------------------------------------------------|--------------------------------|--------|-----------------------------------|--------|----------------------------------------------------|--------|--------------------------------|
| Obligations of states and politicalsubdivisions | $    2,700 |   | $     43 |   | $        - |   | $    2,743 |
| Mortgage-backed securities                      | 108,298                        |   | 3,730                             |   | -                                                  |   | 112,028                        |

|   | $110,998 |   | $3,773 |   | $        - |   | $114,771 |
|--------|----------|--------|--------|--------|----------------------------------------------------|--------|----------|

|   |   | AmortizedCost                                                                                                                                       |   | FairValue |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|
|   |   |                        (In Thousands) |

|   | Due within one year                    | $     1,700 |   | $   1,733 |
|--------|----------------------------------------|--------------------------------------|--------|--------------------------|
|   | Due after one year through five years  | -                                    |   | -                        |
|   | Due after five years through ten years | -                                    |   | -                        |
|   | Due after ten years                    | 130,229                              |   | 137,185                  |

|   |   | $131,929 |   | $138,918 |
|--------|--------|----------|--------|----------|

----

|   | Note 3 - Securities (Continued) |
|--------|---------------------------------|

|   | (In Thousands)         |
|--------|------------------------|
|   | December 31, 2009 |
|   | Less than 12 Months    |   | 12 Months or More |   | Total |
|   | FairValue              |   | Unrealized Losses |   | FairValue |   | Unrealized Losses |   | FairValue |   | Unrealized Losses |
|   | (In Thousands)         |

| Obligations of states and political subdivisions | $12,900 |   | $(241) |   | - |   | - |   | $12,900 |   | $(241) |
|--------------------------------------------------|---------|--------|--------|--------|---|--------|---|--------|---------|--------|--------|

|   | Note 4 - Loans |
|--------|----------------|

|   |   |   | December 31,   |
|--------|--------|--------|----------------|
|   |   |   | 2009           |   | 2008 |
|   |   |   | (In Thousands) |

|   | Commercial loans         |   | $  17,386 |   | $ 15,484 |
|--------|--------------------------|--------|---------------------|--------|----------|
|   | Real estate loans:       |   |                |   |     |
|   | Commercial               |   | 61,359              |   | 61,408   |
|   | Construction             |   | 1,075               |   | 2,087    |
|   | Residential              |   | 114,861             |   | 124,992  |
|   | Municipal loans          |   | 7,826               |   | 8,373    |
|   | Consumer and other loans |   | 2,400               |   | 3,406    |
|   | Net unamortized costs    |   | 185                 |   | 183      |

|   |   |   | $205,092 |   | $215,933 |
|--------|--------|--------|----------|--------|----------|

----

|   |   |   | Years Ended December 31, |   |
|--------|--------|--------|--------------------------|--------|
|   |   |   | 2009                     |   | 2008 |   |
|   |   |   | (In Thousands)           |

|   | Balance, January 1        |   | $1,821  |   | $1,869 |   |
|--------|---------------------------|--------|---------|--------|--------|--------|
|   | Charge offs               |   | (100)   |   | (75)   |   |
|   | Recoveries                |   | 1       |   | 12     |   |
|   | Provision for loan losses |   |  - |   | 15     |   |

|   | Balance at December 31 |   | $1,722 |   | $1,821 |   |
|--------|------------------------|--------|--------|--------|--------|--------|

|   | Note 6 - Financial Instruments with Off-Balance Sheet Risk |
|--------|------------------------------------------------------------|

|   |                                                                                                    |   | December 31,   |   |
|--------|---------------------------------------------------------------------------------------------------------|--------|----------------|--------|
|   |                                                                                                    |   | 2009           |   | 2008 |
|   |                                                                                                    |   | (In Thousands) |
|   | Financial instruments whose contract amounts represent credit risk:                                     |   |           |   |   |
|   |       Commitments to extend credit, including unused lines of credit      |   | $30,282        |   | $29,952 |
|   |       Standby letters of credit                                           |   | 435            |   | 598 |
|   |       Financial standby letters of credit                                 |   | 2,152          |   | 2,562 |
|   | Commitments to purchase securities:                                                                     |   |           |   |   |
|   |        Commitments to purchase Municipal Bonds                       |   | 980            |   | - |
|   |       Commitments to purchase GNMA Agency mortgage backed securities |   | -              |   | 20,000 |

----

|   | Note 6 - Financial Instruments with Off-Balance Sheet Risk (Continued) |
|--------|------------------------------------------------------------------------|

|   | Note 7 - Premises and Equipment |
|--------|---------------------------------|

|   |   |   | 2009           |   | 2008 |
|--------|--------|--------|----------------|--------|------|
|   |   |   | (In Thousands) |

|   | Land                                      |   | $      437 |   | $     437 |
|--------|-------------------------------------------|--------|------------------------------------------|--------|------------------------------------|
|   | Premises                                  |   | 5,789                                    |   | 5,789                              |
|   | Leasehold improvements                    |   | 301                                      |   | 229                                |
|   | Furniture and equipment                   |   | 5,873                                    |   | 5,776                              |
|   |                                      |   |                                     |   |                               |
|   |                                      |   | 12,400                                   |   | 12,231                             |
|   | Accumulated depreciation and amortization |   | (8,852)                                  |   | (8,682)                            |

|   |   |   | $  3,548 |   | $ 3,549 |
|--------|--------|--------|--------------------|--------|---------|

----

|   |   |   | 2009           |   | 2008 |
|--------|--------|--------|----------------|--------|------|
|   |   |   | (In Thousands) |

|   | Savings accounts      |   | $   45,347 |   |   $  40,201 |
|--------|-----------------------|--------|---------------------------|--------|---------------------------------|
|   | NOW accounts          |   | 21,089                    |   | 20,132                          |
|   | Money market accounts |   | 29,166                    |   | 23,682                          |
|   | Time deposits         |   | 99,868                    |   | 106,005                         |

|   |   |   | $195,470 |   | $190,020 |
|--------|--------|--------|----------|--------|----------|

|                                                                                                                                                                           | 2010 |   | $59,295 |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------|--------|---------|
|                               | 2011 |   | 18,484  |
|                                                                                                                                                                           | 2012 |   | 10,232  |
|                                                                                                                                                                           | 2013 |   | 4,373   |
|                                                                                                                                                                           | 2014 |   | 7,484   |

|   |   |   | $99,868 |
|--------|--------|--------|---------|

|   | Note 9 - Short-Term Borrowings |
|--------|--------------------------------|

|   | The outstanding balances and related information of short-term borrowings are summarized as follows: |
|--------|---------------------------------------------------------------------------------------------------------------------|

|   |   |   |                          Years Ended December 31, |
|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   | 2009                                                                                                                                                                      |   | 2008 |
|   |   |   | (Dollars in Thousands)                                                                                                                                                    |

|   | Average balance during the year                   |   | $36,401 |   | $24,480 |
|--------|---------------------------------------------------|--------|---------|--------|---------|
|   | Average interest rate during the year             |   | 0.55%   |   | 1.87%   |
|   | Maximum month-end balance                         |   | $49,850 |   | $40,000 |
|   | Weighted average interest rate at end of the year |   | 0.35%   |   | 0.59%   |

|   | Note 10 - Long-Term Borrowings |
|--------|--------------------------------|

----

|    | Note 11 - Employee Benefit Plans |
|--------------|----------------------------------|

|   | Note 12 - Comprehensive Income |
|--------|--------------------------------|

|   |                                                                                 |   | 2009               |   | 2008    |   |
|--------|--------------------------------------------------------------------------------------|--------|--------------------|--------|---------|--------|
|   |                                                                                 |   | (In Thousands)     |   |    |
|   | Unrealized gains      On securities available for sale |   |   $3,216 |   | $1,519  |   |
|   |  Reclassification adjustment for loss realized in income                        |   | -                  |   | 76      |   |
|   |                                                                                 |   |               |   |    |   |
|   | Net Unrealized Gains                                                                 |   | 3,216              |   | 1,595   |   |
|   |                                                                                 |   |               |   |    |   |
|   | Tax effect                                                                           |   | 1,093              |   | 542     |   |
|   | Net of Tax Amount                                                                    |   |   $2,123 |   | $ 1,053 |   |

|   | Note 13 - Lease Commitments |
|--------|-----------------------------|

|   | 2010       | $142                  |
|--------|------------|-----------------------|
|   | 2011       |   145            |
|   | 2012       |     96 |
|   | 2013       |     94 |
|   | 2014       |     96 |
|   | Thereafter |   286            |

----

|   | Note 14 - Income Taxes |
|--------|------------------------|

|   |   | 2009           |   | 2008 |
|--------|--------|----------------|--------|------|
|   |   | (In Thousands) |

| Allowance for loan losses                            |   | $    340 |   | $   340 |
|------------------------------------------------------|--------|------------------------------|--------|------------------------|
| Accrued benefits                                     |   | 42                           |   | 50                     |
| Intangible assets                                    |   | 70                           |   | 22                     |
| Other                                                |   | 10                           |   | 11                     |
|                                                 |   |                         |   |                   |
| Total Deferred Tax Assets                            |   | 462                          |   | 423                    |
|                                                 |   |                         |   |                   |
| Deferred loan fees                                   |   | 68                           |   | 68                     |
| Securities accretion                                 |   | 69                           |   | 28                     |
| Unrealized net gain on securities available for sale |   | 2,376                        |   | 1,283                  |
| Depreciation                                         |   | 339                          |   | 282                    |
|                                                 |   |                         |   |                   |
| Total Deferred Tax Liabilities                       |   | 2,852                        |   | 1,661                  |
|                                                 |   |                         |   |                   |
| Net Deferred Tax Liability                           |   |  $(2,390)               |   | $(1,238)               |

|   |   |   | 2009           |   | 2008 |
|--------|--------|--------|----------------|--------|------|
|   |   |   | (In Thousands) |

|   | Current  |   | $1,847 |   | $1,604 |
|--------|----------|--------|--------|--------|--------|
|   | Deferred |   | 59     |   | (17)   |
|   |     |   |   |   |   |
|   |     |   | $1,906 |   | $1,587 |

|   |   |   | 2009           |   | 2008 |
|--------|--------|--------|----------------|--------|------|
|   |   |   | (In Thousands) |

|   | Tax at statutory rates                   |   | $2,392 |   |   34.0%           |   | $1,908  |   |    34.0%           |
|--------|------------------------------------------|--------|--------|--------|-----------------------------|--------|---------|--------|-----------------------------------|
|   | Increase (decrease) resulting from:      |   |   |   |                        |   |    |   |                              |
|   | Tax-exempt income                        |   | (337)  |   |    (4.8)     |   | (171)   |   |     (3.0)     |
|   | Non-deductible interest expense          |   | 15     |   |     0.2 |   | 16      |   |      0.3 |
|   | Increase in investment in life insurance |   | (165)  |   |    (2.3)     |   | (172)   |   |    (3.1)           |
|   | Other                                    |   | 1      |   |     0.0 |   |  6 |   |     0.1       |
|   |                                     |   | $1,906 |   |   27.1%           |   | $1,587  |   |   28.3%                 |

----

|   | Note 14 - Income Taxes (Continued) |
|--------|------------------------------------|

----

----

|   | Note 15 - Fair Value of Financial Instruments (Continued) |
|--------|-----------------------------------------------------------|

----

|   | Note 15 - Fair Value of Financial Instruments (Continued) |
|--------|-----------------------------------------------------------|

|                                    | December 31, 2009              |   | December 31, 2008              |
|-----------------------------------------|--------------------------------|--------|--------------------------------|
|                                    | Carrying Amount                |   | FairValue                      |   | Carrying Amount |   | FairValue |
|                                    | (In Thousands)                 |
| Financial assets:                       |                           |   |                           |   |   |   |   |
| Cash and short-term investments         | $    6,741 |   | $    6,741 |   | $    7,132 |   | $    7,132 |
| Securities available for sale           | 138,918                        |   | 138,918                        |   | 114,771 |   | 114,771 |
| Restricted investments in bank stock    | 4,567                          |   | 4,567                          |   | 3,967 |   | 3,967 |
| Net loans receivable                    | 203,370                        |   | 203,553                        |   | 214,112 |   | 222,442 |
| Accrued interest receivable             | 1,456                          |   | 1,456                          |   | 1,117 |   | 1,117 |
| Financial liabilities:                  |                           |   |                           |   |   |   |   |
| Deposits                                | $269,730                       |   | $264,300                       |   | $257,087 |   | $258,190 |
| Short-term borrowings                   | 48,850                         |   | 48,850                         |   | 31,175 |   | 31,175 |
| Long-term borrowings                    | 10,000                         |   | 10,139                         |   | 30,000 |   | 30,585 |
| Accrued interest payable                | 451                            |   | 451                            |   | 725 |   | 725 |
|                                    |                           |   |                           |   |   |   |   |
| Off-balance sheet financial instruments | -                              |   | -                              |   | - |   | - |

|   | Note 16 - Related Party Transactions |
|--------|--------------------------------------|

----

|   | Note 17 - Capital Requirements and Regulatory Restrictions |
|--------|------------------------------------------------------------|

|   |   |   Actual     |   |  For Capital Adequacy Purposes |   | To be Well Capitalized Under Prompt Corrective Action Provisions |   |
|--------|--------|------------------------|--------|------------------------------------------|--------|------------------------------------------------------------------|--------|
|   |   | Amount                 |   | Ratio                                    |   | Amount                                                           |   | Ratio |   | Amount |   | Ratio |   |
|   |   | (Dollars in Thousands) |   |

| As of December 31, 2009                                           |   |    |   |   |   |                    |   |       |   |          |   |                  |   |
|------------------------------------------------------------------------|--------|---------|--------|--------|--------|-------------------------|--------|------------|--------|---------------|--------|-----------------------|--------|
|      Total capital (to risk-weighted assets)  |   | $40,293 |   | 19.1%  |   | $316,915           |   | 38.0% |   | $321,144 |   | 310.0%           |   |
|      Tier 1 capital (to risk-weighted assets) |   | 38,570  |   | 18.2   |   | 3  8,458 |   | 34.0  |   | 312,686  |   | 3  6.0 |   |
|      Tier 1 capital (to average assets)       |   | 38,570  |   | 10.5   |   | 314,656            |   | 34.0  |   | 318,320  |   | 3  5.0 |   |

| As of December 31, 2008                                           |   |    |   |   |   |                    |   |       |   |          |   |                  |   |
|------------------------------------------------------------------------|--------|---------|--------|--------|--------|-------------------------|--------|------------|--------|---------------|--------|-----------------------|--------|
|      Total capital (to risk-weighted assets)  |   | $38,006 |   | 17.6%  |   | $317,286           |   | 38.0% |   | $321,605 |   | 310.0%           |   |
|      Tier 1 capital (to risk-weighted assets) |   | 36,185  |   | 16.8   |   | 3  8,643 |   | 34.0  |   | 312,964  |   | 3  6.0 |   |
|      Tier 1 capital (to average assets)       |   | 36,185  |   | 10.0   |   | 314,441            |   | 34.0  |   | 318,051  |   | 3  5.0 |   |

----

|   | Note 18 - Condensed Financial Information of Commercial National Financial Corporation (Parent Only) |
|--------|------------------------------------------------------------------------------------------------------|

|   | Statements of Financial Condition |
|--------|-----------------------------------|

|   |   |   | December 31,   |
|--------|--------|--------|----------------|
|   |   |   | 2009           |   | 2008 |
|   |   |   | (In Thousands) |

|   | Assets                                           |   |                                          |   |                                          |
|--------|--------------------------------------------------|--------|-----------------------------------------------|--------|-----------------------------------------------|
|   | Cash                                             |   | $       41 |   | $    57                   |
|   | Investment in bank subsidiary                    |   | 43,427                                        |   | 39,016                                        |
|   | Other assets                                     |   | 54                                            |   | 15                                            |
|   |                                             |   |                                          |   |                                          |
|   | Total Assets                                     |   | $43,522                                       |   | $39,088                                       |
|   |                                             |   |                                          |   |                                          |
|   | Liabilities and Shareholders’ Equity       |   |                                          |   |                                          |
|   | Liabilities                                      |   | $       30 |   | $       20 |
|   | Shareholders’ equity                       |   | 43,492                                        |   | 39,068                                        |
|   |                                             |   |                                          |   |                                          |
|   | Total Liabilities and Shareholders’ Equity |   | $43,522                                       |   | $39,088                                       |

|   | Statements of Income |
|--------|----------------------|

|   |   |   | Years Ended December 31, |
|--------|--------|--------|--------------------------|
|   |   |   | 2009                     |   | 2008 |
|   |   |   | (In Thousands)           |

|   | Dividends from bank subsidiary                               |   | $2,943 |   | $4,098 |
|--------|--------------------------------------------------------------|--------|--------|--------|--------|
|   | Fees from bank subsidiary                                    |   | 380    |   | 457    |
|   | Other Income                                                 |   | -      |   | 3      |
|   | Expenses                                                     |   | (533)  |   | (513)  |
|   |                                                         |   |   |   |   |
|   |                                                         |   | 2,790  |   | 4,045  |
|   | Income (benefit) taxes                                       |   | (52)   |   | (17)   |
|   |                                                         |   |   |   |   |
|   |                                                         |   | 2,842  |   | 4,062  |
|   | Equity in (excess of) undistributed earnings of subsidiaries |   | 2,287  |   | (38)   |
|   |                                                         |   |   |   |   |
|   | Net Income                                                   |   | $5,129 |   | $4,024 |

----

|   | Note 18 - Condensed Financial Information of Commercial National Financial Corporation (Parent Only) (Continued) |
|--------|------------------------------------------------------------------------------------------------------------------|

|   | Statements of Cash Flows |
|--------|--------------------------|

|   |   |   | Years Ended December 31, |
|--------|--------|--------|--------------------------|
|   |   |   | 2009                     |   | 2008 |
|   |   |   | (In Thousands)           |

|   | Cash Flows from Operating Activities                                            |   |                                          |   |                                                |
|--------|---------------------------------------------------------------------------------|--------|-----------------------------------------------|--------|-----------------------------------------------------|
|   | Net income                                                                      |   | $ 5,129                                       |   | $ 4,024                                             |
|   | Adjustments to reconcile net income tonet cash provided by operatingactivities: |   |                                          |   |                                                |
|   | (Equity in) excess of undistributedearnings of subsidiaries                     |   | (2,287)                                       |   | 38                                                  |
|   | (Increase) decrease in other assets                                             |   | (40)                                          |   | 44                                                  |
|   | Increase (decrease) in liabilities                                              |   | 10                                            |   | (10)                                                |
|   |                                                                            |   |                                          |   |                                                |
|   | Net Cash Provided by Operating Activities                                       |   | 2,812                                         |   | 4,096                                               |
|   |                                                                            |   |                                          |   |                                                |
|   | Cash Flows from Financing Activities                                            |   |                                          |   |                                                |
|   | Dividends paid                                                                  |   | (2,521)                                       |   | (2,482)                                             |
|   | Purchase of treasury stock                                                      |   | (307)                                         |   | (1,557)                                             |
|   |                                                                            |   |                                          |   |                                                |
|   | Net Cash Used in Financing Activities                                           |   | (2,828)                                       |   | (4,039)                                             |
|   |                                                                            |   |                                          |   |                                                |
|   | Net Increase (Decrease) in Cash                                                 |   | (16)                                          |   | 57                                                  |
|   |                                                                            |   |                                          |   |                                                |
|   | Cash – Beginning                                                          |   | 57                                            |   | -                                                   |
|   |                                                                            |   |                                          |   |                                                |
|   | Cash – Ending                                                             |   | $       41 |   | $        57 |

----