----

delinquency statistics, results of internal loan reviews,its borrowers' perceived financial and managerial strengths, the adequacy of theunderlying collateral, if collateral dependent, or present value of future cashflows and other relevant factors.

----

----

----

| COMMERCIAL      NATIONAL FINANCIAL CORPORATION                            |
|---------------------------------------------------------------------------|
|                                                                      |
| Financial      Comparisons                                                |
| Consolidated      Average Balance Sheet, Interest Income/Expense andRates |
| (Dollars      in Thousands)                                               |

|  2008 | 2007 |
|------------|------|

|   |   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)                                         |   | $      | 219,000 |                                                                                                         |   | $      | 13,277 |       |    |   | 6.06   | %      |   | $      | 226,713 |   |   | $ | 13,946 |   |   |   | 6.15 | % |
|  Taxable      securities                                                                     |   |   | 104,698 |                                                                                                         |   |   | 6,349  |       |    |   | 6.06   |   |   |   | 84,304 |   |   |   | 5,050 |   |   |   | 5.99 |   |
|  Non-taxable      securities                                                                 |   |   | 3,182   |                                                                                                         |   |   | 192    |       |    |   | 6.03   |   |   |   | 3,442 |   |   |   | 206 |   |   |   | 5.98 |   |
|  Interest-bearing      deposits with    banks                            |   |   | 241     |                                                                                                         |   |   | 3      |       |    |   | 1.24   |   |   |   | 244 |   |   |   | 11 |   |   |   | 4.51 |   |
|  Federal      funds sold                                                                     |   |   | 1,038   |                                                                                                         |   |   | 25     |       |    |   | 2.41   |   |   |   | 2,291 |   |   |   | 121 |   |   |   | 5.28 |   |
|  Total      earning assets                                                                   |   |   | 328,159 |                                                                                                         |   |   | 19,846 |       |    |   | 6.05   |   |   |   | 316,994 |   |   |   | 19,334 |   |   |   | 6.10 |   |
|                                                                                              |   |   |    |                                                                                                         |   |   |   |       |    |   |   |   |   |   |   |   |   |
|  Non-interest-earning      assets                                                            |   |   |    |                                                                                                         |   |   |   |       |    |   |   |   |   |   |   |   |   |
|  Cash                                                                                        |   |   | 6,958   |                                                                                                         |   |   |   |       |    |   |   |   |   |   | 8,838 |   |   |   |   |   |   |   |   |   |
|  Allowance      for loan losses                                                              |   |   | (1,836  | )                                                                                                            |   |   |   |       |    |   |   |   |   |   | (1,856 | ) |   |   |   |   |   |   |   |   |
|  Other      assets                                                                           |   |   | 22,738  |                                                                                                         |   |   |   |       |    |   |   |   |   |   | 20,630 |   |   |   |   |   |   |   |   |   |
|  Total      non-interest-earning         assets |   |   | 27,860  |                                                                                                         |   |   |   |       |    |   |   |   |   |   | 27,612 |   |   |   |   |   |   |   |   |   |
|                                                                                              |   |   |    |                                                                                                         |   |   |   |       |    |   |   |   |   |   |   |   |   |
|  Total      assets                                                                           |   | $      | 356,019 |                                                                                                         |   |   |   |       |    |   |   |   |   | $      | 344,606 |   |   |   |   |   |   |   |   |   |
|                                                                                              |   |   |    |                                                                                                         |   |   |   |       |    |   |   |   |   |   |   |   |   |
| Liabilities      and Shareholders’ Equity                                                   |   |   |    |                                                                                                         |   |   |   |       |    |   |   |   |   |   |   |   |   |   |   |
|  Interest-bearing      deposits                                                              |   |   |    |                                                                                                         |   |   |   |       |    |   |   |   |   |   |   |   |   |
|     NOW      accounts                                                         |   | $      | 21,256  |                                                                                                         |   | $      | 33     |       |    |   | 0.16   | %      |   | $      | 21,459 |   |   | $ | 32 |   |   |   | 0.15 | % |
|     Money      Market accounts                                                |   |   | 22,500  |                                                                                                         |   |   | 235    |       |    |   | 1.04   |   |   |   | 22,777 |   |   |   | 251 |   |   |   | 1.10 |   |
|     Savings      deposits                                                     |   |   | 42,697  |                                                                                                         |   |   | 257    |       |    |   | 0.60   |   |   |   | 46,711 |   |   |   | 516 |   |   |   | 1.10 |   |
|  Time      deposits                                                                          |   |   | 117,148 |                                                                                                         |   |   | 4,144  |       |    |   | 3.54   |   |   |   | 137,842 |   |   |   | 5,908 |   |   |   | 4.30 |   |
|  Short-term      borrowings                                                                  |   |   | 24,480  |                                                                                                         |   |   | 460    |       |    |   | 1.87   |   |   |   | 6,171 |   |   |   | 313 |   |   |   | 5.10 |   |
|  Long-term      borrowings                                                                   |   |   | 20,027  |                                                                                                         |   |   | 921    |       |    |   | 4.60   |   |   |   | 5,699 |   |   |   | 259 |   |   |   | 4.54 |   |
|  Total      interest-bearing  liabilities                                          |   |   | 248,108 |                                                                                                         |   |   | 6,050  |       |    |   | 2.44   |   |   |   | 240,659 |   |   |   | 7,279 |   |   |   | 3.03 |   |
|                                                                                              |   |   |    |                                                                                                         |   |   |   |       |    |   |   |   |   |   |   |   |   |
| Non-interest-bearing      deposits                                                                |   |   | 67,250  |                                                                                                         |   |   |   |       |    |   |   |   |   |   | 65,319 |   |   |   |   |   |   |   |   |   |
| Otherliabilities                                                                                  |   |   | 2,628   |                                                                                                         |   |   |   |       |    |   |   |   |   |   | 1,484 |   |   |   |   |   |   |   |   |   |
| Shareholders'    equity                                                                           |   |   | 38,033  |                                                                                                         |   |   |   |       |    |   |   |   |   |   | 37,144 |   |   |   |   |   |   |   |   |   |
| Total      non-interest-bearing                                                                   |   |   |    |                                                                                                         |   |   |   |       |    |   |   |   |   |   |   |   |   |
| Funding sources                                                                                   |   |   | 107,911 |                                                                                                         |   |   |   |       |    |   |   |   |   |   | 103,947 |   |   |   |   |   |   |   |   |   |
|                                                                                              |   |   |    |                                                                                                         |   |   |   |       |    |   |   |   |   |   |   |   |   |
| Total liabilities      and                                                                        |   |   |    |                                                                                                         |   |   |   |       |    |   |   |   |   |   |   |   |   |
| shareholders'      equity                                                                         |   | $      | 356,019 |                                                                                                         |   |   |   |       |    |   |   |   |   | $      | 344,606 |   |   |   |   |   |   |   |   |   |
|                                                                                              |   |   |    |                                                                                                         |   |   |   |       |    |   |   |   |   |   |   |   |   |
|   Net      interest income and net                                                      |   |   |    |                                                                                                         |   |   |   |       |    |   |   |   |   |   |   |   |   |
| Yield      on interest earning assets                                                             |   |   |  $ |                       13,796 |   |   |   | 4.20  | %  |   |   |   |   |   |  $ | 12,055 |   |   |   | 3.80 |  % |                  |   |
|                                                                                              |   |   |    |                                                                                                         |   |   |   |       |    |   |   |   |   |   |   |   |   |

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

| (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 loanfees/costs. |
|-----------------|-----------------------------------------------------|

----

|   |   |
|--------|--------|

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

|                                      |   | 2008 Change from 2007 |   |
|-------------------------------------------|--------|-----------------------|--------|
|                                      |   | Total                 |   |   | Change      Due |   |   | Change      Due |   |
|                                      |   | Change                |   |   | To      Volume |   |   | To      Rate |   |
|                                      |   |                  |   |   |   |   |   |   |   |
| Interest-earning      assets              |   |                  |   |   |   |   |   |   |   |
| Loans      net of unearned income         |   | $                     | (669   | ) |   | $ | (474 | ) |   | $ | (195 | ) |
| Securities                                |   |                  |   |   |   |   |   |   |   |   |   |   |
|   Taxable                       |   |                  | 1,299  |   |   |   | 1,222 |   |   |   | 77 |   |
|   Non-taxable                   |   |                  | (14    | ) |   |   | (16 | ) |   |   | 2 |   |
| Interest-bearing      deposits with banks |   |                  | (8     | ) |   |   | - |   |   |   | (8 | ) |
| Federal      funds sold                   |   |                  | (96    | ) |   |   | (66 | ) |   |   | (30 | ) |
|                                      |   |                  |   |   |   |   |   |   |   |   |   |   |
| Total interest      income                |   |                  | 512    |   |   |   | 666 |   |   |   | (154 | ) |
|                                      |   |                  |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing      liabilities         |   |                  |   |   |   |   |   |   |   |   |   |   |
| Deposits                                  |   |                  | (2,037 | ) |   |   | (738 | ) |   |   | (1,299 | ) |
| Short-term      borrowings                |   |                  | 145    |   |   |   | 929 |   |   |   | (784 | ) |
| Long-term      borrowings                 |   |                  | 663    |   |   |   | 651 |   |   |   | 12 |   |
|                                      |   |                  |   |   |   |   |   |   |   |   | 1,22 |   |
| Total interest      expense               |   |                  | (1,229 | ) |   |   | 842 |   |   |   | (2,071 | ) |
|                                      |   |                  |   |   |   |   |   |   |   |   |   |   |
| Net      interest income                  |   | $                     | 1,741  |   |   | $ | (176 | ) |   | $ | 1,917 |   |
|                                      |   |                  |   |   |   |   |   |   |   |   |   |   |

----

|                                 |   |                |   |
|--------------------------------------|--------|---------------------|--------|
|                                 |   |                |   |
|                                 |   | Amount              |   |   | Percent |   |
|                                 |   | (in      thousands) |   |
| Remaining      maturity:             |   |                |   |   |   |   |
|                                 |   |                |   |   |   |   |
| 3      months or less                |   | $                   | 8,950  |   |   |   | 27 | % |
| Over      3 through 6 months         |   |                | 6,306  |   |   |   | 19 |   |
| Over      6 months through 12 months |   |                | 12,544 |   |   |   | 37 |   |
| Over      12 months                  |   |                | 5,622  |   |   |   | 17 |   |
|                                 |   |                |   |   |   |   |   |   |
|                                 |   |                |   |   |   |   |   |   |
| Total                                |   | $                   | 33,422 |   |   |   | 100 | % |
|                                 |   |                |   |   |   |   |   |   |

----

|                                  |   | Within   |   |   | One-Five |   |   | After      |   |   |        |   |
|---------------------------------------|--------|----------|--------|--------|----------|--------|--------|------------|--------|--------|-------------|--------|
|                                  |   | One Year |   |   | Years    |   |   | Five Years |   | Total  |        |   |
|                                  |   |     |   |   |     |   |   |       |   |   |        |   |
| Commercial      and industrial        |   | $        | 4,597  |   |     | $      | 9,839  |       |   | $      | 1,048       |   | $ | 15,484 |   |
| Real      estate-construction         |   |     | 1,062  |   |     |   | 13     |       |   |   | 1,012       |   |   | 2,087 |   |
| Other                                 |   |     | 1,229  |   |     |   | 1,702  |       |   |   |  6,565 |   |   | 9,496 |   |
|                                  |   |     |   |   |     |   |   |       |   |   |        |   |   |   |   |   |
| Totals                                |   | $        | 6,888  |   |     | $      | 11,554 |       |   | $      | 8,625       |   | $ | 27,067 |   |
|                                  |   |     |   |   |     |   |   |       |   |   |        |   |   |   |   |   |
|                                  |   |     |   |   |     |   |   |       |   |   |        |   |   |   |   |   |
| Loans      at fixed interest rates    |   |     |   |   |     | $      | 7,782  |       |   | $      | 8,625       |   |   |   |   |   |
| Loans      at variable interest rates |   |     |   |   |     |   | 3,772  |       |   |   | -           |   |   |   |   |   |
|                                  |   |     |   |   |     |   |   |       |   |   |        |   |   |   |   |   |
|                                  |   |     |   |   |     | $      | 11,554 |       |   | $      | 8,625       |   |   |   |   |   |

| Loans      by Classification at December 31, |
|----------------------------------------------|
| (in      thousands)                          |
|                                         |   |   |
|                                         |   | 2008 |   |   | 2007 |   |   | 2006 |   |   | 2005 |   |   | 2004 |   |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                   |   | $ | 15,484 |   |   | $ | 21,299 |   |   | $ | 18,188 |   |   | $ | 18,275 |   |   | $ | 15,933 |   |
| Real      estate – commercial          |   |   | 61,408 |   |   |   | 62,779 |   |   |   | 65,786 |   |   |   | 60,794 |   |   |   | 55,555 |   |
| Real      estate - construction              |   |   | 2,087 |   |   |   | 2,002 |   |   |   | 1,256 |   |   |   | 910 |   |   |   | 258 |   |
| Real      estate – other               |   |   | 124,992 |   |   |   | 127,781 |   |   |   | 128,364 |   |   |   | 115,294 |   |   |   | 107,819 |   |
| Consumer      - installment                  |   |   | 2,350 |   |   |   | 3,265 |   |   |   | 3,704 |   |   |   | 2,929 |   |   |   | 886 |   |
| Municipal                                    |   |   | 8,373 |   |   |   | 8,955 |   |   |   | 11,226 |   |   |   | 7,596 |   |   |   | 10,002 |   |
| Other                                        |   |   | 1,056 |   |   |   | 733 |   |   |   | 805 |   |   |   | 1,019 |   |   |   | 1,579 |   |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      loans                             |   |   | 215,750 |   |   |   | 226,814 |   |   |   | 229,329 |   |   |   | 206,817 |   |   |   | 192,032 |   |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      unamortized                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| costs/(fees)                                 |   |   | 183 |   |   |   | 191 |   |   |   | 199 |   |   |   | 222 |   |   |   | 223 |   |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      loans, net of                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  costs/(fees)                           |   | $ | 215,933 |   |   | $ | 227,005 |   |   | $ | 229,528 |   |   | $ | 207,039 |   |   | $ | 192,255 |   |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                             | Maturity      Distribution of Securities at December 31, 2008                                                                                                                    |                                                                                                                                                                      |
|----------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                             | (in      thousands)                                                                                                                                                              |                                                                                                                                                                      |
|                             |                                                                                                                                                                             |                                                                                                                                                                      |   |
|                             | U.S                                                                                                                                                                              | State      &                                                                                                                                                          | Total | Weighted |
|                             | Govt.                                                                                                                                                                            | Political                                                                                                                                                                 | Amortized | Average |
|                             | Agencies      (1)                                                                                                                                                                | Subdivisions      (2)                                                                                                                                                     | Cost | Yield |
|                             |                                                                                                                                                                             |                                                                                                                                                                      |   |   |
| Within      1 year               |                   $           - | $           -                                                                                                      |                 $          - |       -% |
| After      1 but within 5 years  | -                                                                                                                                                                                |    1,700                                                                                                                                                   | 1,700 |       5.24% |
| After      5 but within 10 years | -                                                                                                                                                                                | 1,000                                                                                                                                                                     | 1,000 | 7.88% |
| After      10 years              | 108,298                                                                                                                                                                          |                             - | 108,298 |       6.37% |
|                             |                                                                                                                                                                             |                                                                                                                                                                      |   |   |
|                             | $108,298                                                                                                                                                                         | $   2,700                                                                                                                                                  | $110,998 |      6.40% |
|                             |                                                                                                                                                                             |                                                                                                                                                                      |   |   |

|                                                                         | Fair      Values of Securities at December 31, |
|------------------------------------------------------------------------------|------------------------------------------------|
|                                                                         | (in      thousands)                            |
|                                                                         |                                           |   |
|                                                                         | 2008                                           | 2007 | 2006 |
|                                                                         |                                           |   |   |
| U.S      Govt. Agencies                                                      | $112,028                                       | $104,625 | $73,644 |
|                                                                         |                                           |   |   |
| Obligations      of State &   Political      Subdivisions | 2,743                                          | 5,335 | 5,352 |
|                                                                         |                                           |   |   |
|                                                                         | $114,771                                       | $109,960 | $78,996 |

----

|                                 |   | 0-30      Days |     |   | 31-90      Days |   |    | 91-180      Days |   |   | 181-365      Days |   |   | 1-5      Years |        |   | Over      5 Years |   |        | Totals |   |
|--------------------------------------|--------|----------------|----------|--------|-----------------|--------|---------|------------------|--------|--------|-------------------|--------|--------|----------------|-------------|--------|-------------------|--------|-------------|--------|--------|
| Interest-earning      assets:        |   |           |     |   |            |   |    |             |   |   |              |   |   |           |        |   |              |   |        |   |   |
| Securities                           |   | $              | 5,005    |   |            | $      | 15,768  |             |   | $      | 23,345            |   |   | $              | 25,241      |   |              | $      | 36,330      |   |   | $ | 5,309 |   |   | $ | 110,998 |   |
| Loans                                |   |           | 18,033   |   |            |   | 11,859  |             |   |   | 16,830            |   |   |           | 32,302      |   |              |   | 129,210     |   |   |   | 7,729 |   |   |   | 215,933 |   |
| Total      interest-sensitive        |   |           |     |   |            |   |    |             |   |   |              |   |   |           |        |   |              |   |        |   |   |   |   |   |   |   |   |   |
| Assets                               |   |           | 23,008   |   |            |   | 27,627  |             |   |   | 40,175            |   |   |           | 57,543      |   |              |   | 165,540     |   |   |   | 13,038 |   |   |   | 326,931 |   |
|                                 |   |           |     |   |            |   |    |             |   |   |              |   |   |           |        |   |              |   |        |   |   |   |   |   |   |   |   |   |
|                                 |   |           |     |   |            |   |    |             |   |   |              |   |   |           |        |   |              |   |        |   |   |   |   |   |   |   |   |   |
|                                 |   |           |     |   |            |   |    |             |   |   |              |   |   |           |        |   |              |   |        |   |   |   |   |   |   |   |   |   |
| Interest-bearing      liabilities:   |   |           |     |   |            |   |    |             |   |   |              |   |   |           |        |   |              |   |        |   |   |   |   |   |   |   |   |   |
| Certificates      of deposit         |   |           | 10,205   |   |            |   | 15,156  |             |   |   | 21,297            |   |   |           | 30,077      |   |              |   | 29,242      |   |   |   | 28 |   |   |   | 106,005 |   |
| Other      interest-bearing deposits |   |           | 34,201   |   |            |   | 239     |             |   |   | 358               |   |   |           | 716         |   |              |   | 34,199      |   |   |   | 14,302 |   |   |   | 84,015 |   |
| Short      term borrowings           |   |           | 31,175   |   |            |   | -       |             |   |   | -                 |   |   |           | -           |   |              |   | -           |   |   |   | - |   |   |   | 31,175 |   |
| Long      term borrowings            |   |           | -        |   |            |   | -       |             |   |   | -                 |   |   |           | 20,000      |   |              |   | 10,000      |   |   |   | - |   |   |   | 30,000 |   |
| Total      interest-sensitive        |   |           |     |   |            |   |    |             |   |   |              |   |   |           |        |   |              |   |        |   |   |   |   |   |   |   |   |   |
|    Liabilities        |   |           | 75,581   |   |            |   | 15,395  |             |   |   | 21,655            |   |   |           | 50,793      |   |              |   | 73,441      |   |   |   | 14,330 |   |   |   | 251,195 |   |
|                                 |   |           |     |   |            |   |    |             |   |   |              |   |   |           |        |   |              |   |        |   |   |   |   |   |   |   |   |   |
| Interest      sensitivity gap        |   | $              | (52,573  | )      |            | $      | 12,232  |             |   | $      | 18,520            |   |   | $              | 6,750       |   |              | $      | 92,099      |   |   | $ | (1,292 | ) |   | $ | 75,736 |   |
|                                 |   |           |     |   |            |   |    |             |   |   |              |   |   |           |        |   |              |   |        |   |   |   |   |   |   |   |   |   |
| Cumulative      gap                  |   | $              | ( 52,573 | )      |            | $      | (40,341 | )                |   | $      | (21,821           | )      |   | $              | (15,071     | )      |              | $      | 77,028      |   |   | $ | 75,736 |   |   |   |   |   |
|                                 |   |           |     |   |            |   |    |             |   |   |              |   |   |           |        |   |              |   |        |   |   |   |   |   |   |   |   |   |
| Ratio      of cumulative gap to      |   |           |     |   |            |   |    |             |   |   |              |   |   |           |        |   |              |   |        |   |   |   |   |   |   |   |   |   |
| Interest      sensitive assets       |   |           | (16.08   | %)     |            |   | (12.34  | %)               |   |   | (6.67             | %)     |   |           |  (4.61 | %)     |              |   |  23.56 | %      |   |   | 23.17 | % |   |   |   |   |
|                                 |   |           |     |   |            |   |    |             |   |   |              |   |   |           |        |   |              |   |        |   |   |   |   |   |   |   |   |   |

----

|                    | %      Change in projected | %      Change in projected    |
|-------------------------|----------------------------|-------------------------------|
| Change      in interest | Baseline                   | Economic                      |
| rates                   | net      interest income   | value      of capital         |
|                    |                       |                          |
|                    |                       |                          |
| +200      basis points  | 4.4%                       | (1.1%)                        |
| +100      basis points  | 3.7%                       |           3.7% |
|                    |                       |                          |
| -100      basis points  | 1.5%                       | (3.3%)                        |
| -200      basis points  | 0.6%                       | (3.3%)                        |

----

| Years Ended December 31, (Dollars      in thousands)   |   |
|-------------------------------------------------------------|--------|
|                                                        |   | 2008 |   |   | 2007 |   |   | 2006 |   |   | 2005 |   |   | 2004 |   |
|                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans      outstanding at end of the year,                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| net of unearned      income                                 |   | $ | 215,933 |   |   | $ | 227,005 |   |   | $ | 229,528 |   |   | $ | 207,039 |   |   | $ | 192,255 |   |
|                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Average      loans outstanding                        |   | $ | 219,000 |   |   | $ | 226,713 |   |   | $ | 218,944 |   |   | $ | 199,505 |   |   | $ | 187,918 |   |
|                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance      for loan losses:                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance,      beginning of year                             |   | $ | 1,869 |   |   | $ | 1,806 |   |   | $ | 1,636 |   |   | $ | 1,855 |   |   | $ | 2,462 |   |
|                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans      charged off:                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                                  |   |   | 39 |   |   |   | 48 |   |   |   | 47 |   |   |   | 105 |   |   |   | 251 |   |
| Consumer                                                    |   |   | 5 |   |   |   | 18 |   |   |   | 13 |   |   |   | 30 |   |   |   | 41 |   |
| Real      estate                                            |   |   | 31 |   |   |   | 0 |   |   |   | 0 |   |   |   | 20 |   |   |   | 69 |   |
| Total      loans charged off                                |   |   | 75 |   |   |   | 66 |   |   |   | 60 |   |   |   | 155 |   |   |   | 361 |   |
|                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Recoveries:                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                                  |   |   | 10 |   |   |   | 29 |   |   |   | 11 |   |   |   | 296 |   |   |   | 136 |   |
| Consumer                                                    |   |   | 2 |   |   |   | 10 |   |   |   | 9 |   |   |   | 5 |   |   |   | 10 |   |
| Real      estate                                            |   |   | 0 |   |   |   | 0 |   |   |   | 0 |   |   |   | 0 |   |   |   | 44 |   |
| Total      recoveries                                       |   |   | 12 |   |   |   | 39 |   |   |   | 20 |   |   |   | 301 |   |   |   | 190 |   |
|                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      loans charged off/(recovered)                      |   |   | 63 |   |   |   | 27 |   |   |   | 40 |   |   |   | (146 | ) |   |   | 171 |   |
| Provision      charged/(credited) to expense                |   |   | 15 |   |   |   | 90 |   |   |   | 210 |   |   |   | (365 | ) |   |   | (436 | ) |
|                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance,      end of year                                   |   | $ | 1,821 |   |   | $ | 1,869 |   |   | $ | 1,806 |   |   | $ | 1,636 |   |   | $ | 1,855 |   |
|                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratios:                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      (recoveries)/charge-offs as a                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| percentage of average      loans                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         outstanding |   |   | 0.03 | % |   |   | 0.01 | % |   |   | 0.02 | % |   |   | (0.07 | )% |   |   | 0.09 | % |
|                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance      for loan losses                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| as a percentage of average      loans                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| outstanding                                                 |   |   | 0.83 | % |   |   | 0.82 | % |   |   | 0.83 | % |   |   | 0.82 | % |   |   | 0.99 | % |

----

|                        |   | 2008   |   |   | 2007         |   |   | 2006   |   |   | 2005         |   |   | 2004   |   |
|-----------------------------|--------|--------|--------|--------|--------------|--------|--------|--------|--------|--------|--------------|--------|--------|--------|--------|
| (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                  |   | $      | 1,628  |   |         |   | 46     | %      |   | $      | 1,731        |   |   |   | 47     | % |   | $ | 1,668 |   |   |   | 47 | % |   | $ | 1,540 |   |   |   | 47 | % |   | $ | 1,771 |   |   |   | 42 | % |
| Residential                 |   |   | 145    |   |         |   | 53     |   |   |   | 104          |   |   |   | 52     |   |   |   | 97 |   |   |   | 52 |   |   |   | 63 |   |   |   | 52 |   |   |   | 58 |   |   |   | 56 |   |
| Consumer                    |   |   | 48     |   |         |   | 1      |   |   |   | 34           |   |   |   | 1      |   |   |   |  41 |   |   |   | 1 |   |   |   |  33 |   |   |   | 1 |   |   |   |  26 |   |   |   | 2 |   |
|                        |   |   |   |   |         |   |   |   |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                       |   | $      | 1,821  |   |         |   | 100    | %      |   | $      | 1,869        |   |   |   | 100    | % |   | $ | 1,806 |   |   |   | 100 | % |   | $ | 1,636 |   |   |   | 100 | % |   | $ | 1,855 |   |   |   | 100 | % |

| Dec.      31, 2008                  |                                                                                                                                                            |
|-------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Loans on non-accrual      basis     |                     $      29 |
| Loans past due 90 days or      more | -                                                                                                                                                               |
| Renegotiatedloans                   |     3,566                                                                                                                                   |
| Total                               | $  3,595                                                                                                                                              |
|                                |                                                                                                                                                            |
| Dec.      31, 2007                  |                                                                                                                                                            |
| Loans on non-accrual      basis     | $    156                                                                                                                                    |
| Loans past due 90 days or      more | -                                                                                                                                                               |
| Renegotiatedloans                   |       350                                                                                                                         |
| Total                               | $    506                                                                                                                                    |
|                                |                                                                                                                                                            |
| Dec.      31, 2006                  |                                                                                                                                                            |
| Loans on non-accrual      basis     | $    561                                                                                                                                    |
| Loans past due 90 days or      more | -                                                                                                                                                               |
| Renegotiatedloans                   |    2,823                                                                                                                                         |
| Total                               | $ 3,384                                                                                                                                                         |
|                                |                                                                                                                                                            |
| Dec.      31, 2005                  |                                                                                                                                                            |
| Loans on non-accrual      basis     | $      1,308                                                                                                                                                    |
| Loans past due 90 days or      more | 2                                                                                                                                                               |
| Renegotiatedloans                   |    2,860                                                                                                                                         |
| Total                               | $ 4,170                                                                                                                                                         |
|                                |                                                                                                                                                            |
| Dec.      31, 2004                  |                                                                                                                                                            |
| Loans on non-accrual      basis     | $      1,667                                                                                                                                                    |
| Loans past due 90 days or      more | 12                                                                                                                                                              |
| Renegotiatedloans                   |    3,083                                                                                                                                         |
| Total                               | $4,762                                                                                                                                                          |

----

|                            |   |   |   |   | Percent          |   |
|---------------------------------|--------|--------|--------|--------|------------------|--------|
|                            |   |   |   |   | of      Adjusted |   |
|                            |   | Amount |   |   | Assets           |   |
|                            |   |   |   |   |             |   |
| Tier I Capital                  |   | $      | 36,185 |   |             |   | 16.8 | % |
| Tier I Capital      Requirement |   |   | 8,643  |   |             |   | 4.0 |   |
|                            |   |   |   |   |             |   |   |   |
| Total Equity    Capital         |   | $      | 38,006 |   |             |   | 17.6 | % |
| Risk-Based      Requirement     |   |   | 17,286 |   |             |   | 8.0 |   |
|                            |   |   |   |   |             |   |   |   |
|                            |   |   |   |   |             |   |   |   |
| Leverage Capital                |   | $      | 36,185 |   |             |   | 10.0 | % |
| Leverage    Requirement         |   |   | 14,441 |   |             |   | 4.0 |   |

----

| Ferris      Baker Watts Inc           | Knight      Equity Capital Markets     |
|---------------------------------------|----------------------------------------|
| 100      Light Street                 | 525      Washington Boulevard          |
| Baltimore,      MD 21202              | Jersey      City, NJ 07310             |
| 800-638-7411                          | 800-544-7508                           |
|                                  |                                   |
|                                  |                                   |
| Citadel      Derivates Group          | Stifel      Nicolaus and Company, Inc. |
| 1315      Dearborn Street, 32nd Floor | 18      Columbia Turnpike              |
| Chicago,      IL 60603                | Florham      Park, NJ 07932            |
| 312-395-2010                          | 973-549-4200                           |
|                                  |                                   |
|                                  |                                   |
| UBS                                   | Boenning      & Scattergood        |
| 677      Washington Boulevard         | 4      Tower Bridge, Suite 300         |
| Stamford,      CT 06901               | 200      Bar Harbor Drive              |
| 203-719-7400                          | West      Conshohocken, PA 19428       |
|                                  | 610-862-5360                           |

----

----

|   | December      31,                                 |
|--------|---------------------------------------------------|
|   | 2008                                              |   | 2007 |
|   | (Dollars      in Thousands, Except per ShareData) |

| Cash      and due from banks                                                                      |   | $      | 7,111   |   |   | $      | 9,836   |   |
|---------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|
| Interest      bearing deposits with banks                                                         |   |   | 21      |   |   |   | 93      |   |
|                                                                                              |   |   |    |   |   |   |    |   |
| Cash      and Cash Equivalents                                                                    |   |   | 7,132   |   |   |   | 9,929   |   |
| Securities      available for sale                                                                |   |   | 114,771 |   |   |   | 109,960 |   |
| Restricted      investments in bank stock                                                         |   |   | 3,967   |   |   |   | 2,375   |   |
| Loans      receivable, net of allowance for loan losses of $1,821 in 2008 and $1,869      in 2007 |   |   | 214,112 |   |   |   | 225,136 |   |
| Premises      and equipment, net                                                                  |   |   | 3,549   |   |   |   | 3,728   |   |
| Accrued      interest receivable                                                                  |   |   | 1,117   |   |   |   | 1,174   |   |
| Investment      in life insurance                                                                 |   |   | 14,555  |   |   |   | 14,001  |   |
| Other      assets                                                                                 |   |   | 1,296   |   |   |   | 1,339   |   |

| Total      Assets |          $360,499 |   | $367,642 |
|-------------------|----------------------------------|--------|----------|

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

| Deposits:                  |                                                                                                                                                                          |   |                                                                                                                                      |
|----------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|
| Non-interest      bearing  | $         67,067                                                                                                                                               |   | $  64,914                                                                                                                       |
| Interestbearing            | 190,020                                                                                                                                                                       |   |                        228,605                       |
|                       |                                                                                                                                                                          |   |                                                                                                                                      |
| Total      Deposits        |                              257,087                       |   |                        293,519                       |
| Short-term      borrowings |                                31,175            |   |                          13,175            |
| Long-term      borrowings  |                                30,000            |   |                          20,000            |
| Other      liabilities     |                                  3,169 |   |                            2,487 |

| Total      Liabilities |                                321,431 |   |                          329,181 |
|------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------|

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

| Common      stock, par value $2 per share; authorized 10,000,000 shares; issued      3,600,000  shares; outstanding 2,880,953 and 3,028,813 shares in      2008 and 2007 |                                    7,200 |   |                             7,200 |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------|
| Retained      earnings                                                                                                                                                             |                                  41,616            |   |                           40,505            |
| Accumulated      other comprehensive income                                                                                                                                        |                                    2,490 |   |                             1,437 |
| Treasury      stock, at cost, 719,047 and 571,187 shares in 2008 and2007                                                                                                           |                                (12,238)                      |   |                          (10,681)                |

| Total      Shareholders’ Equity |                                   39,068 |   |                           38,461 |
|---------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------|

| Total      Liabilities and Shareholders’ Equity |                              $360,499 |   |                       $367,642 |
|-------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------|

----

|             Years      Ended December 31,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                   (In Thousands, Except      share      amounts                                  2008 |   |                               2007 |   |
|                      (In Thousands, Except per ShareAmounts)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |

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

| Interest      and fees on loans            |   |          $13,083                                                                                                                                                                                                                                | $13,724 |   |   |   |   |   |
|--------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|--------|--------|--------|--------|--------|
| Interest      and dividends on securities: |   |                                                                                                                                                                                                                                                           |    |   |   |   |   |   |
| Taxable                                    |   |                                           6,349                                 | 5,050   |   |   |   |   |   |
| Exempt from federal income      taxes      |   |                                              127                 | 136     |   |   |   |   |   |
| Other                                      |   |                                                28 | 132     |   |   |   |   |   |

| Total      Interest Income |   |   | 19,587 |   |   |   |   | 19,042 |   |   |
|----------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|

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

| Deposits                   |                                           4,669                 |   |                                         6,707                 |   |
|----------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Short-term      borrowings |                                              460 |   |                                            313 |   |
| Long-term      borrowings  |                                              921 |   |                                            259 |   |

| Total      Interest Expense |                                          6,050 |   |                                    7,279 |   |
|-----------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

| Net      Interest Income |                                        13,537 |   |                                       11,763 |   |
|--------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

| Provision      for Loan Losses |                                                15 |   |                                              90 |   |
|--------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

| Net      Interest Income after Provisionfor      Loan Losses |                                        13,522 |   |                                      11,673 |   |
|--------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

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

| Service      charges on deposit accounts      |                                             631        |   |                                          662                 |   |
|-----------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Other      service charges and fees           |                                             738        |   |                                          697                 |   |
| Net      security gains (losses)              |                                              (76) |   |                                             - |   |
| Trust      department income                  |                                          1,011                        |   |                                       1,029                                 |   |
| Income      from investment in life insurance |                                             601        |   |                                          590                 |   |
| Other      income                             |                                             190        |   |                                          149                 |   |

| Total      Other Operating Income |                                          3,095 |   |                                        3,127 |   |
|-----------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

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

| Salaries      and employee benefits |                                          5,745                 |   |                                        5,324                 |   |
|-------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Net      occupancy                  |                                             741 |   |                                           713 |   |
| Furniture      and equipment        |                                             551 |   |                                           522 |   |
| Professional      fees              |                                             427 |   |                                           453 |   |
| Pennsylvania      shares tax        |                                             530 |   |                                           542 |   |
| ATM  expenses             |                                             335 |   |                                           330 |   |
| Director      fees                  |                                             445 |   |                                           463 |   |
| Other      expenses                 |                                          2,232                 |   |                                        2,316                 |   |

| Total      Other Operating Expenses |                                        11,006 |   |                                      10,663 |   |
|-------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

| Income      before Income Taxes |                                           5,611 |   |                                        4,137 |   |
|---------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

| Income      Tax Expense |                                           1,587 |   |                                        1,072 |   |
|-------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

| Net      Income |                                        $4,024 |   |                                       $3,065 |   |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

| Earnings      per Share, Basic |                                          $1.36 |   |                                         $1.01 |   |
|--------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

----

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

| Balance      - December 31, 2006                                                                                                                                                                                              |                                       |              $7,200                                                                                      |                |             $39,869                                                                                                       |   | $566                                                                                                                                                                      |   | $  (10,406)                                                                                                                                   |   |                          $37,229                                 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|---------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Comprehensive      income:                                                                                                                                                                                                    |                                       |                                                                                                                                        |                |                                                                                                                                                    |   |                                                                                                                                                                      |   |                                                                                                                                                    |   |                                                                                                                                                            |
| Net income                                                                                                                                                                                                                    |                                       |                             - |                |                        3,065                                       |   |                                  - |   |                               - |   |                              3,065           |
| Change in unrealized net gains      on securitiesavailable for sale, net of      reclassificationadjustment and deferred income      taxes                                                                                    |                                       |                             - |                |                              -       |   |                               871                 |   |                               - |   |                                871 |
|                                                                                                                                                                                                                          |                                       |                                                                                                                                        |                |                                                                                                                                                    |   |                                                                                                                                                                      |   |                                                                                                                                                    |   |                                                                                                                                                            |
| Total Comprehensive      Income                                                                                                                                                                                               |                                       |                             - |                |                              -       |   |                                  - |   |                               - |   |                              3,065           |
|                                                                                                                                                                                                                          |                                       |                                                                                                                                        |                |                                                                                                                                                    |   |                                                                                                                                                                      |   |                                                                                                                                                    |   |                                                                                                                                                            |
| Cash dividends declared, $0.80      per share                                                                                                                                                                                 |                                       |                             - |                |                       (2,429)                                                |   |                                  - |   |                               - |   |                            (2,429)                     |
| Purchases of treasury stock      (368,613 shares)                                                                                                                                                                             |                                       |                             - |                |                              -       |   |                                  - |   |                         (275)                                 |   |                               (275)     |
|                                                                                                                                                                                                                          |                                       |                                                                                                                                        |                |                                                                                                                                                    |   |                                                                                                                                                                      |   |                                                                                                                                                    |   |                                                                                                                                                            |
| 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      reclassificationadjustment and 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                                             |

----

|   | Years      Ended December 31,                                                                                                                              |   |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   |                               2008 |   |                      2007 |   |
|   | (In      Thousands)                                                                                                                                        |   |

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

| Net      income                                                                                  |                                       $  4,024                                        |   |                                    $  3,065                                                                  |   |
|--------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Adjustments      to reconcile net income to net cash provided by Operating      activities: |                                                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                                                          |   |
| Depreciation and      amortization                                                               |                                              519             |   |                                            521                       |   |
| Provision for loan      losses                                                                   |                                                15  |   |                                              90            |   |
| Net accretion of securities and      loan fees                                                   |                                            (243)                       |   |                                          (133)                                 |   |
| Net security    losses                                                                           |                                                76       |   |                                                - |   |
| (Gain) loss on sale of      foreclosed real estate                                               |                                                (2) |   |                                         39            |   |
| Income from investment in life      insurance                                                    |                                            (601)                            |   |                                          (590)                                 |   |
| Deferred tax expense      (benefit)                                                              |                                             (17)                  |   |                                              77            |   |
| (Increase) decrease in accrued      interest receivable andother assets                          |                                               62        |   |                                            (93)                      |   |
| Decrease in accrued interest      payable and other  liabilities                       |                                             (376)                 |   |                                            (13)                      |   |

| Net      Cash Provided by Operating Activities | 3,457 |   |                                      2,963   |   |
|------------------------------------------------|-------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

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

| Purchases      of securities                                  | (39,902)                                                                                                                                                                                                                                                 |   |                                        (39,530)                                          |   |
|---------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Maturities,      calls and principal repayments of securities |        15,653                                                                                                                                                                                                                                       |   |                                          10,027                                     |   |
| Proceeds      from sales of securities                        |                                        21,211                                       |   |                                                - |   |
| Net      increase in restricted bank stock                    |                                         (1,591)                                |   |                                          (1,195)                               |   |
| Net      decrease in loans                                    |                                        10,998                                       |   |                                            2,390                     |   |
| Proceeds      from sale of foreclosed assets                  |                                               90 |   |                                               312     |   |
| Purchases      of premises and equipment                      |                                            (242)                     |   |                                              (264)         |   |

| Net      Cash Provided by (Used in) Investing Activities |                                           6,217 |   |                                         (28,260) |   |
|----------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

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

| Net      decrease in deposits              |                                       (36,432)            |   |                                              (401) |   |
|--------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Net      increase in short-term borrowings |                                         18,000  |   |                                             8,175       |   |
| Advances      of long-term borrowings      |                                         10,000  |   |                                           20,000                  |   |
| Dividends      paid                        |                                         (2,482) |   |                                           (2,429)                 |   |
| Purchases      of treasury stock           |                                         (1,557) |   |                                              (275) |   |

| Net      Cash (Used in) Provided by Financing Activities |                                       (12,471) |   |                                           25,070 |   |
|----------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

| Net      Decrease in Cash and Cash Equivalents |                                    (2,797) |   |                                             (227) |   |
|------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

| Cash and Cash Equivalents – Beginning |                                           9,929 |   |                                          10,156 |   |
|---------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

| Cash      and Cash Equivalents – Ending |                                       $  7,132 |   |                                        $  9,929 |   |
|-----------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                          |                                                                                                                                                                                                                     |   |                                                                                                                                                                                                                           |   |

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

| Interest      paid |                                       $  6,616 |   |                                        $  7,228 |   |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

| Income      taxes paid |                                       $  1,415 |   |                                        $  1,113 |   |
|------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

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

----

|   | Note      1 – Summary of Significant AccountingPolicies |
|--------|---------------------------------------------------------------|

----

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

----

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

----

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

|   | Allowance      for LoanLosses  (Continued) |
|--------|------------------------------------------------------|

----

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

----

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

----

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

----

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

----

|   | 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, 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 |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| December      31, 2007:                              |                                                                                                                                                                                 |   |                                                                                                                                                                                                                  |   |                                                                                                                                                                                                                                  |   |                                                                                                                                                                                       |
|------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Obligations of states and      politicalSubdivisions |                               $    5,319 |   |                                    $     62 |   |                                       $(46)                           |   |                                $    5,335 |
| Mortgage-backed      securities                      |                                102,464                  |   |                                      2,161                 |   |                                            - |   |                                  104,625            |

|   |                              $107,783 |   |                                    $2,223 |   |                                       $(46) |   |                                $109,960 |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | Due      within one year                    |                              $            - |   |                          $           - |
|--------|---------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Due      after one year through five years  |                                    1,700                                  |   |                                    1,734                                  |
|   | Due      after five years through ten years |                                    1,000                                  |   |                                    1,009                                  |
|   | Due      after ten years                    |                               108,298                                                              |   |                               112,028                                                              |

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

----

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

|   | (In      Thousands)         |
|--------|-----------------------------|
|   | December 31,      2007 |
|   | 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 | $        - |   | $    - |   | $2,323 |   | $(46) |   | $2,323 |   | $(46) |
|-------------------------------------------------------|----------------------------------------------------|--------|----------------------------|--------|--------|--------|-------|--------|--------|--------|-------|

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

|   |   |   | December      31,   |
|--------|--------|--------|---------------------|
|   |   |   | 2008                |   | 2007 |
|   |   |   | (In      Thousands) |

|   | Commercial      loans         |   |                                $  15,484                                       |   |                                     $  21,299                                             |
|--------|-------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Real      estate loans:       |   |                                                                                                                                                                                                                  |   |                                                                                                                                                                                                                                                      |
|   | Commercial                    |   |                                    61,408                            |   |                                         62,779                                  |
|   | Construction                  |   |                                      2,087                 |   |                                           2,002                       |
|   | Residential                   |   |                                 124,992                                             |   |                                        127,781                                       |
|   | Municipal      loans          |   |                                      8,373                 |   |                                            8,955                 |
|   | Consumer      and other loans |   |                                      3,406                 |   |                                            3,998                 |
|   | Net      unamortized costs    |   |                                         183 |   |                                               191 |

|   |   |   |                                $215,933 |   |                                       $227,005 |
|--------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   |   |   | Years      Ended December 31, |   |
|--------|--------|--------|-------------------------------|--------|
|   |   |   | 2008                          |   | 2007 |   |
|   |   |   | (In      Thousands)           |

|   | Balance,      January 1        |   |                                     $1,869                                       |   |                             $1,806                                            |   |
|--------|--------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   | Charge offs                    |   |                                           (75)     |   |                                  (66)           |   |
|   | Recoveries                     |   |                                            12 |   |                                    39 |   |
|   | Provision for loan      losses |   |                                            15 |   |                                    90 |   |

|   | Balance      at December 31 |   |                                     $1,821 |   |                              $1,869 |   |
|--------|-----------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

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

|   |                                                                                                         |   | December      31,                                                                                                                                                                                                                 |   |
|--------|--------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   |                                                                                                         |   |                  2008                                                                                                                                                      |   |                  2007 |
|   |                                                                                                         |   | (In      Thousands)                                                                                                                                                                                                               |
|   | Financial      instruments whose contract amounts represent credit risk:                                     |   |                                                                                                                                                                                                                              |   |   |
|   |       Commitments      to extend credit, including unused lines of credit      |   |                                   $29,952                                             |   |                                        $32,158 |
|   |       Standby      letters of credit                                           |   |                                           598 |   |                                               589 |
|   |       Financial      standby letters of credit                                 |   |                                        2,562                 |   |                                             2,562 |
|   | Commitments      to purchase securities:                                                                     |   |                                                                                                                                                                                                                              |   |   |
|   |       Commitments      to purchase GNMA Agency mortgage backed securities |   |                                      20,000                            |   |                                                    - |

----

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

|   |   |   | 2008                |   | 2007 |
|--------|--------|--------|---------------------|--------|------|
|   |   |   | (In      Thousands) |

|   | Land                                           |   |                     $      437            |   |                      $     437      |
|--------|------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|
|   | Premises                                       |   |                          5,789                 |   |                          5,789           |
|   | Leasehold      improvements                    |   |                             229 |   |                            229 |
|   | Furniture      and equipment                   |   |                          5,776                 |   |                         5,655                 |
|   |                                           |   |                                                                                                                                          |   |                                                                                                                                    |
|   |                                           |   |                       12,231                                  |   |                       12,110                            |
|   | Accumulated      depreciation and amortization |   |                        (8,682)                           |   |                        (8,382)                     |

|   |   |   |                     $  3,549 |   |                       $ 3,728 |
|--------|--------|--------|---------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------|

----

|   |   |   | 2008                |   | 2007 |
|--------|--------|--------|---------------------|--------|------|
|   |   |   | (In      Thousands) |

|   | Savings      accounts      |   |                                      $   40,201            |   |                                 $  45,229            |
|--------|----------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | NOW      accounts          |   |                                           20,132 |   |                                     21,718 |
|   | Money      market accounts |   |                                      23,682 |   |                                     21,023 |
|   | Time      deposits         |   |                                         106,005            |   |                                     40,635 |

|   |   |   |                                      $190,020 |   |                         $228,605 |
|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2009 |   |                            $  76,887                       |
|--------|------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 2010 |   |                                  8,476 |
|   | 2011 |   |                                13,407            |
|   | 2012 |   |                                  2,933 |
|   | 2013 |   |                                  4,302 |

|   |   |   |                            $106,005 |
|--------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------|

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

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

|   |   |   | Years      Ended December 31, |
|--------|--------|--------|-------------------------------|
|   |   |   | 2008                          |   | 2007 |
|   |   |   | (Dollars      in Thousands)   |

|   | Average      balance during the year                   |   |                          $24,480           |   |                $  6,171      |
|--------|--------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------|
|   | Average      interest rate during the year             |   |                            1.87% |   |                  5.07%       |
|   | Maximum      month-end balance                         |   |                          $40,000                |   |                $15,000                 |
|   | Weighted      average interest rate at end of the year |   |                            0.59% |   |                   4.32% |

----

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

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

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

|   |   |   | 2008                |   | 2007   |   |
|--------|--------|--------|---------------------|--------|--------|--------|
|   |   |   | (In      Thousands) |   |   |

|   | Unrealized      gains      on      securities available for sale |   |                              $1,671                                        |   |                          $1,320                                                  |   |
|--------|------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   | Less      reclassification adjustment for loss realized in income                              |   |                                    (76)      |   |                                   - |   |
|   |                                                                                           |   |                                                                                                                                                                                          |   |                                                                                                                                                                            |   |
|   | Net      Unrealized Gains                                                                      |   |                                 1,595                       |   |                             1,320                                 |   |
|   |                                                                                           |   |                                                                                                                                                                                          |   |                                                                                                                                                                            |   |
|   | Tax      effect                                                                                |   |                                     542 |   |                                449                 |   |
|   |                                                                                           |   |                                                                                                                                                                                          |   |                                                                                                                                                                            |   |
|   | Net      of Tax Amount                                                                         |   |                                $1,053                            |   |                             $  871                      |   |

----

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

|   | 2009       |                 $105                       |
|--------|------------|----------------------------------------------------------------------------------------------|
|   | 2010       |                     96 |
|   | 2011       |                     83 |
|   | 2012       |                     33 |
|   | 2013       |                     29 |
|   | Thereafter |                     78 |

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

|   |   | 2008                |   | 2007 |
|--------|--------|---------------------|--------|------|
|   |   | (In      Thousands) |

| Allowance      for loan losses                            |   |                            $    340                             |   |                               $ 335                                       |
|-----------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Accrued      benefits                                     |   |                                     50 |   |                                    58            |
| Intangible      assets                                    |   |                                     22 |   |                                    64            |
| Other                                                     |   |                                     11 |   |                                      7 |
|                                                      |   |                                                                                                                                                                                         |   |                                                                                                                                                                                              |
| Total      Deferred Tax Assets                            |   |                                   423            |   |                                  464                       |
|                                                      |   |                                                                                                                                                                                         |   |                                                                                                                                                                                              |
| Deferred      loan fees                                   |   |                                     68 |   |                                     71      |
| Securities      accretion                                 |   |                                     28 |   |                                     34      |
| Unrealized      net gain on securities available for sale |   |                               1,283                                  |   |                                    740           |
| Depreciation                                              |   |                                  282                  |   |                                     331     |
|                                                      |   |                                                                                                                                                                                         |   |                                                                                                                                                                                              |
| Total      Deferred Tax Liabilities                       |   |                               1,661                                  |   |                                  1,176                     |
|                                                      |   |                                                                                                                                                                                         |   |                                                                                                                                                                                              |
| Net      Deferred Tax Liability                           |   |                           $(1,238)                                                       |   |                                  $(712)                    |

|   |   |   | 2008                                                                                                                                                                                                                      |   | 2007 |
|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------|
|   |   |   |                                  (In      Thousands) |

|   | Current  |   |                         $1,604                                   |   |                               $   995                       |
|--------|----------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Deferred |   |                               (17) |   |                                      77 |
|   |     |   |                                                                                                                                                       |   |                                                                                                                                                                                               |
|   |     |   |                         $1,587                                   |   |                            $1,072                           |

----

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

|   |   |   | 2008                |   | 2007 |
|--------|--------|--------|---------------------|--------|------|
|   |   |   | (In      Thousands) |

|   | Tax      at statutory rates                   |   |                 $1,908                                                  |            34.0%      |   |             $1,407                                            |             34.0%                  |
|--------|-----------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------|------------------------------------------------|--------|---------------------------------------------------------------------------------------------|------------------------------------------------------------------|
|   | Increase      (decrease) resulting from:      |   |                                                                                                                      |                                           |   |                                                                                        |                                                             |
|   | Tax-exempt income                             |   |                     (171)                           |           (3.0%)           |   |                (192)                           |              (4.6%)           |
|   | Non-deductible interest      expense          |   |                         16      |             0.3% |   |                   22            |                0.5% |
|   | Increase in investment in life      insurance |   |                     (172)                           |           (3.1%)           |   |                (170)                           |              (4.1%)           |
|   | Other                                         |   |                          6 |            0.1%       |   |                     5 |                0.1% |
|   |                                          |   |                  $1,587                                            |          28.3%                  |   |              $1,072                                      |               25.9%      |

----

----

|                                         | December      31, 2008                                                                                                                  |   | December      31, 2007                                                                                                            |
|----------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------|
|                                         | Carrying      Amount                                                                                                                    |   | FairValue                                                                                                                         |   | Carrying      Amount |   | FairValue |
|                                         | (In      Thousands)                                                                                                                     |
| Financial      assets:                       |                                                                                                                                    |   |                                                                                                                              |   |   |   |   |
| Cash and short-term      investments         |                     $    7,132                |   |                    $    7,132                |   |                    $    9,929 |   |                   $    9,929 |
| Securities available for      sale           |                       114,771                           |   |                      114,771                           |   |                       109,960 |   |                109,960 |
| Restricted investments in bank      stock    |                           3,967     |   |                          3,967     |   |                           2,375 |   |                         2,375 |
| Net loans    receivable                      |                      214,112                                 |   |                     222,442                                 |   |                       225,136 |   |                     220,083 |
| Accrued interest      receivable             |                          1,117           |   |                         1,117           |   |                           1,174 |   |                         1,174 |
| Financial      liabilities:                  |                                                                                                                                    |   |                                                                                                                              |   |   |   |   |
| Deposits                                     |              $257,087                                                  |   |                  $258,190                                                  |   |                     $293,519 |   |                   $293,444 |
| Short-term    borrowings                     |                       31,175                            |   |                      31,175                            |   |                         13,175 |   |                       13,175 |
| Long-term    borrowings                      |                       30,000                            |   |                      30,585                            |   |                         20,000 |   |                       20,022 |
| Accrued interest      payable                |                            725 |   |                           725 |   |                           1,291 |   |                          1,291 |
|                                         |                                                                                                                                    |   |                                                                                                                              |   |   |   |   |
| 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, 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 |   |

| As      of December 31, 2007                                           |   |                                                                                 |   |                                          |   |                                                                                                  |   |                                           |   |                                                                                             |   |                  |   |
|-----------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------|--------|-----------------------------------------------|--------|-------------------------------------------------------------------------------------------------------|--------|------------------------------------------------|--------|--------------------------------------------------------------------------------------------------|--------|-----------------------|--------|
|      Total      capital (to risk-weighted assets)  |   |                  $38,425      |   |           17.6%           |   |                  $317,414                 |   |            38.0% |   |                  $321,767            |   | 310.0%           |   |
|      Tier      1 capital (to risk-weighted assets) |   |                   36,556 |   |           16.8            |   |                   3  8,707 |   |       34.0  |   |                    313,060 |   | 3  6.0 |   |
|      Tier      1 capital (to average assets)       |   |                   36,556 |   |             9.9 |   |                   314,688            |   |            34.0  |   |                    318,360 |   | 3  5.0 |   |

----

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

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

|   |   |   | December      31,   |
|--------|--------|--------|---------------------|
|   |   |   | 2008                |   | 2007 |
|   |   |   | (In      Thousands) |

|   | Assets                                                |   |                                                                                                                                                                                                                                  |   |                                                                                                                                                                                                                             |
|--------|-------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Cash                                                  |   |                                $        57                       |   |                               $          -             |
|   | Investment      in bank subsidiary                    |   |                                  39,016                                                        |   |                                    38,432                                       |
|   | Investment      in other subsidiaries                 |   |                                            - |   |                                           32 |
|   | Other      assets                                     |   |                                          15            |   |                                           27 |
|   |                                                  |   |                                                                                                                                                                                                                                  |   |                                                                                                                                                                                                                             |
|   | Total      Assets                                     |   |                                $39,088                                                                   |   |                                   $38,491                                            |
|   |                                                  |   |                                                                                                                                                                                                                                  |   |                                                                                                                                                                                                                             |
|   | Liabilities      and Shareholders’ Equity       |   |                                                                                                                                                                                                                                  |   |                                                                                                                                                                                                                             |
|   | Liabilities                                           |   |                                 $       20                       |   |                                 $       30                  |
|   | Shareholders’      equity                       |   |                                  39,068                                                        |   |                                    38,461                                       |
|   |                                                  |   |                                                                                                                                                                                                                                  |   |                                                                                                                                                                                                                             |
|   | Total      Liabilities and Shareholders’ Equity |   |                                $39,088                                                                   |   |                                  $38,491                                                  |

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

|   |   |   | Years      Ended December 31, |
|--------|--------|--------|-------------------------------|
|   |   |   | 2008                          |   | 2007 |
|   |   |   | (In      Thousands)           |

|   | Dividends      from bank subsidiary                               |   |                              $4,098                                                        |   |                                  $2,704                                                              |
|--------|-------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Fees      from bank subsidiary                                    |   |                                    457                       |   |                                       494                                   |
|   | Other      Income                                                 |   |                                        3 |   |                                           -             |
|   | Expenses                                                          |   |                                  (513)                                 |   |                                      (494)                                       |
|   |                                                              |   |                                                                                                                                                                                                          |   |                                                                                                                                                                                                                                        |
|   |                                                              |   |                                 4,045                                       |   |                                      2,704                                       |
|   | Income      (benefit) taxes                                       |   |                                     (17)                |   |                                             - |
|   |                                                              |   |                                                                                                                                                                                                          |   |                                                                                                                                                                                                                                        |
|   |                                                              |   |                                  4,062                                 |   |                                      2,704                                       |
|   | Equity      in (excess of) undistributed earnings of subsidiaries |   |                                     (38)                |   |                                         361                       |
|   |                                                              |   |                                                                                                                                                                                                          |   |                                                                                                                                                                                                                                        |
|   | Net      Income                                                   |   |                                $4,024                                            |   |                                    $3,065                                                  |

----

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

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

|   |   |   | Years      Ended December 31, |
|--------|--------|--------|-------------------------------|
|   |   |   | 2008                          |   | 2007 |
|   |   |   | (In      Thousands)           |

|   | Cash      Flows from Operating Activities                                                 |   |                                                                                                                                                                                                                                                                                                         |   |                                                                                                                                                                                                          |
|--------|-------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Net income                                                                                |   |                               $                                  4,024 |   |                              $ 3,065                                                       |
|   | Adjustments to reconcile net      income tonet cash provided by      operatingactivities: |   |                                                                                                                                                                                                                                                                                                         |   |                                                                                                                                                                                                          |
|   | (Equity in) excess of      undistributedearnings of subsidiaries                          |   |                                      38                                                                                                           |   |                                   (361)                           |
|   | (Increase) decrease in other      assets                                                  |   |                                      44                                                                                                           |   |                                       (6)     |
|   | Increase (decrease) in      liabilities                                                   |   |                                    (10)                                                                                                                     |   |                                   6 |
|   |                                                                                      |   |                                                                                                                                                                                                                                                                                                         |   |                                                                                                                                                                                                          |
|   | Net      Cash Provided by Operating Activities                                            |   |                                4,096                                                                                                                                            |   |                                 2,704                                       |
|   |                                                                                      |   |                                                                                                                                                                                                                                                                                                         |   |                                                                                                                                                                                                          |
|   | Cash      Flows from Financing Activities                                                 |   |                                                                                                                                                                                                                                                                                                         |   |                                                                                                                                                                                                          |
|   | Dividends paid                                                                            |   |                               (2,482)                                                                                                                                                |   |                                (2,429)                                           |
|   | Purchase of treasury      stock                                                           |   |                               (1,557)                                                                                                                                                |   |                                   (275)                           |
|   |                                                                                      |   |                                                                                                                                                                                                                                                                                                         |   |                                                                                                                                                                                                          |
|   | Net      Cash Used in Financing Activities                                                |   |                               (4,039)                                                                                                                                                |   |                                (2,704)                                           |
|   |                                                                                      |   |                                                                                                                                                                                                                                                                                                         |   |                                                                                                                                                                                                          |
|   | Net      Increase (Decrease) in Cash                                                      |   |                                     57                                                                                                                 |   |                                        - |
|   |                                                                                      |   |                                                                                                                                                                                                                                                                                                         |   |                                                                                                                                                                                                          |
|   | Cash      – Beginning                                                               |   |                                       -                                                                                                      |   |                                       -       |
|   |                                                                                      |   |                                                                                                                                                                                                                                                                                                         |   |                                                                                                                                                                                                          |
|   | Cash      – Ending                                                                  |   |                          $         57                                                                                                                                 |   |                              $        -            |

----