<PAGE>   1

                                   EXHIBIT 13


                  PORTIONS OF THE ANNUAL REPORT TO STOCKHOLDERS
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999



                                      -1-
<PAGE>   2



                               CCFNB BANCORP, INC.

                                 AND SUBSIDIARY

                               1999 ANNUAL REPORT



                                      -2-
<PAGE>   3


CCFNB BANCORP, INC. AND SUBSIDIARY

         CCFNB Bancorp, Inc. (the "Corporation") is a registered bank holding
company and organized under the Pennsylvania business corporation law. The
assets are primarily those of its wholly owned subsidiary, the Columbia County
Farmers National Bank.

         The Columbia County Farmers National Bank is a full service
nationally-chartered financial institution serving customers from six locations
in Columbia County; namely Orangeville, Bloomsburg, Benton, South Centre,
Millville and Lightstreet. The deposits of the Bank are insured by the FDIC to
the maximum extent provided by law.

         A copy of the Corporation's Annual Report for the year ended December
31, 1999, on Form 10-K as filed with the SEC will be furnished without charge
upon written request to Mr. Paul E. Reichart, President and Chief Executive
Officer, Columbia County Farmers National Bank, 232 East Street, Bloomsburg,
Pennsylvania 17815.

CONSOLIDATED SELECTED FINANCIAL DATA
(In thousands of dollars, except per share data and ratios)

<TABLE>
<CAPTION>
                                                                       1999             1998              1997
                                                                       ----             ----              ----

EARNINGS
<S>                                                                 <C>               <C>              <C>
     Interest income............................................    $ 12,669          $ 12,444         $ 12,487
     Interest expense...........................................       6,099             6,072            5,976
     Provision for loan losses..................................          78                78               60
     Investment securities gains................................          39                64               57
     Net income.................................................    $  2,039          $  1,902         $  2,025

PER SHARE
     Net income.................................................    $   1.48          $   1.38         $   1.47
     Cash dividends.............................................         .51               .46              .46

BALANCES AT DECEMBER 31
     Assets.....................................................    $196,122          $185,258         $173,866
     Investment securities......................................      49,104            48,151           43,862
     Net loans..................................................     133,438           117,604          118,144
     Deposits...................................................     138,606           137,679          127,719
     Stockholders' equity.......................................      23,047            23,480           22,105

RATIOS
     Return on average assets...................................       1.09%             1.07%            1.18%
     Return on average equity...................................       8.91%             8.54%            9.79%
     Dividend payout ratio......................................      34.23%            33.59%           31.65%
</TABLE>


<TABLE>
<CAPTION>
CONTENTS
<S>                                                                                                         <C>
Message to shareholders..............................................................................       1
Consolidated balance sheets..........................................................................       2
Consolidated statements of income....................................................................       3
Consolidated statements of stockholders' equity......................................................       4
Consolidated statements of cash flows................................................................       5
Notes to consolidated financial statements...........................................................      6-20
Report of Independent Certified Public Accountants...................................................       21
Management's discussion and analysis of financial condition and results of operations................     22-36
</TABLE>



                                      -3-
<PAGE>   4


CCFNB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998


<TABLE>
<CAPTION>
                                                                                    1999                1998
                                                                                    ----                ----
<S>                                                                                <C>                <C>
ASSETS
Cash and due from banks.....................................................       5,855,083          5,104,807
Interest-bearing deposits with other banks..................................         216,734          6,381,236
Federal funds sold..........................................................               0          1,000,000
Investment securities:
     Securities Available-for-Sale..........................................      48,903,638         47,586,027
     Securities to be Held-to-Maturity (estimated
     fair value 1999, $200,138; 1998, $569,076).............................         200,000            565,000
Loans, net of unearned income...............................................     134,422,848        118,558,382
Allowance for loan losses...................................................         985,165            954,516
                                                                                ------------       ------------
     Net loans..............................................................    $133,437,683       $117,603,866
Premises and equipment......................................................       5,273,947          5,649,537
Other real estate owned.....................................................               0             23,989
Accrued interest receivable.................................................       1,002,517            831,914
Other assets................................................................       1,232,221            511,256
                                                                                ------------       ------------
     TOTAL ASSETS...........................................................    $196,121,823       $185,257,632
                                                                                ============       ============


LIABILITIES AND STOCKHOLDERS' EQUITY


LIABILITIES
Deposits:
     Non-interest bearing...................................................    $ 13,672,023       $ 13,315,596
     Interest bearing.......................................................     124,933,614        124,363,740
                                                                                ------------       ------------
         Total Deposits.....................................................    $138,605,637       $137,679,336
Short-term borrowings.......................................................      30,880,378         20,418,105
Long-term borrowings........................................................       2,343,744          2,290,703
Accrued interest and other expenses.........................................       1,230,972          1,176,107
Other liabilities...........................................................          13,963            213,669
                                                                                ------------       ------------
         TOTAL LIABILITIES..................................................    $173,074,694       $161,777,920
                                                                                ------------       ------------

STOCKHOLDERS' EQUITY
Common stock, par value $1.25 per share; authorized
     5,000,000 shares; issued 1,367,651 shares 1999;
        1,382,433 shares 1998...............................................    $  1,709,564       $  1,728,041
Surplus.....................................................................       5,483,515          5,849,157
Retained earnings...........................................................      17,013,997         15,670,223
Accumulated other comprehensive income......................................      (1,159,947)           447,551
Less: Treasury stock at cost, 6,976 shares 1998.............................               0           (215,260)
                                                                                ------------       ------------
         TOTAL STOCKHOLDERS' EQUITY.........................................    $ 23,047,129       $ 23,479,712
                                                                                ------------       ------------
         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.........................    $196,121,823       $185,257,632
                                                                                ============       ============
</TABLE>


The accompanying notes are an integral part of these consolidated financial
statements.


                                      -4-
<PAGE>   5


CCFNB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


<TABLE>
<CAPTION>
                                                                       1999             1998              1997
                                                                       ----             ----              ----
<S>                                                                <C>               <C>               <C>
INTEREST INCOME
Interest and fees on loans....................................     $ 9,707,599       $ 9,584,559       $ 9,823,607
Interest and dividends on investment securities:
     Taxable..................................................       2,021,448         1,867,265         1,812,883
     Tax-exempt...............................................         689,029           656,654           513,112
     Dividends................................................          80,687            74,118            61,572
Federal funds sold............................................          38,880            32,336           124,019
Deposits in other banks.......................................         131,729           229,324           151,586
                                                                   -----------       -----------       -----------
         TOTAL INTEREST INCOME................................     $12,669,368       $12,444,256       $12,486,779
                                                                   -----------       -----------       -----------

INTEREST EXPENSE
Deposits .....................................................     $ 4,953,724       $ 4,910,321       $ 4,911,541
Short-term borrowings.........................................       1,014,511         1,046,161         1,048,645
Long-term borrowings..........................................         130,408           115,143            16,035
                                                                   -----------       -----------       -----------
         TOTAL INTEREST EXPENSE...............................     $ 6,098,643       $ 6,071,625       $ 5,976,221
                                                                   -----------       -----------       -----------

Net interest income...........................................     $ 6,570,725       $ 6,372,631       $ 6,510,558
Provision for loan losses.....................................          78,000            78,000            60,000
                                                                   -----------       -----------       -----------
     NET INTEREST INCOME AFTER PROVISION
         FOR LOAN LOSSES......................................     $ 6,492,725       $ 6,294,631       $ 6,450,558
                                                                   -----------       -----------       -----------

NON-INTEREST INCOME
Service charges and fees......................................     $   611,625       $   579,338       $   523,050
Trust department..............................................         189,271           143,838           103,189
Other.........................................................         210,247           193,479           132,283
Investment securities gains, net..............................          38,707            64,419            57,326
                                                                   -----------       -----------       -----------
         TOTAL NON-INTEREST INCOME............................     $ 1,049,850       $   981,074       $   815,848
                                                                   -----------       -----------       -----------

NON-INTEREST EXPENSE
Salaries......................................................     $ 1,905,185       $ 1,885,446       $ 1,817,389
Pensions and other employee benefits..........................         629,957           563,266           522,388
Occupancy, net................................................         338,684           334,072           375,379
Equipment.....................................................         597,073           556,302           420,271
Other.........................................................       1,347,700         1,399,941         1,356,706
                                                                   -----------       -----------       -----------
         TOTAL NON-INTEREST EXPENSE...........................     $ 4,818,599       $ 4,739,027       $ 4,492,133
                                                                   -----------       -----------       -----------

Income before income taxes....................................     $ 2,723,976       $ 2,536,678       $ 2,774,273
Income tax expense............................................         684,739           634,278           748,777
                                                                   -----------       -----------       -----------
         NET INCOME...........................................     $ 2,039,237       $ 1,902,400       $ 2,025,496
                                                                   ===========       ===========       ===========

PER SHARE DATA
Net income....................................................     $      1.48       $      1.38       $      1.47
                                                                   -----------       -----------       -----------
Cash dividends................................................     $       .51       $       .46       $       .46
                                                                   -----------       -----------       -----------
Weighted average shares outstanding...........................       1,375,572         1,378,339         1,381,800
</TABLE>


The accompanying notes are an integral part of these consolidated financial
statements.



                                      -5-
<PAGE>   6


CCFNB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                                                              Accumulated
                                                                                                 Other
                                              Common               Comprehensive  Retained    Comprehensive  Treasury
                                              Stock     Surplus       Income      Earnings    Income (Loss)    Stock       Total
                                              -----     -------       -------     --------    -------------    -----       -----
<S>                                         <C>         <C>         <C>          <C>          <C>            <C>        <C>
BALANCE AT DECEMBER 31, 1996.............   $1,727,139  $5,838,453               $13,022,498  $    68,791    $       0  $20,656,881

Comprehensive income;
    Net income...........................            0           0  $ 2,025,496    2,025,496            0            0    2,025,496
    Change in net unrealized gain on
        investment securities
        available-for-sale, net of
        reclassification adjustment and
        tax effects......................            0           0       73,210            0       73,210            0       73,210
                                                                    -----------
    Total comprehensive income                                      $ 2,098,706
                                                                    ===========
Issuance of 6,814 shares of common stock
    under dividend reinvestment and
    stock purchase plans.................        8,517     130,543                         0            0            0      139,060
Purchase of 7,275 shares of treasury
    stock................................            0           0                         0            0     (148,770)    (148,770)
Retirement of 6,092 shares of treasury
    stock ...............................       (7,615)   (114,608)                        0            0      122,223            0
Cash dividends $.46 per share............            0           0                  (641,064)           0            0     (641,064)
                                            ----------  ----------               -----------  -----------    ---------  -----------

BALANCE AT DECEMBER 31, 1997.............   $1,728,041  $5,854,388               $14,406,930  $   142,001    $ (26,547) $22,104,813

Comprehensive income:
    Net income...........................            0           0  $ 1,902,400    1,902,400            0            0    1,902,400
    Change in net unrealized gain on
        investment securities
        available-for-sale, net of
        reclassification adjustment and
        tax effects......................            0           0      305,550            0      305,550            0      305,550
                                                                    -----------
    Total comprehensive income                                      $ 2,207,950
                                                                    ===========
Issuance of 5,013 shares of common stock
    under dividend reinvestment and stock
    purchase plans.......................        6,266     135,224                         0            0            0      141,490
Sale of 453 shares of treasury stock.....            0         (66)                        0            0        9,747        9,681
Purchase of 11,259 shares of treasury
    stock ...............................            0           0                         0            0     (345,115)    (345,115)
Retirement of 5,013 shares of treasury
    stock ...............................       (6,266)   (140,389)                        0            0      146,655            0
Cash dividends $.46 per share............            0           0                  (639,107)           0            0     (639,107)
                                            ----------  ----------               -----------  -----------    ---------  -----------

BALANCE AT DECEMBER 31, 1998.............   $1,728,041  $5,849,157               $15,670,223  $   447,551    $(215,260) $23,479,712

Comprehensive income :
    Net income...........................            0           0  $ 2,039,237    2,039,237            0            0    2,039,237
    Change in net unrealized gain (loss)
        on investment securities
        available-for-sale, net of
        reclassification adjustment
        and tax effects..................            0           0   (1,607,498)           0   (1,607,498)           0   (1,607,498)
                                                                    -----------
    Total comprehensive income                                      $   431,739
                                                                    ===========
Issuance of 7,345 shares of common stock
    under dividend reinvestment and stock
    purchase plans.......................        9,181     139,401                         0            0            0      148,582
Sale of 549 shares of treasury stock.....            0      (4,809)                        0            0       17,843       13,034
Purchase of 15,700 shares of treasury
    stock ...............................            0           0                         0            0     (330,475)    (330,475)
Retirement of 22,127 shares of treasury
    stock ...............................      (27,658)   (500,234)                        0            0      527,892            0
Cash dividends $.51 per share............            0           0                  (695,463)           0            0     (695,463)
                                            ----------  ----------               -----------  -----------    ---------  -----------

BALANCE AT DECEMBER 31, 1999.............   $1,709,564  $5,483,515               $17,013,997  $(1,159,947)   $       0  $23,047,129
                                            ==========  ==========               ===========  ===========    =========  ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.


                                      -6-
<PAGE>   7


CCFNB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                                                             1999           1998           1997
                                                                                             ----           ----           ----
<S>                                                                                       <C>            <C>            <C>
OPERATING ACTIVITIES
Net income     ......................................................................   $  2,039,237   $  1,902,400   $  2,025,496
Adjustments to reconcile net income to net cash provided by
    operating activities:
        Provision for loan losses....................................................         78,000         78,000         60,000
        Depreciation and amortization................................................        515,511        516,947        373,307
        Premium amortization on investment securities................................         72,948         92,031         21,995
        Discount accretion on investment securities..................................        (22,631)       (38,746)       (27,084)
        Deferred income taxes (benefit)..............................................         18,469        (14,828)        20,331
        (Gain) on sales of investment securities Available-for-Sale..................        (38,707)       (64,419)       (57,326)
        (Gain) on sale of premises and equipment.....................................              0              0         (1,623)
        Loss on impairment of bank premises..........................................              0              0         20,000
        (Gain) on sale of other real estate..........................................         (1,285)             0              0
        (Increase) decreases in accrued interest receivable..........................       (170,603)       105,783         27,234
        (Increase) in other assets - net.............................................        (87,181)       (51,899)       (96,013)
        Increase in accrued interest and other expenses..............................         54,865         35,367         82,773
        Increase (decrease) in other liabilities - net...............................        (19,504)       (23,808)        36,826
                                                                                        ------------   ------------   ------------
               NET CASH PROVIDED BY OPERATING ACTIVITIES ............................   $  2,439,119   $  2,536,828   $  2,485,916
                                                                                        ------------   ------------   ------------

INVESTMENT ACTIVITIES
Purchase of investment securities Available-for-Sale.................................   $(16,063,486)  $(38,178,221)  $(25,177,358)
Proceeds from sales, maturities and redemption of investment securities
    Available-for-Sale...............................................................     12,294,313     34,204,431     18,647,390
Proceeds from maturities and redemption of investment securities
    Held-to-Maturity.................................................................        365,000        155,000        250,000
Net (increase) decrease in loans.....................................................    (15,979,778)       437,824     (3,524,606)
Purchases of premises and equipment..................................................       (139,921)    (1,020,309)      (266,185)
Proceeds from sale of premises and equipment.........................................              0              0         22,850
Proceeds from sale of other real estate..............................................         93,234              0              0
                                                                                        ------------   ------------   ------------
               NET CASH (USED) IN INVESTING ACTIVITIES...............................   $(19,430,638)  $ (4,401,275)  $(10,047,909)
                                                                                        ------------   ------------   ------------

FINANCING ACTIVITIES
Net increase (decrease) in deposits..................................................   $    926,301   $  9,960,227   $ (3,680,927)
Net increase (decrease) in short-term borrowings.....................................     10,462,273     (1,944,400)     5,708,524
Proceeds from long-term borrowings                                                            61,560      2,071,628        225,000
Repayment of long-term borrowings....................................................         (8,519)      (220,712)       (82,199)
Proceeds from sale of treasury stock.................................................         13,034          9,681              0
Acquisition of treasury stock........................................................       (330,475)      (345,115)      (148,770)
Proceeds from issuance of common stock...............................................        148,582        141,490        139,060
Cash dividends paid..................................................................       (695,463)      (639,107)      (641,064)
                                                                                        ------------   ------------   ------------
               NET CASH PROVIDED BY FINANCING ACTIVITIES.............................   $ 10,577,293   $  9,033,692   $  1,519,624
                                                                                        ------------   ------------   ------------

               INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS......................   $ (6,414,226)  $  7,169,245   $ (6,042,369)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.......................................     12,486,043      5,316,798     11,359,167
                                                                                        ------------   ------------   ------------
    CASH AND CASH EQUIVALENTS AT END OF YEAR.........................................   $  6,071,817   $ 12,486,043   $  5,316,798
                                                                                        ============   ============   ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
    Interest   ......................................................................   $  6,054,137   $  6,059,842   $  5,984,797
    Income taxes.....................................................................   $    680,106   $    606,446   $    795,855
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.



                                      -7-
<PAGE>   8

CCFNB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         The accounting and reporting policies of CCFNB Bancorp, Inc. and
Subsidiary (the "Corporation") are in accordance with generally accepted
accounting principles and conform to common practices within the banking
industry. The more significant policies follow:

         PRINCIPLES OF CONSOLIDATION

         The consolidated financial statements include the accounts of CCFNB
Bancorp, Inc. and its wholly owned subsidiary, Columbia County Farmers National
Bank (the "Bank"). All significant inter-company balances and transactions have
been eliminated in consolidation.

         NATURE OF OPERATIONS & LINES OF BUSINESS

         The Corporation provides full banking services, including trust
services, through the Bank, to individuals and corporate customers. The Bank has
six offices covering an area of approximately 484 square miles in Northeastern
Pennsylvania. The Corporation and its banking subsidiary are subject to
regulation of the Office of the Comptroller of the Currency, The Federal Deposit
Insurance Corporation and the Federal Reserve Bank of Philadelphia.

         Gathering deposits and making loans are the major lines of business.
The deposits are mainly deposits of individuals and small businesses and the
loans are mainly real estate loans covering primary residences and small
business enterprises. The trust services, under the name of CCFNB and Co.,
include administration of various estates, pension plans, self-directed IRA's
and other services. A third-party brokerage arrangement, Invest, is also
resident in the main branch, namely Bloomsburg. This Invest Financial Service
offers a full line of stocks, bonds and other non-insured financial services.

         USE OF ESTIMATES

         The preparation of these consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
these consolidated financial statements and the reported amounts of income and
expenses during the reporting periods. Actual results could differ from those
estimates.

         INVESTMENT SECURITIES

         The Corporation classifies its investment securities as either
"Held-to-Maturity" or "Available-for-Sale" at the time of purchase. Debt
securities are classified as Held-to-Maturity when the Corporation has the
ability and positive intent to hold the securities to maturity. Investment
securities Held-to-Maturity are carried at cost adjusted for amortization of
premiums and accretion of discounts to maturity.

         Debt securities not classified as Held-to-Maturity and equity
securities included in the Available-for-Sale category, are carried at fair
value, and the amount of any unrealized gain or loss net of the effect of
deferred income taxes is reported as other comprehensive income in the
Consolidated Statement of Stockholders' Equity. Management's decision to sell
Available-for-Sale securities is based on changes in economic conditions
controlling the sources and uses of funds, terms, availability of and yield of
alternative investments, interest rate risk, and the need for liquidity.

         The cost of debt securities classified as Held-to-Maturity or
Available-for-Sale is adjusted for amortization of premiums and accretion of
discounts to maturity. Such amortization and accretion, as well as interest and
dividends, is included in interest income from investments. Realized gains and
losses are included in net investment securities gains. The cost of investment
securities sold, redeemed or matured is based on the specific identification
method.


                                      -8-
<PAGE>   9

         LOANS

         Loans are stated at their outstanding principal balances, net of
deferred fees or costs, unearned income, and the allowance for loan losses.
Interest on loans is accrued on the principal amount outstanding, primarily on
an actual day basis. Non-refundable loan fees and certain direct costs are
deferred and amortized over the life of the loans using the interest method. The
amortization is reflected as an interest yield adjustment, and the deferred
portion of the net fees and costs is reflected as a part of the loan balance.

         Non-Accrual Loans - Generally, a loan is classified as non-accrual,
with the accrual of interest on such a loan discontinued when the contractual
payment of principal or interest has become 90 days past due or management has
serious doubts about further collectibility of principal or interest, even
though the loan currently is performing. A loan may remain on accrual status if
it is in the process of collection and is either guaranteed or well secured.
When a loan is placed on non-accrual status, unpaid interest credited to income
in the current year is reversed, and unpaid interest accrued in prior years is
charged against the allowance for credit losses. Certain non-accrual loans may
continue to perform, that is, payments are still being received with those
payments generally applied to principal. Non-accrual loans remain under constant
scrutiny and if performance continues, interest income may be recorded on a cash
basis based on management's judgement as to collectibility of principal.

         Allowance for Loan Losses - The allowance for loan losses is
established through provisions for loan losses charged against income. Loans
deemed to be uncollectible are charged against the allowance for loan losses,
and subsequent recoveries, if any, are credited to the allowance. A factor in
estimating the allowance for loan losses is the measurement of impaired loans. A
loan is considered impaired when, based on current information and events, it is
probable that the Corporation will be unable to collect all amounts due
according to the contractual terms of the loan agreement. Under current
accounting standards, the allowance for loan losses related to impaired loans is
based on discounted cash flows using the loan's effective interest rate or the
fair value of the collateral for certain collateral dependent loans.

         The allowance for loan losses is maintained at a level established by
management to be adequate to absorb estimated potential loan losses.
Management's periodic evaluation of the adequacy of the allowance for loan
losses is based on the Corporation's past loan loss experience, known and
inherent risks in the portfolio, adverse situations that may affect the
borrower's ability to repay (including the timing of future payments), the
estimated value of any underlying collateral, composition of the loan portfolio,
current economic conditions, and other relevant factors. This evaluation is
inherently subjective as it requires material estimates, including the amounts
and timing of future cash flows expected to be received on impaired loans that
may be susceptible to significant change.

         PREMISES AND EQUIPMENT

         Premises and equipment are stated at cost less accumulated depreciation
computed principally on the straight-line method over the estimated useful lives
of the assets. Maintenance and minor repairs are charged to operations as
incurred. The cost and accumulated depreciation of the premises and equipment
retired or sold are eliminated from the property accounts at the time of
retirement or sale, and the resulting gain or loss is reflected in current
operations.

         OTHER REAL ESTATE OWNED

         Other real estate owned is comprised of property acquired through a
foreclosure proceeding or acceptance of a deed-in-lieu of foreclosure and loans
classified as in-substance foreclosure. In accordance with Statement of
Financial Accounting Standards (SFAS) No. 114, a loan is classified as
in-substance foreclosure when the Corporation has taken possession of the
collateral regardless of whether formal foreclosure proceedings take place.
Other real estate owned is recorded at fair value at the date of foreclosure,
establishing a new cost basis. After foreclosure, valuations are periodically
performed by management, and the real estate is carried at the lower of (1) cost
or (2) fair value minus estimated costs to sell. Income and expenses from
operations of other real estate owned and changes in the valuation allowance are
included in loss on other real estate owned.


                                      -9-
<PAGE>   10

         INCOME TAXES

         The provision for income taxes is based on the results of operations,
adjusted primarily for tax-exempt income. Certain items of income and expense
are reported in different periods for financial reporting and tax return
purposes. Deferred tax assets and liabilities are determined based on the
differences between the consolidated financial statement and income tax bases of
assets and liabilities measured by using the enacted tax rates and laws expected
to be in effect when the timing differences are expected to reverse. Deferred
tax expense or benefit is based on the difference between deferred tax asset or
liability from period to period.

         PER SHARE DATA

         Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings
Per Share", requires dual presentation of basic and diluted earnings per share.
Basic earnings per share is calculated by dividing net income by the weighted
average number of shares of common stock outstanding at the end of each period.
Diluted earnings per share is calculated by increasing the denominator for the
assumed conversion of all potentially dilutive securities. The Corporation does
not have any securities which have or will have a dilutive effect, accordingly,
basic and diluted per share data is the same.

         CASH FLOW INFORMATION

         For purposes of reporting consolidated cash flows, cash and cash
equivalents include cash on hand and due from banks, interest-bearing deposits
in other banks and federal funds sold. The Corporation considers cash classified
as interest-bearing deposits with other banks as a cash equivalent because they
are represented by cash accounts essentially on a demand basis. Federal funds
are also included as a cash equivalent because they are generally purchased and
sold for one-day periods.

         TRUST ASSETS AND INCOME

         Property held by the Corporation in a fiduciary or agency capacity for
its customers is not included in the accompanying consolidated financial
statements because such items are not assets of the Corporation. Trust
Department income is recognized on a cash basis and is not materially different
than if it was reported on an accrual basis.

         RECENT ACCOUNTING PRONOUNCEMENTS

         Statement of Financial Accounting Standards (SFAS) No. 133 (as amended
by SFAS No. 137), "Accounting for Derivative Instruments and Hedging
Activities", becomes effective for financial reporting periods beginning after
June 15, 2000. SFAS No. 133 requires fair value accounting for all stand-alone
derivatives and many derivatives embedded in other instruments and contracts.
Since the Corporation does not enter into transactions involving derivatives
described in the standard and does not engage in hedging activities, the
standard is not expected to have a significant impact on the Corporation's
consolidated financial condition or results of operations.

         RECLASSIFICATION

         Certain amounts in the consolidated financial statements of the prior
years have been reclassified to conform with presentation used in the 1999
consolidated financial statements. Such reclassifications had no effect on the
Corporation's consolidated financial condition or net income.

2.       RESTRICTED CASH BALANCES

         The Bank is required to maintain average reserve balances with the
Federal Reserve Bank. The amount required at December 31, 1999 was $866,000 and
was satisfied by vault cash. Additionally, as compensation for check clearing
and other services, compensating balances are required to be maintained with the
Federal Reserve Bank and other correspondent banks. At December 31, 1999, these
balances were $692,137.


                                      -10-
<PAGE>   11


3.       INVESTMENT SECURITIES

         The amortized cost, related estimated fair value, and unrealized gains
and losses for investment securities classified as "Available-for-Sale" or
"Held-to-Maturity" were as follows at December 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                                                                 Available-for-Sale Securities
                                                                                 -----------------------------
                                                                                    Gross             Gross            Estimated
                                                                Amortized        Unrealized         Unrealized            Fair
December 31, 1999:                                                Cost              Gains             Losses             Value
                                                                  ----              -----             ------             -----
<S>                                                            <C>                    <C>             <C>             <C>
Obligations of U.S. Government Corporations and
    Agencies:
        Mortgage-backed...................................     $18,188,852          $     0          $  593,937       $17,594,915
        Other.............................................      16,016,468                0             533,679        15,482,789
Obligations of state and political subdivisions...........      15,024,908           38,708             613,619        14,449,997
Equity securities.........................................       1,437,293            2,587              63,943         1,375,937
                                                               ------------------------------------------------------------------
Total   ..................................................     $50,667,521          $41,295          $1,805,178       $48,903,638
                                                               ==================================================================
</TABLE>



<TABLE>
<CAPTION>
                                                                                  Held-to-Maturity Securities
                                                                                  ---------------------------
                                                                                    Gross             Gross            Estimated
                                                                Amortized        Unrealized         Unrealized            Fair
December 31, 1999:                                                Cost              Gains             Losses             Value
                                                                  ----              -----             ------             -----
<S>                                                            <C>                  <C>             <C>                <C>
Obligations of state and political subdivisions...........      $200,000            $138                $ 0            $200,138
                                                               ==================================================================
</TABLE>


<TABLE>
<CAPTION>
                                                                                 Available-for-Sale Securities
                                                                                 -----------------------------
                                                                                    Gross             Gross            Estimated
                                                                Amortized        Unrealized         Unrealized            Fair
December 31, 1998:                                                Cost              Gains             Losses             Value
                                                                  ----              -----             ------             -----
<S>                                                            <C>                    <C>             <C>             <C>
Obligations of U.S. Government Corporations and
    Agencies:
        Mortgage-backed...................................      $22,137,279        $270,995          $ 6,406         $22,401,868
        Other.............................................        9,777,510           4,875                0           9,782,385
Obligations of state and political subdivisions...........       13,606,379         423,379                0          14,029,758
Equity securities.........................................        1,388,780               0           16,764           1,372,016
                                                               ------------------------------------------------------------------
Total   ..................................................      $46,909,948        $699,249          $23,170         $47,586,027
                                                               ==================================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                                  Held-to-Maturity Securities
                                                                                  ---------------------------
                                                                                    Gross             Gross            Estimated
                                                                Amortized        Unrealized         Unrealized            Fair
December 31, 1998:                                                Cost              Gains             Losses             Value
                                                                  ----              -----             ------             -----
<S>                                                            <C>                  <C>             <C>                <C>
Obligations of state and political subdivisions...........      $565,000           $4,076               $ 0            $569,076
                                                               ==================================================================
</TABLE>


         Securities Available-for-Sale with an aggregate fair value of
$29,137,371 in 1999 and $29,787,808 in 1998, respectively, were pledged to
secure public funds, trust funds, securities sold under agreements to repurchase
and other balances of $22,971,729 in 1999 and $24,797,741 in 1998, respectively,
as required by law.


                                      -11-
<PAGE>   12

         The amortized cost and estimated fair value of debt securities, by
expected maturity, are shown below at December 31, 1999. Expected maturities
will differ from contractual maturities, because some borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.

<TABLE>
<CAPTION>
                                                                     Held-to-Maturity              Available-for-Sale
                                                                     ----------------              ------------------
                                                                                  Estimated                       Estimated
                                                                   Amortized        Fair         Amortized          Fair
                                                                      Cost          Value           Cost            Value
                                                                      ----          -----           ----            -----
<S>                                                                 <C>            <C>          <C>              <C>
Due in one year or less..................................           $200,000       $200,138     $ 1,913,854      $ 1,848,418
Due after one year through five years....................                  0              0      29,226,022       28,405,545
Due after five years through ten years...................                  0              0       6,002,404        5,751,707
Due after ten years......................................                  0              0      13,525,241       12,897,968
                                                                    --------------------------------------------------------
Total....................................................           $200,000       $200,138     $50,667,521      $48,903,638
                                                                    ========================================================
</TABLE>

         The Bank holds stock in the Federal Home Loan Bank of Pittsburgh
(FHLB). The Bank must hold this FHLB stock as long as it remains a member of the
FHLB System. The Bank does not anticipate that it will discontinue its FHLB
membership and therefore, the investment in this FHLB stock in the amounts of
$889,000 and $864,000 in 1999 and 1998, respectively are classified as equity
securities.

         The quality rating of all obligations of state and political
subdivisions were "A" or higher, as rated by Moody's or Standard and Poors. The
only exceptions were local issues which were not rated, but were secured by the
full faith and credit obligations of the communities that issued these
securities. All of the state and political subdivision investments were actively
traded in a liquid market.

         Proceeds from sale of investments in debt and equity securities
classified as Available-for-Sale during 1999, 1998 and 1997 were $12,294,313,
$34,204,431 and $18,647,390, respectively. Gross gains realized on these sales
were $38,707, $64,419 and $57,935, respectively. Gross losses on these sales
were $609 in 1997. There were no gross losses on the 1999 and 1998 sales.

         Proceeds from maturities and redemptions of investments in debt
securities classified as Held-to-Maturity during 1999, 1998 and 1997 were
$365,000, $155,000 and $250,000 respectively. There were no gross gains or
losses on these sales during 1999, 1998 and 1997, respectively.

4.       LOANS

         Major classifications of loans at December 31, 1999 and 1998 consisted
of:

<TABLE>
<CAPTION>
                                                                                                          1999             1998
                                                                                                          ----             ----
<S>                                                                                                   <C>              <C>
Commercial....................................................................................        $ 15,558,953    $  8,991,476
Tax-exempt....................................................................................           2,123,921       2,512,335
Lease finance receivables.....................................................................             173,148          19,935
Real estate - construction....................................................................           2,508,697       1,278,041
Real estate...................................................................................         102,108,189      96,741,691
Personal .....................................................................................          12,562,141       9,460,832
                                                                                                      ----------------------------
Total gross loans.............................................................................        $135,035,049    $119,004,310
Less: Unearned discount.......................................................................             583,878         376,371
         Unamortized loan fees, net of costs..................................................              28,323          69,557
                                                                                                      ----------------------------
Loans, net of unearned income.................................................................        $134,422,848    $118,558,382
                                                                                                      ============================
</TABLE>

         Non-accrual loans at December 31, 1999, 1998 and 1997 were $198,840,
$536,640 and $69,368, respectively. The gross interest that would have been
recorded if these loans had been current in accordance with their original terms
and the amounts actually recorded in income were as follows:

<TABLE>
<CAPTION>
                                                                                                 1999           1998         1997
                                                                                                 ----           ----         ----
<S>                                                                                            <C>            <C>           <C>
Gross interest due under terms...................................................              $16,089        $55,411       $3,846
Amount included in income........................................................                    0          9,609            0
                                                                                               -----------------------------------
Interest income not recognized...................................................              $16,089        $45,802       $3,846
</TABLE>


                                      -12-
<PAGE>   13


         At December 31, 1999 and 1998 the recorded investment in loans that are
considered to be impaired as defined by SFAS No. 114 was $14,883 and $28,355,
respectively. No additional charge to operations was required to provide for the
impaired loans since the total allowance for loan losses is estimated by
management to be adequate to provide for the loan loss allowance required by
SFAS No. 114 along with any other potential losses. The average recorded
investment in impaired loans during the years ended December 31, 1999 and 1998
was approximately $23,784 and $17,721, respectively.

         At December 31, 1999, there were no significant commitments to lend
additional funds with respect to non-accrual and restructured loans.

         Changes in the allowance for loan losses for the years ended December
31, 1999, 1998 and 1997 were as follows:

<TABLE>
<CAPTION>
                                                                                                1999            1998        1997
                                                                                                ----            ----        ----
<S>                                                                                           <C>            <C>         <C>
Balance, beginning of year.......................................................             $954,516       $900,889    $ 910,711
Provision charged to operations..................................................               78,000         78,000       60,000
Loans charged-off................................................................              (99,951)       (83,140)    (102,474)
Recoveries.......................................................................               52,600         58,767       32,652
                                                                                              ------------------------------------
Balance, end of year.............................................................             $985,165       $954,516    $ 900,889
                                                                                              ====================================
</TABLE>

5.       PREMISES AND EQUIPMENT

         A summary of premises and equipment at December 31, 1999 and 1998
follows:

<TABLE>
<CAPTION>
                                                                                                             1999          1998
                                                                                                             ----          ----
<S>                                                                                                       <C>           <C>
Land.............................................................................................         $  567,939    $  567,939
Buildings and improvements.......................................................................          4,492,242     4,490,372
Furniture and equipment..........................................................................          3,286,291     3,148,240
                                                                                                          ------------------------
                                                                                                          $8,346,472    $8,206,551
Less:  Accumulated depreciation..................................................................          3,072,525     2,557,014
                                                                                                          ------------------------
                                                                                                          $5,273,947    $5,649,537
</TABLE>

         Depreciation amounted to $515,511 for 1999, $516,947 for 1998 and
$373,307 for 1997.

         In accordance with SFAS No. 121, impairment losses were recognized in
the amounts of $20,000 in 1997 due to a writedown of a temporary branch building
to estimated net realizable value. Such loss is reflected in occupancy expense
in the accompanying consolidated financial statements. The temporary building
was replaced by a permanent structure.

6.       DEPOSITS

         Major classifications of deposits at December 31, 1999 and 1998
consisted of:

<TABLE>
<CAPTION>
                                                                                                           1999             1998
                                                                                                           ----             ----
<S>                                                                                                    <C>             <C>
Demand - non-interest bearing..................................................................        $ 13,672,023    $ 13,315,596
Demand - interest bearing......................................................................          20,906,204      22,452,236
Savings........................................................................................          31,991,101      33,493,560
Time $100,000 and over.........................................................................          16,176,300      11,988,742
Other time.....................................................................................          55,860,009      56,429,202
                                                                                                       ----------------------------
                                                                                                       $138,605,637    $137,679,336
                                                                                                       ============================
</TABLE>

         The following is a schedule reflecting remaining maturities of time
deposits of $100,000 and over at December 31, 1999:

<TABLE>
<S>                                                                                                                     <C>
2000..........................................................................................................          $11,460,000
2001..........................................................................................................            1,167,000
2002..........................................................................................................            2,252,000
2003..........................................................................................................              838,000
2004 and thereafter...........................................................................................              459,000
                                                                                                                        -----------
Total.........................................................................................................          $16,176,000
                                                                                                                        ===========
</TABLE>

Interest expense related to time deposits of $100,000 or more was $821,424 in
1999, $672,469 in 1998 and $674,683 in 1997.


                                      -13-
<PAGE>   14


7.       SHORT-TERM BORROWINGS

         Federal funds purchased, securities sold under agreements to
repurchase, and Federal Home Loan Bank advances generally represented overnight
or less than 30-day borrowings. U.S. Treasury tax and loan notes for collections
made by the Bank were payable on demand. Short-term borrowings consisted of the
following at December 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                                               1999                                          1998
                                                               ----                                          ----

                                                                   Maximum                                         Maximum
                                           Ending       Average   Month End   Average    Ending       Average     Month End  Average
                                           Balance      Balance    Balance     Rate      Balance      Balance      Balance    Rates
                                           -------      -------    -------     ----      -------      -------      -------    -----
<S>                                      <C>          <C>         <C>           <C>    <C>          <C>          <C>           <C>
Federal funds purchased and
    securities sold under
    agreements to repurchase.........    $17,696,906  $18,971,808 $21,099,786   4.73%  $20,225,777  $20,149,603  $23,003,016   5.06%
Federal Home Loan Bank...............     12,325,000    1,709,164  12,325,000   5.65%            0        5,342            0   3.62%
U.S. Treasury tax and loan notes.....        858,472      450,989   1,000,000   4.68%      192,328      486,931    1,000,000   5.38%
                                         ------------------------------------------------------------------------------------------
Total................................    $30,880,378  $21,131,961 $34,424,786   4.81%  $20,418,105  $20,641,876  $24,003,016   5.07%
                                         ==========================================================================================
</TABLE>

8.       LONG-TERM BORROWINGS

         Long-term borrowings consisted of the following due Federal Home Loan
Bank at December 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                                                                                            1999            1998
                                                                                                            ----            ----
<S>                                                                                                      <C>            <C>
Loan in the original amount of $2,000,000 for a 10 year term with a 5 year put. Interest only
    is payable monthly @ 5.48% with a floating rate option at the end of 5 years. Principal
    balances outstanding.......................................................................          $2,000,000     $2,000,000
Loan in the original amount of $225,000 for a 10 year term requiring monthly payments
    of $1,627 including interest at 6.12%, maturing in 2007 with a final payment due
    of $146,690.  Principal balances outstanding...............................................             212,234        219,075
Loan in the original amount of $72,000 for a 30 year term requiring monthly payments
    of $425 including interest at 5.856%. Principal balances outstanding.......................              70,617         71,628
Loan in the original amount of $29,160 for a 20 year term requiring monthly payments
    of $179 including interest at 5.50%. Principal balances outstanding........................              28,696              0
Loan in the original amount of $32,400 for a 20 year term requiring monthly payments
    of $199 including interest at 5.50%. Principal balances outstanding........................              32,197              0
                                                                                                         -------------------------
Total..........................................................................................          $2,343,744     $2,290,703
                                                                                                         =========================
</TABLE>

         At December 31, 1999 the annual maturities of long-term debt were as
follows: $8,899 in 2000, $9,448 in 2001, $10,032 in 2002, $10,651 in 2003,
$11,309 in 2004 and $2,293,405 thereafter.

9.       COMPREHENSIVE INCOME

         The Corporation adopted Statement of Financial Accounting Standards
(SFAS) No. 130, "Reporting Comprehensive Income", as of January 1, 1998.
Accounting principles generally require that recognized revenue, expenses, gains
and losses be included in consolidated net income. Although certain changes in
assets and liabilities, such as unrealized gains and losses on
Available-for-Sale investment securities, are reported as a separate component
of consolidated stockholders' equity, such items, along with consolidated net
income, are components of comprehensive income. The adoption of SFAS No. 130 had
no effect on the Corporation's consolidated net income or stockholders' equity.

         The components of other comprehensive income and related tax effects
are as follows:

<TABLE>
<CAPTION>
                                                                                                Years Ended December 31,
                                                                                                ------------------------
                                                                                              1999            1998           1997
                                                                                              ----            ----           ----
<S>                                                                                       <C>              <C>            <C>
Unrealized holding gains (losses) on Available-for-Sale investment
    securities..................................................................          $(2,401,246)     $ 523,257      $170,328
Less reclassification adjustment for gains realized in income...................               38,707         64,419        57,326
                                                                                          ----------------------------------------
Net unrealized gains (losses)...................................................          $(2,439,953)     $ 458,838      $113,002
Tax effects.....................................................................              832,455       (153,288)      (39,792)
Net of tax amount...............................................................          $(1,607,498)     $ 305,550      $ 73,210
                                                                                          ========================================
</TABLE>


                                      -14-
<PAGE>   15


10.      STOCKHOLDERS' EQUITY AND STOCK PURCHASE PLANS

         The Amended Articles of Incorporation contain a provision that permits
the Corporation to issue warrants for the purchase of shares of common stock,
par value $1.25 per share (the "Common Stock"), at below market prices in the
event any person or entity acquires 25% or more of the Common Stock.

         The Corporation offers employees a stock purchase plan. The maximum
number of shares of the Common Stock to be issued under this plan shall be
20,000. In addition, the Corporation may choose to purchase shares on the open
market to facilitate this plan. A participating employee may annually elect
deductions of at least 1% of base pay, but not more than 10% of base pay, to
cover purchases of shares under this plan. A participating employee shall be
deemed to have been granted an option to purchase a number of shares of the
Common Stock equal to the annual aggregate amount of payroll deductions elected
by the employee divided by 90% of the fair market value of Common Stock on the
first day of January in each year. Stock issued to participating employees under
the plan for the most recent three year period was:

<TABLE>
<CAPTION>
                                                                                                      Per Share
                                                                                                      ---------
                                                                                    Number             Employees'           Market
                                                                                      of                Purchase            Value
                                Date Issued                                         Shares               Price            of Shares
                                -----------                                         ------               -----            ---------
<S>                                                                                 <C>                 <C>                <C>
1999...................................................................               549                $23,74             $26.38
1998...................................................................               453                $21.37             $23.75
1997...................................................................               435                $15.75             $17.50
</TABLE>

         The Corporation also offers to its stockholders a Dividend Reinvestment
and Stock Purchase Plan. Under the plan the Corporation registered with the
Securities and Exchange Commission 500,000 shares of the Common Stock to be sold
pursuant to the plan. The price per share for purchases under this plan is
determined at each quarterly dividend payment date by the reported average mean
between the bid and asked prices in the over-the-counter market for 10
consecutive trading days preceding each quarterly dividend payment date.
Participation in this plan by Shareholders began in June 1995. Shares issued
under this plan for the most recent three year period was:

<TABLE>
<CAPTION>
                                                                     Number of        Total
                               Year                                   Shares         Proceeds
                               ----                                   ------         --------
<S>                                                                    <C>           <C>
1999......................................................             7,345         $148,582
1998......................................................             5,013         $141,490
1997......................................................             6,379         $132,209
</TABLE>

11.      INCOME TAXES

         The provision for income tax expense consisted of the following
components:

<TABLE>
<CAPTION>
                                                                                            1999          1998          1997
                                                                                            ----          ----          ----
<S>                                                                                       <C>           <C>           <C>
Current............................................................................       $666,270      $649,106      $728,446
Deferred (benefit).................................................................         18,469       (14,828)       20,331
                                                                                          ------------------------------------
                                         TOTAL PROVISION FOR INCOME TAXES                 $684,739      $634,278      $748,777
                                                                                          ====================================
</TABLE>

         A reconciliation of income tax expense and the amounts which would have
been recorded based upon the statutory rate of 34% follows:

<TABLE>
<CAPTION>
                                                                         1999                    1998                    1997
                                                                         ----                    ----                    ----
                                                                  Amount       Rate       Amount       Rate        Amount      Rate
                                                                  ------       ----       ------       ----        ------      ----
<S>                                                             <C>            <C>      <C>            <C>       <C>           <C>
Provision at statutory rate............................         $ 926,152      34.0%    $ 862,471      34.0%     $ 943,253     34.0%
Tax-exempt income......................................          (276,969)    (10.1)     (263,702)    (10.4)      (224,865)    (8.1)
Non-deductible expenses................................            40,087       1.4        30,509       1.2         35,817      1.3
Other, net.............................................            (4,531)      (.2)        5,000        .2         (5,428)     (.2)
Actual federal income tax and rate.....................         $ 684,739      25.1%    $ 634,278      25.0%     $ 748,777     27.0%
</TABLE>



                                      -15-
<PAGE>   16


         Income taxes applicable to realized security gains included in the
provision for income taxes totaled $13,160 in 1999, $21,902 in 1998 and $19,491
in 1997.

         The net deferred tax asset (liability) recorded by the Corporation
consisted of the following tax effects of temporary timing differences at
December 31 1999, 1998 AND 1997:

<TABLE>
<CAPTION>
                                                                                              1999          1998          1997
                                                                                              ----          ----          ----
<S>                                                                                         <C>          <C>           <C>
Deferred tax assets:
    Loan loss reserve..............................................................        $ 233,194     $ 222,774     $ 204,541
    Deferred compensation..........................................................          134,323       125,777       115,114
    Contributions..................................................................            3,400         6,068         6,018
    Unrealized investment securities losses........................................          603,937             0             0
                                                                                           -------------------------------------
                                                                       TOTAL               $ 974,854     $ 354,619     $ 325,673
                                                                                           =====================================

Deferred tax liabilities:
    Loan fees and costs............................................................        $ (68,321)    $ (60,860)    $ (54,588)
    Accretion......................................................................           (5,679)       (5,072)       (7,356)
    Unrealized investment securities gains.........................................                0      (228,518)      (75,230)
    Depreciation...................................................................         (267,070)     (240,370)     (230,240)
                                                                                           -------------------------------------
                                                                       TOTAL               $(341,070)    $(534,820)    $(367,414)
                                                                                           -------------------------------------

Net deferred tax asset (liability).................................................        $ 633,784     $(180,201)    $ (41,741)
                                                                                           =====================================
</TABLE>

         The above net deferred asset (liability) is included in other assets or
other liabilities on the consolidated balance sheets.

         It is anticipated that all tax assets will be realized, accordingly, no
valuation allowance was provided.

12.      BENEFIT AND DEFERRED COMPENSATION PLANS

         The Bank maintains a 401K salary deferred profit sharing plan for the
benefit of its employees. Under the salary deferral component, employees may
elect to contribute up to 10% of their compensation with the possibility that
the Bank may make matching contributions to the plan. Under the profit sharing
component, contributions are made at the discretion of the Board of Directors.

         Matching contributions amounted to $21,600, $20,961 and $18,266 for
1999, 1998 and 1997, respectively. Discretionary contributions amounted to
$93,191, $85,988 and $108,099 in 1999, 1998 and 1997, respectively.

         DIRECTORS

         The Bank entered into agreements with three directors to establish
non-qualified deferred compensation plans for each of these directors. These
plans are limited to four-year terms. The Bank may, however, enter into
subsequent similar plans with its directors. Each of the participating directors
is deferring the payment to himself of certain directors fees to which he is
entitled. Each director's future payment is based upon the cumulative amount of
deferred fees together with interest currently accruing thereon at the rate of
8% per annum, subject to change by the Board of Directors. The Bank has obtained
life insurance (designating the Bank as the beneficiary) on the lives of certain
directors in face amounts which are intended to cover the Bank's obligations and
related costs under the Director's Deferred Compensation Plan. As of December
31, 1999 and 1998, the net cash value of insurance policies was $216,001 and
$169,377, respectively, and the total accrued liability was $219,133 and
$205,997, respectively, relating to these directors' deferred compensation
agreements.

         EXECUTIVE OFFICERS

         The Bank entered into agreements with two executive officers to
establish non-qualified deferred compensation plans. Each officer is deferring
compensation in order to participate in this Deferred Compensation Plan. If the
officer continues to serve as an officer of the Bank until he attains sixty-five
(65) years of age, the Bank has agreed to pay him 120 guaranteed consecutive
monthly payments commencing on the first day of the month following the
officer's 65th birthday. Each officer's guaranteed monthly payment is based upon
the future value of life insurance purchased with the compensation the officer
has deferred. The Bank has obtained life insurance (designating the Bank as the
beneficiary) on the life of each participating officer in an amount which is
intended to cover the Bank's obligations under the Deferred Compensation Plan,
based upon certain actuarial assumptions. As of December 31, 1999 and 1998, the
net cash value of insurance policies was $184,533 and $164,629, respectively,
and the total accrued liability was $175,935 and $163,935, respectively,
relating to these executive officers' deferred compensation agreements.

         The amounts of net cash values of insurance policies and total accrued
liabilities are included in other assets and accrued interest and other expense,
respectively, on the consolidated balance sheets.



                                      -16-
<PAGE>   17

13.      LEASE COMMITMENTS AND CONTINGENCIES

         At December 31, 1999 the Bank was leasing some minor office equipment
under operating leases. In prior years the Bank contracted for outside data
processing service and related equipment which was discontinued in 1998 as a
result of the Bank's acquisition and implementation of its own in-house computer
system.

         Rental expense under operating leases and contracted data processing
services for the years ended December 31, 1999, 1998 and 1997 were $5,690,
$71,928 and $170,398, respectively.

         In the normal course of business, there were various pending legal
actions and proceedings which were not reflected in the consolidated financial
statements. In the opinion of management, the consolidated financial statements
have not and will not be affected materially by the outcome of such actions and
proceedings.

14.      RELATED PARTY TRANSACTIONS

         Certain directors and executive officers of the Corporation and the
Bank, as well as companies in which they are principal owners (i.e., at least
10%), were indebted to the Bank at December 31, 1999 and 1998. These loans were
made on substantially the same terms and conditions, including interest rates
and collateral, as those prevailing at the time for comparable transactions with
unrelated parties. A summary of the activity on the related party loans,
comprised of eight directors, six executive officers and their related
companies, consisted of the following:

<TABLE>
<CAPTION>
                                                                                                           1999            1998
                                                                                                           ----            ----
<S>                                                                                                     <C>             <C>
Balance, beginning of year.........................................................................     $1,553,845      $1,643,193
Additions..........................................................................................        778,963         761,586
Deductions.........................................................................................       (750,956)       (850,934)
                                                                                                        --------------------------
Balance, end of year...............................................................................     $1,581,852      $1,553,845
                                                                                                        ==========================
</TABLE>

         The above loans represent funds drawn and outstanding at the date of
the accompanying consolidated financial statement. Commitments by the Bank to
related parties on lines of credit for 1999 and 1998 presented an additional
off-balance sheet risk to the extent of undisbursed funds in the amount of
$227,409 and $204,235, respectively, on the above loans. These loans did not
present more than the normal risk of collectibility nor present other
unfavorable features.

15.      REGULATORY MATTERS

         Dividends are paid by the Corporation to shareholders from its assets
which are mainly provided by dividends from the Bank. However, national banking
laws place certain restrictions on the amount of cash dividends allowed to be
paid by the Bank to the Corporation. Generally, the limitation provides that
dividend payments may not exceed the Bank's current year's retained income plus
retained net income for the preceding two years. Accordingly, in 2000, without
prior regulatory approval, the Bank may declare dividends to the Corporation in
the amount of $2,337,489 plus additional amounts equal to the net income earned
in 2000 for the period January 1, 2000, through the date of declaration, less
any dividends which may have already been paid in 2000. Regulations also limit
the amount of loans and advances from the Bank to the Corporation to 10% of
consolidated net assets.

         The Corporation is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory - and possibly additional
discretionary - actions by regulators that, if undertaken, could have a direct
material effect on the Corporation's consolidated financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt corrective
action, the Corporation must meet specific capital guidelines that involve
quantitative measures of the Corporation's assets, liabilities, and certain
off-balance sheet items as calculated under regulatory accounting practices. The
Corporation's capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors. Management believes, as of December 31, 1999 and 1998, that the
Corporation and the Bank met all capital adequacy requirements to which they are
subject.

         Quantitative measures established by regulation to ensure capital
adequacy require the Corporation to maintain minimum amounts and ratios (set
forth in the table below) of Total and Tier I Capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier I Capital (as
defined) to average assets (as defined).

         As of December 31, 1999, the most recent notification from the Office
of the Comptroller of the Currency categorized the Bank as well capitalized
under the regulatory framework for prompt corrective action. To be categorized
as well capitalized the Bank must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage ratios as set forth in the table. There are no
conditions or events since that notification that management believes have
changed the institution's category.



                                      -17-
<PAGE>   18

         The Bank's actual capital amounts (in thousands) and ratios are
presented in the following table:

<TABLE>
<CAPTION>
                                                                                                               To Be Well
                                                                                                            Capitalized Under
                                                                                      For Capital           Prompt Corrective
                                                                   Actual            Adequacy Purposes      Action Provisions
                                                                   ------            -----------------      -----------------
                                                              Amount      Ratio      Amount      Ratio      Amount      Ratio
                                                              ------      -----      ------      -----      ------      -----
<S>                                                          <C>         <C>         <C>         <C>       <C>         <C>
As of December 31, 1999:
    Total Capital
        (To risk-weighted assets)..................          $25,131     18.68%      $10,766     8.00%     $13,457     10.00%
    Tier I Capital
        (To risk-weighted assets)..................          $24,146     17.94%      $ 5,383     4.00%     $ 8,047      6.00%
    Tier I Capital
        (To average assets)........................          $24,146     12.94%      $ 7,464     4.00%     $ 9,330      5.00%
As of December 31, 1998:
    Total Capital
        (To risk-weighted assets)..................          $23,967     21.80%      $ 8,796     8.00%     $10,995     10.00%
    Tier I Capital
        (To risk-weighted assets)..................          $23,012     20.93%      $ 4,398     4.00%     $ 6,597      6.00%
    Tier I Capital
        (To average assets)........................          $23,012     12.95%      $ 7,106     4.00%     $ 8,882      5.00%
</TABLE>

         The Corporation's capital ratios are not materially different from
those of the Bank.


                                      -18-
<PAGE>   19


16.      FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND
         CONCENTRATIONS OF CREDIT RISK

         The Corporation is a party to financial instruments with off-balance
sheet risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend credit,
standby letters of credit and commercial letters of credit. Those instruments
involve, to varying degrees, elements of credit and interest rate risk in excess
of the amount recognized in the consolidated balance sheets. The contract or
notional amounts of those instruments reflect the extent of involvement the
Corporation has in particular classes of financial instruments. The Corporation
does not engage in trading activities with respect to any of its financial
instruments with off-balance sheet risk.

         The Corporation may require collateral or other security to support
financial instruments with off-balance sheet credit risk. The contract or
notional amounts at December 31, 1999 and 1998 were as follows:

<TABLE>
<CAPTION>
                                                                                                        1999           1998
                                                                                                        ----           ----
<S>                                                                                                 <C>            <C>
Financial instruments whose contract amounts represent credit risk:
    Commitments to extend credit...........................................................         $10,341,534    $10,928,888
    Financial standby letters of credit....................................................             639,471        713,754
    Performance standby letters of credit..................................................              10,700        235,000
    Dealer floor plans.....................................................................             991,285        283,776
</TABLE>

         Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Because many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Corporation evaluates each
customer's creditworthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Corporation upon extension of credit, is
based on management's credit evaluation of the counter-party. Collateral held
varies but may include accounts receivable, inventory, property, plant,
equipment and income-producing commercial properties.

         Standby letters of credit and commercial letters of credit are
conditional commitments issued by the Corporation to guarantee the performance
of a customer to a third party. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending loan facilities to
customers. The Corporation holds collateral supporting those commitments for
which collateral is deemed necessary. The extent of collateral held for those
commitments at December 31, 1999 varied from 0 percent to 100 percent; the
average amount collateralized was 72.2 percent.

         The Corporation's exposure to credit loss in the event of
nonperformance by the other party to the financial instrument for commitments to
extend credit and letters of credit is represented by the contractual notional
amount of those instruments. The Corporation uses the same credit policies in
making commitments and conditional obligations, as it does for on-balance sheet
instruments.

         The Corporation granted commercial, consumer and residential loans to
customers within Pennsylvania. Of the total loan portfolio 78% was for real
estate loans, principally residential. It was the opinion of management that the
high concentration did not pose an adverse credit risk. Further, it was
management's opinion that the remainder of the loan portfolio was balanced and
diversified to the extent necessary to avoid any significant concentration of
credit.

17.      FAIR VALUES OF FINANCIAL INSTRUMENTS

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

         The following methods and assumptions were used by the Corporation in
estimating its fair value disclosures for financial instruments:

         CASH AND OTHER SHORT-TERM INSTRUMENTS

                  Cash and due from banks, interest bearing deposits with other
         banks, and Federal Funds sold had carrying values which were a
         reasonable estimate of fair value. Accordingly, fair values regarding
         these instruments were provided by reference to carrying values
         reflected on the consolidated balance sheets.



                                      -19-
<PAGE>   20

         INVESTMENT SECURITIES

                  The fair value of investment securities which included
         mortgage backed securities were estimated based on bid prices published
         in financial newspapers or bid quotations received from securities
         dealers.

         LOANS

                  Fair values were estimated for categories of loans with
         similar financial characteristics. Loans were segregated by type such
         as commercial, tax-exempt, real estate mortgages and consumer. For
         estimation purposes, each loan category was further segmented into
         fixed and adjustable rate interest terms and also into performing and
         non-performing classifications.

                  The fair value of each category of performing loans was
         calculated by discounting future cash flows using the current rates at
         which similar loans would be made to borrowers with similar credit
         ratings and for the same remaining maturities.

                  Fair value for non-performing loans was based on management's
         estimate of future cash flows discounted using a rate commensurate with
         the risk associated with the estimated future cash flows. The
         assumptions used by management were judgmentally determined using
         specific borrower information.

         DEPOSITS

                  Under SFAS No. 107, the fair value of deposits with no stated
         maturity, such as Demand Deposits, Savings Accounts, and Money Market
         Accounts, was equal to the amount payable on demand at December 31,
         1999 and 1998.

                  Fair values for fixed rate Certificates of Deposit were
         estimated using a discounted cash flow calculation that applied
         interest rates currently being offered on certificates to a schedule of
         aggregated expected monthly maturities on time deposits.

         SHORT-TERM BORROWINGS

                  The carrying amounts of federal funds purchased and securities
         sold under agreements to repurchase and other short-term borrowings
         approximated their fair values.



                                      -20-
<PAGE>   21


         LONG-TERM BORROWINGS

                  The fair values of long-term borrowings, other than
         capitalized leases, are estimated using discounted cash flow analyses
         based on the Corporation's incremental borrowing rate for similar
         instruments. The carrying amounts of capitalized leases approximated
         their fair values, because the incremental borrowing rate used in the
         carrying amount calculation was at the market rate.

         COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT

                  Management estimated that there were no material differences
         between the notional amount and the estimated fair value of those
         off-balance sheet items, because they were primarily composed of
         unfunded loan commitments which were generally priced at market value
         at the time of funding.

                  At December 31, 1999 and 1998, the carrying values and
         estimated fair values of financial instruments are presented in the
         table below:

<TABLE>
<CAPTION>
                                                                          1999                                1998
                                                                          ----                                ----
                                                               Carrying          Estimated          Carrying          Estimated
                                                                Amount          Fair Value           Amount          Fair Value
                                                                ------          ----------           ------          ----------
<S>                                                         <C>                <C>                 <C>             <C>
Financial Assets:
    Cash and short-term investments................         $  6,071,817       $  6,071,817        $12,486,043     $ 12,486,043
    Investment securities..........................           49,103,638         49,103,776         48,151,027       48,155,103

Loans:
    Commercial.....................................           15,558,953         15,558,953          8,991,476        8,991,476
    Tax-exempt.....................................            2,123,921          2,116,905          2,512,335        2,541,052
    Qualified municipal leases.....................              173,148            173,148             19,935           19,935
    Real estate - construction.....................            2,508,697          2,479,613          1,278,041        1,272,324
    Real estate....................................          102,108,189        101,287,915         96,741,690       97,034,525
    Personal.......................................           12,562,141         12,217,198          9,460,832        9,298,772
                                                            -------------------------------------------------------------------
    Gross loans....................................         $135,035,049       $133,833,732       $119,004,309     $119,158,084
    Less:  Unearned discount.......................              583,878                  0            376,370                0
        Unamortized loan fees, net of costs........               28,323                  0             69,557                0
                                                            -------------------------------------------------------------------
        Loans, net of unearned income..............         $134,422,848        133,833,732       $118,558,382     $119,158,084
        Less allowance for losses..................              985,165                  0            954,516                0
                                                            -------------------------------------------------------------------
    Net loans......................................         $133,437,683       $133,833,732       $117,603,866     $119,158,084
                                                            =================================================== ===============

Financial Liabilities:
    Deposits:
        Demand - non-interest bearing..............         $ 13,672,023       $ 13,672,023       $ 13,315,596     $ 13,315,596
        Demand - interest bearing..................           20,906,204         20,906,204         22,452,236       22,452,236
        Savings....................................           31,991,101         31,991,101         33,493,560       33,493,560
        Time - $100,000 and over...................           16,176,300         16,252,443         11,988,742       12,177,705
        Other time.................................           55,860,009         55,833,285         56,429,202       57,131,868
           Total Deposits..........................         $138,605,637        138,655,056       $137,679,336     $138,570,965

Short-Term Borrowings..............................         $ 30,880,378       $ 30,880,378       $ 20,418,105     $ 20,418,105
Long-Term Borrowings...............................            2,343,744          2,199,996          2,290,703        2,373,493

Off-Balance Sheet Assets (Liabilities):
    Commitments to extend credit...................                              10,341,534                          10,928,888
    Standby letters of credit......................                                 639,471                             713,754
    Performance standby letters of credit..........                                  10,700                             235,000
    Dealer floor plans.............................                                 991,285                             283,776
</TABLE>


                                      -21-
<PAGE>   22


18.      PARENT COMPANY FINANCIAL INFORMATION

         Condensed financial information for CCFNB Bancorp, Inc. (Parent Company
only) was as follows:

<TABLE>
<CAPTION>
BALANCE SHEETS                                                                                                 December 31,
--------------                                                                                                 ------------
Assets                                                                                                      1999            1998
                                                                                                            ----            ----
<S>                                                                                                    <C>              <C>
    Cash in subsidiary Bank....................................................................         $    66,870     $   293,362
    Investment in subsidiary...................................................................          22,730,575      22,910,536
    Investment in other equity securities......................................................             236,023         256,055
    Prepayments and other assets...............................................................              25,957           8,284
    Receivable from subsidiary.................................................................              17,974          55,981
                                                                                                        ---------------------------
        Total Assets...........................................................................         $23,077,399     $23,524,218
                                                                                                        ===========================
Liabilities and Stockholders' Equity
    Accrued expenses and other liabilities.....................................................         $    30,270     $    44,506
                                                                                                        ---------------------------
        Total Liabilities......................................................................         $    30,270     $    44,506
                                                                                                        ---------------------------
Stockholders' Equity
    Common stock...............................................................................         $ 1,709,564     $ 1,728,041
    Surplus....................................................................................           5,483,515       5,849,157
    Retained earnings..........................................................................          17,013,997      15,670,223
    Unrealized gain (loss) on investment securities Available-for-Sale.........................          (1,159,947)        447,551
    Less treasury stock at cost................................................................                   0        (215,260)
                                                                                                        ---------------------------
        Total Stockholders' Equity.............................................................         $23,047,129     $23,479,712
                                                                                                        ---------------------------
        Total Liabilities and Stockholders' Equity.............................................         $23,077,399     $23,524,218
                                                                                                        ===========================
</TABLE>

<TABLE>
<CAPTION>
STATEMENTS OF INCOME                                                                          Years Ended December 31,
--------------------                                                                          ------------------------
Income                                                                                    1999           1998             1997
                                                                                          ----           ----             ----
<S>                                                                                   <C>             <C>            <C>
    Dividends from subsidiary bank...............................................     $   697,859     $1,001,449     $   637,610
    Dividends - other ...........................................................           7,837          6,027             980
    Interest.....................................................................           8,243          5,451          17,724
                                                                                      ------------------------------------------
        Total Income.............................................................     $   713,939     $1,012,927     $   656,314
Operating Expenses...............................................................         110,264         66,470          62,071
                                                                                      ------------------------------------------
    Income Before Taxes and Equity in Undistributed
        Net Income of Subsidiary.................................................     $   603,675     $  946,457     $   594,243
Applicable income tax (benefit)..................................................         (33,888)       (20,128)        (14,978)
                                                                                      ------------------------------------------
    Income Before Equity in Undistributed Net Income
        of Subsidiary............................................................     $   637,563     $  966,585     $   609,221
Equity in undistributed income of subsidiary.....................................       1,401,674        935,815       1,416,275
                                                                                      ------------------------------------------
    Net Income...................................................................     $ 2,039,237     $1,902,400     $ 2,025,496
                                                                                      ==========================================
STATEMENTS OF CASH FLOWS
------------------------
Operating Activities
Net Income.......................................................................     $ 2,039,237     $1,902,400     $ 2,025,496
Adjustments to reconcile net income to net cash provided by
    operating activities:
        Equity in undistributed net income of subsidiary.........................      (1,401,674)      (935,815)     (1,416,275)
        Decrease in prepaid expenses and other assets............................               0              0          14,235
        (Increase) decrease in receivable from subsidiary........................          38,007        (41,730)         96,055
        Increase (decrease) in income taxes and accrued expenses
        Payable..................................................................         (14,236)        31,809         (56,557)
                                                                                      ------------------------------------------
        Net Cash Provided By Operating Activities................................     $   661,334     $  956,664     $   662,954
                                                                                      ------------------------------------------
Investing Activities
Purchase of equity securities....................................................     $   (23,504)    $  (78,387)    $  (198,075)
Investment in subsidiary.........................................................               0              0        (143,703)
                                                                                      ------------------------------------------
        Net Cash (Used) in Investing Activities..................................     $   (23,504)    $  (78,387)    $  (341,778)
                                                                                      ------------------------------------------
Financing Activities
Proceeds from sale of treasury stock.............................................     $    13,034     $    9,681     $         0
Acquisition of treasury stock....................................................        (330,475)      (345,115)       (148,770)
Proceeds from issuance of common stock...........................................         148,582        141,490         139,060
Cash dividends...................................................................        (695,463)      (639,107)       (641,064)
                                                                                      ------------------------------------------
        Net Cash (Used) By Financing Activities..................................     $  (864,322)    $ (833,051)    $  (650,774)
                                                                                      ------------------------------------------
        Increase (Decrease) in Cash and Cash Equivalents.........................     $  (226,492)    $   45,226     $  (329,598)
Cash and Cash Equivalents at Beginning of Year...................................         293,362        248,136         577,734
                                                                                      ------------------------------------------
        Cash and Cash Equivalents at End of Year.................................     $    66,870     $  293,362     $   248,136
                                                                                      ==========================================
</TABLE>


                                      -22-
<PAGE>   23

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Stockholders of CCFNB Bancorp, Inc.

We have audited the accompanying consolidated balance sheets of CCFNB Bancorp,
Inc. and Subsidiary as of December 31, 1999 and 1998, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1999. These consolidated
financial statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of CCFNB
Bancorp, Inc. and Subsidiary as of December 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999 in conformity with generally
accepted accounting principles.



J.H. Williams & Co., LLP
Kingston, Pennsylvania
January 18, 2000


                                      -23-
<PAGE>   24


                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS
                               CCFNB BANCORP, INC.
                     SELECTED CONSOLIDATED FINANCIAL SUMMARY
                NOT COVERED BY REPORT OF INDEPENDENT ACCOUNTANTS

<TABLE>
<CAPTION>
 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)

                                                       1999        1998         1997         1996         1995
                                                       ----        ----         ----         ----         ----
<S>                                                  <C>         <C>          <C>          <C>          <C>
INCOME STATEMENT DATA:
Total interest income............................    $ 12,669    $ 12,444     $ 12,487     $ 11,844     $ 11,466
Total interest expense...........................       6,099       6,072        5,976        5,588        5,557
                                                     --------    --------     --------     --------     --------
Net interest income..............................    $  6,570       6,372        6,511        6,256        5,909
Provision for possible loan losses...............          78          78           60           80           42
Other operating income...........................       1,050         981          815          762          693
Other operating expenses.........................       4,818       4,739        4,492        4,450        4,374
Federal income taxes.............................         685         634          749          664          561
                                                     --------    --------     --------     --------     --------
Net income.......................................    $  2,039    $  1,902     $  2,025     $  1,824     $  1,625
                                                     ========    ========     ========     ========     ========

PER SHARE DATA:
Earnings per share (1)...........................    $   1.48    $   1.38     $   1.47     $   1.33     $   1.19
Cash dividends declared per share................    $   0.51    $   0.46     $   0.46     $   0.45     $   0.45
Book value per share.............................    $  16.85    $  17.03     $  15.68     $  14.95     $  13.99
Average shares outstanding.......................   1,375,572   1,378,339    1,381,800    1,375,875    1,367,595

BALANCE SHEET DATA:
Total assets.....................................    $196,122    $185,258     $173,866     $170,086     $162,066
Total loans......................................    $134,423    $118,558     $119,045     $115,590     $111,832
Total securities.................................    $ 49,104    $ 48,151     $ 43,862     $ 37,407     $ 40,384
Total deposits...................................    $138,606    $137,679     $127,719     $131,400     $128,985
FHLB advances - long-term........................    $  2,344    $  2,291     $    225     $      0     $      0
Total stockholders' equity.......................    $ 23,047    $ 23,480     $ 22,105     $ 20,657     $ 19,512

PERFORMANCE RATIOS:
Return on average assets.........................        1.09%       1.07%        1.18%        1.11%        1.03%
Return on average stockholders' equity...........        8.91%       8.54%        9.79%        9.35%        8.99%
Net interest margin (2)..........................        3.96%       4.05%        4.23%        4.24%        4.15%
Total non-interest expense as a percentage of
   average assets................................        2.58%       2.67%        2.62%        2.70%        2.77%

ASSET QUALITY RATIOS:
Allowance for possible loan losses as a
percentage of loans, net.........................        0.73%       0.81%        0.76%        0.79%        0.82%
Allowance for possible loan losses as a
   percentage of non-performing loans (3)........      264.83%     100.32%      129.27%      208.00%      222.00%
Non-performing loans as a percentage of total
   loans, net ...................................        0.28%       0.81%        0.59%        0.38%        0.37%
Non-performing assets as a percentage of
   total assets (4) .............................        0.19%       0.51%        0.40%        0.26%        0.25%
Net charge-offs as a percentage of average
   net loans ....................................        0.04%       2.11%        0.06%        0.07%        0.07%

LIQUIDITY AND CAPITAL RATIOS:
Equity to assets ................................       11.75%      12.53%       12.09%       11.86%       11.44%
Tier 1 Capital to risk-weighted assets (5).......       17.94%      20.93%       20.98%       20.58%       28.21%
Leverage ratio (5)(6)............................       12.94%      12.95%       12.57%       12.23%       12.39%
Total capital to risk-weighted assets (5)........       18.68%      21.80%       21.84%       21.49%       29.46%
Dividend payout ratio............................       34.09%      33.59%       31.65%       33.95%       37.88%
</TABLE>

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

(1)      Based upon average shares and common share equivalents outstanding.
(2)      Represents net interest income as a percentage of average total
         interest-earning assets, calculated on a tax-equivalent basis.
(3)      Non-performing loans are comprised of (i) loans which are on a
         non-accrual basis, (ii) accruing loans that are 90 days or more past
         due, and (iii) restructured loans. Non-performing assets are comprised
         of non-performing loans and foreclosed real estate (assets acquired in
         foreclosure), if applicable.
(4)      Based upon average balances for the respective periods.
(5)      Based on the Federal Reserve Bank's risk-based capital guidelines, as
         applicable to the Corporation. The Bank is subject to similar
         requirements imposed by the Office of the Comptroller of the Currency
         (the "OCC").
(6)      The leverage ratio is defined as the ratio of Tier 1 Capital to average
         total assets less intangible assets, if applicable.




                                      -24-
<PAGE>   25

         The following discussion and analysis should be read in conjunction
with the detailed information and financial statements, including notes thereto,
included elsewhere in this report. The consolidated financial condition and
results of operations of the Corporation are essentially those of its
subsidiary, the Bank. Therefore, the analysis that follows is directed to the
performance of the Bank.


                                      -25-
<PAGE>   26


                     FACTORS THAT MAY AFFECT FUTURE RESULTS

         General. Banking is affected, directly and indirectly, by local,
domestic and international economic and political conditions, and by government
monetary and fiscal policies. Conditions such as inflation, recession,
unemployment, volatile interest rates, tight money supply, real estate values,
international conflicts and other factors beyond the control of the Corporation
may adversely affect the future results of operations of the Corporation.
Management does not expect any one particular factor to affect the Corporation's
results of operations. A downward trend in several areas, however, including
real estate, construction and consumer spending, could have an adverse impact on
the Corporation's ability to maintain or increase profitability. Therefore,
there is no assurance that the Corporation will be able to continue their
current rates of income and growth.

         Interest Rates. The Corporation's earnings depend, to a large extent,
upon net interest income, which is primarily influenced by the relationship
between its cost of funds (deposits and borrowings) and the yield on its
interest-earning assets (loans and investments). This relationship, known as the
net interest spread, is subject to fluctuation and is affected by regulatory,
economic and competitive factors which influence interest rates, the volume,
rate and mix of interest-earning assets and interest-bearing liabilities, and
the level of non-performing assets. As part of its interest rate risk management
strategy comprised of interest rate risk, mortgage risk, and deposit pricing
risk components, management seeks to control its exposure to interest rate
changes by managing the maturity and repricing characteristics of
interest-earning assets and interest-bearing liabilities.

         As of December 31, 1999, total interest-earning assets maturing or
repricing within one year were less than total interest-bearing liabilities
maturing or repricing in the same period by $19,098,000, representing a
cumulative one year interest rate sensitivity gap as a percentage of total
assets of negative 9.74%. This condition suggests that the yield on the
Corporation's interest-earning assets should adjust to changes in market
interest rate at a slower rate than the cost of the Corporation's
interest-bearing liabilities. Consequently, the Corporation's net interest
income could decrease during periods of rising interest rates. See "Interest
Rate Sensitivity".

         Local Economic Conditions. The success of the Corporation is dependent,
to a certain extent, upon the general economic conditions in the geographic
market served. Although the Corporation expects that economic conditions will
continue to be favorable in this market, no assurance can be given that these
economic conditions will continue. Adverse changes in economic conditions in the
geographic market that the Corporation serves would likely impair its ability to
collect loans and could otherwise have a material adverse effect on the results
of operations and financial condition of the Corporation.


                                      -26-
<PAGE>   27

         Competition. The Banking industry is highly competitive, with rapid
changes in product delivery systems and in consolidation of service providers.
Many of the Corporation's competitors are bigger than the Corporation in terms
of assets and have substantially greater technical, marketing and financial
resources. Because of their size, many of these competitors can (and do) offer
products and services that the Corporation does not offer. The Corporation is
constantly striving to meet the convenience and needs of its customers and to
enlarge its customer base. No assurance can be given that these efforts will be
successful in maintaining and expanding the Corporation's customer base.

                              RESULTS OF OPERATIONS

         The Corporation's net income increased 7.20% to $2,039,000 for 1999,
compared to $1,902,000 for 1998. Earnings per common share for the current year
were $1.48 compared to $1.38 per common share in 1998. Earnings per share are
dependent on the weighted average number of shares outstanding. Several factors
accounted for the net decrease in the weighted average number of shares
outstanding of 1,375,572, 1,378,339 and 1,381,800 for 1999, 1998 and 1997,
respectively. These factors were the effect of dividend reinvestment and
employees stock option plans and purchase and retirement of treasury stock which
includes the Corporation's strategy begun in the latter part of 1999 to purchase
up to ten percent of the Corporation's common shares in open market purchases.

         Loans increased 13.38% throughout 1999 to $134,423,000 from
$118,558,000 in 1998. Return on average assets ("ROA") increased to 1.09% for
1999 compared to 1.07% for 1998. The return on average equity ("ROE") increased
to 8.91% for 1999 compared to 8.54% for 1998.

         Tax-equivalent net interest income increased 3.22% to $6,987,000 in
1999 from $6,769,000 in 1998. Average earning assets increased 5.53% in 1999
from $167,320,000 in 1998 to $176,576,000 in 1999. This increased net interest
income is a result of changes in strategies in the loan and security area
experienced during the past year. Along with the increase in interest earning
assets net interest income also increased 3.15% from $6,295,000 in 1998 to
$6,493,000 in 1999.

                          TABLE OF NON-INTEREST INCOME
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                                                Years Ended December 31,
                                                                                                ------------------------
                                                                                            1999           1998         1997
                                                                                            ----           ----         ----
<S>                                                                                       <C>              <C>          <C>
Service charges and fees ........................................................         $  612           $579         $523
Trust department income..........................................................            189            144          103
Investment securities gains - net................................................             39             64           57
Other ...........................................................................            210            194          132
                                                                                          ----------------------------- ----
Total non-interest income........................................................         $1,050           $981         $815
                                                                                          ==================================
</TABLE>

         Total non-interest income increased 7.03% during 1999 from $981,000 in
1998 to $1,050,000 in 1999. Trust income increased 31.25% from $144,000 in 1998
to $189,000 in 1999. Service fees and charges increased from $579,000 in 1998 to
$612,000 in 1999 or 5.70%. Other income also increased 8.25% from $194,000 in
1998 to $210,000 in 1999. Conversely, gain on sale of investment securities
decreased from $64,000 in 1998 to $39,000 in 1999, or 39.06%. Included in other
non-interest income is net income from the Invest program, a third party
brokerage and advisory service under the supervision of the Bank, of $14,000,
compared to $15,000 in 1998.


                                      -27-
<PAGE>   28


                          TABLE OF NON-INTEREST EXPENSE
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                                              Years Ended December 31,
                                                                                              ------------------------
                                                                                          1999           1998          1997
                                                                                          ----           ----          ----
<S>                                                                                      <C>            <C>           <C>
Salaries and wages ..............................................................        $1,905         $1,886        $1,817
Employee benefits................................................................           630            563           523
Net occupancy expense............................................................           339            334           375
Furniture and equipment expense..................................................           597            556           420
Other expense....................................................................         1,348          1,400         1,357
                                                                                         -----------------------------------
Total non-interest expense                                                               $4,819         $4,739        $4,492
                                                                                         ===================================
</TABLE>

         Total non-interest expense increased to $4,819,000 in 1999 from
$4,739,000 in 1998 or 1.69%. A 3.51% increase in salaries and benefits was
attributable mainly to normal merit and cost of living increases and increased
benefit costs. Furniture and equipment expense increased 7.37% from $556,000 in
1998 to $597,000 in 1999 as a result of increased depreciation and maintenance
contracts on equipment resulting from the conversion of data processing services
from a third party provider to an in-house computer system during the second
quarter 1998, with 1999 being the first full year of this additional expense.

         A key factor in measuring non-interest expense is to express this
non-interest expense as a percentage of average total assets. In 1999, the
percentage improved to 2.58% from 2.67% in 1998.

         Credit quality remains high and delinquencies manageable, therefore the
provision for loan losses for 1999 remained at $78,000 the same as 1998.

                               NET INTEREST INCOME

         Tax-equivalent net interest income for 1999 equaled $6,988,000 compared
to $6,764,000 in 1998, an increase of 3.31%. The decrease in the overall net
interest margin from 4.04% in 1998 to 3.96% in 1999 is a result of the declining
interest rates, specifically in the loans, with adjustable rate mortgage
repricing downward throughout most of 1999. Interest income at $12,669,000 in
1999 increased from $12,444,000 in 1998 or 1.81%. Interest expense increased to
$6,099,000 in 1999 from $6,072,000 in 1998 or a .44% increase. The "squeeze" in
the net interest spread is an ongoing contributing factor in the current banking
climate and continues to be a challenge into the new millennium.

         Average cost of funds improved for 1999 at 3.94% compared to 4.12% for
1998. Conversely, yield on average interest-earning assets was 7.18% for 1999
down from 7.55% in 1998.

                       TAX-EQUIVALENT NET INTEREST INCOME
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                                              Years Ended December 31,
                                                                                              ------------------------
                                                                                        1999           1998            1997
                                                                                        ----           ----            ----
<S>                                                                                    <C>            <C>             <C>
Interest income ..........................................................             $12,669        $12,444         $12,487
Interest expense..........................................................               6,099          6,072           5,976
                                                                                       --------------------------------------
Net interest income.......................................................             $ 6,570        $ 6,372         $ 6,511
Tax-equivalent adjustment.................................................                 417            397             342
                                                                                       --------------------------------------
Net interest income (fully taxable equivalent)............................             $ 6,987        $ 6,769         $ 6,853
                                                                                       ======================================
</TABLE>

         The net interest margin, which is the total tax-equivalent net interest
income as a percentage of total average interest-earning assets, decreased in
1999 to 3.96% compared to 4.04% in 1998, a decrease of 8 basis points. The
following Average Balance Sheet and Rate Analysis table presents the average
assets, actual income or expense and the average yield on assets, liabilities
and stockholders' equity for the years 1999, 1998 and 1997.



                                      -28-
<PAGE>   29


                     AVERAGE BALANCE SHEET AND RATE ANALYSIS
                         THREE YEARS ENDED DECEMBER 31,
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                      1999                          1998                           1997
                                                      ----                          ----                           ----
                                           Average   Interest   Average  Average   Interest   Average    Average  Interest  Average
                                           Balance   Inc./Exp   Yd/Rate  Balance   Inc./Exp   Yd/Rate    Balance  Inc./Exp  Yd/Rate
                                           -------   --------   -------  -------   --------   -------    ------   --------  -------
ASSETS:                                      (1)        (2)                (1)        (2)                  (1)       (2)
<S>                                        <C>        <C>         <C>    <C>        <C>         <C>    <C>        <C>          <C>
Interest Bearing Deposits With Other
    Financial Institutions...............  $  2,739   $   132     4.82%  $  4,330   $   229     5.29%  $  2,797   $   152      5.43%
                                           ----------------------------------------------------------------------------------------
Investment Securities:
    U.S. Government Securities...........  $ 34,380   $ 2,021     5.88   $ 31,135   $ 1,838     5.90   $ 28,182   $ 1,726      6.12
    State and Municipal
      Obligations (3)....................    14,315       689     7.29     13,216       657     7.53      9,783       513      7.94
    Other Securities.....................     1,132        81     7.16      1,527       103     6.75      2,342       149      6.36
                                           ----------------------------------------------------------------------------------------
Total Investment Securities..............  $ 49,827   $ 2,791     5.60%  $ 45,878   $ 2,598     5.66%  $ 40,307   $ 2,388      5.92%
                                           ----------------------------------------------------------------------------------------
Federal Funds Sold.......................  $    825   $    39     4.73%  $    622   $    32     5.14%  $  2,256   $   124      5.50%
                                           ----------------------------------------------------------------------------------------
    Consumer.............................    10,797       887     8.22      9,183       819     8.92      8,635       811      9.39
    Dealer Floor Plan....................     2,876       230     8.00      2,044       176     8.61      1,552       135      8.70
    Mortgage.............................    99,473     7,771     7.81     97,387     7,897     8.11     97,822     8,121      8.30
    Commercial...........................     7,768       700     9.01      5,954       579     9.72      6,212       608      9.79
    Tax Free (3).........................     2,271       119     7.94      1,922       114     8.99      2,550       148      8.79
                                           ----------------------------------------------------------------------------------------
Total Loans..............................  $123,185   $ 9,707     7.88%  $116,490   $ 9,585     8.23%  $116,771   $ 9,823      8.41%
                                           ----------------------------------------------------------------------------------------
Total Interest-Earning Assets............  $176,576   $12,669     7.18%  $167,320   $12,444     7.44%  $162,131   $12,487      7.70%
                                                      ----------------              ----------------              -----------------
Reserve for Loan Losses..................     (990)                         (932)                          (918)
Cash and Due from Banks..................     1,837                         1,802                         1,372
Other Assets.............................     9,174                         9,284                         8,574
                                           --------                      --------                      --------
Total Assets.............................  $186,597                      $177,474                      $171,159
                                           ========                      ========                      ========

LIABILITIES AND CAPITAL:
SUPER NOW Deposits.......................  $ 21,717   $   289     1.33%  $ 20,255   $   348     1.72%  $ 19,735   $   415      2.10%
IRA's under $100,000.....................     8,352       413     4.94      7,987       409     5.12      8,112       405      4.99
Money Market Deposits....................    10,835       298     2.75     11,755       351     2.99     12,015       352      2.93
Savings Deposits.........................    21,895       559     2.55     20,771       538     2.59     21,498       575      2.67
Time Deposits including IRA's
    over $100,000........................    14,302       821     5.74     11,319       672     5.94     11,450       675      5.90
Other Time Deposits under $100,000           48,505     2,574     5.31     47,095     2,593     5.52     44,276     2,490      5.62
                                           ----------------------------------------------------------------------------------------
Total Interest-Bearing Deposits..........  $125,606   $ 4,954     3.94%  $119,182   $ 4,911     4.12%  $117,086   $ 4,912      4.20%
U.S. Treasury Short-Term Borrowings......       454        21     4.63        488        26     5.33        585        30      5.13
Short-Term Borrowings - Other............     1,709        97     5.68          5         0     0.00          9         0      0.00
Long-Term Borrowings.....................     2,323       130     5.60      2,017       115     5.70        254        16      6.30
Repurchase Agreements....................    18,972       897     4.73     20,150     1,020     5.06     19,350     1,018      5.26
                                           ----------------------------------------------------------------------------------------
Total Interest-Bearing Liabilities.......  $149,064   $ 6,099     4.09%  $141,842   $ 6,072     4.28%  $137,284   $ 5,976      4.35%
                                                      ----------------              ----------------              -----------------
Demand Deposits..........................    13,357                        12,015                        11,968
Other Liabilities........................     1,302                         1,353                         1,217
Stockholders' Equity.....................    22,874                        22,264                        20,690
                                           --------                      --------                      --------
Total Liabilities and Capital............  $186,597                      $177,474                      $171,159
                                           ========                      ========                      ========

NET INTEREST INCOME/NET INTEREST
    MARGIN (4)...........................             $ 6,570     3.72%             $ 6,372     3.81%             $ 6,511      4.02%
                                                      ================              ================              =================
TAX-EQUIVALENT NET INTEREST INCOME/NET
    INTEREST MARGIN (5)...................            $ 6,987     3.96%             $ 6,769     4.04%             $ 6,853      4.23%
                                                      ================              ================              =================
</TABLE>

(1)      Average volume information was compared using daily (or monthly)
         averages.
(2)      Interest on loans includes fee income.
(3)      Yield on tax-exempt obligations has been computed on a tax-equivalent
         basis.
(4)      Net interest margin is computed by dividing net interest income by
         total interest-earning assets.
(5)      Interest and yield are presented on a tax-equivalent basis using 34%
         for 1999, 1998 & 1997.


                                      -29-
<PAGE>   30


                        COMPONENTS OF NET INTEREST INCOME

         To enhance the understanding of the effects of volumes (the average
balance of earning assets and costing liabilities) and average interest rate
fluctuations on the balance sheet as it pertains to net interest income, the
table below reflects these changes for 1999 versus 1998 and preceding two years:

        TABLE OF NET INTEREST INCOME COMPONENTS ON A TAX-EQUIVALENT BASIS
                  For the twelve months ended December 31, 1999
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                             1999 Versus 1998               1998 Versus 1997              1997 Versus 1996
                                             ----------------               ----------------              ----------------
                                            Increase (Decrease)            Increase (Decrease)           Increase (Decrease)
                                             Due to Changes In              Due to Changes In             Due to Changes In
                                             -----------------              -----------------             -----------------
                                        Average   Average              Average  Average              Average   Average
                                         Volume    Rate     Total      Volume    Rate      Total     Volume      Rate     Total
                                         ------    ----     -----      ------    ----      -----     ------      ----     -----
<S>                                       <C>     <C>       <C>         <C>     <C>        <C>         <C>       <C>       <C>
Interest Income:
Interest-Bearing Deposits with Other
    Financial Institutions...........     $(84)   $ (20)    $(104)      $ 83    $  (4)     $  79       $ (3)     $  5      $  2
U.S. Government Securities...........      191       (6)      185        181      (62)       119         85         0        85
State and Municipal Obligations......       83      (32)       51        273      (40)       233         25       (13)       12
Other Securities.....................      (27)       6       (21)       (52)       9        (43)       (42)       (9)      (51)
Federal Funds Sold...................       10       (3)        7        (90)      (8)       (98)        72         2        74
Consumer Loans.......................      144      (64)       80         51      (41)        10         15        12        27
Dealer Floor Plan....................       72      (12)       60         43       (1)        42        102         0       102
Mortgage Loans(1)....................      169     (292)     (123)       (36)    (186)      (222)       194       153       347
Commercial Loans.....................      176      (42)      134        (25)      (4)       (29)        (2)        6         4
Tax Free Loans.......................       31      (20)       11        (55)       5        (50)        65         0        65
                                          ---------------------------------------------------------------------------------------
Total Earning Assets.................     $765    $(485)    $ 280       $373    $(332)     $  41       $511      $156      $667
                                          ---------------------------------------------------------------------------------------

Interest Expense:
SUPER NOW Deposits...................     $ 25    $ (79)    $ (54)      $ 11    $ (75)     $ (64)      $ (2)     $(14)     $(16)
IRA .................................       19      (14)        5         (6)      11          5          6        (1)        5
Money Market Deposits................      (28)     (28)      (56)        (8)       7         (1)       (46)       (4)      (50)
Savings Deposits.....................       29       (8)       21        (19)     (17)       (36)       (58)      (14)      (72)
Time Deposits over $100,000..........      177      (23)      154         (8)       5         (3)        31        (5)       26
Other Time Deposits..................       78      (99)      (21)       158      (44)       114        157        17       174
U.S. Treasury - Short-Term
  Borrowings ........................       (2)      (3)       (5)        (5)       1         (4)         3         0         3
Long-Term Borrowings.................       17       (2)       15        111       (2)       109         (6)       (3)       (9)
Repurchase Agreements................      (60)     (66)     (126)        42      (39)         3        267        39       306
                                          ---------------------------------------------------------------------------------------
Total Interest-Bearing Deposits......     $255    $(322)    $ (67)      $276    $(153)     $ 123       $352      $ 15      $367
                                          ---------------------------------------------------------------------------------------

NET INTEREST INCOME..................     $510    $(163)    $ 347       $ 97    $(179)     $ (82)      $159      $141      $300
                                          =======================================================================================
</TABLE>

(1)      Includes non-accrual loans.




                                      -30-
<PAGE>   31

                               FINANCIAL CONDITION

         The Corporation's total consolidated assets at December 31, 1999 were
$196 million which represented an increase of $11 million or 5.95% over $185
million at December 31, 1998. The 1998 growth rate was 6.32% or $11 million.

         Capital declined 2.13% for 1999 from $23.5 million in 1998 to $23.0
million in 1999. Adjustment for fair market value of securities was a negative
$1.2 million for 1999 compared to a positive $.5 million for 1998. Additionally,
a strategy to purchase up to 10% of the capital stock of CCFNB and retire it is
in place and resulted in common stock and surplus decreasing to $7.2 million in
1999 from $7.6 million in 1998 or a decrease of 5.26%.

         Total average assets grew 5.65% from 1998 at $177 million to 1999 at
$187 million. Average earning assets grew 5.99% from 1998 at $167 million to
1999 at $177 million.

         Loans grew 12.61% from $119 million at December 31, 1998 to $134
million at December 31, 1999. The overall mix also changed which is a positive
trend.

         Core deposits declined 2.38% to $123 million at December 31, 1999 from
$126 million at December 31, 1998. Non-interest bearing deposits remained at $13
million.

         The loan-to-deposit ratio is a key measurement of liquidity. The
loan-to-deposit ratio at CCFNB increased during 1999 to 96.40% compared to
86.23% in 1998.

         It is management's opinion that the balance sheet mix and the interest
rate risk associates with the balance sheet is within manageable parameters.
Constant monitoring using asset/liability reports and interest rate risk
scenarios are in place along with quarterly asset/liability management meetings
on the committee level by the Board of Directors.

                                   INVESTMENTS
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                Outstanding Balance at December 31,
                                                                                -----------------------------------
                                                                 1999                     1998                      1997
                                                                 ----                     ----                      ----
                                                       Available-    Held-To    Available-     Held-To     Available-    Held-To
                                                        For-Sale     Maturity    For-Sale      Maturity     For-Sale     Maturity
                                                        --------     --------    --------      --------     --------     --------
                                                           (2)         (1)          (2)          (1)           (2)         (1)
<S>                                                      <C>            <C>       <C>              <C>       <C>            <C>
U.S. Treasury Securities.............................    $     0        $  0      $     0          $  0     $  2,997        $  0
Federal Agency Obligations...........................     15,482           0        9,782             0       14,546           0
Mortgage-backed Securities...........................     17,595           0       22,402             0       14,450           0
Obligations of State and Political Subdivisions......     14,451         200       14,030           565        9,459         720
Other Securities.....................................      1,376           0        1,372             0        1,690           0
                                                         ------------------------------------------------------------ ----------
Total Investment Securities..........................    $48,904        $200      $47,586          $565     $ 43,142        $720
                                                         ============================================================ ==========
</TABLE>

(1)      Carried at amortized cost.
(2)      Carried at estimated fair value.


         The following table sets forth the maturity distribution of the
investment portfolio's Held-to-Maturity and Available-for-Sale securities, the
weighted average yield for each type of Held-to-Maturity and Available-for-Sale
securities and ranges of maturity at December 31, 1999. Yields are presented on
a tax-equivalent basis, are based upon carrying value and are weighted for the
scheduled maturity. At December 31, 1999 the Corporation's investment securities
portfolio had an average maturity of approximately 6.3 years.


                                      -31-
<PAGE>   32



<TABLE>
<CAPTION>
                                                                             (Dollars in Thousands)
                                                                   After One       After Five
                                                                   Year But         Years But
                                                    Within          Within           Within             After
                                                   One Year       Five Years        Ten Years         Ten Years          Total
                                                   --------       ----------        ---------         ---------          -----
                                                Amount   Yield  Amount    Yield  Amount    Yield   Amount    Yield  Amount    Yield
                                                ------   -----  ------    -----  ------    -----   ------    -----  ------    -----
<S>                                             <C>       <C>   <C>        <C>    <C>       <C>    <C>        <C>   <C>        <C>
HELD-TO-MATURITY SECURITIES AT
    AMORTIZED COST
    U.S. Treasury Securities.............       $    0    0.00% $     0    0.00%  $    0    0.00%  $     0    0.00% $     0    0.00%
    Federal Agency Obligations...........            0    0.00%       0    0.00%       0    0.00%        0    0.00%       0    0.00%
    Obligations of State and Political
      Subdivisions.......................          200    6.74%       0    0.00%       0    0.00%        0    0.00%     200    6.74%
    Other Securities.....................            0    0.00%       0    0.00%       0    0.00%        0    0.00%       0    0.00%
                                                -----------------------------------------------------------------------------------
                                        TOTAL   $  200    6.74%       0    0.00%       0    0.00%  $     0    0.00% $   200    6.74%
AVAILABLE-FOR-SALE SECURITIES AT
    FAIR VALUE
    U.S. Treasury Securities.............       $    0    0.00%       0    0.00%       0    0.00%  $     0    0.00% $     0    0.00%
    Federal Agency Obligations...........        1,848    6.42%  27,320    6.06%   3,909    6.02%        0    0.00%  33,077    6.09%
    Obligations of State and Political
      Subdivisions.......................            0    0.00%   1,086    6.78%   1,843    7.31%   11,522    7.31%  14,451    7.28%
    Other, including Equity Securities...            0    0.00%       0    0.00%       0    0.00%    1,376    5.99%   1,376    5.99%
                                                -----------------------------------------------------------------------------------
                                        TOTAL   $1,848    6.42% $28,406    6.09%  $5,752    6.42%  $12,898    7.31% $48,904    6.44%
</TABLE>

         Available-for-Sale securities are reported on the consolidated balance
sheets at fair value. The difference between market value and carrying cost
results in an increase or decrease, as the case may be, to consolidated
stockholders' equity after giving effect of deferred taxes or benefit. The
possibility of material price volatility in a rising interest rate environment
is offset by the availability to the Corporation of restructuring the portfolio
for gap positioning at any time through the securities classified as
available-for-sale. The decrease in consolidated stockholders' equity for the
year ended December 31, 1999 attributable to the fair value accounting for
Available-for-Sale securities was $1,608,000 resulting from a net unrealized
loss of $1,160,000 at December 31, 1999 compared to a net unrealized gain of
$448,000 at December 31, 1998.

         One local municipal holding is placed in the Held-to-Maturity category.
This holding comprised .41% of the entire portfolio at December 31, 1999,
compared to several local holdings or 1.17% at December 31, 1998. The total at
December 31, 1999 was $200,000 and at December 31, 1998 was $565,000.

         Available-for-Sale securities total $48,904,000 at year end 1999
compared to $47,586,000 at year end 1998 or an increase of 2.77%.

         The mix of securities in the portfolio was 30.15% U.S. agencies, 37.21%
mortgage-backed securities, 29.83% municipal and 2.81% other. The Corporation
does not engage in derivative investment products.

                                      LOANS

                                 LOAN PORTFOLIO
                                LOANS OUTSTANDING
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                          1999           1998            1997
                                                                                          ----           ----            ----
<S>                                                                                     <C>            <C>             <C>
Commercial.......................................................................       $ 15,559       $  8,991        $  7,551
Tax-Exempt.......................................................................          2,124          2,512           2,591
Qualified Municipal Leases.......................................................            173             20               0
Real Estate - Construction.......................................................          2,509          1,278             637
Real Estate......................................................................        102,108         96,742          99,780
Personal.........................................................................       $ 12,562       $  9,461        $  8,907
                                                                                        ---------------------------------------
                                                                                        $135,035       $119,004        $119,466
Unamortized Loan Fees, Net of Costs..............................................             28             70              97
Unearned Discount................................................................            584            376             324
                                                                                        ---------------------------------------
Loans, Net.......................................................................       $134,423       $118,558        $119,045
                                                                                        =======================================
</TABLE>



                                      -32-
<PAGE>   33


         Growth of 13.32% was experienced in the loan portfolio, from $118.6
million in 1998 to $134.4 million in 1999. The distribution of the loan
portfolio reflects 77.81% real estate loans, 11.57% commercial loans, 1.58% tax
exempt loans, .13% qualified municipal leases and 8.91% consumer loans. Variable
rate real estate loans were comprised of 67.90% with 3 year adjustable rate,
16.48% with 1 year adjustable rate and 15.62% with one day to 3 month adjustable
rates. Many three year and one year adjustable rate loans have weekly or
bi-weekly payments.

                           DEPOSITS AND BORROWED FUNDS

                    TABLE OF DISTRIBUTION OF AVERAGE DEPOSITS
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                                       December 31,
                                                                                                       ------------
                                                                                            1999           1998            1997
                                                                                            ----           ----            ----
<S>                                                                                       <C>            <C>             <C>
Demand deposits....................................................................       $ 35,074       $ 32,270        $ 31,703
Savings deposits...................................................................         32,730         32,695          33,513
Time deposits......................................................................         56,857         55,082          52,388
Certificates of deposit, $100,000 and over.........................................         14,302         11,319          11,450
                                                                                          ---------------------------------------
Total..............................................................................       $138,963       $131,366        $129,054
                                                                                          =======================================
</TABLE>

          TABLE OF MATURITY DISTIRBUTION OF TIME DEPOSITS OVER $100,000
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                                    December 31,
                                                                                                    ------------
                                                                                        1999            1998            1997
                                                                                        ----            ----            ----
<S>                                                                                    <C>            <C>             <C>
Three months or less...............................................................    $ 4,306        $ 1,994         $ 4,574
Over three months to six months....................................................      2,513            651           3,665
Over six months to twelve months...................................................      4,641          3,656           2,914
Over twelve months.................................................................      4,716          5,688             308
                                                                                       --------------------------------------
Total..............................................................................    $16,176        $11,989         $11,461
                                                                                       ======================================
</TABLE>

         Total average deposits increased 6.11% from $131 million at year end
1998 to $139 million at year end 1999. Average savings deposits remained at $33
million at year end 1998 and 1999. Average time deposits increased 7.58% from
$66 million at year end 1998 to $71 million at year end 1999. Average
non-interest demand deposits increased to $13 million for 1999 from $12 million
for 1998. Average interest bearing NOW accounts increased from $20 million for
1998 to $22 million for 1999, a 10.00% increase.

         Short-term borrowings, securities sold under agreements to repurchase
and day-to-day borrowings from the Federal Home Loan Bank, increased 55.00% from
$20 million at year end 1998 to $31 million at year end 1999. Treasury tax and
loan deposits held by the Corporation for the U.S. Treasury averaged $454,000
for 1999, one day borrowings averaged $1,709,000 for 1999 and repurchase
agreements averaged $18,972,000 for 1999. Long-term borrowings, namely
borrowings from the Federal Home Loan Bank of Pittsburgh averaged $2,323,000 for
1999.

                              NON-PERFORMING ASSETS

                         PAST DUE AND NON-ACCRUAL LOANS
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                                            Lease
                                                            Real         Installment                      Financing
                          1999                             Estate           Loans         Commercial     Receivables      Total
                          ----                             ------           -----         ----------     -----------      -----
<S>                                                         <C>              <C>               <C>            <C>        <C>
Days 30-89...........................................       $503             $154              $0             $8         $  665
Days 90 Plus.........................................        157               16               0              0            173
Non-accrual..........................................        199                0               0              0            199
                                                            -------------------------------------------------------------------
Total................................................       $859             $170              $0             $8         $1,037
                                                            ===================================================================
</TABLE>


                                      -33-
<PAGE>   34


<TABLE>
<CAPTION>
                                                                                                            Lease
                                                            Real         Installment                      Financing
                          1998                             Estate           Loans         Commercial     Receivables      Total
                          ----                             ------           -----         ----------     -----------      -----
<S>                                                         <C>              <C>               <C>            <C>        <C>
Days 30-89...........................................       $  865           $182             $16             $0         $1,063
Days 90 Plus.........................................          398              2              15              0            415
Non-accrual..........................................          537              0               0              0            537
                                                            -------------------------------------------------------------------
Total................................................       $1,800           $184             $31             $0         $2,015
                                                            ===================================================================
</TABLE>


<TABLE>
<CAPTION>
                                                                                                            Lease
                                                            Real         Installment                      Financing
                          1997                             Estate           Loans         Commercial     Receivables      Total
                          ----                             ------           -----         ----------     -----------      -----
<S>                                                         <C>              <C>             <C>            <C>        <C>
Days 30-89...........................................       $1,049          $232             $50             $0           $1,331
Days 90 Plus.........................................          586            13              29              0              628
Non-accrual..........................................           69             0               0              0               69
                                                            --------------------------------------------------------------------
Total................................................       $1,704          $245             $79             $0           $2,028
                                                            ====================================================================
</TABLE>

         At year end 1999, loans 30-89 days past due totaled $665,000 compared
to $1,063,000 at year end 1998, a 37.44% decrease. Past due loans 90 days plus
total $173,000 at year end 1999 compared to $415,000 at year end 1998, a 58.31%
decrease. Non-accrual loans at year end 1999 totaled $199,000 compared to
$537,000 at year end 1998, a 62.94% decrease. Overall, past due and non-accrual
loans decreased 48.54% from $2,015,000 at year end 1998 to $1,037,000 at year
end 1999. During this same period of time the ratio of net charge-offs during
the period to average loans outstanding during the period was .04%. (See Summary
of Loan Loss Experience). Management does not consider these percentages to be
significant or material.

         Loans were stated at their outstanding principal balances, net of any
deferred fees or costs, unearned income, and the allowance for loan losses.
Interest on loans was accrued on the principal amount outstanding, primarily on
the actual day basis. Non-renewable loan fees and certain direct costs were
deferred and amortized over the life of the loans using the interest method. The
amortization was reflected on an interest yield adjustment, and the deferred
portion of the net fees and costs was reflected as a part of the loan balance.

         Generally, a loan is classified as non-accrual, and the accrual of
interest on such a loan is discontinued when the contractual payment of
principal or interest becomes 90 days past due or management has serious doubts
about further collectability of principal or interest, even though the loan may
be performing.

         A loan may remain on accrual status if it is in the process of
collection and is either guaranteed or well secured. When a loan is placed on
non-accrual status, unpaid interest credited to income in the current year is
reversed, and unpaid interest accrued in prior years is charged against the
allowance for credit losses. Potential problem loans are identified by
management as part of its loan review process. Certain non-accrual loans may
continue to perform, that is, payments are still being received. Generally, the
payments are applied to principal. These loans remain under constant scrutiny
and if performance continues, interest income may be recorded on a cash basis
based on management's judgment as to collectability of principal.

                 ALLOWANCE FOR LOAN LOSSES AND RELATED PROVISION
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                     Outstanding Balance at December 31,
                                                                     -----------------------------------
                                                           1999                      1998                      1997
                                                           ----                      ----                      ----
                                                                % of Loans              % of Loans                % of Loans
                                                               in Category             in Category               in Category
                                                                 to Total               to Total                  to Total
                                                     Amount       Loans       Amount      Loans         Amount      Loans
                                                     ------       -----       ------      -----         ------      -----
<S>                                                    <C>       <C>            <C>        <C>            <C>        <C>
Commercial..................................           $270      13%            $202       10%            $ 83        9%
Real estate mortgages.......................            341      78%             510       82%             516       84%
Consumer....................................             88       9%             196        8%             119        7%
Unallocated.................................            286      N/A              47       N/A             183       N/A
                                                       --------------------------------------------------------------------
                                                       $985      100%           $955      100%            $901      100%
                                                       ====================================================================
</TABLE>



                                      -34-
<PAGE>   35

         The allowance for loan losses was $985,000 at December 31, 1999,
compared to $955,000 at December 31, 1998. This allowance equaled .73% of total
loans, net of unearned income, at the end of 1999 compared to .81% at the end of
1998. This allowance was considered adequate based on delinquency trends and
actual loans written as it relates to the loan portfolio.

         The loan loss reserve is analyzed quarterly and reviewed by the Board
of Directors. The assessment of the loan policies and procedures during 1999
revealed no anticipated loss on any loans considered "significant". No
concentration or apparent deterioration in classes of loans or pledged
collateral was evident. Monthly loan meetings with the Board Credit
Administration Committee provide a review of new loans, delinquent loans and
loan exceptions to determine compliance with policies.

         The schedule below presents a history of actual charge-offs and
recoveries by category and related balances and ratios.

                         SUMMARY OF LOAN LOSS EXPERIENCE
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                                Years Ended December 31,
                                                                                                ------------------------
                                                                                           1999           1998           1997
                                                                                           ----           ----           ----
<S>                                                                                      <C>            <C>           <C>
Loans outstanding at end of  year                                                        $134,423       $118,558      $119,045
                                                                                         =====================================

Average loans outstanding............................................................    $123,185       $116,490      $116,771
                                                                                         =====================================
Allowance for loan losses:
Balance, beginning of year...........................................................    $    955       $    901      $    911
                                                                                         -------------------------------------
Loans Charged-off:
    Commercial and industrial........................................................          (5)             0           (15)
    Real estate mortgages............................................................           0             (8)            0
    Consumer.........................................................................         (94)           (75)          (88)
    Credit cards.....................................................................          (1)             0             0
                                                                                         -------------------------------------
Total loans charged-off..............................................................        (100)           (83)         (103)
                                                                                         -------------------------------------
Recoveries:
    Commercial and industrial........................................................           8              3             0
    Real estate mortgages............................................................           0              8             0
    Consumer.........................................................................          43             42            32
    Lease financing receivables......................................................           0              6             1
    Credit cards.....................................................................           1              0             0
                                                                                         -------------------------------------
Total recoveries.....................................................................          52             59            33
                                                                                         -------------------------------------
Net loans charged-off................................................................         (48)           (24)          (70)
                                                                                         -------------------------------------
Provision charged to expense.........................................................          78             78            60
                                                                                         -------------------------------------
Balance, end of year                                                                     $    985       $    955      $    901
                                                                                         =====================================
Ratio of net charge-offs during the year to average loans
    outstanding during year                                                                  0.04%          0.02%         0.06%
                                                                                         =====================================
</TABLE>

         The allowance for loan losses is established through provisions for
loan losses charged against income. Loans deemed to be uncollectible are charged
against the allowance for loan losses, and subsequent recoveries, if any, are
credited to the allowance.

         A factor in estimating the allowance for loan losses is the measurement
of impaired loans. A loan is considered impaired when, based on current
information and events, it is probable that the Corporation will be unable to
collect all amounts due according to the contractual terms of the loan
agreement. Under current accounting standards, the allowance for loan losses
related to impaired loans is based on discounted cash flow using the loan's
effective interest rate or the fair value of the collateral for certain
collateral dependent loans.

         The allowance for loan losses is maintained at a level established by
management to be adequate to absorb estimated potential loan losses.
Management's periodic evaluation of the adequacy of the allowance for loan
losses is based on the Corporation's past loan loss experience, known and
inherent risks in the portfolio, adverse situations that may affect the
borrower's ability to repay (including the timing of future payments), the
estimated value of any underlying collateral, composition of the loan portfolio,
current economic conditions, and other relevant factors. This evaluation is
inherently subjective as it requires material estimates, including the amounts
and timing of future cash flows expected to be received on impaired loans that
may be susceptible to significant change. See "Factors That May Affect Future
Results".

         Moreover, no additions to the reserve for loan losses were required as
a result of an analysis of impaired loans, as defined under SFAS No. 114, since
the amount of impaired loans so determined was considered to be insignificant
and the existing reserve was more than adequate to provide for those impaired
loans.



                                      -35-
<PAGE>   36

                                    LIQUIDITY

         Liquidity management is required to ensure that adequate funds will be
available to meet anticipated and unanticipated deposit withdrawals, debt
service payments, investment commitments, commercial and consumer loan demand,
and ongoing operating expenses. Funding sources include principal repayments on
loans, sales of assets, growth in core deposits, short and long-term borrowings,
investment securities maturing, loan prepayments and repurchase agreements.
Regular loan payments are a dependable source of funds, while the sale of
investment securities, deposit growth and loan prepayments are significantly
influenced by general economic conditions and the level of interest rates.

         Liquidity is managed on a daily basis at the Corporation. Management
believes that the liquidity is sufficient to meet present and future financial
obligations and commitments on a timely basis. However, see "Factors That May
Affect Future Results".

         At December 31, 1999, cash and cash equivalents totaled $6,071,817
compared to $12,486,043 at December 31, 1998. Changes in cash were measured by
changes in the three major classifications of cash flows known as operating,
investing and financing activities.

         At December 31, 1999, net cash provided by operating activities equaled
$2,439,119 which consisted mainly of net income adjusted for non-cash items such
as depreciation, accruals on interest receivable, premiums on investment
securities and provision for loan losses.

         Net cash used for investing activities totaled $19,430,638 which was
principally the result of a $15,979,778 increase in loans and a $3,404,173
excess of purchases of Available-for-Sale investment securities over the
proceeds on sale and redemption of Available-for-Sale and Held-to-Maturity
securities.

         Net cash provided by financing activities totaled $10,577,293 and
consisted mostly of an increase in short-term borrowings of $10,462,273.
Dividends paid were $695,463.

                                CAPITAL RESOURCES

         Capital continues to be a strength of the Corporation.

         Capital is critical as it must provide growth, payment to shareholders,
and absorption of unforeseen losses. The federal regulators provide standards
that must be met. The Corporation is subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory - and possibly
additional discretionary - actions by regulators that, if undertaken, could have
a direct material impact on the Corporation's consolidated financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Corporation must meet specific capital guidelines that
involve quantitative measures of the Corporation's assets, liabilities, and
certain off-balance sheet items as calculated under regulatory accounting
practices. The Corporation's capital amounts and classification are also subject
to qualitative judgments by the regulators about components, risk weightings,
and other factors.

         Quantitative measures established by regulation to ensure capital
adequacy require the Corporation to maintain minimum amounts and ratios (set
forth in the following table) of Total and Tier I Capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier I Capital (as
defined) to average assets (as defined).



                                      -36-
<PAGE>   37


         As of December 31, 1999, the most recent notification from the Office
of the Comptroller of the Currency categorized the Bank as well capitalized
under the regulatory framework for prompt corrective action. To be categorized
as well capitalized the Bank must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage ratios as set forth in the Table. There are no
conditions or events since that notification that management believes have
changed the institution's category.

         The Bank's actual capital amounts are ratios in the following table:

<TABLE>
<CAPTION>
                                                                                                                   To be Well
                                                                                                               Capitalized Under
                                                                                            For Capital        Prompt Corrective
                                                                        Actual           Adequacy Purposes     Action Provisions
                                                                        ------           -----------------     -----------------
                                                                  Amount      Ratio      Amount      Ratio     Amount      Ratio
                                                                  ------      -----      ------      -----     ------      -----
<S>                                                                <C>       <C>          <C>        <C>        <C>       <C>
As of December 31, 1999:
    Total Capital
        (To risk-weighted assets).......................           $25,131   18.68%       $10,766    8.00%      $13,457   10.00%
    Tier I Capital
        (To risk-weighted assets).......................           $24,146   17.94%       $ 5,383    4.00%      $ 8,047    6.00%
    Tier I Capital
        (To average assets).............................           $24,146   12.94%       $ 7,464    4.00%      $ 9,330    5.00%

As of December 31, 1998:
    Total Capital
        (To risk-weighted assets).......................           $23,967   21.80%       $ 8,796    8.00%      $10,995   10.00%
    Tier I Capital
        (To risk-weighted assets).......................           $23,012   20.93%       $ 4,398    4.00%      $ 6,597    6.00%
    Tier I Capital
        (To average assets).............................           $23,012   12.95%       $ 7,106    4.00%      $ 8,882    5.00%
</TABLE>

         The Corporation's capital ratios are not materially different from
those of the Bank.

         Dividend payouts are restricted by the Pennsylvania Business
Corporation Law of 1988, as amended (the "BCL"). The BCL operates generally to
preclude dividend payments if the effect thereof would render the Corporation
unable to meet its obligations as they become due. As a practical matter, the
Corporation's payment of dividends is contingent upon its ability to obtain
funding in the form of dividends from the Bank. Payment of dividends to the
Corporation by the Bank is subject to the restrictions set forth in the National
Bank Act. Generally, the National Bank Act would permit the Bank to declare
dividends in 2000 of approximately $2,337,489 plus additional amounts equal to
the net income earned in 2000 for the period January 1, 2000 through the date of
declaration, less any dividends which may be paid in 2000.

         Common stock issued by the Corporation is traded on a limited basis in
the local over-the-counter market using the symbol CCFN. The bid prices below
are actual transactions and reflect information from one of the Corporation's
market-makers. The prices do not necessarily reflect any dealer or retail
markup, markdown or commission:

<TABLE>
<CAPTION>
                                                           1999                          1998
                                                           ----                          ----
                                                                    Quarterly                     Quarterly
                                                 Highest  Lowest    Dividend  Highest   Lowest    Dividend
                                                 -------  ------    --------  -------   ------    --------
<S>                                              <C>      <C>        <C>      <C>       <C>        <C>
Fourth quarter...........................        $20.12   $18.75     $0.130   $25.75    $25.00     $0.116
Third quarter............................        $20.63   $20.00     $0.130   $31.00    $28.00     $0.116
Second quarter...........................        $20.50   $18.00     $0.130   $30.50    $27.00     $0.116
First quarter............................        $25.00   $19.13     $0.116   $26.25    $23.00     $0.116
</TABLE>



                                      -37-
<PAGE>   38

                          INTEREST RATE RISK MANAGEMENT

         Interest rate risk management involves managing the extent to which
interest-sensitive assets and interest-sensitive liabilities are matched.
Interest rate sensitivity is the relationship between market interest rates and
earnings volatility due to the repricing characteristics of assets and
liabilities. The Bank's net interest income is affected by changes in the level
of market interest rates. In order to maintain consistent earnings performance,
the Bank seeks to manage, to the extent possible, the repricing characteristics
of its assets and liabilities.

         One major objective of the Bank when managing the rate sensitivity of
its assets and liabilities is to stabilize net interest income. The management
of and authority to assume interest rate risk is the responsibility of the
Bank's Asset/Liability Committee ("ALCO"), which is comprised of senior
management and Board members. ALCO meets quarterly to monitor the ratio of
interest sensitive assets to interest sensitive liabilities. The process to
review interest rate risk management is a regular part of management of the
Bank. Consistent policies and practices of measuring and reporting interest rate
risk exposure, particularly regarding the treatment of noncontractual assets and
liabilities, are in effect. In addition, there is an annual process to review
the interest rate risk policy with the Board of Directors which includes limits
on the impact to earnings from shifts in interest rates.

         The ratio between assets and liabilities repricing in specific time
intervals is referred to as an interest rate sensitivity gap. Interest rate
sensitivity gaps can be managed to take advantage of the slope of the yield
curve as well as forecasted changes in the level of interest rate changes.

         To manage the interest sensitivity position, an asset/liability model
called "gap analysis" is used to monitor the difference in the volume of the
Bank's interest sensitive assets and liabilities that mature or reprice within
given periods. A positive gap (asset sensitive) indicates that more assets
reprice during a given period compared to liabilities, while a negative gap
(liability sensitive) has the opposite effect. The Bank employs computerized net
interest income simulation modeling to assist in quantifying interest rate risk
exposure. This process measures and quantifies the impact on net interest income
through varying interest rate changes and balance sheet compositions. The use of
this model assists the ALCO to gauge the effects of the interest rate changes on
interest sensitive assets and liabilities in order to determine what impact
these rate changes will have upon the net interest spread.

                      STATEMENT OF INTEREST SENSITIVITY GAP
                             (Dollars in thousands)
                                DECEMBER 31, 1999

<TABLE>
<CAPTION>
                                                                              > 90 Days
                                                                     90 Days      But      1 to 5   5 to 10    > 10
                                                                     Or Less   < 1 Year    Years     Years     Years     Total
                                                                     -------   --------    -----     -----     -----     -----
<S>                                                                 <C>        <C>        <C>        <C>      <C>      <C>
Short-term investments...........................................        217          0         0         0        0   $    217
Securities Available-for-Sale (1)................................      2,153      7,535    31,600     5,752    1,864     48,904
Securities Held-to-Maturity (1)..................................        200          0         0         0        0        200
Loans (1)........................................................     30,996     35,847    61,879     1,900    3,801    134,423
                                                                    -----------------------------------------------------------
    Rate Sensitive Assets........................................   $ 33,566     43,382    93,479     7,652    5,665   $183,744
                                                                    -----------------------------------------------------------
Deposits:
Interest-bearing demand deposits (2).............................   $  3,137   $  3,137   $14,640         0        0   $ 20,914
Savings (2)......................................................      4,799      4,799    22,393         0        0     31,991
Time.............................................................     13,444     33,539    25,061         0        0     72,044
Borrowed funds...................................................     29,033      1,847         0         0        0     30,880
Long-term debt...................................................          2          5     2,041       148      148      2,344
Shareholders' equity.............................................        576      1,728     9,219     5,762    5,762     23,047
                                                                    -----------------------------------------------------------
    Rate Sensitive Liabilities and Shareholders' Equity..........   $ 50,991   $ 45,055   $73,354    $5,910   $5,910   $181,220
                                                                    -----------------------------------------------------------
Interest Sensitivity Gap.........................................   $(17,425)  $ (1,673)  $20,125    $1,742   $ (245)  $  2,524
Cumulative Gap...................................................   $(17,425)  $(19,098)  $ 1,027    $2,769   $2,524
</TABLE>

(1)      Investments and loans are included at the earlier of repricing or
         maturity adjusted for the effects of prepayments.
(2)      Interest bearing demand and savings accounts are included based on
         historical experience and managements' judgment about the behavior of
         these deposits in changing interest rate environments.


                                      -38-
<PAGE>   39

At December 31, 1999 the Corporation's cumulative gap positions and the
potential earnings change resulting from a 200 basis point change in rates were
within the internal risk management guidelines.

         Upon reviewing the current interest sensitivity scenario, increasing
interest rates could negatively affect net income because the Bank is
liability-sensitive. In a declining interest rate environment, net income could
be positively affected because more liabilities than assets will reprice during
a given period.

         Certain shortcomings are inherent in the method of analysis presented
in the above table. Although certain assets and liabilities may have similar
maturities or periods of repricing, they may react in different degrees to
changes in market interest rates. The interest rates on certain types of assets
and liabilities may fluctuate in advance of changes in market interest rates,
while interest rates on other types of assets and liabilities may lag behind
changes in market interest rates. Certain assets, such as adjustable-rate
mortgages, have features which restrict changes in interest rates on a
short-term basis and over the life of the asset. In the event of a change in
interest rates, prepayment and early withdrawal levels may deviate significantly
from those assumed in calculating the table. The ability of many borrowers to
service their adjustable-rate debt may decrease in the event of an interest rate
increase.

         The following table provides information about the Corporation's
financial instruments. The table presents the financial instruments including
the expected cash flow over the next five years. In addition the average
interest rate is shown for each period presented. The table also includes the
fair market value for each category of financial instruments as of December 31,
1999. This presentation differs from the above gap report primarily due to
presenting the financial instruments based on a contractual maturity as opposed
to a repricing scenario as reflected in the above gap report.

                    PRINCIPAL / NOTIONAL AMOUNTS MATURING IN:
                              (Dollars in millions)

<TABLE>
<CAPTION>
                                                                                                                            Fair
                                                                                                      There-                Value
                                                   2000     2001      2002       2003       2004       after    Total     12-31-99
                                                   ----     ----      ----       ----       ----       -----    -----     --------
<S>                                              <C>      <C>       <C>         <C>        <C>       <C>       <C>        <C>
Rate sensitive assets:
Fixed interest loans (1)                         $14,375  $ 6,442   $ 5,396     $3,984     $3,136    $ 8,947   $42,280    $41,862
    Average interest rate                           8.11%    8.38%     8.16%      7.93%      7.96%      7.88%
Variable interest rate loans (2)                 $37,058  $27,542   $24,458     $2,072     $1,013    $     0   $92,143    $92,143
    Average interest rate                           7.79%    7.11%     7.16%      7.36%      7.98%      0.00%
Fixed interest rate securities (1)               $ 5,518  $ 6,646   $ 4,467     $4,034     $6,585    $16,178   $43,428    $43,304
    Average interest rate                           6.45%    6.50%     6.57%      6.64%      6.75%      7.16%
Variable interest rate securities (1)            $     0  $     0   $     0     $    0     $    0    $ 5,676   $ 5,676    $ 5,676
    Average interest rate                           0.00%    0.00%     0.00%      0.00%      0.00%      6.46%
Other interest-bearing assets                    $   217  $     0   $     0     $    0     $    0    $     0   $   217    $   217
    Average interest rate                           6.19%    0.00%     0.00%      0.00%      0.00%      0.00%
Rate sensitive liabilities:
Non-interest-bearing checking (2)                $ 3,826  $ 2,460   $ 2,460     $2,460     $2,459    $     0   $13,665    $13,665
    Average interest rate                           0.00%    0.00%     0.00%      0.00%      0.00%      0.00%
Savings & interest-bearing checking (2)          $12,027  $ 7,732   $ 7,732     $7,732     $7,732    $     0   $42,955    $42,955
    Average interest rate                           1.97%    1.97%     1.97%      1.97%      1.97%      0.00%
Money market accounts (2)                        $ 3,980  $ 2,985   $ 2,985     $    0       $  0    $     0   $ 9,950    $ 9,950
    Average interest rate                           2.76%    2.76%     2.76%      0.00%      0.00%      0.00%
Time deposits (under $100,000)                   $31,093  $14,034   $ 6,558     $2,932     $1,251    $     0   $55,868    $55,833
    Average interest rate                           5.22%    5.47%     5.64%      5.75%      5.04%      0.00%
Time deposits (over 100,000)                     $11,460  $ 1,167   $ 2,252     $  838     $  459    $     0   $16,176    $16,252
    Average interest rate                           5.69%    5.96%     6.14%      6.16%      5.73%      0.00%
Fixed interest rate borrowings                   $     9  $     9   $    10     $   11     $   11    $ 2,294   $ 2,344    $ 2,344
    Average interest rate                           5.60%    5.60%     5.60%      5.60%      5.60%      5.60%
Variable interest rate borrowings                $28,880  $     0   $     0     $    0     $2,000    $     0   $30,880    $30,880
    Average interest rate                           4.73%    0.00%     0.00%      0.00%      5.55%      0.00%
</TABLE>

(1)      Investments and loans are included at contractual maturity.
(2)      Non interest-bearing checking, interest-bearing checking, savings and
         money market accounts are reflecting historical experience and
         management's judgment about the duration of these deposits.


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