<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

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

For the fiscal year ended December 31, 2001

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934 [NO FEE REQUIRED]

For the transition period from _____________to________________

Commission file Number:  0-19028

                               CCFNB BANCORP, INC.
                 (Name of small business issuer in its charter)

PENNSYLVANIA                                                   23-2254643
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                            Identification Number)

232 East Street, Bloomsburg, Pennsylvania                        17815
(Address of principal executive offices)                       (Zip Code)

Registrant's telephone number, including area code:  (570) 784-4400

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
value $1.25 per share.

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the past 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No______

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

         The aggregate market value of the voting and non-voting equity held by
non-affiliates of the Registrant based on the average of the bid and asked
prices of $21.39 at February 28, 2002, was $28,208,319.

         As of February 28, 2002, the Registrant had outstanding 1,318,762
shares of its common stock, par value $1.25 per share.

                       DOCUMENTS INCORPORATED BY REFERENCE

         In addition, portions of the Annual Report to stockholders of the
Registrant for the year ended December 31, 2001, are incorporated by reference
in Part II of this Annual Report.

                                  Page 1 of 70
                            Exhibit Index on Page 28

<PAGE>
                               CCFNB BANCORP, INC.
                                    FORM 10-K

                                      INDEX

<Table>
Part I                                                                                                    Page
<S>          <C>                                                                                 <C>
Item 1.      Business.............................................................................................3
Item 2.      Properties..........................................................................................19
Item 3.      Legal Proceedings...................................................................................19
Item 4.      Submission of Matters to a Vote of Security Holders.....................................Not Applicable

Part II

Item 5.      Market for the Registrant's Common Equity and Related Stockholder Matters...........................20
Item 6.      Selected Financial Data.............................................................................20
Item 7.      Management's Discussion and Analysis of Financial Condition and Results of Operations...............20
Item 7A.     Quantitative and Qualitative Disclosures about Market Risk..........................................20
Item 8.      Financial Statements and Supplementary Data.........................................................20
Item 9.      Changes in and Disagreements with Accountants on Accounting and Financial
              Disclosure.............................................................................Not Applicable

Part III

Item 10.     Directors and Executive Officers of the Registrant..................................................21
Item 11.     Executive Compensation..............................................................................22
Item 12.     Security Ownership of Certain Beneficial Owners and Management......................................25
Item 13.     Certain Relationships and Related Transactions......................................................25
Item 14.     Exhibits, Financial Statement Schedules and Reports on Form 8-K.....................................25

SIGNATURES.......................................................................................................26

INDEX TO EXHIBITS................................................................................................28
</Table>



                                        2
<PAGE>
                               CCFNB BANCORP, INC.
                                    FORM 10-K

PART I

ITEM 1.  BUSINESS

GENERAL

We are a registered financial holding company, bank holding company, and
Pennsylvania business corporation, and are headquartered in Bloomsburg,
Pennsylvania. We have one wholly-owned subsidiary which is Columbia County
Farmers National Bank or referred to as the Bank. A substantial part of our
business consists of the management and supervision of the Bank. Our principal
source of income is dividends paid by the Bank. At December 31, 2001, we had
approximately:

         o        $214 million in total assets;

         o        $142 million in loans;

         o        $156 million in deposits; and

         o        $26 million in stockholders' equity.

The Bank is a national banking association and member of the Federal Reserve
System whose deposits are insured by the Bank Insurance Fund of the FDIC. The
Bank is a full-service commercial bank providing a range of services and
products, including time and demand deposit accounts, consumer, commercial and
mortgage loans to individuals and small to medium-sized business in its
Northcentral Pennsylvania market area. The Bank operates also a full-service
trust department. A third-party brokerage is also resident in the Bank's main
office in Bloomsburg, Pennsylvania. At December 31, 2001, the Bank had six
branch banking offices which are located in the Pennsylvania county of Columbia.

We consider our branch banking offices to be a single operating segment, because
these branches have similar:

         o        economic characteristics,

         o        products and services,

         o        operating processes,

         o        delivery system,

         o        customer bases, and

         o        regulatory oversight.

We have not operated any other reportable operating segments in the 3-year
period ended December 31, 2001.

In January, 2001, we purchased a 50% interest in a local insurance agency. The
name of this agency is Neighborhood Group, Inc. and trades under two fictitious
names: Neighborhood Advisors (insurance agency) and Neighborhood Group Financial
Services (insurance and investment). Through this joint venture, we sell
insurance products and services, annuities and other investment products.

As of December 31, 2001, we had 84 employees on a full-time equivalent basis.
The Company and the Bank are not parties to any collective bargaining agreement
and employee relations are considered to be good.

SUPERVISION AND REGULATION

The following discussion sets forth the material elements of the regulatory
framework applicable to us and the Bank and provides certain specific
information. This regulatory framework is primarily intended for the protection
of investors in our common stock, depositors at the Bank and the Bank Insurance
Fund that insures bank deposits. To the extent that the following information
describes statutory and regulatory provisions, it is qualified by reference to
those provisions. A change in the statutes, regulations or regulatory policies
applicable to us or the Bank may have a material effect on our business.



                                        3
<PAGE>
INTERCOMPANY TRANSACTIONS

Various governmental requirements, including Sections 23A and 23B of the Federal
Reserve Act and new Regulation W of the Federal Reserve Board, limit borrowings
by us from the Bank and also limit various other transactions between us and the
Bank. For example, Section 23A of the Federal Reserve Act limits to no more than
ten percent of its total capital the aggregate outstanding amount of the Bank's
loans and other "covered transactions" with any particular non-bank affiliate
(including a financial subsidiary) and limits to no more than 20 percent of its
total capital the aggregate outstanding amount of the Bank's covered
transactions with all of its affiliates (including financial subsidiaries). At
December 31, 2001, approximately $5 million was available for loans to us from
the Bank. Section 23A of the Federal Reserve Act also generally requires that
the Bank's loans to its non-bank affiliates (including financial subsidiaries)
be secured, and Section 23B of the Federal Reserve Act generally requires that
the Bank's transactions with its non-bank affiliates (including financial
subsidiaries) be on arm's-length terms. Also, we, the Bank, and any financial
subsidiary are prohibited from engaging in certain "tie-in" arrangements in
connection with extensions of credit or provision of property or services.

SUPERVISORY AGENCIES

As a national bank and member of the Federal Reserve System, the Bank is subject
to primary supervision, regulation, and examination by the Office of the
Comptroller of the Currency and secondary regulation by the FDIC. The Bank is
subject to extensive statutes and regulations that significantly affect its
business and activities. The Bank must file reports with its regulators
concerning its activities and financial condition and obtain regulatory approval
to enter into certain transactions. The Bank is also subject to periodic
examinations by its regulators to ascertain compliance with various regulatory
requirements. Other applicable statutes and regulations relate to insurance of
deposits, allowable investments, loans, leases, acceptance of deposits, trust
activities, mergers, consolidations, payment of dividends, capital requirements,
reserves against deposits, establishment of branches and certain other
facilities, limitations on loans to one borrower and loans to affiliated
persons, activities of subsidiaries and other aspects of the business of banks.
Recent federal legislation has instructed federal agencies to adopt standards or
guidelines governing banks' internal controls, information systems, loan
documentation, credit underwriting, interest rate exposure, asset growth,
compensation and benefits, asset quality, earnings and stock valuation, and
other matters. Legislation adopted in 1994 gives the federal banking agencies
greater flexibility in implementing standards on asset quality, earnings, and
stock valuation. Regulatory authorities have broad flexibility to initiate
proceedings designed to prohibit banks from engaging in unsafe and unsound
banking practices.

We and the Bank are also affected by various other governmental requirements and
regulations, general economic conditions, and the fiscal and monetary policies
of the federal government and the Federal Reserve Board. The monetary policies
of the Federal Reserve Board influence to a significant extent the overall
growth of loans, leases, investments, deposits, interest rates charged on loans,
and interest rates paid on deposits. The nature and impact of future changes in
monetary policies are often not predictable.

We are subject to the jurisdiction of the SEC for matters relating to the
offering and sale of our securities. We are also subject to the SEC's rules and
regulations relating to periodic reporting, insider trader reports and proxy
solicitation materials. Our common stock is not listed for quotation of prices
on The NASDAQ Stock Market or any other nationally-recognized stock exchange.
However, daily bid and asked price quotations are maintained on the interdealer
electronic bulletin board system.

SUPPORT OF THE BANK

Under current Federal Reserve Board policy, we are expected to act as a source
of financial and managerial strength to the Bank by standing ready to use
available resources to provide adequate capital funds to the Bank during periods
of financial adversity and by maintaining the financial flexibility and
capital-raising capacity to obtain additional resources for assisting the Bank.
The support expected by the Federal Reserve Board may be required at times when
we may not have the resources or inclination to provide it.

If a default occurred with respect to the Bank, any capital loans to the Bank
from us would be subordinate in right of payment to payment of the Bank
depositors and certain of its other obligations.




                                        4
<PAGE>

LIABILITY OF COMMONLY CONTROLLED BANKS

The Bank can be held liable for any loss incurred, or reasonably expected to be
incurred, by the FDIC in connection with:

         o        the default of a commonly controlled FDIC-insured depository
                  institution or

         o        any assistance provided by the FDIC to a commonly controlled
                  FDIC-insured depository institution in danger of default.

"Default" generally is defined as the appointment of a conservator or receiver,
and "in danger of default" generally is defined as the existence of certain
conditions indicating that a default is likely to occur in the absence of
regulatory assistance.

DEPOSITOR PREFERENCE STATUTE

In the "liquidation or other resolution" of the Bank by any receiver, federal
legislation provides that deposits and certain claims for administrative
expenses and employee compensation against the Bank are afforded a priority over
the general unsecured claims against the Bank, including federal funds and
letters of credit.

ALLOWANCE FOR LOAN LOSSES

There are certain risks inherent in making all loans. These risks include
interest rate changes over the time period in which loans may be repaid, risks
resulting from changes in our Northcentral Pennsylvania area economy, risks
inherent in dealing with individual borrowers, and, in the case of a loan backed
by collateral, risks resulting from uncertainties about the future value of the
collateral.

Commercial loans and commercial real estate loans comprised 33% of our total
consolidated loans as of December 31, 2001. Commercial loans are typically
larger than residential real estate loans and consumer loans. Because our loan
portfolio contains a significant number of commercial loans and commercial real
estate loans with relatively large balances, the deterioration of one or a few
of these loans may cause a significant increase in nonperforming loans. An
increase in nonperforming loans could result in a loss of earnings from these
loans, an increase in the provision for loan losses and loan charge-offs.

We maintain an allowance for loan losses to absorb any loan losses based on,
among other things, our historical experience, an evaluation of economic
conditions, and regular reviews of any delinquencies and loan portfolio quality.
We cannot assure you that charge-offs in future periods will not exceed the
allowance for loan losses or that additional increases in the allowance for loan
losses will not be required. Additions to the allowance for loan losses would
result in a decrease in our net income and, possibly, our capital.

In evaluating our allowance for loan losses, we divide our loans into the
following categories:

         o        commercial,

         o        real estate mortgages,

         o        consumer, and

         o        unallocated.

We evaluate some loans as a group and some individually. We use the following
criteria in choosing loans to be evaluated individually:

         o        by industry group,

         o        by risk profile, and

         o        by past due status.

After our evaluation of these loans, we allocate portions of our allowance for
loan losses to categories of loans based upon the following considerations:

         o        historical trends,

         o        economic conditions, and

         o        any known deterioration.

We use a self-correcting mechanism to reduce differences between estimated and
actual losses. We will, on a quarterly basis, weight our loss experience among
the various categories and reallocate the allowance for loan losses.



                                        5
<PAGE>
For a more in-depth presentation of our allowance for loan losses and the
components of this allowance, please refer to Item 7 of this report under
Management's Discussion and Analysis of Financial Condition and Results of
Operations as well as footnote 4 at Exhibit 13 to this report.

CAPITAL REQUIREMENTS

We are subject to risk-based capital requirements and guidelines imposed by the
Federal Reserve Board, which are substantially similar to the capital
requirements and guidelines imposed by the Comptroller of the Currency on the
Bank. For this purpose, a bank's or bank holding company's assets and certain
specified off-balance sheet commitments are assigned to four risk categories,
each weighted differently based on the level of credit risk that is ascribed to
those assets or commitments. In addition, risk-weighted assets are adjusted for
low-level recourse and market-risk equivalent assets. A bank's or bank holding
company's capital, in turn, includes the following tiers:

         o        core ("Tier 1") capital, which includes common equity,
                  non-cumulative perpetual preferred stock, a limited amount of
                  cumulative perpetual preferred stock, and minority interests
                  in equity accounts of consolidated subsidiaries, less
                  goodwill, certain identifiable intangible assets, and certain
                  other assets; and

         o        supplementary ("Tier 2") capital, which includes, among other
                  items, perpetual preferred stock not meeting the Tier 1
                  definition, mandatory convertible securities, subordinated
                  debt and allowances for loan and lease losses, subject to
                  certain limitations, less certain required deductions.

We, like other bank holding companies, are required to maintain Tier 1 and
"Total Capital" (the sum of Tier 1 and Tier 2 capital, less certain deductions)
equal to at least four percent and eight percent of their total risk-weighted
assets (including certain off-balance sheet items, such as unused lending
commitments and standby letters of credit), respectively. At December 31, 2001,
we met both requirements, with Tier 1 and Total Capital equal to 19.06 percent
and 19.82 percent of total risk-weighted assets.

The Federal Reserve Board has adopted rules to incorporate market and interest
rate risk components into their risk-based capital standards. Under these
market-risk requirements, capital will be allocated to support the amount of
market risk related to a financial institution's ongoing trading activities.

The Federal Reserve Board also requires bank holding companies to maintain a
minimum "Leverage Ratio" (Tier 1 capital to adjusted total assets) of three
percent if the bank holding company has the highest regulatory rating and meets
certain other requirements, or of three percent plus an additional cushion of at
least one to two percentage points if the bank holding company does not meet
these requirements. At December 31, 2001, our leverage ratio was 12.44 percent.

The Federal Reserve Board may set capital requirements higher than the minimums
noted above for holding companies whose circumstances warrant it. For example,
bank holding companies experiencing or anticipating significant growth may be
expected to maintain strong capital positions substantially above the minimum
supervisory levels without significant reliance on intangible assets.
Furthermore, the Federal Reserve Board has indicated that it will consider a
"Tangible Tier 1 Leverage Ratio" (deducting all intangibles) and other indicia
of capital strength in evaluating proposals for expansion or new activities or
when a bank holding company faces unusual or abnormal risk. The Federal Reserve
Board has not advised us of any specific minimum leverage ratio applicable to
us.

The Bank is subject to similar risk-based capital and leverage requirements
adopted by the Comptroller of the Currency. The Bank was in compliance with the
applicable minimum capital requirements as of December 31, 2001. The Comptroller
of the Currency has not advised the Bank of any specific minimum leverage ratio
applicable to the Bank.

Failure to meet capital requirements could subject the Bank to a variety of
enforcement remedies, including the termination of deposit insurance by the
FDIC, and to certain restrictions on its business. The Federal Deposit Insurance
Corporation Improvements Act of 1991 ("FDICIA"), among other things, identifies
five capital categories for insured banks - well capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized, and critically
undercapitalized - and requires federal bank regulatory agencies to implement
systems for "prompt corrective action" for insured banks that do not meet
minimum capital requirements based on these categories. The FDICIA imposed
progressively more restrictive constraints on operations, management, and
capital distributions, depending on the category in which an institution is
classified. Unless a bank is well capitalized, it is subject to restrictions on
its ability to offer brokered deposits, on "pass-through" insurance coverage for
certain of




                                        6
<PAGE>

its accounts, and on certain other aspects of its operations. FDICIA generally
prohibits a bank from paying any dividend or making any capital distribution or
paying any management fee to its holding company if the bank would thereafter be
undercapitalized. An undercapitalized bank is subject to regulatory monitoring
and may be required to divest itself of or liquidate subsidiaries. Holding
companies of such institutions may be required to divest themselves of such
institutions or divest themselves of or liquidate other affiliates. An
undercapitalized bank must develop a capital restoration plan, and its parent
bank holding company must guarantee the bank's compliance with the plan up to
the lesser of five percent of the bank's assets at the time it became
undercapitalized or the amount needed to comply with the plan. Critically
undercapitalized institutions are prohibited from making payments of principal
and interest on subordinated debt and are generally subject to the mandatory
appointment of a conservator or receiver.

Rules adopted by the Comptroller of the Currency under FDICIA provide that a
national bank is deemed to be well capitalized if the bank has a total
risk-based capital ratio of ten percent or greater, a Tier 1 risk-based capital
ratio of six percent or greater, and a leverage ratio of five percent or greater
and the institution is not subject to a written agreement, order, capital
directive, or prompt corrective action directive to meet and maintain a specific
level of any capital measure. As of December 31, 2001, the Bank was
well-capitalized, based on the prompt corrective action ratios and guidelines
described above. It should be noted, however, that a bank's capital category is
determined solely for the purpose of applying the Comptroller of the Currency's
prompt corrective action regulations, and that the capital category may not
constitute an accurate representation of the bank's overall financial condition
or prospects.

BROKERED DEPOSITS

Under FDIC regulations, no FDIC-insured bank can accept brokered deposits unless
it (1) is well capitalized, or (2) is adequately capitalized and receives a
waiver from the FDIC. In addition, these regulations prohibit any bank that is
not well capitalized from paying an interest rate on brokered deposits in excess
of three-quarters of one percentage point over certain prevailing market rates.
As of December 31, 2001, the Bank held no brokered deposits.

DIVIDEND RESTRICTIONS

We are a legal entity separate and district from the Bank. In general, under
Pennsylvania law, we cannot pay a cash dividend if such payment would render us
insolvent. Our revenues consist primarily of dividends paid by the Bank. The
National Bank Act limits the amount of dividends the Bank can pay to us without
regulatory approval. The Bank may declare and pay dividends to us to the lesser
of:

         o        the level of undivided profits, and

         o        absent regulatory approval, an amount not in excess of net
                  income combined with retained net income for the preceding two
                  years.

At December 31, 2001, approximately $1.4 million was available for payment of
dividends to us.

In addition, federal bank regulatory authorities have authority to prohibit the
Bank from engaging in an unsafe or unsound practice in conducting its business.
Depending upon the financial condition of the bank in question, the payment of
dividends could be deemed to constitute an unsafe or unsound practice. The
ability of the Bank to pay dividends in the future is currently influenced, and
could be further influenced, by bank regulatory policies and capital guidelines.

DEPOSIT INSURANCE ASSESSMENTS

The deposits of the Bank are insured up to regulatory limits by the FDIC and,
accordingly, are subject to deposit insurance assessments to maintain the Bank
Insurance Fund ("BIF") administered by the FDIC. The FDIC has adopted
regulations establishing a permanent risk-related deposit insurance assessment
system. Under this system, the FDIC places each insured bank in one of nine risk
categories based on the bank's capitalization and supervisory evaluations
provided to the FDIC by the institution's primary federal regulator. An insured
bank's insurance assessment rate is then determined by the risk category in
which it is classified by the FDIC.

In the light of the recent favorable financial situation of the federal deposit
insurance funds and the recent low number of depository institution failures,
the annual insurance premiums on bank deposits insured by the BIF vary between
$0.00 per $100 of deposits for banks classified in the highest capital and
supervisory evaluation categories to $0.27 per $100 of deposits for banks
classified in the



                                        7
<PAGE>

lowest capital and supervisory evaluation categories. BIF assessment rates are
subject to semi-annual adjustment by the FDIC within a range of up to five basis
points without public comment. The FDIC also possesses authority to impose
special assessments from time to time.

The Deposit Insurance Funds Act provides for assessments to be imposed on
insured depository institutions with respect to deposits insured by the BIF ( in
addition to assessments currently imposed on depository institutions with
respect to BIF-insured deposits) to pay for the cost of Financing Corporation
("FICO") funding. The FDIC established the FICO assessment rates effective for
the fourth quarter 2001 at approximately $0.184 per $100 annually for
BIF-assessable deposits. The FICO assessments are adjusted quarterly to reflect
changes in the assessment bases of the FDIC insurance funds and do not vary
depending upon a depository institution's capitalization or supervisory
evaluations. In 2001, the Bank paid FICO assessments of $26,778.

INTERSTATE BANKING AND BRANCHING

Under the Riegle-Neal Interstate Banking and Branching Efficiency Act
("Riegle-Neal"), subject to certain concentration limits and other requirements:

         o        bank holding companies, such as we, are permitted to acquire
                  banks and bank holding companies located in any state;

         o        any bank that is a subsidiary of a bank holding company is
                  permitted to receive deposits, renew time deposits, close
                  loans, service loans, and receive loan payments as an agent
                  for any other depository institution subsidiary of that bank
                  holding company; and

         o        banks are permitted to acquire branch offices outside their
                  home states by merging with out-of-state banks, purchasing
                  branches in other states, and establishing de novo branch
                  offices in other states.

The ability of banks to acquire branch offices through purchase or opening of
other branches is contingent, however, on the host state having adopted
legislation "opting in" to those provisions of Riegle-Neal. In addition, the
ability of a bank to merge with a bank located in another state is contingent on
the host state not having adopted legislation "opting out" of that provision of
Riegle-Neal. Pennsylvania has opted in to all of these provisions upon the
condition that another host state has similar or reciprocal requirements as in
Pennsylvania.

As of the date of this report, we are not contemplating any interstate
acquisitions of a bank or a branch office.

CONTROL ACQUISITIONS

The Change in Bank Control Act prohibits a person or group of persons from
acquiring "control" of a bank holding company, unless the Federal Reserve Board
has been notified and has not objected to the transaction. Under a rebuttable
presumption established by the Federal Reserve Board, the acquisition of ten
percent or more of a class of voting stock of a bank holding company with a
class of securities registered under Section 12 of the Exchange Act, such as we,
would, under the circumstances set forth in the presumption, constitute
acquisition of control of the bank holding company.

In addition, a company is required to obtain the approval of the Federal Reserve
Board under the Bank Holding Company Act before acquiring 25 percent (five
percent in the case of an acquirer that is a bank holding company) or more of
any class of outstanding common stock of a bank holding company, such as we, or
otherwise obtaining control or a "controlling influence" over that bank holding
company.

PERMITTED NON-BANKING ACTIVITIES

The Federal Reserve Board permits us or our subsidiaries to engage in nonbanking
activities so closely related to banking or managing or controlling banks as to
be a proper incident thereto. For a discussion of other activities that are
financial in nature in which we can engage, see the caption that follows
entitled "Financial Services Modernization."

The Federal Reserve Board requires us to serve as a source of financial and
managerial strength to the Bank and not to conduct our operations in an unsafe
and unsound manner. Whenever the Federal Reserve Board believes an activity that
we are doing or our control of a nonbank subsidiary (other than a nonbank
subsidiary of the Bank) constitutes a serious risk to the financial safety,
soundness, or stability of the Bank and is inconsistent with sound banking
principles or the purposes of the federal banking laws, the Federal Reserve
Board may require us to terminate that activity or to terminate control of that
subsidiary. While the types of




                                        8
<PAGE>

permissible activities are subject to change by the Federal Reserve Board, the
principal nonbanking activities that presently may be conducted by a bank
holding company or its subsidiary without prior approval of the Federal Reserve
Board are:

         o        Servicing Activities. Furnishing services for, or establish or
                  acquire a company that engages solely in servicing activities
                  for:

                  -        us or the Bank in connection with activities
                           authorized by law, such as commitments entered into
                           by any subsidiary with third parties as long as we or
                           our servicing company comply with published
                           guidelines and do not act as a principal in dealing
                           with third parties;

                  -        the internal operations of the Bank, such as:

                           -        accounting, auditing and appraising;

                           -        advertising and public relations;

                           -        data processing and transmission services,
                                    data bases or facilities;

                           -        personnel services;

                           -        courier services;

                           -        holding or operating property used by our
                                    subsidiaries or for their future use;

                           -        liquidating property acquired from the Bank;
                                       and

                           -        selling, purchasing or underwriting
                                    insurance, such as blanket bond insurance,
                                    group insurance for employees and property
                                    and casualty insurance.

         o        Safe deposit business. Conduct a safe deposit business or
                  acquire voting securities of a company that conducts such
                  business.

         o        Securities or property representing five percent or less of
                  any company. Acquiring five percent or less of the outstanding
                  voting securities of any company regardless of that company's
                  activities.

         o        Extending credit and servicing loans. Making, acquiring,
                  brokering, or servicing loans or other extensions of credit
                  (including factoring, issuing letters of credit and accepting
                  drafts) for the company's account or for the account of
                  others.

         o        Activities related to extending credit. Any activity usual in
                  connection with making, acquiring, brokering or servicing
                  loans or other extensions of credit, as determined by the
                  Federal Reserve Board. The Federal Reserve Board has
                  determined that the following activities are usual in
                  connection with making, acquiring, brokering or servicing
                  loans or other extensions of credit:

                           -        Real estate and personal property
                                    appraising. Performing appraisals of real
                                    estate and tangible and intangible personal
                                    property, including securities.

                           -        Arranging commercial real estate equity
                                    financing. Acting as intermediary for the
                                    financing of commercial or industrial
                                    income-producing real estate by arranging
                                    for the transfer of the title, control, and
                                    risk of such a real estate project to one or
                                    more investors, if the bank holding company
                                    and its affiliates do not have an interest
                                    in, or participate in managing or
                                    developing, a real estate project for which
                                    it arranges equity financing, and do not
                                    promote or sponsor the development of the
                                    property.

                           -        Check-guaranty services. Authorizing a
                                    subscribing merchant to accept personal
                                    checks tendered by the merchant's customers
                                    in payment for goods and services, and
                                    purchasing from the merchant validly
                                    authorized checks that are subsequently
                                    dishonored.

                           -        Collection agency services. Collecting
                                    overdue accounts receivable, either retail
                                    or commercial.


                                        9
<PAGE>

                           -        Credit bureau services. Maintaining
                                    information related to the credit history of
                                    consumers and providing the information to a
                                    credit grantor who is considering a
                                    borrower's application for credit or who has
                                    extended credit to the borrower.

                           -        Asset management, servicing, and collection
                                    activities. Engaging under contract with a
                                    third party in asset management, servicing,
                                    and collection of assets of a type that an
                                    insured depository institution may originate
                                    and own, if the company does not engage in
                                    real property management or real estate
                                    brokerage services as part of these
                                    services.

                           -        Acquiring debt in default. Acquiring debt
                                    that is in default at the time of
                                    acquisition under certain conditions.

                           -        Real estate settlement servicing. Providing
                                    real estate settlement services.

         o        Leasing personal or real property. Leasing personal or real
                  property or acting as agent, broker, or adviser in leasing
                  such property under certain conditions.

         o        Operating nonbank depository institutions:

                           -        Industrial banking. Owning, controlling, or
                                    operating an industrial bank, Morris Plan
                                    bank, or industrial loan company, so long as
                                    the institution is not a bank.

                           -        Operating savings association. Owning,
                                    controlling or operating a savings
                                    association, if the savings association
                                    engages only in deposit-taking activities,
                                    lending, and other activities that are
                                    permissible for bank holding companies.

         o        Trust company functions. Performing functions or activities
                  that may be performed by a trust company (including activities
                  of a fiduciary, agency, or custodial nature), in the manner
                  authorized by federal or state law, so long as the company is
                  not a bank for purposes of the Bank Holding Company Act.

         o        Financial and investment advisory activities. Acting as
                  investment or financial advisor to any person, including
                  (without, in any way, limiting the foregoing):

                           -        Serving as investment adviser (as defined in
                                    section 2(a)(20) of the Investment Company
                                    Act of 1940, 15 U.S.C. 80a-2(a)(20)), to an
                                    investment company registered under that
                                    act, including sponsoring, organizing, and
                                    managing a closed-end investment company;

                           -        Furnishing general economic information and
                                    advice, general economic statistical
                                    forecasting services, and industry studies;

                           -        Providing advice in connection with mergers,
                                    acquisitions, divestitures, investments,
                                    joint ventures, leveraged buyouts,
                                    recapitalizations, capital structurings,
                                    financing transactions and similar
                                    transactions, and conducting financial
                                    feasibility studies;

                           -        Providing information, statistical
                                    forecasting, and advice with respect to any
                                    transaction in foreign exchange, swaps, and
                                    similar transactions, commodities, and any
                                    forward contract, option, future, option on
                                    a future, and similar instruments;

                           -        Providing educational courses, and
                                    instructional materials to consumers on
                                    individual financial management matters; and

                           -        Providing tax-planning and tax-preparation
                                    services to any person.

         o        Agency transactional services for customer investments:



                                       10
<PAGE>

                           -        Securities brokerage. Providing securities
                                    brokerage services (including securities
                                    clearing and/or securities execution
                                    services on an exchange), whether alone or
                                    in combination with investment advisory
                                    services, and incidental activities
                                    (including related securities credit
                                    activities and custodial services), if the
                                    securities brokerage services are restricted
                                    to buying and selling securities solely as
                                    agent for the account of customers and do
                                    not include securities underwriting or
                                    dealing.

                           -        Riskless principal transactions. Buying and
                                    selling in the secondary market all types of
                                    securities on the order of customers as a
                                    "riskless principal" to the extent of
                                    engaging in a transaction in which the
                                    company, after receiving an order to buy (or
                                    sell) a security from a customer, purchases
                                    (or sells) the security for its own account
                                    to offset a contemporaneous sale to (or
                                    purchase from) the customer. This does not
                                    include:

                                    (A) Selling bank-ineligible securities at
                           the order of a customer that is the issuer of the
                           securities, or selling bank-ineligible securities in
                           any transaction where the company has a contractual
                           agreement to place the securities as agent of the
                           issuer; or

                                    (B) Acting as a riskless principal in any
                           transaction involving a bank-ineligible security for
                           which the company or any of its affiliates acts as
                           underwriter (during the period of the underwriting or
                           for 30 days thereafter) or dealer.

                           -        Private placement services. Acting as agent
                                    for the private placement of securities in
                                    accordance with the requirements of the
                                    Securities Act of 1933 ("1933 Act") and the
                                    rules of the Securities and Exchange
                                    Commission, if the company engaged in the
                                    activity does not purchase or repurchase for
                                    its own account the securities being placed,
                                    or hold in inventory unsold portions of
                                    issues of these securities.

                           -        Futures commission merchant. Acting as a
                                    futures commission merchant ("FCM") for
                                    unaffiliated persons in the execution,
                                    clearance, or execution and clearance of any
                                    futures contract and option on a futures
                                    contract traded on an exchange in the United
                                    States or abroad under certain conditions.

                           -        Other transactional services. Providing to
                                    customers as agent transactional services
                                    with respect to swaps and similar
                                    transactions.

         o        Investment transactions as principal:

                           -        Underwriting and dealing in government
                                    obligations and money market instruments.
                                    Underwriting and dealing in obligations of
                                    the United States, general obligations of
                                    states and their political subdivisions, and
                                    other obligations that state member banks of
                                    the Federal Reserve System may be authorized
                                    to underwrite and deal in under 12 U.S.C. 24
                                    and 335, including banker's acceptances and
                                    certificates of deposit, under the same
                                    limitations as would be applicable if the
                                    activity were performed by the bank holding
                                    company's subsidiary member banks or its
                                    subsidiary nonmember banks as if they were
                                    member banks.

                           -        Investing and trading activities. Engaging
                                    as principal in:

                                    (A) Foreign exchange;

                                    (B) Forward contracts, options, futures,
                           options on futures, swaps, and similar contracts,
                           whether traded on exchanges or not, based on any
                           rate, price, financial asset (including gold, silver,
                           platinum, palladium, copper, or any other metal
                           approved by the Federal Reserve Board), nonfinancial
                           asset, or group of assets, other than a
                           bank-ineligible security under certain conditions.

                                    (C) Forward contracts, options, futures,
                           options on futures, swaps, and similar contracts,
                           whether traded on exchanges or not, based on an index
                           of a rate, a price, or the value of any financial
                           asset, nonfinancial asset, or group of assets, if the
                           contract requires such settlement.

                           -        Buying and selling bullion, and related
                                    activities. Buying, selling and storing
                                    bars, rounds, bullion, and coins of gold,
                                    silver, platinum, palladium, copper, and any
                                    other metal approved by the Federal Reserve
                                    Board, for




                                       11
<PAGE>

                                    the company's own account and the account of
                                    others, and providing incidental services
                                    such as arranging for storage, safe custody,
                                    assaying, and shipment.

         o        Management consulting and counseling activities:

                           -        Management consulting. Providing management
                                    consulting advice under certain conditions.

                           -        Employee benefits consulting services.
                                    Providing consulting services to employee
                                    benefit, compensation and insurance plans,
                                    including designing plans, assisting in the
                                    implementation of plans, providing
                                    administrative services to plans, and
                                    developing employee communication programs
                                    for plans.

                           -        Career counseling services. Providing career
                                    counseling services to:

                                    (A) A financial organization and individuals
                           currently employed by, or recently displaced from, a
                           financial organization;

                                    (B) Individuals who are seeking employment
                           at a financial organization; and

                                    (C) Individuals who are currently employed
                           in or who seek positions in the finance, accounting,
                           and audit departments of any company.

         o        Support services:

                           -        Courier services. Providing courier services
                                    for:

                                    (A) Checks, commercial papers, documents,
                           and written instruments (excluding currency or
                           bearer-type negotiable instruments) that are
                           exchanged among banks and financial institutions; and

                                    (B) Audit and accounting media of a banking
                           or financial nature and other business records and
                           documents used in processing such media.

                           (ii) Printing and selling MICR-encoded items.
                  Printing and selling checks and related documents, including
                  corporate image checks, cash tickets, voucher checks, deposit
                  slips, savings withdrawal packages, and other forms that
                  require Magnetic Ink Character Recognition ("MICR") encoding.

         o        Insurance agency and underwriting:

                           -        Credit insurance. Acting as principal,
                                    agent, or broker for insurance (including
                                    home mortgage redemption insurance) that is:

                                    (A) Directly related to an extension of
                           credit by the bank holding company or any of its
                           subsidiaries; and

                                    (B) Limited to ensuring the repayment of the
                           outstanding balance due on the extension of credit in
                           the event of the death, disability, or involuntary
                           unemployment of the debtor.

                           -        Finance company subsidiary. Acting as agent
                                    or broker for insurance directly related to
                                    an extension of credit by a finance company
                                    that is a subsidiary of a bank holding
                                    company under certain conditions.

                           -        Engaging in any general insurance agency
                                    activities.

         o        Community development activities:



                                       12
<PAGE>
                           -        Financing and investment activities. Making
                                    equity and debt investments in corporations
                                    or projects designed primarily to promote
                                    community welfare, such as the economic
                                    rehabilitation and development of low-income
                                    areas by providing housing, services, or
                                    jobs for residents.

                           -        Advisory activities. Providing advisory and
                                    related services for programs designed
                                    primarily to promote community welfare.

         o        Money orders, savings bonds, and traveler's checks. The
                  issuance and sale at retail of money orders and similar
                  consumer-type payment instruments; the sale of U.S. savings
                  bonds; and the issuance and sale of traveler's checks.

         o        Data processing. Providing data processing and data processing
                  and data transmission services, facilities (including data
                  processing and data transmission hardware, software,
                  documentation, or operating personnel), data bases, advice,
                  and access to such services, facilities, or data bases by any
                  technological means under certain conditions.

COMMUNITY REINVESTMENT ACT

The Community Reinvestment Act of 1977, as amended (the "CRA"), and the
regulations promulgated to implement the CRA are designed to create a system for
bank regulatory agencies to evaluate a depository institution's record in
meeting the credit needs of its community. CRA regulations establish tests for
evaluating both small and large depository institutions' investment in the
community. A "small bank" is defined as a bank which has total assets of less
than $250 million and is independent or is an affiliate of a holding company
with less than $1 billion in assets. There are streamlined procedures for
evaluating small banks and the frequency of CRA examinations will occur less
often based upon a bank's CRA rating. A large retail institution is one which
does not meet the "small bank" definition. A large retail institution can be
evaluated under one of two tests: (1) a three-part test evaluating the
institution's lending, service and investment performance; or (2) a "strategic
plan" designed by the institution with community involvement and approved by the
appropriate federal bank regulator. A large institution must choose one of these
options under which, to be examined. In addition, the CRA regulations include
separate rules regarding the manner in which "wholesale banks" and "limited
purpose banks" will be evaluated for compliance.

For the purposes of the CRA regulations, the Bank is deemed to be a "small
bank," based upon financial information as of December 31, 2001. The Bank will
be examined under the streamlined procedures. The Bank received a "satisfactory"
CRA rating in its last CRA examination which was held in 1997.

CONCENTRATION

We are not dependent for deposits nor exposed by loan concentrations to a single
customer or to a small group of customers the loss of any one or more of which
would have a materially adverse effect on our financial condition.

FINANCIAL SERVICES MODERNIZATION

The Gramm-Leach-Bliley Act (the "GLB Act"), in general, took effect on March 11,
2000. The GLB Act contains some of the most far-reaching changes governing the
operations of companies doing business in the financial services industry. The
GLB Act eliminates the restrictions placed on the activities of banks and bank
holding companies. By creating two new structures - financial holding companies
and financial subsidiaries - we and the Bank will be allowed to provide a wider
array of financial services and products that were reserved only for insurance
companies and securities firms. In addition, we can now affiliate with an
insurance company and a securities firm.

On December 19, 2000 we became a financial holding company. A financial holding
company has authority to engage in activities referred to as "financial
activities" that are not permitted to bank holding companies. A financial
holding company may also affiliate with companies that are engaged in financial
activities. A "financial activity" is an activity that does not pose a safety
and soundness risk and is:

         o        financial in nature,

         o        incidental to an activity that is financial in nature, or

         o        complimentary to a financial activity.



                                       13
<PAGE>

The GLB Act lists certain activities as financial in nature:

         o        Lending, investing or safeguarding money or securities;

         o        Underwriting insurance or annuities, or acting as an insurance
                  or annuity principal, agent or broker;

         o        Providing financial or investment advice;

         o        Issuing or selling interests in pools of assets that a bank
                  could hold;

         o        Underwriting, dealing in or making markets in securities;

         o        Engaging in any activity that the Federal Reserve Board found
                  before the GLB Act to be related closely to banking (See the
                  section in this report entitled "Permitted Non-banking
                  Activities");

         o        Engaging within the United States in any activity that a bank
                  holding company could engage in outside of the country, if the
                  Federal Reserve Board determined before the GLB Act that the
                  activity was usual in connection with banking or other
                  financial operations internationally;

         o        Merchant banking - acquiring or controlling ownership
                  interests in an entity engaged in impermissible activities,
                  if: the interests are not held by a depository institution;
                  the interests are held by a securities affiliate or an
                  investment advisory affiliate of an insurance company as part
                  of underwriting, merchant or investment banking activity; the
                  interests are held long enough to enable their sale in a
                  manner consistent with the financial viability of such an
                  activity; and we do not control the entity except to the
                  extent necessary to obtain a reasonable return on the
                  investment; or

         o        Insurance portfolio investing - acquiring or controlling
                  ownership interests in an entity engaged in impermissible
                  activities, if: the interests are not held by a depository
                  institution; the interests are held by an insurance or annuity
                  company; the interests represent investments made in the
                  ordinary course of business in accordance with state law; and
                  we do not control the entity except to the extent necessary to
                  obtain a reasonable return on the investment.

The GLB Act instructs the Federal Reserve Board to adopt a regulation or order
defining certain additional activities as financial in nature, to the extent
they are consistent with the purposes of the GLB Act. These are:

         o        Lending, exchanging, transferring, investing for others or
                  safeguarding financial assets other than money or securities;

         o        Providing any method of transferring financial assets; and

         o        Arranging, effecting or facilitating financial transactions
                  for third parties.

Other activities also may be decided by the Federal Reserve Board to be
financial in nature or incidental to a financial activity if they meet specified
criteria. The Federal Reserve Board is instructed to consider the purposes of
the GLB Act and the Bank Holding Company Act; changes in the market in which
financial holding companies compete; changes in the technology used to deliver
financial services; and whether the proposed activity is necessary or
appropriate to allow a financial holding company and its affiliates to compete
effectively, deliver services efficiently and offer services through the most
advanced technological means available.

The GLB Act gives national banks authority to use "financial subsidiaries" to
engage in financial activities. This authority has some limitations. A financial
subsidiary of the Bank may not, as a principal:

         o        underwrite insurance or annuities;

         o        engage in real estate development or investment;

         o        engage in merchant banking; or

         o        engage in insurance portfolio investment activities.

A bank's investment in a financial subsidiary will affect the way it calculates
its capital. The bank must deduct from its assets and stockholders' equity the
total of its investments in financial subsidiaries. Moreover, a bank must
present its financial information in two ways: in accordance with generally
accepted accounting principles, and, separately, in a manner that reflects the
segregation of the bank's investments in financial subsidiaries.

PRIVACY

Title V of the GLB Act creates a minimum federal standard of privacy by limiting
the instances which we and the Bank may disclose nonpublic personal information
about a consumer of our products or services to nonaffiliated third parties. A
state, such as Pennsylvania, can impose a greater or more restrictive standard
of privacy than the GLB Act. The GLB Act distinguishes "consumers" from
"customers" for purposes of the notice requirements imposed by this Act. We are
required to give a



                                       14
<PAGE>

"consumer" a privacy notice only if we intend to disclose nonpublic personnel
information about the consumer to a nonaffiliated third party. However, by
contrast, we are required to give a "customer" a notice of our privacy policy at
the time of the establishment of a customer relationship and then annually,
thereafter during the continuation of the customer relationship.

The term consumer is different from the term customer. A consumer means an
individual who obtains or has obtained a financial product or service from the
Bank that is to be used primarily for personal, family or household purposes or
that individual's representative. A customer of the Bank is an individual with a
continuous relationship with the Bank. The Office of the Comptroller of the
Currency issued regulations (effective November 13, 2000, however, compliance
was optional until July 1, 2001) which give several examples of a consumer and
customer relationship:

         o        An individual who applies to the Bank for credit for personal,
                  family or household purposes is a consumer of a financial
                  service, regardless of whether the credit is extended.

         o        An individual who provides nonpublic personal information to
                  the Bank in order to obtain a determination about whether he
                  or she may qualify for a loan to be used primarily for
                  personal, family, or household purposes is a consumer of a
                  financial service, regardless of whether the loan is extended
                  by the Bank or another financial institution.

         o        An individual who provides nonpublic personal information to
                  the Bank in connection with obtaining or seeking to obtain
                  financial, investment or economic advisory services is a
                  consumer regardless of whether the Bank establishes an ongoing
                  advisory relationship.

         o        An individual who negotiates a workout with the Bank for a
                  loan that the Bank owns is a consumer regardless of whether
                  the Bank originally extended the loan to the individual.

         o        An individual who has a loan from the Bank is the Bank's
                  consumer even if the Bank:

                  -        Hires an agent to collect on the loan;

                  -        Sells the rights to service the loan; or

                  -        Bought the loan from the financial institution that
                           originated the loan.

         o        An individual is not the Bank's consumer solely because the
                  Bank processes information about the individual on behalf of a
                  financial institution that extended the loan to the
                  individual.

On the other hand, several examples of a customer follow:

         o        A customer has a continuing relationship with the Bank if the
                  customer:

                  -        Has a deposit, loan, credit, trust or investment
                           account with the Bank;

                  -        Purchases an insurance product from the Bank;

                  -        Holds an investment product through the Bank;

                  -        Enters into an agreement or understanding with the
                           Bank whereby the Bank undertakes to arrange or broker
                           a home mortgage loan for the customer;

                  -        Has a loan that the Bank services where the Bank owns
                           the servicing rights;

                  -        Enters into a lease of personal property with the
                           Bank; or

                  -        Obtains financial, investment, or economic advisory
                           services from the Bank for a fee.

         o        A person does not, however, have a continuing relationship
                  with the Bank and therefore is not a customer, if:

                  -        The person only obtains a financial product or
                           service in an isolated transaction, such as
                           withdrawing cash from the Bank's ATM or purchasing a
                           cashier's check or money order;

                  -        The Bank sells the person's loan and does not retain
                           the rights to service the loan; or

                  -        The Bank sells the person airline tickets, travel
                           insurance or traveler's checks in an isolated
                           transaction.

In general, the Bank cannot disclose to a nonaffiliated third party any
nonpublic personal information of its customers and consumers unless the Bank
provides its customer or consumer with a notice that includes:

         o        the policies and practices of the Bank with regard to:

                  -        disclosing nonpublic personal information to
                           nonaffiliated third parties;

                  -        the categories of persons to whom the information is
                           or may be disclosed; and

                  -        the policy for disclosure to former customers;

         o        categories of nonpublic personal information that are
                  collected by the Bank;

         o        the policies that the Bank maintains to protect the
                  confidentiality and security of nonpublic personal
                  information;

         o        the disclosure, if required, under the Fair Credit Reporting
                  Act; and



                                       15
<PAGE>
         o        in addition, the Bank must provide an opt out notice to each
                  of its consumers and customers that explains accurately the
                  right to opt out of any disclosure by the Bank of the
                  customer's or consumer's nonpublic personal information and
                  the means by which the customer or consumer may exercise the
                  opt out right.

The GLB Act sets forth a new requirement that this notice to a consumer or
customer must be in clear and conspicuous or "plain English" language and
presentation. The proposed regulations give several examples of the rules to
follow in drafting these notices:

         o        The Bank makes its notice reasonably understandable if, the
                  Bank:

                  -        Presents the information contained in the notice in
                           clear, concise sentences, paragraphs and sections;

                  -        Uses short explanatory sentences and bullet lists,
                           whenever possible;

                  -        Uses definite, concrete, everyday words and active
                           voice, whenever possible;

                  -        Avoids multiple negatives;

                  -        Avoids legal and highly technical business
                           terminology; and

                  -        Avoids boilerplate explanations that are imprecise
                           and readily subject to different interpretations.

         o        The Bank designs its notice to call attention to the nature
                  and significance of the information contained in the notice
                  if, to the extent applicable, the Bank:

                  -        Uses a plain-language heading to call attention to
                           the notice;

                  -        Uses a typeface and type size that are easy to read;
                           and

                  - Provides wide margins and ample line spacing.

         o        If the Bank provides a notice on the same form as another
                  notice or other documents, the Bank designs its notice to call
                  attention to the nature and significance of the information
                  contained in the notice if the Bank uses:

                  -        Larger type size(s), boldface or italics in the text;

                  -        Wider margins and line spacing in the notice; or

                  -        Shading or sidebars to highlight the notice, whenever
                           possible.

The GLB Act creates certain exceptions to the prohibition on disclosure of
nonpublic personal information of customers and consumers. Some of these
exceptions are:

         o        with the consent of the customer or consumer;

         o        to effect, administer or enforce a transaction requested or
                  authorized by the customer or consumer;

         o        the servicing or processing of a financial product or service
                  requested or authorized by the customer or consumer;

         o        the maintaining or servicing of the customer's or consumer's
                  account with the Bank or with another entity as part of a
                  private label credit card program;

         o        disclosure to persons holding a legal or beneficial interest
                  relating to the customer or consumer or to persons acting in a
                  fiduciary or representative capacity on behalf of the customer
                  or consumer;

         o        providing information to insurance rate advisory
                  organizations, guaranty funds or agencies, rating agencies,
                  persons assessing the Bank's compliance with industry
                  standards and the Bank's attorneys, accountants and auditors;
                  and

         o        disclosure permitted under other laws, such as the Right to
                  Financial Privacy Act, to law enforcement agencies or under
                  local and state laws.

The Bank cannot disclose an account number or similar form of access code for a
credit card account, deposit account or transaction account of a customer or
consumer to any non-affiliated third party for use in telemarketing, direct mail
marketing or other marketing through electronic mail to the customer or
consumer.

TERRORIST ACTIVITIES

The Federal Bureau of Investigation or FBI has (and will) send our banking
regulatory agencies lists of the names of persons suspected of involvement in
the September 11, 2001, terrorist attacks on New York City and Washington, DC.
The Bank has been requested (and will be requested) to search its records for
any relationships or transactions with persons on those lists. If the Bank finds
any relationships or transactions, the Bank must file a suspicious activity
report and contact the FBI.

The Office of Foreign Assets Control or OFAC of the Department of the Treasury
has (and will) send our banking regulatory agencies lists of names of persons
and organizations suspected of aiding, harboring or engaging in terrorist acts.
If the Bank finds any name on any transaction, account or wire transfer that is
on an OFAC list, the Bank must freeze such account, file a suspicious



                                       16
<PAGE>

activity report and notify the FBI. The Bank has appointed an OFAC compliance
officer to oversee the inspection of its accounts and the filing of any
notifications.

SUBPRIME LENDING

In January 2001, our federal banking regulatory agencies jointly issued expanded
examination and supervision guidance relating to subprime lending activities. In
the guidance, "subprime" lending generally refers to programs that target
borrowers with weakened credit histories or lower repayment capacity. The
guidance principally applies to institutions with subprime lending programs with
an aggregate credit exposure equal to or greater than 25 percent of an
institution's Tier 1 capital. Such institutions would be subject to more
stringent risk management standards and, in many cases, additional capital
requirements. As a starting point, the guidance generally expects that such an
institution would hold capital against subprime portfolios in an amount that is
one and one-half to three times greater than the amount appropriate for similar
types of non-subprime assets. The Bank does not engage in any subprime lending
programs.

In December 2000, the Federal Reserve Board published proposed regulations which
would implement the Home Ownership and Equity Protection Act or HOEPA. This Act
imposes additional disclosure requirements and certain substantive limitations
on certain mortgage loans with rates or fees above specified levels. The
proposed regulations would lower the rate levels that trigger the application of
HOEPA and would include additional fees in the calculation of the fee amount
that triggers HOEPA. The loans that the Bank currently makes are generally below
the rate and fee levels that trigger HOEPA.

On June 23, 2001, the Governor of the Commonwealth of Pennsylvania signed into
law Act 55 of 2001, the Mortgage Bankers and Brokers and Consumer Equity
Protection Act. This law addresses what is known as "predatory lending", among
other things, and is applicable to the Bank's closed-end home equity mortgage
loans, involving property located in Pennsylvania, in an amount less than
$100,000 made at a "high cost" which is generally the rate and point triggers in
the HOEPA. Those HOEPA triggers are:

         o        an annual percentage rate exceeding 10 percentage points above
                  comparable term U.S. Treasury Securities; and/or

         o        total points and fees payable by the consumer at or before
                  closing that exceed the greater of 8 percent of the total loan
                  amount or $400. The $400 is adjusted annually by the annual
                  percentage change in the CPI, and for the year 2001, was $465
                  according to the Federal Reserve Board.

These loans are called "covered loans" under this law. If HOEPA's rate or point
triggers are changed, then the definition of a covered loan under this law
changes automatically. Loans with an original principal amount of $100,000 or
more are not subject to this law, but may be subject to HOEPA.

Certain loan terms are prohibited or conditionally restricted in connection with
a covered loan, such as: balloon payments, call provisions, negative
amortization, increased interest rate upon default, and prepayment fees or
penalties.

Certain acts or practices are prohibited, conditionally restricted, or required
in connection with a covered loan, including the following:

         o        a cautionary notice, in writing, is required to be provided by
                  the Bank to the borrower at least three business days prior to
                  consummation of the mortgage transaction;

         o        it is impermissible to engage in a pattern or practice of
                  making covered loans without due regard to the consumer's
                  ability to repay the loan;(1)

         o        there are restrictions on the Bank refinancing an existing
                  covered loan held by it with a new covered loan such that no
                  points may be charged to the extent the proceeds are used to
                  refinance the existing covered loan if the most recent
                  financing was within one year;

         o        the Bank may not refinance a zero interest rate or low-rate
                  loan made by a governmental or nonprofit lender with a covered
                  loan unless the loan is at least ten years old or the current
                  holder of the loan consents to the refinancing;

----------

(1)      The consumer's ability to repay applies under this law only to persons
         whose income is 120% or less of the median family income under the
         metropolitan statistical area or nonmetropolitan family income
         statistics. There is a statutory presumption that a consumer can repay
         the covered loan if the monthly payment does not exceed 50% of the
         consumer's monthly gross income. There is no statutory presumption that
         a consumer cannot make the payments even if the 50% monthly gross
         income level is exceeded by the required monthly loan payments.



                                       17
<PAGE>

         o        the Bank may not pay proceeds from a covered loan directly to
                  a home improvement contractor but instead must disburse the
                  loan proceeds through an instrument payable to the borrower
                  (statutorily defined as the person obligated to repay a
                  covered loan) individually or jointly with the contractor or,
                  at the borrower's election through a third party escrow agent
                  in accordance with the terms of a written agreement signed by
                  the borrower, the Bank, and home improvement contractor prior
                  to disbursement of funds to the contractors;

         o        the Bank may not sell single premium credit insurance in
                  connection with a covered loan unless the Bank offers the
                  borrower the option of purchasing all such credit insurance on
                  a monthly basis (compliance with this provision is required by
                  18 months to 2 years after June 25, 2002);

         o        a credit insurance notice, in writing, must be provided to the
                  borrower stating that his or her purchase of credit insurance
                  is not a required condition of obtaining the covered loan, and
                  that the borrower may cancel the credit insurance within 30
                  days of the date of the covered loan in order to receive a
                  full refund (meaning a credit to the loan balance or cash, at
                  the Bank's or insurance company's discretion);

         o        the Bank shall maintain records related to covered loans that
                  will facilitate the Pennsylvania Department of Banking
                  determining compliance;

         o        the Bank or its servicer shall file quarterly reports of
                  favorable and unfavorable credit history of the borrower with
                  a nationally recognized consumer credit reporting agency, but
                  this requirement shall not prevent the Bank or servicer from
                  agreeing with the borrower not to report payment history
                  information related to resolved or unresolved disputes with a
                  borrower, and this provision shall not apply to covered loans
                  held or serviced by the Bank for less than 90 days; and

         o        the Bank shall verify that each mortgage broker with whom it
                  does business in connection with covered loans holds the
                  required license to engage in business in Pennsylvania.

A borrower or borrower can institute a civil action to recover damages from the
Bank if it engages in the above practices with respect to a covered loan.
Moreover, the Pennsylvania Department of Banking can impose monetary penalties;
revoke a license; issue a cease and desist order; and removal persons from their
employment in the mortgage finance industry or in any other capacity related to
these prohibited activities.

SALES OF INSURANCE

On April 1, 2001, our federal banking regulatory agencies finalized their
consumer protection rules with respect to the retail sale of insurance products
by the Company, the Bank, or a subsidiary or joint venture of the Company or the
Bank. These rules cover generally practices, solicitations, advertising or
offers of any insurance product by a depository institution or any person that
performs such activities at an office of, or on behalf of, the Company or the
Bank. Moreover, these rules include specific provisions relating to sales
practices, disclosures and advertising, the physical separation of banking and
nonbanking activities, and domestic violence discrimination.

THE BANK

The Bank's legal headquarters are located at 232 East Street, Bloomsburg,
Columbia County, Pennsylvania 17815. The Bank is a locally-owned and managed
community bank that seeks to provide personal attention and professional
financial assistance to its customers. The Bank serves the needs of individuals
and small - and medium-sized businesses. The Bank's business philosophy includes
offering direct access to its President and other officers and providing
friendly, informed and courteous service, local and timely decision making,
flexible and reasonable operating procedures and consistently-applied credit
policies.

The Bank solicits small and medium-sized businesses located primarily with in
the Bank's market area that typically borrow in the $25,000 to $1.0 million
range. In the event that certain loan requests may exceed the Bank's lending
limit to any one customer, the Bank seeks to arrange such loans on a
participation basis with other financial institutions.





                                       18
<PAGE>
MARKETING AREA

The Bank's primary market area is Columbia County, a 484 square mile area
located in Northcentral Pennsylvania with a population of approximately 64,157
based on 2000 census data. The Town of Bloomsburg is the County's largest
municipality and its center of industry and commerce. Bloomsburg has a
population of approximately 12,375 based on 2000 census data, and is the county
seat. Berwick, located on the eastern boundary of the County, is the second
largest municipality, with a 2000 population of approximately 10,774. The Bank
currently serves its market area through six branch offices located in
Bloomsburg, Benton, Lightstreet, Millville, Orangeville and South Centre,
Columbia County.

The Bank competes with eight other depository institutions in Columbia County.
The Bank's major competitors are: First National Bank of Berwick; PNC Bank,
N.A., the largest commercial bank headquartered in Pennsylvania; and First
Columbia Bank and Trust Company of Bloomsburg, Pennsylvania.

The Bank's extended market area includes the adjacent Pennsylvania counties of
Luzerne, Montour, Northumberland, Schuylkill and Sullivan.

FUTURE LEGISLATION

Various legislation, including proposals to substantially change the financial
institution regulatory system and to expand or contract the powers of banking
institutions and bank holding companies, is from time to time introduced in the
Congress. This legislation may change banking statutes and our operating
environment in substantial and unpredictable ways. If enacted, such legislation
could increase or decrease the cost of doing business, limit or expand
permissible activities or affect the competitive balance among banks, savings
associations, credit unions, and other financial institutions. We can not
accurately predict whether any of this potential legislation will ultimately be
enacted, and, if enacted, the ultimate effect that it, or implementing
regulations, would have upon our financial condition or results of operations.

ITEM 2.  PROPERTIES

Our corporate headquarters are located at 232 East Street, Bloomsburg,
Pennsylvania. We own this facility which has approximately 11,686 square feet.
The Bank's legal or registered office is also at 232 East Street, Bloomsburg,
Pennsylvania.

Our remaining banking centers, all of which we own, are described as follows:

<Table>
<Caption>
                              Approximate
      Location               Square Footage         Use
-------------------------------------------------------------------------
<S>                          <C>             <C>
Orangeville, PA                   2,259      Banking Services
Benton, PA                        4,672      Banking Services
South Centre, PA                  3,868      Banking Services
Scott Township, PA               16,500      Banking Services, Corporate,
                                             Credit and Operations
Millville, PA                     2,520      Banking Services
</Table>

We consider our facilities to be suitable and adequate for our current and
immediate future purposes.

ITEM 3.  LEGAL PROCEEDINGS

We and the Bank are not parties to any legal proceedings that could have any
significant effect upon our financial condition or income. In addition, we and
the Bank are not parties to any legal proceedings under federal and state
environmental laws.



                                       19
<PAGE>
PART II.

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
        MATTERS

We had 754 stockholders of record including individual participants in security
position listings and 1,318,762 shares of common stock, par value of $1.25 per
share, the only authorized class of common stock, outstanding as of February 28,
2002. Our common stock trades under the symbol "CCFN." As of February 28, 2002,
six firms were identified on the interdealer electronic bulletin board system as
market makers in our common stock. The following information is reported by one
of our market makers: Tucker Anthony of Lancaster, Pennsylvania. These
quotations represent prices between buyers and sellers and do not include retail
makeup, markdown or commission. They may not necessarily represent actual
transactions. The high and low closing sale prices and dividends per share of
our common stock for the four quarters of 2001 and 2000 are summarized in the
following table.

<Table>
<Caption>
                                                                       Dividends
2001:                                  High ($)          Low ($)      Declared ($)
                                       --------          -------      ------------
<S>                                    <C>               <C>          <C>
First quarter                             17.88            16.50           .140
Second quarter                            21.00            19.00           .150
Third quarter                             24.50            23.00           .150
Fourth quarter                            23.75            23.05           .150
</Table>

<Table>
<Caption>
                                                                       Dividends
2000:                                  High ($)          Low ($)      Declared ($)
                                       --------          -------      ------------
<S>                                    <C>               <C>          <C>
First quarter                             17.00            16.38           .140
Second quarter                            16.63            16.38           .140
Third quarter                             17.50            16.00           .140
Fourth quarter                            19.50            16.00           .140
</Table>

We have paid cash dividends since 1983. It is our present intention to continue
the dividend payment policy, although the payment of future dividends must
necessarily depend upon earnings, financial position, appropriate restrictions
under applicable law and other factors relevant at the time the Board of
Directors considers any declaration of dividends.

ITEM 6.  SELECTED FINANCIAL DATA

The information called for by this item is filed at Exhibit 13 to this report
and is incorporated in its entirety by reference under this Item 6.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The information called for by this item is filed at Exhibit 13 to this report
and is incorporated in its entirety by reference under this Item 7.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information called for by this item is filed at Exhibit 13 to this report
and is incorporated in its entirety by reference under this Item 7A.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements and notes to these statements are filed at
Exhibit 13 to this report and are incorporated in their entirety by reference
under this Item 8.

Our supplementary data is filed at Exhibit 13 to this report and is incorporated
in its entirety by reference under this Item 8.




                                       20
<PAGE>

PART III.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS

At February 28, 2002, we had nine directors.

Our directors are divided into three classes: three directors are in Class 1;
three directors are in Class 2; and three directors are in Class 3. Each
director holds office for a three-year term. The terms of the classes are
staggered, so that the term of office of one class expires each year.

The following information includes the age of each of our current directors and
those persons who have been nominated to become a director upon their election
at our 2002 annual meeting of stockholders. All of our current directors are
also nominees for director.

<Table>
<Caption>
               NAME                      AGE            PRINCIPAL OCCUPATION           DIRECTOR SINCE
------------------------------------ ------------ ---------------------------------- -------------------
<S>                                      <C>      <C>                                  <C>
Don E. Bangs                             70       Secretary of the Corporation and          1985
                                                  the bank.  Former owner of Bangs
                                                  Insurance Agency and former
                                                  agent for The Thrush Insurance
                                                  Agency.
------------------------------------ ------------ ---------------------------------- -------------------
Robert M. Brewington, Jr.                51       Owner of Sutliff Motors and
                                                  Brewington Transportation (sales          1996
                                                  and service of cars and trucks;
                                                  school bus contractor).
------------------------------------ ------------ ---------------------------------- -------------------
Edward L. Campbell                       63       President of ELC Enterprises,
                                                  Inc., doing business as The               1985
                                                  Heritage House Family
                                                  Restaurant, and the sole
                                                  proprietor of Heritage Acres
                                                  Christmas tree sales.
------------------------------------ ------------ ---------------------------------- -------------------
Edward R. Harding, Jr.                   55       Attorney-at-Law and President of          1984
                                                  Inter-County Land Abstract Co.,
                                                  Inc. (title insurance).
------------------------------------ ------------ ---------------------------------- -------------------
William F. Hess                          68       Chairman and former Vice                  1983
                                                  Chairman of the Corporation and
                                                  the bank.  Dairy farmer.
------------------------------------ ------------ ---------------------------------- -------------------
Rodney B. Keller                         51       Community Development Director
                                                  for PPL Electric Utilities.               2000
------------------------------------ ------------ ---------------------------------- -------------------
Willard H. Kile, Jr., D.M.D.             47       Partner of Kile & Robinson LLC            2000
                                                  (dentists); Partner of Kile &
                                                  Kile Real Estate.
------------------------------------ ------------ ---------------------------------- -------------------
Charles E. Long                          66       Retired.  Former President of             1993
                                                  Long Supply Co., Inc. (a
                                                  wholesaler and retailer of
                                                  hardware and masonry products).
------------------------------------ ------------ ---------------------------------- -------------------
Paul E. Reichart                         64       President, Chief Executive                1983
                                                  Officer and Vice Chairman of the
                                                  Corporation and the bank.
------------------------------------ ------------ ---------------------------------- -------------------
</Table>



                                       21
<PAGE>

PRINCIPAL OFFICERS

Our principal officers are appointed by the Board of Directors and serve at the
will of the Board of Directors, subject to certain change in control agreements
discussed later in this report. The following information is presented for our
principal officers:
<Table>
<Caption>
               NAME & POSITION                  HELD SINCE   EMPLOYEE SINCE      AGE
---------------------------------------------- ------------- ---------------- ----------
<S>                                            <C>           <C>              <C>
William F. Hess
Chairman                                           1998             *            68
---------------------------------------------- ------------- ---------------- ----------
Paul E. Reichart
President and CEO                                  1985           1960           64
---------------------------------------------- ------------- ---------------- ----------
Don E. Bangs
Secretary                                          1993             *            70
---------------------------------------------- ------------- ---------------- ----------
Virginia D. Kocher
Treasurer                                          1991           1972           54
---------------------------------------------- ------------- ---------------- ----------
</Table>

* Not an employee of the Company and the Bank.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

Executive officers and directors and "beneficial owners" of more than ten
percent of our common stock must file initial reports of ownership and reports
of changes in ownership with the SEC pursuant to Section 16(a).

We have reviewed the reports and written representations from the executive
officers and directors. Based on this review, we believe that all filing
requirements were met during 2001.

ITEM 11. EXECUTIVE COMPENSATION

This section of the report contains charts that show the amount of compensation
earned by our executive officers whose salary and bonus exceeded $100,000 for
2001. It also contains the performance graph comparing our performance relative
to a peer group and the report of our human resource committee explaining the
compensation philosophy for our most highly paid officers.

                         SUMMARY COMPENSATION TABLE(1)
<Table>
<Caption>
                                                        ANNUAL COMPENSATION
                                       ----------------------------------------------------
NAME AND PRINCIPAL            FISCAL                                      OTHER ANNUAL               ALL OTHER
     POSITION                  YEAR     SALARY($)      BONUS($)        COMPENSATION(2)($)       COMPENSATION(3)($)
----------------------------- -------- ------------ ---------------- ----------------------   ------------------------
<S>                           <C>       <C>         <C>              <C>                      <C>
Paul E. Reichart               2001      98,302        31,333(4)              9,600                    4,471
President and Chief            2000      94,439        31,598(5)              9,600                    4,284
Executive Officer              1999      90,895        23,653(6)              8,400                    4,131
</Table>

(1)      From January 1, 1999 through December 31, 2001, the Corporation did not
         pay any long-term compensation in the form of stock options, stock
         appreciation rights, restricted stock or any other long-term
         compensation, nor did it make any long-term incentive plan payments.
         Accordingly, no such information is presented in the summary
         compensation table set forth above. No such arrangements are currently
         in effect.

(2)      Represents the payment of directors' fees by the bank for the years
         presented. Mr. Reichart did not receive perquisites and other personal
         benefits, securities and property that totaled in the aggregate for the
         years presented either $50,000 or 10% of the total of the amounts
         reported under the salary and bonus columns. Therefore, the amounts for
         such perquisites and other personal benefits, securities and property
         are not reported.

(3)      These figures represent annual term insurance premium payments on the
         life of Mr. Reichart.

(4)      Includes $15,000 as a life insurance premium payment for a deferred
         compensation plan; $3,513 as a cash bonus representing 3-1/2 % of base
         salary; $5,349 as a contribution to the bank's profit sharing plan;
         $1,538 representing 50% up to 3% matching contribution to Mr.
         Reichart's 401K plan; $704 representing car expense; and $5,229
         representing cafeteria plan benefits.

(5)      Includes $15,000 as a life insurance premium payment for a deferred
         compensation plan; $4,212 as a cash bonus representing 4% of base
         salary; $5,430 as a contribution to the bank's profit sharing plan;
         $1,300 representing 50% up to 3% matching contribution to Mr.
         Reichart's 401K plan; $718 representing car expense; and $4,938
         representing cafeteria plan benefits.

(6)      Includes $9,977 as a life insurance premium payment for a deferred
         compensation plan; $1,851 as a cash bonus representing 2% of base
         salary; $4,941 as a contribution to the bank's profit sharing plan;
         $1,350 representing 50% up to 3% matching contribution to Mr.
         Reichart's 401K plan; $865 representing car expense; and $4,669
         representing cafeteria plan benefits.



                                       22
<PAGE>
                             EXECUTIVE COMPENSATION

HUMAN RESOURCE COMMITTEE REPORT

Executive compensation for the officers of the Company and the Bank is
determined by the Human Resource Committee of the Company's Board of Directors.
Salaries and bonuses for the executive officers are reviewed annually. All
executive compensation is paid by the Bank to the applicable executive.

COMPENSATION PHILOSOPHY

Our executive compensation philosophy is designed to attract, retain, and
motivate the best managerial talent available in line with three central themes:
alignment, accountability, and attraction.

         o        Alignment with the long-term interests of our stockholders;

         o        Accountability for results by linking executives to the
                  Company and individual performance; and

         o        Attraction, motivation and retention of critical talent.

The Human Resource Committee annually conducts a full review of our executives
and their performance in determining compensation levels. For 2001, the Human
Resource Committee considered various qualitative and quantitative indicators of
the Company and individual performance in determining the level of compensation
for President and Chief Executive Officer and other executive officers. The
review included an evaluation of the Company's performance both on a short- and
long-term basis. This review included an analysis of quantitative measures, such
as Return on Equity. The Human Resource Committee considered also qualitative
measures such as leadership, experience, strategic direction, community
representation and social responsibility. The Human Resource Committee has been
sensitive to management's maintaining a balance between actions that foster
long-term value creation and short-term performance. In addition, the Human
Resource Committee evaluates total executive compensation in light of the
operational and financial performance and compensation practices of the
commercial banking industry in the Pennsylvania region.

Base salaries are reviewed each year and generally adjusted relative to
individual performance and competitive salaries with the commercial banking
industry in the Pennsylvania region.

A base salary increase of 3.03% was made to all executives in 2001. Actual
salaries will continue to be set according to the scope of the responsibilities
of each executive officer's position.

DEFERRED COMPENSATION AGREEMENTS FOR EXECUTIVE OFFICERS

Paul E. Reichart has served as our and the Bank's President and Chief Executive
Officer since 1985. Mr. Reichart was named Vice Chairman in 1998. J. Jan Girton
has served as the Executive Vice President, Chief Operating Officer and
Assistant Secretary of the Bank since 1987. As a result of Messrs. Reichart's
and Girton's active involvement and experience in the affairs of the Bank, the
Bank has depended upon, and continues to depend upon, their continued
employment. The Bank does not maintain employment agreements or key man
insurance, other than the deferred compensation agreements described below, with
respect to Messrs. Reichart and Girton. In 1992, the Bank entered into
agreements with Paul E. Reichart, President and Chief Executive Officer of the
Company and the Bank, and J. Jan Girton, Executive Vice President, Chief
Operating Officer and Assistant Secretary of the Bank, to establish a
non-qualified deferred compensation plan for these officers.

Each officer is deferring compensation in order to participate in his deferred
compensation plan. If the officer continues to serve as an officer of the Bank
until he attains 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. If the officer attains 65 years of age but dies before
receiving all of the guaranteed monthly payments, then the Bank will make the
remaining payments to the officer's designated beneficiary or to the
representative of his estate. In the event that the officer dies while serving
as an officer, but prior to age 65 years of age, then the Bank will remit the
guaranteed monthly payments to the officer's designated beneficiary or to the
representative of his estate. 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. In 2001, the Bank
accrued $25,800 as an expense for the deferred compensation plan.



                                       23
<PAGE>
FIVE YEAR PERFORMANCE GRAPH

The following graph and table compare the cumulative total stockholder return on
our common stock during the six-year period ending on December 31, 2001, with
(i) the cumulative total return on the SNL Securities Corporation Performance
Index (1) for 35 publicly-traded banks with under $250 million in total assets
in the Middle Atlantic area (2), and (ii) the cumulative total return for all
United States stocks traded on the NASDAQ Stock market. The comparison assumes
the value of the investment in our common stock and each index was $100 on
December 31, 1996, and assumes further the reinvestment of dividends into the
applicable securities. The stockholder return shown on the graph and table below
is not necessarily indicative of future performance.

                                     [CHART]

<Table>
<Caption>
                                                                         PERIOD ENDING
                                           --------------------------------------------------------------------------
Index                                          12/31/96    12/31/97    12/31/98    12/31/99     12/31/00    12/31/01
---------------------------------------------------------------------------------------------------------------------
<S>                                            <C>         <C>         <C>         <C>          <C>         <C>
CCFNB Bancorp, Incorporated                      100.00      142.50      158.65      126.33       107.83      154.90
NASDAQ - Total US*                               100.00      122.48      172.68      320.89       193.01      153.15
SNL less than $250M Bank Index                   100.00      163.18      155.12      136.21       134.86      168.15
</Table>

* Source: CRSP, Center for Research in Security Prices, Graduate School of
  Business, The University of Chicago 2001. Used with permission. All rights
  reserved. crsp.com.

SNL SECURITIES LC                                                (804) 977-1600
(C) 2001

Notes:

A.       The lines represent monthly index levels derived from compounded daily
         returns that include all dividends.

B.       The indexes are reweighted daily, using the market capitalization on
         the previous trading day.

C.       If the monthly interval, based on the fiscal year-end, is not a trading
         day, the preceding day is used.

D.       The index level for all series was set to $100 on 12/31/96.

(1)      SNL Securities is a research and publishing firm specializing in the
         collection and dissemination of data on the banking, thrift and
         financial services industries.

(2)      The Middle Atlantic area comprises the states of Delaware,
         Pennsylvania, Maryland, New Jersey and New York, the District of
         Columbia and Puerto Rico.



                                       24
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

This section describes how much stock our directors, executive officers own. It
also describes the persons or entities that own more than 5% of our voting
stock.

STOCK OWNED BY DIRECTORS, NOMINEES FOR DIRECTOR AND EXECUTIVE DIRECTORS
This table indicates the number of shares of Common Stock owned by the executive
officers and directors as of March 27, 2002. The aggregate number of shares
owned by all directors and executive officers is 4.64%. Unless otherwise noted,
each individual has sole voting and investment power for the shares indicated
below.

<Table>
<Caption>
           NAME OF INDIVIDUAL                     AMOUNT AND NATURE OF
          OF IDENTITY OF GROUP                   BENEFICIAL OWNERSHIP(1)                   PERCENT OF CLASS
         --------------------                   -----------------------                   ----------------
<S>                                             <C>                                       <C>
Don E. Bangs                                            8,504.764                                --
Robert M. Brewington, Jr.                               7,682.425                                --
Edward L. Campbell                                      6,214.339                                --
Elwood R. Harding, Jr.                                 15,501.615                              1.18%
William F. Hess                                         4,415.402                                --
Rodney B. Keller                                          731.874                                --
Willard H. Kile, Jr.                                    2,776.932                                --
Virginia D. Kocher                                        391.000                                --
Charles E. Long                                         6,453.995                                --
Paul E. Reichart                                        8,362.000                                --
All Officers and Directors as a group
   (9 directors, 3 nominees, 4 officers,
   10 persons in total)                                61,034.346                              4.64%
</Table>

 (1)   Includes shares held (a) directly, (b) jointly with a spouse, (c)
       individually by spouse, (d) by the transfer agent in the Corporation's
       dividend reinvestment account, and (e) in various trusts.

VOTING STOCK OWNED BY "BENEFICIAL OWNER"

We know of no persons or entities who own beneficially more than five percent of
our common stock as of February 28, 2002.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We encourage our directors and executive officers to have banking and financial
transactions with the Bank. All of these transactions are made on comparable
terms and with similar interest rates as those prevailing for other customers.

The total consolidated loans made by the Bank at December 31, 2001, to its
directors and officers as a group, members of their immediate families and
companies in which they have a 10% or more ownership interest was $6,766,537 or
approximately 26.0% of our total consolidated capital accounts. The largest
amount for all of these loans in 2001 was $7,357,218 million or approximately
28.3% of our total consolidated capital accounts. These loans did not involve
more than the normal risk of collectibility nor did they present other
unfavorable features.

PART IV.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)      1. Our consolidated financial statements and notes to these statements
as well as the applicable reports of the independent certified public
accountants are filed at Exhibit 13 to this report and are incorporated in their
entirety by reference under this Item 14(a)1.

         2. All schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes to these
statements.



                                       25
<PAGE>
         3. The exhibits required by Item 601 of Regulation S-K are included
under Item 14(c) to this report.

(b)      Reports on Form 8-K

We filed no current reports on Form 8-K during the quarter ended December 31,
2001.

(c)      Exhibits required by Item 601 of Regulation S-K:

<Table>
<Caption>
Exhibit Number Referred to
Item 601 of Regulation SK                       Description of Exhibit
---------------------------                     ----------------------
<S>                                             <C>
                2                                        None.
                3                                        None.
                4                                        None.
                9                                        None.
               10                                        None.
               11                                        None.
               12                                        None.
               13                               Portions of the Annual Report to Stockholders for
                                                Fiscal Year Ended December 31, 2001.
               16                                        None.
               18                                        None.
               21                               List of Subsidiaries of the Company.
               22                                        None.
               23                                        None.
               24                                        None.
               99                               SEC Guide 3 Financial Information.
</Table>

By order of the Board of Directors


                                   SIGNATURES

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

CCFNB BANCORP, INC.
         (Bancorp)


By:      /s/ Paul E. Reichart                     Date:    March 28, 2002
         --------------------------------------
         Paul E. Reichart
         President, Chief Executive Officer and
         Vice Chairman of the Board

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

By:      /s/ Don E. Bangs                         Date:    March 28, 2002
         --------------------------------------
         Don E. Bangs
         Director and Secretary





                                       26
<PAGE>
<Table>
<S>                                                       <C>
By:      /s/ Robert M. Brewington, Jr.                    Date:    March 28, 2002
         ---------------------------------------------
         Robert M. Brewington, Jr.
         Director


By:      /s/ Edward L. Campbell                           Date:    March 28, 2002
         ---------------------------------------------
         Edward L. Campbell
         Director


By:      /s/ Elwood R. Harding, Jr.                       Date:    March 28, 2002
         ---------------------------------------------
         Elwood R. Harding, Jr.
         Director


By:      /s/ William F. Hess                              Date:    March 28, 2002
         ---------------------------------------------
         William F. Hess
         Director  and Chairman of the Board


By:      /s/ Rodney B. Keller                             Date:    March 28, 2002
         ---------------------------------------------
         Rodney B. Keller
         Director


By:      /s/ Willard H. Kile, Jr., DMD                    Date:    March 28, 2002
         ---------------------------------------------
         Willard H. Kile, Jr., DMD
         Director

By:      /s/ Charles E. Long                              Date:    March 28, 2002
         ---------------------------------------------
         Charles E. Long
         Director


By:      /s/ Paul E. Reichart                             Date:    March 28, 2002
         ---------------------------------------------
         Paul E. Reichart
         Director , President, Chief Executive Officer
         and Vice Chairman of the Board
         (Chief Executive Officer)


By:      /s/ Virginia D. Kocher                           Date:    March 28, 2002
         ---------------------------------------------
         Virginia D. Kocher
         Treasurer
         (Principal Financial and Accounting Officer)
</Table>




                                       27
<PAGE>
                                INDEX TO EXHIBITS


<Table>
<Caption>
    Item Number      Description                                                      Page
    -----------      -----------                                                      ----
<S>                  <C>                                                              <C>
        13           Portions of the Annual Report to Stockholders for the
                     Fiscal Year Ended December 31, 2001............................   29
        21           List of Subsidiaries of the Company............................   66
        99           SEC Guide 3 Financial Information..............................   67
</Table>



                                       28
<PAGE>
                                   EXHIBIT 13


                  PORTIONS OF THE ANNUAL REPORT TO STOCKHOLDERS
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001



                                       29
<PAGE>
                               CCFNB BANCORP, INC.

                                 AND SUBSIDIARY

                               2001 ANNUAL REPORT



                                       30
<PAGE>
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 Federal
Deposit Insurance Corporation to the maximum extent provided by law.

         A copy of the Corporation's Annual Report for the year ended December
31, 2001, on Form 10-K as filed with the Securities and Exchange Commission 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>
                                                                             2001                    2000                    1999
                                                                           --------                --------                --------
<S>                                                                        <C>                     <C>                     <C>
EARNINGS
     Interest income .......................................               $ 13,719                $ 13,552                $ 12,669
     Interest expense ......................................                  6,924                   6,859                   6,099
     Provision for loan losses .............................                    163                      54                      78
     Investment securities gains ...........................                     99                       0                      39
     Net income ............................................                  2,057                $  2,054                $  2,039

PER SHARE
     Net income ............................................                   1.54                $   1.51                $   1.48
     Cash dividends ........................................                    .59                     .56                     .51

BALANCES AT DECEMBER 31
     Assets ................................................               $214,238                $203,054                $196,122
     Investment securities .................................                 57,121                  47,311                  49,104
     Net loans .............................................                141,962                 136,352                 133,438
     Deposits ..............................................                155,666                 143,169                 138,606
     Stockholders' equity ..................................                 26,042                  25,050                  23,047

RATIOS
     Return on average assets ..............................                    .99%                   1.04%                   1.09%
     Return on average equity ..............................                   7.90%                   8.59%                   8.91%
     Dividend payout ratio .................................                  39.67%                  37.14%                  34.23%

CONTENTS
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>



                                       31
<PAGE>
CCFNB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 AND 2000


<Table>
<Caption>
                                                                                                      2001                2000
                                                                                                  -------------       -------------
<S>                                                                                               <C>                 <C>
ASSETS
Cash and due from banks ...................................................................       $   6,205,230       $   6,722,273
Interest-bearing deposits with other banks ................................................           2,312,406           5,440,371
Federal funds sold ........................................................................                   0             500,000
Investment Securities Available-for-Sale ..................................................          57,121,229          47,311,098
Loans, net of unearned income .............................................................         142,989,592         137,360,493
Allowance for loan losses .................................................................           1,027,805           1,008,301
                                                                                                  -------------       -------------
     Net loans ............................................................................       $ 141,961,787       $ 136,352,192
Premises and equipment, net ...............................................................           4,634,502           4,922,287
Accrued interest receivable ...............................................................             977,434           1,037,765
Other assets ..............................................................................           1,025,411             767,718
                                                                                                  -------------       -------------
     TOTAL ASSETS .........................................................................       $ 214,237,999       $ 203,053,704
                                                                                                  =============       =============


LIABILITIES AND STOCKHOLDERS' EQUITY


LIABILITIES
Deposits:
     Non-interest bearing .................................................................       $  14,711,465       $  14,593,285
     Interest bearing .....................................................................         140,954,292         128,575,353
                                                                                                  -------------       -------------
         Total Deposits ...................................................................       $ 155,665,757       $ 143,168,638
Short-term borrowings .....................................................................          19,780,924          20,108,966
Long-term borrowings ......................................................................          11,357,497          13,367,560
Accrued interest and other expenses .......................................................           1,382,143           1,325,593
Other liabilities .........................................................................               9,653              32,942
                                                                                                  -------------       -------------
         TOTAL LIABILITIES ................................................................       $ 188,195,984       $ 178,003,699
                                                                                                  -------------       -------------

STOCKHOLDERS' EQUITY
Common stock, par value $1.25 per share; authorized
     5,000,000 shares; issued 1,326,172 shares 2001;
     1,346,328 shares 2000 ................................................................       $   1,657,715       $   1,682,910
Surplus ...................................................................................           4,730,002           5,146,061
Retained earnings .........................................................................          19,578,971          18,310,262
Accumulated other comprehensive income (loss) .............................................              75,327             (89,228)
                                                                                                  -------------       -------------
         TOTAL STOCKHOLDERS' EQUITY .......................................................       $  26,042,015       $  25,050,005
                                                                                                  -------------       -------------
         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......................................       $ 214,237,999       $ 203,053,704
                                                                                                  =============       =============
</Table>


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



                                       32
<PAGE>
CCFNB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR YEARS ENDED DECEMBER 31,  2001, 2000 AND 1999


<Table>
<Caption>
                                                                                  2001                 2000                 1999
                                                                               -----------          -----------          -----------
<S>                                                                            <C>                  <C>                  <C>
INTEREST INCOME
Interest and fees on loans ..........................................          $10,645,387          $10,723,881          $ 9,707,599
Interest and dividends on investment securities:
     Taxable ........................................................            1,842,153            1,924,553            2,021,448
     Tax-exempt .....................................................              814,957              731,901              689,029
     Dividends ......................................................               81,078               85,490               80,687
Federal funds sold ..................................................               66,967                2,675               38,880
Deposits in other banks .............................................              268,742               83,252              131,729
                                                                               -----------          -----------          -----------
         TOTAL INTEREST INCOME ......................................          $13,719,284          $13,551,752          $12,669,368
                                                                               -----------          -----------          -----------

INTEREST EXPENSE
Deposits ............................................................          $ 5,473,454          $ 5,169,571          $ 4,953,724
Short-term borrowings ...............................................              718,979            1,119,810            1,014,511
Long-term borrowings ................................................              731,371              569,747              130,408
                                                                               -----------          -----------          -----------
         TOTAL INTEREST EXPENSE .....................................          $ 6,923,804          $ 6,859,128          $ 6,098,643
                                                                               -----------          -----------          -----------

Net interest income .................................................          $ 6,795,480          $ 6,692,624          $ 6,570,725
Provision for loan losses ...........................................              162,500               54,000               78,000
                                                                               -----------          -----------          -----------
     NET INTEREST INCOME AFTER PROVISION
         FOR LOAN LOSSES ............................................          $ 6,632,980          $ 6,638,624          $ 6,492,725
                                                                               -----------          -----------          -----------

NON-INTEREST INCOME
Service charges and fees ............................................          $   606,252          $   594,838          $   611,625
Trust department ....................................................              237,904              219,261              189,271
Other ...............................................................              205,699              239,174              210,247
Investment securities gains, net ....................................              98, 895                    0               38,707
                                                                               -----------          -----------          -----------
         TOTAL NON-INTEREST INCOME ..................................          $ 1,148,750          $ 1,053,273          $ 1,049,850
                                                                               -----------          -----------          -----------

NON-INTEREST EXPENSE
Salaries ............................................................          $ 2,050,305          $ 2,015,868          $ 1,905,185
Pensions and other employee benefits ................................              691,798              644,774              629,957
Occupancy, net ......................................................              366,157              328,313              338,684
Equipment ...........................................................              544,166              601,031              597,073
State shares tax ....................................................              242,507              218,781              196,186
Other ...............................................................            1,209,282            1,157,955            1,151,514
                                                                               -----------          -----------          -----------
         TOTAL NON-INTEREST EXPENSE .................................          $ 5,104,215          $ 4,966,722          $ 4,818,599
                                                                               -----------          -----------          -----------

Income before income taxes ..........................................          $ 2,677,515          $ 2,725,175          $ 2,723,976
Income tax expense ..................................................              620,928              671,114              684,739
                                                                               -----------          -----------          -----------
         NET INCOME .................................................          $ 2,056,587          $ 2,054,061          $ 2,039,237
                                                                               ===========          ===========          ===========

PER SHARE DATA
Net income ..........................................................          $      1.54          $      1.51          $      1.48
                                                                               -----------          -----------          -----------
Cash dividends ......................................................          $       .59          $       .56          $       .51
                                                                               -----------          -----------          -----------
Weighted average shares outstanding .................................            1,338,007            1,355,624            1,375,572
</Table>

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



                                       33
<PAGE>
CCFNB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

<Table>
<Caption>
                                                                                                            Accumulated
                                                                                                               Other
                                                       Common                 Comprehensive    Retained    Comprehensive
                                                       Stock       Surplus       Income        Earnings    Income (Loss)
                                                     ----------   ----------  -------------   -----------  -------------
<S>                                                  <C>          <C>         <C>             <C>          <C>
BALANCE AT DECEMBER 31, 1998.............            $1,728,041   $5,849,157                  $15,670,930   $   447,551

Comprehensive income:
    Net income...........................                     0            0   $   2,039,237    2,039,237             0
    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)
                                                                               -------------
    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
Sale of 549 shares of treasury stock.....                     0       (4,809)                           0             0
Purchase of 15,700 shares of treasury stock                   0            0                            0             0
Retirement of 22,127 shares of treasury stock           (27,658)    (500,234)                           0             0
Cash dividends $.51 per share............                     0            0                     (695,463)            0
                                                     ----------   ----------                  -----------   -----------

BALANCE AT DECEMBER 31, 1999.............            $1,709,564   $5,483,515                  $17,013,997   $(1,159,947)

Comprehensive income :
    Net income...........................                     0            0   $   2,054,061    2,054,061             0
    Change in net unrealized gain on
        investment  securities available-for-sale,
        net of reclassification adjustment and
        tax effects......................                     0            0       1,070,719            0     1,070,719
                                                                               -------------
    Total comprehensive income                                                 $   3,124,780
                                                                               =============
Issuance of 8,777 shares of common stock under
    dividend reinvestment and stock purchase
    plans................................                10,971      137,191                            0             0
Purchase of 30,100 shares of treasury stock                   0            0                            0             0
Retirement of 30,100 shares of treasury stock           (37,625)    (474,645)                           0             0
Cash dividends $.56 per share............                     0            0                     (757,796)            0
                                                     ----------   ----------                  -----------   -----------

BALANCE AT DECEMBER 31, 2000.............            $1,682,910   $5,146,061                  $18,310,262   $   (89,228)
                                                     ==========   ==========                  ===========   ===========

Comprehensive income :
    Net income...........................                     0            0   $   2,055,587    2,056,597             0
    Change in net unrealized gain on
        investment  securities available-for-sale,
        net of reclassification adjustment and
        tax effects......................                     0            0         164,555            0       164,555
                                                                               -------------
    Total comprehensive income                                                 $   2,221,142
                                                                               =============
Issuance of 7,345 shares of common stock under
    dividend reinvestment and stock purchase
    plans................................                 9,181      139,112                            0             0
Purchase of 27,501 shares of treasury stock                   0            0                            0             0
Retirement of 27,501 shares of treasury stock           (34,376)    (555,171)                           0             0
Cash dividends $.56 per share............                     0            0                     (787,879)            0
                                                     ----------   ----------                  -----------   -----------

BALANCE AT DECEMBER 31, 2001.............            $1,657,715   $4,730,002                  $19,578,971   $    75,327
                                                     ==========   ==========                  ===========   ===========
<Caption>


                                                        Treasury
                                                         Stock         Total
                                                        ---------   -----------
<S>                                                     <C>         <C>
BALANCE AT DECEMBER 31, 1998.............               $(215,260)  $23,479,712

Comprehensive income:
    Net income...........................                       0     2,039,237
    Change in net unrealized gain (loss) on
        investment securities available-for-sale,
        net of reclassification adjustment and
        tax effects......................                       0    (1,607,498)

    Total comprehensive income

Issuance of 7,345 shares of common stock under
    dividend reinvestment and stock purchase
    plans................................                       0       148,582
Sale of 549 shares of treasury stock.....                  17,843        13,034
Purchase of 15,700 shares of treasury stock              (330,475)     (330,475)
Retirement of 22,127 shares of treasury stock             527,892             0
Cash dividends $.51 per share............                       0      (695,463)
                                                        ---------   -----------

BALANCE AT DECEMBER 31, 1999.............                      $0   $23,047,129

Comprehensive income :
    Net income...........................                       0     2,054,061
    Change in net unrealized gain on
        investment  securities available-for-sale,
        net of reclassification adjustment and
        tax effects......................                       0     1,070,719

    Total comprehensive income

Issuance of 8,777 shares of common stock under
    dividend reinvestment and stock purchase
    plans................................                       0       148,162
Purchase of 30,100 shares of treasury stock              (512,270)     (512,270)
Retirement of 30,100 shares of treasury stock             512,270             0
Cash dividends $.56 per share............                       0      (757,796)
                                                        ---------   -----------

BALANCE AT DECEMBER 31, 2000.............                      $0   $25,050,005
                                                               ==   ===========

Comprehensive income :
    Net income...........................                       0     2,056,587
    Change in net unrealized gain on
        investment  securities available-for-sale,
        net of reclassification adjustment and
        tax effects......................                       0       164,555

    Total comprehensive income

Issuance of 7,345 shares of common stock under
    dividend reinvestment and stock purchase
    plans................................                       0       148,293
Purchase of 27,501 shares of treasury stock              (589,547)     (589,547)
Retirement of 27,501 shares of treasury stock             589,547             0
Cash dividends $.56 per share............                       0      (787)878)
                                                        ---------   -----------

BALANCE AT DECEMBER 31, 2001.............               $       0   $26,042,015
                                                        =========   ===========
</Table>

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



                                       34
<PAGE>
CCFNB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR YEARS ENDED DECEMBER 31, 2001, 2000 AND  1999

<Table>
<Caption>
                                                                                2001            2000           1999
                                                                             ------------   ------------   ------------
<S>                                                                          <C>            <C>          <C>
OPERATING ACTIVITIES
Net income ................................................................  $  2,056,587   $  2,054,061   $  2,039,237
Adjustments to reconcile net income to net cash provided by
    operating activities:
        Provision for loan losses .........................................       152,500         54,000         78,000
        Depreciation and amortization .....................................       441,033        509,630        515,511
        Premium amortization on investment securities .....................       103,748         36,381         72,948
        Discount accretion on investment securities .......................       (17,734)       (17,469)       (22,631)
        Deferred income taxes (benefit) ...................................       (42,741)       (11,739)        18,469
        (Gain) on sales of investment securities Available-for-Sale .......       (98,895)             0        (38,707)
        (Gain) on sale of other real estate ...............................             0              0         (1,285)
        Loss from investment in insurance agency ..........................         1,916              0              0
        (Increase) decreases in accrued interest receivable ...............        60,331        (35,248)      (170,603)
        (Increase) in other assets - net ..................................      (140,415)       (74,619)       (87,181)
        Increase in accrued interest and other expenses ...................        56,550         94,621         54,865
        Increase (decrease) in other liabilities - net ....................       (23,279)        18,979        (19,504)
                                                                             ------------   ------------   ------------
               NET CASH PROVIDED BY OPERATING ACTIVITIES ..................  $  2,559,601   $  2,628,597   $  2,439,119
                                                                             ------------   ------------   ------------

INVESTING ACTIVITIES
Purchase of investment securities Available-for-Sale ......................  $(42,860,135)  $ (1,721,950)  $(16,063,486)
Proceeds from sales, maturities and redemption of investment securities
    Available-for-Sale ....................................................    33,318,255      4,917,158     12,294,313
Proceeds from maturities and redemption of investment securities
    Held-to-Maturity ......................................................             0        200,000        365,000
Net (increase) decrease in loans ..........................................    (5,772,095)    (2,968,509)   (15,979,778)
Purchases of premises and equipment .......................................      (153,248)      (157,970)      (139,921)
Proceeds from sale of other real estate ...................................             0              0         93,234
Acquisition of interest in insurance agency ...............................      (167,268)             0              0
                                                                             ------------   ------------   ------------
               NET CASH (USED) IN INVESTING ACTIVITIES ....................  $(15,534,490)  $    268,729   $(19,430,638)
                                                                             -----------    ------------   ------------

FINANCING ACTIVITIES
Net increase (decrease) in deposits .......................................  $ 12,497,119   $  4,563,001    $   926,301
Net increase (decrease) in short-term borrowings ..........................      (328,042)   (10,771,412)    10,462,273
Proceeds from long-term borrowings ........................................             0     11,032,092         61,560
Repayment of long-term borrowings .........................................    (2,010,063)        (8,276)        (8,519)
Proceeds from sale of treasury stock ......................................             0              0         13,034
Acquisition of treasury stock .............................................      (589,547)      (512,270)      (330,475)
Proceeds from issuance of common stock ....................................       148,293        148,162        148,582
Cash dividends paid .......................................................      (787,878)      (757,796)      (695,463)
                                                                             ------------   ------------   ------------
               NET CASH PROVIDED BY FINANCING ACTIVITIES ..................  $  8,929,882   $  3,693,501    $10,577,293
                                                                             ------------   ------------   ------------

               INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ...........  $ (4,145,008)  $  6,590,827   $ (6,414,226)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ............................    12,662,644      6,071,817     12,486,043
                                                                             ------------   ------------   ------------
    CASH AND CASH EQUIVALENTS AT END OF YEAR ..............................  $  8,517,636   $ 12,662,644   $  6,071,817
                                                                             ============   ============   ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
    Interest ..............................................................  $  6,944,409   $  6,775,411   $  6,054,137
    Income taxes ..........................................................       624,853   $    684,207   $    680,106
</Table>

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



                                       35
<PAGE>



CCFNB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999


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 generally accepted in the United States of America 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.

         Procuring 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, is also resident in the
main branch, namely Bloomsburg. This investment center offers a full line of
stocks, bonds and other non-insured financial services.

         On December 19, 2000 the Corporation became a Financial Holding Company
by having filed an election to do so with the Federal Reserve Board. The
Financial Holding Company status was required in order to acquire an interest in
a local insurance agency that occurred during January 2001.

      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.

      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




                                       36
<PAGE>

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.

      INVESTMENT IN INSURANCE AGENCY

         On January 2, 2001, the Corporation acquired a 50% interest in a local
insurance agency, a corporation organized under the laws of the Commonwealth of
Pennsylvania. The income or loss from this investment is accounted for under the
equity method of accounting. The carrying value of this investment as of
December 31, 2001 is $165,352 and is carried in other assets in the accompanying
consolidated balance sheets.

      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 basis 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.



                                       37
<PAGE>
      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.

      SEGMENT REPORTING

         The Corporation's banking subsidiary acts as an independent community
financial services provider, and offers traditional banking and related
financial services to individual, business and government customers. Through its
branch, internet banking, telephone and automated teller machine network, the
Bank offers a full array of commercial and retail financial services, including
the taking of time, savings and demand deposits; the making of commercial,
consumer and mortgage loans; and the providing of other financial services. The
Bank also performs personal, corporate, pension and fiduciary services through
its Trust Department as well as offering diverse investment products through its
Investment center.

         Management does not separately allocate expenses, including the cost of
funding loan demand, between the commercial, retail, trust and investment center
operations of the Corporation. As such, discrete financial information is not
available and segment reporting would not be meaningful.

      RECENT ACCOUNTING PRONOUNCEMENTS

         Statement of Financial Accounting Standards (SFAS) No. 140, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities", is generally effective for transactions occurring after March 31,
2001. For recognition and reclassification of collateral and for disclosure
related to securitization transactions and collateral, the effective date is for
fiscal years ending after December 15, 2000. SFAS No. 140 replaces SFAS No. 125
and provides revisions to the standards for accounting and requirements for
certain disclosures relating to securitizations and other transfers of financial
assets. 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 2001
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, 2001 was $1,034,000
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,
2001, these balances were $620,801.



                                       38
<PAGE>
3.    INVESTMENT SECURITIES AVAILABLE-FOR-SALE

         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, 2001 and 2000:

<Table>
<Caption>
                                                              Available-for-Sale Securities
                                                              -----------------------------
                                                                  Gross         Gross        Estimated
                                                  Amortized     Unrealized    Unrealized       Fair
December 31, 2001:                                  Cost          Gains         Losses         Value
                                                 ------------  ------------  ------------  ------------
<S>                                              <C>           <C>           <C>           <C>
Obligations of U.S. Government Corporations and
    Agencies:
        Mortgage-backed .......................  $ 20,923,241  $     78,087  $          0  $ 21,001,328
        Other .................................    12,478,240        74,408             0    12,552,648
Obligations of state and political subdivisions    17,489,802        35,673             0    17,525,475
Corporate securities ..........................     4,658,023             0        69,135     4,588,888
Marketable equity securities ..................       332,456         4,696        10,662       326,490
Restricted equity securities ..................     1,126,400             0             0     1,126,400
                                                 ------------  ------------  ------------  ------------
Total .........................................  $ 57,008,162  $    192,854  $     79,797  $ 57,121,229
                                                 ============  ============  ============  ============
</Table>

<Table>
<Caption>
                                                               Available-for-Sale Securities
                                                               -----------------------------
                                                                    Gross            Gross       Estimated
                                                   Amortized     Unrealized       Unrealized       Fair
December 31, 2000:                                   Cost           Gains           Losses         Value
                                                 -------------  -------------  -------------  -------------
<S>                                              <C>            <C>            <C>            <C>
Obligations of U.S. Government Corporations and
    Agencies:
        Mortgage-backed .......................  $  13,371,642  $           0  $      77,488  $  13,294,154
        Other .................................     15,893,015              0         82,855     15,810,160
Obligations of state and political
  subdivisions ................................     16,025,022         79,267              0     16,104,289
Corporate securities ..........................        726,430              0          1,430        725,000
Marketable equity securities ..................        310,893         11,365         71,163        251,095
Restricted equity securities ..................      1,126,400              0              0      1,126,400
                                                 -------------  -------------  -------------  -------------
Total .........................................  $  47,453,402  $      90,632  $     232,936  $  47,311,098
                                                 =============  =============  =============  =============

</Table>

         Securities Available-for-Sale with an aggregate fair value of
$35,683,128 in 2001 and $32,189,849 in 2000, respectively, were pledged to
secure public funds, trust funds, securities sold under agreements to repurchase
and other balances of $28,012,969 in 2001 and $28,900,494 in 2000, respectively,
as required by law.

         The amortized cost and estimated fair value of debt securities, by
expected maturity, are shown below at December 31, 2001. 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>

                                                             Available-for-Sale
                                                          ------------------------
                                                                        Estimated
                                                           Amortized      Fair
                                                              Cost        Value
                                                          -----------  -----------
<S>                                                       <C>          <C>
Due in one year or less ................................  $   716,660  $   721,643
Due after one year through five years ..................   22,665,657   22,717,299
Due after five years through ten years .................   15,722,262   15,813,469
Due after ten years ....................................   17,903,583   17,862,818
                                                          -----------  -----------
Total ..................................................  $57,008,162  $57,121,229
                                                          ===========  ===========
</Table>

         Restricted equity securities consist of stock in the Federal Home Loan
Bank of Pittsburgh (FHLB), Federal Reserve Bank (FRB) and Atlantic Central
Bankers Bank (ACBB) and do not have a readily determinable fair value for
purposes of SFAS No. 115, because their ownership as restricted and they can be
sold back only to the FHLB, FRB, ACBB or to another member




                                       39
<PAGE>

institution. Therefore, these securities are classified as restricted equity
investment securities, carried at cost, and evaluated for impairment.

         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 sales, maturities and redemptions of investments in debt
and equity securities classified as Available-for-Sale during 2001, 2000 and
1999 were $33,318,256, $4,917,158 and $12,294,313, respectively. Gross gains
realized on these sales were $98,895, $0 and $38,707, respectively. There were
no gross losses on the 2001, 2000, and 1999 sales.

         Proceeds from maturities and redemptions of investments in debt
securities classified as Held-to-Maturity during 2001, 2000 and 1999 were $0,
$200,000 and $365,000 respectively. There were no gross gains or losses on these
sales during 2001, 2000 and 1999, respectively.

4.       LOANS

         Major classifications of loans at December 31, 2001 and 2000 consisted
of:

<Table>
<Caption>
                                                     2001             2000
                                                --------------   --------------
<S>                                             <C>              <C>
Commercial ...................................  $   13,091,017   $   14,411,838
Tax-exempt ...................................         798,681        2,747,097
Municipal leases .............................       1,147,999          121,520
Real estate - construction ...................       2,537,584        1,648,143
Real estate ..................................     115,716,417      106,604,521
Personal .....................................       9,961,978       12,316,764
                                                --------------   --------------
Total gross loans ............................  $  143,253,676   $  137,849,883
Less:  Unearned discount .....................         279,389          485,967
       Unamortized loan fees, net of costs....         (15,305)           3,423
                                                --------------   --------------
Loans, net of unearned income ................  $  142,989,592   $  137,360,493
                                                ==============   ==============
</Table>

         Non-accrual loans at December 31, 2001, 2000 and 1999 were $729,084,
$311,780, and $198,840, 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>
                                                      2001      2000      1999
                                                     -------   -------   -------
<S>                                                  <C>       <C>       <C>
Gross interest due under terms ...................   $99,280   $29,248   $16,089
Amount included in income ........................    61,568     5,023         0
                                                     -------   -------   -------
Interest income not recognized ...................   $37,712   $24,225   $16,089
                                                     =======   =======   =======
</Table>

         At December 31, 2001 and 2000 the recorded investment in loans that are
considered to be impaired as defined by SFAS No. 114 was $58,424 and $57,766,
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, 2001 and 2000
was approximately $47,339 and $29,604, respectively.

         At December 31, 2001, 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, 2001, 2000 and 1999 were as follows:

<Table>
<Caption>
                                              2001          2000          1999
                                           -----------   -----------   -----------
<S>                                        <C>           <C>           <C>
Balance, beginning of year ..............  $ 1,008,301   $   985,165   $   954,516
Provision charged to operations .........      162,500        54,000        78,000
Loans charged-off .......................     (189,186)      (98,105)      (99,951)
Recoveries ..............................       46,190        67,241        52,600
                                           -----------   -----------   -----------
Balance, end of year ....................  $ 1,027,805   $ 1,008,301   $   985,165
                                           ===========   ===========   ===========
</Table>

5.       PREMISES AND EQUIPMENT

         A summary of premises and equipment at December 31, 2001 and 2000
follows:




                                       40
<PAGE>
<Table>
<Caption>
                                                        2001             2000
                                                     ----------       ----------
<S>                                                  <C>              <C>
Land .........................................       $  567,939       $  567,939
Buildings and improvements ...................        4,533,510        4,530,249
Furniture and equipment ......................        3,556,240        3,406,254
                                                     ----------       ----------
                                                     $8,657,689       $8,504,442
Less:  Accumulated depreciation ..............        4,023,187        3,582,155
                                                     ----------       ----------
                                                     $4,634,502       $4,922,287
                                                     ==========       ==========
</Table>

         Depreciation amounted to $441,033 for 2001, $509,630 for 2000 and
$515,511 for 1999.

6.   DEPOSITS

         Major classifications of deposits at December 31, 2001 and 2000
consisted of:

<Table>
<Caption>
                                                      2001              2000
                                                  ------------      ------------
<S>                                               <C>               <C>
Demand - non-interest bearing ..............      $ 14,711,465      $ 14,593,285
Demand - interest bearing ..................        22,029,517        21,574,064
Savings ....................................        31,789,447        28,746,230
Time $100,000 and over .....................        26,058,987        21,915,685
Other time .................................        61,076,341        56,339,374
                                                  ------------      ------------
                                                  $155,665,757      $143,168,638
                                                  ============      ============
</Table>

         The following is a schedule reflecting remaining maturities of time
deposits of $100,000 and over at December 31, 2001:

<Table>
<S>                                                          <C>
2002......................................................   $   18,163,670
2003......................................................        4,220,916
2004......................................................        1,102,379
2005......................................................        2,271,912
2006 and thereafter.......................................          300,110
                                                             --------------
Total.....................................................   $   26,058,987
                                                             ==============
</Table>

Interest expense related to time deposits of $100,000 or more was $1,493,072 in
2001, $1,065,537 in 2000 and $821,424 in 1999.



                                       41
<PAGE>



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, 2001 and 2000:

<Table>
<Caption>
                                                               2001
                                        --------------------------------------------------
                                                                    Maximum
                                          Ending       Average     Month End    Average
                                          Balance      Balance      Balance       Rate
                                        -----------  -----------  -----------  -----------
<S>                                     <C>          <C>          <C>          <C>
Federal funds purchased and securities
 sold under agreements to repurchase..  $19,606,983  $19,082,599  $20,684,867         3.71%
Federal Home Loan Bank Advances ......            0            0            0          .00%
U.S. Treasury tax and loan notes .....      173,941      532,978    1,000,000         3.23%
                                        -----------  -----------  -----------  -----------
Total ................................  $19,780,924  $19,615,577  $21,684,867         3.70%
                                        ===========  ===========  ===========  ===========
<Caption>
                                                              2000
                                        --------------------------------------------------
                                                                   Maximum
                                         Ending       Average     Month End     Average
                                         Balance      Balance      Balance       Rates
                                        -----------  -----------  -----------  -----------
<S>                                     <C>          <C>          <C>          <C>
Federal funds purchased and securities
 sold under agreements to repurchase..  $19,637,069  $16,468,523  $21,374,759         5.40%
Federal Home Loan Bank Advances ......            0    3,449,250    3,725,000         5.86%
U.S. Treasury tax and loan notes .....      471,897      439,873    1,000,000         6.38%
                                        -----------  -----------  -----------  -----------
Total ................................  $20,108,966  $20,357,646  $26,099,759         5.50%
                                        ===========  ===========  ===========  ===========
</Table>

8.   LONG-TERM BORROWINGS

         Long-term borrowings consisted of the following due Federal Home Loan
Bank at December 31, 2001 and 2000:

<Table>
<Caption>
                                                                                                     2001         2000
                                                                                                  -----------  -----------
<S>                                                                                               <C>          <C>
Loan dated November 28, 1997 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 ................................................................................  $   198,966  $   206,082
Loan dated February 18, 1998 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 dated June 25, 1998 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 .....       68,665       69,711
Loan dated February 23, 1999 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 ................................................................................       27,493       28,111
Loan dated August 20, 1999 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 .......................................................................       30,896       31,564
Loan dated January 27, 2000 in the original amount of $5,000,000 for a 10 year term with
    a 1 year conversion date and a 3 month conversion frequency thereafter.  At
    December 31,2000 the interest rate was 6.00%.  Principal balances outstanding ..............    5,000,000    5,000,000
Loan dated May 26, 2000 in the original amount of $2,000,000 for a 5 year term
    with a 3 month conversion frequency.  At December 31, 2000 the interest rate
    was 6.50%. Principal balances outstanding ..................................................            0    2,000,000
Loan dated August 16, 2000 in the original amount of $2,000,000 for a 10 year
    term with a 6 month conversion date and a 3 month conversion frequency thereafter.
    At December 31, 2000 the interest rate was 5.925%. Principal balances outstanding ..........    2,000,000    2,000,000
Loan dated September 20, 2000 in the original amount of $2,000,000 for a 10 year term
    with a 3 year month conversion date and a e month conversion frequency thereafter
    At December 31, 2000 the interest rate was 6.10%. Principal balances outstanding ...........    2,000,000    2,000,000
Loan December 13, 2000 in the original amount of $32,092.44 for a 20 year term
    requiring monthly payments of $197 including interest at 5.50%.  Principal balances
    outstanding ................................................................................       31,477       32,092
                                                                                                  -----------  -----------
Total ..........................................................................................  $11,357,497  $13,367,560
                                                                                                  ===========  ===========
</Table>

         At December 31, 2001 the annual maturities of long-term debt were as
follows: $10,682 in 2002, $11,338 in 2003, $12,034 in 2004, $12,774 in 2005,
$13,558 in 2006 and $11,297,111 thereafter.



                                       42
<PAGE>

9.   COMPREHENSIVE INCOME

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

<Table>
<Caption>
                                                                              Years Ended December 31,
                                                                       ---------------------------------------
                                                                          2001          2000          1999
                                                                       -----------   -----------   -----------
<S>                                                                    <C>           <C>           <C>
Unrealized holding gains (losses) on Available-for-Sale investment
    securities ......................................................  $   354,266   $ 1,621,580   $(2,401,246)
Less reclassification adjustment for gains realized in income .......       98,895             0        38,707
                                                                       -----------   -----------   -----------
Net unrealized gains (losses) .......................................  $   255,371   $ 1,621,580   $(2,439,953)
Tax effects .........................................................      (90,816)     (550,861)      832,455
                                                                       -----------   -----------   -----------
Net of tax amount ...................................................  $   164,555   $ 1,070,719   $(1,607,498)
                                                                       ===========   ===========   ===========
</Table>

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>
2001...................................................            839                15.07              16.75
2000...................................................            603                18.45              20.50
1999...................................................            549                23.74              26.38
</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 for the shares at the close of trading in the
over-the-counter market on the trading day immediately preceding the 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>
2001................................................          6,506         $135,649
2000................................................          8,174         $137,037
1999................................................          7,345         $148,582
</Table>



                                       43
<PAGE>

11.  INCOME TAXES

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

<Table>
<Caption>
Federal                                    2001           2000           1999
                                       -----------    -----------    -----------
<S>                                    <C>            <C>            <C>
Current ............................   $   663,669    $   682,853    $   666,270
Deferred (benefit) .................       (42,549)       (11,739)        18,469
                                       -----------    -----------    -----------
                                       $   621,120    $   671,114    $   684,739
                                       ===========    ===========    ===========
</Table>

<Table>
<Caption>
State                                                                  2001          2000          1999
                                                                    -----------   -----------  -----------
<S>                                                                 <C>           <C>          <C>
Current ..........................................................  $         0   $         0  $         0
Deferred (benefit) ...............................................         (192)            0            0
                                                                    -----------   -----------  -----------
                                TOTAL PROVISION FOR TAXES           $   620,928   $   671,114  $   684,739
                                                                    ===========   ===========  ===========
</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>
                                               2001                     2000                    1999
                                       ---------------------    ---------------------    ---------------------
                                        Amount       Rate        Amount       Rate        Amount       Rate
                                       ---------   ---------    ---------   ---------    ---------   ---------
<S>                                    <C>         <C>          <C>         <C>          <C>         <C>
Provision at statutory rate .........  $ 910,355        34.0%   $ 926,560        34.0%   $ 926,152        34.0%
Tax-exempt income ...................   (329,338)      (12.3)    (296,431)      (10.9)    (276,969)      (10.1)
Non-deductible expenses .............     48,142         1.8       46,176         1.7       40,087         1.4
Other, net ..........................     (8,039)        (.3)      (5,191)        (.2)      (4,531)        (.2)
                                       ---------   ---------    ---------   ---------    ---------   ---------
Actual federal income tax and rate ..  $ 621,120        23.2%   $ 671,114        24.6%   $ 684,739        25.1%
                                       =========   =========    =========   =========    =========   =========
</Table>

         Income taxes applicable to realized security gains included in the
provision for income taxes totaled $33,624 in 2001, $0 in 2000 and $13,160 in
1999.
         The net deferred tax asset (liability) recorded by the Corporation
consisted of the following tax effects of temporary timing differences at
December 31 2001, 2000 and 1999:

<Table>
<Caption>
                                                                                2001        2000        1999
                                                                              ---------   ---------   ---------
<S>                                                                           <C>         <C>         <C>   <C>
Deferred tax assets:
    Loan loss reserve ......................................................  $ 247,692   $ 241,060   $233, 194
    Deferred compensation ..................................................    151,324     142,981     134,323
    Non-accrual loan interest ..............................................     11,291           0           0
    Contributions ..........................................................          0           0       3,400
    Investment in insurance agency .........................................        777           0           0
    Unrealized investment securities losses ................................          0      53,076     603,937
                                                                              ---------   ---------   ---------
                                                                       TOTAL  $ 411,084   $ 437,117   $ 974,854
                                                                              =========   =========   =========

Deferred tax liabilities:
    Loan fees and costs ....................................................  $ (64,036)  $ (63,369)  $ (68,321)
    Accretion ..............................................................     (2,020)     (3,591)     (5,679)
    Unrealized investment securities gains .................................    (37,740)          0           0
    Depreciation ...........................................................   (260,701)   (175,495)   (267,070)
                                                                              ---------   ---------   ---------
                                                                       TOTAL  $(364,497)  $(342,455)  $(341,070)
                                                                              ---------   ---------   ---------

Net deferred tax asset (liability) .........................................  $  46,587   $  94,662   $ 633,784
                                                                              =========   =========   =========
</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.

         The Corporation and its subsidiary file a consolidated federal income
tax return. The Parent Company is also required to file a separate state income
tax return and has available state operating loss carryforwards totaling
$436,235. The losses expire through 2011. The related deferred state tax asset
in the amount of $43,580 has been fully reserved and is not reflected in the net
tax asset (liability) since management is of the opinion that such assets will
not be realized in the foreseeable future.



                                       44
<PAGE>

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 $23,446, $22,725 and $21,600 for
2001, 2000 and 1999, respectively. Discretionary contributions amounted to
$99,317, $98,638, and $93,191 in 2001, 2000 and 1999, 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, 2001 and 2000, the net cash value of insurance policies was $294,703 and
$253,410, respectively, and the total accrued liability was $227,535 and
$201,735, 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, 2001 and 2000, the
net cash value of insurance policies was $254,936 and $217,389, respectively,
and the total accrued liability was $227,535 and $201,735, 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.

13.  LEASE COMMITMENTS AND CONTINGENCIES

         At December 31, 2001 the Bank was leasing some minor office equipment
under operating leases.

         Rental expense under operating leases and contracted data processing
services for the years ended December 31, 2001, 2000 and 1999 were $4,874,
$5,702 and $5,690, respectively. In connection with an upgrade to the
information systems, the Corporation estimates that in 2002 costs in the amount
of $350,000 will be incurred for computer and software upgrades.

         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.




                                       45
<PAGE>
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, 2001 and 2000. 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>
                                                    2001               2000
                                                 -----------        -----------
<S>                                              <C>                <C>
Balance, beginning of year ...............       $ 2,113,043        $ 1,581,852
Additions ................................         1,410,000          1,509,658
Deductions ...............................        (1,158,275)          (978,467)
                                                 -----------        -----------
Balance, end of year .....................       $ 2,364,768        $ 2,113,043
                                                 ===========        ===========
</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 2001 and 2000 presented an additional
off-balance sheet risk to the extent of undisbursed funds in the amount of
$317,902 and $568,251, 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 2002, without
prior regulatory approval, the Bank may declare dividends to the Corporation in
the amount of $1,355,301 plus additional amounts equal to the net income earned
in 2002 for the period January 1, 2002, through the date of declaration, less
any dividends which may have already been paid in 2002. 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, 2002 and 2001, 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, 2001, 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 (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, 2001:
    Total Capital
        (To risk-weighted assets).................      $26,989     19.82%    $10,894       8.00%     $13,618     10.00%
    Tier I Capital
        (To risk-weighted assets).................      $25,961     19.06%    $ 5,447       4.00%     $ 8,171      6.00%
    Tier I Capital
        (To average assets).......................      $25,961     12.44%    $ 8,346       4.00%     $10,432      5.00%
As of December 31, 2000:
    Total Capital
        (To risk-weighted assets).................      $25,068     21.79%    $ 9,205       8.00%     $11,506     10.00%
    Tier I Capital
        (To risk-weighted assets).................      $24,088     20.94%    $ 4,602       4.00%     $ 6,904      6.00%
    Tier I Capital
        (To average assets).......................      $24,088     13.02%    $ 7,401       4.00%     $ 9,251      5.00%
</Table>



                                       46
<PAGE>

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

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, 2001 and 2000 were as follows:

<Table>
<Caption>
                                                                        2001         2000
                                                                     -----------  -----------
<S>                                                                  <C>          <C>
Financial instruments whose contract amounts represent credit risk:
    Commitments to extend credit ..................................  $11,841,592  $ 9,685,243
    Financial standby letters of credit ...........................    2,347,562    1,990,087
    Performance standby letters of credit .........................       15,030       17,850
    Dealer floor plans ............................................    1,884,022    1,098,455
</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, 2001 varied from 0 percent to 100 percent; the
average amount collateralized was 62.8 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 81.9% 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




                                       47
<PAGE>

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.

         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,
         2001 and 2000.

                  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.

         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, 2001 and 2000, the carrying values and
         estimated fair values of financial instruments are presented in the
         table below:



                                       48
<PAGE>
<Table>
<Caption>
                                                            2001                         2000
                                                ----------------------------  --------------------------
                                                  Carrying        Estimated    Carrying      Estimated
                                                   Amount         Fair Value     Amount      Fair Value
                                                -------------   ------------  ------------  ------------
<S>                                             <C>             <C>           <C>           <C>
Financial Assets:
    Cash and short-term investments ..........  $   8,517,836   $  8,517,836  $ 12,662,644  $ 12,662,644
    Investment securities ....................     57,121,229     57,121,229    47,311,098    47,311,098

Loans:
    Commercial ...............................     13,091,017     13,091,017    14,411,838    14,411,838
    Tax-exempt ...............................        798,681        798,681     2,747,097     2,748,629
    Qualified municipal leases ...............      1,147,999      1,147,999       121,520       121,520
    Real estate - construction ...............      2,537,584      2,537,584     1,648,143     1,648,048
    Real estate ..............................    115,716,417    115,819,722   106,604,521   106,495,056
    Personal .................................      9,961,978      9,964,606    12,316,764    12,079,213
                                                -------------   ------------  ------------  ------------
    Gross loans ..............................  $ 143,253,676   $143,359,609  $137,849,883  $137,504,304
    Less:  Unearned discount .................        279,389              0      485,9671             0
        Unamortized loan fees, net of costs ..        (15,305)             0         3,423             0
                                                -------------   ------------  ------------  ------------
        Loans, net of unearned income ........  $ 142,989,592   $143,359,609  $137,360,493  $137,504,304
        Allowance for losses .................      1,027,805              0     1,008,301             0
                                                -------------   ------------  ------------  ------------
    Net loans ................................  $ 141,961,787   $143,359,609  $136,352,192  $137,504,304
                                                =============   ============  ============  ============

Financial Liabilities:
    Deposits:
        Demand - non-interest bearing ........  $  14,711,465   $ 14,711,465  $ 14,593,285  $ 14,593,285
        Demand - interest bearing ............     22,029,517     22,029,517    21,574,064    21,574,064
        Savings ..............................     31,789,447     31,789,447    28,746,230    28,746,230
        Time - $100,000 and over .............     26,058,987     27,149,953    21,915,685    22,236,210
        Other time ...........................     61,076,341     63,012,111    56,339,374    56,613,257
                                                -------------   ------------  ------------  ------------
           Total Deposits ....................  $ 155,665,757   $158,692,493  $143,168,638  $143,763,046
                                                =============   ============  ============  ============

Short-Term Borrowings ........................  $  19,780,924   $ 19,780,924  $ 20,108,966  $ 20,108,966
Long-Term Borrowings .........................     11,357,497     11,399,546    13,367,560    13,469,281

Off-Balance Sheet Assets (Liabilities):
    Commitments to extend credit .............                    11,841,592                   9,685,243
    Standby letters of credit ................                     2,347,562                   1,990,087
    Performance standby letters of credit ....                        15,030                      17,850
    Dealer floor plans .......................                     1,884,022                   1,098,455
</Table>



                                       49
<PAGE>


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                                                                  2001          2000
                                                                     ------------   ------------
<S>                                                                  <C>            <C>
    Cash in subsidiary Bank .......................................  $    261,018   $     71,168
    Investment in subsidiary ......................................    25,289,498     24,568,790
    Investment in other equity securities .........................       310,866        228,804
    Prepayments and other assets ..................................       170,458         28,887
    Receivable from subsidiary ....................................        77,844        181,209
                                                                     ------------   ------------
        Total Assets ..............................................  $ 26,109,684   $ 25,078,858
                                                                     ============   ============
Liabilities and Stockholders' Equity
    Accrued expenses and other liabilities ........................  $     67,669   $     28,853
                                                                     ------------   ------------
        Total Liabilities .........................................  $     67,669   $     28,853
                                                                     ------------   ------------
Stockholders' Equity
    Common stock ..................................................  $  1,657,715   $  1,682,910
    Surplus .......................................................     4,730,002      5,146,061
    Retained earnings .............................................    19,578,971     18,310,262
    Accumulated other comprehensive income (loss) .................        75,327        (89,228)
                                                                     ------------   ------------
        Total Stockholders' Equity ................................  $ 26,042,015   $ 25,050,005
                                                                     ------------   ------------
        Total Liabilities and Stockholders' Equity ................  $ 26,109,684   $ 25,078,858
                                                                     ============   ============

</Table>

<Table>
<Caption>
STATEMENTS OF INCOME                                                          Years Ended December 31,
                                                                     -----------------------------------------
Income                                                                   2001           2000          1999
                                                                     ------------   ------------   -----------
<S>                                                                  <C>            <C>            <C>
    Dividends from subsidiary bank ................................  $  1,515,635   $  1,330,102   $   697,859
    Dividends - other .............................................         8,898          8,291         7,837
    Interest ......................................................         2,917          4,857         8,243
                                                                     ------------   ------------   -----------
        Total Income ..............................................  $  1,527,450   $  1,343,250   $   713,939
Operating Expenses ................................................        90,787         75,604       110,264
                                                                     ------------   ------------   -----------
    Income Before Taxes and Equity in Undistributed
        Net Income of Subsidiary ..................................  $  1,436,663   $  1,267,646   $   603,675
Applicable income tax (benefit) ...................................       (29,746)       (23,208)      (33,888)
                                                                     ------------   ------------   -----------
    Income Before Equity in Undistributed Net Income
        of Subsidiary .............................................  $  1,466,409   $  1,290,854   $   637,563
Equity in undistributed income of subsidiary ......................       592,094        763,207     1,401,674
Loss from investment in insurance agency ..........................        (1,916)             0             0
                                                                     ------------   ------------   -----------
    Net Income ....................................................  $  2,056,587   $  2,054,061   $ 2,039,237
                                                                     ============   ============   ===========
STATEMENTS OF CASH FLOWS
Operating Activities
Net Income ........................................................  $  2,056,587   $  2,054,061   $ 2,039,237
Adjustments to reconcile net income to net cash provided by
    operating activities:
        Equity in undistributed net income of subsidiary ..........      (592,094)      (763,207)   (1,401,674)
        Loss from investment in an insurance agency ...............         1,916              0             0
        (Increase) decrease in receivable from subsidiary .........       103,365       (163,235)       38,007
        Deferred income taxed (benefit) ...........................          (777)             0             0
        Increase (decrease) in income taxes and accrued expenses
        Payable ...................................................        38,816         (1,417)      (14,236)
                                                                     ------------   ------------   -----------
        Net Cash Provided By Operating Activities .................  $  1,607,813   $  1,125,202   $   661,334
                                                                     ------------   ------------   -----------
Investing Activities
Purchase of equity securities .....................................  $    (21,563)             0   $   (23,504)
Acquisition of interest in an insurance agency ....................      (167,268)             0             0
                                                                     ------------   ------------   -----------
        Net Cash (Used) in Investing Activities ...................  $   (188,831)             0   $   (23,504)
                                                                     ============   ============   ===========
Financing Activities
Proceeds from sale of treasury stock ..............................             0              0   $    13,034
Acquisition of treasury stock .....................................      (589,547)      (512,270)     (330,475)
Proceeds from issuance of common stock ............................       148,293        148,162       148,582
Cash dividends ....................................................      (787,878)      (757,796)     (695,463)
                                                                     ------------   ------------   -----------
        Net Cash (Used) By Financing Activities ...................  $ (1,229,132)  $ (1,121,904)  $  (864,322)
                                                                     ------------   ------------   -----------
        Increase (Decrease) in Cash and Cash Equivalents ..........  $    189,850   $      4,298   $  (226,492)
Cash and Cash Equivalents at Beginning of Year ....................        71,168         66,870       293,362
                                                                     ------------   ------------   -----------
        Cash and Cash Equivalents at End of Year ..................  $    261,018   $     71,168   $    66,870
                                                                     ============   ============   ===========
</Table>



                                       50
<PAGE>

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, 2001 and 2000, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 2001. 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, 2001 and 2000, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2001 in conformity with generally
accepted accounting principles generally accepted in the United States of
America.





J. H. Williams & Co., LLP
Kingston, Pennsylvania
January 18, 2002



                                       51
<PAGE>


                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

 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)

<Table>
<Caption>
                                                            2001           2000           1999           1998           1997
                                                        -------------  -------------  -------------  -------------  -------------
<S>                                                     <C>            <C>            <C>            <C>            <C>
INCOME STATEMENT DATA:
Total interest income ................................. $      13,720  $      13,552  $      12,669  $      12,444  $      12,487
Total interest expense ................................         6,924          6,859          6,099          6,072          5,976
                                                        -------------  -------------  -------------  -------------  -------------
Net interest income ................................... $       6,796  $       6,693  $       6,570          6,372          6,511
Provision for possible loan losses ....................           163             54             78             78             60
Other operating income ................................         1,149          1,053          1,050            981            815
Other operating expenses ..............................         5,104          4,967          4,818          4,739          4,492
Federal income taxes ..................................           621            671            685            634            749
                                                        -------------  -------------  -------------  -------------  -------------
Net income ............................................ $       2,057  $       2,054  $       2,039  $       1,902  $       2,025
                                                        =============  =============  =============  =============  =============

PER SHARE DATA:
Earnings per share (1) ................................ $        1.54  $        1.51  $        1.48  $        1.38  $        1.47
Cash dividends declared per share ..................... $        0.59  $        0.56  $        0.51  $        0.46  $        0.46
Book value per share .................................. $       19.64  $       18.61  $       16.85  $       17.03  $       15.68
Average shares outstanding ............................     1,338,007      1,355,624      1,375,572      1,378,339      1,381,800

BALANCE SHEET DATA:
Total assets .......................................... $     214,238  $     203,054  $     196,122  $     185,258  $     173,866
Total loans ........................................... $     142,990        137,360  $     134,423  $     118,558  $     119,045
Total securities ...................................... $      57,121         47,311  $      49,104  $      48,151  $      43,862
Total deposits ........................................ $     155,666        143,169  $     138,606  $     137,679  $     127,719
FHLB advances - long-term ............................. $      11,357         13,368  $       2,344  $       2,291  $         225
Total stockholders' equity ............................ $      26,042         25,050  $      23,047  $      23,480  $      22,105

PERFORMANCE RATIOS:
Return on average assets ..............................          0.99%          1.04%          1.09%          1.07%          1.18%
Return on average stockholders' equity ................          7.92%          8.59%          8.91%          8.54%          9.79%
Net interest margin (2) ...............................          3.68%          3.91%          3.96%          4.05%          4.23%
Total  non-interest  expense as a percentage of
   average assets .....................................          2.45%          2.52%          2.58%          2.67%          2.62%

ASSET QUALITY RATIOS:
Allowance for possible loan losses as a
percentage of loans, net ..............................          0.72%          0.74%          0.73%          0.81%          0.76%
Allowance for possible loan losses as a percentage of
   non-performing loans (3) ...........................         60.54%        153.66%        264.83%        100.32%        129.27%
Non-performing loans as a percentage of total loans,
   net (3) ............................................          1.19%          0.48%          0.28%          0.81%          0.59%
Non-performing assets as a percentage of
   total assets (3) ...................................          0.79%          0.32%          0.19%          0.51%          0.40%
Net charge-offs as a percentage of average
   net loans (4) ......................................          0.10%          0.02%          0.04%          2.11%          0.06%

LIQUIDITY AND CAPITAL RATIOS:
Equity to assets ......................................         12.16%         12.34%         11.75%         12.53%         12.09%
Tier 1 Capital to risk-weighted assets (5) ............         19.06%         20.94%         17.94%         20.93%         20.98%
Leverage ratio (5)(6) .................................         12.44%         13.02%         12.94%         12.95%         12.57%
Total capital to risk-weighted assets (5) .............         19.82%         21.79%         18.68%         21.80%         21.84%
Dividend payout ratio .................................         38.31%         36.89%         34.09%         33.59%         31.65%
</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.

         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




                                       52
<PAGE>

Corporation are essentially those of its subsidiary, the Bank. Therefore, the
analysis that follows is directed to the performance of the Bank.

                     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, 2001, total interest-earning assets maturing or
repricing within one year were more than total interest-bearing liabilities
maturing or repricing in the same period by $14,161,000, representing a
cumulative one year interest rate sensitivity gap as a percentage of total
assets of total assets of positive 6.6%. This condition suggests that the yield
on the Corporation's interest-earning assets should adjust to changes in market
interest rate at a faster rate than the cost of the Corporation's
interest-bearing liabilities. Consequently, the Corporation's net interest
income could increase 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.

         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 .2% to $2,057,000 for 2001,
compared to $2,054,000 for 2000. Earnings per common share for the current year
were $1.54 compared to $1.51 per common share in 2000. Beginning June 1995,
dividend reinvestment and employee's stock option plans went into effect for the
Corporation. Additionally, since 1997 the Corporation has purchased and
partially retired treasury stock. Additionally, during the last half of 1999 the
Corporation entered into a strategy to purchase up to ten percent of the
company's common stock in open market purchases. This resulted in 27,501 shares
of stock being purchased and retired during 2001 and 30,100 shares of stock
being purchased and retired during 2000. The net effect of these factors have
caused a net decrease in weighted average number of shares outstanding of
1,338,007, 1,355,624, and 1,375,572 for 2001, 2000 and 1999 respectively.

         Loans increased 4.1% throughout 2001 to $142,990,000 from $137,360,000
in 2000. The increase was in the Real Estate lending area. Return on average
assets ("ROA") decreased to .99% for 2001 compared to 1.04% for 2000. The return
on average equity ("ROE") decreased to 7.9% for 2001 compared to 8.6% for 2000.

         Tax-equivalent net interest income increased 2.1% in 2001 to $7,290,000
in 2001 from $7,138,000 in 2000. Average earning assets increased 8.5% in 2001
from $182,673,000 in 2000 to $198,152,000 in 2001. This increased net interest
income is a result of changes in interest rates with the rates being dropped by
the Federal Reserve eleven times during 2001. Coupled with




                                       53
<PAGE>

the falling rates was a downturn in the economy and stock market which increased
bank deposits, specifically certificates of deposit ("CD") as customers looked
for safer investment vehicles for their assets. All loan and deposits rates
dropped throughout 2001. The CD rates for deposits were much lower than
previously. As a result of the factors outlined above, net interest income
increased 1.5% from $6,693,000 in 2000 to $6,795,000 in 2001.

                          TABLE OF NON-INTEREST INCOME
                             (Dollars in Thousands)

<Table>
<Caption>
                                                           Years Ended December 31,
                                                      -----------------------------------
                                                         2001        2000        1999
                                                      ----------- ----------- -----------
<S>                                                   <C>         <C>         <C>
Service charges and fees ............................ $       606 $       595 $       612
Trust department income .............................         238         219         189
Investment securities gains - net ...................          99           0          39
Other ...............................................         206         239         210
                                                      ----------- ----------- -----------
Total non-interest income ........................... $     1,149 $     1,053 $     1,050
                                                      =========== =========== ===========
</Table>

         Total non-interest income increased slightly during 2001 from
$1,053,000 in 2000 to $1,149,000 in 2001. Trust income increased 8.68% from
$219,000 in 2000 to $238,000 in 2001. Service fees and charges increased from
$595,000 in 2000 to $606,000 in 2001 or 1.8%. Other income decreased 13.8% from
$239,000 in 2000 to $206,000 in 2001. Gains on sales of investment securities
increased from $0 in 2000 to $99,000 in 2001. The decrease in other income was
principally the result of Investment income of $106,000 in 2000 falling to
$72,000 in 2001 or a decrease of $34,000 or 32.1%.

                          TABLE OF NON-INTEREST EXPENSE
                             (Dollars in Thousands)

<Table>
<Caption>
                                                    Years Ended December 31,
                                             -----------------------------------
                                                2001        2000        1999
                                             ----------- ----------- -----------
<S>                                          <C>         <C>         <C>
Salaries and wages ......................... $     2,050 $     2,016 $     1,905
Employee benefits ..........................         692         645         630
Net occupancy expense ......................         366         328         339
Furniture and equipment expense ............         544         601         597
State shares tax ...........................         243         219         196
Other expense ..............................       1,209       1,158       1,152
                                             ----------- ----------- -----------
Total non-interest expense ................. $     5,104 $     4,967 $     4,819
                                             =========== =========== ===========
</Table>

         Total non-interest expense increased to $5,104,000 in 2001 from
$4,967,000 in 2000 or an increase of 2.8% or $137,000. An $81,000 or 3% increase
in salaries and benefits was attributable mainly to normal merit and cost of
living increases and increased benefit costs. Furniture and equipment expense
decreased $57,000 from $601,000 in 2000 compared to $544,000 in 2001. Net
occupancy expenses increased $38,000 to $366,000 in 2001 compared to $328,000 in
2000. State shares tax expense increased 11% or $24,000 from 2000 to 2001. Mac
expense up 16.7% or $16,000; advertising up 27.6% or $16,000; Data Processing
Expense up 41.8% or $12,000; and Directors fees up 6.3% or $7,000 resulted in
the increased other expenses of $51,000.

         A key in measuring non-interest expense is to express this non-interest
expense as a percentage of average total assets. In 2000, this percentage was
2.5% compared to 2.4% in 2001 or a 4.0% improvement.

         The provision for loan losses increased in 2001 from $54,000 in 2000 to
$162,500. The increase resulted from one small business loan that was converted
to non-accrual status.

                               NET INTEREST INCOME

         Tax-equivalent net interest income for 2001 equaled $7,290,000 compared
to $7,138,000 in 2000, an increase of 2.1%.



                                       54
<PAGE>
                       TAX-EQUIVALENT NET INTEREST INCOME
                             (Dollars in Thousands)

<Table>
<Caption>
                                                            Years Ended December 31,
                                                      -----------------------------------
                                                         2001        2000        1999
                                                      ----------- ----------- -----------
<S>                                                   <C>         <C>         <C>
Interest income ..................................... $    13,719 $    13,552 $    12,669
Interest expense ....................................       6,924       6,859       6,099
                                                      ----------- ----------- -----------
Net interest income .................................       6.795       6,693 $     6,570
Tax-equivalent adjustment ...........................         495         445         417
                                                      ----------- ----------- -----------
Net interest income (fully taxable equivalent) ...... $     7,290 $     7,138 $     6,987
                                                      =========== =========== ===========
</Table>

         The decrease in the overall tax-equivalent net interest margin from
4.91% in 2000 to 3.68% in 2001 is a result of interest rate changes during the
year with loans repricing downward sooner than deposits repricing downward.
Overall average interest earning assets yielded 6.9% in 2001 or 52 basis points
less than the 7.42% in 2000. Conversely, average interest bearing liabilities
cost 4.14% in 2001 or 24 basis points less than 2000. This "squeeze" occurring
with the downward trend of interest rates resulted in the decreased net interest
margin.

         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 2001, 2000 and 1999.

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

<Table>
<Caption>
                                                          2001                                       2000
                                        -----------------------------------------   ---------------------------------------
                                          Average       Interest        Average       Average       Interest      Average
                                          Balance       Inc./Exp        Yd/Rate       Balance       Inc./Exp      Yd/Rate
                                        -----------    -----------    -----------   -----------   -----------   -----------
ASSETS:                                     (1)            (2)                          (1)           (2)
<S>                                     <C>            <C>            <C>           <C>            <C>          <C>
Interest Bearing Deposits With Other
    Financial Institutions ...........  $     6,569    $       269           4.09%  $     1,296   $        83          6.40%
                                        -----------    -----------    -----------   -----------   -----------   -----------
Investment Securities:
    U.S. Government Securities .......  $    29,908    $     1,727           5.77   $    30,980   $     1,912          6.17
    State and Municipal
      Obligations(3) .................       17,162            815           7.19        14,731           732          7.53
    Other Securities .................        3,523            196           5.56         1,292            98          7.59
                                        -----------    -----------    -----------   -----------   -----------   -----------
Total Investment Securities ..........  $    50,593    $     2,738           5.41%  $    47,003   $     2,742          5.83%
                                        -----------    -----------    -----------   -----------   -----------   -----------
Federal Funds Sold ...................  $     1,771    $        67           3.78%  $        49   $         3          6.12%
                                        -----------    -----------    -----------   -----------   -----------   -----------
    Consumer .........................  $    11,436    $       959           8.39        12,515         1,016          8.12
    Dealer Floor Plan ................        4,522            290           6.41         5,424           475          8.76
    Mortgage .........................      111,715          8,523           7.63       104,356         8,169          7.83
    Commercial .......................        8,733            726           8.28         9,500           931          9.80
    Municipal Leases(3) ..............          230             10           6.59           145             8          8.36
    Tax Free(3) ......................        2,543            137           8.16         2,385           125          7.94
                                        -----------    -----------    -----------   -----------   -----------   -----------
Total Loans ..........................  $   139,219    $    10,645           7.65%  $   134,325   $    10,724          7.98%
                                        -----------    -----------    -----------   -----------   -----------   -----------
Total Interest-Earning Assets ........  $   198,152    $    13,719           6.92%  $   182,673   $    13,552          7.42%
                                                       -----------    -----------                 -----------   -----------
Reserve for Loan Losses ..............       (1,015)                                     (1,018)
Cash and Due from Banks ..............        2,373                                       5,360
Other Assets .........................        9,120                                       9,712
                                        -----------                                 -----------
Total Assets .........................  $   208,630                                 $   196,727
                                        ===========                                 ===========
<Caption>
                                                        1999
                                         ----------------------------------------
                                           Average       Interest       Average
                                           Balance       Inc./Exp       Yd/Rate
                                         -----------    ----------    -----------
ASSETS:                                      (1)            (2)
<S>                                      <C>            <C>           <C>
Interest Bearing Deposits With Other
    Financial Institutions ...........  $     2,739    $       132           4.82%
                                        -----------    -----------    -----------
Investment Securities:
    U.S. Government Securities .......  $    34,380    $     2,021           5.88
    State and Municipal
      Obligations(3) .................       14,315            689           7.29
    Other Securities .................        1,132             81           7.16
                                        -----------    -----------    -----------
Total Investment Securities ..........  $    49,827    $     2,791           5.60%
                                        -----------    -----------    -----------
Federal Funds Sold ...................  $       825    $        39           4.73%
                                        -----------    -----------    -----------
    Consumer .........................       10,797            887           8.22
    Dealer Floor Plan ................        2,876            230           8.00
    Mortgage .........................       99,473          7,771           7.81
    Commercial .......................        7,768            700           9.01
    Municipal Leases(3) ..............           77              5           9.84
    Tax Free(3) ......................        2,194            114           7.87
                                        -----------    -----------    -----------
Total Loans ..........................  $   123,185    $     9,707           7.88%
                                        -----------    -----------    -----------
Total Interest-Earning Assets ........  $   176,576    $    12,669           7.18%
                                                       -----------    -----------
Reserve for Loan Losses ..............         (990)
Cash and Due from Banks ..............        1,837
Other Assets .........................        9,174
                                        -----------
Total Assets .........................  $   186,597
                                        ===========
</Table>


                                       55
<PAGE>



<Table>
<Caption>
LIABILITIES AND CAPITAL:
<S>                                          <C>          <C>        <C>    <C>          <C>       <C>
SUPER NOW Deposits ..................... $   22,188 $      217         .98% $   21,662  $      279       1.29%
IRA's under $100,000 ...................      8,326        368        4.42       8,147         433       5.31
Money Market Deposits ..................      8,337        173        2.08       9,308         255       2.74
Savings Deposits .......................     21,335        396        1.86      21,464         550       2.56
Time Deposits including IRA's
    over $100,000 ......................     24,272      1,493        6.15      17,169       1,066       6.21
Other Time Deposits under  $100,000 ....     51,121      2,827        5.53      47,579         889       5.40
                                         ---------- ----------  ----------  ----------  ---------- ----------
Total Interest-Bearing Deposits ........ $  135,579 $    5,474        4.04% $  125,329  $    5,170       4.13%
U.S. Treasury Short-Term Borrowings ....        485         17        3.51         439          28       6.38
Short-Term Borrowings - Other ..........          0          0         .00       3.449         202       5.68
Long-Term Borrowings ...................     12,179        731        6.00      10,847         570       5.25
Repurchase Agreements ..................     18,965        702        3.70      16,468         889       5.40
                                         ---------- ----------  ----------  ----------  ---------- ----------
Total Interest-Bearing Liabilities ..... $  167,208 $    6,924        4.14% $  156,532  $    6,859       4.38%
                                                                                        ---------- ----------
Demand Deposits ........................     14,022                            14,445
Other Liabilities ......................      1,420                             1,840
Stockholders' Equity ...................     25,980                            23,910
                                         ----------                         ----------
Total Liabilities and Capital .......... $  208,630                         $ 196,727
                                         ==========                         ==========
NET INTEREST INCOME/NET INTEREST
    MARGIN (4) .........................             $    6,795        3.43%            $    6,693       3.66%
                                                     ==========  ==========             ========== ==========
TAX-EQUIVALENT NET INTEREST INCOME/NET
    INTEREST MARGIN (5) ................             $    7,290        3.68%            $    7,138       3.91%
                                                     ==========  ==========             ========== ==========
<Caption>
LIABILITIES AND CAPITAL:
<S>                                          <C>          <C>       <C>
SUPER NOW Deposits.......................    $ 21,717     $ 289     1.33%
IRA's under $100,000.....................       8,352       413      4.94
Money Market Deposits....................      10,835       298      2.75
Savings Deposits.........................      21,895       559      2.55
Time Deposits including IRA's
    over $100,000........................      14,302       821      5.74
Other Time Deposits under  $100,000......      48,505     2,574      5.31
                                             ---------  --------  --------
Total Interest-Bearing Deposits..........    $125,606   $ 4,954     3.94%
U.S. Treasury Short-Term Borrowings......         454        21      4.63
Short-Term Borrowings - Other............       1,709        97      5.68
Long-Term Borrowings.....................       2,323       130      5.60
Repurchase Agreements....................      18,972       897      4.73
                                             ---------  --------  --------
Total Interest-Bearing Liabilities.......    $149,064   $ 6,099     4.09%
                                                        --------  --------
Demand Deposits..........................      13,357
Other Liabilities........................       1,302
Stockholders' Equity.....................      22,874
                                             ---------
Total Liabilities and Capital............    $186,597
                                             =========
NET INTEREST INCOME/NET INTEREST
    MARGIN (4)...........................               $ 6,570     3.72%
                                                        ========  ========
TAX-EQUIVALENT NET INTEREST INCOME/NET
    INTEREST MARGIN (5)..................               $ 6,987     3.96%
                                                        ========  ========
</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 2001, 2000 & 1999.

                        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 2001, 2000 and 1999:

        TABLE OF NET INTEREST INCOME COMPONENTS ON A TAX-EQUIVALENT BASIS
                  For the twelve months ended December 31, 2001
                             (Dollars in thousands)

<Table>
<Caption>
                                             2001 Versus 2000                2000 Versus 1999               1999 Versus 1998
                                         --------------------------     --------------------------     --------------------------
                                            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...........      $  337   $  (30)    $  307    $  (70)     $  43   $  (27)    $  (84)    $ (20)   $ (104)
U.S. Government Securities...........        (66)     (124)     (190)      (200)       100     (100)        191       (6)       185
State and Municipal Obligations......         183      (50)       133         30        34        64         83      (32)        51
Other Securities.....................         169      (26)       143         10        12        22      (101)       (3)     (104)
Federal Funds Sold...................         105       (1)       104       (37)        11      (26)         10       (3)         7
Consumer Loans.......................        (88)        34      (54)        141      (11)       130        144      (64)        80
Dealer Floor Plan....................        (79)     (127)     (206)        204        22       226         72      (12)        60
Mortgage Loans(1)....................         576     (209)       367        382        10       392        169     (282)     (113)
Commercial Loans.....................        (71)     (144)     (215)        156        61       217        176      (42)       134
Municipal Leases.....................           7       (3)         4          7       (1)         6          0         0         0
Tax Free Loans.......................          13         5        18         15         2        17        108         1       109
                                          -------   ------      -----     ------    ------    ------     ------   ------     ------
Total Earning Assets.................     $ 1,086   $ (675)     $ 411     $  638    $  283    $  921     $  768   $ (463)    $  305
                                          =======   ======      =====     ======    ======    ======     ======   ======     ======
</Table>



                                       56
<PAGE>



<Table>
<S>                                        <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
Interest Expense:
SUPER NOW Deposits ....................... $      7  $    (67) $    (60) $     (1) $     (9) $    (10) $     25  $    (79) $    (54)
IRA ......................................       10       (73)      (63)      (10)       31        21        19       (14)        5
Money Market Deposits ....................      (27)      (61)      (88)      (42)       (1)      (43)      (28)      (28)      (56)
Savings Deposits .........................       (3)     (150)     (153)      (11)        2        (9)       29        (8)       21
Time Deposits over $100,000 ..............      441       (10)      431       165        67       232       177       (23)      154
Other Time Deposits ......................      193        43       236       (49)       63        14        78       (94)      (16)
U.S. Treasury - Short-Term Borrowings ....        3       (13)      (10)       (1)        8         7        (2)       (3)       (5)
Short-Term Borrowings - Other ............     (202)     (202)     (404)       99         3       102         0         0         0
Long-Term Borrowings .....................       70        81       151       477        (8)      469        17        (2)       15
Repurchase Agreements ....................      135      (280)     (145)     (118)      127         9       (60)      (66)     (126)
                                           --------  --------  --------  --------  --------  --------  --------  --------  --------
Total Interest-Bearing Deposits .......... $    627  $   (732) $   (105) $    509  $    283  $    792  $    255  $   (317) $    (62)
                                           --------  --------  --------  --------  --------  --------  --------  --------  --------

NET INTEREST INCOME ...................... $    459  $     57  $    516  $    129  $      0  $    129  $    513  $   (146) $    367
                                           ========  ========  ========  ========  ========  ========  ========  ========  ========
</Table>

(1)  Includes non-accrual loans.

                               FINANCIAL CONDITION

         The Corporation's total consolidated assets at December 31, 2001 were
$214 million which represented an increase of $7 million or 3.4% over $203
million at December 31, 2000. The 2000 growth rate was 3.6% or $7 million.

         Capital increased 3.6% for 2001 from $25.1 million in 2000 to $26.0
million in 2001. The equity adjustment for fair market value of securities was a
positive $75,000 for 2001 compared to a negative $89,000 for 2000. 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 $6.4 million in
2001 from $6.8 million in 2000 or a decrease of 5.9%.

         Total average assets grew 6.1% from 2000 at $197 million to 2001 at
$209 million. Average earning assets grew 8.2% from 2000 or a decrease of 5.9%.

         Loans grew 4.1% from $137.4 million at December 31, 2000 to $143
million at December 31, 2001.

         Non-interest deposits grew slightly from $14.6 million at December 31,
2000 to $14.7 million at December 31, 201. Interest bearing deposits grew 9.6%
from $128.6 million in 2000 to $141 million in 2001.

         The loan-to-deposit ratio is a key measurement of liquidity. The
loan-to-deposit ratio at the Bank decreased during 2001 to 91.9% compared to
95.9% during 2000.

         It is management's opinion that the balance sheet mix and the interest
rate risk associated 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. Additionally, the entire Board
of Directors meets with the investment consultants annually.

                                   INVESTMENTS
                             (Dollars in thousands)

<Table>
<Caption>
                                                                           Outstanding Balance at December 31,
                                                       ---------------------------------------------------------------------------
                                                                 2001                      2000                      1999
                                                       -----------------------   -----------------------   -----------------------
                                                        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>

Federal Agency Obligations .........................   $   12,553   $        0   $   15,810   $        0   $   15,482   $        0
Mortgage-backed Securities .........................       21,001            0       13,294            0       17,595            0
Obligations of State and Political Subdivisions ....       17,525            0       16,104            0       14,451          200
Corporate Securities ...............................        4,589            0          725            0            0            0
Marketable Equity Securities .......................          327            0          252            0          256            0
Restricted Equity Securities .......................        1,126            0        1,126            0        1,120            0
                                                       ----------   ----------   ----------   ----------   ----------   ----------
Total Investment Securities ........................   $   57,121   $        0   $   47,311   $        0   $   48,904   $      200
                                                       ==========   ==========   ==========   ==========   ==========   ==========
</Table>

(1)  Carried at amortized cost.

(2)  Carried at estimated fair value.



                                       57
<PAGE>


         The following table sets forth the maturity distribution of the
investment portfolio, the weighted average yield, and ranges of maturity at
December 31, 2001. Yields are presented on a tax-equivalent basis, are based
upon fair value and are weighted for the scheduled maturity. At December 31,
2001 the Corporation's investment securities portfolio had an average maturity
of approximately 7.6 years.

<Table>
<Caption>
                                                                        (Dollars in Thousands)
                                                  --------------------------------------------------------------------
                                                                              After One            After Five
                                                                              Year But              Years But
                                                          Within               Within                 Within
                                                         One Year             Five Years            Ten Years
                                                  --------------------   --------------------   --------------------
                                                   Amount       Yield     Amount       Yield     Amount       Yield
                                                  --------    --------   --------    --------   --------    --------
<S>                                               <C>         <C>       <C>          <C>        <C>         <C>

AVAILABLE-FOR-SALE SECURITIES AT
    FAIR VALUE
    Federal Agency Obligations ................   $    476       6.32%   $ 20,003       5.99%   $ 13,075       5.96%
    Obligations of State and Political
      Subdivisions ............................        251       6.59%        713       6.84%      2,744       7.32%
    Corporate Securities ......................          0       0.00%      2,001       5.37%          0       0.00%
    Marketable Equity Securities ..............          0       0.00%          0       0.00%          0       0.00%
    Restricted Equity Securities ..............          0       0.00%          0       0.00%          0       0.00%
                                                  --------               --------               --------
                                        TOTAL     $    727       5.58%   $ 22,717       5.92%   $ 15,819       6.21%
                                                  ========               ========               ========

<Caption>

                                                              (Dollars in Thousands)
                                                  -------------------------------------------


                                                          After
                                                        Ten Years                Total
                                                  --------------------   --------------------
                                                   Amount       Yield     Amount      Yield
                                                  --------    --------   --------    --------

<S>                                               <C>         <C>        <C>         <C>
AVAILABLE-FOR-SALE SECURITIES AT
    FAIR VALUE
    Federal Agency Obligations ................   $      0       0.00%   $ 33,554       5.98%
    Obligations of State and Political
      Subdivisions ............................     13,817       7.18%     17,525       7.18%
    Corporate Securities ......................      2,588       4.44%      4,589       5.06%
    Marketable Equity Securities ..............        327       2.75%        327       2.75%
    Restricted Equity Securities ..............      1,126       6.39%      1,126       6.39%
                                                  --------               --------
                                        TOTAL     $ 17,858       6.88%   $ 57,121       6.25%
                                                  ========               ========

</Table>

         Available-for-Sale securities are reported on the balance sheet at fair
value. An adjustment to capital, net or deferred taxes, is the offset for this
entry. The possibility of material price volatility in a falling interest rate
environment is offset by the availability to the Corporation of restructuring
the portfolio for gap positioning at any time through the securities classed as
Available-for-Sale. The impact of the fair value accounting was an unrealized
gain, net of tax, on December 31, 2001 of $75,000 compared to an unrealized
loss, net of tax, on December 31, 2000 of $89,000.

         Presently there are no Held-to-Maturity securities.

         Available-for-Sale securities total $57,121,000 at year end 2001
compared to $47,311,000 at year end 2000, or a increase of 20.7%.

         The mix of securities in the portfolio was 21.98% U.S. agencies, 36.76%
mortgage-backed securities, 30.68% municipal and 10.58% other. The Corporation
does not engage in derivative investment products.

                                      LOANS

                                 LOAN PORTFOLIO
                                LOANS OUTSTANDING
                             (Dollars in thousands)

<Table>
<Caption>
                                               2001            2000            1999
                                           ------------    ------------    ------------
<S>                                        <C>             <C>             <C>
Commercial .............................   $     13,091    $     14,412    $     15,559
Tax-Exempt .............................          1,947           2,747           2,124
Real Estate - Construction .............          2,538           1,648           2,509
Real Estate ............................        115,716         106,604         102,108
Personal ...............................          9,962          12,317    $     12,562
                                           ------------    ------------    ------------
                                           $    143,254    $    137,850    $    135,035
Unamortized Loan Fees, Net of Costs ....             15              (4)            (28)
Unearned Discount ......................           (279)           (486)           (584)
                                           ------------    ------------    ------------
Loans, Net .............................   $    142,990    $    137,360    $    134,423
                                           ============    ============    ============
</Table>

         Growth of 4.1% was experienced in the loan portfolio, from $137.4
million in 2000 to $143.0 million in 2001. The distribution of the loan
portfolio reflects 82.55% real estate loans at $118,254,000; 9.14% commercial
loans at $13,091,000; 1.36% tax exempt loans at $1,947,000; and 6.95% consumer
loans at $9,962,000. Variable rate real estate loans were comprised of .32% with
a 5 year adjustable rate; 61.61% with 3 year adjustable rate; 16.03% with 1 year
adjustable rate; and 22.04% with one day to 3 month adjustable rates. Many three
year and one year adjustable rate loans have bi-weekly payments.



                                       58
<PAGE>


                           DEPOSITS AND BORROWED FUNDS

                    TABLE OF DISTRIBUTION OF AVERAGE DEPOSITS
                             (Dollars in thousands)

<Table>
<Caption>
                                                      December 31,
                                       ------------------------------------------
                                           2001           2000           1999
                                       ------------   ------------   ------------
<S>                                    <C>            <C>            <C>
Demand deposits ....................   $     36,210   $     36,107   $     35,074
Savings deposits ...................         29,672         30,772         32,730
Time deposits ......................         59,447         55,726         56,857
Time deposits, $100,000 and over ...         24,272         17,169         14,302
                                       ------------   ------------   ------------
Total ..............................   $    149,601   $    139,774   $    138,963
                                       ============   ============   ============
</Table>


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

<Table>
<Caption>
                                                       December 31,
                                        ------------------------------------------
                                            2001           2000           1999
                                        ------------   ------------   ------------
<S>                                     <C>            <C>            <C>
Three months or less ................   $      6,446   $      4,648   $      4,306
Over three months to six months .....          4,225          1,960          2,513
Over six months to twelve months ....          7,493          5,889          4,641
Over twelve months ..................          7,895          9,419          4,716
                                        ------------   ------------   ------------
Total ...............................   $     26,059   $     21,916   $     16,176
                                        ============   ============   ============
</Table>

         Total average deposits increased 7.1% from $140 million at year end
2000 to $150 million at year end 2001. Average savings deposits decreased 3.2%
to $30 million at year end 2001 from $31 million at year end 2000. Average time
deposits increased 15.1% from $73 million at year end 2000 to $84 million at
year end 2001. Average interest bearing NOW accounts were $22 million for 2000
and 2001.

         Short-term borrowings, securities sold under agreements to repurchase
and day-to-day borrowings from the Federal Home Loan Bank remained constant at
$20 million for 2000 and 2001. Treasury tax and loan deposits held by the
Corporation for the U.S. Treasury averaged $485,000 for 2001. One day borrowings
did not occur in 2001 and repurchase agreements averaged $19 million for 2001
compared to an average of $16 million for 2000. Long-term borrowings, namely
borrowings from the Federal Home Loan Bank of Pittsburgh, averaged $12 million
for 2000 and $2,323,000 for 1999.

                              NON-PERFORMING ASSETS

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


<Table>
<Caption>
                                                                  Lease
                            Real     Installment                Financing
         2001              Estate        Loans     Commercial  Receivables      Total
         ----            ----------  -----------   ----------  -----------   ----------
<S>                      <C>         <C>          <C>          <C>          <C>
Days 30-89 ...........   $      798   $      142   $        9   $        0   $      949
Days 90 Plus .........          915           28           26            0          969
Non-accrual ..........          429           15          285            0          729
                         ----------   ----------   ----------   ----------   ----------
Total ................   $    2,142   $      185   $      320   $        0   $    2,647
                         ==========   ==========   ==========   ==========   ==========
</Table>

<Table>
<Caption>
                                                                          Lease
                             Real        Installment                    Financing
         2000               Estate          Loans       Commercial     Receivables      Total
         ----            ------------   ------------   ------------   ------------   ------------
<S>                     <C>            <C>            <C>            <C>            <C>
Days 30-89 ...........   $      1,053   $        205   $         82   $          0   $      1,340
Days 90 Plus .........            336              8              0              0            344
Non-accrual ..........            282              0             30              0            312
                         ------------   ------------   ------------   ------------   ------------
Total ................   $      1,671   $        213   $        112   $          0   $      1,996
                         ============   ============   ============   ============   ============
</Table>



                                       59
<PAGE>



<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>

         At year end 2001, loans 30-89 days past due totaled $949,000 compared
to $1,340,000 at year end 2000. Past due loans 90 days plus totaled $969,000 at
year end 2001 compared to $344,000 at year end 2000. Non-accrual loans at year
end 2001 totaled $729,000 compared to $312,000 at year end 2000. Overall, past
due and non-accrual loans increased 32.62% from $1,996,000 at year end 2000 to
$2,647,000 at year end 2001 or 1.9% of total loans for 2001 and 1.5% for 2000.
The ratio of net charge-offs to average loans outstanding was .10% and .02% for
2001 and 2000, respectively. (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 collectibility 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 loan losses. Potential problem loans are identified by management
as part of its loan review process.

         Income recognition is in accordance with Statement of Financial
Accounting Standard No. 118. 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 collectibility of principal.

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

<Table>
<Caption>
                                               Outstanding Balance at December 31,
                              ----------------------------------------------------------------------
                                     2001                     2000                    1999
                              ---------------------   ---------------------   ----------------------
                                         % 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 ................   $    372          11%   $    173          13%   $    270          13%
Real estate mortgages .....        464          82%        318          78%        341          78%
Consumer ..................         94           7%         79           9%         88           9%
Unallocated ...............         98         N/A         438         N/A         286         N/A
                              --------    --------    --------    --------    --------    --------
                              $  1,028         100%   $  1,008         100%   $    985         100%
                              ========    ========    ========    ========    ========    ========
</Table>


         The allowance for loan losses was $1,028,000 at December 31, 2001,
compared to $1,008,000 at December 31, 2000. This allowance equaled .72% of
total loans, net of unearned income, at the end of 2001 and .73% at the end of
2000. 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 2001
revealed no anticipated loss on any loans considered "significant". No
concentration or apparent


                                       60
<PAGE>


deterioration in classes of loans or pledged collateral was evident. Monthly
loan meetings with the Board Credit Administration Committee provided 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,
                                                                 ----------------------------------------------
                                                                     2001             2000             1999
                                                                 ------------     ------------     ------------
<S>                                                              <C>              <C>              <C>
Loans outstanding at end of  year ............................   $    142,990     $    137,360     $    134,423
                                                                 ============     ============     ============

Average loans outstanding ....................................   $    139,219     $    134,325     $    123,185
                                                                 ============     ============     ============
Allowance for loan losses:
Balance, beginning of year ...................................   $      1,008     $        985     $        955
                                                                 ------------     ------------     ------------
Loans Charged-off:
    Commercial and industrial ................................            (94)               0               (5)
    Real estate mortgages ....................................            (13)              (1)               0
    Consumer .................................................            (82)             (97)             (94)
    Credit cards .............................................              0                0               (1)
                                                                 ------------     ------------     ------------
Total loans charged-off ......................................           (189)             (98)            (100)
                                                                 ------------     ------------     ------------
Recoveries:
    Commercial and industrial ................................             14                5                8
    Real estate mortgages ....................................              0                3                0
    Consumer .................................................             29               55               43
    Municipal leases .........................................              0                0                0
    Credit cards .............................................              3                4                1
                                                                 ------------     ------------     ------------
Total recoveries .............................................             46               67               52
                                                                 ------------     ------------     ------------
Net loans charged-off ........................................           (143)             (31)             (48)
                                                                 ------------     ------------     ------------
Provision charged to expense .................................            163               54               78
                                                                 ------------     ------------     ------------
Balance, end of year .........................................   $      1,028     $      1,008     $        985
                                                                 ============     ============     ============
Ratio of net charge-offs during the year  to average loans
    outstanding during year ..................................           0.10%            0.02%            0.04%
                                                                 ============     ============     ============
</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.

         As of January 1, 1995 the Corporation adopted Statement of Financial
Accounting Standards No. 114. "Accounting for Creditors for Impairment of a Loan
- Income Recognition and Disclosure." ("SFAS No. 114") Under the new standards,
the allowance for loan losses related to loans that were identified for
evaluation in accordance with Statement No. 114 which was based on discounted
cash flows using the loan's initial effective interest rate or the fair value of
the collateral for certain collateral dependent loans. Prior to 1995, the
allowance for loan losses related to these loans was based on undiscounted cash
flows or the fair value of the collateral for collateral dependent loans. SFAS
No. 118 allowed the continued use of existing methods for income recognition on
impaired loans and amends disclosure requirements to require information about
the recorded investment in certain impaired loans and related income recognition
on those loans. The allowance for loan losses was maintained at a level by
management to be adequate to absorb estimated potential loan losses.
Management's periodic revaluation of the adequacy of the allowance for loan
losses was 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); and other
relevant factors. This evaluation was inherently subjective as it required
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 or SFAS
No. 118, 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.


                                       61
<PAGE>


                                    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, 2001, cash and cash equivalents totaled $8,517,636
compared to $12,662,644 at December 31, 2000. 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, 2001, net cash provided by operating activities equaled
$2,559,601 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 $15,634,490 which was
principally the result of a $5,772,095 increase in loans and a $9,541,879 excess
of purchases of Available-for-Sale investment securities over the proceeds on
sale and redemptions of securities.

         Net cash provided by financing activities totaled $8,929,882 and
consisted mainly of an increase in deposits of $12,497,119 and a decrease in
long term debt of $2,010,063.

                                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).

         As of December 31, 2001, 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:



                                       62
<PAGE>



<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, 2001:
    Total Capital
        (To risk-weighted assets) ....        $26,989          19.82%        $10,894           8.00%        $13,618          10.00%
    Tier I Capital
        (To risk-weighted assets) ....        $25,961          19.06%         $5,447           4.00%         $8,171           6.00%
    Tier I Capital
        (To average assets) ..........        $25,961          12.44%         $8,346           4.00%        $10,432           5.00%

As of December 31, 2000:
    Total Capital
        (To risk-weighted assets) ....        $25,068          21.79%         $9,205           8.00%        $11,506          10.00%
    Tier I Capital
        (To risk-weighted assets) ....        $24,088          20.94%         $4,602           4.00%         $6,904           6.00%
    Tier I Capital
        (To average assets) ..........        $24,088          13.02%         $7,401           4.00%         $9,251           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 2002 of approximately $1,355,301 plus additional amounts equal to
the net income earned in 2002 for the period January 1, 2002 through the date of
declaration, less any dividends which may be paid in 2002.

         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>
                                       2001                                  2000
                       ------------------------------------   ------------------------------------
                                                  Quarterly                              Quarterly
                         Highest      Lowest      Dividend      Highest       Lowest     Dividend
                       ----------   ----------   ----------   ----------   ----------   ----------
<S>                    <C>          <C>          <C>          <C>          <C>          <C>

Fourth quarter .....       $23.75       $23.05       $0.150       $17.00       $16.38       $0.140
Third quarter ......       $24.50       $23.00       $0.150       $16.63       $16.38       $0.140
Second quarter .....       $21.00       $19.00       $0.150       $17.50       $16.00       $0.140
First quarter ......       $17.88       $16.50       $0.140       $19.50       $16.00       $0.140
</Table>

                          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.


                                       63
<PAGE>


         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, 2001

<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 ...........................   $    2,312             0            0            0             0    $    2,312
Securities Available-for-Sale(1) .................       10,360        12,741       29,399        3,197         1,424        57,121
Loans (1) ........................................       29,142        46,673       58,763        8,331            81       142,990
                                                     ----------    ----------   ----------   ----------    ----------    ----------
    Rate Sensitive Assets ........................   $   41,814    $   59,414   $   88,162   $   11,528    $    1,505    $  202,423
                                                     ----------    ----------   ----------   ----------    ----------    ----------
Deposits:
Interest-bearing demand deposits(2) ..............   $    3,305    $    2,864   $   15,861            0             0    $   22,030
Savings(2) .......................................        5,404         8,265       18,120            0             0        31,789
Time .............................................       18,402        32,133       36,600            0             0        87,135
Borrowed funds ...................................       19,781             0            0            0             0        19,781
Long-term debt ...................................            3             8           49       11,147           150        11,357
Shareholders' equity .............................          651         1,983        8,659        8,659         6,120        26,072
                                                     ----------    ----------   ----------   ----------    ----------    ----------
    Rate Sensitive Liabilities and
      Shareholders' Equity .......................   $   47,546    $   45,253   $   79,289   $   19,806    $    6,270    $  198,164
                                                     ----------    ----------   ----------   ----------    ----------    ----------
Interest Sensitivity Gap .........................   $   (5,732)   $   14,161   $    8,873   $   (8,278)   $   (4,765)   $    4,259
Cumulative Gap ...................................   $   (5,732)   $    8,429   $   17,302   $    9,024    $    4,259    $        0
</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.

At December 31, 2001 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, declining
interest rates could negatively affect net income because the Bank is
asset-sensitive. In an increasing 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.

         In addition to gap analysis, the Corporation also uses earnings
simulation to assist in measuring and controlling interest rate risk.

         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,
2001. 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.



                                       64
<PAGE>

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

<Table>
<Caption>
                                                                                                                              Fair
                                                                                                     There-                  Value
                                               2002       2003      2004       2005      2006        after        Total     12-31-01
                                             -------    -------    -------    ------    --------    --------    --------    --------
<S>                                          <C>        <C>        <C>        <C>       <C>        <C>          <C>        <C>
Rate sensitive assets:
Fixed interest loans(1)                      $11,950    $ 6,588    $ 5,293    $3,557    $  2,603    $ 10,311    $ 40,302    $ 40,651
    Average interest rate                       7.97%      7.70%      8.01%     7.81%       7.78%       7.63%       7.90%
Variable interest rate loans(2)              $60,927    $17,551    $23,026    $  765    $    419    $      0    $102,688    $102,688
    Average interest rate                       6.34%      7.43%      7.08%     7.91%       7.29%       0.00%       6.72%
Fixed interest rate securities(1)            $   717    $ 7,829    $ 1,091    $4,774    $  7,159    $ 23,046    $ 44,616    $ 44,616
    Average interest rate                       6.41%      6.23%      5.72%     5.58%       5.61%       6.56%       6.27%
Variable interest rate securities(1)         $     0    $   996    $   483    $  523    $      0    $ 10,503    $ 12,505    $ 12,505
    Average interest rate                       0.00%      3.75%      3.11%     2.98%       0.00%       6.59%       5.86%
Other interest-bearing assets                $ 2,312    $     0    $     0    $    0    $      0    $  1,127    $  3,439    $  3,439
    Average interest rate                       4.09%      0.00%      0.00%     0.00%       0.00%       6.39%       4.55%
Rate sensitive liabilities:
Non-interest-bearing checking(2)             $ 5,443    $ 2,317    $ 2,317    $2,317    $  2,317    $      0    $ 14,711    $ 14,711
    Average interest rate                       0.00%      0.00%      0.00%     0.00%       0.00%       0.00%       0.00%
Savings & interest-bearing checking(2)       $16,768    $ 7,188    $ 7,188    $7,188    $  7,188    $      0    $ 45,520    $ 45,520
    Average interest rate                       0.81%      0.81%      0.81%     0.81%       0.81%       0.00%       0.81%
Money market accounts(2)                     $ 3,071    $ 1,307    $ 1,307    $1,307    $  1,307    $      0    $  8,299    $  8,299
    Average interest rate                       0.90%      0.90%      0.90%     0.90%       0.90%       0.00%       0.90%
Time deposits (under $100,000)               $29,830    $26,443    $ 2,981    $  807    $  1,015    $      0    $ 61,076    $ 63,012
    Average interest rate                       3.08%      4.49%      4.63%     6.04%       5.15%       0.00%       4.80%
Time deposits (over 100,000)                 $18,164    $ 4,221    $ 1,102    $2,272    $    300    $      0    $ 26,059    $ 27,150
    Average interest rate                       4.84%      6.43%      5.83%     7.10%       6.50%       0.00%       5.36%
Fixed interest rate borrowings               $     0    $     0    $     0    $    0    $      0    $    357    $    357    $    357
    Average interest rate                       0.00%      0.00%      0.00%     0.00%       0.00%       5.93%       5.93%
Variable interest rate borrowings            $19,781    $     0    $     0    $    0    $ 11,000    $      0    $ 30,781    $ 30,824
    Average interest rate                       5.38%      0.00%      0.00%     0.00%       5.91%       0.00%       5.57%
</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.


                                       65
<PAGE>


                                                                      EXHIBIT 21


                       LIST OF SUBSIDIARIES OF THE COMPANY


Direct Subsidiary:       Columbia County Farmers National Bank, chartered under
                         the laws of the United States of America, a national
                         banking association.


Direct (50% Owned)
Subsidiary:              Neighborhood Group, Inc., incorporated under the laws
                         of the Commonwealth of Pennsylvania.





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