UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year-ended December 31, 2008
 or
 o
    
    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.
  PENNSYLVANIA
    
    23-2254643(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification Number)232 East Street, Bloomsburg, Pennsylvania
(Address of principal executive offices)
    
    17815
(Zip Code)
 (570) 784-4400
 None
 Common Stock, par value $1.25 per
share
 o þ
 o þ
 þ o
 o
  Large accelerated filer 
oAccelerated filer 
oNon-accelerated filer 
o(Do not check if a smaller
reporting company)Smaller reporting company þ o þ




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CCFNB BANCORP, INC.
FORM 10-K
 INDEX
 PagePART IItem 1.
    
    Business
    
    
    3Item 1A.
    
    Risk Factors
    
    
    11Item 1B.
    
    Unresolved Staff Comments
    
    
    13Item 2.
    
    Properties
    
    
    14Item 3.
    
    Legal Proceedings
    
    
    14Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    14PART IIItem 5.
    
    Market for the Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    14Item 6.
    
    Selected Financial Data
    
    
    16Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Item 7A.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    30Item 8.
    
    Financial Statements and Supplementary Data
    
    
    31Item 9.
    
    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    60Item 9A(T)
    
    Controls and Procedures
    
    
    60Item 9B.
    
    Other Information
    
    
    62PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    62Item 11.
    
    Executive Compensation
    
    
    62Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
    
    
    62Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    62Item 14.
    
    Principal Accounting Fees and Services
    
    
    63PART IVItem 15.
    
    Exhibits, Financial Statements Schedules
    
    
    63SIGNATURES
    
    
    65INDEX TO EXHIBITS
    
    
    66
 2




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PART I
 Item 1. Business
 General
  
    
    $568 million in total assets;
    
    $320 million in loans;
    
    $434 million in deposits; and
    
    $61 million in stockholders equity.
   
    
    economic characteristics,
    
    products and services,
    
    operating processes,
    
    delivery systems,
    
    customer bases, and
    
    regulatory oversight.
    Supervision and Regulation
  Intercompany Transactions
  3




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Supervisory Agencies
    Support of the Bank
   Liability of Commonly Controlled Banks
  
    
    the default of a commonly controlled FDIC-insured depository institution or
    
    any assistance provided by the FDIC to a commonly controlled FDIC-insured depository
institution in danger of default.
  Depositor Preference Statute
  Allowance For Loan Losses
 4




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
    
    commercial,
    
    real estate mortgages,
    
    consumer, and
    
    unallocated.
  
    
    by risk profile, and
    
    by past due status.
  
    
    historical trends,
    
    economic conditions, and
    
    any known deterioration.
   Sources of Funds
 General
 Deposits
   5




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##### 



Capital Requirements
  
    
    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
    
    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.
      Brokered Deposits
 6




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Dividend Restrictions
  
    
    the Banks surplus is at least equal to its paid-in capital, and
    
    the payment of the dividend would not reduce the Banks surplus below the required
level.
   Deposit Insurance Reform Laws
   
    
    Merging the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund
(SAIF) into a new fund, the Deposit Insurance Fund (DIF). This change was made
effective March 31, 2006.
    
    Increasing the coverage limit for retirement accounts to $250,000 and indexing
the coverage limit for retirement accounts to inflation as with the general deposit
insurance coverage limit. This change was made effective April 1, 2006.
    
    Establishing a range of 1.15 percent to 1.50 percent within which the FDIC Board
of Directors may set the Designated Reserve Ratio (DRR).
    
    Allowing the FDIC to manage the pace at which the reserve ratio varies within
this range.
 1.
    
    If the reserve ratio falls below 1.15 percent  or is
expected to within six months  the FDIC must adopt a restoration plan that
provides that the DIF will return to 1.15 percent generally within 5 years.2.
    
    If the reserve ratio exceeds 1.35 percent, the FDIC must
generally dividend to BIF members half of the amount above the amount
necessary to maintain the DIF at 1.35 percent, unless the FDIC Board,
considering statutory factors, suspends the dividends.3.
    
    If the reserve ratio exceeds 1.5 percent, the FDIC must
generally dividend to BIF members all amounts above the amount necessary to
maintain the DIF at 1.5 percent.
 
    
    Eliminating the restrictions on premium rates based on the DRR and granting the
FDIC Board the discretion to price deposit insurance according to risk for all
insured institutions regardless of the level of the reserve ratio.
    
    Granting a one-time initial assessment credit (of approximately $4.7 billion) to
recognize institutions past contributions to the fund.
  TARP Capital Purchase Program
  7




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##### 




    
    to proactively recapitalize First Columbia Bank & Trust Co. (Bank) if the Board of
Directors anticipated future reductions in the Banks capital caused, for example, by
loan and investment losses;
    
    if we thought the probability was high that we would acquire a troubled bank, a
healthy bank or one or more branches over the next three years; and
    
    if as a result of our market going through a shake up due to mergers of significant
financial institutions, significant assets could migrate to the Bank causing much larger
than expected asset growth.
  
    
    issuance of non-voting preferred stock at a 5% dividend rate which is equal to a rate
of approximately 7.69% on a pre-tax basis and which payment would have preference over
any dividend payments to our holders of common stock;
    
    issuance of stock purchase warrants to the United States Treasury equal to 15% of the
amount of CPP funds received with an exercise price at the current market level;
    
    restrictions on buy-backs of our common stock and no increase in the dividends to be
paid on our common stock; and
    
    if we decide to buy-back the preferred stock from the United States Treasury, we must
use funds generated from the sale of our securities which could cause a dilution in
value of the shares of common stock currently held by our stockholders.
  Interstate Banking and Branching
   Control Acquisitions
  8




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Permitted Non-Banking Activities
  Community Reinvestment Act
  Financial Services Modernization
  Privacy
  Terrorist Activities
  The USA PATRIOT Act
  9




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Subprime and Predatory Lending
   
    
    An annual percentage rate exceeding 8.00 percentage points above comparable term U.S.
Treasury securities for first-lien mortgages and 10 percent for subordinate-lien
mortgages; and/or
    
    Total points and fees payable by the consumer at or before closing that exceed the
greater of 8.0 percent of the total loan amount or $583. The $583 is adjusted annually
by the annual percentage change in the Consumer Price Index.
  Sales of Insurance
  Corporate Governance
    The Bank
  10




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Marketing Area
    Available Information
 th
 Item 1A. Risk Factors
 Adverse changes in the economic conditions in our market area could materially and negatively
affect our business.
  
    
    customers credit quality may deteriorate;
    
    loan delinquencies may increase;
    
    problem assets and foreclosures may increase;
    
    demand for our products and services may decrease;
    
    competition for low cost or non-interest bearing deposits may increase; and
    
    collateral securing loans may decline in value.
 Competitive pressures from financial services companies and other companies offering banking
services could negatively impact our business.
  11




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Changes in interest rates could reduce our income and cash flows.
  Significant increases in interest rates may affect customer loan demand and payment habits.
  If the Banks loan growth exceeds that of its deposit growth, then the Bank may be required to
obtain higher cost sources of funds.
  If the Banks allowance for loan losses is not adequate to cover actual loan losses, its earnings
may decline.
  Adverse changes in the market value of securities and investments that we manage for others may
negatively impact the growth level of the Banks non-interest income.
  The Banks branch locations may be negatively affected by changes in demographics.
  12




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Changes in the regulatory environment may adversely affect the Banks business.
  Training and technology costs, as well as product development and operating costs, may exceed our
expectations and negatively impact our profitability.
  If we fail to maintain an effective system of internal controls, we may not be able to accurately
report our financial results or prevent fraud.
  The loss of one or more of our key personnel may materially and adversely affect our prospects.
  Item 1B. Unresolved Staff Comments
  13




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Item 2. Properties
   ApproximateSquare
    
    Own orLocation
    
    Footage
    
    Lease
    
    UseRed Rock Road, Benton, PA
    
    2,814
    
    Own
    
    For SaleMarket Street, Benton, PA
    
    4,672
    
    Own
    
    Banking Services1016 W. Front Street, Berwick, PA
    
    3,096
    
    Own
    
    For Sale1919 W. Front Street, Berwick, PA
    
    2,240
    
    Own
    
    Banking ServicesMarket Street, Berwick, PA
    
    
    
    Own
    
    Future expansion1 Hospital Drive, Bloomsburg
    
    120
    
    Lease
    
    ATM Facility11 W. Main Street, Bloomsburg
    
    27,592
    
    Own
    
    Sales agreement17 E. Main Street, Bloomsburg
    
    
    
    Lease
    
    ATM Facility232 East Street, Bloomsburg
    
    11,686
    
    Own
    
    Main Office and Bancorp HeadquartersMarket Street, Bloomsburg
    
    1,335
    
    Lease
    
    Banking ServicesBuckhorn, PA
    
    693
    
    Lease
    
    Banking Services (In Wal-Mart Supercenter)Buckhorn, PA
    
    3,804
    
    Own
    
    Banking ServicesCatawissa, PA
    
    1,558
    
    Own
    
    Banking ServicesCatawissa, PA
    
    2,804
    
    Own
    
    ResidentialElysburg, PA
    
    2,851
    
    Own
    
    Banking ServicesMillville, PA
    
    2,520
    
    Own
    
    Banking ServicesOrangeville, PA
    
    2,259
    
    Own
    
    Banking Services1199 Lightstreet Road, Scott Township, PA
    
    16,500
    
    Own
    
    Banking Services,  Financial Planning, IT and Operations2691 Columbia Blvd, Scott Township, PA
    
    3,680
    
    Own
    
    Banking Services992 Central Road, Scott Township, PA
    
    12,624
    
    Own
    
    Operations CenterSouth Centre, PA
    
    3,868
    
    Own
    
    For SaleWest Hazleton, PA
    
    3,015
    
    Own
    
    Banking Services
  Item 3. Legal Proceedings
  Item 4. Submission of Matters to a Vote of Security Holders
  PART II
 Item 5. Market for the Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
  14




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Dividends2008:
    
    High ($)
    
    Low ($)
    
    Declared ($)First quarter
    
    
    25.65
    
    
    
    24.88
    
    
    
    .21Second quarter
    
    
    24.68
    
    
    
    23.73
    
    
    
    .21Third quarter
    
    
    23.30
    
    
    
    20.93
    
    
    
    .24Fourth quarter
    
    
    19.78
    
    
    
    18.75
    
    
    
    .24
 Dividends2007:
    
    High ($)
    
    Low ($)
    
    Declared ($)First quarter
    
    
    29.00
    
    
    
    27.55
    
    
    
    .20Second quarter
    
    
    27.70
    
    
    
    26.70
    
    
    
    .20Third quarter
    
    
    27.08
    
    
    
    26.63
    
    
    
    .21Fourth quarter
    
    
    25.95
    
    
    
    25.35
    
    
    
    .21
  15




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##### 



Item 6. Selected Financial Data
  CCFNB BANCORP, INC.  SELECTED CONSOLIDATED FINANCIAL SUMMARY
 (In Thousands except per share data)
    
    For the Year Ending December 31,2008
    
    2007
    
    2006
    
    2005
    
    2004INCOME STATEMENT DATA:Total interest income
    
    $
    21,357
    
    
    $
    14,483
    
    
    $
    13,202
    
    
    $
    11,442
    
    
    $
    10,843Total interest expense
    
    
    7,504
    
    
    
    6,185
    
    
    
    5,301
    
    
    
    4,131
    
    
    
    3,669Net interest income
    
    
    13,853
    
    
    
    8,298
    
    
    
    7,901
    
    
    
    7,311
    
    
    
    7,174Provision for possible loan losses
    
    
    750
    
    
    
    30
    
    
    
    175
    
    
    
    90
    
    
    
    140Non interest income
    
    
    3,043
    
    
    
    2,305
    
    
    
    1,900
    
    
    
    1,713
    
    
    
    1,530Non interest expenses
    
    
    12,172
    
    
    
    7,038
    
    
    
    6,437
    
    
    
    6,077
    
    
    
    5,746Federal income taxes
    
    
    896
    
    
    
    888
    
    
    
    777
    
    
    
    631
    
    
    
    601Net income
    
    $
    3,078
    
    
    $
    2,647
    
    
    $
    2,412
    
    
    $
    2,226
    
    
    $
    2,217PER SHARE DATA:Earnings per share (1)
    
    $
    1.82
    
    
    $
    2.15
    
    
    $
    1.93
    
    
    $
    1.76
    
    
    $
    1.74Cash dividends declared per share
    
    $
    0.90
    
    
    $
    0.82
    
    
    $
    0.78
    
    
    $
    0.74
    
    
    $
    0.70Book value per share
    
    $
    26.94
    
    
    $
    25.79
    
    
    $
    24.36
    
    
    $
    23.06
    
    
    $
    22.49Average annual shares outstanding
    
    
    1,688,498
    
    
    
    1,233,339
    
    
    
    1,249,844
    
    
    
    1,262,171
    
    
    
    1,274,034BALANCE SHEET DATA:Total assets
    
    $
    568,319
    
    
    $
    245,324
    
    
    $
    241,920
    
    
    $
    231,218
    
    
    $
    235,377Total loans
    
    
    320,068
    
    
    
    161,460
    
    
    
    160,641
    
    
    
    154,271
    
    
    
    149,900Total securities
    
    
    196,580
    
    
    
    57,686
    
    
    
    53,486
    
    
    
    53,919
    
    
    
    61,834Total deposits
    
    
    434,309
    
    
    
    170,938
    
    
    
    169,285
    
    
    
    164,847
    
    
    
    172,487FHLB advances-long-term
    
    
    9,133
    
    
    
    11,137
    
    
    
    11,297
    
    
    
    11,311
    
    
    
    11,323Total stockholders equity
    
    
    60,775
    
    
    
    31,627
    
    
    
    30,249
    
    
    
    29,012
    
    
    
    28,506PERFORMANCE RATIOS:Return on average assets
    
    
    0.77
    %
    
    
    1.07
    %
    
    
    1.02
    %
    
    
    0.97
    %
    
    
    0.96
    %Return on average stockholders equity
    
    
    6.91
    %
    
    
    8.54
    %
    
    
    7.97
    %
    
    
    7.73
    %
    
    
    7.88
    %Net interest margin (2)
    
    
    3.90
    %
    
    
    3.74
    %
    
    
    3.74
    %
    
    
    3.65
    %
    
    
    3.54
    %Total non-interest expense as a percentage of
average assets
    
    
    3.06
    %
    
    
    2.83
    %
    
    
    2.72
    %
    
    
    2.64
    %
    
    
    2.45
    %ASSET QUALITY RATIOS:Allowance for possible loan losses as a
percentage of loans, net
    
    
    1.17
    %
    
    
    0.89
    %
    
    
    0.91
    %
    
    
    1.02
    %
    
    
    0.93
    %Allowance for possible loan losses as a
percentage of non-performing loans (3)
    
    
    83.29
    %
    
    
    102.64
    %
    
    
    686.79
    %
    
    
    185.54
    %
    
    
    110.37
    %Non-performing loans as a percentage of total
loans, net (3)
    
    
    1.43
    %
    
    
    0.09
    %
    
    
    0.13
    %
    
    
    0.85
    %
    
    
    0.85
    %Non-performing assets as a percentage of total
assets (3)
    
    
    0.86
    %
    
    
    0.57
    %
    
    
    0.09
    %
    
    
    0.36
    %
    
    
    0.54
    %Net charge-offs as a percentage of average net
loans (4)
    
    
    -0.05
    %
    
    
    -0.03
    %
    
    
    -0.17
    %
    
    
    0.05
    %
    
    
    -0.11
    %LIQUIDITY AND CAPITAL RATIOS:Average equity to average assets
    
    
    11.19
    %
    
    
    12.48
    %
    
    
    12.79
    %
    
    
    12.51
    %
    
    
    13.08
    %Tier 1 capital to risk-weighted assets (5)
    
    
    15.37
    %
    
    
    18.10
    %
    
    
    19.25
    %
    
    
    19.24
    %
    
    
    19.27
    %Leverage ratios (5) (6)
    
    
    9.27
    %
    
    
    12.71
    %
    
    
    12.71
    %
    
    
    12.74
    %
    
    
    12.17
    %Total capital to risk-weighted assets (5)
    
    
    16.48
    %
    
    
    18.93
    %
    
    
    20.29
    %
    
    
    20.32
    %
    
    
    20.31
    %Dividend Payout Ratio
    
    
    51.75
    %
    
    
    38.16
    %
    
    
    40.38
    %
    
    
    41.92
    %
    
    
    40.19
    %
 16




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(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 FDIC.(6)
    
    The leverage ratio is defined as the ratio of Tier 1 Capital to average total assets
less intangible assets, if applicable. Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 CAUTIONARY STATEMENT
  
    
    Our business and financial results are affected by business and economic
conditions, both generally and specifically in the Northcentral Pennsylvania market
in which we operate. In particular, our businesses and financial results may be
impacted by:
    
    Changes in interest rates and valuations in the debt, equity and other financial
markets.
    
    Disruptions in the liquidity and other functioning of financial markets,
including such disruptions in the market for real estate and other assets commonly
securing financial products.
    
    Actions by the Federal Reserve Board and other government agencies, including
those that impact money supply and market interest rates.
    
    Changes in our customers and suppliers performance in general and their
creditworthiness in particular.
    
    Changes in customer preferences and behavior, whether as a result of changing
business and economic conditions or other factors.
    
    Changes resulting from the newly enacted Emergency Economic Stabilization Act of
2008.
    
    A continuation of recent turbulence in significant segments of the United States
and global financial markets, particularly if it worsens, could impact our
performance, both directly by affecting our revenues and the value of our assets and
liabilities and indirectly by affecting our customers and suppliers and the economy
generally.
    
    Our business and financial performance could be impacted as the financial
industry restructures in the current environment by changes in the competitive
landscape.
    
    Given current economic and financial market conditions, our forward-looking
financial statements are subject to the risk that these conditions will be
substantially different than we are currently expecting. These statements are based
on our current expectations that interest rates will remain low through 2009 with
continued wide market credit spreads and our view that national economic trends
currently point to a continuation of severe recessionary conditions through 2009
followed by a subdued recovery.
    
    Legal and regulatory developments could have an impact on our ability to operate
our businesses or our financial condition or results of operations or our
competitive position or reputation. Reputational impacts, in turn, could affect
matters such as business generation and retention, our ability to attract and retain
management, liquidity and funding. These legal and regulatory developments could
include: (a) the unfavorable resolution of legal proceedings or regulatory and other
governmental inquiries; (b) increased litigation risk from recent regulatory and
other governmental developments; (c) the results of the regulatory examination
process, and regulators future use of supervisory and enforcement tools; (d)
legislative and regulatory reforms, including changes to laws and
 17




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##### 




    
    Our business and operating results are affected by our ability to identify and
effectively manage risks inherent in our businesses, including, where appropriate,
through the effective use of third-party insurance and capital management
techniques.
    
    Our ability to anticipate and respond to technological changes can have an impact
on our ability to respond to customer needs and to meet competitive demands.
    
    Our ability to implement our business initiatives and strategies could affect our
financial performance over the next several years.
    
    Competition can have an impact on customer acquisition, growth and retention, as
well as on our credit spreads and product pricing, which can affect market share,
deposits and revenues.
    
    Our business and operating results can also be affected by widespread natural
disasters, terrorist activities or international hostilities, either as a result of
the impact on the economy and capital and other financial markets generally or on us
or on our customers and suppliers.
   RESULTS OF OPERATIONS
 NET INTEREST INCOME
 2008 vs. 2007
   2007 vs. 2006
  18




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##### 



AVERAGE BALANCE SHEET AND RATE ANALYSIS
 YEARS ENDED DECEMBER 31,
 (In Thousands)
    
    2008
    
    
    2007
    
    
    2006Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance(1)
    
    
    Interest
    
    
    Rate
    
    
    Balance(1)
    
    
    Interest
    
    
    Rate
    
    
    Balance(1)
    
    
    Interest
    
    
    RateASSETS:Tax-exempt loans
    
    $
    16,156
    
    
    $
    1,070
    
    
    
    6.62
    %
    
    $
    11,389
    
    
    $
    771
    
    
    
    6.77
    %
    
    $
    9,433
    
    
    $
    638
    
    
    
    6.76
    %All other loans
    
    
    218,915
    
    
    
    14,587
    
    
    
    6.66
    %
    
    
    148,959
    
    
    
    10,585
    
    
    
    7.11
    %
    
    
    149,121
    
    
    
    10,239
    
    
    
    6.87
    %Total loans (2)(3)(4)
    
    
    235,071
    
    
    
    15,657
    
    
    
    6.66
    %
    
    
    160,348
    
    
    
    11,356
    
    
    
    7.08
    %
    
    
    158,554
    
    
    
    10,877
    
    
    
    6.86
    %Taxable securities
    
    
    118,012
    
    
    
    5,633
    
    
    
    4.77
    %
    
    
    54,353
    
    
    
    2,546
    
    
    
    4.68
    %
    
    
    47,857
    
    
    
    1,850
    
    
    
    3.87
    %Tax-exempt securitites (3)
    
    
    6,765
    
    
    
    385
    
    
    
    5.69
    %
    
    
    4,200
    
    
    
    281
    
    
    
    6.69
    %
    
    
    5,846
    
    
    
    406
    
    
    
    6.94
    %Total securities
    
    
    124,777
    
    
    
    6,018
    
    
    
    4.82
    %
    
    
    58,553
    
    
    
    2,827
    
    
    
    4.83
    %
    
    
    53,703
    
    
    
    2,256
    
    
    
    4.20
    %Federal funds sold
    
    
    6,990
    
    
    
    155
    
    
    
    2.22
    %
    
    
    10,013
    
    
    
    512
    
    
    
    5.11
    %
    
    
    7,621
    
    
    
    385
    
    
    
    5.05
    %Interest-bearing deposits
    
    
    873
    
    
    
    22
    
    
    
    2.52
    %
    
    
    2,754
    
    
    
    145
    
    
    
    5.27
    %
    
    
    750
    
    
    
    39
    
    
    
    5.20
    %Total interest-earning assets
    
    
    367,711
    
    
    
    21,852
    
    
    
    5.94
    %
    
    
    231,668
    
    
    
    14,840
    
    
    
    6.41
    %
    
    
    220,628
    
    
    
    13,557
    
    
    
    6.14
    %Other assets
    
    
    30,117
    
    
    
    
    
    
    
    
    
    
    
    16,808
    
    
    
    
    
    
    
    
    
    
    
    15,941TOTAL ASSETS
    
    $
    397,828
    
    
    
    
    
    
    
    
    
    
    $
    248,476
    
    
    
    
    
    
    
    
    
    
    $
    236,569LIABILITIES:Savings
    
    $
    39,223
    
    
    
    156
    
    
    
    0.40
    %
    
    $
    24,602
    
    
    
    98
    
    
    
    0.40
    %
    
    $
    25,671
    
    
    
    103
    
    
    
    0.40
    %Now deposits
    
    
    47,534
    
    
    
    129
    
    
    
    0.27
    %
    
    
    29,321
    
    
    
    91
    
    
    
    0.31
    %
    
    
    29,029
    
    
    
    88
    
    
    
    0.30
    %Money market deposits
    
    
    21,119
    
    
    
    350
    
    
    
    1.66
    %
    
    
    8,894
    
    
    
    59
    
    
    
    0.66
    %
    
    
    9,795
    
    
    
    65
    
    
    
    0.66
    %Time deposits
    
    
    154,334
    
    
    
    5,447
    
    
    
    3.53
    %
    
    
    90,375
    
    
    
    3,810
    
    
    
    4.22
    %
    
    
    84,261
    
    
    
    3,207
    
    
    
    3.81
    %Total deposits
    
    
    262,210
    
    
    
    6,082
    
    
    
    2.32
    %
    
    
    153,192
    
    
    
    4,058
    
    
    
    2.65
    %
    
    
    148,756
    
    
    
    3,463
    
    
    
    2.33
    %Short-term borrowings
    
    
    42,912
    
    
    
    754
    
    
    
    1.76
    %
    
    
    31,582
    
    
    
    1,457
    
    
    
    4.61
    %
    
    
    25,373
    
    
    
    1,161
    
    
    
    4.58
    %Long-term borrowings
    
    
    9,413
    
    
    
    572
    
    
    
    6.08
    %
    
    
    11,188
    
    
    
    670
    
    
    
    5.99
    %
    
    
    11,303
    
    
    
    677
    
    
    
    5.99
    %Junior subordinate debentures
    
    
    1,605
    
    
    
    96
    
    
    
    5.98
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total borrowings
    
    
    53,930
    
    
    
    1,422
    
    
    
    2.64
    %
    
    
    42,770
    
    
    
    2,127
    
    
    
    4.97
    %
    
    
    36,676
    
    
    
    1,838
    
    
    
    5.01
    %Total interest-bearing liabilities
    
    
    316,140
    
    
    
    7,504
    
    
    
    2.37
    %
    
    
    195,962
    
    
    
    6,185
    
    
    
    3.16
    %
    
    
    185,432
    
    
    
    5,301
    
    
    
    2.86
    %Demand deposits
    
    
    34,403
    
    
    
    
    
    
    
    
    
    
    
    19,611
    
    
    
    
    
    
    
    
    
    
    
    18,268Other liabilities
    
    
    2,761
    
    
    
    
    
    
    
    
    
    
    
    1,900
    
    
    
    
    
    
    
    
    
    
    
    2,620Stockholders equity
    
    
    44,524
    
    
    
    
    
    
    
    
    
    
    
    31,003
    
    
    
    
    
    
    
    
    
    
    
    30,249TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY
    
    $
    397,828
    
    
    
    
    
    
    
    
    
    
    $
    248,476
    
    
    
    
    
    
    
    
    
    
    $
    236,569Interest rate spread (6)
    
    
    
    
    
    
    
    
    
    
    3.57
    %
    
    
    
    
    
    
    
    
    
    
    3.25
    %
    
    
    
    
    
    
    
    
    
    
    3.29
    %Net interest income/margin (5)
    
    
    
    
    
    $
    14,348
    
    
    
    3.90
    %
    
    
    
    
    
    $
    8,655
    
    
    
    3.74
    %
    
    
    
    
    
    $
    8,256
    
    
    
    3.74
    %
 
 (1)
    
    Average volume information was compared using daily (or monthly) averages for
interest-earning and bearing accounts. Certain balance sheet items
utilized quarter-end balances for averages.(2)
    
    Interest on loans includes fee income.(3)
    
    Tax exempt interest revenue is shown on a tax-equivalent basis using a statutory federal
income tax rate of 34 percent for 2008,2007 and 2006. (4) Nonaccrual loans have been included
with loans for the purpose of analyzing net interest earnings.(5)
    
    Net interest margin is computed by dividing annualized net interest income by total interest
earning assets.(6)
    
    Interest rate spread represents the difference between the average rate
earned on interest-earning assets and the average rate paid on
interest-bearing liabilities. 19




---



##### 



Reconcilement of Taxable Equivalent Net Interest Income
For the Years Ended December 31,
 (In Thousands)
    
    2008
    
    
    2007
    
    
    2006Total interest income
    
    $
    21,357
    
    
    $
    14,483
    
    
    $
    13,202Total interest expense
    
    
    7,504
    
    
    
    6,185
    
    
    
    5,301Net interest income
    
    
    13,853
    
    
    
    8,298
    
    
    
    7,901Tax equivalent adjustment
    
    
    495
    
    
    
    357
    
    
    
    355Net interest income
(fully taxable equivalent)
    
    $
    14,348
    
    
    $
    8,655
    
    
    $
    8,256
 Rate/Volume Analysis
  (In Thousands)
    
    Year Ended December 31,2008 vs 2007
    
    
    2007 vs 2006Increase (Decrease)
    
    
    Increase (Decrease)Due to
    
    
    Due toVolume
    
    
    Rate
    
    
    Net
    
    
    Volume
    
    
    Rate
    
    
    NetInterest income:Loans, tax-exempt
    
    $
    316
    
    
    $
    (17
    )
    
    $
    299
    
    
    $
    132
    
    
    $
    1
    
    
    $
    133Loans
    
    
    4,614
    
    
    
    (612
    )
    
    
    4,002
    
    
    
    (11
    )
    
    
    357
    
    
    
    346Taxable investment securities
    
    
    3,040
    
    
    
    47
    
    
    
    3,087
    
    
    
    156
    
    
    
    540
    
    
    
    696Tax-exempt investment
securities
    
    
    151
    
    
    
    (47
    )
    
    
    104
    
    
    
    (109
    )
    
    
    (16
    )
    
    
    (125
    )Federal funds sold
    
    
    (255
    )
    
    
    (102
    )
    
    
    (357
    )
    
    
    123
    
    
    
    5
    
    
    
    128Interest bearing deposits
    
    
    124
    
    
    
    (247
    )
    
    
    (123
    )
    
    
    105
    
    
    
    
    
    
    
    105Total interest-earning assets
    
    
    7,990
    
    
    
    (978
    )
    
    
    7,012
    
    
    
    396
    
    
    
    887
    
    
    
    1,283Interest expense:Savings
    
    
    58
    
    
    
    
    
    
    
    58
    
    
    
    (4
    )
    
    
    (1
    )
    
    
    (5
    )NOW deposits
    
    
    51
    
    
    
    (13
    )
    
    
    38
    
    
    
    1
    
    
    
    2
    
    
    
    3Money market deposits
    
    
    (1,325
    )
    
    
    1,615
    
    
    
    290
    
    
    
    (6
    )
    
    
    
    
    
    
    (6
    )Time deposits
    
    
    2,339
    
    
    
    (702
    )
    
    
    1,637
    
    
    
    181
    
    
    
    422
    
    
    
    603Short-term borrowings
    
    
    404
    
    
    
    (1,107
    )
    
    
    (703
    )
    
    
    286
    
    
    
    10
    
    
    
    296Long-term borrowings, FHLB
    
    
    (107
    )
    
    
    10
    
    
    
    (97
    )
    
    
    (7
    )
    
    
    
    
    
    
    (7
    )Junior subordinate debentures
    
    
    96
    
    
    
    
    
    
    
    96
    
    
    
    
    
    
    
    
    
    
    
    Total interest-bearing
liabilities
    
    
    1,516
    
    
    
    (197
    )
    
    
    1,319
    
    
    
    451
    
    
    
    433
    
    
    
    884Change in net interest income
    
    $
    6,474
    
    
    $
    (781
    )
    
    $
    5,693
    
    
    $
    (55
    )
    
    $
    454
    
    
    $
    399
 PROVISION FOR LOAN LOSSES
 2008 vs. 2007
  20




---



##### 



2007 vs. 2006
  NON-INTEREST INCOME
 2008 vs. 2007
  (In Thousands)
    
    For The Year EndedDecember 31, 2008
    
    December 31, 2007
    
    ChangeAmount
    
    % Total
    
    Amount
    
    % Total
    
    Amount
    
    %Service charges and fees
    
    $
    1,281
    
    
    
    42.1
    %
    
    $
    942
    
    
    
    40.9
    %
    
    $
    339
    
    
    
    36.0
    %Gain on sale of loans
    
    
    339
    
    
    
    11.1
    
    
    
    182
    
    
    
    7.9
    
    
    
    157
    
    
    
    86.3Earnings on bank-owned
life insurance
    
    
    366
    
    
    
    12.0
    
    
    
    285
    
    
    
    12.4
    
    
    
    81
    
    
    
    28.4Brokerage and insurance
    
    
    218
    
    
    
    7.2
    
    
    
    399
    
    
    
    17.3
    
    
    
    (181
    )
    
    
    (45.4
    )Trust
    
    
    434
    
    
    
    14.3
    
    
    
    196
    
    
    
    8.5
    
    
    
    238
    
    
    
    121.4Investment security
(losses) gains
    
    
    (431
    )
    
    
    (14.2
    )
    
    
    1
    
    
    
    
    
    
    
    (432
    )
    
    
    Other
    
    
    836
    
    
    
    27.5
    
    
    
    300
    
    
    
    13.0
    
    
    
    536
    
    
    
    178.7Total non-interest income
    
    $
    3,043
    
    
    
    100.0
    %
    
    $
    2,305
    
    
    
    100.0
    %
    
    $
    738
    
    
    
    32.0
    %
 2007 vs. 2006
  21




---



##### 



(In Thousands)
    
    For The Year EndedDecember 31, 2007
    
    December 31, 2006
    
    ChangeAmount
    
    % Total
    
    Amount
    
    % Total
    
    Amount
    
    %Service charges and fees
    
    $
    942
    
    
    
    40.9
    %
    
    $
    845
    
    
    
    44.5
    %
    
    $
    97
    
    
    
    11.5
    %Gain on sale of loans
    
    
    182
    
    
    
    7.9
    
    
    
    45
    
    
    
    2.4
    
    
    
    137
    
    
    
    304.4Earnings on bank-owned
life insurance
    
    
    285
    
    
    
    12.4
    
    
    
    253
    
    
    
    13.3
    
    
    
    32
    
    
    
    12.6Brokerage and insurance
    
    
    399
    
    
    
    17.3
    
    
    
    219
    
    
    
    11.5
    
    
    
    180
    
    
    
    82.2Trust
    
    
    196
    
    
    
    8.5
    
    
    
    191
    
    
    
    10.1
    
    
    
    5
    
    
    
    2.6Investment security gains
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    0.1
    
    
    
    
    
    
    
    Other
    
    
    300
    
    
    
    13.0
    
    
    
    346
    
    
    
    18.1
    
    
    
    (46
    )
    
    
    (13.3
    )Total non-interest income
    
    $
    2,305
    
    
    
    100.0
    %
    
    $
    1,900
    
    
    
    100.0
    %
    
    $
    405
    
    
    
    21.3
    %
 NON-INTEREST EXPENSE
 2008 vs. 2007
   (In Thousands)
    
    For The Years EndedDecember 31, 2008
    
    December 31, 2007
    
    ChangeAmount
    
    % Total
    
    Amount
    
    % Total
    
    Amount
    
    %Salaries
    
    $
    4,762
    
    
    
    39.1
    %
    
    $
    3,000
    
    
    
    42.6
    %
    
    $
    1,762
    
    
    
    58.7
    %Employee benefits
    
    
    2,179
    
    
    
    17.9
    
    
    
    897
    
    
    
    12.7
    
    
    
    1,282
    
    
    
    142.9Occupancy
    
    
    760
    
    
    
    6.2
    
    
    
    491
    
    
    
    7.0
    
    
    
    269
    
    
    
    54.8Furniture and equipment
    
    
    927
    
    
    
    7.6
    
    
    
    485
    
    
    
    6.9
    
    
    
    442
    
    
    
    91.1State shares tax
    
    
    418
    
    
    
    3.4
    
    
    
    313
    
    
    
    4.4
    
    
    
    105
    
    
    
    33.5Professional fees
    
    
    570
    
    
    
    4.7
    
    
    
    315
    
    
    
    4.5
    
    
    
    255
    
    
    
    81.0Directors fees
    
    
    244
    
    
    
    2.0
    
    
    
    182
    
    
    
    2.6
    
    
    
    62
    
    
    
    34.1Other
    
    
    2,312
    
    
    
    19.0
    
    
    
    1,355
    
    
    
    19.3
    
    
    
    957
    
    
    
    70.6Total non-interest expense
    
    $
    12,172
    
    
    
    99.9
    %
    
    $
    7,038
    
    
    
    100.0
    %
    
    $
    5,134
    
    
    
    72.9
    %
 2007 vs. 2006
   22




---



##### 



(In Thousands)
    
    For The Years EndedDecember 31, 2007
    
    December 31, 2006
    
    ChangeAmount
    
    % Total
    
    Amount
    
    % Total
    
    Amount
    
    %Salaries
    
    $
    3,000
    
    
    
    42.6
    %
    
    $
    2,615
    
    
    
    40.6
    %
    
    $
    385
    
    
    
    14.7
    %Employee benefits
    
    
    897
    
    
    
    12.7
    
    
    
    837
    
    
    
    13.0
    
    
    
    60
    
    
    
    7.2Occupancy
    
    
    491
    
    
    
    7.0
    
    
    
    458
    
    
    
    7.1
    
    
    
    33
    
    
    
    7.2Furniture and equipment
    
    
    485
    
    
    
    6.9
    
    
    
    494
    
    
    
    7.7
    
    
    
    (9
    )
    
    
    (1.8
    )State shares tax
    
    
    313
    
    
    
    4.4
    
    
    
    304
    
    
    
    4.7
    
    
    
    9
    
    
    
    3.0Professional fees
    
    
    315
    
    
    
    4.5
    
    
    
    229
    
    
    
    3.6
    
    
    
    86
    
    
    
    37.6Directors fees
    
    
    182
    
    
    
    2.6
    
    
    
    167
    
    
    
    2.6
    
    
    
    15
    
    
    
    9.0Other
    
    
    1,355
    
    
    
    19.3
    
    
    
    1,333
    
    
    
    20.7
    
    
    
    22
    
    
    
    1.7Total non-interest expense
    
    $
    7,038
    
    
    
    100.0
    %
    
    $
    6,437
    
    
    
    100.0
    %
    
    $
    601
    
    
    
    9.3
    %
 FINANCIAL CONDITION
        INVESTMENTS
 For the Years Ended December 31,(In Thousands)
    
    2008
    
    
    2007
    
    
    2006Federal Agency Obligations
    
    $
    64,080
    
    
    $
    27,547
    
    
    $
    25,066Mortgage-backed Securities
    
    
    118,046
    
    
    
    23,782
    
    
    
    21,147Obligations of State amd Political Subdivisions
    
    
    9,994
    
    
    
    4,045
    
    
    
    4,703Marketable Equity Securities
    
    
    2,293
    
    
    
    1,037
    
    
    
    1,341Restricted Equity Securities
    
    
    2,167
    
    
    
    1,275
    
    
    
    1,229Total
    
    $
    196,580
    
    
    $
    57,686
    
    
    $
    53,486
  23




---



##### 



After One Year
    
    
    After Five YearWithin
    
    
    But Within
    
    
    But Within
    
    
    AfterOne Year
    
    
    Five Years
    
    
    Ten Years
    
    
    Ten Years
    
    
    Total(In Thousands)
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    YieldFederal Agency Obligations
    
    $
    2,108
    
    
    
    3.77
    %
    
    $
    22,237
    
    
    
    4.20
    %
    
    $
    51,990
    
    
    
    4.83
    %
    
    $
    103,054
    
    
    
    4.69
    %
    
    $
    179,389
    
    
    
    4.66
    %Obligations of State and
Political Subdivisions
    
    
    635
    
    
    
    2.52
    %
    
    
    2,866
    
    
    
    5.10
    %
    
    
    4,326
    
    
    
    5.83
    %
    
    
    2,116
    
    
    
    6.21
    %
    
    
    9,943
    
    
    
    5.49
    %$
    2,743
    
    
    
    
    
    
    $
    25,103
    
    
    
    
    
    
    $
    56,316
    
    
    
    
    
    
    $
    105,170
    
    
    
    
    
    
    
    189,332Marketable Equity Securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,623Restricted Equity Securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,167Total Invesment Securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    194,122
   LOANS
   For the Years Ended December 31,(In Thousands)
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Commercial, financial and
agricultural
    
    $
    27,165
    
    
    $
    8,074
    
    
    $
    9,574
    
    
    $
    12,097
    
    
    $
    12,182Tax-exempt
    
    
    16,762
    
    
    
    13,108
    
    
    
    9,621
    
    
    
    9,019
    
    
    
    10,062Real estate
    
    
    262,539
    
    
    
    132,453
    
    
    
    135,009
    
    
    
    127,170
    
    
    
    122,104Real estate construction
    
    
    5,307
    
    
    
    3,698
    
    
    
    2,231
    
    
    
    1,548
    
    
    
    734Installment loans to individuals
    
    
    8,202
    
    
    
    4,059
    
    
    
    4,118
    
    
    
    4,348
    
    
    
    4,738Add (deduct): Unearned discount
    
    
    (24
    )
    
    
    (23
    )
    
    
    (19
    )
    
    
    (30
    )
    
    
    (46
    )Unamortized loan costs, net of
fees
    
    
    117
    
    
    
    91
    
    
    
    107
    
    
    
    119
    
    
    
    126Gross loans
    
    $
    320,068
    
    
    $
    161,460
    
    
    $
    160,641
    
    
    $
    154,271
    
    
    $
    149,900
  For the Years Ended December 31,2008
    
    2007
    
    2006
    
    2005
    
    2004Commercial, financial and
agricultural
    
    
    8.5
    %
    
    
    5.0
    %
    
    
    6.0
    %
    
    
    7.8
    %
    
    
    8.1
    %Tax-exempt
    
    
    5.2
    
    
    
    8.1
    
    
    
    6.0
    
    
    
    5.9
    
    
    
    6.7Real estate
    
    
    82.1
    
    
    
    82.1
    
    
    
    84.1
    
    
    
    82.5
    
    
    
    81.6Real estate construction
    
    
    1.7
    
    
    
    2.3
    
    
    
    1.4
    
    
    
    1.0
    
    
    
    0.5Installment loans to individuals
    
    
    2.5
    
    
    
    2.5
    
    
    
    2.5
    
    
    
    2.8
    
    
    
    3.1Gross loans
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
  24




---



##### 



One YearIn One Year
    
    
    Through
    
    
    Over(In Thousands)
    
    or Less
    
    
    Five Years
    
    
    Five Years
    
    
    TotalCommercial, Tax exempt,
Real estate and
Personal loans
    
    $
    77,097
    
    
    $
    126,378
    
    
    $
    111,286
    
    
    $
    314,761Real estate construction
    
    
    5,307
    
    
    
    
    
    
    
    
    
    
    
    5,307$
    82,404
    
    
    $
    126,378
    
    
    $
    111,286
    
    
    $
    320,068Amounts of Such Loans with:Predetermined Fixed Rates
    
    $
    11,781
    
    
    $
    28,279
    
    
    $
    103,813
    
    
    $
    143,873Floating or Adjustable Rates
    
    
    70,623
    
    
    
    98,099
    
    
    
    7,473
    
    
    
    176,195$
    82,404
    
    
    $
    126,378
    
    
    $
    111,286
    
    
    $
    320,068
 ALLOWANCE FOR LOAN LOSSES
   For the Years Ended December 31,(In Thousands)
    
    2008
    
    2007
    
    2006
    
    2005
    
    2004Commercial, financial, and agricultural
    
    $
    402
    
    
    $
    104
    
    
    $
    101
    
    
    $
    208
    
    
    $
    349Real estate mortgages
    
    
    2,461
    
    
    
    700
    
    
    
    659
    
    
    
    694
    
    
    
    755Installment loans to indiviuals
    
    
    158
    
    
    
    28
    
    
    
    27
    
    
    
    32
    
    
    
    24Unallocated
    
    
    737
    
    
    
    605
    
    
    
    669
    
    
    
    619
    
    
    
    264$
    3,758
    
    
    $
    1,437
    
    
    $
    1,456
    
    
    $
    1,553
    
    
    $
    1,392
  25




---



##### 



For the Years Ended December 31,(In Thousands)
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Average Loans Outstanding during
the period
    
    $
    235,071
    
    
    $
    160,348
    
    
    $
    158,554
    
    
    $
    150,065
    
    
    $
    147,348Balance, beginning of year
    
    $
    1,437
    
    
    $
    1,456
    
    
    $
    1,553
    
    
    $
    1,392
    
    
    $
    1,415Provision charged to operations
    
    
    750
    
    
    
    30
    
    
    
    175
    
    
    
    90
    
    
    
    140Allowance acquired
    
    
    1,683
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loans charged off:Commercial, financial, and
agricultural
    
    
    
    
    
    
    
    
    
    
    (185
    )
    
    
    
    
    
    
    (147
    )Real estate mortgages
    
    
    (42
    )
    
    
    (29
    )
    
    
    (65
    )
    
    
    
    
    
    
    (25
    )Installment loans to indiviuals
    
    
    (106
    )
    
    
    (56
    )
    
    
    (50
    )
    
    
    (54
    )
    
    
    (31
    )Recoveries:Commercial, financial, and
agricultural
    
    
    4
    
    
    
    
    
    
    
    8
    
    
    
    79
    
    
    
    Real estate mortgages
    
    
    2
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    5Installment loans to indiviuals
    
    
    30
    
    
    
    35
    
    
    
    20
    
    
    
    46
    
    
    
    35Balance, end of year
    
    $
    3,758
    
    
    $
    1,437
    
    
    $
    1,456
    
    
    $
    1,553
    
    
    $
    1,392Net charge-offs to Average loans
outstanding during the period
    
    
    -0.05
    %
    
    
    -0.03
    %
    
    
    -0.17
    %
    
    
    0.05
    %
    
    
    -0.11
    %
 NON-PERFORMING LOANS
   26




---



##### 



For the Years Ended December 31,(In Thousands)
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Commercial, financial and
agriculturalDays 30-89
    
    $
    61
    
    
    $
    168
    
    
    $
    
    
    
    $
    12
    
    
    $
    Days 90 plus
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-accrual
    
    
    581
    
    
    
    
    
    
    
    
    
    
    
    189
    
    
    
    339Real estateDays 30-89
    
    
    1,528
    
    
    
    259
    
    
    
    598
    
    
    
    1,152
    
    
    
    421Days 90 plus
    
    
    
    
    
    
    70
    
    
    
    67
    
    
    
    128
    
    
    
    20Non-accrual
    
    
    3,780
    
    
    
    77
    
    
    
    91
    
    
    
    518
    
    
    
    902Installment loans to individualsDays 30-89
    
    
    9
    
    
    
    33
    
    
    
    40
    
    
    
    65
    
    
    
    71Days 90 plus
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    2
    
    
    
    Non-accrual
    
    
    92
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    6,051
    
    
    $
    617
    
    
    $
    796
    
    
    $
    2,066
    
    
    $
    1,753Days 30-89
    
    $
    1,598
    
    
    $
    460
    
    
    $
    638
    
    
    $
    1,229
    
    
    $
    492Days 90 plus
    
    
    
    
    
    
    80
    
    
    
    67
    
    
    
    130
    
    
    
    20Non-accrual
    
    
    4,453
    
    
    
    77
    
    
    
    91
    
    
    
    707
    
    
    
    1,241$
    6,051
    
    
    $
    617
    
    
    $
    796
    
    
    $
    2,066
    
    
    $
    1,753Restructured loans still accruing
    
    $
    58
    
    
    $
    1,243
    
    
    $
    54
    
    
    $
    
    
    
    $
    Other real estate owned
    
    $
    373
    
    
    $
    
    
    
    $
    14
    
    
    $
    
    
    
    $
    Interest income that would have
been
recorded under original terms
    
    $
    320
    
    
    $
    10
    
    
    $
    98
    
    
    $
    9
    
    
    $
    129Interest income recorded during
the year
    
    $
    116
    
    
    $
    4
    
    
    $
    90
    
    
    $
    28
    
    
    $
    87
 DEPOSITS
 .
  2008
    
    2007
    
    2006Average
    
    
    
    
    
    Average
    
    
    
    
    
    Average(In Thousands)
    
    Balance
    
    Rate
    
    Balance
    
    Rate
    
    Balance
    
    RateNon-interest bearing
    
    $
    34,403
    
    
    
    
    %
    
    $
    19,611
    
    
    
    
    %
    
    $
    18,268
    
    
    
    
    %Savings
    
    
    39,223
    
    
    
    0.40
    
    
    
    24,602
    
    
    
    0.40
    
    
    
    25,671
    
    
    
    0.40Now deposits
    
    
    47,534
    
    
    
    0.27
    
    
    
    29,321
    
    
    
    0.31
    
    
    
    29,029
    
    
    
    0.30Money market deposits
    
    
    21,119
    
    
    
    1.66
    
    
    
    8,894
    
    
    
    0.66
    
    
    
    9,795
    
    
    
    0.66Time deposits
    
    
    154,334
    
    
    
    3.53
    
    
    
    90,375
    
    
    
    4.22
    
    
    
    84,261
    
    
    
    3.81Total deposits
    
    $
    296,613
    
    
    
    2.05
    %
    
    $
    172,803
    
    
    
    2.35
    %
    
    $
    167,024
    
    
    
    2.07
    %
 27




---



##### 



For the Years Ended(In Thousands)
    
    2008
    
    
    2007
    
    
    2006Three months or less
    
    $
    9,353
    
    
    $
    8,932
    
    
    $
    6,942Three months to six months
    
    
    9,259
    
    
    
    7,662
    
    
    
    3,502Six months to twelve months
    
    
    24,095
    
    
    
    5,799
    
    
    
    6,952Over twelve months
    
    
    15,672
    
    
    
    8,248
    
    
    
    11,475Total
    
    $
    58,379
    
    
    $
    30,641
    
    
    $
    28,871As a percentage of total average
time deposits
    
    
    37.8
    %
    
    
    33.9
    %
    
    
    34.3
    %
 BORROWED FUNDS
  LIQUIDITY
   CAPITAL RESOURCES
    28




---



##### 



2008
    
    2007(In Thousands)
    
    Amount
    
    Ratio
    
    Amount
    
    RatioTotal Capital
(to Risk-weighted Assets)Actual
    
    $
    55,851
    
    
    
    16.5
    %
    
    $
    32,930
    
    
    
    18.9
    %For Capital Adequacy Purposes
    
    
    27,112
    
    
    
    8.0
    
    
    
    13,917
    
    
    
    8.0To Be Well-Capitalized
    
    
    33,890
    
    
    
    10.0
    
    
    
    17,396
    
    
    
    10.0Tier I Capital
(to Risk-weighted Assets)Actual
    
    $
    52,083
    
    
    
    15.4
    %
    
    $
    31,483
    
    
    
    18.1
    %For Capital Adequacy Purposes
    
    
    13,556
    
    
    
    4.0
    
    
    
    6,958
    
    
    
    4.0To Be Well-Capitalized
    
    
    20,334
    
    
    
    6.0
    
    
    
    10,436
    
    
    
    6.0Tier I Capital
(to Average Assets)Actual
    
    $
    52,083
    
    
    
    9.3
    %
    
    $
    31,483
    
    
    
    12.7
    %For Capital Adequacy Purposes
    
    
    22,476
    
    
    
    4.0
    
    
    
    9,908
    
    
    
    4.0To Be Well-Capitalized
    
    
    28,095
    
    
    
    5.0
    
    
    
    12,385
    
    
    
    5.0
   INTEREST RATE RISK MANAGEMENT
     29




---



##### 



STATEMENT OF INTEREST SENSITIVITY GAP
December 31, 2008
 > 90 Days90 Days
    
    
    But
    
    
    1 to 5
    
    
    5 to 10
    
    
    > 10(In Thousands)
    
    Or Less
    
    
    < 1 Year
    
    
    Years
    
    
    Years
    
    
    Years
    
    
    TotalInterest-bearing deposits
at banks
    
    $
    5,312
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    5,312Investment securities (1)
    
    
    22,459
    
    
    
    48,957
    
    
    
    85,211
    
    
    
    28,359
    
    
    
    11,594
    
    
    
    196,580Loans (1)
    
    
    57,350
    
    
    
    57,860
    
    
    
    152,623
    
    
    
    38,627
    
    
    
    13,608
    
    
    
    320,068Rate Sensitive Assets
    
    
    85,121
    
    
    
    106,817
    
    
    
    237,834
    
    
    
    66,986
    
    
    
    25,202
    
    
    
    521,960Deposits:Interest-bearing demand
deposits (2)
    
    
    4,334
    
    
    
    14,226
    
    
    
    69,581
    
    
    
    12,755
    
    
    
    
    
    
    
    100,896Savings (2)
    
    
    
    
    
    
    549
    
    
    
    43,773
    
    
    
    10,943
    
    
    
    
    
    
    
    55,265Time
    
    
    40,472
    
    
    
    113,164
    
    
    
    71,885
    
    
    
    144
    
    
    
    23
    
    
    
    225,688Borrowed funds
    
    
    54,844
    
    
    
    618
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55,462Long-term debt
    
    
    
    
    
    
    
    
    
    
    9,000
    
    
    
    47
    
    
    
    86
    
    
    
    9,133Junior Subordinated
Debentures
    
    
    4,640
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,640Rate Sensitive Liabilities
    
    
    104,290
    
    
    
    128,557
    
    
    
    194,239
    
    
    
    23,889
    
    
    
    109
    
    
    
    451,084Interest Sensitivity Gap
    
    $
    (19,169
    )
    
    $
    (21,740
    )
    
    $
    43,595
    
    
    $
    43,097
    
    
    $
    25,093
    
    
    $
    70,876Cumulative Gap
    
    $
    (19,169
    )
    
    $
    (40,909
    )
    
    $
    2,686
    
    
    $
    45,783
    
    
    $
    70,876
    
    
    $
    
 
 (1)
    
    Investments and loans are included at the earlier of repricing or maturity and 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.     Item 7A. Quantitative and Qualitative Disclosures about Market Risk
  30




---



##### 



Item 8. Financial Statements and Supplementary Data
 CCFNB Bancorp, Inc.
Consolidated Balance Sheets
 December 31 ,(In Thousands)
    
    2008
    
    
    2007ASSETSCash and due from banks
    
    $
    10,173
    
    
    $
    5,550Interest-bearing deposits in other banks
    
    
    149
    
    
    
    732Federal funds sold
    
    
    5,163
    
    
    
    7,119Total cash and cash equivalents
    
    
    15,485
    
    
    
    13,401Investment securities, available for sale, at fair value
    
    
    196,580
    
    
    
    57,686Loans,net of unearned income
    
    
    320,068
    
    
    
    161,460Less: Allowance for loan losses
    
    
    3,758
    
    
    
    1,437Loans, net
    
    
    316,310
    
    
    
    160,023Premises and equipment, net
    
    
    12,609
    
    
    
    5,087Accrued interest receivable
    
    
    2,388
    
    
    
    1,082Cash surrender value of bank-owned life insurance
    
    
    10,943
    
    
    
    7,077Investment in limited partnerships
    
    
    845
    
    
    
    Intangible Assets:Core deposit
    
    
    3,411
    
    
    
    Goodwill
    
    
    7,937
    
    
    
    Other assets
    
    
    1,811
    
    
    
    968TOTAL ASSETS
    
    $
    568,319
    
    
    $
    245,324LIABILITIESInterest-bearing deposits
    
    $
    381,849
    
    
    $
    151,544Noninterest-bearing deposits
    
    
    52,460
    
    
    
    19,394Total deposits
    
    
    434,309
    
    
    
    170,938Short-term borrowings
    
    
    55,462
    
    
    
    29,511Long-term borrowings
    
    
    9,133
    
    
    
    11,137Junior subordinate debentures
    
    
    4,640
    
    
    
    Accrued interest payable
    
    
    1,075
    
    
    
    475Other liabilities
    
    
    2,925
    
    
    
    1,636TOTAL LIABILITIES
    
    
    507,544
    
    
    
    213,697STOCKHOLDERS EQUITYCommon stock, par value $1.25 per share; authorized
5,000,000 shares; issued and outstanding 2,253,080 shares
in 2008 and 1,226,536 shares in 2007
    
    
    2,816
    
    
    
    1,533Surplus
    
    
    27,173
    
    
    
    2,271Retained earnings
    
    
    29,164
    
    
    
    27,679Accumulated other comprehensive income
    
    
    1,622
    
    
    
    144TOTAL STOCKHOLDERS EQUITY
    
    
    60,775
    
    
    
    31,627TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    568,319
    
    
    $
    245,324
  31




---



##### 



CCFNB Bancorp, Inc.
Consolidated Statements of Income
 For
the Years Ended December 31,(In Thousands, Except Per Share Data)
    
    2008
    
    
    2007
    
    
    2006INTEREST AND DIVIDEND INCOMEInterest and fees on loans:Taxable
    
    $
    14,586
    
    
    $
    10,585
    
    
    $
    10,239Tax-exempt
    
    
    706
    
    
    
    509
    
    
    
    421Interest and divedends on investment securities:Taxable
    
    
    5,521
    
    
    
    2,423
    
    
    
    1,729Tax-exempt
    
    
    254
    
    
    
    186
    
    
    
    269Dividend and other interest income
    
    
    112
    
    
    
    123
    
    
    
    120Federal funds sold
    
    
    155
    
    
    
    512
    
    
    
    385Deposits in other banks
    
    
    23
    
    
    
    145
    
    
    
    39TOTAL INTEREST AND DIVIDEND INCOME
    
    
    21,357
    
    
    
    14,483
    
    
    
    13,202INTEREST EXPENSEDeposits
    
    
    6,083
    
    
    
    4,058
    
    
    
    3,463Short-term borrowings
    
    
    753
    
    
    
    1,457
    
    
    
    1,161Long-term borrowings
    
    
    572
    
    
    
    670
    
    
    
    677Junior subordinate debentures
    
    
    96
    
    
    
    
    
    
    
    TOTAL INTEREST EXPENSE
    
    
    7,504
    
    
    
    6,185
    
    
    
    5,301NET INTEREST INCOME
    
    
    13,853
    
    
    
    8,298
    
    
    
    7,901PROVISION FOR LOAN LOSSES
    
    
    750
    
    
    
    30
    
    
    
    175NET INTEREST INCOME AFTER PROVISION FOR LOAN
LOSSES
    
    
    13,103
    
    
    
    8,268
    
    
    
    7,726NON-INTEREST INCOMEService charges and fees
    
    
    1,281
    
    
    
    942
    
    
    
    845Gain on sale of loans
    
    
    339
    
    
    
    182
    
    
    
    45Earnings on bank-owned life insurance
    
    
    366
    
    
    
    285
    
    
    
    253Brokerage
    
    
    218
    
    
    
    399
    
    
    
    219Trust
    
    
    434
    
    
    
    196
    
    
    
    191Investment security (losses) gains
    
    
    (431
    )
    
    
    1
    
    
    
    1Other
    
    
    836
    
    
    
    300
    
    
    
    346TOTAL NON-INTEREST INCOME
    
    
    3,043
    
    
    
    2,305
    
    
    
    1,900NON-INTEREST EXPENSESalaries
    
    
    4,762
    
    
    
    3,000
    
    
    
    2,615Employee benefits
    
    
    2,179
    
    
    
    897
    
    
    
    837Occupancy
    
    
    760
    
    
    
    491
    
    
    
    458Furniture and Equipment
    
    
    927
    
    
    
    485
    
    
    
    494State shares tax
    
    
    418
    
    
    
    313
    
    
    
    304Professional fees
    
    
    570
    
    
    
    315
    
    
    
    229Directors fees
    
    
    244
    
    
    
    188
    
    
    
    171Other
    
    
    2,312
    
    
    
    1,349
    
    
    
    1,329TOTAL NON-INTEREST EXPENSE
    
    
    12,172
    
    
    
    7,038
    
    
    
    6,437INCOME BEFORE INCOME TAX PROVISION
    
    
    3,974
    
    
    
    3,535
    
    
    
    3,189INCOME TAX PROVISION
    
    
    896
    
    
    
    888
    
    
    
    777NET INCOME
    
    $
    3,078
    
    
    $
    2,647
    
    
    $
    2,412EARNINGS PER SHARE
    
    $
    1.82
    
    
    $
    2.15
    
    
    $
    1.93CASH DIVIDENDS PER SHARE
    
    $
    0.90
    
    
    $
    0.82
    
    
    $
    0.78WEIGHTED AVERAGE SHARES OUTSTANDING
    
    
    1,688,498
    
    
    
    1,233,339
    
    
    
    1,249,844
  32




---



##### 



CCFNB Bancorp, Inc.
Consolidated Statements of Changes in Stockholders Equity
 AccumulatedCommon
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    TotalStock
    
    
    
    
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury
    
    
    Stockholders(In Thousands Except Per Share Data)
    
    Shares
    
    
    Amount
    
    
    Surplus
    
    
    Earnngs
    
    
    Income (loss)
    
    
    Stock
    
    
    EquityBalance, December 31, 2005
    
    
    1,258,337
    
    
    $
    1,573
    
    
    $
    3,127
    
    
    $
    24,616
    
    
    $
    (303
    )
    
    $
    
    
    
    $
    29,013Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,412
    
    
    
    
    
    
    
    
    
    
    
    2,412Change in net unrealized gain on
investment securities
available-for-sale,
net of reclassification adjustment and
tax effects.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    273
    
    
    
    
    
    
    
    273Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,685Common stock issuance under dividend
reinvestment and stock purchase plans
    
    
    7,327
    
    
    
    9
    
    
    
    196
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    205Recognition of employee stock purchase
plan expense
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Purchase of treasury stock (24,000
shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (681
    )
    
    
    (681
    )Retirement of treasury stock
    
    
    (24,000
    )
    
    
    (30
    )
    
    
    (651
    )
    
    
    
    
    
    
    
    
    
    
    681
    
    
    
    Cash dividends, ($0.78 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (974
    )
    
    
    
    
    
    
    
    
    
    
    (974
    )Balance, December 31, 2006
    
    
    1,241,664
    
    
    
    1,552
    
    
    
    2,673
    
    
    
    26,054
    
    
    
    (30
    )
    
    
    
    
    
    
    30,249Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,647
    
    
    
    
    
    
    
    
    
    
    
    2,647Change in net unrealized gain on
investment securities
available-for-sale,
net of reclassification adjustment and
tax effects.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    174
    
    
    
    
    
    
    
    174Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,821Cumulative effect of change in
accounting
for deferred compensation endorsement
split-dollar life insurance
arrangements
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12
    )
    
    
    
    
    
    
    
    
    
    
    (12
    )Common stock issuance under dividend
reinvestment and stock purchase plans
    
    
    8,872
    
    
    
    11
    
    
    
    225
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    236Recognition of employee stock purchase
plan expense
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Purchase of treasury stock (24,000
shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (658
    )
    
    
    (658
    )Retirement of treasury stock
    
    
    (24,000
    )
    
    
    (30
    )
    
    
    (628
    )
    
    
    
    
    
    
    
    
    
    
    658
    
    
    
    Cash dividends, ($0.82 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,010
    )
    
    
    
    
    
    
    
    
    
    
    (1,010
    )Balance, December 31, 2007
    
    
    1,226,536
    
    
    
    1,533
    
    
    
    2,271
    
    
    
    27,679
    
    
    
    144
    
    
    
    
    
    
    
    31,627Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,078
    
    
    
    
    
    
    
    
    
    
    
    3,078Change in net unrealized gain on
investment securities
available-for-sale,
net of reclassification adjustment and
tax effects.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,478
    
    
    
    
    
    
    
    1,478Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,556Par value of new shares issued to
acquire
Columbia Financial
    
    
    1,030,286
    
    
    
    1,288
    
    
    
    25,026
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,314Common stock issuance under dividend
reinvestment and stock purchase plans
    
    
    12,258
    
    
    
    15
    
    
    
    252
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    267Recognition of employee stock purchase
plan expense
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Purchase of treasury stock (16,000
shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (398
    )
    
    
    (398
    )Retirement of treasury stock
    
    
    (16,000
    )
    
    
    (20
    )
    
    
    (378
    )
    
    
    
    
    
    
    
    
    
    
    398
    
    
    
    Cash dividends, ($0.90 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,593
    )
    
    
    
    
    
    
    
    
    
    
    (1,593
    )Balance, December 31, 2008
    
    
    2,253,080
    
    
    $
    2,816
    
    
    $
    27,173
    
    
    $
    29,164
    
    
    $
    1,622
    
    
    $
    
    
    
    $
    60,775
  33




---



##### 



CCFNB Bancorp, Inc.
Consolidated Statements of Cash Flows
 Years Ended December 31,(In Thousands)
    
    2008
    
    
    2007
    
    
    2006OPERATING ACTIVITIESNet Income
    
    $
    3,078
    
    
    $
    2,647
    
    
    $
    2,412Adjustments to reconcile net income to net cash
provided by operating activities:Provision for loan losses
    
    
    750
    
    
    
    30
    
    
    
    175Depreciation and amortization
    
    
    693
    
    
    
    409
    
    
    
    376Gain on sale of investment securities
    
    
    (6
    )
    
    
    
    
    
    
    Impairment loss on securites
    
    
    437
    
    
    
    
    
    
    
    Amortization and accretion on investment securities
    
    
    350
    
    
    
    43
    
    
    
    88Loss on sale of premises and equipment
    
    
    29
    
    
    
    
    
    
    
    Deferred income taxes benefit
    
    
    (259
    )
    
    
    (25
    )
    
    
    (32
    )Gain on sale of loans
    
    
    (339
    )
    
    
    (182
    )
    
    
    (45
    )Proceeds from sale of mortgage loans
    
    
    17,407
    
    
    
    9,979
    
    
    
    2,396Originations of mortgage loans held for resale
    
    
    (16,477
    )
    
    
    (10,215
    )
    
    
    (2,567
    )Amortization of intangibles and invesment in limited
partnerships
    
    
    353
    
    
    
    
    
    
    
    Decrease (increase) in accrued interest receivable
    
    
    228
    
    
    
    (88
    )
    
    
    (35
    )Increases in cash surrender value of bank-owned life insurance
    
    
    (404
    )
    
    
    (309
    )
    
    
    (287
    )(Decrease) increase in accrued interest payable
    
    
    (164
    )
    
    
    80
    
    
    
    51Other, net
    
    
    (211
    )
    
    
    115
    
    
    
    199Net cash provided by operating activities
    
    
    5,465
    
    
    
    2,484
    
    
    
    2,731INVESTING ACTIVITIESInvestment securities available for sale:Purchases
    
    
    (49,809
    )
    
    
    (39,718
    )
    
    
    (15,582
    )Proceeds from sales, maturities and redemptions
    
    
    50,001
    
    
    
    35,783
    
    
    
    16,419Proceeds from redemption of regulatory stock
    
    
    1,806
    
    
    
    16
    
    
    
    46Purchase of regulatory stock
    
    
    (1,176
    )
    
    
    (62
    )
    
    
    (123
    )Net decrease (increase) in loans
    
    
    2,723
    
    
    
    (449
    )
    
    
    (6,425
    )Proceeds from sale of premises and equipment
    
    
    786
    
    
    
    
    
    
    
    Acquisition of bank cash
    
    
    5,803
    
    
    
    
    
    
    
    Acquisition of premises and equipment
    
    
    (2,534
    )
    
    
    (448
    )
    
    
    (580
    )Net cash provided by (used for) investing activities
    
    
    7,600
    
    
    
    (4,878
    )
    
    
    (6,245
    )FINANCING ACTIVITIESNet (decrease) increase in deposits
    
    
    (1,321
    )
    
    
    1,654
    
    
    
    4,438Net (decrease) increase in short-term borrowings
    
    
    (5,932
    )
    
    
    201
    
    
    
    4,710Repayment of long-term borrowings
    
    
    (2,004
    )
    
    
    (160
    )
    
    
    (14
    )Acquisition of treasury stock
    
    
    (398
    )
    
    
    (658
    )
    
    
    (681
    )Proceeds from issuance of common stock
    
    
    267
    
    
    
    236
    
    
    
    205Cash dividends paid
    
    
    (1,593
    )
    
    
    (1,010
    )
    
    
    (974
    )Net cash (used for) provided by financing activities
    
    
    (10,981
    )
    
    
    263
    
    
    
    7,684NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    2,084
    
    
    
    (2,131
    )
    
    
    4,170CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    13,401
    
    
    
    15,532
    
    
    
    11,362CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    15,485
    
    
    $
    13,401
    
    
    $
    15,532SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATIONInterest paid
    
    $
    6,904
    
    
    $
    6,135
    
    
    $
    5,221Income taxes paid
    
    
    992
    
    
    
    889
    
    
    
    886Loans transferred to other real estate owned
    
    
    373
    
    
    
    
    
    
    
    
  34




---



##### 



CCFNB BANCORP, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  PRINCIPLES OF CONSOLIDATION
 
 NATURE OF OPERATIONS
   SEGMENT REPORTING
   USE OF ESTIMATES
  INVESTMENT SECURITIES
   35




---



##### 



LOANS
   Past Due Loans
 Non-Accrual Loans
 Impaired Loans
 Allowance for Loan Losses
   PREMISES AND EQUIPMENT
  MORTGAGE SERVICING RIGHTS
  JUNIOR SUBORDINATE DEBENTURES
  36




---



##### 



INTANGIBLE ASSETS  GOODWILL
  INTANGIBLE ASSETS  CORE DEPOSIT
   For the Year Ended:2009
    
    $
    643,0002010
    
    
    576,0002011
    
    
    509,0002012
    
    
    442,0002013
    
    
    374,000Thereafter
    
    
    867,000Total
    
    $
    3,411,000
 OTHER REAL ESTATE OWNED
  BANK OWNED LIFE INSURANCE
  INVESTMENTS IN LIMITED PARTNERSHIPS
 Accounting for Tax Benefits Resulting from Investments in Affordable Housing Projects
 INVESTMENT IN INSURANCE AGENCY
  37




---



##### 



INCOME TAXES
  PER SHARE DATA
 Earnings Per Share
 CASH FLOW INFORMATION
  TRUST ASSETS AND INCOME
  ACCUMULATED OTHER COMPREHENSIVE INCOME
  ADVERTISING COSTS
  RECENT ACCOUNTING PRONOUNCEMENTS
 Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in
Variable Interest Entities.
  Amendments to the Impairment Guidance of
EITF 99-20
 Business Combinations
 38




---



##### 



Accounting for Costs Associated with Exit or Disposal Activities
  Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB 51
 Accounting for Deferred Compensation and Postretirement Benefit Aspects of
Endorsement Split-Dollar Life Insurance Arrangements
 Accounting for Income
Tax Benefits of Dividends on Share-Based Payment Awards
 Amendment of FASB Interpretation No. 39, Offsetting
of Amounts Related to Certain Contracts
  39




---



##### 



The Fair Value Option for Financial Assets
and Liabilities
 Employers Accounting for Defined Benefit Pension and
Other Post Retirement Plans
 Fair
Value Measurements
 Accounting for a Change or
Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged
Lease Transaction
 Accounting for Uncertainty in
Income Taxes
 Accounting for Servicing of Financial Assets
  40




---



##### 



Accounting for Certain Hybrid Financial Instruments
 RECLASSIFICATIONS
  2. RESTRICTED CASH BALANCES
  41




---



##### 



3. INVESTMENT SECURITIES AVAILABLE-FOR-SALE
  2008Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair(In Thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueObligation of U.S.Government Corporations
and Agencies:Mortgage-backed
    
    $
    116,357
    
    
    $
    1,808
    
    
    $
    (119
    )
    
    $
    118,046Other
    
    
    63,031
    
    
    
    1,049
    
    
    
    
    
    
    
    64,080Obligations of state and political subdivisions
    
    
    9,944
    
    
    
    67
    
    
    
    (17
    )
    
    
    9,994Total debt securities
    
    
    189,332
    
    
    
    2,924
    
    
    
    (136
    )
    
    
    192,120Marketable equity securities
    
    
    2,623
    
    
    
    73
    
    
    
    (403
    )
    
    
    2,293Restricted equity securities
    
    
    2,167
    
    
    
    
    
    
    
    
    
    
    
    2,167Total investment securities AFS
    
    $
    194,122
    
    
    $
    2,997
    
    
    $
    (539
    )
    
    $
    196,580
 2007Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair(In Thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueObligation of U.S.Government Corporations
and Agencies:Mortgage-backed
    
    $
    23,720
    
    
    $
    135
    
    
    $
    (73
    )
    
    $
    23,782Other
    
    
    27,370
    
    
    
    184
    
    
    
    (7
    )
    
    
    27,547Obligations of state and political subdivisions
    
    
    3,999
    
    
    
    46
    
    
    
    
    
    
    
    4,045Total debt securities
    
    
    55,089
    
    
    
    365
    
    
    
    (80
    )
    
    
    55,374Marketable equity securities
    
    
    1,105
    
    
    
    94
    
    
    
    (162
    )
    
    
    1,037Restricted equity securities
    
    
    1,275
    
    
    
    
    
    
    
    
    
    
    
    1,275Total investment securities AFS
    
    $
    57,469
    
    
    $
    459
    
    
    $
    (242
    )
    
    $
    57,686
   WeightedAmortized
    
    
    Estimated
    
    
    Average(In Thousands)
    
    Cost
    
    
    Fair Value
    
    
    YieldDue in one year or less
    
    $
    2,743
    
    
    $
    2,742
    
    
    
    3.48
    %Due after one year to five years
    
    
    25,103
    
    
    
    25,371
    
    
    
    4.30
    %Due after five years to ten years
    
    
    56,316
    
    
    
    57,327
    
    
    
    4.91
    %Due after ten years
    
    
    109,960
    
    
    
    111,140
    
    
    
    4.62
    %Total
    
    $
    194,122
    
    
    $
    196,580
  42




---



##### 



2008Less than Twelve Months
    
    
    Twelve Months or Greater
    
    
    TotalEstimated
    
    
    Gross
    
    
    Estimated
    
    
    Gross
    
    
    Estimated
    
    
    GrossFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized(In Thousands)
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesObligations of U.S. Government Corporations
and Agencies:Mortgage-backed
    
    $
    12,894
    
    
    $
    114
    
    
    $
    1,481
    
    
    $
    5
    
    
    $
    14,375
    
    
    $
    119Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Obligations of state and political subdivisions
    
    
    1,004
    
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    1,004
    
    
    
    17Total debt securities
    
    
    13,898
    
    
    
    131
    
    
    
    1,481
    
    
    
    5
    
    
    
    15,379
    
    
    
    136Equity securities
    
    
    1,327
    
    
    
    304
    
    
    
    617
    
    
    
    99
    
    
    
    1,944
    
    
    
    403Total
    
    $
    15,225
    
    
    $
    435
    
    
    $
    2,098
    
    
    $
    104
    
    
    $
    17,323
    
    
    $
    539
 2007Less than Twelve Months
    
    
    Twelve Months or Greater
    
    
    TotalEstimated
    
    
    Gross
    
    
    Estimated
    
    
    Gross
    
    
    Estimated
    
    
    GrossFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized(In Thousands)
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesObligations of U.S. Government Corporations
and Agencies:Mortgage-backed
    
    $
    659
    
    
    $
    2
    
    
    $
    5,986
    
    
    $
    71
    
    
    $
    6,645
    
    
    $
    73Other
    
    
    
    
    
    
    
    
    
    
    1,494
    
    
    
    7
    
    
    
    1,494
    
    
    
    7Obligations of state and political subdivisions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total debt securities
    
    
    659
    
    
    
    2
    
    
    
    7,480
    
    
    
    78
    
    
    
    8,139
    
    
    
    80Equity securities
    
    
    444
    
    
    
    107
    
    
    
    131
    
    
    
    55
    
    
    
    575
    
    
    
    162Total
    
    $
    1,103
    
    
    $
    109
    
    
    $
    7,611
    
    
    $
    133
    
    
    $
    8,714
    
    
    $
    242
      4. LOANS
 43




---



##### 



(In Thousands)
    
    2008
    
    
    2007Commercial, financial and agricultural
    
    $
    27,165
    
    
    $
    8,074Tax-exempt
    
    
    16,762
    
    
    
    13,108Real estate
    
    
    262,539
    
    
    
    132,453Real estate construction
    
    
    5,307
    
    
    
    3,698Installment loans to individuals
    
    
    8,202
    
    
    
    4,059Add (deduct): Unearned discount
    
    
    (24
    )
    
    
    (23
    )Unamortized loan costs, net of fees
    
    
    117
    
    
    
    91Gross loans
    
    $
    320,068
    
    
    $
    161,460
    (In Thousands)
    
    2008
    
    
    2007
    
    
    2006Gross interest due under terms
    
    $
    320
    
    
    $
    10
    
    
    $
    98Amount included in income
    
    
    (116
    )
    
    
    (4
    )
    
    
    (90
    )Interest income not recognized
    
    $
    204
    
    
    $
    6
    
    
    $
    8
     (In Thousands)
    
    2008
    
    
    2007
    
    
    2006Balance, beginning of year
    
    $
    1,437
    
    
    $
    1,456
    
    
    $
    1,553Provision charged to operations
    
    
    750
    
    
    
    30
    
    
    
    175Allowance acquired
    
    
    1,683
    
    
    
    
    
    
    
    Loans charged off
    
    
    (148
    )
    
    
    (85
    )
    
    
    (300
    )Recoveries
    
    
    36
    
    
    
    36
    
    
    
    28Balance, end of year
    
    $
    3,758
    
    
    $
    1,437
    
    
    $
    1,456
 5. MORTGAGE SERVICING RIGHTS
 44




---



##### 



(In Thousands)
    
    2008
    
    
    2007Balance, beginning of year
    
    $
    49
    
    
    $
    27Servicing asset additions and acquisition
    
    
    201
    
    
    
    40Amortization
    
    
    (44
    )
    
    
    (18
    )Balance, end of year
    
    $
    206
    
    
    $
    49
  6. PREMISES AND EQUIPMENT
  (In Thousands)
    
    2008
    
    
    2007Land
    
    $
    1,514
    
    
    $
    980Premises
    
    
    12,550
    
    
    
    5,302Furniture and equipment
    
    
    9,696
    
    
    
    3,808Leasehold improvements
    
    
    64
    
    
    
    Total
    
    
    23,824
    
    
    
    10,090Less accumulated depreciation
and amortization
    
    
    11,215
    
    
    
    5,003Net premises and equipment
    
    $
    12,609
    
    
    $
    5,087
  7. DEPOSITS
  (In Thousands)
    
    2008
    
    
    2007Demand deposits
    
    $
    52,460
    
    
    $
    19,394Interest-bearing demand deposits
    
    
    100,896
    
    
    
    28,784Savings
    
    
    55,265
    
    
    
    30,903Time deposits over $100,000
    
    
    58,379
    
    
    
    30,641Other time deposits
    
    
    167,309
    
    
    
    61,216Total deposits
    
    $
    434,309
    
    
    $
    170,938
  (In Thousands)2009
    
    $
    41,8232010
    
    
    6,0752011
    
    
    4,1402012
    
    
    4,1262013
    
    
    2,215Total
    
    $
    58,379
  45




---



##### 



8. SHORT-TERM BORROWINGS
  2008Weighted
    
    MaximumEnding
    
    Average
    
    Month End
    
    Average(In Thousands)
    
    Balance
    
    Balance
    
    Balance
    
    RateSecurities sold under agreements
to repurchase
    
    $
    54,462
    
    
    $
    41,573
    
    
    $
    62,692
    
    
    
    1.77
    %Other short-term borrowings
    
    
    
    
    
    
    849
    
    
    
    5,400
    
    
    
    1.04
    %U.S. Treasury tax and loan notes
    
    
    1,000
    
    
    
    490
    
    
    
    1,000
    
    
    
    1.38
    %Total
    
    $
    55,462
    
    
    $
    42,912
    
    
    $
    69,092
    
    
    
    1.76
    %
 2007Weighted
    
    MaximumEnding
    
    Average
    
    Month End
    
    Average(In Thousands)
    
    Balance
    
    Balance
    
    Balance
    
    RateSecurities sold under agreements
to repurchase
    
    $
    29,265
    
    
    $
    31,206
    
    
    $
    37,490
    
    
    
    4.61
    %U.S. Treasury tax and loan notes
    
    
    246
    
    
    
    376
    
    
    
    1,000
    
    
    
    4.91
    %Total
    
    $
    29,511
    
    
    $
    31,582
    
    
    $
    38,490
    
    
    
    4.61
    %
 9. LONG-TERM BORROWINGS
  46




---



##### 



(In Thousands)
    
    2008
    
    
    2007Loan dated February 18, 1998 in the original amount of
$2,000,000 for a 10-year term
with a 5-year put. Interest only was payable monthly
at 5.48% with a floating rate option,
at the discretion of FHLB, at the end of five years.
Principal balances outstanding.
    
    $
    
    
    
    $
    2,000,000Loan dated June 25, 1998 in the original amount of
$72,000 for a 30-year term
requiring monthly payments of
$425 including interest at
5.86%. Principal balances
outstanding.
    
    
    60,000
    
    
    
    61,000Loan 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.
    
    
    22,000
    
    
    
    23,000Loan 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.
    
    
    25,000
    
    
    
    26,000Loan dated January 27, 2000 in the original amount of
$5,000,000 for a 10-year term
with a 1-year conversion date, at the discretion of
FHLB, and a 3-month conversion
frequency thereafter. At
December 31, 2008 the interest
rate was 6.00%.
Principal balances outstanding.
    
    
    5,000,000
    
    
    
    5,000,000Loan dated August 16, 2000 in the original amount of
$2,000,000 for a 10-year term
with a 6-month conversion date, at the discretion of
FHLB, and a 3-month conversion
frequency thereafter. At
December 31, 2008 the interest
rate was 5.93%.
Principal balances outstanding.
    
    
    2,000,000
    
    
    
    2,000,000Loan dated September 20, 2000 in the original amount
of $2,000,000 for a 10-year term
with a 3-year conversion date, at the discretion of
FHLB, and a 3-month conversion
frequency thereafter. At
December 31, 2008 the interest
rate was 6.10%.
Principal balances outstanding.
    
    
    2,000,000
    
    
    
    2,000,000Loan dated December 13, 2000 in the original amount of
$32,092 for a 20-year term
requiring monthly payments of
$197 including interest at
5.50%. Principal balances
outstanding.
    
    
    26,000
    
    
    
    27,000Total
    
    $
    9,133,000
    
    
    $
    11,137,000
  10. COMPREHENSIVE INCOME
  Years Ended December 31,(In Thousands)
    
    2008
    
    
    2007
    
    
    2006Unrealized holding gains on available-for-sale
investment securities
    
    $
    2,671
    
    
    $
    262
    
    
    $
    413Reclassification adjustment for gains
(losses) realized in income
    
    
    (431
    )
    
    
    1
    
    
    
    1Change in unrealized gains before tax effect
    
    
    2,240
    
    
    
    263
    
    
    
    414Tax effect
    
    
    762
    
    
    
    89
    
    
    
    141Net change in unrealized gains
    
    $
    1,478
    
    
    $
    174
    
    
    $
    273
 47




---



##### 



11. STOCKHOLDERS EQUITY AND STOCK PURCHASE PLANS
   Per ShareEmployees
    
    MarketNumber
    
    Purchase
    
    Valueof Shares
    
    Price
    
    of SharesYear Issued:2008
    
    
    606
    
    
    $
    22.86
    
    
    $
    25.402007
    
    
    557
    
    
    $
    25.50
    
    
    $
    28.332006
    
    
    464
    
    
    $
    25.38
    
    
    $
    28.20
  Number
    
    Total(In Thousands, Except Per Share Data)
    
    of Shares
    
    ProceedsYear:2008
    
    
    11,652
    
    
    $
    2542007
    
    
    8,315
    
    
    $
    2222006
    
    
    6,863
    
    
    $
    193
 12. INCOME TAXES
  For the Years Ended December 31,(In Thousands)
    
    2008
    
    
    2007
    
    
    2006Currently payable
    
    $
    1,155
    
    
    $
    913
    
    
    $
    809Deferred benefit
    
    
    (259
    )
    
    
    (25
    )
    
    
    (32
    )Total income tax provision
    
    $
    896
    
    
    $
    888
    
    
    $
    777
  48




---



##### 



2008
    
    
    2007
    
    
    2006(In Thousands)
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %Provision at statutory rate
    
    $
    1,351
    
    
    
    34.0
    %
    
    $
    1,202
    
    
    
    34.0
    %
    
    $
    1,084
    
    
    
    34.0
    %Tax-exempt income
    
    
    (327
    )
    
    
    (8.2
    )
    
    
    (236
    )
    
    
    (6.7
    )
    
    
    (235
    )
    
    
    (7.4
    )Bank-owned life insurance
income-net
    
    
    (124
    )
    
    
    (3.1
    )
    
    
    (97
    )
    
    
    (2.7
    )
    
    
    (86
    )
    
    
    (2.7
    )Tax credit from limited
partnerships
less amortization, net
    
    
    (68
    )
    
    
    (1.7
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-decuctible expenses
    
    
    51
    
    
    
    1.3
    
    
    
    32
    
    
    
    0.9
    
    
    
    28
    
    
    
    0.9Other, net
    
    
    13
    
    
    
    0.2
    
    
    
    (13
    )
    
    
    (0.4
    )
    
    
    (14
    )
    
    
    (0.4
    )Effective income tax and rate
    
    $
    896
    
    
    
    22.5
    %
    
    $
    888
    
    
    
    25.1
    %
    
    $
    777
    
    
    
    24.4
    %
  (In Thousands)
    
    2008
    
    
    2007Deferred tax assets:Allowance for loan losses
    
    $
    991
    
    
    $
    387Allowance for off balance sheet losses
    
    
    3
    
    
    
    4Deferred compensation and directors fees
    
    
    488
    
    
    
    338Non-accrual loan interest
    
    
    106
    
    
    
    9Mortgage service rights
    
    
    
    
    
    
    13Investment in limited partnerships
    
    
    96
    
    
    
    Impairment losses on investment securities
    
    
    445
    
    
    
    *       Property valuation
    
    
    309Capital loss carryforward
    
    
    41
    
    
    
    Total
    
    
    2,479
    
    
    
    751Deferred tax liabilities:Loan fees and costs
    
    
    (39
    )
    
    
    (60
    )Bond accretion
    
    
    (63
    )
    
    
    (14
    )Depreciation
    
    
    (609
    )
    
    
    (323
    )Investment in insurance agency
    
    
    (17
    )
    
    
    (16
    )*       Intangibles
    
    
    (843
    )
    
    
    *       Other
    
    
    (224
    )Unrealized investment security gains
    
    
    (836
    )
    
    
    (74
    )Total
    
    
    (2,631
    )
    
    
    (487
    )Deferred tax (liability)asset, net
    
    $
    (152
    )
    
    $
    264
   49




---



##### 



13. EMPLOYEE BENEFIT AND DEFERRED COMPENSATION PLANS
 EMPLOYEE BENEFIT PLANS
  DEFERRED COMPENSATION PLANS
 Directors
     Officers
    50




---



##### 



14. LEASE COMMITMENTS AND CONTINGENCIES
  2009
    
    $
    106,7312010
    
    
    82,0692011
    
    
    82,0692012
    
    
    74,5112013
    
    
    60,879Thereafter
    
    
    19,249
  15. ACQUISITION
   (In Thousands)Purchase price
    
    $
    26,316Carrying value of net assets acquired
    
    
    (17,855
    )Excess of purchase price over carrying value
of net assets acquired
    
    
    8,461Purchase accounting adjustments:Loans
    
    
    30Premises and equipment
    
    
    853Deposits
    
    
    1,235Severance and related costs
    
    
    840Deferred taxes
    
    
    208Subtotal
    
    
    11,627Core deposit intangibles
    
    
    (3,690
    )Goodwill
    
    $
    7,937
 51




---



##### 



(In Thousands)AssetsCash and cash equivalents
    
    $
    5,157Interest-bearing deposits in other banks
    
    
    129Federal funds sold
    
    
    517Investment securities
    
    
    138,257Loans, net of allowance for loan losses
    
    
    160,724Premises and equipment
    
    
    6,492Accrued interest receivable
    
    
    1,534Bank-owned life insurance
    
    
    3,462Investment in limited partnerships
    
    
    919Goodwill and other intangibles
    
    
    11,627Other assets
    
    
    564Total assets
    
    $
    329,382LiabilitiesDeposits
    
    $
    264,692Borrowings
    
    
    31,883Junior subordinate debentures
    
    
    4,640Accrued interest payable
    
    
    764Other liabilities
    
    
    1,087Total liabilities
    
    $
    303,066Fair value of net assets acquired
    
    $
    26,316
  For the Years Ended December 31,(In Thousands, Except Per Share Data)
    
    2008
    
    2007Net interest income
    
    $
    19,132
    
    
    $
    18,047Provision for loan losses
    
    
    775
    
    
    
    330Net interest income after provision for loan losses
    
    
    18,357
    
    
    
    17,717Non-interest income
    
    
    4,739
    
    
    
    4,137Non-interest expense
    
    
    16,923
    
    
    
    16,181Income before income tax provision
    
    
    6,173
    
    
    
    5,673Income tax provision
    
    
    1,743
    
    
    
    1,297Net income
    
    $
    4,430
    
    
    $
    4,376Net income per common share
    
    $
    1.97
    
    
    $
    1.93Average common shares outstanding
    
    
    2,251,486
    
    
    
    2,263,625
  16. RELATED PARTY TRANSACTIONS
 52




---



##### 



Beginning
    
    
    
    
    
    
    
    
    
    Ending(In Thousands)
    
    Balance
    
    Additions
    
    Payments
    
    Balance2008
    
    $
    926
    
    
    $
    7,633
    
    
    $
    (756
    )
    
    $
    7,8032007
    
    
    931
    
    
    
    600
    
    
    
    (605
    )
    
    
    926
   ,
 17. REGULATORY MATTERS
      53




---



##### 



2008
    
    
    2007(In Thousands)
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioTotal Capital (to Risk-weighted Assets)Actual
    
    $
    55,851
    
    
    
    16.5
    %
    
    $
    32,930
    
    
    
    18.9
    %For Capital Adequacy Purposes
    
    
    27,112
    
    
    
    8.0
    
    
    
    13,917
    
    
    
    8.0To Be Well-Capitalized
    
    
    33,890
    
    
    
    10.0
    
    
    
    17,396
    
    
    
    10.0Tier I Capital (to Risk-weighted Assets)Actual
    
    $
    52,083
    
    
    
    15.4
    %
    
    $
    31,483
    
    
    
    18.1
    %For Capital Adequacy Purposes
    
    
    13,556
    
    
    
    4.0
    
    
    
    6,958
    
    
    
    4.0To Be Well-Capitalized
    
    
    20,334
    
    
    
    6.0
    
    
    
    10,436
    
    
    
    6.0Tier I Capital (to Average Assets)Actual
    
    $
    52,083
    
    
    
    9.3
    %
    
    $
    31,483
    
    
    
    12.7
    %For Capital Adequacy Purposes
    
    
    22,476
    
    
    
    4.0
    
    
    
    9,908
    
    
    
    4.0To Be Well-Capitalized
    
    
    28,095
    
    
    
    5.0
    
    
    
    12,385
    
    
    
    5.0
  18. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF
CREDIT RISK
   (In Thousands)
    
    2008
    
    2007Financial instruments whose contract amounts
repsresent credit risk:Commitments to extend credit
    
    $
    68,412
    
    
    $
    20,492Standby letters of credit
    
    
    3,064
    
    
    
    1,679Dealer floor plans
    
    
    1,129
    
    
    
    66Loans held for sale
    
    
    72
    
    
    
    418
    54




---



##### 



19. FAIR VALUE MEASUREMENTS
  Level I:
    
    Quoted prices are available in active markets for identical assets or liabilities as of
the reported date.
 Level II:
    
    Pricing inputs are other than quoted prices in active markets, which are either
directly or indirectly
observables as of the reported date. The nature of these assets and liabilities include
items for which quoted prices are available but traded less frequently, and items that
are fair valued using other financial instruments of which can be directly observed.
 Level III:
    
    Assets and liabilities that have little or no pricing observability as of the
reported date. These items do not have two-way markets and are measured using
managements best estimate of fair value, where the inputs into determination of fair
value require significant management judgment or estimation.
  December 31, 2008(In Thousands)
    
    Level I
    
    Level II
    
    Level III
    
    TotalAssets:Investment
Securities,
available-for-sale
    
    $
    2,293
    
    
    $
    194,287
    
    
    $
    
    
    
    $
    196,580
  (In Thousands)
    
    Level I
    
    
    Level II
    
    
    Level III
    
    
    TotalAvailable for sale securitiesObligation of US Government AgenciesMortgage-backed
    
    $
    
    
    
    $
    118,046
    
    
    $
    
    
    
    $
    118,046Other
    
    
    
    
    
    
    64,080
    
    
    
    
    
    
    
    64,080Obligations of state and political
subdivisions
    
    
    
    
    
    
    9,994
    
    
    
    
    
    
    
    9,994Equity securities
    
    
    2,293
    
    
    
    
    
    
    
    
    
    
    
    2,293Restricted equity securities
    
    
    
    
    
    
    2,167
    
    
    
    
    
    
    
    2,167$
    2,293
    
    
    $
    194,287
    
    
    $
    
    
    
    $
    196,580
  20. ESTIMATED FAIR VALUES OF FINANCIAL INSTRUMENTS
  55




---



##### 



56




---



##### 



2008
    
    
    2007Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    Estimated(In Thousands)
    
    Amount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueFinancial Assets:Cash and short-term investments
    
    $
    15,485
    
    
    $
    15,485
    
    
    $
    13,401
    
    
    $
    13,401Investment securities
    
    
    196,580
    
    
    
    196,580
    
    
    
    57,686
    
    
    
    57,686Loans, net
    
    
    316,310
    
    
    
    317,203
    
    
    
    160,023
    
    
    
    161,044Cash surrender value of bank owned life insurance
    
    
    10,943
    
    
    
    10,943
    
    
    
    7,077
    
    
    
    7,077Accrued interest receivable
    
    
    2,388
    
    
    
    2,388
    
    
    
    1,082
    
    
    
    1,082Financial Liabilities:Interest- bearing deposits
    
    
    381,849
    
    
    
    384,105
    
    
    
    151,544
    
    
    
    151,562Noninterest- bearing deposits
    
    
    52,460
    
    
    
    52,460
    
    
    
    19,394
    
    
    
    19,394Short-term borrowings
    
    
    55,462
    
    
    
    55,462
    
    
    
    29,511
    
    
    
    29,511Long-term borrowings
    
    
    9,133
    
    
    
    9,452
    
    
    
    11,137
    
    
    
    11,708Junior subordinate debentures
    
    
    4,640
    
    
    
    4,640
    
    
    
    
    
    
    
    Accrued interest payable
    
    
    1,075
    
    
    
    1,075
    
    
    
    475
    
    
    
    475Off-Balance Sheet Assets (Liabilities):Commitments to extend credit
    
    
    
    
    
    $
    68,412
    
    
    
    
    
    
    $
    20,492Standby letters of credit
    
    
    
    
    
    
    3,064
    
    
    
    
    
    
    
    1,679Dealer floor plans
    
    
    
    
    
    
    1,129
    
    
    
    
    
    
    
    66
 21. PARENT COMPANY FINANCIAL INFORMATION
  57




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##### 



December 31,BALANCE SHEETS
    
    2008
    
    2007
    
    2006AssetsCash
    
    $
    524
    
    
    $
    131
    
    
    $
    162Investment in subsidiary
    
    
    61,568
    
    
    
    30,091
    
    
    
    28,606Investment in other equity securities
    
    
    2,292
    
    
    
    1,037
    
    
    
    1,342Prepayments and other assets
    
    
    942
    
    
    
    402
    
    
    
    261Receivable from subsidiary
    
    
    200
    
    
    
    
    
    
    
    Total Assets
    
    $
    65,526
    
    
    $
    31,661
    
    
    $
    30,371Liabilities and Stockholders EquityJunior subordinate debentures
    
    $
    4,640
    
    
    
    
    
    
    
    Accrued expenses and other liabilities
    
    
    111
    
    
    $
    15
    
    
    $
    92Payable to subsidiary
    
    
    
    
    
    
    19
    
    
    
    30Total Liabilities
    
    
    4,751
    
    
    
    34
    
    
    
    122Stockholders EquityCommon stock
    
    
    2,816
    
    
    
    1,533
    
    
    
    1,552Surplus
    
    
    27,173
    
    
    
    2,271
    
    
    
    2,673Retained earnings
    
    
    29,164
    
    
    
    27,679
    
    
    
    26,054Accumulated other comprehensive income (loss)
    
    
    1,622
    
    
    
    144
    
    
    
    (30
    )Total Stockholders Equity
    
    
    60,775
    
    
    
    31,627
    
    
    
    30,249Total Liabilities and Stockholders Equity
    
    $
    65,526
    
    
    $
    31,661
    
    
    $
    30,371
 Years Ended December 31,STATEMENTS OF INCOME
    
    2008
    
    2007
    
    2006IncomeDividends from subsidiary bank
    
    $
    2,359
    
    
    $
    1,534
    
    
    $
    1,478Dividends  other
    
    
    81
    
    
    
    46
    
    
    
    44Securities losses, net
    
    
    (431
    )
    
    
    
    
    
    
    Interest
    
    
    
    
    
    
    1
    
    
    
    2Total Income
    
    
    2,009
    
    
    
    1,581
    
    
    
    1,524Operating expenses
    
    
    202
    
    
    
    89
    
    
    
    82Income Before Taxes and Equity in Undistributed
Net Income of Subsidiary and Insurance Agency
    
    
    1,807
    
    
    
    1,492
    
    
    
    1,442Applicable income tax benefit
    
    
    (206
    )
    
    
    (21
    )
    
    
    (22
    )Income Before Equity in Undistributed Net Income of
Subsidiary
and Equity in Income from Insurance Agency
    
    
    2,013
    
    
    
    1,513
    
    
    
    1,464Equity in undistributed income of subsidiary
    
    
    1,059
    
    
    
    1,122
    
    
    
    946Equity in income from investment in insurance agency
    
    
    6
    
    
    
    12
    
    
    
    2Net Income
    
    $
    3,078
    
    
    $
    2,647
    
    
    $
    2,412
 Years Ended December 31,STATEMENTS OF CASH FLOWS
    
    2008
    
    2007
    
    2006Operating Activities:Net income
    
    $
    3,078
    
    
    $
    2,647
    
    
    $
    2,412Adjustments to reconcile net income to net cash
provided by operating activities:Securities gains
    
    
    (6
    )
    
    
    
    
    
    
    Impairment loss on securites
    
    
    437
    
    
    
    
    
    
    
    Equity in undistributed net income of subsidiary
    
    
    (1,059
    )
    
    
    (1,122
    )
    
    
    (945
    )(Increase) decrease in amounts due from (to) subsidiary
    
    
    (219
    )
    
    
    
    
    
    
    69Increase (decrease) in income taxes and accrued
expenses payable
    
    
    (263
    )
    
    
    (124
    )
    
    
    (79
    )Net Cash Provided By Operating Activities
    
    
    1,968
    
    
    
    1,401
    
    
    
    1,457Investing Activities:Purchase of equity securities
    
    
    (153
    )
    
    
    
    
    
    
    Acquisition of bank cash
    
    
    251
    
    
    
    
    
    
    
    Proceeds from sale of equity securities
    
    
    51
    
    
    
    
    
    
    
    Net Cash Provided B y Investing Activities
    
    
    149
    
    
    
    
    
    
    
    Financing Activities:Acquisition of treasury stock
    
    
    (398
    )
    
    
    (658
    )
    
    
    (681
    )Proceeds from issuance of common stock
    
    
    267
    
    
    
    236
    
    
    
    205Cash dividends
    
    
    (1,593
    )
    
    
    (1,010
    )
    
    
    (974
    )Net Cash Used In Financing Activities
    
    
    (1,724
    )
    
    
    (1,432
    )
    
    
    (1,450
    )Increase (Decrease) in Cash and Cash Equivalents
    
    
    393
    
    
    
    (31
    )
    
    
    7Cash and Cash Equivalents at Beginning of Year
    
    
    131
    
    
    
    162
    
    
    
    155Cash and Cash Equivalents at End of Year
    
    $
    524
    
    
    $
    131
    
    
    $
    162
 58




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##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     /s/ J. H. Williams & Co., LLPJ. H. Williams & Co., LLP
Kingston, PennsylvaniaMarch 10, 2009 59




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##### 



Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
  Item 9A(T). Controls and Procedures
 (a) Disclosure Controls and Internal Controls
   .
 Limitations on the Effectiveness of Controls.
 Scope of the Controls Evaluation
  60




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##### 



Conclusions
 (b) Managements Report on Internal Control Over Financial Reporting
      /s/ Lance O. DiehlPresidentChief Executive OfficerDate: March 10, 2009/s/ Jeffrey T. ArnoldChief Financial Officer and TreasurerDate: March 10, 2009 (c) Changes to Internal Control Over Financial Reporting
  61




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##### 



Item 9B. Other Information
  PART III
 Item 10. Directors, Executive Officers and Corporate Governance
 Directors
  Executive Officers
  Compliance with Section 16(a) of the Exchange Act
  Disclosure of Code of Ethics
  Corporate Governance
  Item 11. Executive Compensation
  Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
   Item 13. Certain Relationships and Related Transactions, Director Independence
 Certain Relationships and Related Transactions
   Director Independence
  62




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##### 



14. Principal Accounting Fees and Services
  PART IV
 Item 15. Exhibits and Financial Statement Schedules
 (a)
    
    The following documents are filed as part of this report:
 1.
    
    The following financial statements are incorporated by reference in Item 8:
 
 2.
    
    All financial statement schedules are omitted because the required information is either
not applicable, not required or is shown in the respective financial statement or in the
notes thereto, which are incorporated by reference at subsection (a) (1) of this item.
 3.
    
    The following exhibits are filed herewith, or incorporated by reference as a part
of this report..
 3.1
    
    Amended and Restated Articles of Incorporation (1)3.2
    
    Amended Bylaws (2)10.1
    
    Executive Employment Agreement of Lance O. Diehl (3)10.2
    
    Executive Employment Agreement of Edwin A. Wenner (4)10.3
    
    Form of Deferred Director Fees Agreement (5)10.4
    
    Supplemental Executive Retirement Plan Agreement and Amendment for Lance O. Diehl (6))10.5
    
    Supplemental Executive Retirement Plan Agreement and Amendment for Edwin A. Wenner (7)10.6
    
    Supplemental Executive Retirement Plan Agreement for Jacob S. Trump (8)10.7
    
    Executive Employment Agreement for Paul Page (9)11
    
    Statement re computation of per share earnings12
    
    Statement re computation of ratios13
    
    Annual report to security holders, Form 10-Q or quarterly report to security holders14
    
    Code of Conduct and Ethics20.1
    
    Form 8-K filed during reporting period (10)20.2
    
    Form 8-K filed during reporting period (11)21
    
    List of Subsidiaries of the Corporation23
    
    Consent of Independent Certified Public Accountants31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer32.1
    
    Section 1350 Certification of Chief Executive Officer32.2
    
    Section 1350 Certification of Chief Financial Officer99.1
    
    Charter of the Audit Committee
 
 (1)
    
    Incorporated by reference to Exhibit 3.1 to Registrants Current Report on Form 8-K,
dated May 9, 2005, filed with the commission on May 10, 2005. Amended on current Form 8-K,
dated July 18, 2008, filed with the commission on July 18, 2008.(2)
    
    Incorporated by reference to Exhibit 3.2 to Registrants Current Report on Form 8-K,
dated November 9, 2005, filed with the Commission on November 10, 2005.(3)
    
    Incorporated by reference to Exhibit 10.1 to Registrants Registration Statement on
Form S-4, dated April 1, 2008, filed with the Commission on March 27, 2008.
 63




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##### 



(4)
    
    Incorporated by reference to Exhibit 10.2 to Registrants Registration Statement on
Form S-4, dated April 1, 2008, filed with the Commission on March 27, 2008.(5)
    
    Incorporated by reference to Exhibit 10.3 to Registrants Current Report on Form 8-K,
dated December 14, 2004, filed with the Commission on December 15, 2004.(6)
    
    Incorporated by reference to Exhibit 10.4 to Registrants Current Report on Form 8-K,
dated December 14, 2004, filed with the Commission on December 15, 2004.(7)
    
    Incorporated by reference to Exhibit 10.5 to Registrants Current Report on Form 8-K,
dated December 14, 2004, filed with the Commission on December 15, 2004.(8)
    
    Incorporated by reference to Exhibit 10.6 to Registrants Current Report on Form 8-K,
dated December 14, 2004, filed with the Commission on December 15, 2004.(9)
    
    Incorporated by reference to Exhibit 10.7 to Registrants Registration Statement on
Form S-4, dated April 1, 2008, filed with the Commission on March 27, 2008.(10)
    
    Incorporated by reference to Exhibit 10.1 to Registrants Current Report on Form 8-K,
dated October 14, 2008, filed with the Commission on October 16, 2008.(11)
    
    Incorporated by reference to Exhibit 10.2 to Registrants Current Report on Form 8-K,
dated December 9, 2008, filed with the Commission on December 12, 2008.
 (b)
    
    See item 15(a)(3)(c)
    
    None.
 64




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##### 



SIGNATURES
  
 By:
    /s/ Lance O. Diehl
    
    Date: March 10, 2009Lance O. DiehlPresident and Chief Executive Officer  By:
    /s/ Robert W. Brewington, Jr.
    
    Date: March 10, 2009Robert W. Brewington, Jr.DirectorBy:
    /s/ Edward L. Campbell
    
    Date: March 10, 2009Edward L. Campbell.DirectorBy:
    /s/ Lance O. Diehl
    
    Date: March 10, 2009Lance O. DiehlPresident, Chief Executive Officer and
DirectorBy:
    /s/ Robert W. Dillon
    
    Date: March 10, 2009Robert W. DillonDirectorBy:
    /s/ Frank D. Gehrig
    
    Date: March 10, 2009Frank D. GehrigDirectorBy:
    /s/ William F. Gittler
    
    Date: March 10, 2009William F. GittlerDirectorBy:
    /s/ Glenn E. Halterman
    
    Date: March 10, 2009Glenn E. HaltermanDirector, Chairman of the BoardBy:
    /s/ Elwood R. Harding, Jr..
    
    Date: March 10, 2009Elwood R. Harding, Jr.DirectorBy:
    /s/ Joanne I. Keenan
    
    Date: March 10, 2009Joanne I. KeenanDirectorBy:
    /s/  Willard H. Kile, Jr.
    
    Date: March 10, 2009Willard H. Kile, Jr.DirectorBy:
    /s/ W. Bruce McMichael, Jr.
    
    Date: March 10, 2009W. Bruce McMichael, Jr.Director 65




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##### 



By:
    /s/ Mary Ann B. Naugle
    
    Date: March 10, 2009Mary Ann B. NaugleDirectorBy:
    /s/ Andrew B. Pruden
    
    Date: March 10, 2009Andrew B. PrudenDirectorBy:
    /s/ Charles B. Pursel
    
    Date: March 10, 2009Charles B. PurselDirectorBy:
    /s/ Paul E. Reichart
    
    Date: March 10, 2009Paul E. ReichartDirector, Vice Chairman of the BoardBy:
    /s/ Steven H. Shannon
    
    Date: March 10, 2009Steven H. ShannonDirectorBy:
    /s/ Jeffrey T. Arnold
    
    Date: March 10, 2009Jeffrey T. ArnoldChief Financial Officer and Treasurer INDEX TO EXHIBITS
 Item Number
    
    Description
    
    Page14
    
    Code of Conduct and Ethics
    
    
    6721
    
    List of Subsidiaries of the Corporation
    
    
    7123
    
    Consent of Independent Certified Public Accountants
    
    
    7231.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
    
    
    7331.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
    
    
    7432.1
    
    Section 1350 Certification of Chief Executive Officer
    
    
    7532.2
    
    Section 1350 Certification of Chief Financial Officer
    
    
    7699.1
    
    Charter of Audit Committee
    
    
    77
 66