<PAGE>

                                   EXHIBIT 13

                  PORTIONS OF THE ANNUAL REPORT TO STOCKHOLDERS
                   FOR THE FISCAL YEAR-ENDED DECEMBER 31, 2002





















                                       44
<PAGE>
                               CCFNB BANCORP, INC.
                                 AND SUBSIDIARY
                               2002 ANNUAL REPORT















                                       45
<PAGE>
CCFNB BANCORP, INC. AND SUBSIDIARY

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

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

      A copy of the Corporation's Annual Report for the year-ended December 31,
2002, on Form 10-K as filed with the Securities and Exchange Commission will be
furnished without charge upon written request to Mr. Lance O. Diehl, President
and Chief Executive Officer, Columbia County Farmers National Bank, 232 East
Street, Bloomsburg, Pennsylvania 17815.

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

<TABLE>
<CAPTION>
                                           2002        2001       2000
                                         --------    --------   --------
<S>                                      <C>         <C>        <C>
EARNINGS
     Interest income .................   $ 12,780    $ 13,719   $ 13,552
     Interest expense ................      5,741       6,924      6,859
     Provision for loan losses .......        309         163         54
     Investment securities gains .....        137          99          0
     Net income ......................      1,922       2,057   $  2,054

PER SHARE
     Net income ......................   $   1.47    $   1.54   $   1.51
     Cash dividends ..................        .63         .59        .56

BALANCES AT DECEMBER 31
     Assets ..........................   $229,032    $214,238   $203,054
     Investment securities ...........     53,528      57,121     47,311
     Net loans .......................    150,040     141,962    136,352
     Deposits ........................    172,127     155,666    143,169
     Stockholders' equity ............     26,840      26,042     25,050

RATIOS
     Return on average assets ........        .86%        .99%      1.04%
     Return on average equity ........       7.22%       7.90%      8.59%
     Dividend payout ratio ...........      42.86%      38.31%     37.09%
</TABLE>

<TABLE>
<CAPTION>
CONTENTS
<S>                                                                                                     <C>
Message to shareholders............................................................................
Consolidated balance sheets........................................................................
Consolidated statements of income..................................................................
Consolidated statements of stockholders' equity....................................................
Consolidated statements of cash flows..............................................................
Notes to consolidated financial statements
Report of Independent Certified Public Accountants.................................................
Management's discussion and analysis of financial condition and results of operations..............
</TABLE>

                                       46
<PAGE>
CCFNB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2002 AND 2001

<TABLE>
<CAPTION>
                                                                                    2002           2001
                                                                                ------------   ------------
<S>                                                                             <C>            <C>
ASSETS
Cash and due from banks .....................................................   $  5,952,976   $  6,205,230
Interest-bearing deposits with other banks ..................................      8,010,927      2,312,406
Federal funds sold ..........................................................      2,056,774              0
Investment Securities Available-for-Sale ....................................     53,527,510     57,121,229
Loans, net of unearned income ...............................................    151,338,411    142,989,592
Allowance for loan losses ...................................................      1,298,406      1,027,805
                                                                                ------------   ------------
     Net loans ..............................................................   $150,040,005   $141,961,787
Premises and equipment, net .................................................      4,414,686      4,634,502
Other real estate owned .....................................................         67,900              0
Cash surrender value of life insurance ......................................      3,626,606        549,639
Accrued interest receivable .................................................        894,234        977,434
Other assets ................................................................        440,773        475,772
                                                                                ------------   ------------
     TOTAL ASSETS ...........................................................   $229,032,391   $214,237,999
                                                                                ------------   ------------

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Deposits:
     Non-interest bearing....................................................   $ 15,238,044   $ 14,711,465
     Interest bearing .......................................................    156,889,067    140,954,292
                                                                                ------------   ------------
         Total Deposits......................................................   $172,127,111   $155,665,757
Short-term borrowings .......................................................     17,274,252     19,780,924
Long-term borrowings ........................................................     11,346,815     11,357,497
Accrued interest and other expenses .........................................      1,332,584      1,382,143
Other liabilities ...........................................................        111,630          9,663
                                                                                ------------   ------------
         TOTAL LIABILITIES ..................................................   $202,192,392   $188,195,984
                                                                                ------------   ------------

STOCKHOLDERS' EQUITY
Common stock, par value $1.25 per share; authorized
     5,000,000 shares; issued and outstanding 1,292,724
        shares 2002, 1,326,172 shares 2001...................................   $  1,615,905   $  1,657,715
Surplus......................................................................      4,008,665      4,730,002
Retained earnings............................................................    20,678,631      19,578,971
Accumulated other comprehensive income.......................................        536,798         75,327
                                                                                ------------   ------------
         TOTAL STOCKHOLDERS' EQUITY..........................................   $ 26,839,999   $ 26,042,015
                                                                                ------------   ------------
         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..........................   $229,032,391   $214,237,999
                                                                                ============   ============
</TABLE>

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

                                       47
<PAGE>
CCFNB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR YEARS ENDED DECEMBER 31,  2002, 2001 AND 2000

<TABLE>
<CAPTION>
                                                                     2002           2001           2000
                                                                 ------------   ------------   ------------
<S>                                                              <C>            <C>            <C>
INTEREST INCOME
Interest and fees on loans....................................   $ 10,096,412   $ 10,645,387   $ 10,723,881
Interest and dividends on investment securities:
     Taxable..................................................      1,710,258      1,842,153      1,924,553
     Tax-exempt...............................................        798,663        814,957        731,901
     Dividends................................................         58,792         81,078         85,490
Federal funds sold............................................         51,224         66,967          2,675
Deposits in other banks.......................................         64,872        268,742         83,252
                                                                 ------------   ------------   ------------
         TOTAL INTEREST INCOME................................   $ 12,780,221   $ 13,719,284   $ 13,551,752
                                                                 ------------   ------------   ------------

INTEREST EXPENSE
Deposits .....................................................   $  4,724,904   $  5,473,454   $  5,169,571
Short-term borrowings.........................................        336,364        718,979      1,119,810
Long-term borrowings..........................................        679,936        731,371        569,747
                                                                 ------------   ------------   ------------
         TOTAL INTEREST EXPENSE...............................   $  5,741,204   $  6,923,804   $  6,859,128
                                                                 ------------   ------------   ------------

Net interest income...........................................   $  7,039,017   $  6,795,480   $  6,692,624
Provision for loan losses.....................................        309,000        162,500         54,000
                                                                 ------------   ------------   ------------
     NET INTEREST INCOME AFTER PROVISION
         FOR LOAN LOSSES......................................   $  6,730,017   $  6,632,980   $  6,638,624
                                                                 ------------   ------------   ------------

NON-INTEREST INCOME
Service charges and fees......................................   $    650,379   $    606,252   $    594,838
Gain on Sale of Loans.........................................          1,435              0              0
Trust department..............................................        215,145        237,904        219,261
Other.........................................................        206,719        205,699        239,174
Investment securities gains, net..............................        136,892        98, 895              0
                                                                 ------------   ------------   ------------
         TOTAL NON-INTEREST INCOME............................   $  1,210,570   $  1,148,750   $  1,053,273
                                                                 ------------   ------------   ------------

NON-INTEREST EXPENSE
Salaries......................................................   $  2,223,923   $  2,050,305   $  2,015,868
Pensions and other employee benefits..........................        729,689        691,798        644,774
Occupancy, net................................................        354,643        366,157        328,313
Equipment.....................................................        587,168        544,166        601,031
State shares tax..............................................        254,208        242,507        218,781
Other.........................................................      1,329,541      1,209,282      1,157,955
                                                                 ------------   ------------   ------------
         TOTAL NON-INTEREST EXPENSE...........................   $  5,479,172   $  5,104,215   $  4,966,722
                                                                 ------------   ------------   ------------

Income before income taxes....................................   $  2,461,415   $  2,677,515   $  2,725,175
Income tax expense............................................        539,157        620,928        671,114
                                                                 ------------   ------------   ------------
         NET INCOME...........................................   $  1,922,258   $  2,056,587   $  2,054,061
                                                                 ============   ============   ============

PER SHARE DATA
Net income....................................................           1.47           1.54   $       1.51
                                                                 ------------   ------------   ------------
Cash dividends................................................   $        .63   $        .59   $        .56
                                                                 ------------   ------------   ------------
Weighted average shares outstanding...........................      1,309,084      1,338,007      1,355,624
</TABLE>

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

                                       48
<PAGE>
CCFNB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000



<TABLE>
<CAPTION>
                                            Common                   Comprehensive
                                            Stock        Surplus        Income
                                          -----------   ----------   -----------
<S>                                       <C>           <C>          <C>
BALANCE AT DECEMBER 31, 1999 ...........  $ 1,709,564   $5,483,515

Comprehensive income :
  Net income ...........................            0            0   $   2,054,061
  Change in net unrealized gain on
    investment  securities
    available-for-sale,
    net of reclassification
    adjustment and
    tax effects ........................            0            0       1,070,719
                                                                     -------------
  Total comprehensive income ...........                             $   3,124,780
                                                                     =============
Issuance of 8,777 shares of common stock
  under dividend reinvestment and stock
  purchase plans .......................       10,971      137,191
Purchase of 30,100 shares of treasury
  stock ................................            0            0
Retirement of 30,100 shares of treasury
  stock ................................      (37,625)    (474,645)
Cash dividends $.56 per share ..........            0            0
                                          -----------   ----------
BALANCE AT DECEMBER 31, 2000 ...........  $ 1,682,910   $5,146,061
                                          ===========   ==========

Comprehensive income :
  Net income ...........................            0            0   $   2,056,587
  Change in net unrealized gain on
    investment  securities
    available-for-sale,
    net of reclassification
    adjustment and
    tax effects ........................            0            0         164,555
                                                                     -------------
  Total comprehensive income ...........                             $   2,221,142
                                                                     =============
Issuance of 7,345 shares of common stock
  under dividend reinvestment and stock
  purchase plans .......................        9,181      139,112
Purchase of 27,501 shares of treasury
  stock ................................            0            0
Retirement of 27,501 shares of treasury
  stock ................................      (34,376)    (555,171)
Cash dividends $.59 per share ..........            0            0
                                          -----------   ----------

BALANCE AT DECEMBER 31, 2001 ...........  $ 1,657,715   $4,730,002

Comprehensive income: ..................
  Net income ...........................            0            0   $   1,922,258
  Change in net unrealized gain  on
    investment securities
    available-for-sale,
    net of reclassification
    adjustment and
    tax effects ........................            0            0         461,471
                                                                     -------------
   Total comprehensive income ..........                             $   2,383,729
                                                                     =============
Issuance of 8,052 shares of common......
    stock under dividend reinvestment
    and stock purchase plans ...........       10,065      167,188
Purchase of 41,500 shares  of
  treasury stock .......................            0            0
Retirement of 41,500 shares of treasury
  stock ................................      (51,875)    (888,525)
Cash dividends $.63 per share ..........            0            0
                                          -----------   -----------

BALANCE AT DECEMBER 31, 2002 ...........  $ 1,615,905   $4,008,665
                                          ===========   ==========
</TABLE>

<TABLE>
<CAPTION>
                                                         Accumulated
                                                            Other
                                           Retained     Comprehensive   Treasury
                                           Earnings     Income (Loss)     Stock        Total
                                          ----------    -------------   --------    --------------
<S>                                       <C>           <C>             <C>         <C>
BALANCE AT DECEMBER 31, 1999 ...........  $17,013,997   $  (1,159,947)  $       0   $23,047,129

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

  Total comprehensive income ...........

Issuance of 8,777 shares of common stock
  under dividend reinvestment and stock
  purchase plans .......................            0               0           0        148,162
Purchase of 30,100 shares of treasury
  stock ................................            0               0    (512,270)      (512,270)
Retirement of 30,100 shares of treasury
  stock ................................            0               0     512,270              0
Cash dividends $.56 per share ..........     (757,796)              0           0      (757,796)
                                          -----------   -------------   ----------  ------------
BALANCE AT DECEMBER 31, 2000 ...........  $18,310,262    $    (89,228)  $       0   $ 25,050,005
                                          ===========   =============   =========   ============

Comprehensive income :
  Net income ...........................    2,056,597               0           0      2,056,587
  Change in net unrealized gain on
    investment  securities
    available-for-sale,
    net of reclassification
    adjustment and
    tax effects ........................            0         164,555           0        164,555

  Total comprehensive income ...........

Issuance of 7,345 shares of common stock
  under dividend reinvestment and stock
  purchase plans .......................            0               0           0        148,293
Purchase of 27,501 shares of treasury
  stock ................................            0               0    (589,547)      (589,547)
Retirement of 27,501 shares of treasury
  stock ................................            0               0     589,547              0
Cash dividends $.59 per share ..........     (787,878)              0           0       (787,878)
                                          -----------   -------------   ---------   ------------

BALANCE AT DECEMBER 31, 2001 ...........  $19,578,981   $      75,327   $       0   $ 26,042,015
                                          ===========   =============   =========   ============

Comprehensive income: ..................                                        0              0
  Net income ...........................    1,922,258               0           0      1,922,258
  Change in net unrealized gain  on
    investment securities
    available-for-sale,
    net of reclassification
    adjustment and
    tax effects ........................            0         461,471           0        461,471

   Total comprehensive income ..........

Issuance of 8,052 shares of common......
    stock under dividend reinvestment
    and stock purchase plans ...........            0               0           0        177,253
Purchase of 41,500 shares  of
  treasury stock .......................            0               0    (940,400)      (940,400)
Retirement of 41,500 shares of treasury
  stock ................................            0               0     940,400              0
Cash dividends $.63 per share ..........     (822,598)              0           0       (822,598)
                                          -----------   -------------   ---------   ------------

BALANCE AT DECEMBER 31, 2002 ...........  $20,678,641    $    536,798   $       0   $ 26,839,999
                                          ===========   =============   =========   ============
</TABLE>

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

                                       49
<PAGE>
CCFNB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR YEARS ENDED DECEMBER 31, 2002, 2001 AND  2000

<TABLE>
<CAPTION>
                                                                              2002            2001            2000
                                                                          ------------    ------------    ------------
<S>                                                                       <C>             <C>             <C>
OPERATING ACTIVITIES
Net income ............................................................   $  1,922,258    $  2,056,587    $  2,054,061
Adjustments to reconcile net income to net cash provided by
  operating activities:
    Provision for loan losses .........................................        309,000         152,500          54,000
    Depreciation and amortization .....................................        479,529         441,033         509,630
    Premium amortization on investment securities .....................        240,126         103,748          36,381
    Discount accretion on investment securities .......................        (21,966)        (17,734)        (17,469)
    Deferred income taxes (benefit) ...................................       (139,369)        (42,741)        (11,739)
    (Gain) on sales of investment securities Available-for-Sale .......       (136,892)        (98,895)              0
    (Gain) on sale of mortgage loans ..................................         (1,435)              0               0
    Proceeds from sale of mortgage loans ..............................        143,315               0               0
    Originations of mortgage loans for resale .........................       (142,065)              0               0
    (Gain) loss from investment in insurance agency ...................            (78)          1,916               0
    (Increase) decrease in accrued interest receivable ................         83,200          60,331         (35,248)
    (Increase) in other assets - net ..................................        (11,510)        (61,575)         (4,354)
    Net increase in cash surrender value of bank owned life insurance .        (76,967)        (78,840)        (70,265)
    Increase (decrease) in accrued interest and other expenses ........        (49,559)         56,550          94,621
    Increase (decrease) in other liabilities - net ....................         46,100         (23,279)         18,979
                                                                          ------------    ------------    ------------
          NET CASH PROVIDED BY OPERATING ACTIVITIES ...................   $  2,643,687    $  2,559,601    $  2,628,597
                                                                          ------------    ------------    ------------
INVESTING ACTIVITIES
Purchase of investment securities Available-for-Sale ..................   $(31,616,079)   $(42,860,135)   $ (1,721,950)
Proceeds from sales, maturities and redemption of investment securities
    Available-for-Sale ................................................     35,831,825      33,318,255       4,917,158
Proceeds from maturities and redemption of investment securities
    Held-to-Maturity ..................................................              0               0         200,000
Net (increase) decrease in loans ......................................     (8,454,934)     (5,772,095)     (2,968,509)
Purchases of premises and equipment ...................................       (259,713)       (153,248)       (157,970)
Acquisition of interest in insurance agency ...........................              0        (167,268)              0
Purchase of bank owned life insurance policies ........................      3,000,000               0               0
                                                                          ------------    ------------    ------------
          NET CASH PROVIDED BY (USED) IN INVESTING ACTIVITIES .........   $ (7,498,901)   $(15,534,490)   $    268,729
                                                                          ------------    ------------    ------------
FINANCING ACTIVITIES
Net increase (decrease) in deposits ...................................   $ 16,461,354    $ 12,497,119    $  4,563,001
Net increase (decrease) in short-term borrowings ......................     (2,506,672)       (328,042)    (10,771,412)
Proceeds from long-term borrowings ....................................              0               0      11,032,092
Repayment of long-term borrowings .....................................        (10,682)     (2,010,063)         (8,276)
Acquisition of treasury stock .........................................       (940,400)       (589,547)       (512,270)
Proceeds from issuance of common stock ................................        177,253         148,293         148,162
Cash dividends paid ...................................................       (822,598)       (787,878)       (757,796)
                                                                          ------------    ------------    ------------
          NET CASH PROVIDED BY FINANCING ACTIVITIES ...................   $ 12,358,255    $  8,929,882    $  3,693,501
                                                                          ------------    ------------    ------------
          INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ............   $  7,503,041    $ (4,145,008)   $  6,590,827


CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ........................      8,517,636      12,662,644       6,071,817
                                                                          ------------    ------------    ------------
    CASH AND CASH EQUIVALENTS AT END OF YEAR ..........................   $ 16,020,677    $  8,517,636    $ 12,662,644
                                                                          ============    ============    ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
    Interest ..........................................................   $  5,800,312    $  6,944,409    $  6,775,411
    Income taxes ......................................................   $    780,669         624,853    $    684,207
</TABLE>

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

                                       50
<PAGE>
CCFNB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

      PRINCIPLES OF CONSOLIDATION

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

      NATURE OF OPERATIONS & LINES OF BUSINESS

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

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

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

      USE OF ESTIMATES

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

      INVESTMENT SECURITIES

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

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

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

      LOANS

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

      Real estate mortgage loans held for resale are carried at the lower of
cost or market on an aggregate basis. These loans are sold with limited recourse
to the Corporation.

      Past Due Loans - Generally, a loan is considered past due when a payment
is in arrears for a period of 10 or 15 days, depending on the type of loan.
Delinquent notices are issued at this point and collection efforts will continue
on loans past due

                                       51
<PAGE>
beyond 60 days which have not been satisfied. Past due loans are continually
evaluated with determination for charge-off being made when no reasonable chance
remains that the status of the loan can be improved.

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

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

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

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

      DERIVATIVES

      The Bank has outstanding loan commitments that relate to the origination
of mortgage loans that will be held for resale. Pursuant to Statement of
Financial Accounting Standards (SFAS) No. 133 "Accounting for Derivative
Instruments and Hedging Activities" as amended by SFAS No. 138 "Accounting for
Certain Derivative Instruments and Certain Hedging Activities" and the guidance
contained in the Derivatives Implementation Group Statement 133 Implementation
Issue No. C 13, the Bank has accounted for such loan commitments as derivative
instruments. The effective date of the implementation guidance is the first day
of the first fiscal quarter beginning after April 10, 2002. The outstanding loan
commitments in this category did not give rise to any losses for the year-ended
December 31, 2002, as the fair market value of each outstanding loan commitment
exceeded the Bank's cost basis in each loan commitment.

      PREMISES AND EQUIPMENT

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

      MORTGAGE SERVICING RIGHTS

      The Corporation originates and sells real estate loans to investors in the
secondary mortgage market. After the sale, the Corporation retains the right to
service these loans. When originated mortgage loans are sold and servicing is
retained, a servicing asset is capitalized based on relative fair value at the
date of sale. Servicing assets are amortized as an offset to other fees in
proportion to, and over the period of, estimated net servicing income. The
unamortized cost is included in other assets in the accompanying consolidated
balance sheet. The servicing rights are periodically evaluated for impairment
based on their relative fair value.

      OTHER REAL ESTATE OWNED

      Real estate properties acquired through, or in lieu of, loan foreclosure
are held for sale and are initially recorded at fair value on the date of
foreclosure establishing a new cost basis. After foreclosure, valuations are
periodically performed by management and the real estate is carried at the lower
of carrying amount or fair value less cost to sell and is included in other
assets. Revenues derived from and costs to maintain the assets and subsequent
gains and losses on sales are included in other non-interest income and expense.

      BANK OWNED LIFE INSURANCE

      The Corporation invests in Bank Owned Life Insurance (BOLI). Purchase of
BOLI provides life insurance coverage on certain employees with the Corporation
being owner and beneficiary of the policies.

                                       52
<PAGE>
      INVESTMENT IN INSURANCE AGENCY

      On January 2, 2001, the Corporation acquired a 50% interest in a local
insurance agency, a corporation organized under the laws of the Commonwealth of
Pennsylvania. The income or loss from this investment is accounted for under the
equity method of accounting. The carrying value of this investment as of
December 31, 2002 and 2001 is $165,430, and $165,352, respectively, and is
carried in other assets in the accompanying consolidated balance sheets.

      INCOME TAXES

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

      PER SHARE DATA

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

      CASH FLOW INFORMATION

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

      TRUST ASSETS AND INCOME

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

      SEGMENT REPORTING

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

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

      RECENT ACCOUNTING PRONOUNCEMENTS

      Statement of Financial Accounting Standards (SFAS) No. 141, "Business
Combinations" is generally effective for all business combinations initiated
after June 30, 2001, and replaces APB Opinion No. 16, "Business Combinations"
and SFAS No. 38 "Accounting for Preacquisition Contingencies of Purchased
Enterprises". All business combinations under this statement are to be accounted
for under the purchase method of accounting as the pooling-of-interest method is
prohibited. The standard does not have any impact on the Corporation's
consolidated financial condition or results of operations.

      Statement of Financial Accounting Standards (SAFS) No. 142, "Goodwill and
Other Intangible Assets" is generally effective for fiscal years beginning after
December 31, 2001, and addresses the financial accounting and reporting for
acquired goodwill and other intangible assets and replaces APB Opinion No. 17,
"Intangible Assets". The statement addresses how intangible assets that are
acquired individually or with a group or other assets (but not those acquired in
a business combination) should be accounted for in financial statements upon
their acquisition. Goodwill and other intangible assets with an indefinite
useful life should not be amortized but should be tested for impairment at least
annually. Intangibles that are separable from goodwill and that have a
determinable useful life should be amortized over the determinable useful life.
The standard does not have any impact on the Corporation's consolidated
financial condition or results of operations.

      Statement of Financial Accounting Standards (SFAS) No. 143, "Accounting
for Asset Retirement Obligations" is generally effective for financial
statements for fiscal years beginning after June 15, 2002. The statement
addresses financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. It applies to legal obligations associated with the retirement of
long-lived assets that result from the acquisition , construction development
and (or) the normal operation of a long-lived asset. The statement requires that
the fair value of a

                                       53
<PAGE>
liability for an asset retirement obligation be recognized in the period in
which it is incurred if a reasonable estimate of fair value can be made. The
associated asset retirement costs are capitalized as part of the carrying amount
of the long -lived asset. This standard is not expected to have any impact on
the Corporation's consolidated financial condition or results of operations.

      Statement of Financial Accounting Standards (SFAS) No. 144 "Accounting for
Impairment or Disposal of Long-Lived Assets" is generally effective for
financial statements issued for fiscal years beginning after December 15, 2001,
and for interim periods within those fiscal years. The statement addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets. The statement replaces FASB Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of",
and the accounting and reporting provisions of APB Opinion No. 30, "Reporting
the Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions", for the disposal of a "segment of a business" (as previously
defined in that opinion). The statement also amends ARB No. 51, "Consolidated
Financial Statements", to eliminate the exception to consolidation for a
subsidiary for which control is likely to be temporary. This standard does not
have any impact on the Corporation's consolidated financial condition or results
of operations.

      Statement of Financial Accounting Standards (SFAS) No. 145, "Recession of
FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and
Technical Corrections" is generally effective for financial statements issued on
or after May 15, 2002. The statement rescinds FASB Statement No. 4, "Reporting
Gains and Losses from Extinguishment of Debt", and an amendment of that
statement, FASB Statement No. 64, "Extinguishments of Debt made to Satisfy
Sinking-Fund Requirements". The statement amends FASB Statement No. 13,
"Accounting for Leases", to eliminate an inconsistency between the required
accounting for sale-leaseback transaction and the required accounting for
certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. The statement also amends other existing
authoritative pronouncements to make various technical corrections, clarify
meanings, or describe their applicability under changed conditions. This
standard does not have any impact on the Corporations' consolidated financial
condition or results of operations.

      ADVERTISING COSTS

      It is the Corporation's policy to expense advertising costs in the period
in which they are incurred. Advertising expense for the years ended December 31,
2002, 2001 and 2000, was approximately $71,923, $73,192 and $57,355,
respectively.

      RECLASSIFICATION

      Certain amounts in the consolidated financial statements of the prior
years have been reclassified to conform with presentation used in the 2002
consolidated financial statements. Such reclassifications had no effect on the
Corporation's consolidated financial condition or net income.

2.    RESTRICTED CASH BALANCES

      The Bank is required to maintain average reserve balances with the Federal
Reserve Bank. The amount required at December 31, 2002 was $998,000 and was
satisfied by vault cash. Additionally, as compensation for check clearing and
other services, compensating balances are required to be maintained with the
Federal Reserve Bank and other correspondent banks. At December 31, 2002, these
balances were $764,843.





                                       54
<PAGE>
3.    INVESTMENT SECURITIES AVAILABLE-FOR-SALE

      The amortized cost, related estimated fair value, and unrealized gains and
losses for investment securities were as follows at December 31, 2002 and 2001:

<TABLE>
<CAPTION>
                                                              Available-for-Sale Securities
                                                  -----------------------=-----------------------------
                                                                   Gross        Gross        Estimated
                                                   Amortized    Unrealized    Unrealized       Fair
                                                     Cost          Gains        Losses         Value
                                                  -----------   -----------   -----------   -----------
<S>                                               <C>           <C>           <C>           <C>
December 31, 2002:
Obligations of U.S. Government Corporations and
    Agencies:
        Mortgage-backed .......................   $22,266,089   $   440,491   $    16,812   $22,689,768
        Other .................................    10,082,530        43,029        18,253    10,107,306
Obligations of state and political subdivisions    15,336,744       420,898         7,037    15,750,604
Corporate securities ..........................     3,495,029         9,179        85,487     3,418,721
Marketable equity securities ..................       332,456        57,384        27,030       362,810
Restricted equity securities ..................     1,198,300             0             0     1,198,300
                                                  -----------   -----------   -----------   -----------
Total .........................................   $52,711,148   $   970,981   $   154,619   $53,527,510
                                                  ===========   ===========   ===========   ===========
</TABLE>


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


      Securities Available-for-Sale with an aggregate fair value of
$33,456,382in 2002 and $35,683,128 in 2001, respectively, were pledged to secure
public funds, trust funds, securities sold under agreements to repurchase and
other balances of $25,430,978 in 2002 and $28,012,969 in 2000, respectively, as
required by law.

      The amortized cost and estimated fair value of debt securities, by
expected maturity, are shown below at December 31, 2002. Expected maturities
will differ from contractual maturities, because some borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.

<TABLE>
<CAPTION>
                                                          Available-for-Sale
                                                     ---------------------------
                                                                      Estimated
                                                      Amortized         Fair
                                                        Cost            Value
                                                     -----------     -----------
<S>                                                  <C>             <C>
Due in one year or less ........................     $ 2,313,668     $ 2,340,995
Due after one year through five years ..........      23,715,943      24,049,266
Due after five years through ten years .........       9,056,280       9,198,736
Due after ten years ............................      17,625,257      17,938,513
                                                     -----------     -----------
Total ..........................................     $52,711,148     $53,527,510
                                                     ===========     ===========
</TABLE>

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

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

                                       55
<PAGE>
      Proceeds from sales, maturities and redemptions of investments in debt and
equity securities classified as Available-for-Sale during 2002, 2001 and 2000
were $35,899,741, $33,318,256 and $4,917,158, respectively. Gross gains realized
on these sales were $136,892, $98,895, and $0, respectively. There were no gross
losses on the 2002, 2001, and 2000 sales.

4     LOANS

      Major classifications of loans at December 31, 2002 and 2001 consisted of:

<TABLE>
<CAPTION>
                                                     2002             2001
                                                 -------------   -------------
<S>                                              <C>             <C>
Commercial ...................................   $  15,033,479   $  13,091,017
Tax-exempt ...................................       1,290,478         798,681
Municipal leases .............................       2,244,397       1,147,999
Real estate - construction ...................       1,185,530       2,537,584
Real estate ..................................     123,745,716     115,716,417
Personal .....................................       7,901,766       9,961,978
Total gross loans ............................     151,401,366     143,253,676
Less:  Unearned discount .....................         139,153         279,389
         Unamortized loan fees, net of costs .         (76,198)        (15,305)
                                                 -------------   -------------
Loans, net of unearned income ................     151,338,411     142,989,592
                                                 =============   =============
</TABLE>

      Non-accrual loans at December 31, 2002, 2001 and 2000 were $2,122,074,
$729,084 and $311,780, respectively. The gross interest that would have been
recorded if these loans had been current in accordance with their original terms
and the amounts actually recorded in income were as follows:

                                              2002          2001          2000
                                            --------      --------      --------
Gross interest due under terms .......      $131,335      $ 99,280      $ 29,248
Amount included in income ............        67,873        61,568         5,023
                                            --------      --------      --------
Interest income not recognized .......      $ 63,462      $ 37,712      $ 24,225
                                            ========      ========      ========

      At December 31, 2002, 2001 and 2000 the recorded investment in loans that
are considered to be impaired as defined by SFAS No. 114 was $149,278, $58,424
and $57,766, respectively. No additional charge to operations was required to
provide for the impaired loans since the total allowance for loan losses is
estimated by management to be adequate to provide for the loan loss allowance
required by SFAS No. 114 along with any other potential losses. The average
recorded investment in impaired loans during the years ended December 31, 2002,
2001 and 2000 was approximately $86,566, $47,339 and $29,604, respectively.

      At December 31, 2002, there were no significant commitments to lend
additional funds with respect to non-accrual and restructured loans.

      Changes in the allowance for loan losses for the years ended December 31,
2002, 2001 and 2000 were as follows:

<TABLE>
<CAPTION>
                                         2002           2001           2000
                                      -----------    -----------    -----------
<S>                                   <C>            <C>            <C>
Balance, beginning of year ........   $ 1,027,805    $ 1,008,301    $   985,165
Provision charged to operations ...       309,000        162,500         54,000
Loans charged-off .................       (99,707)      (189,186)       (98,105)
Recoveries ........................        61,308         46,190         67,241
                                      -----------    -----------    -----------
Balance, end of year ..............   $ 1,298,406    $ 1,027,805    $ 1,008,301
                                      ===========    ===========    ===========
</TABLE>

5     MORTGAGE SERVICING RIGHTS

      The Corporation commenced selling real estate mortgages during the last
quarter of 2002. The mortgage loans sold serviced for others are not included in
the accompanying Consolidated Balance Sheets. The unpaid principal balances of
mortgage loans serviced for others was $143,500 at December 31, 2002.

      The Bank does not require custodial escrow accounts in connection with the
foregoing loan servicing.

6.    PREMISES AND EQUIPMENT

      A summary of premises and equipment at December 31, 2002 and 2001 follows:

<TABLE>
<CAPTION>
                                                        2002             2001
                                                     ----------       ----------
<S>                                                  <C>              <C>
Land .........................................       $  567,939       $  567,939
Buildings and improvements ...................        4,539,204        4,533,510
Furniture and equipment ......................        3,810,259        3,556,240
                                                     ----------       ----------
                                                     $8,917,402       $8,657,689
Less:  Accumulated depreciation ..............        4,502,716        4,023,187
                                                     ----------       ----------
</TABLE>

                                       56
<PAGE>
<TABLE>
<S>                                                  <C>              <C>
                                                     $4,414,686       $4,634,502
                                                     ==========       ==========
</TABLE>

      Depreciation amounted to $479,529 for 2002, $441,033 for 2001 and $509,630
for 2000.

7     DEPOSITS

      Major classifications of deposits at December 31, 2002 and 2001 consisted
of:

<TABLE>
<CAPTION>
                                                     2002               2001
                                                 ------------       ------------
<S>                                              <C>                <C>
Demand - non-interest bearing ............       $ 15,238,044       $ 14,711,465
Demand - interest bearing ................         27,785,333         22,029,517
Savings ..................................         35,000,853         31,789,447
Time $100,000 and over ...................         31,190,539         26,058,987
Other time ...............................         62,912,342         61,076,341
                                                 ------------       ------------
                                                  172,127,111        155,665,757
                                                 ============       ============
</TABLE>


      The following is a schedule reflecting remaining maturities of time
deposits of $100,000 and over at December 31, 2002:

<TABLE>
<S>                                              <C>
2002 .....................................       $22,675,230
2003 .....................................         3,855,020
2004 .....................................         3,259,752
2005 .....................................           451,445
2006 and thereafter ......................           949,092
----                                             ------------
Total ....................................       $31,190,539
                                                 ===========
</TABLE>

      Interest expense related to time deposits of $100,000 or more was
$1,419,337 in 2002, $1493,072 in 2001 and $1,065,537 in 2000.

                                       57
<PAGE>
8     SHORT TERM BORROWINGS

      Federal funds purchased, securities sold under agreements to repurchase,
and Federal Home Loan Bank advances generally represented overnight or less than
30-day borrowings. U.S. Treasury tax and loan notes for collections made by the
Bank were payable on demand. Short-term borrowings consisted of the following at
December 31, 2002 and 2001:

<TABLE>
<CAPTION>
                                                                2002
                                         ----------------------------------------------
                                                                     Maximum
                                           Ending       Average     Month End   Average
                                           Balance      Balance      Balance     Rate
                                         -----------  -----------  -----------  -------
<S>                                      <C>          <C>          <C>          <C>
Federal funds purchased and securities
sold under agreements to repurchase ..   $16,274,252  $17,494,315  $20,058,091   1.89%

U.S. Treasury tax and loan notes .....     1,000,000      511,131    1,000,000   1.17%
                                         -----------  -----------  -----------  -------
Total ................................    17,274,252  $18,005,446  $21,058,091   1.87%
                                         ===========  ===========  ===========  =======
</TABLE>

<TABLE>
<CAPTION>
                                                                2001
                                         ----------------------------------------------
                                                                     Maximum
                                           Ending       Average     Month End   Average
                                           Balance      Balance      Balance     Rates
                                         -----------  -----------  -----------  -------
<S>                                      <C>          <C>          <C>          <C>
Federal funds purchased and securities
sold under agreements to repurchase ..   $19,606,983  $18,965,499  $20,684,867   3.70%

U.S. Treasury tax and loan notes .....       173,941      485,378    1,000,000   3.51%
                                         -----------  -----------  -----------  -------
Total ................................   $19,780,924  $19,450,877  $21,684,867   3.70%
                                         ===========  ===========  ===========  =======
</TABLE>

9.    LONG-TERM BORROWINGS

      Long-term borrowings consisted of the following due Federal Home Loan Bank
at December 31, 2002 and 2001:

<TABLE>
<CAPTION>
                                                                                                2002          2001
                                                                                             -----------   -----------
<S>                                                                                          <C>           <C>
Loan dated November 28, 1997 in the original amount of $225,000 for a 10 year term
    requiring monthly payments of $1,627 including interest at 6.12%, maturing in 2007 ...   $   191,402   $   198,966
    with a final payment due of $146,690.  Principal balances outstanding ................
Loan dated February 18, 1998 in the original amount of $2,000,000 for a 10 year term
    with a 5 year put.  Interest only is payable monthly @ 5.48% with a floating rate ....     2,000,000     2,000,000
    option at the end of 5 years.  Principal balances outstanding ........................
Loan dated June 25, 1998 in the original amount of $72,000 for a 30 year term
requiring
    monthly payments of $425 including interest at 5.856%.  Principal balances outstanding        67,556        68,665
Loan dated February 23, 1999 in the original amount of $29,160 for a 20 year term
    requiring monthly payments of $179 including interest at 5.50%.  Principal balances ..        26,840        27,493
    outstanding ..........................................................................
Loan dated August 20, 1999 in the original amount of $32,400 for a 20 year term
    requiring monthly payments of $199 including interest at 5.50%.  Principal ...........        30,190        30,896
    balances outstanding .................................................................
Loan dated January 27, 2000 in the original amount of $5,000,000 for a 10 year
term with
    a 1 year conversion date and a 3 month conversion frequency thereafter.  At ..........     5,000,000     5,000,000
    December 31,2002 the interest rate was 6.00%.  Principal balances outstanding ........
Loan dated August 16, 2000 in the original amount of $2,000,000 for a 10 year
    term with a 6 month conversion date and a 3 month conversion frequency thereafter ....     2,000,000     2,000,000
    At December 31, 2002 the interest rate was 5.925%. Principal balances outstanding ....
Loan dated September 20, 2000 in the original amount of $2,000,000 for a 10 year term
    with a 3 year conversion date and a 3 month conversion frequency thereafter ..........     2,000,000     2,000,000
    At December 31, 2002 the interest rate was 6.10%. Principal balances outstanding .....
Loan December 13, 2000 in the original amount of $32,092.44 for a 20 year term
    requiring monthly payments of $197 including interest at 5.50%.  Principal balances           30,827        31,477
    outstanding ..........................................................................   -----------   -----------
Total ....................................................................................   $11,346,815   $11,357,497
                                                                                             ===========   ===========
</TABLE>

      At December 31, 2002 the annual maturities of long-term debt were as
follows: $11,338 in 2003, $12,033 in 2004, $12,773 in 2005, $13,558 in 2006,
$160,203 in 2007 and $11,136,910 thereafter.

                                       58
<PAGE>
10.   COMPREHENSIVE INCOME

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

<TABLE>
<CAPTION>
                                                                              Years Ended December 31,
                                                                     -----------------------------------------
                                                                        2002            2001           2000
                                                                     -----------    -----------    -----------
<S>                                                                  <C>            <C>            <C>
Unrealized holding gains (losses) on Available-for-Sale investment
    securities ...................................................   $   840,186    $   354,266    $ 1,621,580

Less reclassification adjustment for gains realized in income ....       136,892         98,895              0
                                                                     -----------    -----------    -----------
Net unrealized gains (losses) ....................................   $   703,294    $   255,371    $ 1,621,580
Tax effects ......................................................      (241,823)       (90,816)      (550,861)
                                                                     -----------    -----------    -----------
Net of tax amount ................................................   $   461,471    $   164,555    $ 1,070,719
                                                                     ===========    ===========    ===========
</TABLE>

11.   STOCKHOLDERS' EQUITY AND STOCK PURCHASE PLANS

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

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

<TABLE>
<CAPTION>
                                         Per Share
                                -------------------------------
                                Number   Employees'    Market
                                  of      Purchase      Value
       Date Issued              Shares     Price      Of Shares
-----------------------------   ------   ----------   ---------
<S>                             <C>      <C>          <C>
2002 ........................      590       $20.92      $23.25
2001 ........................      839       $15.07      $16.75
2000 ........................      603       $18.45      $20.50
</TABLE>

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

<TABLE>
<CAPTION>
                                     Number of    Total
               Year                   Shares     Proceeds
----------------------------------   ---------   --------
<S>                                  <C>         <C>
2002 .............................       7,462   $164,906
2001 .............................       6,506   $135,649
2000 .............................       8,174   $137,037
</TABLE>

12    INCOME TAXES

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

<TABLE>
<CAPTION>
Federal                                  2002            2001            2000
                                      ---------       ---------       ---------
<S>                                   <C>             <C>             <C>
Current ........................      $ 678,526       $ 663,669       $ 682,853
Deferred (benefit) .............       (139,377)        (42,549)        (11,739)
                                      ---------       ---------       ---------
                                      $ 539,149       $ 621,120       $ 671,114
                                      =========       =========       =========

State                                   2002             2001           2000
                                      ---------       ---------       ---------
Current ........................      $       0       $       0       $       0
Deferred (benefit) .............              8           (192)               0
                                      ---------       ---------       ---------
       TOTAL PROVISION FOR TAXES      $ 539,157       $ 620,928       $ 671,114
                                      =========       =========       =========
</TABLE>

                                       59
<PAGE>
      A reconciliation of the actual provision for federal income tax expense
and the amounts which would have been recorded based upon the statutory rate of
34% follows:

<TABLE>
<CAPTION>
                                                2002                  2001                   2000
                                         ------------------    ------------------     ------------------
                                          Amount      Rate      Amount      Rate       Amount      Rate
                                         ---------    -----    ---------    -----     ---------    -----
<S>                                      <C>          <C>      <C>          <C>       <C>          <C>
Provision at statutory rate ..........   $ 836,811     34.0%   $ 910,355     34.0%    $ 926,560     34.0%
Tax-exempt income ....................    (323,811)   (13.2)    (327,037)   (12.2)     (294,275)   (10.8)
Non-deductible expenses ..............      38,296     1.6        48,142      1.8        46,176      1.7
Bank owned life insurance income - net      (9,509)     (.4)      (8,106)     (.3)       (5,190)     (.2)
Other, net ...........................      (2,638)     (.1)      (2,234)     (.1)       (2,157)     (.1)
                                         ---------    -----    ---------    -----     ---------    -----
Actual federal income tax and rate ...   $ 539,149     21.9%   $ 621,120     23.2%    $ 671,114     24.6%
                                         =========    =====    =========    =====     =========    =====
</TABLE>

      Income taxes applicable to realized security gains included in the
provision for income taxes totaled $48,110 in 2002, $33,624 in 2001 and $0 in
2000.

      The net deferred tax asset (liability) recorded by the Corporation
consisted of the following tax effects of temporary timing differences at
December 31 2002, 2001 and 2000:

<TABLE>
<CAPTION>
                                                     2002         2001         2000
                                                   ---------    ---------    ---------
<S>                                                <C>          <C>          <C>
Deferred tax assets:
    Loan loss reserve ..........................   $ 339,696    $ 247,692    $ 241,060
    Deferred compensation ......................     185,430      151,324      142,981
    Non-accrual loan interest ..................      16,800       11,291            0
    Contributions ..............................       5,588            0            0
    Investment in insurance agency .............         746          777            0
    Unrealized investment securities losses ....           0            0       53,076
                                                   ---------    ---------    ---------
                                           TOTAL   $ 548,260    $ 411,084    $ 437,117
                                                   =========    =========    =========

Deferred tax liabilities:
    Loan fees and costs ........................   $ (74,104)   $ (64,036)   $ (63,369)
    Accretion ..................................      (2,516)      (2,020)      (3,591)
    Unrealized investment securities gains .....    (279,563)     (37,740)           0
    Depreciation ...............................    (247,944)    (260,701)    (175,495)
                                                   ---------    ---------    ---------
                                           TOTAL   $(604,127)   $(364,497)   $(342,455)
                                                   ---------    ---------    ---------
Net deferred tax asset (liability) .............   $ (55,867)   $  46,587    $  94,662
                                                   =========    =========    =========
</TABLE>

      The above net deferred asset (liability) is included in other assets or
other liabilities on the consolidated balance sheets. It is anticipated that all
tax assets shown above will be realized, accordingly, no valuation allowance was
provided.

      The Corporation and its subsidiary file a consolidated federal income tax
return. The Parent Company is also required to file a separate state income tax
return and has available state operating loss carryforwards totaling $503,263.
The losses expire through 2022. The related deferred state tax asset in the
amount of $50,276 has been fully reserved and is not reflected in the net tax
asset (liability) since management is of the opinion that such assets will not
be realized in the foreseeable future.

13.   BENEFIT AND DEFERRED COMPENSATION PLANS

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

      Matching contributions amounted to $24,927, $23,446 and $22,725 for 2002,
2001 and 2000, respectively. Discretionary contributions amounted to $92,312,
$99,317, and $98,638 in 2002, 2001 and 2000, respectively.

      DIRECTORS

      The Bank entered into agreements with three directors to establish
non-qualified deferred compensation plans for each of these directors. These
plans are limited to four-year terms. The Bank may, however, enter into
subsequent similar plans with its directors. Each of the participating directors
is deferring the payment to himself of certain directors fees to which he is
entitled. Each director's future payment is based upon the cumulative amount of
deferred fees together with interest currently accruing thereon at the rate of
8% per annum, subject to change by the Board of Directors. The Bank has obtained
life insurance (designating the Bank as the beneficiary) on the lives of certain
directors in face amounts which are intended to cover the Bank's obligations and
related costs under the Director's Deferred Compensation Plan. As of December
31, 2002 and 2001, the net cash

                                       60
<PAGE>
value of insurance policies was $331,095 and $294,703 respectively, and the
total accrued liability was $216,039 and $217,536, respectively, relating to
these directors' deferred compensation agreements.

      EXECUTIVE OFFICERS

            The Bank entered into agreements with two executive officers to
      establish non-qualified deferred compensation plans. Each officer is
      deferring compensation in order to participate in this Deferred
      Compensation Plan. If the officer continues to serve as an officer of the
      Bank until he attains sixty-five (65) years of age, the Bank has agreed to
      pay him 120 guaranteed consecutive monthly payments commencing on the
      first day of the month following the officer's 65th birthday. Each
      officer's guaranteed monthly payment is based upon the future value of
      life insurance purchased with the compensation the officer has deferred.
      The Bank has obtained life insurance (designating the Bank as the
      beneficiary) on the life of each participating officer in an amount which
      is intended to cover the Bank's obligations under the Deferred
      Compensation Plan, based upon certain actuarial assumptions.

            During 2002, the agreements with the two executive officers were
      modified. Under one agreement, the executive officer will receive $225,000
      payable monthly over a 10 year period commencing in February 2003. Under
      another agreement, another executive officer will receive $175,000 payable
      monthly over a 10 year period commending in July 2003. This second
      agreement will also provide post employment health care benefits to the
      executive officer until the attainment of age 65. As of December 31, 2002
      and 2001, the net cash value of insurance policies was $292,515 and
      $254,936, respectively, and the total accrued liability, equal to the
      present value of these obligations, was $314,674 and $227,535,
      respectively, relating to these executive officers' deferred compensation
      agreements and the accrued liability related to the post employment health
      care benefit was $14,668 as of December 31, 2002.

      Additionally, during December 2002 the Bank purchased $3,000,000 of Bank
Owned Life Insurance policies on the lives of certain executive officers. The
amounts of net cash values of insurance policies are reported as assets on the
consolidated balance sheets.

14.   LEASE COMMITMENTS AND CONTINGENCIES

      At December 31, 2002 the Bank was leasing some minor office equipment
under operating leases.

      Rental expense under operating leases and contracted data processing
services for the years ended December 31, 2002, 2001 and 2000 were $4,976,
$4,874 and $5,702, respectively.

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

                                       61
<PAGE>
15.   RELATED PARTY TRANSACTIONS

      Certain directors and executive officers of the Corporation and the Bank,
as well as companies in which they are principal owners (i.e., at least 10%
ownership), were indebted to the Bank at December 31, 2002 and 2001. These loans
were made on substantially the same terms and conditions, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with unrelated parties.

      A summary of the activity on the related party loans, comprised of eight
directors, six executive officers and their related companies, consisted of the
following:

<TABLE>
<CAPTION>
                                                    2002                2001
                                                -----------         -----------
<S>                                             <C>                 <C>
Balance, beginning of year .............        $ 2,364,768         $ 2,113,043
Additions ..............................            901,660           1,410,000
Deductions .............................         (1,262,268)         (1,158,275)
                                                -----------         -----------
Balance, end of year ...................        $ 2,004,160         $ 2,364,768
                                                ===========         ===========
</TABLE>

      The above loans represent funds drawn and outstanding at the date of the
accompanying consolidated financial statement. Commitments by the Bank to
related parties on lines of credit for 2002 and 2001 presented an additional
off-balance sheet risk to the extent of undisbursed funds in the amount of
$437,955 and $317,902, respectively, on the above loans.

      These loans did not present more than the normal risk of collectibility
nor present other unfavorable features.

16    REGULATORY MATTERS

      Dividends are paid by the Corporation to shareholders from its assets
which are mainly provided by dividends from the Bank. However, national banking
laws place certain restrictions on the amount of cash dividends allowed to be
paid by the Bank to the Corporation. Generally, the limitation provides that
dividend payments may not exceed the Bank's current year's retained income plus
retained net income for the preceding two years. Accordingly, in 2003, without
prior regulatory approval, the Bank may declare dividends to the Corporation in
the amount of $1,080,224 plus additional amounts equal to the net income earned
in 2003 for the period January 1, 2003, through the date of declaration, less
any dividends which may have already been paid in 2003. Regulations also limit
the amount of loans and advances from the Bank to the Corporation to 10% of
consolidated net assets.

      The Corporation is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory - and possibly additional
discretionary - actions by regulators that, if undertaken, could have a direct
material effect on the Corporation's consolidated financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt corrective
action, the Corporation must meet specific capital guidelines that involve
quantitative measures of the Corporation's assets, liabilities, and certain
off-balance sheet items as calculated under regulatory accounting practices. The
Corporation's capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors. Management believes, as of December 31, 2002 and 2001, that the
Corporation and the Bank met all capital adequacy requirements to which they are
subject.

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

      As of December 31, 2002, the most recent notification from the Office of
the Comptroller of the Currency categorized the Bank as well capitalized under
the regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based,
and Tier I leverage ratios as set forth in the table. There are no conditions or
events since that notification that management believes have changed the
institution's category.

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

<TABLE>
<CAPTION>
                                                                                To Be Well
                                                                             Capitalized Under
                                                           For Capital       Prompt Corrective
                                        Actual          Adequacy Purposes    Action Provisions
                                  ------------------   ------------------   ------------------
                                   Amount     Ratio     Amount     Ratio     Amount     Ratio
                                  --------   -------   --------   -------   --------   -------
<S>                               <C>        <C>       <C>        <C>       <C>        <C>
As of December 31, 2002:
   Total Capital
      (To risk-weighted assets)    $27,615     19.46%   $11,352      8.00%   $14,191     10.00%
   Tier I Capital
      (To risk-weighted assets)    $26,303     18.53%   $ 5,682      4.00%   $ 8,524      6.00%
   Tier I Capital
      (To average assets) .....    $26,303     11.77%   $ 8,939      4.00%   $11,174      5.00%
As of December 31, 2001:
   Total Capital
      (To risk-weighted assets)    $26,989     19.82%   $10,894      8.00%   $13,618     10.00%
   Tier I Capital
</TABLE>

                                       62
<PAGE>
<TABLE>
<S>                               <C>        <C>       <C>        <C>       <C>        <C>
      (To risk-weighted assets)    $25,961     19.06%   $ 5,447      4.00%   $ 8,171      6.00%
   Tier I Capital
      (To average assets) .....    $25,961     12.44%   $ 8,346      4.00%   $10,432      5.00%
</TABLE>

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

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

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

      The Corporation may require collateral or other security to support
financial instruments with off-balance sheet credit risk. The contract or
notional amounts at December 31, 2002 and 2001 were as follows:

<TABLE>
<CAPTION>
                                                                         2002          2001
                                                                      -----------   -----------
<S>                                                                   <C>           <C>
Financial instruments whose contract amounts represent credit risk:
    Commitments to extend credit ..................................   $11,768,038   $11,841,592
    Financial standby letters of credit ...........................     1,842,578     2,347,562
    Performance standby letters of credit .........................        48,404        15,030
    Dealer floor plans ............................................     1,393,763     1,884,022
</TABLE>

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

      Standby letters of credit and commercial letters of credit are conditional
commitments issued by the Corporation to guarantee the performance of a customer
to a third party. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to customers.
The Corporation holds collateral supporting those commitments for which
collateral is deemed necessary. The extent of collateral held for those
commitments at December 31, 2002 varied from 0 percent to 100 percent; the
average amount collateralized was 82.5 percent.

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

      The Corporation granted commercial, consumer and residential loans to
customers within Pennsylvania. Of the total loan portfolio 82.0% was for real
estate loans, principally residential. It was the opinion of management that the
high concentration did not pose an adverse credit risk. Further, it was
management's opinion that the remainder of the loan portfolio was balanced and
diversified to the extent necessary to avoid any significant concentration of
credit.

18.   FAIR VALUES OF FINANCIAL INSTRUMENTS

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

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

      CASH AND OTHER SHORT-TERM INSTRUMENTS

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

                                       63
<PAGE>
      INVESTMENT SECURITIES

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

      LOANS

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

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

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

      DEPOSITS

            Under SFAS No. 107, the fair value of deposits with no stated
      maturity, such as Demand Deposits, Savings Accounts, and Money Market
      Accounts, was equal to the amount payable on demand at December 31, 2002
      and 2001.

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

      SHORT-TERM BORROWINGS

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

      LONG-TERM BORROWINGS

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

      COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT

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

            At December 31, 2002 and 2001, the carrying values and estimated
      fair values of financial instruments are presented in the table below:

                                       64
<PAGE>
<TABLE>
<CAPTION>
                                                                    2002                             2001
                                                       ------------------------------   ------------------------------
                                                         Carrying         Estimated       Carrying        Estimated
                                                          Amount          Fair Value       Amount         Fair Value
                                                       -------------    -------------   -------------    -------------
<S>                                                    <C>              <C>             <C>              <C>
Financial Assets:
    Cash and short-term investments ................   $  16,020,677    $  16,020,677   $   8,517,836    $   8,517,836
    Investment securities ..........................      53,427,510       53,527,510      57,121,229       57,121,229

Loans:
    Commercial .....................................      15,033,479       15,061,929      13,091,017       13,091,017
    Tax-exempt .....................................       1,290,478        1,367,242         798,681          798,681
    Municipal leases ...............................       2,244,397        2,260,100       1,147,999        1,147,999
    Real estate - construction .....................       1,185,530        1,184,982       2,537,584        2,537,584
    Real estate ....................................     123,745,716      124,272,112     115,716,417      115,819,722
    Personal .......................................       7,901,766        7,952,022       9,961,978        9,964,606
                                                       -------------    -------------   -------------    -------------
    Gross loans ....................................   $ 151,401,366    $ 152,098,387   $ 143,253,676    $ 143,359,609
    Deduct (add):  Unearned discount ...............         139,153                0         279,389                0
        Unamortized loan fees, net of costs ........         (76,198)               0          15,305                0
                                                       -------------    -------------   -------------    -------------
        Loans, net of unearned income ..............   $ 151,338,411    $ 152,098,387   $ 142,989,592    $ 143,359,609
        Allowance for losses .......................       1,298,406                0       1,027,805                0
                                                       -------------    -------------   -------------    -------------
    Net loans ......................................   $ 150,040,005    $ 152,098,387   $ 141,961,787    $ 143,359,609
                                                       =============    =============   =============    =============

Financial Liabilities:
    Deposits:
        Demand - non-interest bearing ..............   $  15,238,044    $  15,238,044   $  14,711,465    $  14,711,465
        Demand - interest bearing ..................      27,785,333       27,785,333      22,029,517       22,029,517
        Savings ....................................      35,000,853       35,000,853      31,789,447       31,789,447
        Time - $100,000 and over ...................      31,190,539       31,789,269      26,058,987       27,149,953
        Other time .................................      62,912,342       64,477,628      61,076,341       63,012,111
                                                       -------------    -------------   -------------    -------------
           Total Deposits ..........................   $ 172,127,111    $ 174,291,127   $ 155,665,757    $ 158,692,493
                                                       =============    =============   =============    =============

Short-Term Borrowings ..............................   $  17,274,252    $  17,274,252   $  19,780,924    $  19,780,924
Long-Term Borrowings ...............................      11,346,815       11,589,167      11,357,497       11,399,546

Off-Balance Sheet Assets (Liabilities):
    Commitments to extend credit ...................                       11,433,789                       11,841,592
    Standby letters of credit ......................                        1,842,578                        2,347,562
    Performance standby letters of credit ..........                           48,404                           15,030
    Dealer floor plans .............................                        1,393,763                        1,884,022
</TABLE>

                                       65
<PAGE>
19.   PARENT COMPANY FINANCIAL INFORMATION

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

<TABLE>
<CAPTION>
BALANCE SHEETS                                                                           December 31,
--------------                                                                    -------------------------
                                                                                     2002           2001
                                                                                  -----------    -----------
<S>                                                                               <C>            <C>
Assets
    Cash .......................................................                  $   153,103    $   261,018
    Investment in subsidiary ...................................                   26,214,740     25,289,498
    Investment in other equity securities ......................                      351,870        310,866
    Prepayments and other assets ...............................                      199,905        170,458
    Receivable from subsidiary .................................                            0         77,844
                                                                                  -----------    -----------
        Total Assets ...........................................                  $26,919,618    $26,109,684
                                                                                  ===========    ===========
Liabilities and Stockholders' Equity
    Accrued expenses and other liabilities .....................                  $    59,535    $    67,669
     Payable to subsidiary .....................................                       20,084              0
        Total Liabilities ......................................                  $    79,619    $    67,669
Stockholders' Equity
    Common stock ...............................................                  $ 1,615,905    $ 1,657,715
    Surplus ....................................................                    4,008,665      4,730,002
    Retained earnings ..........................................                   20,678,631     19,578,971
    Accumulated other comprehensive income .....................                      536,798         75,327
                                                                                  -----------    -----------
        Total Stockholders' Equity .............................                  $26,839,999    $26,042,015
                                                                                  -----------    -----------
        Total Liabilities and Stockholders' Equity .............                  $26,919,618    $26,109,684
                                                                                  ===========    ===========
</TABLE>

<TABLE>
<CAPTION>
STATEMENTS OF INCOME                                                        Years Ended December 31,
--------------------                                               -----------------------------------------
                                                                      2002           2001           2000
                                                                   -----------    -----------    -----------
<S>                                                                <C>            <C>            <C>
Income
    Dividends from subsidiary bank .............................   $ 1,470,933    $ 1,515,635    $ 1,330,102
    Dividends - other ..........................................        10,553          8,898          8,291
    Interest ...................................................         2,489          2,917          4,857
                                                                   -----------    -----------    -----------
        Total Income ...........................................   $ 1,483,975    $ 1,527,450    $ 1,343,250
Operating Expenses .............................................        72,683         90,787         75,604
                                                                   -----------    -----------    -----------
    Income Before Taxes and Equity in Undistributed
        Net Income of Subsidiary ...............................   $ 1,411,292    $ 1,436,663    $ 1,267,646
Applicable income tax (benefit) ................................       (22,758)       (29,746)       (23,208)
                                                                   -----------    -----------    -----------
    Income Before Equity in Undistributed Net Income
        of Subsidiary ..........................................   $ 1,434,050    $ 1,466,409    $ 1,290,854
Equity in undistributed income of subsidiary ...................       488,130        592,094        763,207
Loss from investment in insurance agency .......................            78         (1,916)             0
                                                                   -----------    -----------    -----------
    Net Income .................................................   $ 1,922,258    $ 2,056,587    $ 2,054,061
                                                                   ===========    ===========    ===========

STATEMENTS OF CASH FLOWS
------------------------
Operating Activities
Net Income .....................................................   $ 1,922,258    $ 2,056,587    $ 2,054,061
Adjustments to reconcile net income to net cash provided by
    operating activities:
        Equity in undistributed net income of subsidiary .......      (488,130)      (592,094)      (763,207)
        (Gain) loss from investment in an insurance agency .....           (78)         1,916              0
           (Increase) in prepayments and other assets ..........       (34,474)             0              0
        (Increase) decrease in receivable from subsidiary ......        77,844        103,365       (163,235)
           Increase in payable to subsidiary ...................        20,084              0              0
        Deferred income taxed (benefit) ........................            31           (777)             0
        Increase (decrease) in income taxes and accrued expenses
        Payable ................................................       (19,705)        38,816         (1,417)
                                                                   -----------    -----------    -----------
        Net Cash Provided By Operating Activities ..............   $ 1,477,830    $ 1,607,813    $ 1,125,202
                                                                   -----------    -----------    -----------
Investing Activities
Purchase of equity securities ..................................   $         0    $   (21,563)             0
Acquisition of interest in an insurance agency .................             0       (167,268)             0
                                                                   -----------    -----------    -----------
        Net Cash (Used) in Investing Activities ................   $         0    $  (188,831)             0
                                                                   -----------    -----------    -----------
Financing Activities
Acquisition of treasury stock ..................................   $  (940,400)   $  (589,547)   $  (512,270)
Proceeds from issuance of common stock .........................       177,253        148,293        148,162
Cash dividends .................................................      (822,598)      (787,878)      (757,796)
                                                                   -----------    -----------    -----------
        Net Cash (Used) By Financing Activities ................   $ 1,585,745)   $(1,229,132)   $(1,121,904)
                                                                   -----------    -----------    -----------
        Increase (Decrease) in Cash and Cash Equivalents .......   $  (107,915)   $   189,850    $     4,298
Cash and Cash Equivalents at Beginning of Year .................       261,018         71,168         66,870
                                                                   -----------    -----------    -----------
        Cash and Cash Equivalents at End of Year ...............   $   153,103    $   261,018    $    71,168
                                                                   ===========    ===========    ===========
</TABLE>

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<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Stockholders of CCFNB Bancorp, Inc.

We have audited the accompanying consolidated balance sheets of CCFNB Bancorp,
Inc. and Subsidiary as of December 31, 2002 and 2001, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 2002. These consolidated
financial statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of CCFNB
Bancorp, Inc. and Subsidiary as of December 31, 2002 and 2001, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2002 in conformity with generally
accepted accounting principles generally accepted in the United States of
America.





J. H. Williams & Co., LLP
Kingston, Pennsylvania
January 20, 2003











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