UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year-ended December 31, 2010
 or
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file Number: 000-19028
 CCFNB BANCORP, INC.
  PENNSYLVANIA
(State or other jurisdiction of 
incorporation or organization)
    
    23-2254643
(I.R.S. Employer
Identification Number)
 232 East Street, Bloomsburg, Pennsylvania
(Address of principal executive offices)
    
    17815
(Zip Code)
 (570) 784-4400
 None
 Common Stock, par value $1.25 per
share
 o þ
 o þ
 þ o
 o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
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CCFNB BANCORP, INC.
FORM 10-K
 INDEX
 PagePART IItem 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    10Item 1B. Unresolved Staff Comments
    
    
    14Item 2. Properties
    
    
    14Item 3. Legal Proceedings
    
    
    14PART IIItem 5. Market for the Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    14Item 6. Selected Financial Data
    
    
    16Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    30Item 8. Financial Statements and Supplementary Data
    
    
    31Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    65Item 9A Controls and Procedures
    
    
    65Item 9B. Other Information
    
    
    67PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    67Item 11. Executive Compensation
    
    
    67Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
    
    
    67Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    67Item 14. Principal Accounting Fees and Services
    
    
    67PART IVItem 15. Exhibits, Financial Statements Schedules
    
    
    68SIGNATURES
    
    
    69INDEX TO EXHIBITS
    
    
    70
  2




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PART I
 Item 1. Business
 General
  
    
    $614 million in total assets;
    
    $340 million in gross loans;
    
    $474 million in deposits; and
    
    $68 million in stockholders equity.
   
    
    economic characteristics,
    
    products and services,
    
    operating processes,
    
    delivery systems,
    
    customer bases, and
    
    regulatory oversight.
     Regulation and Supervision
   3




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Financial and Bank Holding Company Activities
  Interstate Banking and Branching
  Control Acquisitions
   Liability for Banking Subsidiaries
  Capital Requirements
  FDICIA
  4




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Dividend Restrictions
  Deposit or Preference Statute
  Other Federal Laws and Regulations
  
    
    Privacy provisions of the Gramm-Leach-Bliley Act and related regulations, which require us
to maintain privacy policies intended to safeguard customer financial information, to
disclose the policies to our customers and to allow customers to opt out of having their
financial service providers disclose their confidential financial information to
non-affiliated third parties, subject to certain exceptions;
    
    Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of
consumer financial records and prescribes procedures for complying with administrative
subpoenas of financial records;
    
    Consumer protection rules for the sale of insurance products by depository institutions,
adopted pursuant to the requirements of the Gramm-Leach-Bliley Act; and
    
    USA Patriot Act, which requires financial institutions to take certain actions to help
prevent, detect and prosecute international money laundering and the financing of terrorism.
 Sarbanes-Oxley Act of 2002
  5




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FDIC Insurance and Assessments
       Government Actions and Legislation
   6




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Dodd-Frank Wall Street Reform and Consumer Protection Act
  Holding Company Capital Requirements
 Corporate Governance
 Prohibition Against Charter Conversions of Troubled Institutions
 Limits on Derivatives
 Transactions with Affiliates and Insiders
 Debit Card Interchange Fees
 Interest on Business Accounts
 7




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Consumer Financial Protection Bureau
 Future Legislation
  The Bank
   Marketing Area
   Allowance for Loan Losses
    
    
    commercial, financial, and agricultural
    
    real estate mortgages,
 8




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
    
    consumer, and
    
    unallocated.
  
    
    by risk profile, and
    
    by past due status.
  
    
    historical trends,
    
    economic conditions, and
    
    any known deterioration.
   Sources of Funds
 General
 Deposits
    Available Information
 th
 9




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Item 1A. Risk Factors
 Adverse changes in the economic conditions in our market area could materially and negatively
affect our business.
  
    
    customers credit quality may deteriorate;
    
    loan delinquencies may increase;
    
    problem assets and foreclosures may increase;
    
    demand for our products and services may decrease;
    
    competition for low cost or non-interest bearing deposits may increase; and
    
    collateral securing loans may decline in value.
 Competitive pressures from financial services companies and other companies offering banking
services could negatively impact our business.
  Changes in interest rates could reduce our income and cash flows.
  Significant increases in interest rates may affect customer loan demand and payment habits.
  If the Banks loan growth exceeds that of its deposit growth, then the Bank may be required to
obtain higher cost sources of funds.
  If the Banks allowance for loan losses is not adequate to cover actual loan losses, its earnings
may decline.
  10




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Adverse changes in the market value of securities and investments that we manage for others may
negatively impact the growth level of the Banks non-interest income.
  The Banks branch locations may be negatively affected by changes in demographics.
  We operate in a highly regulated environment and may be adversely affected by changes in laws and
regulations.
  Training and technology costs, as well as product development and operating costs, may exceed our
expectations and negatively impact our profitability.
  If we fail to maintain an effective system of internal controls, we may not be able to accurately
report our financial results or prevent fraud.
  The loss of one or more of our key personnel may materially and adversely affect our prospects.
  11




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Increases in FDIC insurance premiums may have a material adverse effect of our results of
operations.
     We are a holding company dependent for liquidity on payments from First Columbia Bank & Trust Co.,
our major subsidiary, which are subject to restrictions.
  Our commercial real estate lending may expose us to a greater risk of loss and hurt our earnings
and profitability.
  We are required to make a number of judgments in applying accounting policies and different
estimates and assumptions in the application of these policies could result in a decrease in
capital and/or other material changes to our reports of financial condition and results of
operations. Also, changes in accounting standards can be difficult to predict and can materially
impact how we record and report our financial condition and results of operations.
   12




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Impairment of investment securities, goodwill, other intangible assets, or deferred tax assets
could require charges to earnings, which could result in a negative impact on our results of
operations.
  If we want to, or are compelled to, raise additional capital in the future, that capital may not be
available when it is needed and on terms favorable to current shareholders.
   The soundness of other financial institutions could adversely affect us.
  A substantial decline in the value of our Federal Home Loan Bank of Pittsburgh common stock may
adversely affect our financial condition.
   13




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An interruption or breach in security with respect to our information system, or our outsourced
service providers, could adversely impact our reputation and have an adverse impact on our
financial condition and results of operations.
  Item 1B. Unresolved Staff Comments
  Item 2. Properties
   Approximate
    
    Own orLocation
    
    Square Footage
    
    Lease
    
    UseMarket Street, Benton, PA
    
    
    8,512
    
    
    Own
    
    Banking Services1919 W. Front Street, Berwick, PA
    
    
    2,440
    
    
    Own
    
    Banking ServicesMarket Street, Berwick, PA
    
    
    3,547
    
    
    Own
    
    Banking Services1 Hospital Drive, Bloomsburg
    
    
    120
    
    
    Lease
    
    ATM Facility17 E. Main Street, Bloomsburg
    
    
    100
    
    
    Lease
    
    ATM Facility232 East Street, Bloomsburg
    
    
    16,213
    
    
    Own
    
    Main Office and Bancorp HeadquartersMarket Street, Bloomsburg
    
    
    1,335
    
    
    Lease
    
    Banking ServicesBuckhorn, PA
    
    
    693
    
    
    Lease
    
    Banking Services (In Wal-Mart Supercenter)Buckhorn, PA
    
    
    3,804
    
    
    Own
    
    Banking ServicesCatawissa, PA
    
    
    1,558
    
    
    Own
    
    Banking ServicesCatawissa, PA
    
    
    1,300
    
    
    Own
    
    ResidentialElysburg, PA
    
    
    2,851
    
    
    Own
    
    Banking ServicesMillville, PA
    
    
    2,553
    
    
    Own
    
    Banking ServicesOrangeville, PA
    
    
    3,444
    
    
    Own
    
    Banking Services1199 Lightstreet Road, Scott 
Township, PA
    
    
    16,384
    
    
    Own
    
    Banking Services, Financial Planning, IT
and Deposit Operations2691 Columbia Blvd, Scott 
Township, PA
    
    
    3,680
    
    
    Own
    
    Banking Services992 Central Road, Scott 
Township, PA
    
    
    12,813
    
    
    Own
    
    Operations CenterWest Hazleton, PA
    
    
    3,015
    
    
    Own
    
    Banking Services
  Item 3. Legal Proceedings
  PART II
 Item 5. Market for the Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
  14




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2010:
    
    High ($)
    
    
    Low ($)
    
    
    Dividends Declared ($)First quarter
    
    
    27.78
    
    
    
    24.95
    
    
    
    .29Second quarter
    
    
    27.99
    
    
    
    25.70
    
    
    
    .29Third quarter
    
    
    28.22
    
    
    
    25.70
    
    
    
    .30Fourth quarter
    
    
    30.00
    
    
    
    27.72
    
    
    
    .30
 2009:
    
    High ($)
    
    
    Low ($)
    
    
    Dividends Declared ($)First quarter
    
    
    19.00
    
    
    
    14.00
    
    
    
    .24Second quarter
    
    
    22.50
    
    
    
    18.35
    
    
    
    .24Third quarter
    
    
    24.00
    
    
    
    20.90
    
    
    
    .27Fourth quarter
    
    
    28.00
    
    
    
    23.50
    
    
    
    .28
   Total
    
    
    Average
    
    
    Total Number of
    
    
    Maximum Number (orNumber of
    
    
    Price Paid
    
    
    Shares (or Units)
    
    
    Approximate Dollar Value)Shares (or
    
    
    per Share
    
    
    Purchased as Part of
    
    
    of Shares (or Units) thatUnits)
    
    
    (or Units)
    
    
    Publicly Announced
    
    
    May Yet Be PurchasedPeriod
    
    Purchased
    
    
    Purchased
    
    
    Plans or Programs (1)
    
    
    Under the Plans or ProgramsMonth #1 (October 1 - October 31, 2010)
    
    
    5,000
    
    
    $
    28.80
    
    
    
    5,000
    
    
    
    139,000Month #2 (November 1 - November 30, 2010)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    139,000Month #3 (December 1 - December 31, 2010)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    139,000
 
 (1)
    
    This program was announced in 2009. The Board of Directors approved the purchase of
200,000 shares from time to time at prevailing market prices in block trades on the open
market or in privately negotiated transactions, as market conditions warrant. No
expiration date is associated with this program. 15




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Item 6. Selected Financial Data
  CCFNB BANCORP, INC.  SELECTED CONSOLIDATED FINANCIAL SUMMARY
 For the Year Ending December 31,(In Thousands except per share data)
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006INCOME STATEMENT DATA:Total interest income
    
    $
    26,776
    
    
    $
    28,420
    
    
    $
    21,357
    
    
    $
    14,483
    
    
    $
    13,202Total interest expense
    
    
    6,683
    
    
    
    8,614
    
    
    
    7,504
    
    
    
    6,185
    
    
    
    5,301Net interest income
    
    
    20,093
    
    
    
    19,806
    
    
    
    13,853
    
    
    
    8,298
    
    
    
    7,901Provision for possible loan losses
    
    
    1,555
    
    
    
    1,025
    
    
    
    750
    
    
    
    30
    
    
    
    175Non interest income
    
    
    6,123
    
    
    
    5,065
    
    
    
    3,043
    
    
    
    2,305
    
    
    
    1,900Non interest expenses
    
    
    16,031
    
    
    
    15,914
    
    
    
    12,172
    
    
    
    7,038
    
    
    
    6,437Federal income taxes
    
    
    2,326
    
    
    
    2,055
    
    
    
    896
    
    
    
    888
    
    
    
    777Net income
    
    $
    6,304
    
    
    $
    5,877
    
    
    $
    3,078
    
    
    $
    2,647
    
    
    $
    2,412PER SHARE DATA:Earnings per share (1)
    
    $
    2.82
    
    
    $
    2.61
    
    
    $
    1.82
    
    
    $
    2.15
    
    
    $
    1.93Cash dividends declared per share
    
    $
    1.18
    
    
    $
    1.03
    
    
    $
    0.90
    
    
    $
    0.82
    
    
    $
    0.78Book value per share
    
    $
    30.48
    
    
    $
    28.95
    
    
    $
    26.94
    
    
    $
    25.79
    
    
    $
    24.36Average annual shares outstanding
    
    
    2,232,239
    
    
    
    2,253,087
    
    
    
    1,688,498
    
    
    
    1,233,339
    
    
    
    1,249,844BALANCE SHEET DATA:Total assets
    
    $
    614,299
    
    
    $
    602,489
    
    
    $
    568,319
    
    
    $
    245,324
    
    
    $
    241,920Total loans
    
    
    340,453
    
    
    
    330,489
    
    
    
    320,068
    
    
    
    161,460
    
    
    
    160,641Total securities
    
    
    210,185
    
    
    
    223,250
    
    
    
    196,580
    
    
    
    57,686
    
    
    
    53,486Total deposits
    
    
    473,792
    
    
    
    462,288
    
    
    
    434,309
    
    
    
    170,938
    
    
    
    169,285FHLB advances-long-term
    
    
    6,123
    
    
    
    15,128
    
    
    
    9,133
    
    
    
    11,137
    
    
    
    11,297Total stockholders equity
    
    
    67,854
    
    
    
    65,086
    
    
    
    60,775
    
    
    
    31,627
    
    
    
    30,249PERFORMANCE RATIOS:Return on average assets
    
    
    1.03
    %
    
    
    1.01
    %
    
    
    0.77
    %
    
    
    1.07
    %
    
    
    1.02
    %Return on average stockholders equity
    
    
    9.35
    %
    
    
    9.25
    %
    
    
    6.91
    %
    
    
    8.54
    %
    
    
    7.97
    %Net interest margin (2)
    
    
    3.68
    %
    
    
    3.80
    %
    
    
    3.90
    %
    
    
    3.74
    %
    
    
    3.74
    %Total non-interest expense as a percentage of
average assets
    
    
    2.62
    %
    
    
    2.73
    %
    
    
    3.06
    %
    
    
    2.83
    %
    
    
    2.72
    %ASSET QUALITY RATIOS:Allowance for possible loan losses as a
percentage of total loans
    
    
    1.41
    %
    
    
    1.27
    %
    
    
    1.17
    %
    
    
    0.89
    %
    
    
    0.91
    %Allowance for possible loan losses as a
percentage of non-performing loans (3)
    
    
    115.75
    %
    
    
    89.87
    %
    
    
    83.29
    %
    
    
    102.64
    %
    
    
    686.79
    %Non-performing loans as a percentage of total
loans (3)
    
    
    1.22
    %
    
    
    1.42
    %
    
    
    1.43
    %
    
    
    0.09
    %
    
    
    0.13
    %Non-performing assets as a percentage of total
assets (3)
    
    
    0.68
    %
    
    
    0.78
    %
    
    
    0.86
    %
    
    
    0.57
    %
    
    
    0.09
    %Net charge-offs as a percentage of average net
loans (4)
    
    
    -0.28
    %
    
    
    -0.18
    %
    
    
    -0.05
    %
    
    
    -0.03
    %
    
    
    -0.17
    %LIQUIDITY AND CAPITAL RATIOS:Average equity to average assets
    
    
    11.04
    %
    
    
    10.90
    %
    
    
    11.19
    %
    
    
    12.48
    %
    
    
    12.79
    %Tier 1 capital to risk-weighted assets (5)
    
    
    17.25
    %
    
    
    16.38
    %
    
    
    15.37
    %
    
    
    18.10
    %
    
    
    19.25
    %Leverage ratios (5) (6)
    
    
    10.00
    %
    
    
    9.82
    %
    
    
    9.27
    %
    
    
    12.71
    %
    
    
    12.71
    %Total capital to risk-weighted assets (5)
    
    
    18.50
    %
    
    
    17.62
    %
    
    
    16.48
    %
    
    
    18.93
    %
    
    
    20.29
    %Dividend Payout Ratio
    
    
    41.72
    %
    
    
    39.44
    %
    
    
    51.75
    %
    
    
    38.16
    %
    
    
    40.38
    %
 16




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(1)
    
    Based upon average shares and common share equivalents outstanding.(2)
    
    Represents net interest income as a percentage of average total interest-earning assets,
calculated on a tax-equivalent basis.(3)
    
    Non-performing loans are comprised of (i) loans which are on a non-accrual basis, (ii)
accruing loans that are 90 days or more past due, and (iii) restructured loans.
Non-performing assets are comprised of non-performing loans and foreclosed real estate (assets
acquired in foreclosure), if applicable.(4)
    
    Based upon average balances for the respective periods.(5)
    
    Based on the Federal Reserve Banks risk-based capital guidelines, as applicable to the
Corporation. The Bank is subject to similar requirements imposed by the FDIC.(6)
    
    The leverage ratio is defined as the ratio of Tier 1 Capital to average total assets less
intangible assets, if applicable. Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 CAUTIONARY STATEMENT
  
    
    Our business and financial results are affected by business and economic
conditions, both generally and specifically in the Northcentral Pennsylvania market
in which we operate.
    
    Changes in interest rates and valuations in the debt, equity and other financial
markets.
    
    Disruptions in the liquidity and other functioning of financial markets,
including such disruptions in the market for real estate and other assets commonly
securing financial products.
    
    Actions by the Federal Reserve Board and other government agencies, including
those that impact money supply and market interest rates.
    
    Changes in our customers and suppliers performance in general and their
creditworthiness in particular.
    
    Changes in customer preferences and behavior, whether as a result of changing
business and economic conditions or other factors.
    
    Changes resulting from the newly enacted Dodd-Frank Wall Street Reform and
Consumer Protection Act.
    
    A continuation of recent turbulence in significant segments of the United States
and global financial markets, particularly if it worsens, could impact our
performance, both directly by affecting our revenues and the value of our assets and
liabilities and indirectly by affecting our customers and suppliers and the economy
generally.
    
    Our business and financial performance could be impacted as the financial
industry restructures in the current environment by changes in the competitive
landscape.
    
    Given current economic and financial market conditions, our forward-looking
statements are subject to the risk that these conditions will be substantially
different than we are currently expecting. These statements are based on our
current expectations that interest rates will remain low throughout most of 2011
with consistent credit spreads and our view that national economic trends currently
point to improving economic conditions into 2011 and a subdued recovery.
    
    Legal and regulatory developments could have an impact on our ability to operate
our businesses or our financial condition or results of operations or our
competitive position or reputation. Reputational impacts, in turn, could affect
matters such as business generation and retention, our ability to attract and retain
management, liquidity and
 17




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funding. These legal and regulatory developments could include: (a) the unfavorable
resolution of legal proceedings or regulatory and other governmental inquiries; (b)
increased litigation risk from recent regulatory and other governmental
developments; (c) the results of the regulatory examination process, and regulators
future use of
supervisory and enforcement tools; (d) legislative and regulatory reforms, including
changes to laws and regulations involving tax, pension, education and mortgage
lending, the protection of confidential customer information, and other aspects of the
financial institution industry; and (e) changes in accounting policies and principles.
 
    
    Our business and operating results are affected by our ability to identify and
effectively manage risks inherent in our businesses, including, where appropriate,
through the effective use of third-party insurance and capital management
techniques.
    
    Our ability to anticipate and respond to technological changes can have an impact
on our ability to respond to customer needs and to meet competitive demands.
    
    Our ability to implement our business initiatives and strategies could affect our
financial performance over the next several years.
    
    Competition can have an impact on customer acquisition, growth and retention, as
well as on our credit spreads and product pricing, which can affect market share,
deposits and revenues.
    
    Our business and operating results can also be affected by widespread natural
disasters, terrorist activities or international hostilities, either as a result of
the impact on the economy and capital and other financial markets generally or on us
or on our customers and suppliers.
   RESULTS OF OPERATIONS
 NET INTEREST INCOME
 2010 vs. 2009
    18




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2009 vs. 2008
     19




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##### 



AVERAGE BALANCE SHEET AND RATE ANALYSIS  YEARS ENDED DECEMBER 31,
 2010
    
    
    2009
    
    
    2008(In Thousands)
    
    Average Balance
    
    
    Interest
    
    
    Average Rate
    
    
    Average Balance
    
    
    Interest
    
    
    Average Rate
    
    
    Average Balance
    
    
    Interest
    
    
    Average RateASSETS:
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (1
    )Tax-exempt loans
    
    $
    22,900
    
    
    $
    1,460
    
    
    
    6.38
    %
    
    $
    19,627
    
    
    $
    1,254
    
    
    
    6.39
    %
    
    $
    16,156
    
    
    $
    1,070
    
    
    
    6.62
    %All other loans
    
    
    316,511
    
    
    
    18,662
    
    
    
    5.90
    %
    
    
    307,450
    
    
    
    18,925
    
    
    
    6.16
    %
    
    
    218,915
    
    
    
    14,587
    
    
    
    6.66
    %Total loans (2)(3)(4)
    
    
    339,411
    
    
    
    20,122
    
    
    
    5.93
    %
    
    
    327,077
    
    
    
    20,179
    
    
    
    6.17
    %
    
    
    235,071
    
    
    
    15,657
    
    
    
    6.66
    %Taxable securities
    
    
    196,615
    
    
    
    6,710
    
    
    
    3.41
    %
    
    
    189,202
    
    
    
    8,220
    
    
    
    4.34
    %
    
    
    118,012
    
    
    
    5,633
    
    
    
    4.77
    %Tax-exempt securitites (3)
    
    
    10,640
    
    
    
    602
    
    
    
    5.66
    %
    
    
    11,550
    
    
    
    650
    
    
    
    5.63
    %
    
    
    6,765
    
    
    
    385
    
    
    
    5.69
    %Total securities
    
    
    207,255
    
    
    
    7,312
    
    
    
    3.53
    %
    
    
    200,752
    
    
    
    8,870
    
    
    
    4.42
    %
    
    
    124,777
    
    
    
    6,018
    
    
    
    4.82
    %Federal funds sold
    
    
    1,536
    
    
    
    2
    
    
    
    0.13
    %
    
    
    7,639
    
    
    
    10
    
    
    
    0.13
    %
    
    
    6,990
    
    
    
    155
    
    
    
    2.22
    %Interest-bearing deposits
    
    
    17,623
    
    
    
    42
    
    
    
    0.24
    %
    
    
    2,877
    
    
    
    8
    
    
    
    0.28
    %
    
    
    873
    
    
    
    22
    
    
    
    2.52
    %Total interest-earning assets
    
    
    565,825
    
    
    
    27,478
    
    
    
    4.86
    %
    
    
    538,345
    
    
    
    29,067
    
    
    
    5.40
    %
    
    
    367,711
    
    
    
    21,852
    
    
    
    5.94
    %Other assets
    
    
    45,161
    
    
    
    
    
    
    
    
    
    
    
    44,460
    
    
    
    
    
    
    
    
    
    
    
    30,117TOTAL ASSETS
    
    $
    610,986
    
    
    
    
    
    
    
    
    
    
    $
    582,805
    
    
    
    
    
    
    
    
    
    
    $
    397,828LIABILITIES:Savings
    
    $
    63,223
    
    
    
    237
    
    
    
    0.37
    %
    
    $
    56,493
    
    
    
    225
    
    
    
    0.40
    %
    
    $
    39,223
    
    
    
    156
    
    
    
    0.40
    %Now deposits
    
    
    71,374
    
    
    
    99
    
    
    
    0.14
    %
    
    
    68,650
    
    
    
    100
    
    
    
    0.15
    %
    
    
    47,534
    
    
    
    129
    
    
    
    0.27
    %Money market deposits
    
    
    42,460
    
    
    
    319
    
    
    
    0.75
    %
    
    
    43,906
    
    
    
    452
    
    
    
    1.03
    %
    
    
    21,119
    
    
    
    350
    
    
    
    1.66
    %Time deposits
    
    
    234,812
    
    
    
    5,154
    
    
    
    2.19
    %
    
    
    228,005
    
    
    
    6,701
    
    
    
    2.94
    %
    
    
    154,334
    
    
    
    5,447
    
    
    
    3.53
    %Total deposits
    
    
    411,869
    
    
    
    5,809
    
    
    
    1.41
    %
    
    
    397,054
    
    
    
    7,478
    
    
    
    1.88
    %
    
    
    262,210
    
    
    
    6,082
    
    
    
    2.32
    %Short-term borrowings
    
    
    53,691
    
    
    
    427
    
    
    
    0.80
    %
    
    
    48,826
    
    
    
    368
    
    
    
    0.75
    %
    
    
    42,912
    
    
    
    754
    
    
    
    1.76
    %Long-term borrowings
    
    
    9,252
    
    
    
    349
    
    
    
    3.77
    %
    
    
    12,492
    
    
    
    640
    
    
    
    5.12
    %
    
    
    9,413
    
    
    
    572
    
    
    
    6.08
    %Junior subordinate debentures
    
    
    4,640
    
    
    
    98
    
    
    
    2.11
    %
    
    
    4,640
    
    
    
    128
    
    
    
    2.76
    %
    
    
    1,605
    
    
    
    96
    
    
    
    5.98
    %Total borrowings
    
    
    67,583
    
    
    
    874
    
    
    
    1.29
    %
    
    
    65,958
    
    
    
    1,136
    
    
    
    1.72
    %
    
    
    53,930
    
    
    
    1,422
    
    
    
    2.64
    %Total interest-bearing liabilities
    
    
    479,452
    
    
    
    6,683
    
    
    
    1.39
    %
    
    
    463,012
    
    
    
    8,614
    
    
    
    1.86
    %
    
    
    316,140
    
    
    
    7,504
    
    
    
    2.37
    %Demand deposits
    
    
    59,013
    
    
    
    
    
    
    
    
    
    
    
    51,908
    
    
    
    
    
    
    
    
    
    
    
    34,403Other liabilities
    
    
    5,096
    
    
    
    
    
    
    
    
    
    
    
    4,359
    
    
    
    
    
    
    
    
    
    
    
    2,761Stockholders equity
    
    
    67,425
    
    
    
    
    
    
    
    
    
    
    
    63,526
    
    
    
    
    
    
    
    
    
    
    
    44,524TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY
    
    $
    610,986
    
    
    
    
    
    
    
    
    
    
    $
    582,805
    
    
    
    
    
    
    
    
    
    
    $
    397,828Interest rate spread (6)
    
    
    
    
    
    
    
    
    
    
    3.47
    %
    
    
    
    
    
    
    
    
    
    
    3.54
    %
    
    
    
    
    
    
    
    
    
    
    3.57
    %Net interest income/margin (5)
    
    
    
    
    
    $
    20,795
    
    
    
    3.68
    %
    
    
    
    
    
    $
    20,453
    
    
    
    3.80
    %
    
    
    
    
    
    $
    14,348
    
    
    
    3.90
    %
 
 (1)
    
    Average volume information was compared using daily averages for interest-earning and
bearing accounts.(2)
    
    Interest on loans includes loan fee income.(3)
    
    Tax exempt interest revenue is shown on a tax-equivalent basis using a statutory federal income
tax rate of 34 percent for 2010, 2009 and 2008.(4)
    
    Nonaccrual loans have been included with loans for the purpose of analyzing net interest
earnings.(5)
    
    Net interest margin is computed by dividing annualized tax-equivalent net interest income by
total interest earning assets.(6)
    
    Interest rate spread represents the difference between the average rate earned on
interest-earning assets and the average rate paid on interest-bearing liabilities. 20




---



##### 



Reconcilement of Taxable Equivalent Net Interest Income
 For the Years Ended December 31,(In Thousands)
    
    2010
    
    
    2009
    
    
    2008Total interest income
    
    $
    26,776
    
    
    $
    28,420
    
    
    $
    21,357Total interest expense
    
    
    6,683
    
    
    
    8,614
    
    
    
    7,504Net interest income
    
    
    20,093
    
    
    
    19,806
    
    
    
    13,853Tax equivalent adjustment
    
    
    702
    
    
    
    647
    
    
    
    495Net interest income(fully taxable equivalent)
    
    $
    20,795
    
    
    $
    20,453
    
    
    $
    14,348
 Rate/Volume Analysis
  Year Ended December 31,2010 vs 2009
    
    
    2009 vs 2008Increase (Decrease)
    
    
    Increase (Decrease)Due to
    
    
    Due to(In Thousands)
    
    Volume
    
    
    Rate
    
    
    Net
    
    
    Volume
    
    
    Rate
    
    
    NetInterest income:Loans, tax-exempt
    
    $
    209
    
    
    $
    (4
    )
    
    $
    205
    
    
    $
    223
    
    
    $
    (39
    )
    
    $
    184Loans
    
    
    613
    
    
    
    (875
    )
    
    
    (262
    )
    
    
    5,346
    
    
    
    (1,008
    )
    
    
    4,338Taxable investment securities
    
    
    311
    
    
    
    (1,821
    )
    
    
    (1,510
    )
    
    
    3,133
    
    
    
    (546
    )
    
    
    2,587Tax-exempt investment securities
    
    
    (51
    )
    
    
    3
    
    
    
    (48
    )
    
    
    269
    
    
    
    (4
    )
    
    
    265Federal funds sold
    
    
    (8
    )
    
    
    
    
    
    
    (8
    )
    
    
    13
    
    
    
    (158
    )
    
    
    (145
    )Interest bearing deposits
    
    
    35
    
    
    
    (1
    )
    
    
    34
    
    
    
    19
    
    
    
    (33
    )
    
    
    (14
    )Total interest-earning assets
    
    
    1,109
    
    
    
    (2,698
    )
    
    
    (1,589
    )
    
    
    9,003
    
    
    
    (1,788
    )
    
    
    7,215Interest expense:Savings
    
    
    26
    
    
    
    (14
    )
    
    
    12
    
    
    
    69
    
    
    
    
    
    
    
    69NOW deposits
    
    
    4
    
    
    
    (5
    )
    
    
    (1
    )
    
    
    44
    
    
    
    (73
    )
    
    
    (29
    )Money market deposits
    
    
    (16
    )
    
    
    (117
    )
    
    
    (133
    )
    
    
    272
    
    
    
    (170
    )
    
    
    102Time deposits
    
    
    195
    
    
    
    (1,742
    )
    
    
    (1,547
    )
    
    
    2,278
    
    
    
    (1,024
    )
    
    
    1,254Short-term borrowings
    
    
    41
    
    
    
    18
    
    
    
    59
    
    
    
    93
    
    
    
    (479
    )
    
    
    (386
    )Long-term borrowings, FHLB
    
    
    (2,588
    )
    
    
    2,297
    
    
    
    (291
    )
    
    
    168
    
    
    
    (100
    )
    
    
    68Junior subordinate debentures
    
    
    
    
    
    
    (30
    )
    
    
    (30
    )
    
    
    84
    
    
    
    (52
    )
    
    
    32Total interest-bearing liabilities
    
    
    (2,338
    )
    
    
    407
    
    
    
    (1,931
    )
    
    
    3,008
    
    
    
    (1,898
    )
    
    
    1,110Change in net interest income
    
    $
    3,447
    
    
    $
    (3,105
    )
    
    $
    342
    
    
    $
    5,995
    
    
    $
    110
    
    
    $
    6,105
 PROVISION FOR LOAN LOSSES
 2010 vs. 2009
  21




---



##### 



2009 vs. 2008
  NON-INTEREST INCOME
 2010 vs. 2009
  For The Year EndedDecember 31, 2010
    
    
    December 31, 2009
    
    
    Change(In Thousands)

    
    Amount
    
    
    % Total
    
    
    Amount
    
    
    % Total
    
    
    Amount
    
    
    %Service charges and fees
    
    $
    1,778
    
    
    
    29.0
    %
    
    $
    1,704
    
    
    
    33.6
    %
    
    $
    74
    
    
    
    4.3
    %Gain on sale of loans
    
    
    1,113
    
    
    
    18.2
    
    
    
    617
    
    
    
    12.2
    
    
    
    496
    
    
    
    80.4Earnings on bank-owned life insurance
    
    
    444
    
    
    
    7.3
    
    
    
    445
    
    
    
    8.8
    
    
    
    (1
    )
    
    
    (0.2
    )Brokerage
    
    
    325
    
    
    
    5.3
    
    
    
    281
    
    
    
    5.5
    
    
    
    44
    
    
    
    15.7Trust
    
    
    663
    
    
    
    10.8
    
    
    
    655
    
    
    
    12.9
    
    
    
    8
    
    
    
    1.2Investment security losses
    
    
    (42
    )
    
    
    (0.7
    )
    
    
    (385
    )
    
    
    (7.6
    )
    
    
    343
    
    
    
    (89.1
    )Interchange fees
    
    
    850
    
    
    
    13.9
    
    
    
    743
    
    
    
    14.7
    
    
    
    107
    
    
    
    14.4Other
    
    
    992
    
    
    
    16.2
    
    
    
    1,005
    
    
    
    19.9
    
    
    
    (13
    )
    
    
    (1.3
    )Total non-interest income
    
    $
    6,123
    
    
    
    100.0
    %
    
    $
    5,065
    
    
    
    100.0
    %
    
    $
    1,058
    
    
    
    20.9
    %
 2009 vs. 2008
  22




---



##### 



For The Year EndedDecember 31, 2009
    
    
    December 31, 2008
    
    
    Change(In Thousands)
    
    Amount
    
    
    % Total
    
    
    Amount
    
    
    % Total
    
    
    Amount
    
    
    %Service charges and fees
    
    $
    1,704
    
    
    
    33.6
    %
    
    $
    1,281
    
    
    
    42.1
    %
    
    $
    423
    
    
    
    33.0
    %Gain on sale of loans
    
    
    617
    
    
    
    12.2
    
    
    
    316
    
    
    
    10.4
    
    
    
    301
    
    
    
    95.3Earnings on bank-owned life insurance
    
    
    445
    
    
    
    8.8
    
    
    
    366
    
    
    
    12.0
    
    
    
    79
    
    
    
    21.6Brokerage
    
    
    281
    
    
    
    5.5
    
    
    
    218
    
    
    
    7.2
    
    
    
    63
    
    
    
    28.9Trust
    
    
    655
    
    
    
    12.9
    
    
    
    434
    
    
    
    14.3
    
    
    
    221
    
    
    
    50.9Investment security losses
    
    
    (385
    )
    
    
    (7.6
    )
    
    
    (431
    )
    
    
    (14.2
    )
    
    
    46
    
    
    
    (10.7
    )Interchange fees
    
    
    743
    
    
    
    14.7
    
    
    
    417
    
    
    
    13.7
    
    
    
    326
    
    
    
    78.2Other
    
    
    1,005
    
    
    
    19.9
    
    
    
    442
    
    
    
    14.5
    
    
    
    563
    
    
    
    127.4Total non-interest income
    
    $
    5,065
    
    
    
    100.0
    %
    
    $
    3,043
    
    
    
    100.0
    %
    
    $
    2,022
    
    
    
    66.4
    %
 NON-INTEREST EXPENSE
 2010 vs. 2009
   For The Years EndedDecember 31, 2010
    
    
    December 31, 2009
    
    
    Change(In Thousands)

    
    Amount
    
    
    % Total
    
    
    Amount
    
    
    % Total
    
    
    Amount
    
    
    %Salaries
    
    $
    6,447
    
    
    
    40.2
    %
    
    $
    6,314
    
    
    
    39.7
    %
    
    $
    133
    
    
    
    2.1
    %Employee benefits
    
    
    1,811
    
    
    
    11.3
    
    
    
    1,605
    
    
    
    10.1
    
    
    
    206
    
    
    
    12.8Occupancy
    
    
    1,114
    
    
    
    6.9
    
    
    
    1,062
    
    
    
    6.7
    
    
    
    52
    
    
    
    4.9Furniture and equipment
    
    
    1,330
    
    
    
    8.3
    
    
    
    1,272
    
    
    
    8.0
    
    
    
    58
    
    
    
    4.6State shares tax
    
    
    561
    
    
    
    3.5
    
    
    
    529
    
    
    
    3.3
    
    
    
    32
    
    
    
    6.0Professional fees
    
    
    595
    
    
    
    3.7
    
    
    
    587
    
    
    
    3.7
    
    
    
    8
    
    
    
    1.4Directors fees
    
    
    274
    
    
    
    1.7
    
    
    
    284
    
    
    
    1.8
    
    
    
    (10
    )
    
    
    (3.5
    )FDIC assessments
    
    
    610
    
    
    
    3.8
    
    
    
    920
    
    
    
    5.8
    
    
    
    (310
    )
    
    
    (33.7
    )Telecommunications
    
    
    385
    
    
    
    2.4
    
    
    
    347
    
    
    
    2.2
    
    
    
    38
    
    
    
    11.0Amortization of core deposit intangible
    
    
    576
    
    
    
    3.6
    
    
    
    643
    
    
    
    4.0
    
    
    
    (67
    )
    
    
    (10.4
    )Automated teller machine and interchange
    
    
    560
    
    
    
    3.5
    
    
    
    509
    
    
    
    3.2
    
    
    
    51
    
    
    
    10.0Other
    
    
    1,768
    
    
    
    11.1
    
    
    
    1,842
    
    
    
    11.5
    
    
    
    (74
    )
    
    
    (4.0
    )Total non-interest expense
    
    $
    16,031
    
    
    
    100.0
    %
    
    $
    15,914
    
    
    
    100.0
    %
    
    $
    117
    
    
    
    0.7
    %
 2009 vs. 2008
   23




---



##### 



For The Years EndedDecember 31, 2009
    
    
    December 31, 2008
    
    
    Change(In Thousands)
    
    Amount
    
    
    % Total
    
    
    Amount
    
    
    % Total
    
    
    Amount
    
    
    %Salaries
    
    $
    6,314
    
    
    
    39.7
    %
    
    $
    4,762
    
    
    
    39.1
    %
    
    $
    1,552
    
    
    
    32.6
    %Employee benefits
    
    
    1,605
    
    
    
    10.1
    
    
    
    2,298
    
    
    
    18.9
    
    
    
    (693
    )
    
    
    (30.2
    )Occupancy
    
    
    1,062
    
    
    
    6.7
    
    
    
    760
    
    
    
    6.2
    
    
    
    302
    
    
    
    39.7Furniture and equipment
    
    
    1,272
    
    
    
    8.0
    
    
    
    927
    
    
    
    7.6
    
    
    
    345
    
    
    
    37.2State shares tax
    
    
    529
    
    
    
    3.3
    
    
    
    418
    
    
    
    3.4
    
    
    
    111
    
    
    
    26.6Professional fees
    
    
    587
    
    
    
    3.7
    
    
    
    570
    
    
    
    4.7
    
    
    
    17
    
    
    
    3.0Directors fees
    
    
    284
    
    
    
    1.8
    
    
    
    244
    
    
    
    2.0
    
    
    
    40
    
    
    
    16.4FDIC assessments
    
    
    920
    
    
    
    5.8
    
    
    
    81
    
    
    
    0.7
    
    
    
    839
    
    
    
    1,035.8Telecommunications
    
    
    347
    
    
    
    2.2
    
    
    
    215
    
    
    
    1.8
    
    
    
    132
    
    
    
    61.4Amortization of core deposit intangible
    
    
    643
    
    
    
    4.0
    
    
    
    280
    
    
    
    2.3
    
    
    
    363
    
    
    
    Automated teller machine and interchange
    
    
    509
    
    
    
    3.2
    
    
    
    286
    
    
    
    2.3
    
    
    
    223
    
    
    
    78.0Other
    
    
    1,842
    
    
    
    11.5
    
    
    
    1,331
    
    
    
    11.0
    
    
    
    511
    
    
    
    38.4Total non-interest expense
    
    $
    15,914
    
    
    
    100.0
    %
    
    $
    12,172
    
    
    
    100.0
    %
    
    $
    3,742
    
    
    
    30.7
    %
 FINANCIAL CONDITION
        INVESTMENT SECURITIES AVAILABLE-FOR-SALE
 For the Years Ended December 31,(In Thousands)
    
    2010
    
    
    2009
    
    
    2008Federal Agency Obligations
    
    $
    58,903
    
    
    $
    68,339
    
    
    $
    64,080Mortgage-backed Securities
    
    
    132,515
    
    
    
    138,856
    
    
    
    118,046Obligations of State amd Political Subdivisions
    
    
    13,671
    
    
    
    11,374
    
    
    
    9,994Marketable Equity Securities
    
    
    2,084
    
    
    
    1,697
    
    
    
    2,293Total
    
    $
    207,173
    
    
    $
    220,266
    
    
    $
    194,413
 24




---



##### 



After One Year
    
    
    After Five YearWithin
    
    
    But Within
    
    
    But Within
    
    
    AfterOne Year
    
    
    Five Years
    
    
    Ten Years
    
    
    Ten Years
    
    
    Total(In Thousands)
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    YieldFederal Agency Obligations
    
    $
    1,347
    
    
    
    3.69
    %
    
    $
    45,233
    
    
    
    1.93
    %
    
    $
    23,851
    
    
    
    3.60
    %
    
    $
    117,623
    
    
    
    3.62
    %
    
    $
    188,054
    
    
    
    3.21
    %Obligations of State and Political Subdivisions
    
    
    994
    
    
    
    3.66
    %
    
    
    1,975
    
    
    
    5.99
    %
    
    
    5,130
    
    
    
    5.15
    %
    
    
    5,526
    
    
    
    5.97
    %
    
    
    13,625
    
    
    
    5.48
    %$
    2,341
    
    
    
    
    
    
    $
    47,208
    
    
    
    
    
    
    $
    28,981
    
    
    
    
    
    
    $
    123,149
    
    
    
    
    
    
    
    201,679Marketable Equity Securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,130Total Invesment Securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    203,809
   LOANS
   For the Years Ended December 31,(In Thousands)
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Commercial, financial and agricultural
    
    $
    33,819
    
    
    $
    37,642
    
    
    $
    27,165
    
    
    $
    8,074
    
    
    $
    9,574Tax-exempt
    
    
    25,180
    
    
    
    18,055
    
    
    
    16,762
    
    
    
    13,108
    
    
    
    9,621Real estate
    
    
    262,355
    
    
    
    253,463
    
    
    
    262,539
    
    
    
    132,453
    
    
    
    135,009Real estate construction
    
    
    11,689
    
    
    
    13,526
    
    
    
    5,307
    
    
    
    3,698
    
    
    
    2,231Installment loans to individuals
    
    
    7,232
    
    
    
    7,725
    
    
    
    8,202
    
    
    
    4,059
    
    
    
    4,118Add (deduct): Unearned discount
    
    
    (6
    )
    
    
    (15
    )
    
    
    (24
    )
    
    
    (23
    )
    
    
    (19
    )Unamortized loan costs, net of fees
    
    
    184
    
    
    
    93
    
    
    
    117
    
    
    
    91
    
    
    
    107Gross loans
    
    $
    340,453
    
    
    $
    330,489
    
    
    $
    320,068
    
    
    $
    161,460
    
    
    $
    160,641
  For the Years Ended December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Commercial, financial and agricultural
    
    
    9.9
    %
    
    
    11.4
    %
    
    
    8.5
    %
    
    
    5.0
    %
    
    
    6.0
    %Tax-exempt
    
    
    7.4
    
    
    
    5.5
    
    
    
    5.2
    
    
    
    8.1
    
    
    
    6.0Real estate
    
    
    77.1
    
    
    
    76.7
    
    
    
    82.1
    
    
    
    82.1
    
    
    
    84.1Real estate construction
    
    
    3.4
    
    
    
    4.1
    
    
    
    1.7
    
    
    
    2.3
    
    
    
    1.4Installment loans to individuals
    
    
    2.2
    
    
    
    2.3
    
    
    
    2.5
    
    
    
    2.5
    
    
    
    2.5Gross loans
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
  25




---



##### 



One YearIn One Year
    
    
    Through
    
    
    Over(In Thousands)
    
    or Less
    
    
    Five Years
    
    
    Five Years
    
    
    TotalCommercial, Tax exempt, Real estate and
Personal loans
    
    $
    22,140
    
    
    $
    35,471
    
    
    $
    271,153
    
    
    $
    328,764Real estate construction
    
    
    11,689
    
    
    
    
    
    
    
    
    
    
    
    11,689$
    33,829
    
    
    $
    35,471
    
    
    $
    271,153
    
    
    $
    340,453Amounts of Such Loans with:Predetermined Fixed Rates
    
    $
    9,158
    
    
    $
    27,086
    
    
    $
    81,891
    
    
    $
    118,135Floating or Adjustable Rates
    
    
    24,671
    
    
    
    8,385
    
    
    
    189,262
    
    
    
    222,318$
    33,829
    
    
    $
    35,471
    
    
    $
    271,153
    
    
    $
    340,453
 ALLOWANCE FOR LOAN LOSSES
   For the Years Ended December 31,(In Thousands)
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Commercial, financial, and agricultural
    
    $
    752
    
    
    $
    567
    
    
    $
    402
    
    
    $
    104
    
    
    $
    101Real estate mortgages
    
    
    3,529
    
    
    
    3,132
    
    
    
    2,461
    
    
    
    700
    
    
    
    659Installment loans to indiviuals
    
    
    106
    
    
    
    149
    
    
    
    158
    
    
    
    28
    
    
    
    27Unallocated
    
    
    414
    
    
    
    362
    
    
    
    737
    
    
    
    605
    
    
    
    669$
    4,801
    
    
    $
    4,210
    
    
    $
    3,758
    
    
    $
    1,437
    
    
    $
    1,456
  For the Years Ended December 31,(In Thousands)
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Average Loans Outstanding during
the period
    
    $
    339,411
    
    
    $
    327,077
    
    
    $
    235,071
    
    
    $
    160,348
    
    
    $
    158,554Balance, beginning of year
    
    $
    4,210
    
    
    $
    3,758
    
    
    $
    1,437
    
    
    $
    1,456
    
    
    $
    1,553Provision charged to operations
    
    
    1,555
    
    
    
    1,025
    
    
    
    750
    
    
    
    30
    
    
    
    175Allowance acquired
    
    
    
    
    
    
    
    
    
    
    1,683
    
    
    
    
    
    
    
    Loans charged off:Commercial, financial, and agricultural
    
    
    (5
    )
    
    
    (116
    )
    
    
    
    
    
    
    
    
    
    
    (185
    )Real estate mortgages
    
    
    (994
    )
    
    
    (407
    )
    
    
    (42
    )
    
    
    (29
    )
    
    
    (65
    )Installment loans to indiviuals
    
    
    (37
    )
    
    
    (76
    )
    
    
    (106
    )
    
    
    (56
    )
    
    
    (50
    )Recoveries:Commercial, financial, and agricultural
    
    
    34
    
    
    
    1
    
    
    
    4
    
    
    
    
    
    
    
    8Real estate mortgages
    
    
    14
    
    
    
    10
    
    
    
    2
    
    
    
    1
    
    
    
    Installment loans to indiviuals
    
    
    24
    
    
    
    15
    
    
    
    30
    
    
    
    35
    
    
    
    20Balance, end of year
    
    $
    4,801
    
    
    $
    4,210
    
    
    $
    3,758
    
    
    $
    1,437
    
    
    $
    1,456Net charge-offs to Average loans
outstanding during the period
    
    
    -0.28
    %
    
    
    -0.18
    %
    
    
    -0.05
    %
    
    
    -0.03
    %
    
    
    -0.17
    %
 26




---



##### 



NON-PERFORMING LOANS
   For the Years Ended December 31,(In Thousands)
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Commercial, financial and agriculturalDays 3089
    
    $
    244
    
    
    $
    14
    
    
    $
    61
    
    
    $
    168
    
    
    $
    Days 90 plus
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non accrual
    
    
    224
    
    
    
    145
    
    
    
    581
    
    
    
    
    
    
    
    Real estateDays 3089
    
    
    2,880
    
    
    
    1,632
    
    
    
    1,528
    
    
    
    259
    
    
    
    598Days 90 plus
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70
    
    
    
    67Nonaccrual
    
    
    3,604
    
    
    
    4,216
    
    
    
    3,780
    
    
    
    77
    
    
    
    91Installment loans to individualsDays 3089
    
    
    32
    
    
    
    49
    
    
    
    9
    
    
    
    33
    
    
    
    40Days 90 plus
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    Non accrual
    
    
    
    
    
    
    
    
    
    
    92
    
    
    
    
    
    
    
    $
    6,984
    
    
    $
    6,056
    
    
    $
    6,051
    
    
    $
    617
    
    
    $
    796Days 3089
    
    $
    3,156
    
    
    $
    1,695
    
    
    $
    1,598
    
    
    $
    460
    
    
    $
    638Days 90 plus
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80
    
    
    
    67Non accrual
    
    
    3,828
    
    
    
    4,361
    
    
    
    4,453
    
    
    
    77
    
    
    
    91$
    6,984
    
    
    $
    6,056
    
    
    $
    6,051
    
    
    $
    617
    
    
    $
    796Restructured loans still accruing
    
    $
    319
    
    
    $
    323
    
    
    $
    58
    
    
    $
    1,018
    
    
    $
    539Other real estate owned
    
    $
    
    
    
    $
    29
    
    
    $
    373
    
    
    $
    
    
    
    $
    14Interest income that would have been
recorded under original terms
    
    $
    224
    
    
    $
    285
    
    
    $
    320
    
    
    $
    10
    
    
    $
    98Interest income recorded during the year
    
    $
    187
    
    
    $
    241
    
    
    $
    116
    
    
    $
    4
    
    
    $
    90
 DEPOSITS
  .
 27




---



##### 



2010
    
    
    2009
    
    
    2008Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    Average(In Thousands)
    
    Balance
    
    
    Rate
    
    
    Balance
    
    
    Rate
    
    
    Balance
    
    
    RateNon-interest bearing
    
    $
    59,013
    
    
    
    
    %
    
    $
    51,908
    
    
    
    
    %
    
    $
    34,403
    
    
    
    
    %Savings
    
    
    63,223
    
    
    
    0.37
    
    
    
    56,493
    
    
    
    0.40
    
    
    
    39,223
    
    
    
    0.40Now deposits
    
    
    71,374
    
    
    
    0.14
    
    
    
    68,650
    
    
    
    0.15
    
    
    
    47,534
    
    
    
    0.27Money market deposits
    
    
    42,460
    
    
    
    0.75
    
    
    
    43,906
    
    
    
    1.03
    
    
    
    21,119
    
    
    
    1.66Time deposits
    
    
    234,812
    
    
    
    2.19
    
    
    
    228,005
    
    
    
    2.94
    
    
    
    154,334
    
    
    
    3.53Total deposits
    
    $
    470,882
    
    
    
    1.23
    %
    
    $
    448,962
    
    
    
    1.67
    %
    
    $
    296,613
    
    
    
    2.05
    %
  For the Years Ended(In Thousands)
    
    2010
    
    
    2009
    
    
    2008Three months or less
    
    $
    6,543
    
    
    $
    8,346
    
    
    $
    9,353Three months to six months
    
    
    4,035
    
    
    
    8,666
    
    
    
    9,259Six months to twelve months
    
    
    12,504
    
    
    
    20,805
    
    
    
    24,095Over twelve months
    
    
    56,596
    
    
    
    33,903
    
    
    
    15,672Total
    
    $
    79,678
    
    
    $
    71,720
    
    
    $
    58,379As a percentage of total average
time deposits
    
    
    33.9
    %
    
    
    31.5
    %
    
    
    37.8
    %
 BORROWED FUNDS
   December 31, 2010
    
    
    December 31, 2009
    
    
    December 31, 2008(In Thousands)
    
    Amount
    
    
    % Total
    
    
    Amount
    
    
    % Total
    
    
    Amount
    
    
    % TotalShort-term borrowings:Securities sold under agreement to repurchase
    
    $
    52,315
    
    
    
    77.4
    %
    
    $
    47,873
    
    
    
    72.6
    %
    
    $
    41,573
    
    
    
    77.1
    %Other short-term borrowings, FHLB
    
    
    603
    
    
    
    0.9
    
    
    
    352
    
    
    
    0.5
    
    
    
    849
    
    
    
    1.6U.S. Treasury tax and loan notes
    
    
    773
    
    
    
    1.1
    
    
    
    601
    
    
    
    0.9
    
    
    
    490
    
    
    
    0.9Total short-term borrowings
    
    
    53,691
    
    
    
    79.4
    %
    
    
    48,826
    
    
    
    74.0
    %
    
    
    42,912
    
    
    
    79.6
    %Long-term borrowings, FHLB
    
    
    9,252
    
    
    
    13.7
    
    
    
    12,492
    
    
    
    19.0
    
    
    
    9,413
    
    
    
    17.4Junior subordinate debentures
    
    
    4,640
    
    
    
    6.9
    
    
    
    4,640
    
    
    
    7.0
    
    
    
    1,605
    
    
    
    3.0Total borrowed funds
    
    $
    67,583
    
    
    
    100.0
    %
    
    $
    65,958
    
    
    
    100.0
    %
    
    $
    53,930
    
    
    
    100.0
    %
 CAPITAL RESOURCES
   28




---



##### 



2010
    
    
    2009(In Thousands)
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioTotal Capital
(to Risk-weighted Assets)Actual
    
    $
    64,476
    
    
    
    18.5
    %
    
    $
    60,322
    
    
    
    17.6
    %For Capital Adequacy Purposes
    
    
    27,884
    
    
    
    8.0
    
    
    
    27,394
    
    
    
    8.0To Be Well-Capitalized
    
    
    34,855
    
    
    
    10.0
    
    
    
    34,243
    
    
    
    10.0Tier I Capital
(to Risk-weighted Assets)Actual
    
    $
    60,114
    
    
    
    17.3
    %
    
    $
    56,102
    
    
    
    16.4
    %For Capital Adequacy Purposes
    
    
    13,942
    
    
    
    4.0
    
    
    
    13,697
    
    
    
    4.0To Be Well-Capitalized
    
    
    20,913
    
    
    
    6.0
    
    
    
    20,546
    
    
    
    6.0Tier I Capital
(to Average Assets)Actual
    
    $
    60,114
    
    
    
    10.0
    %
    
    $
    56,102
    
    
    
    9.8
    %For Capital Adequacy Purposes
    
    
    24,034
    
    
    
    4.0
    
    
    
    22,861
    
    
    
    4.0To Be Well-Capitalized
    
    
    30,043
    
    
    
    5.0
    
    
    
    28,577
    
    
    
    5.0
   LIQUIDITY
   INTEREST RATE RISK MANAGEMENT
   29




---



##### 



STATEMENT OF INTEREST SENSITIVITY GAP
December 31, 2010
 90 Days
    
    
    > 90 Days
    
    
    1 to 5
    
    
    5 to 10
    
    
    > 10(In Thousands)
    
    Or Less
    
    
    But < 1 Year
    
    
    Years
    
    
    Years
    
    
    Years
    
    
    TotalInterest-bearing deposits at banks
    
    $
    20,332
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    20,332Investment securities (1)
    
    
    21,249
    
    
    
    46,547
    
    
    
    108,551
    
    
    
    21,242
    
    
    
    12,596
    
    
    
    210,185Loans (1)
    
    
    51,571
    
    
    
    55,507
    
    
    
    149,748
    
    
    
    48,326
    
    
    
    35,301
    
    
    
    340,453Rate Sensitive Assets
    
    
    93,152
    
    
    
    102,054
    
    
    
    258,299
    
    
    
    69,568
    
    
    
    47,897
    
    
    
    570,970Deposits:Interest-bearing demand deposits (2)
    
    
    
    
    
    
    
    
    
    
    56,762
    
    
    
    14,191
    
    
    
    
    
    
    
    70,953Savings (2)
    
    
    7,249
    
    
    
    17,440
    
    
    
    69,880
    
    
    
    13,110
    
    
    
    
    
    
    
    107,679Time
    
    
    30,974
    
    
    
    65,339
    
    
    
    135,492
    
    
    
    478
    
    
    
    
    
    
    
    232,283Borrowed funds
    
    
    55,001
    
    
    
    2,701
    
    
    
    1,057
    
    
    
    
    
    
    
    
    
    
    
    58,759Long-term debt
    
    
    1
    
    
    
    4
    
    
    
    6,023
    
    
    
    55
    
    
    
    40
    
    
    
    6,123Junior Subordinated Debentures
    
    
    4,640
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,640Rate Sensitive Liabilities
    
    
    97,865
    
    
    
    85,484
    
    
    
    269,214
    
    
    
    27,834
    
    
    
    40
    
    
    
    480,437Interest Sensitivity Gap
    
    $
    (4,713
    )
    
    $
    16,570
    
    
    $
    (10,915
    )
    
    $
    41,734
    
    
    $
    47,857
    
    
    $
    90,533Cumulative Gap
    
    $
    (4,713
    )
    
    $
    11,857
    
    
    $
    942
    
    
    $
    42,676
    
    
    $
    90,533
    
    
    $
    
 
 (1)
    
    Investments and loans are included at the earlier of repricing or maturity and adjusted
for the effects of prepayments.(2)
    
    Interest bearing demand and savings accounts are included based on historical experience and
managements judgment about the behavior of these deposits in changing interest rate environments.     Item 7A. Quantitative and Qualitative Disclosures about Market Risk
  30




---



##### 



Item 8. Financial Statements and Supplementary Data
 CCFNB Bancorp, Inc.
Consolidated Balance Sheets
 December 31,(In Thousands)
    
    2010
    
    
    2009ASSETSCash and due from banks
    
    $
    7,263
    
    
    $
    8,922Interest-bearing deposits in other banks
    
    
    18,683
    
    
    
    1,945Federal funds sold
    
    
    1,649
    
    
    
    592Total cash and cash equivalents
    
    
    27,595
    
    
    
    11,459Investment securities, available for sale, at fair value
    
    
    207,173
    
    
    
    220,266Restricted securities, at cost
    
    
    3,012
    
    
    
    2,984Loans, net of unearned income
    
    
    340,453
    
    
    
    330,489Less: Allowance for loan losses
    
    
    4,801
    
    
    
    4,210Loans, net
    
    
    335,652
    
    
    
    326,279Premises and equipment, net
    
    
    11,992
    
    
    
    12,583Accrued interest receivable
    
    
    1,632
    
    
    
    2,006Cash surrender value of bank-owned life insurance
    
    
    11,942
    
    
    
    11,440Investment in limited partnerships
    
    
    1,607
    
    
    
    687Intangible Assets:Core deposit
    
    
    2,192
    
    
    
    2,768Goodwill
    
    
    7,937
    
    
    
    7,937Prepaid FDIC assessment
    
    
    1,490
    
    
    
    2,037Other assets
    
    
    2,075
    
    
    
    2,043TOTAL ASSETS
    
    $
    614,299
    
    
    $
    602,489LIABILITIESInterest-bearing deposits
    
    $
    410,915
    
    
    $
    406,554Noninterest-bearing deposits
    
    
    62,877
    
    
    
    55,734Total deposits
    
    
    473,792
    
    
    
    462,288Short-term borrowings
    
    
    58,759
    
    
    
    51,997Long-term borrowings
    
    
    6,123
    
    
    
    15,128Junior subordinate debentures
    
    
    4,640
    
    
    
    4,640Accrued interest payable
    
    
    652
    
    
    
    859Other liabilities
    
    
    2,479
    
    
    
    2,491TOTAL LIABILITIES
    
    
    546,445
    
    
    
    537,403STOCKHOLDERS EQUITYCommon stock, par value $1.25 per share; authorized
5,000,000 shares; issued 2,286,931 shares
in 2010 and 2,270,850 shares in 2009
    
    
    2,859
    
    
    
    2,838Surplus
    
    
    27,964
    
    
    
    27,539Retained earnings
    
    
    36,397
    
    
    
    32,723Accumulated other comprehensive income
    
    
    2,221
    
    
    
    2,523Treasury stock, at cost; 61,000 shares in 2010 and 22,500 shares
in 2009
    
    
    (1,587
    )
    
    
    (537
    )TOTAL STOCKHOLDERS EQUITY
    
    
    67,854
    
    
    
    65,086TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    614,299
    
    
    $
    602,489
  31




---



##### 



CCFNB Bancorp, Inc.
Consolidated Statements of Income
 For the Years Ended December 31,(In Thousands, Except Per Share Data)
    
    2010
    
    
    2009
    
    
    2008INTEREST AND DIVIDEND INCOMEInterest and fees on loans:Taxable
    
    $
    18,662
    
    
    $
    18,925
    
    
    $
    14,586Tax-exempt
    
    
    963
    
    
    
    828
    
    
    
    706Interest and dividends on investment securities:Taxable
    
    
    6,668
    
    
    
    8,162
    
    
    
    5,521Tax-exempt
    
    
    397
    
    
    
    429
    
    
    
    254Dividend and other interest income
    
    
    42
    
    
    
    58
    
    
    
    112Federal funds sold
    
    
    2
    
    
    
    10
    
    
    
    155Deposits in other banks
    
    
    42
    
    
    
    8
    
    
    
    23TOTAL INTEREST AND DIVIDEND INCOME
    
    
    26,776
    
    
    
    28,420
    
    
    
    21,357INTEREST EXPENSEDeposits
    
    
    5,809
    
    
    
    7,478
    
    
    
    6,083Short-term borrowings
    
    
    427
    
    
    
    368
    
    
    
    753Long-term borrowings
    
    
    349
    
    
    
    640
    
    
    
    572Junior subordinate debentures
    
    
    98
    
    
    
    128
    
    
    
    96TOTAL INTEREST EXPENSE
    
    
    6,683
    
    
    
    8,614
    
    
    
    7,504NET INTEREST INCOME
    
    
    20,093
    
    
    
    19,806
    
    
    
    13,853PROVISION FOR LOAN LOSSES
    
    
    1,555
    
    
    
    1,025
    
    
    
    750NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
    
    
    18,538
    
    
    
    18,781
    
    
    
    13,103NON -INTEREST INCOMEService charges and fees
    
    
    1,778
    
    
    
    1,704
    
    
    
    1,281Gain on sale of loans
    
    
    1,113
    
    
    
    617
    
    
    
    316Earnings on bank-owned life insurance
    
    
    444
    
    
    
    445
    
    
    
    366Brokerage
    
    
    325
    
    
    
    281
    
    
    
    218Trust
    
    
    663
    
    
    
    655
    
    
    
    434Investment security losses
    
    
    (42
    )
    
    
    (385
    )
    
    
    (431
    )Interchange fees
    
    
    850
    
    
    
    743
    
    
    
    417Other
    
    
    992
    
    
    
    1,005
    
    
    
    442TOTAL NON-INTEREST INCOME
    
    
    6,123
    
    
    
    5,065
    
    
    
    3,043NON -INTEREST EXPENSESalaries
    
    
    6,447
    
    
    
    6,314
    
    
    
    4,762Employee benefits
    
    
    1,811
    
    
    
    1,605
    
    
    
    2,298Occupancy
    
    
    1,114
    
    
    
    1,062
    
    
    
    760Furniture and Equipment
    
    
    1,330
    
    
    
    1,272
    
    
    
    927State shares tax
    
    
    561
    
    
    
    529
    
    
    
    418Professional fees
    
    
    595
    
    
    
    587
    
    
    
    570Directors fees
    
    
    274
    
    
    
    284
    
    
    
    244FDIC assessments
    
    
    610
    
    
    
    920
    
    
    
    81Telecommunications
    
    
    385
    
    
    
    347
    
    
    
    215Amortization of core deposit intangible
    
    
    576
    
    
    
    643
    
    
    
    280Automated teller machine and interchange
    
    
    560
    
    
    
    509
    
    
    
    286Other
    
    
    1,768
    
    
    
    1,842
    
    
    
    1,331TOTAL NON-INTEREST EXPENSE
    
    
    16,031
    
    
    
    15,914
    
    
    
    12,172INCOME BEFORE INCOME TAX PROVISION
    
    
    8,630
    
    
    
    7,932
    
    
    
    3,974INCOME TAX PROVISION
    
    
    2,326
    
    
    
    2,055
    
    
    
    896NET INCOME
    
    $
    6,304
    
    
    $
    5,877
    
    
    $
    3,078EARNINGS PER SHARE
    
    $
    2.82
    
    
    $
    2.61
    
    
    $
    1.82CASH DIVIDENDS PER SHARE
    
    $
    1.18
    
    
    $
    1.03
    
    
    $
    0.90WEIGHTED AVERAGE SHARES OUTSTANDING
    
    
    2,232,239
    
    
    
    2,253,087
    
    
    
    1,688,498
  32




---



##### 



CCFNB Bancorp, Inc.
Consolidated Statements of Changes in Stockholders Equity
 AccumulatedCommon
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    TotalStock
    
    
    
    
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury
    
    
    Stockholders(In Thousands Except Per Share Data)
    
    Shares
    
    
    Amount
    
    
    Surplus
    
    
    Earnngs
    
    
    Income (loss)
    
    
    Stock
    
    
    EquityBalance, December 31,
2007
    
    
    1,226,536
    
    
    $
    1,533
    
    
    $
    2,271
    
    
    $
    27,679
    
    
    $
    144
    
    
    $
    
    
    
    $
    31,627Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,078
    
    
    
    
    
    
    
    
    
    
    
    3,078Change in net
unrealized gain on
investment
securities
available-for-sale,
net of
reclassification
adjustment and
tax effects.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,478
    
    
    
    
    
    
    
    1,478Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,556Par
 value of new
shares issued to
acquire Columbia Financial
    
    
    1,030,286
    
    
    
    1,288
    
    
    
    25,026
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,314Common stock issuance
under dividend
reinvestment and
stock purchase
plans
    
    
    12,258
    
    
    
    15
    
    
    
    252
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    267Recognition of
employee stock
purchase
plan expense
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Purchase of treasury
stock (16,000 shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (398
    )
    
    
    (398
    )Retirement of treasury
stock
    
    
    (16,000
    )
    
    
    (20
    )
    
    
    (378
    )
    
    
    
    
    
    
    
    
    
    
    398
    
    
    
    Cash dividends, ($0.90
per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,593
    )
    
    
    
    
    
    
    
    
    
    
    (1,593
    )Balance, December 31,
2008
    
    
    2,253,080
    
    
    
    2,816
    
    
    
    27,173
    
    
    
    29,164
    
    
    
    1,622
    
    
    
    
    
    
    
    60,775Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,877
    
    
    
    
    
    
    
    
    
    
    
    5,877Change in net
unrealized gain on
investment
securities
available-for-sale,
net of
reclassification
adjustment and
tax effects.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    901
    
    
    
    
    
    
    
    901Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,778Common stock issuance
under dividend
reinvestment and
stock purchase
plans
    
    
    17,770
    
    
    
    22
    
    
    
    359
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    381Recognition of
employee stock
purchase
plan expense
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7Purchase of treasury
stock (22,500 shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (537
    )
    
    
    (537
    )Cash dividends, ($1.03
per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,318
    )
    
    
    
    
    
    
    
    
    
    
    (2,318
    )Balance, December 31, 2009
    
    
    2,270,850
    
    
    
    2,838
    
    
    
    27,539
    
    
    
    32,723
    
    
    
    2,523
    
    
    
    (537
    )
    
    
    65,086Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,304
    
    
    
    
    
    
    
    
    
    
    
    6,304Change in net
unrealized gain on
investment
securities
available-for-sale,
net of
reclassification
adjustment and
tax effects.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (302
    )
    
    
    
    
    
    
    (302
    )Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,002Common stock issuance
under dividend
reinvestment and
stock purchase
plans
    
    
    16,081
    
    
    
    21
    
    
    
    419
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    440Recognition of
employee stock
purchase
plan expense
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6Purchase of treasury
stock (38,500 shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,050
    )
    
    
    (1,050
    )Cash dividends, ($1.18
per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,630
    )
    
    
    
    
    
    
    
    
    
    
    (2,630
    )Balance, December 31,
2010
    
    
    2,286,931
    
    
    $
    2,859
    
    
    $
    27,964
    
    
    $
    36,397
    
    
    $
    2,221
    
    
    $
    (1,587
    )
    
    $
    67,854
  33




---



##### 



CCFNB Bancorp, Inc.
Consolidated Statements of Cash Flows
 Years Ended December 31,(In Thousands)
    
    2010
    
    
    2009
    
    
    2008OPERATING ACTIVITIESNet Income
    
    $
    6,304
    
    
    $
    5,877
    
    
    $
    3,078Adjustments to reconcile net income to net cash provided by operating activities:Provision for loan losses
    
    
    1,555
    
    
    
    1,025
    
    
    
    750Depreciation and amortization of premises and equipment
    
    
    944
    
    
    
    1,023
    
    
    
    693Loss (gain) on sale of investment securities
    
    
    
    
    
    
    316
    
    
    
    (6
    )Impairment loss on securites
    
    
    42
    
    
    
    69
    
    
    
    437Amortization and accretion on investment securities
    
    
    933
    
    
    
    606
    
    
    
    350(Gain) loss on sale of premises and equipment
    
    
    (47
    )
    
    
    (117
    )
    
    
    29Loss on sale of other real estate owned
    
    
    11
    
    
    
    94
    
    
    
    Deferred income (benefit) taxes
    
    
    (159
    )
    
    
    35
    
    
    
    (259
    )Gain on sale of loans
    
    
    (1,113
    )
    
    
    (617
    )
    
    
    (316
    )Proceeds from sale of mortgage loans
    
    
    46,273
    
    
    
    35,074
    
    
    
    17,384Originations of mortgage loans held for resale
    
    
    (46,898
    )
    
    
    (33,847
    )
    
    
    (16,477
    )Amortization of intangibles and invesment in limited partnerships
    
    
    741
    
    
    
    801
    
    
    
    353Decrease in accrued interest receivable
    
    
    374
    
    
    
    382
    
    
    
    228Increases in cash surrender value of bank-owned life insurance
    
    
    (502
    )
    
    
    (497
    )
    
    
    (404
    )Decrease in accrued interest payable
    
    
    (207
    )
    
    
    (216
    )
    
    
    (164
    )(Decrease) Increase in prepaid FDIC assessment
    
    
    547
    
    
    
    (2,037
    )
    
    
    Other, net
    
    
    (251
    )
    
    
    (1,501
    )
    
    
    (211
    )Net cash provided by operating activities
    
    
    8,547
    
    
    
    6,470
    
    
    
    5,465INVESTING ACTIVITIESInvestment securities available for sale:Purchases
    
    
    (116,087
    )
    
    
    (117,943
    )
    
    
    (49,809
    )Proceeds from sales, maturities and redemptions
    
    
    128,246
    
    
    
    92,463
    
    
    
    50,001Proceeds from redemption of restricted securities
    
    
    156
    
    
    
    
    
    
    
    1,806Purchase of restricted securities
    
    
    (184
    )
    
    
    (817
    )
    
    
    (1,176
    )Net (increase) decrease in loans
    
    
    (9,490
    )
    
    
    (12,350
    )
    
    
    2,723Proceeds from sale of premises and equipment
    
    
    249
    
    
    
    1,294
    
    
    
    786Proceeds from sale of other real estate owned
    
    
    318
    
    
    
    996
    
    
    
    Purchase of investment in limited partnership
    
    
    (1,084
    )
    
    
    
    
    
    
    Acquisition of bank cash
    
    
    
    
    
    
    
    
    
    
    5,803Acquisition of premises and equipment
    
    
    (556
    )
    
    
    (2,174
    )
    
    
    (2,534
    )Net cash provided by (used for) investing activities
    
    
    1,568
    
    
    
    (38,531
    )
    
    
    7,600FINANCING ACTIVITIESNet increase (decrease) in deposits
    
    
    11,504
    
    
    
    27,979
    
    
    
    (1,321
    )Net increase (decrease) in short-term borrowings
    
    
    6,762
    
    
    
    (3,465
    )
    
    
    (5,932
    )Proceeds from long-term borrowings
    
    
    
    
    
    
    6,000
    
    
    
    Repayment of long-term borrowings
    
    
    (9,005
    )
    
    
    (5
    )
    
    
    (2,004
    )Acquisition of treasury stock
    
    
    (1,050
    )
    
    
    (537
    )
    
    
    (398
    )Proceeds from issuance of common stock
    
    
    440
    
    
    
    381
    
    
    
    267Cash dividends paid
    
    
    (2,630
    )
    
    
    (2,318
    )
    
    
    (1,593
    )Net cash provided by (used for) financing activities
    
    
    6,021
    
    
    
    28,035
    
    
    
    (10,981
    )NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    16,136
    
    
    
    (4,026
    )
    
    
    2,084CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    11,459
    
    
    
    15,485
    
    
    
    13,401CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    27,595
    
    
    $
    11,459
    
    
    $
    15,485SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATIONInterest paid
    
    $
    6,890
    
    
    $
    8,830
    
    
    $
    6,904Income taxes paid
    
    
    2,605
    
    
    
    1,790
    
    
    
    992Loans transferred to other real estate owned
    
    
    300
    
    
    
    746
    
    
    
    373
  34




---



##### 



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




---



##### 



RESTRICTED SECURITIES
   LOANS
     ALLOWANCE FOR LOAN LOSSES
   36




---



##### 



PREMISES AND EQUIPMENT
  MORTGAGE SERVICING RIGHTS
  JUNIOR SUBORDINATE DEBENTURES
  37




---



##### 



INTANGIBLE ASSETS  GOODWILL
  INTANGIBLE ASSETS  CORE DEPOSIT
   For the Year Ended:2011
    
    $
    509,0002012
    
    
    442,0002013
    
    
    374,0002014
    
    
    308,0002015
    
    
    240,000Thereafter
    
    
    319,000Total
    
    $
    2,192,000
 OTHER REAL ESTATE OWNED
  BANK OWNED LIFE INSURANCE
  INVESTMENTS IN LIMITED PARTNERSHIPS
  38




---



##### 



INVESTMENT IN INSURANCE AGENCY
  INCOME TAXES
     PER SHARE DATA
  CASH FLOW INFORMATION
  TREASURY STOCK
  TRUST ASSETS AND INCOME
  ACCUMULATED OTHER COMPREHENSIVE INCOME
  39




---



##### 



ADVERTISING COSTS
  RECENT ACCOUNTING PRONOUNCEMENTS
 FASB ASU 2010-20, Receivable (Topic 310), Disclosures about the Credit Quality of Financing
Receivables and the Allowance for Credit Losses 
 FASB ASU 2010-09  Subsequent Events (Topic 855): Amendments to Certain Recognition and
Disclosure requirements.
 FASB ASC 860 Accounting for Transfers of Financial Assets an amendment of
FASB Statement No. 140
 FASB ASC 820-10-
 RECLASSIFICATIONS
  2. RESTRICTED CASH BALANCES
  40




---



##### 



3. INVESTMENT SECURITIES AVAILABLE-FOR-SALE
  2010Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair(In Thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueObligation of U.S. Government Corporations
and Agencies:Mortgage-backed
    
    $
    129,008
    
    
    $
    3,794
    
    
    $
    (287
    )
    
    $
    132,515Other
    
    
    59,046
    
    
    
    279
    
    
    
    (422
    )
    
    
    58,903Obligations of state and politic al subdivisions
    
    
    13,625
    
    
    
    115
    
    
    
    (69
    )
    
    
    13,671Total debt securities
    
    
    201,679
    
    
    
    4,188
    
    
    
    (778
    )
    
    
    205,089Marketable equity securities
    
    
    2,130
    
    
    
    148
    
    
    
    (194
    )
    
    
    2,084Total investment securities AFS
    
    $
    203,809
    
    
    $
    4,336
    
    
    $
    (972
    )
    
    $
    207,173
 2009Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair(In Thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueObligation of U.S. Government Corporations
and Agencies:Mortgage-backed
    
    $
    134,762
    
    
    $
    4,212
    
    
    $
    (118
    )
    
    $
    138,856Other
    
    
    68,323
    
    
    
    421
    
    
    
    (405
    )
    
    
    68,339Obligations of state and political subdivisions
    
    
    11,265
    
    
    
    116
    
    
    
    (7
    )
    
    
    11,374Total debt securities
    
    
    214,350
    
    
    
    4,749
    
    
    
    (530
    )
    
    
    218,569Marketable equity securities
    
    
    2,093
    
    
    
    41
    
    
    
    (437
    )
    
    
    1,697Total investment securities AFS
    
    $
    216,443
    
    
    $
    4,790
    
    
    $
    (967
    )
    
    $
    220,266
   WeightedAmortized
    
    
    Estimated
    
    
    Average(In Thousands)
    
    Cost
    
    
    Fair Value
    
    
    YieldDue in one year or less
    
    $
    2,341
    
    
    $
    2,372
    
    
    
    3.68
    %Due after one year to five years
    
    
    47,208
    
    
    
    47,175
    
    
    
    2.10
    %Due after five years to ten years
    
    
    28,981
    
    
    
    29,388
    
    
    
    3.88
    %Due after ten years
    
    
    125,279
    
    
    
    128,238
    
    
    
    3.72
    %Total
    
    $
    203,809
    
    
    $
    207,173
  41




---



##### 



2010Less than Twelve Months
    
    
    Twelve Months or Greater
    
    
    TotalEstimated
    
    
    Gross
    
    
    Estimated
    
    
    Gross
    
    
    Estimated
    
    
    GrossFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized(In Thousands)
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesObligations of U.S.
Government Corporations
and Agencies:Mortgage-backed
    
    $
    33,482
    
    
    $
    287
    
    
    $
    
    
    
    $
    
    
    
    $
    33,482
    
    
    $
    287Other
    
    
    29,578
    
    
    
    422
    
    
    
    
    
    
    
    
    
    
    
    29,578
    
    
    
    422Obligations of state and
political subdivisions
    
    
    3,849
    
    
    
    69
    
    
    
    
    
    
    
    
    
    
    
    3,849
    
    
    
    69Total debt securities
    
    
    66,909
    
    
    
    778
    
    
    
    
    
    
    
    
    
    
    
    66,909
    
    
    
    778Equity securities
    
    
    45
    
    
    
    3
    
    
    
    1,005
    
    
    
    191
    
    
    
    1,050
    
    
    
    194Total
    
    $
    66,954
    
    
    $
    781
    
    
    $
    1,005
    
    
    $
    191
    
    
    $
    67,959
    
    
    $
    972
 2009Less than Twelve Months
    
    
    Twelve Months or Greater
    
    

    TotalEstimated
    
    
    Gross
    
    
    Estimated
    
    
    Gross
    
    
    Estimated
    
    
    GrossFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized(In Thousands)
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesObligations of U.S. Government Corporations
and Agencies:Mortgage-backed
    
    $
    8,105
    
    
    $
    117
    
    
    $
    51
    
    
    $
    1
    
    
    $
    8,156
    
    
    $
    118Other
    
    
    28,876
    
    
    
    405
    
    
    
    
    
    
    
    
    
    
    
    28,876
    
    
    
    405Obligations of state and political subdivisions
    
    
    1,856
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    1,856
    
    
    
    7Total debt securities
    
    
    38,837
    
    
    
    529
    
    
    
    51
    
    
    
    1
    
    
    
    38,888
    
    
    
    530Equity securities
    
    
    366
    
    
    
    159
    
    
    
    806
    
    
    
    278
    
    
    
    1,172
    
    
    
    437Total
    
    $
    39,203
    
    
    $
    688
    
    
    $
    857
    
    
    $
    279
    
    
    $
    40,060
    
    
    $
    967
 42




---



##### 



December 31, 2010Gross
    
    
    Gross
    
    
    Estimated(In Thousands)
    
    Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairAsset size($)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueUnder $1 Billion
    
    $
    455
    
    
    $
    59
    
    
    $
    (23
    )
    
    $
    491$1 to $5 Billion
    
    
    209
    
    
    
    10
    
    
    
    (18
    )
    
    
    201$6 to $100 billion
    
    
    780
    
    
    
    44
    
    
    
    (134
    )
    
    
    690Over $100 Billion
    
    
    686
    
    
    
    35
    
    
    
    (19
    )
    
    
    702$
    2,130
    
    
    $
    148
    
    
    $
    (194
    )
    
    $
    2,084
 December 31, 2010Gross
    
    
    Gross
    
    
    Estimated(In Thousands)
    
    Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairGeographic Region
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueEastern U.S.
    
    $
    1,040
    
    
    $
    95
    
    
    $
    (110
    )
    
    $
    1,025Southeastern U.S.
    
    
    110
    
    
    
    
    
    
    
    (3
    )
    
    
    107Western U.S.
    
    
    53
    
    
    
    
    
    
    
    (1
    )
    
    
    52National
    
    
    927
    
    
    
    53
    
    
    
    (80
    )
    
    
    900$
    2,130
    
    
    $
    148
    
    
    $
    (194
    )
    
    $
    2,084
  43




---



##### 



4. LOANS
  (In Thousands)
    
    2010
    
    
    2009Commercial, financial and agricultural
    
    $
    33,819
    
    
    $
    37,642Tax-exempt
    
    
    25,180
    
    
    
    18,055Commercial real estate:Commercial mortgages
    
    
    95,688
    
    
    
    81,704Other construction and land develpoment loans
    
    
    6,284
    
    
    
    9,072Secured by farmland
    
    
    5,697
    
    
    
    5,843Consumer real estate:Home equity loans
    
    
    21,687
    
    
    
    23,985Home equity lines of credit
    
    
    17,802
    
    
    
    15,1291-4 family reisdential mortgages
    
    
    121,665
    
    
    
    126,895Construction
    
    
    5,405
    
    
    
    4,454Installment loans to individuals
    
    
    7,232
    
    
    
    7,725Unearned discount
    
    
    (6
    )
    
    
    (15
    )Gross loans
    
    $
    340,453
    
    
    $
    330,489
 Loan Origination and Risk Management
      44




---



##### 



Concentrations of Credit Risk
  Non-Accrual and Past Due Loans
   (In Thousands)
    
    2010
    
    
    2009
    
    
    2008Commercial, financial and agricultural
    
    $
    224
    
    
    $
    145
    
    
    $
    581Tax-exempt
    
    
    
    
    
    
    
    
    
    
    Commercial real estate:Commercial mortgages
    
    
    2,166
    
    
    
    3,100
    
    
    
    481Other construction and land develpoment loans
    
    
    
    
    
    
    
    
    
    
    Secured by farmland
    
    
    
    
    
    
    
    
    
    
    Consumer real estate:Home equity loans
    
    
    297
    
    
    
    109
    
    
    
    14Home equity lines of credit
    
    
    
    
    
    
    92
    
    
    
    531-4 family reisdential mortgages
    
    
    1,141
    
    
    
    915
    
    
    
    3,324Construction
    
    
    
    
    
    
    
    
    
    
    Installment loans to individuals
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    3,828
    
    
    $
    4,361
    
    
    $
    4,453
  (In Thousands)
    
    2010
    
    
    2009
    
    
    2008Gross interest due under terms
    
    $
    224
    
    
    $
    285
    
    
    $
    320Amount included in income
    
    
    (187
    )
    
    
    (241
    )
    
    
    (116
    )Interest income not recognized
    
    $
    37
    
    
    $
    44
    
    
    $
    204
    45




---



##### 



Loans
    
    
    Loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accruing Loans30-89 Days
    
    
    90 or more days
    
    
    Total Past
    
    
    Current
    
    
    Total
    
    
    90 or more(In Thousands)
    
    Past Due
    
    
    Past Due
    
    
    Due Loans
    
    
    Loans
    
    
    Loans
    
    
    Days Past DueCommercial, financial and agricultural
    
    $
    244
    
    
    $
    224
    
    
    $
    468
    
    
    $
    33,351
    
    
    $
    33,819
    
    
    $
    Tax-exempt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,180
    
    
    
    25,180
    
    
    
    Commercial real estate:Commercial mortgages
    
    
    511
    
    
    
    2,166
    
    
    
    2,677
    
    
    
    93,011
    
    
    
    95,688
    
    
    
    Other construction and land develpoment loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,284
    
    
    
    6,284
    
    
    
    Secured by farmland
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,697
    
    
    
    5,697
    
    
    
    Consumer real estate:Home equity loans
    
    
    136
    
    
    
    297
    
    
    
    433
    
    
    
    21,254
    
    
    
    21,687
    
    
    
    Home equity lines of credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,802
    
    
    
    17,802
    
    
    
    1-4 family reisdential mortgages
    
    
    2,233
    
    
    
    1,141
    
    
    
    3,374
    
    
    
    118,291
    
    
    
    121,665
    
    
    
    Construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,405
    
    
    
    5,405
    
    
    
    Installment loans to individuals
    
    
    32
    
    
    
    
    
    
    
    32
    
    
    
    7,200
    
    
    
    7,232
    
    
    
    Unearned discount
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    (6
    )Gross loans
    
    $
    3,156
    
    
    $
    3,828
    
    
    $
    6,984
    
    
    $
    333,469
    
    
    $
    340,453
    
    
    $
    
  Impaired Loans
    2010Unpaid
    
    
    Recorded
    
    
    RecordedContractual
    
    
    Investment
    
    
    Investment
    
    
    TotalPrincipal
    
    
    With No
    
    
    With
    
    
    Recorded
    
    
    Related(In Thousands)
    
    Balance
    
    
    Allowance
    
    
    Allowance
    
    
    Investment
    
    
    AllowanceCommercial, financial and agricultural
    
    $
    498
    
    
    $
    463
    
    
    $
    35
    
    
    $
    498
    
    
    $
    15Tax-exempt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial real estate:Commercial mortgages
    
    
    2,325
    
    
    
    484
    
    
    
    1,841
    
    
    
    2,325
    
    
    
    499Other construction and land develpoment loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Secured by farmland
    
    
    319
    
    
    
    319
    
    
    
    
    
    
    
    319
    
    
    
    Consumer real estate:Home equity loans
    
    
    411
    
    
    
    112
    
    
    
    299
    
    
    
    411
    
    
    
    209Home equity lines of credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1-4 family reisdential mortgages
    
    
    1,211
    
    
    
    716
    
    
    
    495
    
    
    
    1,211
    
    
    
    90Construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Installment loans to individuals
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gross loans
    
    $
    4,764
    
    
    $
    2,094
    
    
    $
    2,670
    
    
    $
    4,764
    
    
    $
    813
 46




---



##### 



2009Unpaid
    
    
    Recorded
    
    
    RecordedContractual
    
    
    Investment
    
    
    Investment
    
    
    TotalPrincipal
    
    
    With No
    
    
    With
    
    
    Recorded
    
    
    Related(In Thousands)
    
    Balance
    
    
    Allowance
    
    
    Allowance
    
    
    Investment
    
    
    AllowanceCommercial, financial and agricultural
    
    $
    45
    
    
    $
    45
    
    
    $
    
    
    
    $
    45
    
    
    $
    Tax-exempt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial real estate:Commercial mortgages
    
    
    3,275
    
    
    
    1,332
    
    
    
    1,943
    
    
    
    3,275
    
    
    
    377Other construction and land develpoment loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Secured by farmland
    
    
    323
    
    
    
    323
    
    
    
    
    
    
    
    323
    
    
    
    Consumer real estate:Home equity loans
    
    
    72
    
    
    
    56
    
    
    
    16
    
    
    
    72
    
    
    
    16Home equity lines of credit
    
    
    92
    
    
    
    92
    
    
    
    
    
    
    
    92
    
    
    
    1-4 family reisdential mortgages
    
    
    1,032
    
    
    
    614
    
    
    
    418
    
    
    
    1,032
    
    
    
    101Construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Installment loans to individuals
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gross loans
    
    $
    4,839
    
    
    $
    2,462
    
    
    $
    2,377
    
    
    $
    4,839
    
    
    $
    494
 Allowance for Possible Loan Losses
   2010Commercial
    
    
    Commercial
    
    
    Consumer
    
    
    InstallmentFinancial &
    
    
    Real
    
    
    Real
    
    
    Loans(In Thousands)
    
    Agricultural
    
    
    Estate
    
    
    Estate
    
    
    Individuals
    
    
    Unallocated
    
    
    TotalBalance, beginning of year
    
    $
    567
    
    
    $
    1,793
    
    
    $
    1,339
    
    
    $
    149
    
    
    $
    362
    
    
    $
    4,210Provision charged to operations
    
    
    156
    
    
    
    1,464
    
    
    
    (87
    )
    
    
    (30
    )
    
    
    52
    
    
    
    1,555Loans charged off
    
    
    (5
    )
    
    
    (973
    )
    
    
    (21
    )
    
    
    (37
    )
    
    
    
    
    
    
    (1,036
    )Recoveries
    
    
    34
    
    
    
    2
    
    
    
    12
    
    
    
    24
    
    
    
    
    
    
    
    72Balance, end of year
    
    $
    752
    
    
    $
    2,286
    
    
    $
    1,243
    
    
    $
    106
    
    
    $
    414
    
    
    
    4,801Ending balance individually
evaluated for impairment
    
    $
    54
    
    
    $
    654
    
    
    $
    90
    
    
    $
    
    
    
    $
    
    
    
    $
    798Ending balance collectively
evaluated for impairment
    
    $
    698
    
    
    $
    1,632
    
    
    $
    1,153
    
    
    $
    106
    
    
    $
    414
    
    
    $
    4,003
 47




---



##### 



2009Commercial
    
    
    Commercial
    
    
    Consumer
    
    
    InstallmentFinancial &
    
    
    Real
    
    
    Real
    
    
    Loans(In Thousands)
    
    Agricultural
    
    
    Estate
    
    
    Estate
    
    
    Individuals
    
    
    Unallocated
    
    
    TotalBalance, beginning of year
    
    $
    402
    
    
    $
    1,340
    
    
    $
    1,121
    
    
    $
    158
    
    
    $
    737
    
    
    $
    3,758Provision charged to operations
    
    
    280
    
    
    
    448
    
    
    
    619
    
    
    
    51
    
    
    
    (373
    )
    
    
    1,025Loans charged off
    
    
    (116
    )
    
    
    
    
    
    
    (407
    )
    
    
    (76
    )
    
    
    
    
    
    
    (599
    )Recoveries
    
    
    1
    
    
    
    4
    
    
    
    6
    
    
    
    15
    
    
    
    
    
    
    
    26Balance, end of year
    
    $
    567
    
    
    $
    1,792
    
    
    $
    1,339
    
    
    $
    148
    
    
    $
    364
    
    
    
    4,210Ending balance individually
evaluated for impairment
    
    $
    
    
    
    $
    392
    
    
    $
    102
    
    
    $
    
    
    
    $
    
    
    
    $
    494Ending balance collectively
evaluated for impairment
    
    $
    567
    
    
    $
    1,415
    
    
    $
    1,237
    
    
    $
    148
    
    
    $
    414
    
    
    $
    3,781
  2008Balance, beginning of year
    
    $
    1,437Provision charged to operations
    
    
    750Allowance acquired
    
    
    1,683Loans charged off
    
    
    (148
    )Recoveries
    
    
    36Balance, end of year
    
    $
    3,758
  2010Commercial
    
    
    Commercial
    
    
    Consumer
    
    
    InstallmentFinancial &
    
    
    Real
    
    
    Real
    
    
    Loans(In Thousands)
    
    Agricultural
    
    
    Estate
    
    
    Estate
    
    
    Individuals
    
    
    TotalEnding balance individually
evaluated for impairment
    
    $
    498
    
    
    $
    2,644
    
    
    $
    1,622
    
    
    $
    
    
    
    $
    4,764Ending balance collectively
evaluated for impairment
    
    
    58,501
    
    
    
    105,025
    
    
    
    164,937
    
    
    
    7,226
    
    
    
    335,689Ending balance
    
    $
    58,999
    
    
    $
    107,669
    
    
    $
    166,559
    
    
    $
    7,226
    
    
    $
    340,453
 2009Commercial
    
    
    Commercial
    
    
    Consumer
    
    
    InstallmentFinancial &
    
    
    Real
    
    
    Real
    
    
    Loans(In Thousands)
    
    Agricultural
    
    
    Estate
    
    
    Estate
    
    
    Individuals
    
    
    TotalEnding balance individually
evaluated for impairment
    
    $
    45
    
    
    $
    3,598
    
    
    $
    1,196
    
    
    $
    
    
    
    $
    4,839Ending balance collectively
evaluated for impairment
    
    
    55,652
    
    
    
    93,021
    
    
    
    169,267
    
    
    
    7,710
    
    
    
    325,650Ending balance
    
    $
    55,697
    
    
    $
    96,619
    
    
    $
    170,463
    
    
    $
    7,710
    
    
    $
    330,489
 Loan Modifications
  48




---



##### 



5. MORTGAGE SERVICING RIGHTS
  The following summarizes mortgage servicing rights capitalized and amortized:
 (In Thousands)
    
    2010
    
    
    2009Balance, beginning of year
    
    $
    344
    
    
    $
    206Servicing asset additions
    
    
    235
    
    
    
    214Amortization
    
    
    (88
    )
    
    
    (76
    )Balance, end of year
    
    $
    491
    
    
    $
    344
  6. PREMISES AND EQUIPMENT
  (In Thousands)
    
    2010
    
    
    2009Land
    
    $
    1,684
    
    
    $
    1,704Premises
    
    
    11,942
    
    
    
    12,139Furniture and equipment
    
    
    9,244
    
    
    
    8,969Leasehold improvements
    
    
    64
    
    
    
    64Total
    
    
    22,934
    
    
    
    22,876Less accumulated depreciation
and amortization
    
    
    10,942
    
    
    
    10,293Net premises and equipment
    
    $
    11,992
    
    
    $
    12,583
  7. DEPOSITS
  (In Thousands)
    
    2010
    
    
    2009Demand deposits
    
    $
    62,877
    
    
    $
    55,734Interest-bearing demand deposits
    
    
    70,953
    
    
    
    71,396Savings
    
    
    107,679
    
    
    
    101,537Time deposits over $100,000
    
    
    79,678
    
    
    
    71,720Other time deposits
    
    
    152,605
    
    
    
    161,901Total deposits
    
    $
    473,792
    
    
    $
    462,288
  49




---



##### 



(In Thousands)2011
    
    $
    23,0822012
    
    
    22,7742013
    
    
    23,1952014
    
    
    3,8832015
    
    
    6,744Total
    
    $
    79,678
  8. SHORT-TERM BORROWINGS
  2010Weighted
    
    
    MaximumEnding
    
    
    Average
    
    
    Month End
    
    
    Average(In Thousands)
    
    Balance
    
    
    Balance
    
    
    Balance
    
    
    RateSecurities sold under agreements
to repurchase
    
    $
    57,824
    
    
    $
    52,315
    
    
    $
    62,172
    
    
    
    0.81
    %Other short-term borrowings
    
    
    
    
    
    
    773
    
    
    
    4,075
    
    
    
    0.73
    %U.S. Treasury tax and loan notes
    
    
    935
    
    
    
    603
    
    
    
    1,000
    
    
    
    0.00
    %Total
    
    $
    58,759
    
    
    $
    53,691
    
    
    $
    67,247
    
    
    
    0.79
    %
 2009Weighted
    
    
    MaximumEnding
    
    
    Average
    
    
    Month End
    
    
    Average(In Thousands)
    
    Balance
    
    
    Balance
    
    
    Balance
    
    
    RateSecurities sold under agreements
to repurchase
    
    $
    51,682
    
    
    $
    47,873
    
    
    $
    56,253
    
    
    
    0.76
    %Other short-term borrowings
    
    
    
    
    
    
    352
    
    
    
    5,400
    
    
    
    0.64
    %U.S. Treasury tax and loan notes
    
    
    315
    
    
    
    601
    
    
    
    994
    
    
    
    0.00
    %Total
    
    $
    51,997
    
    
    $
    48,826
    
    
    $
    62,647
    
    
    
    0.75
    %
 9. LONG-TERM BORROWINGS
  50




---



##### 



(In Thousands)
    
    2010
    
    
    2009Loan dated June 25, 1998 in the original amount of $72,000 for a 30-year term
requiring monthly payments of $425 including
interest at 5.86%.
    
    $
    56
    
    
    $
    58Loan 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%.
    
    
    20
    
    
    
    21Loan 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%.
    
    
    23
    
    
    
    24Loan dated January 27, 2000 in the original amount of $5,000,000 for a 10-year
term
with a 1-year conversion date, at the discretion of FHLB, and a 3-month
conversion
frequency thereafter. This note matured and was
paid off during 2010.
    
    
    
    
    
    
    5,000Loan dated August 16, 2000 in the original amount of $2,000,000 for a
 10-year term
with a 6-month conversion date, at the discretion of FHLB, and a 3-month
conversion
frequency thereafter. This note matured and was
paid off during 2010.
    
    
    
    
    
    
    2,000Loan dated September 20, 2000 in the original amount of $2,000,000 for a 10-year term

with a 3-year conversion date, at the discretion of FHLB, and a 3-month
conversion
frequency thereafter. This note matured and was
paid off in 2010.
    
    
    
    
    
    
    2,000Loan dated December 13, 2000 in the original amount of $32,092 for a 20-year term

requiring monthly payments of $197 including
interest at 5.50%.
    
    
    24
    
    
    
    25Three FHLB Fixed Rate Community Lending Program loans dated May 7, 2009 in the
original amount of $1,000,000 each for terms ranging
from 3 to 5 years. At
December 31, 2010 the interest rates ranged from
2.03% to 2.94%.
    
    
    3,000
    
    
    
    3,000Three FHLB Fixed Rate Community Lending Program loans dated July 15, 2009 in the
original amount of $1,000,000 each for terms ranging
from 3 to 5 years. At
December 31, 2010 the interest rates ranged from
1.99% to 3.04%.
    
    
    3,000
    
    
    
    3,000Total
    
    $
    6,123
    
    
    $
    15,128
  (In Thousands)2011
    
    $
    52012
    
    
    2,0052013
    
    
    2,0062014
    
    
    2,0062015
    
    
    6Thereafter
    
    
    95Total
    
    $
    6,123
 51




---



##### 



10. COMPREHENSIVE INCOME
  Years Ended December 31,(In Thousands)
    
    2010
    
    
    2009
    
    
    2008Unrealized holding (losses) gains on available-for-sale investment securities
    
    $
    (416
    )
    
    $
    1,750
    
    
    $
    2,671Reclassification adjustment for losses realized in income
    
    
    (42
    )
    
    
    (385
    )
    
    
    (431
    )Change in net unrealized gains before tax effect
    
    
    (458
    )
    
    
    1,365
    
    
    
    2,240Tax effect
    
    
    (156
    )
    
    
    464
    
    
    
    762Change in net unrealized gain on investment securities available-for-sale, net of reclassification and tax effect
    
    $
    (302
    )
    
    $
    901
    
    
    $
    1,478
 11. STOCKHOLDERS EQUITY AND STOCK PURCHASE PLANS
   Average Per ShareEmployees
    
    
    MarketNumber
    
    
    Purchase
    
    
    Valueof Shares
    
    
    Price
    
    
    of SharesYear Issued:2010
    
    
    2,149
    
    
    $
    24.19
    
    
    $
    27.002009
    
    
    3,154
    
    
    $
    20.96
    
    
    $
    22.552008
    
    
    606
    
    
    $
    22.86
    
    
    $
    25.40
  Number
    
    
    Total(In Thousands, Except Per Share Data)
    
    of Shares
    
    
    ProceedsYear:2010
    
    
    13,932
    
    
    $
    3872009
    
    
    14,616
    
    
    $
    3192008
    
    
    11,652
    
    
    $
    254
 52




---



##### 



12. INCOME TAXES
  For the Years Ended December 31,(In Thousands)
    
    2010
    
    
    2009
    
    
    2008Currently payable
    
    $
    2,496
    
    
    $
    1,980
    
    
    $
    1,155Deferred (benefit) tax
    
    
    (170
    )
    
    
    75
    
    
    
    (259
    )Total income tax provision
    
    $
    2,326
    
    
    $
    2,055
    
    
    $
    896
  2010
    
    
    2009
    
    
    2008(In Thousands)
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %Provision at statutory rate
    
    $
    2,934
    
    
    
    34.0
    %
    
    $
    2,697
    
    
    
    34.0
    %
    
    $
    1,351
    
    
    
    34.0
    %Tax-exempt income
    
    
    (462
    )
    
    
    (5.4
    )
    
    
    (428
    )
    
    
    (5.4
    )
    
    
    (327
    )
    
    
    (8.2
    )Bank-owned life insurance income-net
    
    
    (151
    )
    
    
    (1.7
    )
    
    
    (152
    )
    
    
    (1.9
    )
    
    
    (124
    )
    
    
    (3.1
    )Tax credit from limited partnerships
less amortization, net
    
    
    (131
    )
    
    
    (1.5
    )
    
    
    (133
    )
    
    
    (1.7
    )
    
    
    (68
    )
    
    
    (1.7
    )Non-decuctible expenses
    
    
    35
    
    
    
    0.4
    
    
    
    38
    
    
    
    0.5
    
    
    
    51
    
    
    
    1.3Other, net
    
    
    101
    
    
    
    1.2
    
    
    
    33
    
    
    
    0.4
    
    
    
    13
    
    
    
    0.2Effective income tax and rate
    
    $
    2,326
    
    
    
    27.0
    %
    
    $
    2,055
    
    
    
    25.9
    %
    
    $
    896
    
    
    
    22.5
    %
  (In Thousands)
    
    2010
    
    
    2009Deferred tax assets:Allowance for loan losses
    
    $
    1,376
    
    
    $
    1,101Allowance for off balance sheet losses
    
    
    3
    
    
    
    3Deferred compensation and directors fees
    
    
    457
    
    
    
    418Non-accrual loan interest
    
    
    23
    
    
    
    21Investment in limited partnerships
    
    
    126
    
    
    
    106Impairment losses on investment securities
    
    
    393
    
    
    
    378*   Property valuation
    
    
    238
    
    
    
    280Capital loss carryforward
    
    
    159
    
    
    
    238Total
    
    
    2,775
    
    
    
    2,545Deferred tax liabilities:Loan fees and costs
    
    
    (63
    )
    
    
    (32
    )Bond accretion
    
    
    (88
    )
    
    
    (73
    )Depreciation
    
    
    (619
    )
    
    
    (598
    )Investment in insurance agency
    
    
    (22
    )
    
    
    (22
    )*   Intangibles
    
    
    (1,185
    )
    
    
    (1,186
    )*   Other
    
    
    (30
    )
    
    
    (27
    )Unrealized investment security gains
    
    
    (1,144
    )
    
    
    (1,299
    )Total
    
    
    (3,151
    )
    
    
    (3,237
    )Deferred tax liability, net
    
    $
    (376
    )
    
    $
    (692
    )
  53




---



##### 



13. EMPLOYEE BENEFIT AND DEFERRED COMPENSATION PLANS
 EMPLOYEE BENEFIT PLANS
  DEFERRED COMPENSATION PLANS
 Directors
    Officers
    54




---



##### 



14. LEASE COMMITMENTS AND CONTINGENCIES
  (In Thousands)2011
    
    $
    2802012
    
    
    2822013
    
    
    1232014
    
    
    412015
    
    
    5Thereafter
    
    
    5Total
    
    $
    736
  15. ACQUISITION
   55




---



##### 



(In Thousands)Purchase price
    
    $
    26,316Carrying value of net assets acquired
    
    
    (17,855
    )Excess of purchase price over carrying value
of net assets acquired
    
    
    8,461Purchase accounting adjustments:Loans
    
    
    30Premises and equipment
    
    
    853Deposits
    
    
    1,235Severance and related costs
    
    
    840Deferred taxes
    
    
    208Subtotal
    
    
    11,627Core deposit intangibles
    
    
    (3,690
    )Goodwill
    
    $
    7,937
  (In Thousands)AssetsCash and cash equivalents
    
    $
    5,157Interest-bearing deposits in other banks
    
    
    129Federal funds sold
    
    
    517Investment securities
    
    
    138,257Loans, net of allowance for loan losses
    
    
    160,724Premises and equipment
    
    
    6,492Accrued interest receivable
    
    
    1,534Bank-owned life insurance
    
    
    3,462Investment in limited partnerships
    
    
    919Goodwill and other intangibles
    
    
    11,627Other assets
    
    
    564Total assets
    
    $
    329,382LiabilitiesDeposits
    
    $
    264,692Borrowings
    
    
    31,883Junior subordinate debentures
    
    
    4,640Accrued interest payable
    
    
    764Other liabilities
    
    
    1,087Total liabilities
    
    $
    303,066Fair value of net assets acquired
    
    $
    26,316
  56




---



##### 



For the Year Ended(In Thousands, Except Per Share Data)
    
    December 31, 2008Net interest income
    
    $
    19,132Provision for loan losses
    
    
    775Net interest income after provision for
loan losses
    
    
    18,357Non-interest income
    
    
    4,739Non-interest expense
    
    
    16,923Income before income tax provision
    
    
    6,173Income tax provision
    
    
    1,743Net income
    
    $
    4,430Net income per common share
    
    $
    1.97Average common shares outstanding
    
    
    2,251,486
  16. RELATED PARTY TRANSACTIONS
  Beginning
    
    
    
    
    
    
    
    
    
    
    Ending(In Thousands)
    
    Balance
    
    
    Additions
    
    
    Payments
    
    
    Balance2010
    
    $
    7,845
    
    
    $
    995
    
    
    $
    (998
    )
    
    $
    7,8422009
    
    
    7,803
    
    
    
    1,441
    
    
    
    (1,399
    )
    
    
    7,845
    17. REGULATORY MATTERS
  57




---



##### 



2010
    
    
    2009(In Thousands)
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioTotal Capital
(to Risk-weighted Assets)Actual
    
    $
    64,476
    
    
    
    18.5
    %
    
    $
    60,322
    
    
    
    17.6
    %For Capital Adequacy Purposes
    
    
    27,884
    
    
    
    8.0
    
    
    
    27,394
    
    
    
    8.0To Be Well-Capitalized
    
    
    34,855
    
    
    
    10.0
    
    
    
    34,243
    
    
    
    10.0Tier I Capital
(to Risk-weighted Assets)Actual
    
    $
    60,114
    
    
    
    17.3
    %
    
    $
    56,102
    
    
    
    16.4
    %For Capital Adequacy Purposes
    
    
    13,942
    
    
    
    4.0
    
    
    
    13,697
    
    
    
    4.0To Be Well-Capitalized
    
    
    20,913
    
    
    
    6.0
    
    
    
    20,546
    
    
    
    6.0Tier I Capital
(to Average Assets)Actual
    
    $
    60,114
    
    
    
    10.0
    %
    
    $
    56,102
    
    
    
    9.8
    %For Capital Adequacy Purposes
    
    
    24,034
    
    
    
    4.0
    
    
    
    22,861
    
    
    
    4.0To Be Well-Capitalized
    
    
    30,043
    
    
    
    5.0
    
    
    
    28,577
    
    
    
    5.0
  18. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF CREDIT RISK
   58




---



##### 



(In Thousands)
    
    2010
    
    
    2009Financial instruments whose contract amounts represents credit risk:Commitments to extend credit
    
    $
    65,926
    
    
    $
    71,868Standby letters of credit
    
    
    2,674
    
    
    
    3,393Dealer floor plans
    
    
    966
    
    
    
    932Loans held for sale
    
    
    2,005
    
    
    
    267
     19. FAIR VALUE MEASUREMENTS
  Level I:
    
    Quoted prices are available in active markets for identical assets or liabilities as of
the reported date.Level II:
    
    Pricing inputs are other than quoted prices in active markets, which are either
directly or indirectly observable as of the reported date. The nature of these assets and liabilities include
items for which quoted prices are available but traded less frequently, and items that are
fair valued using other financial instruments of which can be directly observed.Level III:
    
    Assets and liabilities that have little or no pricing observability as of the
reported date. These items do not have two-way markets and are measured using
managements best estimate of fair value, where the inputs into determination of fair
value require significant management judgment or estimation.
  December 31, 2010(In Thousands)
    
    Level I
    
    
    Level II
    
    
    Level III
    
    
    TotalAssets Measured on a Recurring Basis:Investment Securities, available-for-sale
    
    $
    2,084
    
    
    $
    205,089
    
    
    $
    
    
    
    $
    207,173
 59




---



##### 



December 31, 2009(In Thousands)
    
    Level I
    
    
    Level II
    
    
    Level III
    
    
    TotalAssets Measured on a Recurring Basis:Investment Securities, available-for-sale
    
    $
    1,697
    
    
    $
    218,569
    
    
    $
    
    
    
    $
    220,266
  December 31, 2010Level I
    
    
    Level II
    
    
    Level III
    
    
    Total(In Thousands)Available for sale securitiesObligation of US Government AgenciesMortgage-backed
    
    $
    
    
    
    $
    132,515
    
    
    $
    
    
    
    $
    132,515Other
    
    
    
    
    
    
    58,903
    
    
    
    
    
    
    
    58,903Obligations of state and political subdivisions
    
    
    
    
    
    
    13,671
    
    
    
    
    
    
    
    13,671Equity securities
    
    
    2,084
    
    
    
    
    
    
    
    
    
    
    
    2,084$
    2,084
    
    
    $
    205,089
    
    
    $
    
    
    
    $
    207,173
 December 31, 2009(In Thousands)
    
    Level I
    
    
    Level II
    
    
    Level III
    
    
    TotalAvailable for sale securitiesObligation of US Government AgenciesMortgage-backed
    
    $
    
    
    
    $
    138,856
    
    
    $
    
    
    
    $
    138,856Other
    
    
    
    
    
    
    68,339
    
    
    
    
    
    
    
    68,339Obligations of state and political subdivisions
    
    
    
    
    
    
    11,374
    
    
    
    
    
    
    
    11,374Equity securities
    
    
    1,697
    
    
    
    
    
    
    
    
    
    
    
    1,697$
    1,697
    
    
    $
    218,569
    
    
    $
    
    
    
    $
    220,266
   December 31, 2010(In Thousands)
    
    Level I
    
    
    Level II
    
    
    Level III
    
    
    TotalAssets Measured on a Non-recurring Basis:Impaired Loans
    
    $
    
    
    
    $
    4,764
    
    
    $
    
    
    
    $
    4,764Loans Held for Sale
    
    
    
    
    
    
    2,005
    
    
    
    
    
    
    
    2,005Mortgage Servicing Rights
    
    
    
    
    
    
    491
    
    
    
    
    
    
    
    491Other Real Estate Owned
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    7,260
    
    
    $
    
    
    
    $
    7,260
 60




---



##### 



December 31, 2009(In Thousands)
    
    Level I
    
    
    Level II
    
    
    Level III
    
    
    TotalAssets Measured on a Non-recurring Basis:Impaired Loans
    
    $
    
    
    
    $
    4,839
    
    
    $
    
    
    
    $
    4,839Loans Held for Sale
    
    
    
    
    
    
    267
    
    
    
    
    
    
    
    267Mortgage Servicing Rights
    
    
    
    
    
    
    344
    
    
    
    
    
    
    
    344Other Real Estate Owned
    
    
    
    
    
    
    29
    
    
    
    
    
    
    
    29$
    
    
    
    $
    5,479
    
    
    $
    
    
    
    $
    5,479
 20. ESTIMATED FAIR VALUES OF FINANCIAL INSTRUMENTS
   2010
    
    
    2009Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    Estimated(In Thousands)
    
    Amount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueFinancial Assets:Cash and short-term instruments
    
    $
    27,595
    
    
    $
    27,595
    
    
    $
    11,459
    
    
    $
    11,459Investment securities
    
    
    207,173
    
    
    
    207,173
    
    
    
    220,266
    
    
    
    220,266Restricted securities
    
    
    3,012
    
    
    
    3,012
    
    
    
    2,984
    
    
    
    2,984Loans, net
    
    
    335,652
    
    
    
    341,814
    
    
    
    326,279
    
    
    
    329,726Cash surrender value of bank owned life insurance
    
    
    11,942
    
    
    
    11,942
    
    
    
    11,440
    
    
    
    11,440Accrued interest receivable
    
    
    1,632
    
    
    
    1,632
    
    
    
    2,006
    
    
    
    2,006Financial Liabilities:Interest- bearing deposits
    
    
    410,915
    
    
    
    414,706
    
    
    
    406,554
    
    
    
    410,168Noninterest- bearing deposits
    
    
    62,877
    
    
    
    62,877
    
    
    
    55,734
    
    
    
    55,734Short-term borrowings
    
    
    58,759
    
    
    
    58,759
    
    
    
    51,997
    
    
    
    51,997Long-term borrowings
    
    
    6,123
    
    
    
    6,303
    
    
    
    15,128
    
    
    
    15,375Junior subordinate debentures
    
    
    4,640
    
    
    
    4,640
    
    
    
    4,640
    
    
    
    4,640Accrued interest payable
    
    
    652
    
    
    
    652
    
    
    
    859
    
    
    
    859Off-Balance Sheet Assets (Liabilities):Commitments to extend credit
    
    
    
    
    
    $
    65,926
    
    
    
    
    
    
    $
    71,868Standby letters of credit
    
    
    
    
    
    
    2,674
    
    
    
    
    
    
    
    3,393Dealer floor plans
    
    
    
    
    
    
    966
    
    
    
    
    
    
    
    932
  CASH AND OTHER SHORT-TERM INSTRUMENTS
  INVESTMENT SECURITIES
  RESTRICTED SECURITIES
  61




---



##### 



LOANS
    CASH SURRENDER VALUE OF BANK OWNED LIFE INSURANCE
  ACCRUED INTEREST RECEIVABLE AND PAYABLE
  DEPOSITS
   SHORT-TERM BORROWINGS
  LONG-TERM BORROWINGS
  COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT
  21. PARENT COMPANY FINANCIAL INFORMATION
  BALANCE SHEETS
    
    December 31,(In Thousands)
    
    2010
    
    
    2009
    
    
    2008AssetsCash
    
    $
    530
    
    
    $
    793
    
    
    $
    524Investment in subsidiary
    
    
    68,763
    
    
    
    65,927
    
    
    
    61,568Investment in other equity securities
    
    
    2,084
    
    
    
    1,697
    
    
    
    2,292Prepayments and other assets
    
    
    1,121
    
    
    
    1,226
    
    
    
    942Receivable from subsidiary
    
    
    
    
    
    
    109
    
    
    
    200Total Assets
    
    $
    72,498
    
    
    $
    69,752
    
    
    $
    65,526Liabilities and Stockholders EquityJunior subordinate debentures
    
    $
    4,640
    
    
    $
    4,640
    
    
    
    4,640Accrued expenses and other liabilities
    
    
    4
    
    
    
    26
    
    
    $
    111Total Liabilities
    
    
    4,644
    
    
    
    4,666
    
    
    
    4,751Stockholders EquityCommon stock
    
    
    2,859
    
    
    
    2,838
    
    
    
    2,816Surplus
    
    
    27,964
    
    
    
    27,539
    
    
    
    27,173Retained earnings
    
    
    36,397
    
    
    
    32,723
    
    
    
    29,164Accumulated other comprehensive income
    
    
    2,221
    
    
    
    2,523
    
    
    
    1,622Treasury stock
    
    
    (1,587
    )
    
    
    (537
    )
    
    
    Total Stockholders Equity
    
    
    67,854
    
    
    
    65,086
    
    
    
    60,775Total Liabilities and Stockholders Equity
    
    $
    72,498
    
    
    $
    69,752
    
    
    $
    65,526
 62




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##### 



STATEMENTS OF INCOME
    
    Years Ended December 31,(In Thousands)
    
    2010
    
    
    2009
    
    
    2008IncomeDividends from subsidiary bank
    
    $
    3,130
    
    
    $
    2,818
    
    
    $
    2,359Dividends  other
    
    
    44
    
    
    
    55
    
    
    
    81Securities losses, net
    
    
    (42
    )
    
    
    (383
    )
    
    
    (431
    )Total Income
    
    
    3,132
    
    
    
    2,490
    
    
    
    2,009Operating expenses
    
    
    212
    
    
    
    245
    
    
    
    202Income Before Taxes and Equity in UndistributedNet Income of Subsidiary and Insurance Agency
    
    
    2,920
    
    
    
    2,245
    
    
    
    1,807Applicable income tax benefit
    
    
    (14
    )
    
    
    (204
    )
    
    
    (206
    )Income Before Equity in Undistributed Net Income of Subsidiary
and Equity in Income from Insurance Agency
    
    
    2,934
    
    
    
    2,449
    
    
    
    2,013Equity in undistributed income of subsidiary
    
    
    3,370
    
    
    
    3,414
    
    
    
    1,059Equity in income from investment in insurance agency
    
    
    
    
    
    
    14
    
    
    
    6Net Income
    
    $
    6,304
    
    
    $
    5,877
    
    
    $
    3,078
 STATEMENTS OF CASH FLOWS
    
    Years Ended December 31,(In Thousands)
    
    2010
    
    
    2009
    
    
    2008Operating Activities:Net income
    
    $
    6,304
    
    
    $
    5,877
    
    
    $
    3,078Adjustments to reconcile net income to net cash provided by operating activities:Securities losses (gains)
    
    
    
    
    
    
    314
    
    
    
    (6
    )Impairment loss on securites
    
    
    42
    
    
    
    69
    
    
    
    437Equity in undistributed net income of subsidiary
    
    
    (3,370
    )
    
    
    (3,414
    )
    
    
    (1,059
    )Decrease (increase) in amounts due from subsidiary
    
    
    109
    
    
    
    (44
    )
    
    
    (219
    )Decrease in income taxes and accrued expenses payable
    
    
    (30
    )
    
    
    (230
    )
    
    
    (263
    )Net Cash Provided By Operating Activities
    
    
    3,055
    
    
    
    2,572
    
    
    
    1,968Investing Activities:Purchase of equity securities
    
    
    (78
    )
    
    
    
    
    
    
    (153
    )Acquisition of bank cash
    
    
    
    
    
    
    
    
    
    
    251Proceeds from sale of equity securities
    
    
    
    
    
    
    164
    
    
    
    51Net Cash (Used in) Provided By Investing Activities
    
    
    (78
    )
    
    
    164
    
    
    
    149Financing Activities:Acquisition of treasury stock
    
    
    (1,050
    )
    
    
    (537
    )
    
    
    (398
    )Proceeds from issuance of common stock
    
    
    440
    
    
    
    388
    
    
    
    267Cash dividends
    
    
    (2,630
    )
    
    
    (2,318
    )
    
    
    (1,593
    )Net Cash Used In Financing Activities
    
    
    (3,240
    )
    
    
    (2,467
    )
    
    
    (1,724
    )(Decrease) increase in Cash and Cash Equivalents
    
    
    (263
    )
    
    
    269
    
    
    
    393Cash and Cash Equivalents at Beginning of Year
    
    
    793
    
    
    
    524
    
    
    
    131Cash and Cash Equivalents at End of Year
    
    $
    530
    
    
    $
    793
    
    
    $
    524
 63




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##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     /s/ J. H. Williams & Co., LLPJ. H. Williams & Co., LLPKingston, PennsylvaniaMarch 8, 2011 64




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##### 



Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
  Item 9A. Controls and Procedures
 (a) Disclosure Controls and Procedures
   .
 Limitations on the Effectiveness of Controls.
 Scope of the Controls Evaluation
  65




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##### 



Conclusions
 (b) Managements Report on Internal Control Over Financial Reporting
      /s/ Lance O. DiehlPresident Chief Executive OfficerDate: March 8, 2011/s/ Jeffrey T. ArnoldChief Financial Officer and TreasurerDate: March 8, 2011 (c) Changes to Internal Control Over Financial Reporting
  66




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##### 



Item 9B. Other Information
 None.
 PART III
 Item 10. Directors, Executive Officers and Corporate Governance
 Directors
  Executive Officers
  Compliance with Section 16(a) of the Exchange Act
  Disclosure of Code of Ethics
  Corporate Governance
  Item 11. Executive Compensation
  Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
   Item 13. Certain Relationships and Related Transactions, Director Independence
 Certain Relationships and Related Transactions
  Director Independence
  Item 14. Principal Accounting Fees and Services
  67




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##### 



PART IV
 Item 15. Exhibits and Financial Statement Schedules
  1.
    
    The following financial statements are filed herewith in Item 8:
 Report of Independent Registered Public Accounting FirmConsolidated Balance Sheet as of December 31, 2010 and 2009Consolidated Statement of Income for the Years Ended December 31, 2010, 2009 and 2008Consolidated Statement of Changes in Stockholders Equity for the Years Ended December
31, 2010, 2009 and 2008Consolidated Statement of Cash Flows for the Years Ended December 31, 2010, 2009 and
2008Notes to Consolidated Financial Statements
 2.
    
    All financial statement schedules are omitted because the required information is either
not applicable, not required or is shown in the respective financial statement or in the
notes thereto, which are incorporated by reference at subsection (a) (1) of this item.3.
    
    The following exhibits are filed herewith, or, as indicated, incorporated by
reference as a part of this report.
 3.1
    
    
    Amended and Restated Articles of Incorporation (1)3.2
    
    
    Amended Bylaws (9)10.1
    
    
    Executive Employment Agreement of Lance O. Diehl (2)10.2
    
    
    Executive Employment Agreement of Edwin A. Wenner (3)10.3
    
    
    Form of Deferred Director Fees Agreement (4)10.4
    
    
    Supplemental Executive Retirement Plan Agreement and Amendment of Lance O. Diehl (5))10.5
    
    
    Supplemental Executive Retirement Plan Agreement and Amendment of Edwin A. Wenner (6)10.6
    
    
    Supplemental Executive Retirement Plan Agreement of Paul Page (7)10.7
    
    
    Executive Employment Agreement for Paul Page (8)10.8
    
    
    Executive Employment Agreement of Jeffrey T. Arnold (10)10.9
    
    
    Supplemental Executive Retirement Plan Agreement of Jeffrey T. Arnold (11)21
    
    
    List of Subsidiaries of the Corporation23
    
    
    Consent of Independent Registered Public Accounting Firm31.1
    
    
    Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer31.2
    
    
    Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer32.1
    
    
    Section 1350 Certification of Principal Executive Officer32.2
    
    
    Section 1350 Certification of Principal Financial Officer
 
 (1)
    
    Incorporated by reference to Exhibit 1 to Registrants Current Report on Form 8-K,
dated May 9, 2005, filed with the commission on May 10, 2005.(2)
    
    Incorporated by reference to Exhibit 10.6 to Registrants Registration Statement on
Form S-4 filed with the Commission on March 27, 2008.(3)
    
    Incorporated by reference to Exhibit 10.7 to Registrants Registration Statement on
Form S-4 filed with the Commission on March 27, 2008.(4)
    
    Incorporated by reference to Exhibit 10.3 to Registrants Current Report on Form 8-K,
dated December 14, 2004, filed with the Commission on December 15, 2004.(5)
    
    Incorporated by reference to Exhibit 10.4 to Registrants Current Report on Form 8-K,
dated December 14, 2004, filed with the Commission on December 15, 2004.(6)
    
    Incorporated by reference to Exhibit 10.5 to Registrants Current Report on Form 8-K,
dated December 14, 2004, filed with the Commission on December 15, 2004.(7)
    
    Incorporated by reference to Exhibit 1 to Registrants Current Report on Form 8-K,
dated May 27, 2009, filed with the Commission on May 28, 2009.(8)
    
    Incorporated by reference to Exhibit 10.9 to Registrants Registration Statement on
Form S-4 filed with the Commission on March 27, 2008. 68




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##### 



(9)
    
    Incorporated by reference to Exhibit 3.2 to Registrants Annual Report on Form 10-K,
dated March 9, 2010, filed with the Commission on March 26, 2010.(10)
    
    Incorporated by reference to Exhibit 10.1 to Registrants Current Report on Form 8-K,
dated December 14, 2010, filed with the Commission on December 17, 2010.(11)
    
    Incorporated by reference to Exhibit 10.2 to Registrants Current Report on Form 8-K,
dated December 14, 2010, filed with the Commission on December 17, 2010.   SIGNATURES
  
 By:
    /s/ Lance O. Diehl
    Date: March 8, 2011Lance O. DiehlPresident and Chief Executive Officer  By:
    
    /s/ Robert W. Brewington, Jr.

Robert W. Brewington, Jr.
Director
    
    Date: March 8, 2011By:
    
    /s/ Edward L. Campbell

Edward L. Campbell.
Director
    
    Date: March 8, 2011By:
    
    /s/ Lance O. Diehl

Lance O. Diehl
President, Chief Executive Officer and
Director (Principal Executive Officer)
    
    Date: March 8, 2011By:
    
    /s/ Robert W. Dillon

Robert W. Dillon
Director
    
    Date: March 8, 2011By:
    
    /s/ Frank D. Gehrig

Frank D. Gehrig
Director
    
    Date: March 8, 2011By:
    
    /s/ William F. Gittler

William F. Gittler
Director
    
    Date: March 8, 2011By:
    
    /s/ Glenn E. Halterman

Glenn E. Halterman
Director, Chairman of the Board
    
    Date: March 8, 2011
 69




---



##### 



By:
    
    /s/ Elwood R. Harding, Jr..

Elwood R. Harding, Jr.
Director, Vice Chairman of the Board
    
    Date: March 8, 2011By:
    
    /s/ Joanne I. Keenan

Joanne I. Keenan
Director
    
    Date: March 8, 2011By:
    
    /s/ Willard H. Kile, Jr.

Willard H. Kile, Jr.
Director
    
    Date: March 8, 2011By:
    
    /s/ W. Bruce McMichael, Jr.

W. Bruce McMichael, Jr.
Director
    
    Date: March 8, 2011By:
    
    /s/ Mary Ann B. Naugle

Mary Ann B. Naugle
Director
    
    Date: March 8, 2011By:
    
    /s/ Andrew B. Pruden

Andrew B. Pruden
Director
    
    Date: March 8, 2011By:
    
    /s/ Charles B. Pursel

Charles B. Pursel
Director
    
    Date: March 8, 2011By:
    
    /s/ Steven H. Shannon

Steven H. Shannon
Director
    
    Date: March 8, 2011By:
    
    /s/ Jeffrey T. Arnold

Jeffrey T. Arnold
Chief Financial Officer and Treasurer
(Principal Financial Officer)
(Principal Accounting Officer)
    
    Date: March 8, 2011
 INDEX TO EXHIBITS
 Item Number
    
    Description
    
    Page21
    
    List of Subsidiaries of the Corporation
    
    
    7123
    
    Consent of Independent Registered Public Accounting Firm
    
    
    7231.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Principal
Executive Officer
    
    
    7331.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Principal
Financial Officer
    
    
    7432.1
    
    Section 1350 Certification of Principal Executive Officer
    
    
    7532.2
    
    Section 1350 Certification of Principal Financial Officer
    
    
    76
 70