Form 10-Q
        UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                    Washington, D. C.  20549


(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended            September 30, 2001
                                   _____________________________

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

For the transition period from                 to
                               _______________    _______________

Commission file number                  0-19214
                     ____________________________________________

                     Union National Financial Corporation
________________________________________________________________
          (Exact name of registrant as specified in its charter)

           Pennsylvania                             23-2415179
 ___________________________________      _______________________
    (State of Incorporation)             (I.R.S. Employer ID No.)


  101 East Main Street, P.O. Box 567, Mount Joy, PA        17552
____________________________________________________     ________
     (Address of principal executive offices)            Zip Code

                            (717) 653 - 1441
_________________________________________________________________
           (Registrant's telephone number, including area code)

                             Not Applicable
_________________________________________________________________
           (Former name, former address, & former fiscal year,
                    if changed since last report)

     Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.                 Yes [X] No [ ]
                                                  ______________
     Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
    2,585,826     shares of $.25 (par) common stock were
_________________
outstanding as of October 31, 2001.
                  _________________
<PAGE>
                UNION NATIONAL FINANCIAL CORPORATION
                           10Q INDEX                       Page
                                                             #
 PART I    - FINANCIAL INFORMATION:                     _________
            _______________________

   Item 1 - Financial Statements

          - Consolidated Statements of Financial Condition     1

          - Consolidated Statements of Income                  2

          - Consolidated Statements of Comprehensive Income    2

          - Consolidated Statements of Cash Flows              3

          - Notes to Consolidated Financial Statements     4 - 5

  Item 2  - Management's Discussion and Analysis of Financial
            Condition and Results of Operations           6 - 15


  Item 3  - Quantitative and Qualitative Disclosures About
            Market Risk                                  15 - 16

PART II   - OTHER INFORMATION
          __________________

  Item 1  - Legal Proceedings                                 17

  Item 2  - Change in Securities and Use of Proceeds          17

  Item 3  - Defaults Upon Senior Securities                   17

  Item 4  - Submission of Matters to a Vote of
            Security Holders                                  17

  Item 5  - Other Information                                 17

  Item 6  - Exhibits and Reports on Form 8-K                  17

Signature Page                                                18

   Exhibit 10 - Change of Control Agreement              19 - 28

<PAGE>
                  PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
<TABLE>
Union National Financial Corporation
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)

<CAPTION>
             (In Thousands)                 9/30/01      12/31/00
                                          _______________________
<S>                                           <C>          <C>

ASSETS

Cash and Due from Banks                      $5,446      $7,715
Federal Funds Sold                            1,500           0
Investment Securities Held-to-Maturity
 (Fair Value - 2001-$13,317;
 2000-$13,960)                               13,338      14,139
Investment Securities Available-for-Sale     81,335      63,429

Loans(Net of Unearned Income)               182,519     185,981
  Less: Allowance for Loan Losses            (2,008)     (1,787)
                                          _______________________
    Total Net Loans                         180,511     184,194

Premises and Equipment - Net                  6,501       5,975
Other Assets                                  6,882       7,228
                                          _______________________
    TOTAL ASSETS                           $295,513    $282,680
                                          =======================
LIABILITIES
Deposits:
 Noninterest-Bearing                        $23,288     $24,941
 Interest-Bearing                           192,593     187,604
                                          _______________________
    Total Deposits                          215,881     212,545

Short-Term Borrowings                         2,911      13,495
Long-Term Debt                               48,927      30,735
Other Liabilities                             2,159       2,343
                                          _______________________
     TOTAL LIABILITIES                      269,878     259,118

STOCKHOLDERS' EQUITY

Common Stock (Par Value $.25)                   686         687
Shares: Authorized - 20,000,000; Issued -
  2,744,160 in 2001 (2,748,068 in 2000)
  Outstanding - 2,585,828 in 2001 (2,575,218
  in 2000)
Surplus                                       8,889       9,078
Retained Earnings                            18,289      17,487
Accumulated Other Comprehensive Income/(Loss)   935        (201)
Less: Treasury Stock - at cost
 (158,332 shares in 2001 and 172,850 shares
  in 2000)                                   (3,164)     (3,489)
                                          _______________________
     TOTAL STOCKHOLDERS' EQUITY              25,635      23,562
                                          _______________________
     TOTAL LIABILITIES AND
      STOCKHOLDERS' EQUITY                 $295,513    $282,680

                                          =======================

The accompanying notes are an integral part of the
consolidated financial statements.
</TABLE>

<PAGE>
<TABLE>
Union National Financial Corporation
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<CAPTION>
                                 Three Months Ended September 30,
                                     ____________________________
(In Thousands, except Per Share Data)       2001       2000
                                     ____________________________
<S>                                            <C>        <C>
INTEREST INCOME
Interest and Fees on Loans                 $3,829      $3,977
Investment Securities:
  Taxable Interest                          1,018         952
  Tax-Exempt Interest                         278         304
  Dividends                                    54          59
 Other                                         41           3
                                     ____________________________
  Total Interest Income                     5,220       5,295

INTEREST EXPENSE
Deposits                                    1,780       2,042
Short-Term Borrowings                          48         329
Long-Term Debt                                680         386
                                     ____________________________
   Total Interest Expense                   2,508       2,757
                                     ____________________________
   Net Interest Income                      2,712       2,538
PROVISION for LOAN LOSSES                      84         112
                                     ____________________________
Net Interest Income after Provision
  for Loan Losses                           2,628       2,426
OTHER OPERATING INCOME
Income from Fiduciary Activities               33           9
Service Charges on Deposit Accounts           241         197
Other Service Charges, Commissions, Fees      214         176
Investment Securities Gains/(Losses)           25         (18)
Other Income                                   70          59
                                     ____________________________
    Total Other Operating Income              583         423

OTHER OPERATING EXPENSES
Salaries and Wages                          1,160       1,093
Retirement Plan and Other Employee Benefits   253         245
Net Occupancy Expense                         174         163
Furniture and Equipment Expense               142         121
Professional Fees                             115         199
Data Processing Services                      135          16
Other Operating Expenses                      530         569
                                     ____________________________
    Total Other Operating Expenses          2,509       2,406
                                     ____________________________
    Income before Income Taxes                702         443
PROVISION for INCOME TAXES (BENEFIT)           88         (11)
                                     ____________________________
    NET INCOME for PERIOD                    $614        $454
                                     ============================
PER SHARE INFORMATION
 Net Income for Period-Basic                $0.24       $0.18
 Net Income for Period - Assuming Dilution  $0.24       $0.18
 Cash Dividends                            $0.105      $0.145

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(UNAUDITED)
Net Income for Period                        $614        $454
Other Comprehensive Income, Net of Tax:
 Unrealized Holding Gains/(Losses) on Investment
   Securities Available-for-Sale Arising
   During Period                              403         488
 Unrealized Holding Gains on Investment
   Securities Transferred to Available-for-Sale
   During Period                                0           0
 Reclassification adjustment for (Gains)/Losses
   included in Net Income                     (17)         12
                                    ____________________________
Total Other Comprehensive Income/(Loss)       386         500
                                     ____________________________
COMPREHENSIVE INCOME for PERIOD            $1,000        $954
                                     ============================
The accompanying notes are an integral part of the consolidated
financial statements.

Union National Financial Corporation
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<CAPTION>
                                  Nine Months Ended September 30,
                                  _______________________________
(In Thousands, except Per Share Data)       2001       2000
                                     ____________________________
<S>                                            <C>        <C>
INTEREST INCOME
Interest and Fees on Loans                $11,719     $11,540
Investment Securities:
  Taxable Interest                          2,915       2,660
  Tax-Exempt Interest                         852         927
  Dividends                                   163         167
 Other                                        160          15
                                     ____________________________
  Total Interest Income                    15,809      15,309

INTEREST EXPENSE
Deposits                                    5,666       5,873
Short-Term Borrowings                         316         509
Long-Term Debt                              1,879       1,164
                                     ____________________________
   Total Interest Expense                   7,861       7,546
                                     ____________________________
   Net Interest Income                      7,948       7,763
PROVISION for LOAN LOSSES                     357         240
                                     ____________________________
Net Interest Income after Provision
  for Loan Losses                           7,591       7,523
OTHER OPERATING INCOME
Income from Fiduciary Activities              124          90
Service Charges on Deposit Accounts           730         539
Other Service Charges, Commissions, Fees      610         504
Investment Securities Gains/(Losses)           24         (13)
Other Income                                  216         114
                                     ____________________________
    Total Other Operating Income            1,704       1,234

OTHER OPERATING EXPENSES
Salaries and Wages                          3,279       3,131
Retirement Plan and Other Employee Benefits   765         749
Net Occupancy Expense                         510         494
Furniture and Equipment Expense               421         343
Professional Fees                             422         367

Data Processing Services                      408          63
Other Operating Expenses                    1,741       1,640
                                     ____________________________
    Total Other Operating Expenses          7,546       6,787
                                     ____________________________
    Income before Income Taxes              1,749       1,970
PROVISION for INCOME TAXES                    134         228
                                     ____________________________
    NET INCOME for PERIOD                  $1,615      $1,742
                                     ============================
PER SHARE INFORMATION
 Net Income for Period-Basic                $0.63       $0.68
 Net Income for Period - Assuming Dilution  $0.62       $0.67
 Cash Dividends                            $0.315      $0.431

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(UNAUDITED)
Net Income for Period                      $1,615      $1,742
Other Comprehensive Income, Net of Tax:
 Unrealized Holding Gains/(Losses) on Investment
   Securities Available-for-Sale Arising
   During Period                            1,152         564
 Unrealized Holding Gains on Investment
   Securities Transferred to Available-for-Sale
   During Period                                0          34
 Reclassification Adjustment for (Gains)/Losses
   included in Net Income                     (16)          9
                                    ____________________________
Total Other Comprehensive Income/(Loss)     1,136         607
                                     ____________________________
COMPREHENSIVE INCOME for PERIOD            $2,751      $2,349
                                     ============================
The accompanying notes are an integral part of the consolidated
financial statements.

</TABLE>

<PAGE>

<TABLE>
Union National Financial Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
                                 Nine Months Ended September 30,
                                 ________________________________
    (In Thousands)                          2001         2000
                                 ________________________________
<S>                                          <C>          <C>
CASH FLOWS from OPERATING ACTIVITIES
Net Income                                  $1,615     $1,742
Adjustments to Reconcile Net Income to Net
  Cash Provided by Operating Activities:
  Depreciation and Amortization                559        365
  Provision for Loan Losses                    357        240
  Investment Securities (Gains)/Losses         (24)        13
  Provision for Deferred Income Taxes         (132)        15
  Interest in Cash-Surrender Value of
  Bank-Owned Life Insurance                   (152)       (54)
(Increase)/Decrease in Accrued
   Interest Receivable                         (90)      (183)
(Increase)/Decrease in Other Assets             13       (885)
 Increase/(Decrease) in Other Liabilities     (184)       730
                                     ____________________________
   Net Cash Provided by Operating Activities 1,962      1,983

CASH FLOWS from INVESTING ACTIVITIES
Net (Increase)/Decrease in
  Federal Funds Sold                        (1,500)    (1,080)
Proceeds from Sales of
 Available-for-Sale Securities               17,263     9,708
Proceeds from Maturities of
 Available-for-Sale Securities               28,397     4,895
Proceeds from Maturities of
 Held-to-Maturity Securities                  1,011     1,648
Purchases of Available-for-Sale Securities  (61,820)  (14,933)
Purchases of Held-to-Maturity Securities       (210)   (1,718)
Net Change in Loans                           3,326   (11,670)
Purchases of Property and Equipment            (963)   (1,057)
Purchase of Bank-Owned Life Insurance             0    (3,000)
                                     ____________________________
   Net Cash (Used in)Investing Activities   (14,496)  (17,207)
CASH FLOWS from FINANCING ACTIVITIES
Net Increase/(Decrease)in Demand Deposits
 and Savings Accounts                        15,620      (559)
Net Increase/(Decrease) in Certificates
 of Deposits                                (12,285)    6,459
Net Increase/(Decrease) in Short-Term
 Borrowings                                 (10,584)   16,286
Proceeds from Issuance of Long-Term Debt     19,000    10,000
Payment on Long-Term Debt                      (809)  (16,300)
Acquisition of Treasury Stock                   (49)     (803)
Issuance of Treasury Stock                        7         0
Issuance of Common Stock                        178       255
Cash Dividends Paid                            (813)   (1,114)
                                     ____________________________
   Net Cash Provided by Financing Activities 10,265     14,224
                                     ____________________________
Net Increase/(Decrease) in Cash
 and Cash Equivalents                        (2,269)    (1,000)
CASH and CASH EQUIVALENTS -
  Beginning of Period                         7,715       7,004
                                     ____________________________
CASH and CASH EQUIVALENTS - End of Period    $5,446      $6,004
                                     ============================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash Payments for:
Interest                                     $7,967      $7,050
Income Taxes                                     55         280

SUPPLEMENTAL SCHEDULE OF NONCASH
 INVESTING AND FINANCING ACTIVITIES
 Retirement of Treasury Stock (18,000
 shares in 2001 and 24,000 shares in 2000)     $363        $493

The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
<PAGE>

            UNION NATIONAL FINANCIAL CORPORATION
                  MOUNT JOY, PENNSYLVANIA

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. The information contained in this interim report is unaudited
and subject to year-end adjustment and audit.  However, in the
opinion of management, the information reflects all adjustments
necessary to present fairly the financial condition and results
of operations for the periods presented.  All such adjustments
were of a normal, recurring nature. All material intercompany
transactions have been eliminated in consolidation.  The results
of operations for the nine-month period ended September 30, 2001,
are not necessarily indicative of the results to be expected for
the full year.

2. These statements should be read in conjunction with notes to
the financial statements contained in the 2000 Annual Report to
Stockholders.

3. The weighted-average number of shares of common stock
outstanding was as follows:
<TABLE>
                               Basic        Assuming Dilution
                               _____        _________________

                            <c>          <c>
Three months ended:
    September 30, 2001       2,586,539      2,595,087
    September 30, 2000       2,572,291      2,581,552
Nine months ended:
    September 30, 2001       2,582,573      2,594,731
    September 30, 2000       2,577,381      2,587,342

</TABLE>
4. In July of 2001, the Financial Accounting Standards Board
issued Statement No. 141, "Business Combinations", and Statement
No. 142, "Goodwill and Other Intangible Assets".

Statement No. 141 requires all business combinations to be
accounted for using the purchase method of accounting as use of
the pooling-of-interests method is prohibited. In addition, this
statement requires that negative goodwill that exists after the
basis of certain acquired assets is reduced to zero should be
recognized as an extraordinary gain. The provisions of this
statement apply to all business combinations initiated after June
30, 2001.

Statement No. 142 prescribes that goodwill associated with a
business combination and intangible assets with an indefinite
useful life should not be amortized, but should be tested for
impairment at least annually.  The statement requires intangibles
that are separable from goodwill and that have a determinable
useful life to be amortized over the determinable useful life.
The provisions of this statement will become effective for Union
National in January of 2002.

In June of 2001, the Financial Accounting Standards Board issued
Statement 143, "Accounting for Asset Retirement Obligations",
which addresses the financial accounting and reporting for
obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs.  This statement
requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. The
associated asset retirement costs are capitalized as part of the
carrying amount of the long-lived asset. This statement will
become effective on January 1, 2003.

In August of 2001, the Financial Accounting Standards Board
issued Statement 144, "Accounting for the Impairment of or
Disposal of Long-Lived Assets".  This statement supersedes FASB
Statement No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of", and the
accounting and reporting provisions of APB Opinion No. 30,
"Reporting the Results of Operations   Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual
and

<PAGE>

Infrequently Occurring Events and Transactions for the disposal
of a segment of a business".  This statement also amends ARB No.
51, "Consolidated Financial Statements" and will be effective for
Union National on January 1, 2001.

The provisions of the above statements are not expected to have a
significant impact on the financial condition or results of
operations of Union National.

5. Certain reclassifications have been made to the 2000
consolidated financial statements to conform to the 2001
presentation.

<PAGE>

   Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS

The following is management's discussion and analysis of the
significant changes in the results of operations, capital
resources and liquidity presented in the accompanying
consolidated financial statements for Union National Financial
Corporation, a bank holding company, and its wholly-owned
subsidiary, Union National Community Bank.  Union National's
consolidated financial condition and results of operations
consist almost entirely of the bank's financial condition and
results of operations.  This discussion should be read in
conjunction with the 2000 Annual Report.  Current performance
does not guarantee, assure or indicate similar performance in the
future.

We have made forward-looking statements in this document, and in
documents that we incorporate by reference, that are subject to
risks and uncertainties.  Forward-looking statements include
information concerning possible or assumed future results of
operations of Union National Financial Corporation, Union
National Community Bank or the combined company.  When we use
words such as "believes," "expects," "anticipates" or similar
expressions, we are making forward-looking statements.

Shareholders should note that many factors, some of which are
discussed elsewhere in this document and in the documents that we
incorporate by reference, could affect the future financial
results of Union National Financial Corporation, Union National
Community Bank or the combined company and could cause those
results to differ materially from those expressed in our forward-
looking statements contained or incorporated by reference in this
document.  These factors include the following:
*  operating, legal and regulatory risks;
*  economic, political and competitive forces; and
*  the risk that our analyses of these risks and forces could be
incorrect and/or that the strategies developed to address them
could be unsuccessful.
Union National undertakes no obligation to publicly revise or
update these forward- looking statements to reflect events or
circumstances that arise after the date of this report.  Readers
should carefully review the risk factors described in other
documents that Union National periodically files with the
Securities and Exchange Commission.

Results of Operations
_____________________

Overview

Consolidated net income for the quarter ended September 30, 2001,
was $614,000, an increase of 35.2%, as compared to consolidated
net income of $454,000 for the same period of 2000.  Consolidated
net income for the nine months ended September 30, 2001, was
$1,615,000, a decrease of 7.3%, as compared to $1,742,000 for the
same period of 2000.  For the quarter ended September 30, 2001,
basic and diluted earnings per share amounted to 24 cents, as
compared to 18 cents for the same period of last year.  For the
nine months ended September 30, 2001, basic earnings per share
amounted to 63 cents and diluted earnings per share amounted to
62 cents, as compared to basic earnings per share of 68 cents and
diluted earnings per share of 67 cents for the same period of
last year.

Results of operations for the quarter and the nine months ended
September 30, 2001, as compared to the same periods of 2000 were
impacted by the following items:
*  Net income increased due to an increase in net interest income
of $174,000 or 6.9% for the quarter ended September 30, 2001, and
$185,000 or 2.4% for the nine months ended September 30, 2001.
*  Net income increased slightly due to a decrease of $28,000 in
the provision for loan losses for the quarter ended September 30,
2001, and net income decreased due to an increase of $117,000 in
the provision for loan losses for the nine months ended September
30, 2001.

<PAGE>

*  Net income increased due to an increase in other operating
income of $160,000, or 37.8%, for the quarter ended September 30,
2001, and $470,000 or 38.1% for the nine months ended September
30, 2001.
*  Net income decreased due to an increase in other operating
expenses of $103,000 or 4.3% for the quarter ended September 30,
2001, and $759,000 or 11.2% for the nine months ended September
30, 2001.
The above items are quantified and discussed in further detail
under their respective sections below.

Net income as a percent of total average assets, also known as
return on average assets (ROA) and net income as a percent of
average stockholders' equity, also known as return on average
equity (ROE) were as follows:
<TABLE>
         Quarter Ended Sept. 30,    Nine Months Ended Sept. 30,
           2001         2000            2001           2000
          ______       ______          ______         ______

       <c>          <c>             <c>            <c>
ROA        0.83%        0.64%           0.74%          0.84%
ROE        9.74%        7.77%           8.77%         10.12%

</TABLE>
Management currently expects a moderation in the growth of loans
and deposits for the remainder of 2001 as compared to historic
growth rates of loans and deposits.  Moderation in loan and
deposit growth is expected due to increased competition in Union
National's market area and uncertain current economic conditions.
However, management has taken specific actions to enhance the
bank's competitive position for loans, deposits and other
financial services in northwestern Lancaster County, Pennsylvania
(the bank's market area).  These actions include the following:
*  increased emphasis on business development and continued sales
training for staff;
*  the development of formalized sales incentive programs;
*  further development of both loan and deposit products;
*  further development of the bank's cash management program for
commercial customers; and
*  the strategic promotion of the bank's retail offices in light
of continued consolidation in the banking and financial services
industry.
In addition, Union National is currently considering the purchase
of a pool of residential mortgage loans in November 2001 that
will total approximately $25,000,0000.  The purchase of these
loans will be funded by the sale of certain mortgage-backed and
other securities and additional borrowings from the Federal Home
Loan Bank of Pittsburgh.  The funding for loan growth is further
discussed under the section on Liquidity.

The economy in the bank's market area may be negatively impacted
by recent national events and may be subject to overall national
economic trends.  The overall effects of economic conditions, as
well as other factors, can be seen by a mild lessening of certain
borrowers' financial strength.  Management is monitoring these
general and specific trends closely.  Their various effects are
discussed later under the section on Loans.

Net Interest Income

Net interest income is the amount by which interest income on
loans and investments exceeds interest incurred on deposits and
other interest-bearing liabilities.  Net interest income is Union
National's primary source of revenue.  The amount of net interest
income is affected by changes in interest rates and by changes in
the volume and mix of interest-bearing assets and liabilities.

For analytical and discussion purposes, net interest income and
corresponding yields are presented on a taxable equivalent basis.
Net interest income for the quarter ended September 30, 2001,
increased by $146,000, or 5.3%, over the same period in 2000.
Net interest income for the nine months ended September 30, 2001,
increased by $148,000 or 1.8% over the same period of 2000.

<PAGE>

The net effect of volume growth in average earning assets and
interest-bearing liabilities increased net interest income by
$52,000 in comparing the quarter ended September 30, 2001, to the
same period of 2000.  For the nine months ended September 30,
2001, compared to the same period of 2000, the net effect of
volume growth increased net interest income by $31,000.  For both
periods, growth in average earning assets was funded primarily by
additional borrowings.

The overall interest rate on the average total earning assets for
the quarter ended September 30, 2001, was 7.78%, as compared to
8.15% for the same period of last year.  The overall interest
rate on the average interest-bearing liabilities was 4.07% for
the quarter ending September 30, 2001, and 4.61% for the quarter
ending September 30, 2000.  The net effect of interest rate
changes was to increase net interest income in the amount of
$94,000 for the quarter ended September 30, 2001, over the same
period in 2000.  The net interest margin percentage for the
quarter ended September 30, 2001, was 4.17%, as compared to 4.07%
for the same period of 2000.

For the nine months ended September 30, 2001, the interest rate
on total average assets was 7.94%, which represents a decrease
from the 8.04% earned for the same period of 2000.  The overall
interest rate on interest-bearing liabilities decreased from
4.40% to 4.33% for the nine months ended September 30, 2001.  The
net effect of these interest rate changes was to increase net
interest income by $117,000 for the nine months ended September
30, 2001, over the same period in 2000.  The net interest margin
percentage for the nine months ended September 30, 2001 was
4.13%, as compared to 4.22% for the same period of 2000.  See
management's discussion below concerning the anticipated impact
of these interest rate fluctuations on the results of operations
for the remainder of 2001.

In order to enhance the net interest income in future periods,
management has entered into transactions that increase earning
assets funded by advances from the Federal Home Loan Bank (FHLB).
The terms and amounts of the transactions, when combined with the
bank's overall balance sheet structure, maintain the bank within
its interest rate risk policies.  As of September 30, 2001, the
bank received long-term advances of $48,927,000 from its
available credit of $137,025,000 at the FHLB for purposes of
funding loan demand and security purchases.  The total advances
had an effective rate of 5.32% at September 30, 2001, with
maturities ranging from March 2002 to February 2011.

In January, the Federal Reserve Bank began loosening the monetary
supply and the prime interest rate decreased from 9.50% to 6.00%
by September 2001.  This decline in interest rates has impacted
adjustable-rate commercial loans and a broader decline in overall
interest rates has impacted new lending and investing activity.
There has also been a decline in the rates the bank must pay to
attract and retain deposits and must pay on maturing or repricing
advances from the FHLB.

For the remainder of 2001, it is currently anticipated that the
bank's net interest margin percentage will widen slightly in
comparison to current levels.  The net interest margin is
currently expected to widen as higher fixed-rate certificates of
deposit and borrowings from the FHLB mature and reprice to lower
current levels.  In addition, a portion of Union National's loan
portfolio has now repriced to their interest rate floor and will
not be impacted by future rate reductions.  However, the bank's
net interest margin may still be impacted by future actions of
the Federal Reserve Bank.  In addition, income from growth in
earning assets during 2000 and the first nine months of 2001, net
of costs resulting from growth in deposits and borrowings, should
increase the net interest margin for the remainder of 2001.  The
netting of these two factors, as reflected in the bank's current
simulation model and estimates as of September 30, 2001, may
result in a net interest margin for the remainder of 2001 that
reflects a moderate increase over the net interest margin earned
during the same period of 2000.  The yield curve during the
remainder of 2001, the options selected by customers and the
future mix of the loan, investment and deposit products in the
bank's portfolios may significantly change the estimates used

<PAGE>

in the simulation model.  See discussions on Liquidity and Market
Risk - Interest Rate Risk.

The bank's current model includes an interest rate cap purchased
in October 2000.  The interest rate cap was purchased to mitigate
interest rate risk in a rising-rate environment.  The bank
purchased, for $70,000, a three-year interest rate cap with a
notional amount of $10,000,000 and a strike price of 7%.  If the
three-month LIBOR rate exceeds the 7% strike price, the cap is
"in the money" and pays the bank the difference in interest cost
between the current three-month LIBOR rate and 7% on the notional
amount of $10,000,000.  The cap, which had a market value of
$9,000 at September 30, 2001, was accounted for on a marked-to-
market basis in accordance with SFAS No. 133.  Since the cap did
not meet the criteria for a hedge under SFAS No. 133, a loss of
$23,000 since year-end was reflected as additional interest
expense for the nine months ended September 30, 2001.

Provision for Loan Losses

The provision for loan losses was $84,000 for the quarter ended
September 30, 2001, and $112,000 for the quarter ended September
30, 2000.  The provision for the nine months ended September 30,
2001, was $357,000, as compared to $240,000 for the same period
of 2000.  Net charge-offs for the quarter ended September 30,
2001, were $45,000 as compared to $157,000 for the same period of
last year.  Net charge-offs for the nine months ended September
30, 2001, were $136,000, as compared to $229,000 for the same
period of last year.  Future adjustments to the allowance, and
consequently, the provision for loan losses, may be necessary if
economic conditions or loan credit quality differ substantially
from the assumptions used in establishing the level of the
allowance for loan losses.

Other Operating Income

Other operating income increased by $160,000, or 37.8%, for the
quarter ended September 30, 2001, as compared to the same period
of 2000.  For the nine months ended September 30, 2001, other
operating income increased by $470,000, or 38.1%, as compared to
the same period of last year.  Contributing factors to the
increase in other operating income as compared to the same
periods in 2000 are summarized below:
<TABLE>
                                        Amount of Increase
                                _________________________________
                                Quarter Ended   Nine Months Ended
                                Sept 30, 2001     Sept 30, 2001
                                _____________   _________________

                             <c>             <c>
  Wealth Management Group Income   $24,000           $34,000
  Monthly Deposit Account
    Service Charges                $40,000          $135,000
  ATM Usage Fees                   $19,000           $37,000
  Mutual Fund Commissions          $36,000          $111,000
  Debit Card Earnings              $19,000           $42,000
  Investment Gains/(Losses)        $43,000           $37,000
  Earnings on Bank-Owned
    Life Insurance                 $ 2,000           $98,000
</TABLE>

The increase in Wealth Management Group income is predominantly a
result of an increase in estate fees.  The increase in monthly
service charges and ATM usage fees is primarily a result of fee
changes that were effective January 1, 2001.  The increase in
earnings on mutual fund commissions is a result of a change in
the commission and cost-sharing structure the bank has with
T.H.E. Financial Group, Ltd.  Other operating income as a
percentage of total revenue (net interest income and other
operating income) was 17.7% for the three months ended September
30, 2001, as compared to 14.3% for the same period of last year.
For the nine months ended September 30, 2001, this percentage was
17.7%, as compared to 13.7% for the same period of the prior
year. This increase is a result of revenue enhancement
initiatives, some of which are discussed above, that were
essentially implemented in January 2001.  The bank also currently
assesses a surcharge at its ATMs; however, ATM surcharges, or the
elimination thereof, may be subject to future legislation.

<PAGE>

Other Operating Expenses

The aggregate of noninterest expenses for the quarter ended
September 30, 2001, increased by $103,000, or 4.3%, over the same
period in 2000.  For the nine months ended September 30, 2001,
noninterest expenses increased by $759,000, or 11.2%.  These
noninterest expense increases are discussed below as they pertain
to the various expense categories.

Employee salaries and wages increased by $67,000, or 6.1% for the
quarter ended September 30, 2001, and they increased by $148,000,
or 4.7%, for the nine months ended September 30, 2001, as
compared to the same periods of last year.  These increases were
essentially due to annual merit and cost-of-living increases,
planned staff additions and an accrual for incentives to be paid
to staff at year-end based on operating performance.  New staff
positions included staff for a new community banking office
located in Columbia, Pennsylvania, which was opened in April
2000, staff for our expanded Wealth Management Group, a chief
technology/operations officer, an investment representative for
T.H.E. Financial Group who is now a bank employee and various
other support staff positions.  Offsetting the increased salary
costs of these staff additions is the cost savings resulting from
the business process improvement project, which reduced staff
through an early retirement program and attrition.  Full-time
equivalent employees have been reduced from 131 in December 2000
to 122 in September 2001

Occupancy, furniture and equipment expenses increased by $32,000
for the quarter ended September 30, 2001, and $94,000 for the
nine months ended September 30, 2001, as compared to the same
periods of the previous year.  These increases were a result of
an increase in lease expense and equipment and furniture
depreciation.  The increase in lease expense is a result of
additional costs relative to the new Columbia office and the
Wealth Management Group offices.  The increase in equipment and
furniture depreciation is related to systems and equipment
implemented with technology initiatives in the fourth quarter of
2000.

Professional fees for the quarter ended September 30, 2001,
amounted to $115,000, as compared to $199,000 for the same period
of last year.  For the nine months ended September 30, 2001,
professional fees amounted to $422,000, as compared to $367,000
for the same period of the prior year.  The year-to-date increase
in professional fees relates primarily to consulting fees paid to
Metavante Corporation for a business improvement and revenue
enhancement engagement.  With their assistance, we evaluated our
internal processes, products and procedures in order to identify
efficiencies, cost savings and additional fee income
opportunities.  The expenses under this consulting arrangement
concluded in the second quarter of 2001.  The decrease in
consulting fees during the third quarter of 2001 is due to non-
recurring consulting fees paid to Metavante during the same
period of 2000.

Data processing services for the quarter ended September 30,
2001, amounted to $135,000, as compared to $16,000 for the same
quarter of the prior year.  These fees amounted to $408,000 for
the nine months ended September 30, 2001, as compared to $63,000
for the same period of last year. The increased cost of computer
and data processing services relates to services from our
electronic data services provider in connection with new core-
processing and trust systems, a sales platform program and a
wide-area network which were implemented in November 2000.

Other operating expenses decreased by $39,000, or 6.9%, for the
quarter ended September 30, 2001, as compared to the same period
of 2000.  The three-month period was impacted primarily by a
decline in travel costs of $34,000 and a decline in supplies
costs of $24,000. These decreases were partially offset by an
increase in software amortization expense of $41,000.  The
decline in travel costs is a result of significant costs that
were incurred in 2000 related to training for the implementation
of the technology initiatives in the fourth quarter of 2000.  The

<PAGE>

increase in software amortization is a result of systems
implemented with the technology initiatives.  For the nine months
ended September 30, 2001, other operating expenses increased by
$101,000, or 6.2%, over the same period of 2000.  Contributing
factors to the increase in other operating expenses as compared
to the same period in 2000 are summarized below:
<TABLE>

                              Amount of Increase/(Decrease)
                              _____________________________
                                   Nine Months Ended
                                     Sept 30, 2001
                                     _____________

                                  <c>
   Software Amortization                $101,000
   Advertising and Marketing Expenses    $19,000
   Foreclosed Real Estate Expenses       $28,000
   Employee Training and Development     $18,000
   Supplies                             $(11,000)
   Appraisal and Recording Fees         $(14,000)
   Travel                                $(8,000)
   Check Losses                         $(19,000)
</TABLE>

Increased software amortization relates to systems implemented
with technology initiatives in the fourth quarter of 2000.  The
decrease in appraisal and recording fees relates to the lower
mortgage volumes in 2001.  Check losses decreased significantly
due to a large recovery in 2001 for a check loss in 2000.

Income Taxes

Union National's income tax expense increased by $99,000 for the
quarter ended September 30, 2001, as compared to the same period
of last year.  For the nine months ended September 30, 2001,
income tax expense decreased by $94,000 as compared to the same
period of last year.  The effective tax rate was 12.5% for the
quarter ended September 30, 2001, and  2.5% for the quarter ended
September 30, 2000.  The effective tax rate for the nine months
ended September 30, 2001, was 7.7%, as compared to 11.6% for the
same period of 2000.  The decrease in income tax expense was due
to lower pretax income and an increase in tax-exempt income on
loans, securities and the investment in bank-owned life
insurance.  Currently, the effective tax rate of Union National
for the remaining months of 2001 is expected to be greater than
the current effective tax rate.

Current Initiatives
___________________

In June 2001, Union National announced the formation of the Union
National Insurance Agency.  The Union National Insurance Agency
will operate as a wholly-owned subsidiary of Union National
Community Bank and will offer insurance products at the bank's
retail offices through an agreement with the Wiley Insurance
Agency of Mount Joy, Pennsylvania.  Union National views the sale
of insurance products as a natural expansion of its existing
financial services business.  Union National Insurance Agency
will offer customers auto, home, business, life, health, long-
term disability and long-term care/nursing home insurance.  The
sale of insurance products began in the third quarter of 2001 and
is not expected to materially affect the consolidated results of
operations for the year ending December 31, 2001.

Regulatory Activity
___________________

As a consequence of the extensive regulation of commercial
banking activities in the United States, Union National's and the
bank's business is particularly susceptible to being affected by
federal legislation and regulations that may increase the cost of
doing business.  Management is not aware of any current specific
recommendations by regulatory authorities or proposed
legislation, which if implemented, would have a material adverse
effect upon the liquidity, capital resources or results of
operations.  However, the general cost of compliance with
numerous and multiple federal and state laws and regulations does
have, and in the future may have, a negative impact on Union
National's results of operations.

<PAGE>

Further, the business of Union National is affected by the state
of the financial services industry in general. As a result of
legal and industry changes, management predicts that the industry
will continue to experience an increase in consolidations and
mergers as the financial services industry strives for greater
cost efficiencies and market share.  Management believes that
such consolidations and mergers may enhance its competitive
position as a community bank.

The bank is routinely examined by the OCC and no material adverse
impact is anticipated on current or future operations and
financial position as a result of this process. The last
Community Reinvestment Act performance evaluation by the OCC
resulted in a "satisfactory" rating of the bank's record of
meeting the credit needs of its entire community.

Credit Risk and Loan Quality
____________________________

Other than as described herein, management does not believe there
are any trends, events or uncertainties that are reasonably
expected to have a material impact on future results of
operations, liquidity or capital resources.  Further, based on
known information, management believes that the effects of
current and past economic conditions, including the current
economic slowdown, and other unfavorable specific business
conditions may result in the inability of loans amounting to
$2,938,000 to comply with their respective repayment terms.  This
amount represents a slight decrease from the amount of $3,061,000
at December 31, 2000.  These loans are secured with real estate,
equipment, inventory and vehicles.  Management currently believes
that probable losses on these loans have already been provided
for in the allowance for loan losses.  These loans are not
considered impaired as defined by current generally accepted
accounting principles.  The borrowers are of special mention
since they have shown a decline in financial strength and payment
quality.  Management has increased its monitoring of the
borrowers' financial strength.  In addition, management currently
expects that a portion of these loans will be classified as
nonperforming in the remaining months of 2001.

At September 30, 2001, total nonperforming loans amounted to
$2,683,000, or 1.5% of total net loans, as compared to a level of
$1,789,000, or 1.0%, at December 31, 2000.  The increase in
nonperforming loans is a result of increased nonaccrual loans and
accrual loans that are 90 days or more past due.  The increase is
a result of several small-balance commercial loans and numerous
residential mortgage loans that became nonperforming during the
first nine months of 2001.  These loans are essentially
collateralized with real estate.  Historically, the percentage of
nonperforming loans to total net loans as of December 31, for the
previous five-year period was an average of .7%.
<TABLE>

Schedule of Nonperforming Assets:
<CAPTION>
                                September 30,     December 31,
(In Thousands)                      2001              2000
                                _____________     ____________

                             <c>               <c>
Nonaccruing Loans               $      2,179      $      1,625
Accrual Loans - 90 days or
   more past due                         504               164
Restructured Accrual Loans                 0                 0
                                _____________     ____________
     Total Nonperforming Loans         2,683             1,789
Foreclosed Real Estate                    79               159
                                _____________     ____________
     Total Nonperforming Assets $      2,762      $      1,948
                                =============     ============

Nonperforming Loans
   as a % of Net Loans                   1.5%              1.0%
                                ============      ============

Allowance for Loan Losses
   as a % of Nonperforming Loans          75%              100%
                                ============      ============
</TABLE>
<PAGE>

Allowance for Loan Losses
_________________________

The allowance for loan losses is maintained at a level believed
adequate by management to absorb estimated probable loan losses.
Management is responsible for the adequacy of the allowance for
loan losses, which is formally reviewed by management and the
Board of Directors on a quarterly basis.  In addition, ongoing
loan reviews are performed on selected portions of the loan
portfolio by an independent consultant.

The allowance is increased by provisions charged to operating
expense and reduced by net charge-offs.  Management's periodic
evaluation of the adequacy of the allowance is based on Union
National's past loan loss experience, known and inherent risks in
the portfolio, adverse situations that may affect the borrower's
ability to repay (including the timing of future payments), the
estimated value of any underlying collateral, composition of the
loan portfolio, current economic conditions and other relevant
factors.  While management uses available information to make
such evaluations, future adjustments to the allowance may be
necessary if economic conditions differ substantially from the
assumptions used in making the evaluation.  In addition, various
regulatory agencies, as an integral part of their examination
process, review the bank's allowance for loan losses.  Such
agencies may require the bank to recognize additions to the
allowance based on their judgment of information available to
them at the time of their examination.  After management's
assessment, no adjustment to the allowance for loan losses was
necessary as a result of the Office of Comptroller's most recent
examination as of June 30, 2000.

In response to the higher levels of nonperforming loans, the
allowance for loan losses was increased by $221,000 for the nine
months ended September 30, 2001, and the ratio of the allowance
for loan losses to net loans was 1.10% at September 30, 2001, as
compared to 0.96% at December 31, 2000.  Management believes,
based on information currently available, that the current
allowance for loan losses of $2,008,000 is adequate to meet
potential loan losses.

<TABLE>
Analysis of Allowance for Loan Losses:
<CAPTION>
                          Three Months Ended  Nine Months Ended
                             September 30,       September 30,
(In Thousands)              2001      2000      2001     2000
                           ______    ______    ______   ______

                        <c>       <c>       <c>      <c>
Average Total Loans Outstanding
   (Less Unearned Income)  $183,579  $185,625  $184,842 $181,247
                           ========  ========  ======== ========
Allowance for Loan Losses,
   Beginning of Period     $  1,969  $  1,839  $  1,787 $  1,783
Loans Charged-Off During Period  53       165       199      251
Recoveries of Loans Previously
   Charged-Off                    8         8        63       22
                           ________  ________  ________ ________
     Net Loans Charged-Off       45       157       136      229
Addition to Provision for Loan Losses
   Charged to Operations         84       112       357      240
                           ________  ________  ________ ________
Allowance for Loan Losses,
   End of Period           $  2,008  $  1,794  $  2,008 $  1,794
                           ========  ========  ======== ========

Ratio of Net Loans Charged-Off to Average
   Loans Outstanding
   (Annualized)                 .10%      .34%      .10%     .17%
                           ========  ========  ======== ========

Ratio of Allowance for Loan Losses to
   Net Loans at
   End of Period               1.10%     0.96%     1.10%    0.96%
                           ========  ========  ======== ========
</TABLE>
<PAGE>

Liquidity
_________

Union National's objective is to maintain adequate liquidity to
fund needs at a reasonable cost and to provide contingency plans
to meet unanticipated funding needs or a loss of funding sources,
while minimizing interest rate risk.  Adequate liquidity provides
resources for credit needs of borrowers, for depositor
withdrawals and for funding corporate operations.  Sources of
liquidity are as follows:
*   proceeds from the sale or maturity of investment securities,
which include overnight investments in federal funds sold;
*   overnight correspondent bank (including FHLB) borrowings on
various credit lines;
*   payments on loans and mortgage-backed securities; and
*   a growing core deposit base.
Management believes that its core deposits are fairly stable even
in periods of changing interest rates.  Liquidity management is
governed by policies and measured on a quarterly basis.  These
measurements indicate that liquidity generally remains stable and
that liquidity consistently exceeds the bank's minimum defined
level.  There are no known trends, or any known demands,
commitments, events or uncertainties that will result in, or that
are reasonably likely to result in, liquidity increasing or
decreasing in any material way.

Membership in the Federal Home Loan Bank provides the bank with
additional liquidity alternatives such as short- or long-term
funding on fixed- or variable-rate terms.  The bank has a maximum
funding capacity of up to $137,025,000 available at the Federal
Home Loan Bank.  In order to provide funding for the bank's loans
and investments, the bank had outstanding borrowings from the
Federal Home Loan Bank of $48,927,000 at September 30, 2001, and
$41,305,000 at December 31, 2000.

Stockholders' Equity
____________________

Union National maintains capital ratios that are well above the
minimum total capital levels required by federal regulatory
authorities and is considered to be well-capitalized under
regulatory guidelines.  There are no known trends or
uncertainties, including regulatory matters that are expected to
have a material impact on the capital resources of Union National
for 2001.

In addition, see discussion on Regulatory Activity.
The bank's capital ratios exceed regulatory requirements, which
require banks to maintain a minimum risk-based capital ratio of
8.0% at September 30, 2001, as compared to the bank's current
risk-based capital ratio of 12.41%.  The total risk-based capital
ratio is computed by dividing stockholders' equity (as adjusted)
plus the allowance for loan losses by risk-adjusted assets.
Risk-adjusted assets are determined by assigning credit risk-
weighting factors from 0% to 100% to various categories of assets
and off-balance-sheet financial instruments.  Banking regulations
also require the bank to maintain certain minimum capital levels
in relation to bank assets.  Failure to meet minimum capital
requirements could result in prompt regulatory action.  As of
September 30, 2001, the bank was categorized as well-capitalized.
Management is not aware of any conditions or events that would
adversely affect the bank's capital.  The bank maintains the
following leverage and risk-based capital ratios:
<TABLE>
      (In Thousands)                  September 30,  December 31,
                                          2001           2000
                                        ________       ________

                                     <c>            <c>
Tier I - Total Stockholders' Equity     $ 23,662       $ 22,611
Tier II - Allowance for Loan Losses        2,008          1,787
                                        ________       ________
   Total Qualifying Capital             $ 25,670       $ 24,398
                                        ========       ========

Risk-adjusted On-balance-sheet Assets   $194,701       $184,273
Risk-adjusted Off-balance-sheet Exposure  12,210         16,526
                                        ________       ________
   Total Risk-adjusted Assets           $206,911       $200,799
                                        ========       ========
<PAGE>

Leverage Ratio:
 Tier I Capital to Average Total Assets     8.06%          8.00%
 Minimum Required                           4.00           4.00
 To Be Well-Capitalized Under Prompt
  Corrective Action Provisions              5.00           5.00
Risk-based Capital Ratios:
 Tier I Capital Ratio - Actual             11.44%         11.26%
 Minimum Required                           4.00           4.00
 To Be Well-Capitalized under Prompt
  Corrective Action Provisions              6.00           6.00

 Total Capital Ratio - Actual              12.41%         12.15%
 Minimum Required                           8.00           8.00
 To Be Well-Capitalized under Prompt
  Corrective Action Provisions             10.00          10.00

Total Risk-Based Capital in Excess of the
  Minimum Regulatory Requirement        $  9,117       $  8,334
                                        ========       ========
</TABLE>
Item 3   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK

Market Risk - Interest Rate Risk
________________________________

As a financial institution, Union National's primary component of
market risk is interest rate volatility.  Fluctuations in
interest rates will ultimately impact the level of income and
expense recorded on a large portion of the bank's assets and
liabilities.  Virtually all of Union National's interest-
sensitive assets and liabilities are held by the bank, and
therefore, interest rate risk management procedures are performed
by the bank.  The nature of the bank's current operations is such
that the bank is not subject to foreign currency exchange or
commodity price risk.  Union National does not own any trading
assets.  Except as described below, Union National has not
entered into any hedging transactions such as interest rate
floors, caps and swaps.

The objectives of interest rate risk management are to maintain
or increase net interest income over a broad range of market
interest rate movements.  The Asset and Liability Management
Committee is responsible for managing interest rate risk using
policies approved by the bank's board of directors.  The bank
manages interest rate risk by changing the mix or repricing
characteristics of its investment securities portfolio and
borrowings from the Federal Home Loan Bank and by the promotion
or development of specific loan and deposit products.  As
mentioned earlier, in October 2000, the bank took steps to
mitigate interest rate risk in a rising-rate environment.  The
bank purchased, for $70,000, a three-year interest rate cap with
a notional amount of $10,000,000 and a strike price of 7%.  If
the three-month LIBOR rate exceeds the 7% strike price, the cap
is "in the money" and pays the bank the difference in interest
cost between the current three-month LIBOR rate and 7% on the
notional amount of $10,000,000.  The bank retains an outside
consulting group to assist in monitoring its interest rate risk
using income simulation models on a quarterly basis.  The
simulation model measures the sensitivity of future net interest
income to hypothetical changes in market interest rates.

The simulation model is utilized by the bank to determine the
effect of gradual increases or decreases in market interest rates
on net interest income and net income.  Certain assumptions are
made in the simulation model and these are revised based on
defined scenarios of assumed speed and direction changes of
market interest rates.  These assumptions are inherently
uncertain due to the timing, magnitude and frequency of rate
changes and changes in market conditions, as well as management
strategies, among other factors.  Because it is difficult to
accurately quantify into

<PAGE>

assumptions the reaction of depositors and borrowers to market
interest rate changes, the actual net interest income and net
income results may differ from simulated results.  While
assumptions are developed based upon current economic and local
market conditions, management cannot make any assurances as to
the predictive nature of these assumptions.

The simulation model assumes a hypothetical gradual shift in
market interest rates over a twelve-month period.  This is based
on a review of historical changes in market interest rates and
the level and curve of current interest rates.  The simulated
results represent the hypothetical effects to the bank's net
interest income and net income.  Projections for loan and deposit
growth are ignored in the simulation model.  The simulation model
includes all of the bank's earning assets and interest-bearing
liabilities and assumes a parallel and prorated shift in interest
rates over a twelve-month period.  As mentioned previously, the
bank's model also includes the purchase of an interest rate cap
in October 2000.  The simulation model currently indicates that a
hypothetical two-percent general decline in prevailing market
interest rates over a one-year period will have an unfavorable
impact on the bank's net interest income over the next twelve
months as compared to the constant rate scenario.  This
unfavorable impact on net interest income is currently estimated
at $121,000, net of taxes.  A hypothetical two-percent general
rise in rates will have an immaterial impact on net interest
income over the next twelve months.  At December 31, 2000, the
simulation model indicated that a two-percent decline in rates
would have an unfavorable impact estimated at $138,000, net of
taxes and a two-percent increase in rates would have an
unfavorable impact estimated at $71,000, net of taxes.  The
computations do not contemplate any actions management or the
Asset Liability Management Committee could undertake in response
to changes in market conditions or market interest rates.

The bank managed its interest rate risk position in 2001 by the
following:
*   marketing its variable-rate home equity line of credit and
its variable-rate unsecured consumer line of credit;
*   increasing its use of adjustable- and floating-rate loans for
new or refinanced commercial and agricultural loans;
*   additions to or by repositioning of its investment security
portfolio into floating-rate, short- or long-term securities;
*   managing and expanding the bank's core deposit base including
deposits obtained in the bank's commercial cash management
programs; and
*   additions to or restructuring of adjustable- and fixed-rate
advances from the Federal Home Loan Bank, including convertible
advances.
The above strategies and actions impact interest rate risk and
are all included in the bank's quarterly simulation models in
order to determine future asset and liability management
strategies.  See the related discussions in the section on Net
Interest Income.

<PAGE>

Part II - Other Information:

Item 1. Legal Proceedings

Management is not aware of any litigation that would have a
material adverse effect on the consolidated financial position of
Union National.  There are no proceedings pending other than the
ordinary routine litigation incident to the business of Union
National and its subsidiary, Union National Community Bank.  In
addition, no material proceedings are pending or are known to be
threatened or contemplated against Union National and the bank by
government authorities.

Item 2.  Changes in Securities and Use of Proceeds - Nothing to
report.

Item 3.  Defaults Upon Senior Securities - Nothing to report.

Item 4.  Submission of Matters to a Vote of Security Holders
Nothing to report.

Item 5.  Other Information - Nothing to report.

Item 6.  Exhibits and Reports on Form 8-K:

         (a)  Exhibits

              Exhibit No. 10 - Change of Control Agreement, dated
as of August 2, 2001, between Michael A. Frey and Union National
Financial Corporation.

         (b) Reports on Form 8-K

             Union National filed a report on form 8-K via EDGAR
dated July 13, 2001.  The report was filed pursuant to Item 5,
Other Events, and reported the issuance of a press release.  The
press release was attached to the report as an exhibit and
reported second quarter earnings and announced the third quarter
cash dividend for 2001.

<PAGE>

                             Signatures
                             __________

Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.


                             Union National Financial Corporation
                             (Registrant)

                             By /s/ Mark D. Gainer
                             _____________________________
                                Mark D. Gainer
                                President & CEO
                                (Principal Executive Officer)

                             Date: November 14, 2001


                             By /s/ Clement M. Hoober
                             _____________________________
                                Clement M. Hoober
                                Chief Financial Officer
                                (Principal Financial and
                                 Accounting Officer)

                             Date: November 14, 2001

<PAGE>

EXHIBIT 10



                  CHANGE OF CONTROL AGREEMENT

<PAGE>
                  CHANGE OF CONTROL AGREEMENT
                  ___________________________

      THIS AGREEMENT is made as of this   2nd day of August,
                                        ______
2001, among Union National Financial Corporation ("Corporation"),
a Pennsylvania business corporation having a place of business at
101 East Main Street, Mount Joy, Pennsylvania  17552, Union
National Community Bank ("Bank"), a national banking association
having a place of business at 101 East Main Street, Mount Joy,
Pennsylvania  17552, and Michael A. Frey ("Executive"), an
individual residing at 163 Canterbury Turn, Lancaster,
Pennsylvania  17601 (collectively the "Parties" and,
individually, sometimes a "Party").

                     W I T N E S S E T H:

     WHEREAS, the Corporation is a registered bank holding
company;

     WHEREAS, the Bank is a subsidiary of the Corporation;

     WHEREAS, any reference to Corporation in this Agreement
shall mean Corporation or Bank;

     WHEREAS, the Executive has been employed by the Corporation
as Executive Vice President and Chief Operating Officer of Bank
and Vice President of Corporation; and

     WHEREAS, this Agreement will become operative only upon a
Change of Control (as defined herein); and

     WHEREAS, the purpose of this Agreement is to define certain
severance benefits that will be paid by the Corporation in the
event of a Change of Control (as defined herein), but is not
intended to affect, nor does it affect, the terms of the
Executive's employment at will, in the absence of a Change of
Control (as defined herein) of the Corporation.

     NOW THEREFORE, in consideration of the Executive's service
to the Corporation and of the mutual covenants, undertakings and
agreements set forth herein and intending to be legally bound
hereby, the Parties agree as follows:

     1.   TERM.  The term of the Agreement shall be effective as
          _____
of the day and year written above, and shall continue until
either Executive or Corporation gives the other written notice of
termination of employment, with or without cause.  Provided,
however, that during the period of time between the execution of
an agreement to effect a Change of Control (as defined herein)
and

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the actual Date of Change of Control (as defined herein),
termination of the Executive's employment shall only be for Cause
(as defined herein).

     2.  DEFINITION OF CAUSE.   The term "Cause" shall be
         ____________________
defined, for purposes of this Agreement, as the occurrence of one
or more of the following: (1) the willful failure by the
Executive to substantially perform his duties hereunder, other
than a failure resulting from Executive's incapacity because of
physical or mental illness, after notice from the Corporation,
and a failure to cure such violation within twenty (20) days of
said notice; (2) the willful engaging by the Executive in
misconduct injurious to the Corporation; (3) dishonesty or gross
negligence of the Executive in the performance of his duties; (4)
Executive's breach of fiduciary duty involving personal profit;
(5) Executive's violation of any law, rule or regulation
governing banks or bank officers or any final cease and desist
order issued by a bank regulatory authority; (6) conduct on the
part of Executive which brings public discredit to the Bank; (7)
Executive's conviction of or plea of guilty or nolo contendre to
a felony, crime of falsehood or a crime involving moral
turpitude, or the actual incarceration of Executive for a period
of twenty (20) consecutive days or more; (8) Executive's unlawful
discrimination, including harassment, against Corporation's
employees, customers, business associates, contractors or
visitors; (9) Executive's theft or abuse of Corporation's
property or the property of Corporation's customers, employees,
contractors, vendors or business associates; (10) the direction
or recommendation of a state or federal bank regulatory authority
to remove Executive from his positions with Corporation as
identified herein; or (11) Executive's willful failure to follow
the good faith lawful instructions of the Board of Directors of
Corporation with regard to its operations, after written notice
from Corporation and a failure to cure such violation within
twenty (20) days of said notice.

     3.   DEFINITION OF CHANGE OF CONTROL.  For purposes of this
          ________________________________
Agreement, the term "Change of Control" shall mean a change of
control (other than one occurring by reason of an acquisition of
the Corporation by Executive) of a nature that would be required
to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A or any successor rule or regulation promulgated
under the Securities Exchange Act of 1934, as amended (the
"Act"); provided that, without limiting the foregoing, a Change
of Control shall be deemed to have occurred if:

          (a)   a merger or consolidation of the Corporation or
purchase of substantially all of the Corporation's assets by
another "person" or group of "persons" (as such term is defined
or used in Sections 3, 13(d), and 14(d) of the Act) and, as a
result of such merger, consolidation or sale of assets, less than
a majority of the outstanding voting stock of the surviving,
resulting or purchasing person is owned, immediately after the
transaction, by the holders of the voting stock of the
Corporation before the transaction;

          (b)   any "person" as defined above, other than the
Corporation, the Executive or any "person" who on the date hereof
is a director or officer of the

<PAGE>

Corporation, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 and Rule 13d-5, or any successor rule or regulation,
promulgated under the Act), directly or indirectly, of securities
of the Corporation which represent twenty-five percent (25%) or
more of the combined voting power of the securities of the
Corporation, then outstanding;

          (c)   during any period of two (2) consecutive years
during the term of this Agreement and any extension thereof,
individuals who at the beginning of such period constitute the
Board of Directors of the Corporation cease for any reason to
constitute at least two-thirds thereof, unless the election of
each director who was not a director at the beginning of such
period has been approved in advance by directors representing at
least two-thirds of the directors then in office who were
directors at the beginning of the period; or

          (d)   any other change of control of the Corporation
similar in effect to any of the foregoing.

     4.   DEFINITION OF DATE OF CHANGE OF CONTROL.  For purposes
          ________________________________________
of this Agreement, the "Date of Change of Control" shall mean:

          (a)   the first date on which a single person and/or
entity, or group of affiliated persons and/or entities, acquire
the beneficial ownership of twenty-five (25%) percent or more of
the Corporation's voting securities; or

          (b)   the date of the closing of an Agreement,
transferring all or substantially all of the Corporation's
assets; or

          (c)   the date on which a merger, consolidation or
business combination is consummated, as applicable; or

          (d)   the date on which individuals who formerly
constituted a majority of the Board of Directors of the
Corporation under paragraph 3(c) above, cease to be a majority.

     5.   PAYMENTS UPON TERMINATION.
          __________________________

          (a)   If, during the period of time between the
execution of an agreement to effect a Change of Control(as
defined herein) and the actual Date of the Change of Control (as
defined herein), Executive's employment is terminated for Cause
(as defined herein), all rights of the Executive under this
Agreement shall

<PAGE>

cease as of the effective date of such termination, except that
Executive (i) shall be entitled to receive accrued salary through
the date of such termination and (ii) shall be entitled to
receive the payments and benefits to which he is then entitled
under the employee benefit plans of the Corporation as of the
date of such termination;

          (b)   If a Change of Control (as defined herein) occurs
and one of the following events occurs, then the Executive shall
be entitled to receive a payment of twenty-four (24) months of
his then current Annual Direct Salary (as defined herein) minus
applicable withholdings and taxes and paid on a biweekly basis on
regular bank pay days, beginning on the earliest of the following
events:

                (i)   if, between the execution of an agreement
to effect a Change of Control (as defined herein) and the actual
Date of a Change of Control (as defined herein), the Executive's
employment with the Bank is terminated, other than for Cause (as
defined herein);

                (ii)   if the Executive is not offered employment
by the acquiring person or entity as of the Date of  Change of
Control (as defined herein) in a position having equivalent
responsibilities, authority, compensation and benefits as he
received immediately prior to the Change of Control (as defined
herein);

                (iii)   if, between the Date of the Change of
Control (as defined herein) and six (6) months after the Date of
Change of Control (as defined herein), the Executive is
terminated from employment for any reason other than for Cause
(as defined herein), by the acquiring person or entity; or

                (iv)   if, between three (3) and (6) months after
the Date of Change of Control (as defined herein), the Executive
terminates his employment with the acquiring person or entity.

          (c)   If a Change of Control (as defined herein) occurs
and one of the events set forth in Paragraph 5(b) occurs,
Executive shall receive, in addition to the salary set forth in
5(b), continued health care, life insurance, and disability
insurance coverage with the Corporation providing, on behalf of
Executive, the same contribution level toward Executive's health
care, life insurance and disability insurance coverage, as
Corporation provides for other employees.  These contributions
shall continue for a period of twenty-four (24) months,

<PAGE>

if permitted under the terms and conditions of Corporation's
contracts with the insurance providers. If continued coverage is
not permitted, Corporation shall pay to Executive the sum which
it would have paid the health care and/or life insurance and/or
disability insurance providers for Executive's continued
coverage.

          (d)   If at the end of six (6) months after the Date of
the Change of Control (as defined herein), none of the events
described above in Subsections (b)(i), (b)(ii), (b)(iii) or
(b)(iv) of this Section have occurred, then the Executive shall
no longer be entitled to receive the Payments Upon Termination
set forth in subsection (b) of this Section, and the Agreement
shall thereafter be null and void.

     6.   ANNUAL DIRECT SALARY.  For purposes of this Agreement,
          _____________________
Annual Direct Salary shall be defined as the fixed, gross, base
annual salary paid to the Executive at such time as the
Corporation customarily pays its other senior officers and shall
not include any benefits, bonuses, incentives or other
compensation.

     7.   RESTRICTIVE COVENANT.
          _____________________

          (a)   Executive hereby acknowledges and recognizes the
highly competitive nature of the business of Corporation and
Bank, and, accordingly, agrees that, during and for the first
twelve (12) months of the applicable payment period set forth in
Section 5 hereof, Executive shall not:

                (i)   be engaged, directly or indirectly, either
for his own account or as agent, consultant, employee, partner,
officer, director, proprietor, investor (except as an investor
owning less than 5% of the stock of a publicly owned company) or
otherwise of any person, firm, corporation or enterprise engaged
in (1) the banking (including bank holding company) or financial
services industry, or (2) any other activity in which Corporation
or any of its subsidiaries are engaged during Executive's
employment with Corporation, and remain so engaged at the end of
said employment, in any area in which, at any time during
employment or at the date of termination of the Executive's
employment, is within twenty (20) miles of any branch location,
office or other facility of Corporation or any of its
subsidiaries, unless Executive exclusively performs all such
activity

<PAGE>

outside of said twenty (20) mile area (the "Non-Competition
Area"); or

                (ii)   provide financial or other assistance to
any person, firm, corporation, or enterprise engaged in (1) the
banking or financial services industry (including bank holding
company), or (2) any other activity in which Corporation or any
of its subsidiaries are engaged during Executive's employment
with Corporation, in the Non-Competition Area; or

                (iii)   directly or indirectly contact, solicit
or induce any person, corporation or other entity who or which is
a customer or referral source of Corporation or any Corporation
subsidiary in the Non-Competition Area during the term of
Executive's employment or at the date of termination of
Executive's employment; or

                (iv)   directly or indirectly solicit, induce or
encourage any employee of Corporation or any Corporation
subsidiary, who is employed during the term of Executive's
employment or at the date of termination of Executive's
employment, to leave the employ of Corporation or to seek, obtain
or accept employment with any person or entity other than
Corporation.

          (b)   It is expressly understood and agreed that,
although Executive and Corporation consider the restrictions
contained in Section 7(a) reasonable for the purpose of
preserving for Corporation and its subsidiaries, their good will
and other proprietary rights, if a final judicial determination
is made by a court having jurisdiction that the time or territory
or any other restriction contained in Section 7(a) is an
unreasonable or otherwise unenforceable restriction against
Executive, the provisions of Section 7(a) shall not be rendered
void, but shall be deemed amended to apply as to such maximum
time and territory and to such other extent as such court may
judicially determine or indicate to be reasonable.

          (c)   The existence of any immaterial claim or cause of
action of the Executive against Corporation, whether predicated
on this Agreement or otherwise, shall not constitute a defense to
the enforcement by Corporation of this covenant.  The Executive
agrees that any breach of the restrictions set forth in this
Section will result in irreparable injury to Corporation for
which it will have no adequate remedy at law and the Corporation
shall be entitled to injunctive relief in order to enforce the
provisions hereof and/or seek specific performance and damages.

<PAGE>

     8.   NO EMPLOYMENT CONTRACT.  This Agreement is not an
          _______________________
employment contract.  Nothing contained herein shall guarantee or
assure Executive of continued employment by Corporation.  Rather,
Corporation's obligations to Executive hereunder shall arise only
if Executive continues to be employed by Corporation and Bank in
his present or in a higher capacity and, then, only in the event
the conditions described herein for payment to Executive have
been met.

     9.   NOTICE.  For the purposes of this Agreement, notices
          _______
and all other communications provided for in this Agreement shall
be in writing and shall be deemed to have been duly given when
delivered or mailed by United States certified mail, return
receipt requested, postage prepaid, addressed as follows:

     If to the Executive:        Michael A. Frey
                                 163 Canterbury Turn
                                 Lancaster, PA 17601

     If to the Corporation:      Mr. Mark D. Gainer
                                 President and CEO
                                 Union National Community Bank
                                 P.O. Box 567
                                 Mt. Joy, PA 17552-0567

or to such other address as Executive or Corporation may have
furnished to the other in writing in accordance herewith, except
that notices of change of address shall be effective only upon
receipt.

     10.   SUCCESSORS; BINDING AGREEMENT.  This Agreement shall
           ______________________________
 inure to the benefit of and be binding upon the Corporation,
Bank and Executive, their respective personal representatives,
heirs, assigns or successors, provided, however, that the
Executive may not commute, anticipate, encumber, dispose or
assign any payment herein except as specifically set forth in
paragraph 13 herein.

     11.   SEVERABILITY.  If any provision of this Agreement is
           _____________
declared unenforceable for any reason, the remaining provisions
of this Agreement shall be unaffected thereby and shall remain in
full force and effect.

     12.   WAIVER; AMENDMENT.  No provision of this Agreement
           __________________
may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing and signed by
Executive and an executive officer specifically designated by the
Boards of Directors of Corporation and Bank.  No waiver by either
party, at any time, of any breach by the other party of,

<PAGE>

or compliance with, any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time.  This Agreement may be amended or
canceled only by mutual agreement of the parties in writing.

     13.   PAYMENT OF MONEY DUE DECEASED EXECUTIVE.  In the
           ________________________________________
event of Executive's death, any monies that may be due him from
the Corporation under this Agreement as of the date of death or
thereafter, shall be paid to the person designated by him in
writing for this purpose, or, in the absence of any such
designation, to his estate.

     14.   LIMITATION OF DAMAGES FOR BREACH OF AGREEMENT.  In
           ______________________________________________
the event of a breach of this Agreement, by either the
Corporation or the Executive, each hereby waives to the fullest
extent permitted by law, the right to assert any claim against
the others for punitive or exemplary damages.  In no event shall
any party be entitled to the recovery of attorney's fees or
costs.

     15.   ARBITRATION.  Corporation and Executive recognize
           ____________
that in the event a dispute should arise between them concerning
the interpretation or implementation of this Agreement, lengthy
and expensive litigation will not afford a practical resolution
of the issues within a reasonable period of time.  Consequently,
each party agrees that all disputes, disagreements and questions
of interpretation concerning this Agreement are to be submitted
for resolution, in Philadelphia, Pennsylvania, to the American
Arbitration Association (the "Association") in accordance with
the Association's National Rules for the Resolution of Employment
Disputes or other applicable rules then in effect ("Rules").
Corporation or Executive may initiate an arbitration proceeding
at any time by giving notice to the other in accordance with the
Rules.  Corporation and Executive may, as a matter of right,
mutually agree on the appointment of a particular arbitrator from
the Association's pool.  The arbitrator shall not be bound by the
rules of evidence and procedure of the courts of the Commonwealth
of Pennsylvania, but shall be bound by the substantive law
applicable to this Agreement.  The decision of the arbitrator,
absent fraud, duress, incompetence or gross and obvious error of
fact, shall be final and binding upon the parties and shall be
enforceable in courts of proper jurisdiction.  Following written
notice of a request for arbitration, Corporation and Executive
shall be entitled to an injunction restraining all further
proceedings in any pending or subsequently filed litigation
concerning this Agreement, except as otherwise provided herein.

     16.   LAW GOVERNING.  This Agreement shall be governed by
           ______________
and construed in accordance with the laws of the Commonwealth of
Pennsylvania, without regard to its conflicts of law principles.

<PAGE>

     17.   VALIDITY.  The invalidity or unenforceability of any
           _________
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.

     18.   HEADINGS.  The section headings of this Agreement are
           _________
for convenience only and shall not control or affect the meaning
or construction or limit the scope or intent of any of the
provisions of this Agreement.

     19.   ENTIRE AGREEMENT.  This Agreement supersedes any and
           _________________
all prior agreements, either oral or in writing, between the
parties with respect to payments upon termination after a Change
of Control, and this Agreement contains all the covenants and
agreements between the parties with respect to same.


     IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound hereby, have caused this Agreement to be duly
executed in their respective names and, in the case of the
Corporation and Bank, by its authorized representatives the day
and year above mentioned.

ATTEST:                     UNION NATIONAL FINANCIAL CORP.

/s/ Marcene L. Camara       By   /s/ Mark D. Gainer
_____________________       _______________________________
                            Mark D. Gainer, President and CEO


ATTEST:                     UNION NATIONAL COMMUNITY BANK

/s/ Marcene L. Camara       By   /s/ Mark D. Gainer
_____________________       _______________________________
                            Mark D. Gainer, President and CEO


WITNESS:                    EXECUTIVE:

/s/ Dwight N. Kreiser       /s/ Michael A. Frey
_____________________       __________________________________
                            Michael A. Frey

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