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           March 31,2002
                                  _____________________________
                               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.
    2,557,198     shares of $.25 (par) common stock were
_________________
outstanding as of May 1, 2002.
                  ______________
<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

  Item 2  - Management's Discussion and Analysis of Financial
            Condition and Results of Operations            5-12

  Item 3  - Quantitative and Qualitative Disclosures About
            Market Risk                                   12-14

PART II   - OTHER INFORMATION
            _________________
  Item 1  - Legal Proceedings                                15

  Item 2  - Changes in Securities and Use of Proceeds        15

  Item 3  - Defaults Upon Senior Securities                  15

  Item 4  - Submission of Matters to a Vote of
            Security Holders                                 15

  Item 5  - Other Information                                15

  Item 6  - Exhibits and Reports on Form 8-K                 15

Signature Page                                               16

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

<CAPTION>
(Dollars in thousands, except per share data)3/31/02    12/31/01
                                          _______________________
<S>                                           <C>          <C>

ASSETS

Cash and Due from Banks                    $  5,629    $  8,227
Interest-Bearing Deposits in Other Banks        105          63
Federal Funds Sold                              420           -
Short-Term Investments                        4,000       4,999
                                          _______________________
   Total Cash and Cash Equivalents           10,154      13,289

Investment Securities Held-to-Maturity
 (Fair Value: 2002-$12,553;2001-$12,995)     12,836      13,335
Investment Securities Available-for-Sale     65,731      65,033
Loans Held for Sale                             372         574

Loans(Net of Unearned Income)               202,326     203,581
  Less: Allowance for Loan Losses            (1,904)     (1,893)
                                          _______________________
   Net Loans                                200,422     201,688

Premises and Equipment - Net                  6,638       6,734
Other Assets                                  7,495       7,020
                                          _______________________
   TOTAL ASSETS                            $303,648    $307,673
                                          =======================
LIABILITIES
Deposits:
 Noninterest-Bearing                       $ 26,003    $ 24,065
 Interest-Bearing                           188,641     191,479
                                          _______________________
    Total Deposits                          214,644     215,544

Short-Term Borrowings                         3,855       3,400
Long-Term Debt                               57,937      61,252
Other Liabilities                             1,981       1,932
                                          _______________________
     TOTAL LIABILITIES                      278,417     282,128

STOCKHOLDERS' EQUITY

Common Stock (Par Value $.25 per share)         689         687
Shares: Authorized - 20,000,000; Issued -
  2,755,781 in 2002 (2,749,500 in 2001)
  Outstanding - 2,564,398 in 2002 (2,590,964
  in 2001)
Surplus                                       9,046       8,960
Retained Earnings                            19,024      18,631
Accumulated Other Comprehensive Income          127         434
Less: Treasury Stock - 191,383 shares in
 2002 (158,536 in 2001), at cost             (3,655)     (3,167)
                                          _______________________
     TOTAL STOCKHOLDERS' EQUITY              25,231      25,545
                                          _______________________
     TOTAL LIABILITIES AND
      STOCKHOLDERS' EQUITY                 $303,648    $307,673

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

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>
(Dollars in thousands, except per share data)
                                     Three Months Ended March 31,
                                     ____________________________
                                            2002       2001
                                     ____________________________
<S>                                            <C>        <C>
INTEREST INCOME
Interest and Fees on Loans                 $3,947      $3,951
Investment Securities:
  Taxable Interest                            779         907
  Tax-Exempt Interest                         267         285
  Dividends                                    40          54
 Other                                         15          57
                                     ____________________________
  Total Interest Income                     5,048       5,254

INTEREST EXPENSE
Deposits                                    1,322       1,988
Short-Term Borrowings                          17         157
Long-Term Debt                                871         563
                                     ____________________________
   Total Interest Expense                   2,210       2,708
                                     ____________________________
   Net Interest Income                      2,838       2,546
PROVISION for LOAN LOSSES                      25         113
                                     ____________________________
Net Interest Income after Provision
  for Loan Losses                           2,813       2,433
OTHER OPERATING INCOME
Income from Fiduciary Activities               31          36
Service Charges on Deposit Accounts           256         228
Other Service Charges, Commissions, Fees      220         170
Investment Securities Gains/(Losses)          (20)         11
Other Income                                  157          76
                                     ____________________________
    Total Other Operating Income              644         521

OTHER OPERATING EXPENSES
Salaries and Wages                          1,096       1,058
Retirement Plan and Other Employee Benefits   285         275
Net Occupancy Expense                         164         171
Furniture and Equipment Expense               158         138
Professional Fees                             154         173
Data Processing Services                      144         124
Other Operating Expenses                      595         592
                                     ____________________________
    Total Other Operating Expenses          2,596       2,531
                                     ____________________________
    Income before Income Taxes                861         423
PROVISION (BENEFIT)for INCOME TAXES           144         (10)
                                     ____________________________
    NET INCOME for PERIOD                  $  717      $  433
                                     ============================
PER SHARE INFORMATION
 Net Income for Period (Basic and Assuming
   Dilution)                               $ 0.28      $ 0.17
Cash Dividends                             $0.125      $0.105

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(UNAUDITED)
Net Income for Period                      $  717      $  433
Other Comprehensive Income, Net of Tax:
 Unrealized Holding Gains/(Losses) on Investment
   Securities Available-for-Sale Arising
   During Period                             (320)        472
Reclassification Adjustment for (Gains)/Losses
   Included in Net Income                      13          (7)
                                     ____________________________
Total Other Comprehensive Income/(Loss)      (307)        465
                                     ____________________________
COMPREHENSIVE INCOME for PERIOD            $  410      $  898
                                     ============================
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>
                                     Three Months Ended March 31,
                                     ____________________________
         (In thousands)                      2002         2001
                                     ____________________________
<S>                                          <C>          <C>
CASH FLOWS from OPERATING ACTIVITIES
Net Income                                 $   717    $   433
Adjustments to Reconcile Net Income to Net
  Cash Provided by Operating Activities:
Depreciation and Amortization                  201        177
Provision for Loan Losses                       25        113
Investment Securities Gains/(Losses)            20        (11)
Provision for Deferred Income Taxes              7        106
Increase in Cash-Surrender Value of
  Bank-Owned Life Insurance                    (54)       (50)
Gains on Loans Sold                            (78)         -
Proceeds from Sales of Loans                 3,663          -
Loans Originated for Sale                   (3,383)         -
(Increase)/Decrease in Accrued
   Interest Receivable                        (116)       (13)
(Increase)/Decrease in Other Assets           (196)      (322)
 Increase/(Decrease) in Other Liabilities       49       (341)
                                     ____________________________
Net Cash Provided by Operating Activities      855         92

CASH FLOWS from INVESTING ACTIVITIES
Proceeds from Sales of
   Available-for-Sale Securities             5,293      8,932
Proceeds from Maturities of
   Available-for-Sale Securities             4,917      4,338
Proceeds from Maturities of
   Held-to-Maturity Securities                 499          4
Purchases of Available-for-Sale Securities (11,394)   (20,720)
Net Principal Collected on Loans             1,241        923
Purchases of Property and Equipment            (62)      (315)
                                     ____________________________

Net Cash (Used in) Investing Activities        494     (6,838)

CASH FLOWS from FINANCING ACTIVITIES
Net Increase/(Decrease)in Demand Deposits
 and Savings Accounts                         (889)     5,247
Net Increase/(Decrease) in Certificates
 of Deposit                                    (11)    (4,896)
Net Increase/(Decrease) in Short-Term
 Borrowings                                    455     (5,334)
Proceeds from Issuance of Long-Term Debt     3,000     15,000
Payment on Long-Term Debt                   (6,315)      (809)
Acquisition of Treasury Stock                 (488)         -
Issuance of Common Stock                        88         61
Cash Dividends Paid                           (324)      (270)

____________________________
   Net Cash Provided by Financing Activities(4,484)     8,999
                                     ____________________________
Net Increase/(Decrease) in Cash
 and Cash Equivalents                       (3,135)     2,253

CASH and CASH EQUIVALENTS -
  Beginning of Year                         13,289      7,715
                                     ____________________________
CASH and CASH EQUIVALENTS - End of Year   $ 10,154   $  9,968
                                     ============================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash Payments for:
   Interest                               $  2,286   $  2,607
   Income Taxes                                  -          -

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 three-month period ended March 31, 2002,
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 2001 Annual Report to
Stockholders.

3. The weighted-average number of shares of common stock
outstanding was as follows:
                             Basic         Assuming Dilution
                           _________       _________________
Three months ended:
    March 31, 2002         2,579,461           2,595,090
    March 31, 2001         2,578,000           2,592,569

4. In June of 2001, the Financial Accounting Standards Board
issued Statement No. 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 April of 2002, the Financial Accounting Standards Board issued
Statement No. 145, "Recission of FASB Statements No. 4, 44, and
64, Amendment of FASB Statement No. 13, and Technical
Corrections."  This statement updates, clarifies and simplifies
existing accounting pronouncements.

The provisions of the above statements did not have or 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 2001
consolidated financial statements to conform to the 2002
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 2001 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 three months ended March 31,
2002, was $717,000, an increase of 65.6%, as compared to $433,000
for the same period of 2001.  Basic and diluted earnings per
share for the three months ended March 31, 2002, amounted to 28
cents and for the same period of 2001 basic and diluted earnings
per share amounted to 17 cents.

Results of operations for the three months ended March 31, 2002,
as compared to the same period of 2001 were impacted by the
following items:
*  Net income increased due to a widening of the spread between
the interest rates earned on loans and investments as compared
to the interest rates paid on deposits and short- and long-
term borrowings.
*  Net income increased due to growth of 6.6% in average earning
assets, which was funded primarily by additional long-term
borrowings.
*  Net income increased due to a decrease of $88,000 in the
provision for loan losses.
*  Net income increased due to an increase in other operating
income of $123,000, or 23.6%.
*  Net income decreased due to an increase in other operating
expenses of $65,000 or 2.6% for the three months ended March
31, 2002.

<PAGE>

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) amounted to 0.94% on an annualized
basis for the three months ended March 31, 2002, as compared to
0.61% for the same period of 2001.  Net income as a percent of
average stockholders' equity, also known as return on average
equity (ROE) was 11.35% on an annualized basis for the current
period as compared to 7.25% for the same period of 2001.

Management currently expects only moderate growth in loans and
deposits for the remainder of 2002.  This is expected due to
increased competition in Union National's market area and
uncertain current economic conditions.  However, management
continues to develop and promote additional loan and deposit
products, to implement various sales strategies and to offer
incentives to employees to generate loan and deposit growth.

The economy in the bank's market area may be negatively impacted
by the effects of 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, investments and other interest-bearing assets 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 three months ended March 31, 2002,
increased by $277,000 or 10.1% over the same period of 2001.

The net effect of volume growth in average earning assets and
interest-bearing liabilities increased net interest income by
$217,000 in comparing the three months ended March 31, 2002, to
the same period of 2001.  Growth of 6.6% in average earning
assets was funded primarily by additional long-term borrowings.

The overall interest rate on the average total earning assets for
the three months ended March 31, 2002, was 7.27%, as compared to
8.08% for the same period of last year.  The overall interest
rate on the average interest-bearing liabilities was 3.52% for
the three months ended March 31, 2002, and 4.61% for the three
months ended March 31, 2001.  The net effect of these interest
rate changes was to increase net interest income in the amount of
$60,000 for the three months ended March 31, 2002, over the same
period in 2001.  The net interest margin percentage for the three
months ended March 31, 2002, was 4.20%, as compared to 4.06% for
the same period of 2001.  See management's discussion below
concerning the anticipated impact of these interest rate
fluctuations on the results of operations for the remainder of
2002.

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 March 31, 2002, the bank
received long-term advances of $57,937,000 from its available
credit of $134,770,000 at the FHLB for purposes of

<PAGE>

funding loan demand and security purchases.  The total advances
had a weighted-average interest rate of 5.04% at March 31, 2002,
with maturities ranging from September 2002 to February 2011.

During the first quarter of 2002, Union National restructured
some long-term borrowings with the FHLB.  A total of $4,000,000
in borrowings with a weighted-average rate of 5.24% were paid off
and were replaced with borrowings of slightly longer maturities
that bear a weighted-average rate of 3.84%.  The restructuring of
these borrowings will benefit Union National in future periods.

The overall decline in interest rates has been prompted by
actions of the Federal Reserve Bank, which started reducing
interest rates in January 2001.  Since that time the prime
interest rate has declined from 9.50% to 4.75%.  As indicated by
the yields discussed above, this decline in interest rates has
negatively impacted the interest yield on Union National's
earning assets, but this interest rate decline has also reduced
Union National's funding costs due to a decrease in rates Union
National must pay to attract and retain deposits and must pay on
maturing or repricing advances from the FHLB.

For the remainder of 2002, 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 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 2001 and
the first three months of 2002, net of costs resulting from
growth in deposits and borrowings, should increase the net
interest margin for the remainder of 2002.  The netting of these
two factors, as reflected in the bank's current simulation model
and estimates as of March 31, 2002, may result in a net interest
margin for the remainder of 2002 that reflects a moderate
increase over the net interest margin earned during the same
period of 2001.  The yield curve during the remainder of 2002,
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 in the simulation model.
See discussions on Liquidity and Market Risk - Interest Rate
Risk.

Provision for Loan Losses

The provision for loan losses was $25,000 for the three months
ended March 31, 2002, and $113,000 for the three months ended
March 31, 2001.  Net charge-offs for the three months ended March
31, 2002, were $14,000, as compared to $13,000 for the same
period of last year.  The lower provision for loan losses for the
first quarter of 2002 can be attributed to a low level of net
charge-offs accompanied by generally stable levels of
nonperforming loans.  In contrast, during the first quarter of
2001, Union National experienced increased levels of
nonperforming loans.  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 current level of
the allowance for loan losses.

Other Operating Income

Other operating income increased by $123,000, or 23.6%, for the
three months ended March 31, 2002, as compared to the same period
of 2001.  Contributing factors to the increase in other operating
income as compared to the same periods in 2001 are summarized
below:
                                        Amount of
                                        Increase
                                       (Decrease)
                                       ___________

<PAGE>

     Insufficient Funds Charges         $  12,000
     ATM Usage Fees                        19,000
     Mutual Fund Commissions               46,000
     Debit Card Earnings                   20,000
     Investment Securities Gains/(Losses) (31,000)
     Gains on Loans Sold                   78,000

The increase in ATM usage fees is a result of a fee change
implemented in the first quarter of 2001.  The gains on loans
sold are a result of a new mortgage program that Union National
implemented in November 2001.  Through this program, Union
National is able to offer expanded mortgage products at
competitive rates.  These mortgages are sold to the FHLB, but the
servicing is still handled by Union National so the sale is
transparent to customers.  Other fee increases detailed above are
generally a result of increased transaction volumes.  Other
operating income as a percentage of total revenue (net interest
income and other operating income) was 18.5% for the three months
ended March 31, 2002, as compared to 17.0% for the same period of
last year.  The bank also currently assesses a surcharge at its
ATMs; however, ATM surcharges, or the elimination thereof, may be
subject to future legislation.

Other Operating Expenses

The aggregate of noninterest expenses for the three months ended
March 31, 2002, increased by $65,000, or 2.6%, over the same
period in 2001.  These noninterest expense increases are
discussed below as they pertain to the various expense
categories.

Employee salaries and wages increased by $38,000, or 3.6% for the
three months ended March 31, 2002, as compared to the same period
of last year.  This increase was essentially due to annual merit
and cost-of-living increases and incentives for staff for
reaching certain sales and profitability goals.  Offsetting the
increased salary costs of the above items is the cost savings
resulting from ensuring more efficient staffing levels throughout
the bank.  Full-time equivalent employees were 123 in March 2002
and 125 in March 2001.  The cost of retirement plans and other
employee benefits for 2002 increased by $10,000 or 3.6% as
compared to 2001.

Occupancy, furniture and equipment expenses increased by $13,000,
or 4.2%, for the three months ended March 31, 2002, as compared
to the same period of the previous year.  Professional fees for
the three months ended March 31, 2002, have decreased by $19,000
and data processing fees have increased by $20,000, as compared
to the same period of last year.

Other operating expenses increased by $3,000 for the three months
ended March 31, 2002, as compared to the same period of 2001.
Impacting other operating expenses as compared to the same period
in 2001 were an increase in software costs, check and other
losses that were partially offset by decreases in supplies,
training and travel expenses.  The decrease in travel and
training costs is due to higher costs incurred in fourth quarter
of 2000.  Increased software costs primarily related to the
systems implemented with the technology initiatives referenced
above.  The increase in check losses is due to a large recovery
that occurred during the first quarter of 2001 and the increase
in other losses is primarily a result of a robbery loss at one of
our retail branch locations in the first quarter of 2002.

Income Taxes

Union National's income tax expense increased by $154,000 for the
three months ended March 31, 2002, as compared to the same period
of last year.  The effective tax rate was 16.7% for the three
months ended March 31, 2002, and -2.4% for the three months ended
March 31, 2001.  The increase in income tax expense was primarily
due to an increase in earnings before income taxes.  The
realization of net deferred tax

<PAGE>

assets, which amounted to $707,000 at March 31, 2002, is
dependent on future earnings of Union National.  Management
currently anticipates future earnings will be adequate to utilize
these deferred tax assets.

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 and state legislation and regulations that may increase
the cost of doing business.  Specifically, Union National is
susceptible to changes in tax law that may increase the cost of
doing business or impact Union National's ability to realize the
value of deferred tax assets.  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.

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. In addition, management also
expects increased competition in the banking industry as a result
of the passage of the Gramm-Leach-Bliley Financial Services
Modernization Act in November 1999.  This act expanded the range
of non-bank activities for certain bank holding companies, but
also removed restrictions to the banking industry for other
financial service companies.

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 continuing
economic slowdown, and other unfavorable specific business
conditions may result in the inability of loans amounting to
$2,151,000 to comply with their respective repayment terms. This
compares to the amount of $1,893,000 at December 31, 2001 and the
increase is mainly a result of one commercial loan relationship
that was added to this amount during the first quarter of 2002.
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 2002.

At March 31, 2002, total nonperforming loans amounted to
$2,198,000, or 1.1% of total net loans, as compared to a level of
$2,204,000, or 1.1%, at December 31, 2001.  These loans are
essentially collateralized with real estate.  Historically, the

<PAGE>

percentage of nonperforming loans to total net loans as of
December 31, for the previous five-year period was an average of
..8%.

Schedule of Nonperforming Assets:
                                     March 31,       December 31,
(In thousands)                         2002              2001
                                     _________       ____________
Nonaccruing Loans                    $   1,610         $  1,589
Accrual Loans   90 days or more past due   588              615
Restructured Accrual Loans                   -                -
                                     _________       ____________
     Total Nonperforming Loans           2,198            2,204
Foreclosed Real Estate                      43               43
                                     _________       ____________
     Total Nonperforming Assets      $   2,241         $  2,247

Nonperforming Loans
   as a % of Net Loans                     1.1%              1.1%
                                     =========       ============

Allowance for Loan Losses
   as a % of Nonperforming Loans            87%              86%
                                     ==========      ============

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, 2001.

Management believes, based on information currently available,
that the current allowance for loan losses of $1,904,000 is
adequate to meet potential loan losses.  In addition, management
expects loan charge-offs, net of recoveries for the remainder of
2002 to be below the level of net loan charge-offs for the same
period of 2001.

Analysis of Allowance for Loan Losses:

                                 Three Months Ended
                                      March 31,
(In thousands)                     2002      2001
                                 ________  ________
Average Total Loans Outstanding
   (Less Unearned Income)        $203,583  $185,783
                                 ========  ========
Allowance for Loan Losses,
   Beginning of Period           $  1,893  $  1,787
Loans Charged-Off During Period        57        43


<PAGE>

Recoveries of Loans Previously
   Charged-Off                         43        30
                                 ________  ________
Net Loans Charged-Off                  14        13
Addition to Provision for Loan Losses
   Charged to Operations               25       113
                                 ________  ________
Allowance for Loan Losses,
   End of Period                 $  1,904  $  1,887
                                 ========  ========

Ratio of Net Loans Charged-Off to Average
   Loans Outstanding (Annualized)     .03%      .03%
                                 ========  ========

Ratio of Allowance for Loan Losses to
   Net Loans at End of Period        0.94%     1.02%
                                 ========  ========

As detailed above, the ratio of the allowance for loan losses to
net loans has decreased from 1.02% at March 31, 2001 to 0.94% at
the end of the current quarter.  This decline can be attributed
to the purchase of a pool of approximately $25,000,000 of first-
lien residential mortgage loans in November 2001.  These well-
secured loans present a lower risk of loss to Union National and
accordingly require a lower related allowance for loan losses.

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 borrowings on various credit
lines and borrowing capacity available from the FHLB;
*   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
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 FHLB provides the bank with liquidity
alternatives such as short- or long-term funding on fixed- or
variable-rate terms.  As of March 31, 2002, the bank had received
long-term advances of $57,937,000 from its available credit of
$134,770,000 at the FHLB for purposes of funding loan demand and
mortgage-backed security purchases.  Advances of $3,217,000 are
due over the next twelve months and advances of $20,000,000 are
convertible during 2002.  The FHLB's convertible fixed-rate
advances allow the FHLB the periodic option to convert to a LIBOR
adjustable-rate advance.  Upon the FHLB's conversion, the bank
has the option to repay the respective advances in full.  See
section on Market Risk - Interest Rate Risk for further analysis
of these advances.

Stockholders' Equity
____________________

Union National and the bank maintain capital ratios that are well
above the minimum total capital levels required by federal
regulatory authorities and are considered to be well-capitalized
under regulatory guidelines.  Except as discussed below
concerning Union National's common stock repurchase plan, there
are no known trends or uncertainties, including regulatory
matters that are expected to have a material

<PAGE>

impact on the capital resources of Union National for 2002.  In
addition, see discussion on Regulatory Activity.

On January 24, 2002, the Board of Directors of Union National
authorized and approved a plan to purchase up to 100,000 shares
of its outstanding common stock in open market or privately
negotiated transactions.  The number of shares to be purchased
under the plan represents approximately 3.9% of the outstanding
shares of Union National.  The Board of Directors believes that a
redemption or repurchase of this type is in the best interests of
Union National and its stockholders as a method to enhance long-
term shareholder value.  Currently, the shares are to be held as
treasury shares (issued, but not outstanding shares).  As of
March 31, 2002, approximately 32,800 shares have been repurchased
under this plan.

Union National and the bank have risk-based capital ratios that
exceed the regulatory requirements.  The risk-capital guidelines
require banks to maintain a minimum risk-based capital ratio of
8.0% at March 31, 2002, as compared to the bank's current risk-
based capital ratio of 12.22%.  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
March 31, 2002, 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:

      (In thousands)                   March 31,   December 31,
                                         2002          2001
                                       _________   ____________
Tier I - Total Stockholders' Equity    $ 24,076      $ 23,979
Tier II - Allowance for Loan Losses       1,904         1,893
                                       _________   ____________
   Total Qualifying Capital            $ 25,980      $ 25,872
                                       =========   ============

Risk-adjusted On-balance-sheet Assets  $199,396      $203,351
Risk-adjusted Off-balance-sheet Exposure 13,239        11,806
                                       _________   ____________
   Total Risk-adjusted Assets          $212,635      $215,157
                                       =========   ============

Leverage Ratio:
 Tier I Capital to Average Total Assets    7.91%         7.95%
 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            11.32%        11.14%
 Minimum Required                          4.00          4.00
 To Be Well-Capitalized under Prompt
  Corrective Action Provisions             6.00          6.00

 Total Capital Ratio - Actual             12.22%        12.02%
 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       $  8,969      $  8,659
                                       =========   ============

        Item 3   QUANTITATIVE AND QUALITATIVE DISCLOSURES
                          ABOUT MARKET RISK

Market Risk - Interest Rate Risk
________________________________

<PAGE>

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.

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.  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 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.

The simulation model currently indicates that a hypothetical one-
percent general decline in prevailing market interest rates over
a one-year period will have an immaterial positive impact on the
bank's net interest income over the next twelve months as
compared to the constant rate scenario.  Only a one-percent
decline in interest rates was modeled at March 31, 2002, based on
management's assessment of potential future interest rate levels.
A hypothetical two-percent general rise in rates will have an
immaterial impact on net interest income over the next twelve
months.

In addition to the above scenarios, management modeled the impact
of a "flattening" interest rate yield curve on the bank's net
interest income.  The rate assumptions for this scenario included
an increase in short-term interest rates while minimizing
increases in longer-term interest rates.  Management determined
that this is a potential scenario considering current market
interest rates as compared to historical average interest rates.
A "flattening" interest rate environment with short-term interest
rates increasing two-percent will have a negative impact on net

<PAGE>

interest income over the next twelve months.  This negative
impact is estimated at $110,000, net of income 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 2002 by the
following:
   *   increasing its use of adjustable- and floating-rate loans
for new or refinanced commercial and agricultural loans;
   *   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 premium money market accounts; and
   *   additions to or restructuring of fixed-rate advances from
the Federal Home Loan Bank.

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   Nothing to report.

         (b)  Reports on Form 8-K

              Union National filed a report on form 8-K via EDGAR
              dated January 24, 2002.  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
              fourth quarter earnings for 2001 and announced the
              first quarter cash dividend for 2002 and a common
              stock repurchase plan.

<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: May 15, 2002

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

                              Date: May 15, 2002