UNITED STATES
                SECURITIES AND EXCHANGE COMMISSION

                  Washington, DC 20549

                             FORM 10 Q

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

          For the quarterly period ended September 30, 2006

                               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 or Other Jurisdiction of        (I.R.S. Employer
        Incorporation or Organization)    Identification Number)

          570 Lausch Lane
     Lancaster, Pennsylvania                      17601
     ________________________                     _____
(Address of Principal Executive Offices)       (Zip Code)

                      (717) 653-1441
                      ______________
   (Registrant's Telephone Number, Including Area Code)





<PAGE>


     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 by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer.  See definition of "accelerated filer and large
accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
One):

Large accelerated filer [ ]              Accelerated filer [ ]

                     Non-accelerated filer [X]

     Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Act).

                                              Yes [ ]    No [X]

     Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.

      2,523,299 shares of $.25 (par) common stock were
      outstanding as of November 3, 2006.

<PAGE>

                UNION NATIONAL FINANCIAL CORPORATION
                             FORM 10-Q
                                INDEX

PART I - FINANCIAL INFORMATION                          PAGE NO.
         _____________________                          _______

Item 1 -  Financial Statements
          Consolidated Statements of Financial
          Condition...........................................1
          Consolidated Statements of Income...............2 - 3
          Consolidated Statements of Comprehensive Income
          (Loss)..............................................3
          Consolidated Statements of Cash Flows...............4
          Notes to Consolidated Financial Statements......5 - 8
Item 2 -  Management's Discussion and Analysis of Financial
          Condition and Results of Operations............8 - 20
Item 3 -  Quantitative and Qualitative Disclosures About
          Market Risk...................................20 - 21
Item 4 -  Controls and Procedures............................21

PART II - OTHER INFORMATION
          _________________
Item 1 -  Legal Proceedings..................................23
Item 1A - Risk Factors.......................................23
Item 2 -  Unregistered Sales of Equity Securities and
          Use of Proceeds....................................23
Item 3 -  Defaults Upon Senior Securities....................23
Item 4 -  Submission of Matters to a Vote of Security
          Holder.............................................23
Item 5 -  Other Information..................................23
Item 6 -  Exhibits......................................23 - 24

Signature Page...............................................25

Unless the context otherwise requires, the terms "Union
National," "we," "us," and "our" refer to Union National
Financial Corporation and its consolidated subsidiaries.

<PAGE>

                PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

Union National Financial Corporation
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>

                                    9/30/2006         12/31/2005
                                   (unaudited)        (audited)
                                   ___________        __________
<S>                                    <C>                <C>
ASSETS
Cash and Due from Banks             $  13,409        $   14,317
Interest-Bearing Deposits in
  Other Banks                             318               184
                                   ___________        __________
    Total Cash and Cash Equivalents    13,727            14,501
Investment Securities Available
  for Sale                            137,066           119,702
Loans Held for Sale                     1,119             2,147
Loans and Leases, Net of Unearned
  Income                              329,138           300,213
  Less: Allowance for Loan and
   Lease Losses                        (2,914)           (2,675)
                                   ___________        __________
    Net Loans and Leases              326,224           297,538
Premises and Equipment, Net            10,577             7,059
Restricted Investment in Bank
   Stocks, at cost                      6,351             5,736
Bank-Owned Life Insurance              10,140             9,860
Other Assets                            6,171             5,635
                                   ___________        __________
        TOTAL ASSETS                $ 511,375        $  462,178
                                   ===========        ==========

LIABILITIES
Deposits:
  Noninterest-Bearing               $  42,197        $   43,643
  Interest-Bearing                    289,642           252,967
                                   ___________        __________
    Total Deposits                    331,839           296,610
Short-Term Borrowings                   4,770            18,305
Long-Term Debt                        125,478           105,815
Junior Subordinated Debentures         17,341            11,341
Other Liabilities                       2,877             2,817
                                   ___________        __________
        TOTAL LIABILITIES             482,305           434,888

Minority Interests in
   Consolidated Subsidiaries                6                65

STOCKHOLDERS' EQUITY
Common Stock (Par Value $.25 per share)   734               734
  Shares: Authorized - 20,000,000;
  Issued - 2,937,201 and 2,936,798
   shares at September 30, 2006 and
   December 31, 2005, respectively
  Outstanding - 2,522,657 and
   2,510,682 shares at September 30, 2006
   and December 31, 2005, respectively
Surplus                                12,836            12,855
Retained Earnings                      23,251            22,576
Accumulated Other Comprehensive
  Income (Loss)                           505              (447)
Treasury Stock, at cost - 414,544
  and 426,116 shares at September 30,
  2006 and December 31, 2005,
  respectively                         (8,262)           (8,493)
                                   ___________        __________
        TOTAL STOCKHOLDERS' EQUITY     29,064            27,225
                                   ___________        __________
        TOTAL LIABILITIES and
        STOCKHOLDERS' EQUITY        $ 511,375        $  462,178
                                   ===========        ==========

See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Union National Financial Corporation
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands, except per share data)
<CAPTION>
                                Three Months Ended September 30,
                                _______________________________
                                           2006         2005
                                           ____         _____
 <S>                                        <C>           <C>
INTEREST INCOME
Interest and Fees on Loans and Leases   $ 6,170       $   4,886
Investment Securities:
  Taxable Interest                        1,306             883
  Tax-Exempt Interest                       351             330
  Dividends                                  91              39
Other                                        19               5
                                          ______         ______
  Total Interest Income                   7,937           6,143
INTEREST EXPENSE
Deposits                                  2,347           1,327
Short-Term Borrowings                        98              73
Long-Term Debt                            1,537             984
Junior Subordinated Debentures              293             175
                                          ______         ______
   Total Interest Expense                 4,275           2,559
                                          ______         ______
   Net Interest Income                    3,662           3,584
PROVISION for LOAN and LEASE LOSSES         104             135
                                          ______         ______
   Net Interest Income after Provision
    for Loan and Lease Losses             3,558           3,449

OTHER OPERATING INCOME
Income from Fiduciary Activities             58              76
Service Charges on Deposit Accounts         427             409
Other Service Charges, Commissions, Fees    234             203
Alternative Investment Sales Commissions    161             195
Investment Securities Gains                  24              11
Mortgage Banking/Brokerage Activities       714             665
Title Insurance/Settlement Income           148             156
Earnings from Bank-Owned Life Insurance      99              96
Other Income                                 97              95
                                          ______         ______
Total Other Operating Income              1,962           1,906

OTHER OPERATING EXPENSES
Salaries and Wages                        2,068           1,869
Retirement Plan and Other Employee
 Benefits                                   495             502
Net Occupancy Expense                       381             248
Furniture and Equipment Expense             228             172
Professional Fees                           211             158
Data Processing Services                    212             193
Pennsylvania Shares Tax                      86              78
Advertising and Marketing Expenses          318             210
ATM Processing Expenses                     109              90
 Minority Interests in Earnings of
  Subsidiaries                              (78)            137
 Other Expenses                             804             649
                                          ______         ______
   Total Other Operating Expenses         4,834           4,306
                                          ______         ______
    Income before Income Taxes              686           1,049
 PROVISION for INCOME TAXES                  46             179
                                          ______         ______
 NET INCOME                             $   640       $     870
                                          ======         ======

See notes to consolidated financial statements.
<CAPTION>
Union National Financial Corporation
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) - Continued
(Dollars in thousands, except per share data)
                                Three Months Ended September 30,
                                 _______________________________
                                       2006           2005
                                       ______       _________
<S>                                     <C>            <C>
PER SHARE INFORMATION
Net Income - Basic                 $   0.25        $  0.35
Net Income - Assuming Dilution         0.25           0.34
Cash Dividends                        0.160          0.160

<CAPTION>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(Dollars in thousands)
                               Three Months Ended September 30,
                               _______________________________
                                      2006            2005
                                    _______         _______
<S>                                    <C>            <C>
Net Income                         $    640        $    870
 Other Comprehensive Income (Loss),
  Net of Tax: Unrealized Holding
  Gains (Losses) on Available-
  for-Sale Investment Securities
  Arising During the Year, Net of
  Tax Benefit (Expense) of ($1,210)
  and $302 for the three months
  ended and ($525) and $275 for the
  nine months ended September 30, 2006
  and 2005, respectively              2,349            (586)
 Reclassification Adjustment for
  Gains included in Net Income, Net
  of Tax of $8 and $4 for the
  three months ended and $22 and $16
  for the nine months ended September
  30, 2006 and 2005, respectively       (16)             (7)
 Unrealized Gains (Losses) on Cash
  Flow Hedges, Net of Tax (Expense)
  Benefit of ($8) for the three
  months ended and $12 for the nine
  months ended September 30, 2006,
  respectively                           17               -
                                     ______          ______
Total Other Comprehensive Income
   (Loss)                             2,350            (593)
                                     ______          ______
TOTAL COMPREHENSIVE INCOME (LOSS)  $  2,990        $    277
                                     ======          ======

See notes to consolidated financial statements.
<CAPTION>
                               Nine Months Ended September 30,
                              _______________________________
                                           2006         2005
                                           ____         ____
<S>                                       <C>            <C>
INTEREST INCOME
Interest and Fees on Loans and Leases   $17,245       $  13,702

Investment Securities:
  Taxable Interest                        3,470           2,621
  Tax-Exempt Interest                     1,070             932
  Dividends                                 267             150
Other                                        28              14
                                          ______         ______
  Total Interest Income                  22,080          17,419
INTEREST EXPENSE
Deposits                                  5,948           3,385
Short-Term Borrowings                       286             189
Long-Term Debt                            4,204           2,672
Junior Subordinated Debentures              690             493
                                          ______         ______
   Total Interest Expense                11,128           6,739
                                          ______         ______
   Net Interest Income                   10,952          10,680
PROVISION for LOAN and LEASE LOSSES         441             403
                                          ______         ______
   Net Interest Income after Provision
    for Loan and Lease Losses            10,511          10,277

OTHER OPERATING INCOME
Income from Fiduciary Activities            201             219
Service Charges on Deposit Accounts       1,232           1,179
Other Service Charges, Commissions, Fees    697             613
Alternative Investment Sales Commissions    514             558
Investment Securities Gains                  65              46
Mortgage Banking/Brokerage Activities     2,228             772
Title Insurance/Settlement Income           438             180
Earnings from Bank-Owned Life Insurance     280             301
Other Income                                297             191
                                          ______         ______
Total Other Operating Income              5,952           4,059

OTHER OPERATING EXPENSES
Salaries and Wages                        6,043           4,782
Retirement Plan and Other Employee
 Benefits                                 1,604           1,389
Net Occupancy Expense                     1,080             695
Furniture and Equipment Expense             636             524
Professional Fees                           559             482
Data Processing Services                    623             544
Pennsylvania Shares Tax                     194             193
Advertising and Marketing Expenses        1,033             419
ATM Processing Expenses                     310             266
 Minority Interests in Earnings of
  Subsidiaries                               52             143
Other Expenses                            2,363           1,812
                                          ______         ______
  Total Other Operating Expenses         14,497          11,249
                                          ______         ______
   Income before Income Taxes             1,966           3,087
PROVISION for INCOME TAXES                   84             536
                                          ______         ______
NET INCOME                              $ 1,882       $   2,551
                                          ======         ======

See notes to consolidated financial statements.
<PAGE>
<CAPTION>
Union National Financial Corporation
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) - Continued
(Dollars in thousands, except per share data)
                                Nine Months Ended September 30,
                                _______________________________
                                       2006           2005
                                       ______       _________
<S>                                     <C>            <C>
PER SHARE INFORMATION
Net Income - Basic                 $   0.75         $ 1.01
Net Income - Assuming Dilution         0.74           1.00
Cash Dividends                        0.480          0.465
<CAPTION>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(Dollars in thousands)
                                 Nine Months Ended September 30,
                                       2006            2005
                                       ______         ______
<S>                                    <C>             <C>
Net Income                          $ 1,882        $  2,551
Other Comprehensive Income (Loss),
  Net of Tax: Unrealized Holding
  Gains (Losses) on Available-
  for-Sale Investment Securities
  Arising During the Year, Net of
  Tax Benefit (Expense) of ($1,210)
  and $302 for the three months
  ended and ($525) and $275 for the
  nine months ended September 30, 2006
  and 2005, respectively              1,019            (533)
 Reclassification Adjustment for
  Gains included in Net Income, Net
  of Tax of $8 and $4 for the
  three months ended and $22 and $16
  for the nine months ended September
  30, 2006 and 2005, respectively       (43)            (30)
 Unrealized Gains (Losses) on Cash
  Flow Hedges, Net of Tax (Expense)
  Benefit of ($8) for the three
  months ended and $12 for the nine
  months ended September 30, 2006,
  respectively                          (24)              -
                                       ______         ______
Total Other Comprehensive Income
   (Loss)                               952            (563)
                                       ______         ______
TOTAL COMPREHENSIVE INCOME (LOSS)  $  2,834         $ 1,988
                                       ======         ======

See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

Union National Financial Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
                                Nine Months Ended September 30,
                                ______________________________
                                        2006            2005
                                      _______         ________
<S>                                      <C>              <C>
CASH FLOWS from OPERATING ACTIVITIES
Net Income                          $  1,882        $  2,551
Adjustments to Reconcile Net Income
  to Net Cash Provided by Operating
  Activities:
    Depreciation and Amortization        822             678
    Provision for Loan and Lease Losses  441             403
    Net Amortization of Investment
    Securities' Premiums                 379             706
    Investment Securities Gains          (65)            (46)
    (Benefit from) Provision for
    Deferred Income Taxes               (116)            105
    (Decrease) Increase in Minority
    Interest Liability                   (59)            140
    Earnings from Bank-Owned Life
     Insurance                          (280)           (301)
    Gains on Loans Sold               (1,489)            (89)
    Proceeds from Sales of Loans      53,735           4,663
    Loans Originated for Sale        (51,218)         (4,649)
    Increase in Accrued Interest
    Receivable                          (317)           (250)
    Increase in Other Assets            (355)         (1,232)
    (Decrease) Increase in Other
     Liabilities                        (233)            327
                                      _______         ________
        Net Cash Provided by
        Operating Activities           3,127           3,006
                                      _______         ________
CASH FLOWS from INVESTING ACTIVITIES
Proceeds from Sales of
  Available-for-Sale Securities        7,562           6,491
Proceeds from Maturities of
  Available-for-Sale Securities       12,149          12,822
Purchases of Available-for-Sale
  Securities                         (35,907)        (29,176)
Net Purchases of Restricted
  Investments in Bank Stocks            (615)           (263)
Net Loans and Leases Made to
  Customers                          (29,127)        (27,352)
Purchases of Premises, Equipment,
  and Computer Software               (4,325)           (689)
                                      _______         ________
        Net Cash Used in Investing
        Activities                   (50,263)        (38,167)
                                      _______         ________
CASH FLOWS from FINANCING ACTIVITIES
Net (Decrease) Increase in Demand Deposits
  and Savings Accounts                (1,446)         10,562
Net Increase in Time Deposits         36,675          19,266
Net Decrease in Short-Term
  Borrowings                         (13,535)         (2,522)
Proceeds from Issuance of
  Long-Term Debt                      36,981          29,690
Payments on Long-Term Debt           (17,318)        (17,450)
Proceeds from Issuance of Junior
  Subordinated Debentures              6,000             -
Acquisition of Treasury Stock           (108)           (972)
Issuance of Common Stock                 320             604
Cash Dividends Paid                   (1,207)         (1,175)
                                      _______         ________
        Net Cash Provided by
        Financing Activities          46,362          38,003
                                      _______         ________
Net (Decrease) Increase in Cash
  and Cash Equivalents                  (774)          2,842
CASH and CASH EQUIVALENTS -
  Beginning of Year                   14,501           9,843
                                      _______         ________
CASH and CASH EQUIVALENTS -
  End of Period                  $    13,727      $   12,685
                                      =======         =======

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash Payments for:
  Interest                       $    10,810        $  6,492
  Income Taxes                           800             616
Noncash Transactions
  Retirement of Treasury Stock
  (17,000 shares in 2006 and 2005)       339             339

See notes to consolidated financial statements.
</TABLE>
<PAGE>

              UNION NATIONAL FINANCIAL CORPORATION
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. Financial Statements

The consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and
Exchange Commission ("SEC"), and certain information and
footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or
omitted.  We believe the information presented is not misleading
and the disclosures are adequate. In our opinion, the
consolidated financial statements contain all adjustments
(consisting only of normal recurring accruals and adjustments)
necessary to present fairly our financial position as of
September 30, 2006 and December 31, 2005, and results of
operations and cash flows for the three- and nine-month periods
ended September 30, 2006 and 2005. Our results of operations for
interim periods are not necessarily indicative of results
expected for the full year.  These interim financial statements
should be read in conjunction with notes to the consolidated
financial statements contained in the 2005 Annual Report to
Stockholders.

2. Basis of Presentation

The consolidated financial statements include the accounts of
Union National Financial Corporation, its subsidiary Union
National Community Bank (the "bank"), and bank subsidiaries
Union National Insurance Agency, and Home Team Financial, LLC
and its subsidiary TA of Lancaster, LLC (together, "Home Team
Financial").  All material intercompany accounts and
transactions have been eliminated in consolidation.  Union
National's trust subsidiaries, Union National Capital Trust I
and Union National Capital Trust II, which were established for
the purpose of issuing $11,000,000 of trust capital securities
during 2003 and 2004, are not consolidated.

Certain reclassifications have been made to the 2005
consolidated financial statements to conform to the 2006
presentation.

3. Earnings per Share

Net income as set forth in the consolidated statements of income
is used in the computation of basic and diluted earnings per
share information. Reconciliations of shares used in the
computations of earnings per share are as follows:


<TABLE>
<CAPTION
                        Three Months Ended    Nine Months Ended
                            September 30,        September 30,
                         2006       2005       2006      2005
                         _____      _____      ____      _____
<S>                       <C>        <C>        <C>       <C>
Weighted-average common
shares outstanding
used in the computation
of basic earnings per
                      2,520,174   2,511,866  2,515,858 2,519,848

Effect of dilutive
   stock options         18,643      36,045     19,436    40,680
                         _____      _____      ____      _____

Weighted-average common
  shares and equivalents
  used in the computation
  of diluted earnings per
  share               2,538,817   2,547,911  2,535,294 2,560,528
                      =========   =========  ========= =========

Stock options not included in the
   earnings per share computation
   as their effect would have been anti-
   dilutive              78,132      37,082     82,074    30,802
                      =========   =========  ========= =========
</TABLE>
<PAGE>


4.  Share-Based Compensation

On January 1, 2006, Union National adopted Statement of
Financial Accounting Standards No. 123(R), "Share-Based
Payments" ("SFAS 123(R)") related to accounting for share-based
payments and, accordingly, compensation expense will be
recognized for future share-based awards based upon an
assessment of the grant date fair value. Prior to 2006, share-
based compensation was accounted for in accordance with
Accounting Principles Board Opinion No. 25 and, thus, no
compensation expense was recognized at the grant date. Union
National is using the modified prospective method of adoption,
which permits application of SFAS 123(R) on a going-forward
basis rather than restating prior periods.   Stock compensation
expense for future share-based awards will be recognized on a
straight-line basis over the vesting period of the award.

No share-based awards were granted or vested during the three-
and nine-month periods ended September 30, 2006; therefore, no
compensation expense was recorded during the three months or the
nine months ended September 30, 2006.  During the three months
and nine months ended September 30, 2005, the pro-forma impact
to net income and earnings per share that would occur if
compensation expense had been recognized in 2005, based on the
estimated fair value of the options on the date of the grant,
was as follows:
<TABLE>
<CAPTION>
(Dollars in thousands, except per share data)
                     Three Months Ended        Nine Months Ended
                     September 30, 2005       September 30, 2005
                     ___________________      __________________
<S>                            <C>                    <C>
Net Income - As Reported    $   870                 $ 2,551
Less: Share-Based
 Compensation Cost              (48)                    (56)
                            _________               _________
Net Income - Pro-Forma      $   822                 $ 2,495
                            =========               =========
Net Income Per Share:
   As Reported - Basic       $ 0.35                   $1.01
   As Reported - Assuming
   Dilution                  $ 0.34                   $1.00
   Pro-Forma - Basic         $ 0.33                   $0.99
   Pro-Forma - Assuming
   Dilution                  $ 0.32                   $0.97

</TABLE>

Union National currently has three separate stock option plans
in place. The Employee Stock Purchase Plan allows eligible
employees to purchase stock in Union National. Of the 115,762
shares reserved for issuance under this plan, options to
purchase 64,658 shares are available for grant. Options granted
under this plan have a five-year term and can be exercised at
85% of the fair market value of the stock on the date of
exercise. The other two plans are the Employee Stock Incentive
Plan and the Independent Directors' Stock Option Plan. Of the
249,506 shares reserved for issuance under the Employee Stock
Incentive Plan, options to purchase 31,920 shares are available
for grant.  No further options can be granted under the
Independent Directors' Stock Option Plan. Options granted under
these two plans have terms up to 10 years, have option prices
equal to the fair value of the shares on the date of the grant
and are exercisable nine months after their grant date.

During the nine months ended September 30, 2006, Union National
received proceeds of $41,000 for the exercise of options with an
intrinsic value of $16,000.  Stock option transactions for the
nine months ended September 30, 2006 are summarized below:

<TABLE>
<CAPTION>                           Stock       Weighted-Average
                                   Options       Exercise Price
                                   _______       _______________
<S>                                 <C>               <C>
Options Outstanding at December
  31, 2005
(Prices range from $11.52
  to $22.14)                      202,999        $   18.22
Options Granted                       -                -
Options Exercised                  (2,989)           13.83
Options Forfeited                 (10,158)           20.00
Options Expired                   (11,633)           16.42
                                  ________
Options Outstanding at
 September 30, 2006
(Prices range from $11.52
  to $22.14)                      178,219        $   18.10
                                  ========
</TABLE>
<PAGE>



The following table presents information regarding options
outstanding as of September 30, 2006:

<TABLE>
<S>                                           <C>
Weighted-average contractual
     remaining term - options
     outstanding                            5.5 Years
Aggregate intrinsic value -
     options outstanding                    $212,000
Options exercisable                          178,219
Weighted-average exercise
     price - options exercisable           $   18.10
Aggregate intrinsic value -
     options exercisable                    $212,000
Weighted-average contractual
     remaining term - options exercisable   5.5 Years

</TABLE>
Intrinsic value represents the amount by which the market price
of the stock on the measurement date of September 30, 2006
exceeded the exercise price of the option.  It is Union
National's policy to issue new shares upon the exercise of stock
options.

Union National records a tax benefit and associated deferred tax
asset realized on the exercise of non-qualified stock options
and disqualifying dispositions of incentive stock options and
the Employee Stock Purchase Plan.  No tax benefit was recorded
during the three months and nine months ended September 30, 2006
or the three months ended September 30, 2005, as there were no
such exercises or dispositions during the period.  Union
National recorded a tax benefit $39,000 for exercises and
dispositions during the nine months ended September 30, 2005.

5.  Guarantees

Union National does not issue any guarantees that would require
liability recognition or disclosure, other than its standby
letters of credit.  Standby letters of credit written are
conditional commitments issued by Union National to guarantee
the performance of a customer to a third party.  Generally, all
letters of credit when issued have expiration dates within one
year.  The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan
facilities to customers.  Union National generally holds
collateral and/or personal guarantees supporting these
commitments.  Union National had $9,943,000 and $4,950,000 of
standby letters of credit outstanding as of September 30, 2006
and December 31, 2005, respectively.  Management believes that
the proceeds obtained through a liquidation of collateral and
the enforcement of guarantees would be sufficient to cover the
potential amount of future payment required under the
corresponding guarantees.  The current amount of the liability
as of September 30, 2006 for guarantees under standby letters of
credit issued is not material.

6. Recent Accounting Pronouncements

In February 2006, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No.
155, "Accounting for Certain Hybrid Financial Instruments"
("SFAS 155").  SFAS 155 amends FASB Statement Nos. 133 and 140,
and improves the financial reporting of certain hybrid financial
instruments by requiring more consistent accounting that
eliminates exemptions and provides a means to simplify the
accounting for these instruments.  Specifically, SFAS 155 allows
financial instruments that have embedded derivatives to be
accounted for as a whole (eliminating the need to bifurcate the
derivative from its host) if the holder elects to account for
the whole instrument on a fair value basis.  SFAS 155 is
effective for all financial instruments acquired or issued after
the beginning of an entity's first fiscal year that begins after
September 15, 2006.  Union National is required to adopt the
provisions of SFAS 155, as applicable, beginning January 1,
2007.  Management does not believe the adoption of SFAS 155 will
have a material impact on Union National's consolidated
financial condition and results of operations.

In March 2006, the FASB issued SFAS No. 156, "Accounting for
Servicing of Financial Assets - An Amendment of FASB Statement
No. 140" ("SFAS 156"). SFAS 156 requires that all separately
recognized servicing assets and servicing liabilities be
initially measured at fair value, if practicable. The statement
permits, but does not require, the subsequent measurement of
servicing assets and servicing liabilities at fair value. SFAS
156 is effective as of the beginning of an

<PAGE>

entity's first fiscal year that begins after September 15, 2006,
which for Union National will be as of January 1, 2007.
Management does not believe that the adoption of SFAS 156 will
have a material effect on its consolidated financial statements.

In July 2006, the FASB issued FASB Interpretation No. 48,
"Accounting for Uncertainty in Income Taxes-an interpretation of
FASB Statement No. 109" (FIN 48), which clarifies the accounting
for uncertainty in tax positions. This interpretation requires
that companies recognize in their financial statements the
impact of a tax position, if that position is more likely than
not of being sustained on audit, based on the technical merits
of the position. The provisions of FIN 48 are effective for
fiscal years beginning after December 15, 2006, with the
cumulative effect of the change in accounting principle recorded
as an adjustment to opening retained earnings. We are currently
evaluating the impact of adopting FIN 48 on our consolidated
financial statements.

In September 2006, the FASB issued FASB Statement No. 157, "Fair
Value Measurements", which defines fair value, establishes a
framework for measuring fair value under GAAP, and expands
disclosures about fair value measurements. FASB Statement No.
157 applies to other accounting pronouncements that require or
permit fair value measurements. The new guidance is effective
for financial statements issued for fiscal years beginning after
November 15, 2007, and for interim periods within those fiscal
years. We are currently evaluating the potential impact, if any,
of the adoption of FASB Statement No. 157 on our consolidated
financial condition, results of operations and cash flows.

On September 13, 2006, the Securities and Exchange Commission
"SEC" issued Staff Accounting Bulleting No. 108 ("SAB 108"). SAB
108 provides interpretive guidance on how the effects of the
carryover or reversal of prior year misstatements should be
considered in quantifying a potential current year misstatement.
Prior to SAB 108, Companies might evaluate the materiality of
financial-statement misstatements using either the income
statement or balance sheet approach, with the income statement
approach  focusing on new misstatements added in the current
year, and the balance sheet approach focusing on the cumulative
amount of misstatement present in a company's balance sheet.
Misstatements that would be material under one approach could be
viewed as immaterial under another approach, and not be
corrected. SAB 108 now requires that companies view financial
statement misstatements as material if they are material
according to either the income statement or balance sheet
approach. The Company has analyzed SAB 108 and determined that
upon adoption it will have no impact on the reported
consolidated results of operations or financial condition.


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 ("Union National"), a bank holding company, and its
wholly-owned subsidiary, Union National Community Bank (the
"bank"). Union National's consolidated financial condition and
results of operations consist primarily of the bank's financial
condition and results of operations. Union National's trust
subsidiaries, Union National Capital Trust I and Union National
Capital Trust II, were established for the purpose of issuing
$11,000,000 of trust capital securities during 2003 and 2004.
Home Team Financial, LLC, a subsidiary of the bank, and its
subsidiary, TA of Lancaster, LLC (together, "Home Team
Financial") began operations in July 2005. Home Team Financial
operates a mortgage banking and brokerage business and also
offers title insurance and settlement services. The bank's
ownership interest in Home Team Financial is 98% with an initial
interest in net profits of 30%, which increases over succeeding
years. This discussion should be read in conjunction with the
financial tables/statistics, financial statements and notes to
financial statements appearing in our 2005 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, the 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, our 2005 annual
report, our 2005 Form 10-K, and in the documents that we
incorporate by reference, could affect the future financial
results of Union National, the 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 but are not limited to the following:

<PAGE>
         *   operating, legal and regulatory risks;
         *   economic, political and competitive forces;
         *   rapidly changing technology; 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 including our Form 10-K for
the year ended December 31, 2005.

Critical Accounting Policies
_____________________________
The reporting of Union National's consolidated financial
condition and results of operations is impacted by the
application of accounting policies by management. Certain
accounting policies are particularly sensitive and require
significant judgments, estimates and assumptions to be made by
management in matters that are inherently uncertain.

Union National's provision for loan * losses and the level of
the allowance for loan losses involve significant estimates by
management in evaluating the adequacy of the allowance for loan
losses. The allowance for loan losses is increased by a charge
to the provision for loan losses. Management's evaluation 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 and the provision for loan losses
may be necessary if economic conditions or loan credit quality
differ substantially from the assumptions used in making the
evaluation.

Union National carries all of its investments at fair value with
any unrealized gains, as well as losses that are considered to
be temporary, reported net of tax as an adjustment to
stockholders' equity. If management determines that impairment
in the value of an investment security is "other than
temporary," the related loss is recorded in the income
statement. In order to determine whether such unrealized losses
are other than temporary, management must regularly review
investment securities for possible impairment, analyzing factors
including but not limited to the underlying creditworthiness of
the issuing organization, the length of time for which the
market value has been less than cost, and independent analysts'
opinions about circumstances that could affect the performance
of the investment. After considering such factors, it is a
matter of judgment on the part of management to make the
determination of whether or not the decline in market value is
other than temporary.

Results of Operations
_____________________

Overview

Consolidated net income for the three months ended September 30,
2006 decreased by $230,000 or 26.4% to $640,000, as compared to
$870,000 for the three months ended September 30, 2005.  For the
third quarter of 2006, basic and diluted earnings per share
amounted to $0.25, as compared to basic and diluted earnings per
share of $0.35 and $0.34, respectively, for the same period in
2005.  For the nine months ended September 30, 2006,
consolidated net income was $1,882,000, a decrease of $669,000
or 26.2% as compared to $2,551,000 for the nine months ended
September 30, 2005.  Basic and diluted earnings per share of
$0.75 and $0.74, respectively, for the nine months ended
September 30, 2006, were lower as compared to basic and diluted
earnings per share of $1.01 and $1.00, respectively, for the
same period in 2005.

The following items impacted results of operations for the three
and nine months ended September 30, 2006 as compared to 2005:

     *  On a taxable-equivalent basis, net interest income
        increased by $115,000, or 3.0%, and $441,000 or 3.9%,

*Loans include leases that meet the criteria for direct
financing leases under SFAS No.13. Loans and lease financing
receivables are, throughout the remainder of Management's
Discussion and Analysis, together referred to as "loans."
<PAGE>
        respectively.  Asset growth was largely offset by higher
        funding costs due to higher interest rates and a greater
        proportion of higher-cost alternative funding sources.
        The effect of customer deposit shifts on the cost of
        funds is also outpacing the effect of earnings rate
        increases on interest income.
     *  The provision for loan losses during the three months
        ended September 30, 2006 decreased in comparison to the
        same period last year primarily due to improved loss
        history on purchased loans.  For the nine months ended
        September 30, 2006, the provision was higher than the
        prior year due to a $139,000 increase in net
        charge-offs, partially offset by the improvement in loss
        history on purchased loans.
     *  Other operating income, including securities gains,
        increased by $56,000 or 2.9% and $1,893,000 or 46.6%,
        respectively.  The increase included the results of Home
        Team Financial, LLC, which began operations in the third
        quarter of 2005.
     *  Other operating expenses increased by $528,000 or 12.3%
        and $3,248,000 or 28.9%, respectively.  The increase
        included the results of Home Team Financial, LLC, which
        began operations in the third quarter of 2005.

The above items are quantified and discussed in further detail
under their respective sections below.  Since Home Team
Financial did not begin operations until the third quarter of
2005, inclusion of their results throughout 2006 caused
significant increases in consolidated other operating income and
expenses in comparison to the prior year.  Accordingly, the
discussion below excludes the results of Home Team Financial
from the various income statement lines, in order to provide
comparability between periods.  Home Team Financial contributed,
net of income taxes, a loss of $24,000 for the three months
ended and earnings of $8,000 for the nine months ended September
30, 2006 to consolidated net income.

Net income as a percent of average stockholders' equity, also
known as return on average equity ("ROE") and net income as a
percent of average realized stockholders' equity, which excludes
the impact of accumulated other comprehensive income (loss),
were as follows on an annualized basis:
<TABLE>
<CAPTION>
                    Three Months Ended        Nine Months Ended
                        September 30,              September 30,
                    ___________________       __________________
                        2006     2005            2006      2005
                        _____    _____           ____      _____
<S>                      <C>      <C>            <C>        <C>
ROE                     9.22%   13.17%           9.19%    12.69%
ROE (Realized Equity)   8.69%   13.21%           8.85%    12.80%

</TABLE>

For Union National, accumulated other comprehensive income
(loss) is the amount of net unrealized gains (losses) on
available-for-sale investment securities and cash flow hedges,
net of tax. Accumulated other comprehensive income (loss)
increased by $2,350,000 and $952,000 during the three months and
nine months ended September 30, 2006, respectively, due to such
unrealized gains during the three months ended September 30,
2006.  These gains resulted primarily from the effect of a
decrease in interest rates in relation to the duration of the
securities in the investment portfolio.



Overall loan balances increased by $28,925,000 or 9.6% over
loans outstanding at the preceding year-end, primarily resulting
from an increase in commercial loans, commercial lines of
credit, leases, and consumer loans, partially offset by a slight
decline in residential mortgage loans.

Outlook

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

Management currently expects continued growth in loans, and
moderate deposit growth for the remainder of 2006, driven
largely by the expansion of existing and development of new
commercial business relationships and the opening of two Gold
Cafe retail offices that feature innovative delivery of branch
banking services in a high-end coffee house setting.  The first
Gold Cafe retail office opened for business in April 2006.
Construction and equipping of the second Gold Cafe

<PAGE>

retail office, which will be in a leased facility, is
substantially complete and is scheduled to open during the
fourth quarter of 2006.  The net impact to the results of
operations for the fourth quarter of 2006 as compared to the
costs expensed for these offices in the fourth quarter of 2005
is currently estimated to be a reduction in net income of
$259,000 ($171,000 after tax).  Based upon projected incremental
loan generation, fee and commission income, and deposit growth
resulting from the additional branches, each Gold Cafe branch is
expected to begin operating at breakeven in approximately its
third year of operation.

The expansion of our commercial banking business continues to be
a strategic focus for Union National.  Commercial loans have
increased by $27,319,000 or 38.5% since December 2005.  The
leasing department that Union National established during 2005
to augment other commercial products and services that are
currently offered has been experiencing rapid growth as well.
As of September 30, 2006, net leases outstanding totaled
$7,194,000, compared to $3,721,000 as of December 31, 2005.
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.  Increased lending volume from these activities and from
the new retail offices is expected to have a positive impact on
net interest income and other operating income for the remainder
of 2006. In addition, Union National has engaged a marketing
firm to assist in implementation of a deposit acquisition
program during the remainder of 2006 in order to maximize
funding of asset growth with growth in core deposits.

With the inclusion of a full year of Home Team Financial's
operations in 2006, as compared with only five months in 2005,
increases in net interest income and other income related to
mortgage origination, brokerage, title insurance, and settlement
fees are expected to occur accordingly.  Operating expenses of
Home Team Financial will also be generally higher in 2006, due
to the inclusion of a full year of activity, as well as
additions to their loan origination staff and an increase in
lease expense due to the relocation of Home Team Financial to
expanded facilities in mid 2006.

Union National moved its corporate offices into a new leased
facility at 570 Lausch Lane in Manheim Township during the first
and third quarters of 2006.  Union National has leased this
space over an initial term of 15 years and occupies two floors
of the three-story building.  The remaining floor of office
space is currently expected to be under contract for sublease in
the first quarter of 2007. The lease transaction is classified
as an operating lease and requires initial annual lease payments
of $483,000 plus reimbursement of the landlord's operating
costs.  Offsetting these costs, including the anticipated
sublease payments, are various consolidations of Union
National's current facilities that have been completed during
2006.  In addition, Home Team Financial has leased the office
portion of the bank's branch location in Mount Joy,
Pennsylvania, that became available due to the relocation of
some of Union National's corporate functions to the Lausch Lane
facility, thereby eliminating rent expense previously paid to
third parties.  The combined impact of all the changes in leases
and premises to the results of operations for the remaining
months of 2006 is currently estimated to be a net cost of
approximately $105,000 ($69,000 after tax) as compared to the
same period of 2005.

As of September 30, 2006, the consolidated capital ratio of
Union National Financial Corporation, excluding the effects of
other comprehensive income (loss) on stockholders' equity, was
5.58%, which was below the Corporation's policy limit of 5.75%.
The expected future asset growth resulting from the
implementation of Union National's strategic initiatives as
described above may require additional capital resources in 2006
or future years.  Union National is analyzing various
capital-enhancing options including but not limited to issuance
of common stock or perpetual preferred stock; however, no option
has been chosen as of the date of this report.

Net Interest Income/Funding Sources

Net interest income is the amount by which interest income on
loans and investments exceeds interest incurred on deposits and
borrowings.  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-sensitive assets and liabilities.
For analytical and discussion purposes, net interest income and
corresponding yields are presented on a taxable-equivalent
basis.  Income from tax-exempt assets, primarily loans to or
securities issued by state and local governments, is adjusted by
an amount equivalent to the federal income taxes which would
have been paid if the income received on these assets was
taxable at the statutory rate of 34%.

<PAGE>

During the current year and the two previous calendar years,
Union National has experienced growth in assets that has
outpaced growth in deposits, requiring the increased use of
alternative sources of funding.  In addition, there has been a
gradual shift in the bank's funding sources towards relatively
higher-cost financing sources including borrowings from the
Federal Home Loan Bank of Pittsburgh ("FHLB"), brokered CDs, and
issuance of junior subordinated debentures.  Management utilized
outstanding long-term FHLB advances of $125,478,000 as of
September 30, 2006, as compared to total FHLB borrowings of
$118,815,000 (consisting of short-term advances of $10,000,000,
long-term advances of $105,815,000, and $3,000,000 outstanding
under a $15,000,000 line of credit) as of December 31, 2005.
Long-term advances totaled $100,870,000 as of September 30,
2005.  The long-term advances have maturities that range from
October 2006 to December 2013.  The average interest rate on
total FHLB borrowings increased to 4.94% at September 30, 2006
as compared to 4.31% at December 31, 2005 and 4.17% at September
30, 2005. Union National has also obtained funding through the
use of brokered CDs, which were obtained through various sources
where Union National bids for these funds. As of September 30,
2006 and December 31, 2005, Union National had $26,964,000 and
$26,123,000, respectively, in brokered CDs outstanding, compared
to $28,449,000 as of September 30, 2005.  The average interest
rate on total brokered CDs was 4.93% at September 30, 2006 as
compared to 4.32% at December 31, 2005 and 4.24% at September
30, 2005.

On July 28, 2006, the bank issued $6,000,000 of subordinated
debentures due September 15, 2021, with a 5-year initial fixed
rate of 7.17% in order to fund growth and to raise the bank's
risk-based capital ratio above the 10% well-capitalized level.
During 2004 and 2003, Union National obtained net funding of
$11,000,000 from the issuance of junior subordinated debentures
to trust subsidiaries that then issued trust capital securities.
In October 2004, $3,000,000 of net funding was obtained through
the issuance of debentures that are at a fixed rate of 5.28% for
an initial period of approximately three years.  In December
2003, $8,000,000 of net funding was obtained through the
issuance of floating-rate debentures that provide for quarterly
distributions at a variable annual coupon rate that is reset
quarterly, based on three-month London Interbank Offered Rate
("LIBOR") plus 2.85%.  The coupon rate was 8.34% at September
30, 2006 and 7.09% at December 31, 2005.

The terms and amounts of the FHLB borrowings, brokered CDs, and
the issuance of the junior subordinated debentures, when
combined with Union National's overall balance sheet structure,
maintain Union National within its interest rate risk policies.
The change in mix of funding sources together with related cost
of those funding sources and a shift in the mix of customer
deposits contributed to a constriction in the net interest
margin as described below.  The bank uses derivatives to
mitigate the effects of fluctuating interest rates on net
interest income.

In comparing the three months ended and the nine months ended
September 30, 2006 to the same periods of 2005, the net effect
of volume growth in average earning assets and interest-bearing
liabilities on net interest income was an increase of $413,000
and $1,201,000, respectively.  Growth in average earning assets
was funded primarily by increased deposit balances and
additional borrowings.  Average earning assets increased by
16.5% and 14.8% for the three months and nine months ended
September 30, 2006, respectively, as compared to the same
periods of 2005.

The overall interest rate on average total earning assets for
the three months and nine months ended September 30, 2006 was
7.00% and 6.83%, respectively, as compared to 6.34% and 6.19%,
respectively, for the same periods of last year.  The overall
interest rate on average interest-bearing liabilities was 3.98%
and 3.64%, respectively, for the three months and nine months
ended September 30, 2006, compared to 2.80% and 2.57%,
respectively, for the three months and nine months ended
September 30, 2005.  The net effect of these interest rate
changes on net interest income was a decrease of $298,000 for
the three months ended September 30, 2006, and a decrease of
$760,000 for the nine months ended September 30, 2006, compared
to the same periods of 2005.  The net interest margin percentage
for the three months and nine months ended September 30, 2006
was 3.35% and 3.51%, respectively, as compared to 3.79% and
3.87% for the same periods of 2005. Contributing to the
narrowing net interest margin percentage is the current
inversion of the treasury yield curve, which resulted in a
transition of commercial and consumer loans from floating or
variable interest rates to fixed interest rates.  The net effect
of the above volume growth and interest rate changes on net
interest income on a taxable-equivalent-yield basis for the
third quarter of 2006 was an increase of $115,000 as compared to
the same period of 2005; for the nine months ended September 30,
2006, the net effect was an increase of $441,000 as compared to
the prior year.

For the remainder of 2006, it is currently anticipated that
Union National's net interest margin percentage will remain
below prior year levels due to the flat and inverted treasury
yield curve, combined with the effects of changes in the mix

<PAGE>

of customer deposits and alternative funding sources described
above. However, income from higher earning rates on asset
balances in comparison to the prior year, together with current
year expected growth in earning assets, should more than offset
the constriction in net interest margin, resulting in net
interest income for the remainder of 2006 that reflects a
moderate increase over the net interest income earned during the
same period of 2005.  Union National's net interest income may
be impacted by future actions of the Federal Reserve Bank.

Provision for Loan Losses

The loan loss provision is an estimated expense charged to
earnings to provide for losses attributable to uncollectible
loans, based on management's analysis of the adequacy of the
allowance for loan losses.  The provision for loan losses was
$104,000 and $441,000, respectively, for the three months and
nine months ended September 30, 2006, as compared to $135,000
and $403,000, respectively, for the three months and nine months
ended September 30, 2005. For the three months and nine month
ended September 30, 2006, Union National had net charge-offs of
$7,000 and $202,000, respectively, compared to net charge-offs
of $68,000 and $63,000, respectively, for the three months and
nine months ended September 30, 2005.  The higher provision for
loan losses for the nine months ended September 30, 2006 can be
primarily attributed to an increase in net charge-offs and
higher growth in outstanding loan balances in 2006 compared to
2005, partially offset by improved charge-off history on
purchased 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 making management's evaluation of
the level of the allowance for loan losses as compared to the
balance of outstanding loans.  See the discussion on Credit Risk
and Loan Quality/Allowance for Loan Losses.

Other Operating Income

Other Operating Income (including investment securities gains)
increased by $56,000 or 2.9% for the third quarter of 2006 as
compared to the same period of 2005. For the nine months ended
September 30, 2006, the increase was $1,893,000 or 46.6%.  The
change in consolidated Other Operating Income resulting from
Home Team Financial was an increase of $42,000 for the third
quarter and $1,799,000 for the nine months ended September 30,
2006, primarily from mortgage banking/brokerage activities.  The
increase in other operating income not attributable to Home Team
Financial for the three-month and nine-month periods was
primarily a result of increases (decreases) in the following
items:

<TABLE>
<CAPTION>
                                      Three Months Ended
(Dollars in thousands)           September 30, 2006 vs. 2005
                                 ____________________________
<S>                                                  <C>
Overdraft fees                                $      32
Other service charges on deposit accounts           (14)
Debit card interchange income                        21
Alternative investment sales commissions            (34)
ATM cash service fees                                24
Mortgage banking activities of the bank             (29)
Settlement commission income                         (8)
Other, net                                           22
                                                __________
Total increase in other operating income
     not attributable to Home Team Financial $       14
                                                ==========
<CAPTION>
                                       Nine Months Ended
 (Dollars in thousands)           September 30, 2006 vs. 2005
                                  ___________________________
 <S>                                               <C>
Overdraft fees                                $      89
Other service charges on deposit accounts           (36)
Debit card interchange income                        70
Alternative investment sales commissions            (44)
ATM cash service fees                               128
Mortgage banking activities of the bank             (99)
Settlement commission income                        (32)
Other, net                                           18
                                                ___________
Total increase in other operating income
     not attributable to Home Team Financial $       94
                                                ===========
</TABLE>

Overdraft fees have increased as a result of the bank's
"Overdraft Privilege" product, which permits customers to
overdraw their accounts subject to certain limits.  Other
service charges on deposit accounts decreased primarily as a
result of the introduction of the bank's "Three for Free"
promotion, whereby a customer may select from any one of three
types of accounts which are not subject to service charges. The
increase in debit card interchange income reflects the bank's
sales focus promoting debit card usage.  Alternative investment
sales commissions decreased due to lower mutual fund and annuity
sales in 2006. The ATM cash service fees relate to an
arrangement with a local ATM company where Union National
provides cash for its ATM machines.  These service fees
fluctuate with interest rates and the cash balances on hand at
the ATM company.  Mortgage banking activities and settlement
commission income have been largely

<PAGE>

supplanted by the activities of Home Team Financial and its
title insurance subsidiary, TA of Lancaster, LLC.  There were
also smaller increases in various other income categories that
were not individually significant.

Other Operating Expenses

Other Operating Expenses increased by $528,000 or 12.3% for the
third quarter of 2006 as compared to the same period of 2005.
For the nine months ended September 30, 2006, the increase was
$3,248,000 or 28.9% as compared to the first nine months of
2005.  The change in consolidated Other Operating Expenses
resulting from Home Team Financial was an increase of $87,000
for the third quarter and $1,557,000 for the nine months ended
September 30, 2006, primarily from mortgage banking/brokerage
activities.  The increase in other operating expenses not
attributable to Home Team Financial for the three-month and
nine-month periods was primarily a result of increases
(decreases) in the following items:

<TABLE>
<CAPTION>

                                         Three Months Ended
(Dollars in thousands)            September 30, 2006 vs. 2005
                                  ___________________________
<S>                                               <C>
Salaries and wages                            $    89
Employee benefit costs                            (19)
Net occupancy expense                             132
Furniture and equipment expense                    48
Advertising and marketing expenses                 (1)
ATM processing expenses                            19
Losses and costs related to repossessed assets     39
Other, net                                        134
                                               _________
Total increase in other operating expenses
     not attributable to Home Team Financial  $   441
                                               =========
<CAPTION>
                                         Nine Months Ended
(Dollars in thousands)            September 30, 2006 vs. 2005
                                  ___________________________
<S>                                              <C>
Salaries and wages                            $   612
Employee benefit costs                            103
Net occupancy expense                             344
Furniture and equipment expense                    73
Advertising and marketing expenses                145
ATM processing expenses                            44
Losses and costs related to repossessed assets     48
Other, net                                        322
                                              _________
Total increase in other operating expenses
     not attributable to Home Team Financial  $ 1,691
                                              =========
</TABLE>

The increase in salaries and wages resulted from Gold Cafe staff
additions, annual salary increases, additional commercial and
business banking staff positions and other staff additions, and
staff promotion bonuses paid in the first quarter of 2006.
Employee benefit cost increases commensurate with the higher
salaries and wages described above, as well as higher health
insurance costs, were partially offset by a decrease in accrued
profit sharing expense based upon 2006 results.  Net occupancy
expense increased primarily due to occupancy of the Lausch Lane
office facility, the Gold Cafe building, and the addition to the
administrative services center ("ASC") in Mount Joy, PA,
partially offset by termination of an office lease enabled by
the move of employees into the Lausch Lane office.  Furniture
and equipment expense increased primarily due to depreciation of
the furniture and equipment at Lausch Lane, the Gold Cafe, and
the ASC addition.  Advertising and marketing costs incurred
during the second quarter of 2006 related to the opening of the
Gold Cafe branch location and promotion of the Gold Cafe brand
did not recur in the third quarter.  Also, the bank engaged a
marketing firm to assist in implementation of a deposit
acquisition program beginning in the second quarter.  ATM
processing services increased due to higher usage of ATMs by
bank customers.  The bank incurred carrying expenses and losses
on the sale of repossessed assets during the third quarter,
primarily residential real estate.  There were also numerous
smaller increases in various other expense categories that were
not individually significant.

Income Taxes

Union National recognized an income tax expense of $46,000 for
the third quarter of 2006, as compared to $179,000 for the same
period of last year. For the nine months ended September 30,
2006, income tax expense was $84,000 as compared to $536,000
last year. Union National's effective tax rates were as follows:

<TABLE>
<CAPTION>

                          Three Months Ended  Nine Months Ended
                          __________________  _________________
<S>                                <C>                <C>
September 30, 2006                 6.7%               4.3%
September 30, 2005                17.1%              17.4%

</TABLE>

The effective tax rate for Union National is below the statutory
rate due to tax-exempt earnings on investments, loans and

<PAGE>

bank-owned life insurance and the impact of tax credits. The
decrease in the 2006 effective tax rate resulted primarily from
a higher percentage of pre-tax income derived from interest on
tax-exempt investment securities and loans. As of September 30,
2006, Union National had a net deferred tax asset of $1,004,000.
The realization of deferred tax assets is dependent on future
earnings of Union National.  Management currently anticipates
future earnings will be adequate to utilize deferred tax assets.

Financial Condition
____________________
Loan Quality and Credit Risk

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 and other unfavorable
business conditions may impact certain borrowers' abilities to
comply with their repayment terms.  For certain commercial
loans, management has determined that it is probable that all
interest and principal payments due according to the contractual
terms of the loan agreements will not be collected.  These loans
are considered to be impaired as defined by current accounting
principles generally accepted in the United States of America
("GAAP").  At September 30, 2006, the recorded investment in
loans that are considered to be impaired under GAAP was
$6,282,000 as compared to $3,270,000 at December 31, 2005.  The
increase is the result of the identification of impaired
commercial loans to four additional borrowers, most of which are
well-secured with real estate and all but one of which is
current with respect to principal and interest payments.  The
one that was not current as of September 30, 2006 is expected to
be current before the end of 2006. The increase was partially
offset by charge-offs and payments made by the borrowers on
certain commercial loans that were identified as impaired loans
at December 31, 2005.

The measure of impairment is primarily based on the fair value
of collateral securing these loans, which is primarily real
estate and equipment.  The related allowance for loan losses on
the above total of impaired commercial loans amounted to
$141,000 at September 30, 2006, and $251,000 at December 31,
2005.  Management currently believes that probable losses on
these loans have already been provided for in the allowance for
loan losses.  As of September 30, 2006, impaired loans with
balances of $1,520,000 were included with total nonperforming
loans detailed below, and at December 31, 2005 impaired loans
with balances of $745,000 were nonperforming.  Nonperforming
loans below include consumer and residential mortgage loans
which are evaluated collectively for impairment and other
commercial loans that are not considered impaired.  Under Union
National's current internal risk rating system, there were no
loans with a rating of "substandard" that were not nonperforming
or impaired at September 30, 2006 or December 31, 2005.
Management considers impaired and substandard loans to be
potential problem loans and currently expects that an additional
amount of these loans may be classified as nonperforming during
the remainder of 2006.  Management has increased its monitoring
of these borrowers' financial strength.

At September 30, 2006, total nonperforming loans amounted to
$2,331,000, or 0.7% of net loans, as compared to a level of
$2,112,000, or 0.7%, at December 31, 2005.  These loans are
essentially collateralized with real estate.  Historically, the
percentage of nonperforming loans to net loans as of December 31
for the previous five-year period was an average of 0.8%.  In
addition, the bank held $219,000 of foreclosed real estate and
$134,000 of foreclosed purchased loans as of September 30, 2006.


<TABLE>
<CAPTION>
Schedule of Nonperforming Assets:

                                   September 30,   December 31,
(Dollars in thousands)                  2006             2005

                                      ________       _________
<S>                                     <C>              <C>
Nonaccruing Loans                    $ 2,156          $ 1,814
Accruing Loans - 90 days or more
  past due                               175              298
Restructured Accruing Loans               -                -
                                      _________      ________
     Total Nonperforming Loans         2,331            2,112
Foreclosed Real Estate                   219              -
Foreclosed Purchased Loans               134              -
     Total Nonperforming
                                      _________      ________
         Assets                      $ 2,684          $ 2,112
                                      =========      ========
Nonperforming Loans
   as a % of Net Loans                   0.7 %            0.7 %
                                      =========      ========
Allowance for Loan Losses
   as a % of Nonperforming Loan          125 %           127 %
                                      =========      ========
</TABLE>

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 on a
quarterly basis.

The allowance is increased by provisions charged to operating
expense and reduced by net charge-offs.  Management's 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.  Management determined
that no adjustment to the allowance for loan losses was
necessary as a result of the Office of the Comptroller of the
Currency's ("OCC") most recent examination.

Management believes, based on information currently available,
that the current allowance for loan losses of $2,914,000 is
adequate to meet potential loan losses.  In addition, management
expects loan charge-offs, net of recoveries for the remainder of
2006 to be less than the level of net loan charge-offs for the
same period of 2005.

<PAGE>

<TABLE>
Analysis of Allowance for Loan Losses:
<CAPTION>
                                         Three Months Ended
                                            September 30,
(Dollars in thousands)                _________________________
                                         2006           2005
                                      __________      _________
<S>                                       <C>            <C>
Average Total Loans Outstanding
 (Net of Unearned Income)           $   326,227    $   286,081
                                       ==========      =========
Allowance for Loan Losses,
 Beginning of Period                $     2,817    $     2,561
Loans Charged Off During Period              10             75
Recoveries of Loans Previously
   Charged Off                                3              7
                                      __________      _________
Net Loans Charged Off                         7             68
Addition to Provision for Loan Losses
   Charged to Operations                    104            135
                                      __________      _________
Allowance for Loan Losses,
   End of Period                    $     2,914    $     2,628
                                      ==========      =========

Ratio of Net Loans Charged Off to
   Average Loans Outstanding
   (Annualized)                            0.01%         0.10%
                                      ==========      =========

Ratio of Allowance for Loan Losses to
  Net Loans at End of Period

<CAPTION>
                                         Nine Months Ended
                                           September 30,
(Dollars in thousands)                _________________________
                                         2006           2005
                                      __________      _________
<S>                                       <C>            <C>
Average Total Loans Outstanding
 (Net of Unearned Income)           $   312,205    $   274,961
                                      ==========      =========
Allowance for Loan Losses,
 Beginning of Period                $     2,675    $     2,288
Loans Charged Off During Period             255             92
Recoveries of Loans Previously
   Charged Off                               53             29
                                      __________      _________
Net Loans Charged Off                       202             63
Addition to Provision for Loan Losses
   Charged to Operations                    441            403
                                      __________      _________
Allowance for Loan Losses,
   End of Period                    $     2,914    $     2,628
                                      ==========      =========
Ratio of Net Loans Charged Off to
   Average Loans Outstanding
   (Annualized)                            0.09%         0.03%
                                      ==========      =========
Ratio of Allowance for Loan Losses to
  Net Loans at End of Period               0.89%         0.91 %
                                      ==========      =========
</TABLE>

Investment Securities

In addition to the credit risk present in the loan portfolio,
Union National also has credit risk associated with its
investment security holdings. Based on recent national economic
trends and other factors, Union National has increased its
monitoring of its corporate debt securities and changes in their
credit ratings as published by national statistical rating
organizations. As of September 30, 2006, Union National had a
total of 78 debt securities of various types that had aggregated
unrealized losses of $1,504,000 that amounted to 1.94% of the
amortized cost basis of these securities. Except for losses on
corporate securities pertaining to major corporations in the
auto industry, management believes that the unrealized losses
primarily reflect changes in interest rates subsequent to the
acquisition of specific securities. With respect to major auto
industry corporate debt securities, amortized cost totals
$2,031,000 and fair value totals $1,963,000 on four securities
with unrealized losses amounting to $68,000. These losses
primarily represent a decline in credit strength of the
corporations; however, based upon management's analysis,
management believes that these corporations have the ability to
service the debt for the foreseeable future and that all amounts
will be collected at maturity. Based on management's assessment
of the total investment portfolio at September 30, 2006, Union
National did not hold any security that had a fair value decline
that is currently expected to be other than temporary.
Consequently, any declines in a specific security's fair value
below amortized cost have been provided for in other
comprehensive income (loss). In addition, there are no
significant concentrations of investments (greater than 10% of
stockholders' equity) in any individual security issuer.

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;
   *  overnight correspondent bank borrowings on various credit
      lines and borrowing capacity available from the FHLB;
   *  acquisition of brokered certificates of deposit (CDs) and
      CDs issued through the CDARS program as discussed

<PAGE>
      below;
   *  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.  Liquidity generally remains stable and exceeds Union
National's minimum defined levels.  There are no known trends,
except the anticipated loan and deposit growth and expansion
plans previously discussed in the Results of Operations section,
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.  The
expected future asset growth resulting from the implementation
of Union National's strategic initiatives as described above may
require additional capital resources in 2006 or future years.
Union National is analyzing various capital-enhancing options
including but not limited to issuance of common stock or
perpetual preferred stock; however, no option has been chosen as
of the date of this report.

Membership in the FHLB provides the bank with additional
liquidity alternatives such as short- or long-term funding on
fixed- or variable-rate terms.  As of September 30, 2006, the
bank had outstanding long-term FHLB advances totaling
$125,478,000 from its available credit of $171,814,000 at the
FHLB.  This compares to total FHLB borrowings of $118,815,000
(consisting of short-term advances of $10,000,000, long-term
advances of $105,815,000, and $3,000,000 outstanding under a
$15,000,000 line of credit) as of December 31, 2005; and
long-term advances of $100,870,000 as of September 30, 2005.
The long-term advances have maturities that range from October
2006 to December 2013.  As of September 30, 2006, advances of
$24,289,000 are due in the next twelve months and advances of
$30,000,000 are currently convertible by the FHLB on a quarterly
basis, depending on current interest rate levels.  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.

Union National also obtains funding through the use of brokered
CDs, which are obtained through various sources where Union
National bids for these funds.  As of September 30, 2006 and
December 31, 2005, Union National had $26,964,000 and
$26,123,000, respectively, in brokered CDs outstanding.  Union
National's policy limit for FHLB advances and certain brokered
CDs is 40% of total assets.  As of September 30, 2006 and
December 31, 2005, the ratio of aggregated FHLB advances and
brokered CDs to total assets was 29.8% and 30.7%, respectively.

Off-Balance Sheet Commitments

Union National is party to financial instruments with
off-balance sheet risk in the normal course of business to meet
the financing needs of its customers.  These financial
instruments include commitments to extend credit and standby
letters of credit.  Total commitments to extend credit amounted
to $145,960,000 at September 30, 2006 as compared to
$136,459,000 at December 31, 2005.  Total standby letters of
credit amounted to $9,943,000 at September 30, 2006 as compared
to $4,950,000 at December 31, 2005.  In addition, Union
National, in the conduct of business operations, routinely
enters into contracts for services. These contracts may require
payment for services to be provided in the future and may also
contain penalty clauses for the early termination of the
contracts.  There has been no material change in such contracts
since December 31, 2005.

Stockholders' Equity

Union National and the bank maintain capital ratios that are
above the minimum total capital levels required by federal
regulatory authorities.  As discussed above under "Results of
Operations", 2006 initiatives that have impacted capital
resources of Union National include two new retail office
locations and the new corporate office center.  Since the second
Gold Cafe is a leased facility, the capital requirements for the
remainder of 2006 are expected to be limited to the investment
in furniture and equipment, which are substantially complete,
and the lease payments, additional staff, and operating costs
associated with the office.  The expected future asset growth
resulting from the implementation of Union

<PAGE>

National's strategic initiatives as described in the "Outlook"
section above may require additional capital resources in 2006
or future years.  Union National is analyzing various
capital-enhancing options including but not limited to issuance
of common stock or perpetual preferred stock; however, no option
has been chosen as of the date of this report.

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

Quantitative measures established by regulation to ensure
capital adequacy require Union National and the bank to maintain
minimum amounts and ratios (set forth below) of Tier 1 capital
to average assets and of total capital (as defined in the
regulations) to risk-weighted assets. Management believes, as of
September 30, 2006, that Union National and the bank  meet all
capital adequacy requirements to which they are subject.
Union National and the bank maintained the following regulatory
capital levels and leverage and risk-based capital ratios as of:

<TABLE>
Union National Financial Corporation
<CAPTION>
                       September 30, 2006   December 31, 2005
(Dollars in thousands)     Amount       %      Amount       %
                       ___________________  ___________________
<S>                        <C>       <C>       <C>       <C>
Leverage Ratio:
  Tier I Capital to
  Average Total Assets  $ 37,943    7.54%   $ 36,457    8.09%
    Minimum Required
   for Capital Adequacy
   Purposes               20,138    4.00      18,021    4.00
Risk-based Capital Ratios:
    Tier I Capital Ratio -
      Actual              37,943    8.96      36,457    9.70
    Minimum Required for
    Capital Adequacy
    Purposes              16,943    4.00      15,032    4.00
    Total Capital Ratio -
     Actual               48,416   11.43      41,289   10.99
    Minimum Required for
    Capital Adequacy
    Purposes              33,885    8.00      30,064    8.00

Union National Community Bank
Leverage Ratio:
  Tier I Capital to
  Average Total Assets $  38,009    7.57%  $  36,398   8.10%
   Minimum Required for
   Capital Adequacy
   Purposes               20,072    4.00      17,965   4.00
    To Be Well-Capitalized
    Under Prompt Corrective
    Action Provisions     25,090    5.00      22,456   5.00
Risk-based Capital Ratios:
    Tier I Capital Ratio -
    Actual                38,009    8.99      36,398   9.71
    Minimum Required for
    Capital Adequacy
    Purposes              16,909    4.00      14,992   4.00
    To Be Well-Capitalized
    Under Prompt Corrective
    Action Provisions     25,363    6.00      22,488   6.00

    Total Capital Ratio -
    Actual                46,923   11.10      39,073  10.43
    Minimum Required for
    Capital Adequacy
    Purposes              33,817    8.00      29,984   8.00
    To Be Well-Capitalized
    Under Prompt Corrective
    Action Provisions     42,272   10.00      37,480  10.00

</TABLE>
Additionally, banking regulations limit the amount of
investments, loans, extensions of credit and advances the bank
can make to Union National at any time to 10% of the bank's
total regulatory capital. At September 30, 2006, this limitation
amounted to approximately $4,692,000. These regulations also
require that any such investment, loan, extension of credit or
advance be secured by securities having a market value in excess
of the amount thereof.

<PAGE>

Included in Tier I regulatory capital of Union National
Financial Corporation detailed above is $9,520,000 of junior
subordinated debentures issued through Union National Capital
Trust I and Union National Capital Trust II (together, "the
Capital Trusts"), wholly-owned subsidiaries of Union National.
The balance of the junior subordinated debentures issued through
the Capital Trusts, $1,480,000, is included in Tier II
regulatory capital of Union National Financial Corporation
above.  Additionally, included in Tier II regulatory capital of
the bank and Union National Financial Corporation is  $6,000,000
of junior subordinated debentures issued by the bank.  These
securities would become callable if the Federal Reserve makes a
determination that junior subordinated debt can no longer be
considered in regulatory capital.

Regulatory Activity
___________________
From time to time, various types of federal and state
legislation have been proposed that could result in additional
regulation of, and restrictions on, the business of Union
National and the bank.  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.

The Sarbanes-Oxley Act, enacted in July 2002, represents a
comprehensive revision of laws affecting corporate governance,
accounting obligations and corporate reporting.  Many of the
provisions of this act have already been implemented by Union
National and Union National will need to comply with the
provisions of Section 404 of the Sarbanes-Oxley Act during 2007.
In accordance with Section 404, Union National will be required
to report on its internal control over financial reporting as of
December 31, 2007.  To allow for proper reporting on the
internal control over financial reporting, Union National will
need to identify, document and test key controls over the
financial reporting process.  There may be significant external
and internal costs associated with complying with the provisions
of Section 404. The full impact of the Sarbanes-Oxley Act and
the increased costs related to Union National's compliance are
still uncertain and evolving.

We cannot predict what other legislation might be enacted or
what regulations might be adopted, or if enacted or adopted, the
effect thereof on our operations.  Other than the cost of the
compliance with the Sarbanes-Oxley Act described above,
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
liquidity, capital resources or results of operations.  However,
the general cost of compliance with numerous 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. 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.


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 Union National's assets
and liabilities.  The nature of Union National's current
operations is such that Union National 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 Union National's Board of Directors.  Union
National manages interest rate risk by changing the mix or
repricing characteristics of its investment securities portfolio
and borrowings from the FHLB and by the promotion or development
of specific loan and deposit products, as well as the use of
derivatives in a collar

<PAGE>

transaction and an interest rate cap to mitigate the impact of
changing rates.  Union National retains an outside consulting
group to assist in monitoring its interest rate risk using a net
interest income simulation model on a quarterly basis.  The
simulation model measures the sensitivity of future net interest
income to hypothetical changes in market interest rates.

In an effort to assess market risk, Union National utilizes a
simulation model to determine the effect of gradual increases or
decreases in market interest rates on net interest income and
net income.  The aforementioned assumptions 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 Union National'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 Union National's earning assets
and interest-bearing liabilities and assumes a parallel and
prorated shift in interest rates over a twelve-month period.
The results of the simulation model could change significantly
if there was not a parallel shift in interest rates, therefore
reflecting a change in the assumed shape of the interest rate
yield curve.

The simulation model currently indicates that a hypothetical
two-percent general decline in prevailing market interest rates
over a one-year period would cause the bank's net interest
income over the next twelve months to decline less than three
percent as compared to the constant rate scenario.  In addition,
a hypothetical two-percent general rise in rates would cause the
bank's net interest income over the next twelve months to
decline less than one percent.  These 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.

Union National is managing its interest rate risk position in
2006 by the following:

     *  managing and expanding the bank's use of adjustable- and
        floating-rate loans and fixed-rate loans for new or
        refinanced commercial, agricultural and consumer loans;
     *  use of derivatives including a collar transaction and an
        interest rate cap arrangement to mitigate the impact of
        fluctuations in rates;
     *  repositioning of its investment security portfolio into
        certain types of mortgage-backed and asset-backed
        securities to better prepare for any future increase in
        interest rates;
     *  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
     *  adding to or restructuring of fixed-rate and
        floating-rate advances from the FHLB or brokered CDs.

The above strategies and actions impact interest rate risk and
are all included in Union National'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/Funding Sources.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures
________________________________________________
Union National maintains controls and procedures designed to
ensure that information required to be disclosed in the reports
that it files or submits under the Securities Exchange Act of
1934 is recorded, processed, summarized and reported within the
time periods specified in the rules and forms of the Securities
and Exchange Commission. Based upon their evaluation of those
controls and procedures as of September 30, 2006, Union
National's Chief Executive Officer and Chief Financial Officer
concluded that the disclosure controls and procedures were
adequate.

<PAGE>

Changes in Internal Controls
_____________________________
During the nine months ended September 30, 2006, there were no
changes in our internal controls over financial reporting that
have materially affected, or are reasonable likely to materially
affect, these controls.

<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 1A.  Risk Factors

During the nine months ended September 30, 2006 and through the
date of this report, there have been no known material changes
to the risk factors described in our Annual Report on Form 10-K
for the year ended December 31, 2005.

Item 2.  Unregistered Sales of Equity Securities and Use of
Proceeds

<TABLE>
                ISSUER PURCHASES OF EQUITY SECURITIES
<CAPTION>
                                                      (c)
                                                Total Number of
                                                      Shares
                        (a)                       Purchased as
                       Total          (b)            Part of
                     Number of      Average         Publicly
                      Shares       Price Paid    Announced Plans
     Period          Purchased      per Share      or Programs*
________________________________________________________________
<S>                     <C>            <C>            <C>
July 1, 2006 to
July 31, 2006            1           $20.25            1

August 1, 2006 to
August 31, 2006         122          $19.75          122

September 1, 2006 to
September 30, 2006       -           $ 0.00           -
                    ________                       _______
Total                   123          $19.75          123

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

    *On April 21, 2005, 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.

                                         (d)
                                    Maximum Number
                                    of Shares that
                                      May Yet Be
                                      Purchased
                                      Under the
                                       Plans or
     Period                            Programs*
________________________________________________________________
<S>                                      <C>

July 1, 2006 to
July 31, 2006                          53,467

August 1, 2006 to
August 31, 2006                        53,345

September 1, 2006 to
September 30, 2006                     53,345

Total

*On April 21, 2005, 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.

</TABLE>

Item 3.  Defaults Upon Senior Securities

             None.

Item 4.  Submission of Matters to a Vote of Security Holders

             None.

Item 5.  Other Information

           None.

Item 6.  Exhibits:

         a) Exhibits

         Exhibit No. 31.1 - Certification of Principal Executive
         Officer Pursuant to
<PAGE>
         Exchange Act Rules 13a-14(a)/15d-14(a) as added by
         Section 302 of the  Sarbanes-Oxley Act of 2002

         Exhibit No. 31.2 - Certification of Principal Financial
         Officer Pursuant to Exchange Act Rules
         13a-14(a)/15d-14(a) as added by Section 302 of the
         Sarbanes-Oxley Act of 2002

         Exhibit No. 32 - Certification of Principal Executive
         Officer and Principal Financial Officer Pursuant to 18
         U.S.C. Section 1350 as Added by Section 906 of the
         Sarbanes-Oxley Act of 2002


<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

                                        Chairman/President/Chief
                                        Executive Officer
                                        (Principal Executive
                                        Officer)

                                        Date: November 13, 2006


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

                                        Date: November 13, 2006

<PAGE>

                          EXHIBIT 31.1

             CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
                   PURSUANT TO EXCHANGE ACT RULES
            13A-14(A)/15D-14(A) AS ADDED BY SECTION 302
                 OF THE SARBANES-OXLEY ACT OF 2002
                           CERTIFICATION

I, Mark D. Gainer, Chairman/President/CEO, certify, that:

     1.   I have reviewed this quarterly report on Form 10-Q of
          Union National Financial Corporation.

     2.   Based on my knowledge, the quarterly report does not
          contain any untrue statement of a material fact or
          omit to state a material fact necessary to make the
          statements made, in light of the circumstances under
          which such statements were made, not misleading with
          respect to the period covered by this quarterly
          report.

     3.   Based on my knowledge, the financial statements, and
          other financial information included in this quarterly
          report, fairly present in all material respects the
          financial condition, results of operations and cash
          flows of the registrant as of, and for, the periods
          presented in this quarterly report.

     4.   Union National's other certifying officer and I are
          responsible for establishing and maintaining
          disclosure controls and procedures (as defined in
          Exchange Act Rules 13a-15(e) and 15d-15(e) for the
          registrant and we have:

         (a) designed such disclosure controls and procedures,
             or caused such disclosure controls and procedures
             to be designed under our supervision, to ensure
             that material information relating to the
             registrant, including its consolidated
             subsidiaries, is made known to us by others within
             those entities, particularly during the period in
             which this quarterly report is being prepared;
         (b) evaluated the effectiveness of the registrant's
             disclosure controls and procedures and presented in
             this report our conclusions about the effectiveness
             of the disclosure controls and procedures as of the
             end of the period covered by this quarterly report
             based on such evaluation; and
         (c) disclosed in this report any change in the
             registrant's internal control over financial
             reporting that occurred during the registrant's
             most recent fiscal quarter that has materially
             affected, or is reasonably likely to materially
             affect, the registrant's internal control over
             financial reporting; and

     5.   Union National's other certifying officer and I have
          disclosed, based on our most recent evaluation of
          internal control over financial reporting, to the
          registrant's auditors and the audit committee of
          registrant's board of directors (or persons performing
          the equivalent function):

         (a) all significant deficiencies and material
             weaknesses in the design or operation of the
             internal control over financial reporting which are
             reasonably likely to adversely affect the
             registrant's ability to record, process, summarize
             and report financial information; and

         (b) any fraud, whether or not material, that involves
             management or other employees who have a
             significant role in the registrant's internal
             controls over financial reporting.


                                 By    /s/ Mark D. Gainer
                                     ___________________________
                                       Chairman/President/CEO

                                       Date: November 13, 2006

<PAGE>

                      EXHIBIT 31.2

            CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
                 PURSUANT TO EXCHANGE ACT RULES
             13A-14(A)/15D-14(A) AS ADDED BY SECTION 302
                 OF THE SARBANES-OXLEY ACT OF 2002
                          CERTIFICATION

I, Clement M. Hoober, Treasurer/CFO, certify, that:

     1.   I have reviewed this quarterly report on Form 10-Q of
          Union National Financial Corporation.

     2.   Based on my knowledge, the quarterly report does not
          contain any untrue statement of a material fact or
          omit to state a material fact necessary to make the
          statements made, in light of the circumstances under
          which such statements were made, not misleading with
          respect to the period covered by this quarterly
          report.

     3.   Based on my knowledge, the financial statements, and
          other financial information included in this quarterly
          report, fairly present in all material respects the
          financial condition, results of operations and cash
          flows of the registrant as of, and for, the periods
          presented in this quarterly report.

     4.   Union National's other certifying officer and I are
          responsible for establishing and maintaining
          disclosure controls and procedures (as defined in
          Exchange Act Rules 13a-15(e) and 15d-15(e) for the
          registrant and we have:

          (a)  designed such disclosure controls and procedures,
               or caused such disclosure controls and procedures
               to be designed under our supervision, to ensure
               that material information relating to the
               registrant, including its consolidated
               subsidiaries, is made known to us by others
               within those entities, particularly during the
               period in which this quarterly report is being
               prepared;

          (b)  evaluated the effectiveness of the registrant's
               disclosure controls and procedures and presented
               in this report our conclusions about the
               effectiveness of the disclosure controls and
               procedures as of the end of the period covered by
               this quarterly report based on such evaluation;
               and

          (c)  disclosed in this report any change in the
               registrant's internal control over financial
               reporting that occurred during the registrant's
               most recent fiscal quarter that has materially
               affected, or is reasonably likely to materially
               affect, the registrant's internal control over
               financial reporting; and

     5.   Union National's other certifying officer and I have
          disclosed, based on our most recent evaluation of
          internal control over financial reporting, to the
          registrant's auditors and the audit committee of
          registrant's board of directors (or persons performing
          the equivalent function):

          (a)  all significant deficiencies and material
               weaknesses in the design or operation of the
               internal control over financial reporting which
               are reasonably likely to adversely affect the
               registrant's ability to record, process,
               summarize and report financial information; and


          (b)  any fraud, whether or not material, that involves
               management or other employees who have a
               significant role in the registrant's internal
               controls over financial reporting.


                                  By  /s/ Clement M. Hoober
                                     _______________________
                                     Treasurer/CFO

                                     Date: November 13, 2006

<PAGE>
                           EXHIBIT 32

          CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND
                    PRINCIPAL FINANCIAL OFFICER
                  PURSUANT TO 18 U.S.C. SECTION 1350
                     AS ADDED BY SECTION 906 OF THE
                      SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Union National
Financial Corporation on Form 10-Q for the period ending
September 30, 2006, as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Mark D. Gainer,
President/CEO, and I, Clement M. Hoober, Treasurer/CFO, certify,
pursuant to 18 U.S.C. Section 1350, as added pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that:

1.   The Report fully complies with the requirements of Section
     13(a) or 15(d) of the Securities Exchange Act of 1934.


2.   To my knowledge, the information contained in the Report
     fairly presents, in all material respects the financial
     condition and results of operations of Union National as of
     the dates and for the periods expressed in the Report.




                                By  /s/ Mark D. Gainer
                                    ___________________
                                    Chairman/President/CEO

                                    Date: November 13, 2006



                                By  /s/ Clement M. Hoober
                                    _____________________
                                    Treasurer/CFO

                                    Date: November 13, 2006
<PAGE>