| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|--------------------------------------------------------------------------------------|

| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|------------------------------------------------------------------------------------------|

| Pennsylvania                                                                                      |   | 23-2415179                                             |
|---------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------|
| (State or Other Jurisdiction of Incorporation or Organization) |   | (I.R.S. Employer Identification Number) |
|                                                                                              |   |                                                   |
| 570 Lausch Lane, Suite 300, Lancaster, Pennsylvania                 |   | 17601                                                  |
| (Address of Principal Executive Offices)                                      |   | (Zip Code)                                        |

| Large accelerated filer  ̈ | Accelerated filer  ̈ | Non-accelerated filer  ̈ | Smaller reporting company x |
|--------------------------------|--------------------------|------------------------------|-----------------------------|

----

|        |                                                       | PAGE NO. |
|-------------|------------------------------------------------------------|---------------|
| PART I |                                                       |          |
|        |                                                       |          |   |
| Item 1 -    | Business                                                   | 4             |   |
| Item 1A -   | Risk Factors                                               | 10            |   |
| Item 1B -   | Unresolved Staff Comments                                  | 10            |   |
| Item 2 -    | Properties                                                 | 10            |   |
| Item 3 -    | Legal Proceedings                                          | 11            |   |
| Item 4 -    | Removed and Reserved                                       | 11            |   |
|        |                                                       |          |   |
| PART II     |                                                       |          |   |
|        |                                                       |          |   |
| Item 5 -    | Market for Registrant's Common Equity, Related Stockholder |          |   |
|        | Matters and Issuer Purchases of Equity Securities          | 12            |   |
| Item 6 -    | Selected Financial Data                                    | 13            |   |
| Item 7 -    | Management's Discussion and Analysis of                    |          |   |
|        | Financial Condition and Results of Operations              | 14            |   |
| Item 7A-    | Quantitative and Qualitative Disclosure About Market Risk  | 36            |   |
| Item 8 -    | Financial Statements and Supplementary Data                | 37            |   |
| Item 9 -    | Changes In and Disagreements With Accountants              |          |   |
|        | on Accounting and Financial Disclosure                     | 88            |   |
| Item 9A -   | Controls and Procedures                                    | 88            |   |
| Item 9B -   | Other Information                                          | 88            |   |
|        |                                                       |          |   |
| PART III    |                                                       |          |   |
|        |                                                       |          |   |
| Item 10 -   | Directors, Executive Officers, and Corporate Governance    | 88            |   |
| Item 11 -   | Executive Compensation                                     | 93            |   |
| Item 12 -   | Security Ownership of Certain Beneficial Owners and        |          |   |
|        | Management and Related Stockholder Matters                 | 98            |   |
| Item 13 -   | Certain Relationships and Related Transactions, and        |          |   |
|        | Director Independence                                      | 100           |   |
| Item 14 -   | Principal Accountant Fees and Services                     | 101           |   |
|        |                                                       |          |   |
| PART IV     |                                                       |          |   |
|        |                                                       |          |   |
| Item 15 -   | Exhibits, Financial Statement Schedules                    | 103           |   |
|        |                                                       |          |   |
|        | Signatures                                                 | 107           |   |
|        |                                                       |          |   |
|        | Exhibit Index                                              | 108           |   |

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| Office and Address                                                  |   | Description of Property                                                                                                              |   | Year Acquired |
|-------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|
| Mount Joy Branch Office101 East Main StreetMount Joy, PA 17552                |   | Branch Bank, cut limestone and brick.  1995 addition is concrete over steel construction with approximately 22,251 sq. ft. of space. |   | 1911               |
|                                                                          |   |                                                                                                                                           |   |               |
| MotorBank Branch Office21 North Barbara StreetMount Joy, PA 17552             |   | Drive-up Bank Branch, brick on frame containing approximately 445 sq. ft. of space.                                                            |   | 1972               |
|                                                                          |   |                                                                                                                                           |   |               |
| Maytown Branch Office100 West High StreetMaytown, PA 17550                    |   | Branch Bank, brick veneer, shingled roof with wood trusses containing approximately 4,960 sq. ft. of space.                                    |   | 1972               |
|                                                                          |   |                                                                                                                                           |   |               |
| Hempfield Branch Office190 Stony Battery RoadSalunga, PA 17538                |   | Branch Bank, brick with wood shingle roof containing approximately 4,619 sq. ft. of space.                                                     |   |  1979         |
|                                                                          |   |                                                                                                                                           |   |               |
| Administrative Services Center25 North Barbara StreetMount Joy, PA 17552      |   | Bank Administration Building, brick on concrete block with wood and steel frame with approximately 12,798 sq. ft. of space.                    |   | 1984               |
|                                                                          |   |                                                                                                                                           |   |               |
| Elizabethtown Branch Office1275 South Market StreetElizabethtown, PA 17022    |   | Branch Bank, brick veneer, shingled roof with wood trusses containing approximately 6,808 sq. ft. of space.                                    |   | 1988               |
|                                                                          |   |                                                                                                                                           |   |               |
| Columbia Branch Office901 Lancaster AvenueColumbia, PA 17512                  |   | Branch Bank, one-story brick building containing approximately 2,257 sq. ft. of space.                                                         |   | 1992               |
|                                                                          |   |                                                                                                                                           |   |               |
| Elizabethtown Motorbank Office1275 South Market StreetElizabethtown, PA 17022 |   | Drive-up Bank Branch, brick on frame containing approximately 574 sq. ft. of space.                                                            |   | 2001               |
|                                                                          |   |                                                                                                                                           |   |               |
| Centerville Branch Office301 Centerville RoadLancaster, PA 17601              |   | Branch Bank, one-story masonry and brick building with metal trusses, containing approximately 3,575 sq. ft. of space.                         |   | 2008               |

----

| Office and Address                                                    |   | Description of Property                                                                                                                                                                                                                  |   | Original Lease Date |
|---------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|
| Manheim Branch Office701 Lancaster RoadManheim, PA 17545                        |   | Concrete block building containing 4,266 sq. ft. of space, of which, approximately 2,600 sq. ft. is used for banking purposes.                                                                                                                     |   | January 1995                  |
|                                                                            |   |                                                                                                                                                                                                                                               |   |                          |
| Manheim Township Branch Office38 E. Roseville RoadLancaster, PA 17601           |   | Branch Bank, one story brick and metal siding building containing approximately 2,000 sq. ft. of space.                                                                                                                                            |   | April 2003                    |
|                                                                            |   |                                                                                                                                                                                                                                               |   |                          |
| HACC Branch Office1625 Old Philadelphia PikeLancaster, PA 17602                 |   | Branch Bank, one story masonry and brick building with metal trusses, containing approximately 3,486 sq. ft. of space.                                                                                                                             |   | February 2005                 |
|                                                                            |   |                                                                                                                                                                                                                                               |   |                          |
| Ephrata Branch Office108 North Reading RoadEphrata, PA 17522                    |   | Branch Bank, one story masonry and brick building with metal trusses, containing approximately 1,300 sq. ft. of space.                                                                                                                             |   | April 2007                    |
|                                                                            |   |                                                                                                                                                                                                                                               |   |                          |
| Union National Professional Center570 Lausch Lane, Suite 300Lancaster, PA 17601 |   | Three story masonry, stone and brick over steel building with concrete floors, containing approximately 27,000 sq. ft. of office space, of which, approximately 9,000 sq. ft. is used for administrative purposes and the remainder is sub-leased. |   | February 2006                 |

----

| ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. |
|--------------|---------------------------------------------------------------------------------------------------------------------|

| (a) | Market Information and Dividends |
|-----|----------------------------------|

|           |   | 2010         |    |   | 2009          |   |
|----------------|--------|--------------|---------|--------|---------------|--------|
|           |   | FirstQuarter |    |   | SecondQuarter |   |   | Third Quarter |   |   | Fourth Quarter |   |   | FirstQuarter |   |   | SecondQuarter |   |   | Third Quarter |   |   | FourthQuarter |   |
|           |   |         |    |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| High           |   | $            | 4.60    |   |          | $      | 7.80 |   |   | $ | 8.20 |   |   | $ | 8.15 |   |   | $ | 5.00 |   |   | $ | 5.00 |   |   | $ | 6.10 |   |   | $ | 4.25 |   |
| Low            |   |         | 3.00    |   |          |   | 3.65 |   |   |   | 7.00 |   |   |   | 7.05 |   |   |   | 3.51 |   |   |   | 3.50 |   |   |   | 3.20 |   |   |   | 2.82 |   |
| Dividends Paid |   |         | – |   |          |   | – |   |   |   | – |   |   |   | – |   |   |   | – |   |   |   | – |   |   |   | – |   |   |   | – |   |

| (b)  | Purchases of Equity Securities by the Registrant and Affiliated Purchasers |
|-----------|----------------------------------------------------------------------------|

| Period                                |   | TotalNumber ofSharesPurchased |   |   | AveragePricePaid perShare |   |   | Total Numberof SharesPurchased asPart ofPubliclyAnnouncedPlans orPrograms* |   |   | MaximumNumber ofShares thatMay Yet BePurchasedUnder thePlans orPrograms* |   |
|---------------------------------------|--------|------------------------------------|--------|--------|--------------------------------|--------|--------|-----------------------------------------------------------------------------------------------------|--------|--------|--------------------------------------------------------------------------------------------------------|--------|
| October 1, 2010 to October 31, 2010   |   |                               | -      |   |                           |   | -      |                                                                                                |   |   | -                                                                                                      |   |   |   | 49,700 |   |
| November 1, 2010 to November 30, 2010 |   |                               | -      |   |                           |   | -      |                                                                                                |   |   | -                                                                                                      |   |   |   | 49,700 |   |
| December 1, 2010 to December 31, 2010 |   |                               | -      |   |                           |   | -      |                                                                                                |   |   | -                                                                                                      |   |   |   | 49,700 |   |
| Total                                 |   |                               | -      |   |                           |   | -      |                                                                                                |   |   | -                                                                                                      |   |   |   |   |   |

| * | This plan was suspended as a provision of the merger agreement between Union National and DFSC, an affiliate of Donegal Group, Inc. and Donegal Mutual Insurance Company (see Note 14-Proposed Merger to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K). |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (c)  | Recent Sales of Unregistered Securities |
|-----------|-----------------------------------------|

| (d)  | Securities Authorized for Issuance under Equity Compensation Plans |
|-----------|--------------------------------------------------------------------|

|                                                   |   | (A)                                                                                                                             |   |   | (B)                                                                                   |   |   | (C)                                                                                                                                                                                  |   |
|--------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------------------------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                   |   | Number of Securitiesto be Issued UponExercise ofOutstandingOptions,Warrants, and Rights |   |   | WeightedAverage ExercisePrice ofOutstandingOptions,Warrants, andRights |   |   | Number of SecuritiesRemaining Availablefor Future IssuanceUnder EquityCompensation PlansExcluding SecuritiesReflected in Column(A) |   |
| Equity Compensation Plans Approved by Shareholders(1)  |   |                                                                                                                            | 74,435 |   |                                                                                  | $      | 19.19  |                                                                                                                                                                                 |   |   | 0 |   |
| Equity Compensation Plans Not Approved by Shareholders |   |                                                                                                                            | 0      |   |                                                                                  |   | 0      |                                                                                                                                                                                 |   |   | 0 |   |
| Totals                                                 |   |                                                                                                                            | 74,435 |   |                                                                                  | $      | 19.19  |                                                                                                                                                                                 |   |   | 0 |   |

| (1) | Includes outstanding options issued under Union National Financial Corporation’s 1988 and 1997 Stock Incentive Plans, 1997 Stock Purchase Plan (which expired in 2003) and 1997 Independent Director Plan (expired).  These plans were suspended as a provision of the merger agreement between Union National and DFSC, an affiliate of Donegal Group, Inc. and Donegal Mutual Insurance Company (see Note 14-Proposed Merger to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K). |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (e)  | Stock Performance Graph |
|-----------|-------------------------|

----

| ITEM 7. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
|--------------|----------------------------------------------------------------------------------------|

----

| Issuer                                                   |   | Rating atPurchase |   | CurrentRating |   | AmortizedCost |      |   | Fair Value |   |      | % ofAmortizedCost toStockholders’Equity |   |
|----------------------------------------------------------|--------|------------------------|--------|---------------|--------|---------------|-----------|--------|-----------------|--------|-----------|---------------------------------------------------------|--------|
| Manheim Township PA School District                      |   | AAA                    |   | AA+           |   | $             | 5,693,000 |   |            | $      | 5,271,000 |                                                    |   |   | 19.97 | % |
| Elizabethtown Area PA School District                    |   | Aa3                    |   | Aa3           |   | $             | 4,576,000 |   |            | $      | 4,360,000 |                                                    |   |   | 16.05 | % |
| Mount Joy Township PA Authority                          |   | AA-                    |   | AA-           |   | $             | 3,430,000 |   |            | $      | 3,255,000 |                                                    |   |   | 12.03 | % |
| Hanover PA Boro                                          |   | AA-                    |   | AA-           |   | $             | 3,332,000 |   |            | $      | 3,023,000 |                                                    |   |   | 11.69 | % |
| Mount Joy PA Boro Water & Sewer  Authority |   | AAA                    |   | AA+           |   | $             | 2,930,000 |   |            | $      | 2,727,000 |                                                    |   |   | 10.28 | % |

----

|                                            |   | At December 31, |   |
|-------------------------------------------------|--------|---------------------------|--------|
|                                            |   | 2010                      |   |   | 2009 |   |   | 2008 |   |
| Obligations of State and Political Subdivisions |   | $                         | 23,410 |   |   | $ | 3,815 |   |   | $ | – |   |
| Obligations of U.S. Government Agencies         |   |                      | 7,502  |   |   | – |   |   |   | 3,396 |   |
| U.S. Agency Mortgage-Backed Securities          |   |                      | 4,694  |   |   |   | 53,394 |   |   |   | 56,250 |   |
| Private Issuer Mortgage-Backed Securities       |   | –                   |   |   |   | 2,638 |   |   |   | 3,219 |   |
| Corporate Debt Securities                       |   | –                   |   |   |   | 631 |   |   |   | 1,218 |   |
| Equity Securities                               |   |                      | 64     |   |   |   | 68 |   |   |   | 206 |   |
| Total                                           |   | $                         | 35,670 |   |   | $ | 60,546 |   |   | $ | 64,289 |   |

|                                                  |   | Within1 Year |    |   | 1-5Years |   |    | 5-10Years |   |   | After10Years |   |   | NoStatedMaturity |    |   | Total  |   |    | Yield  |   |
|-------------------------------------------------------|--------|-------------------|---------|--------|----------|--------|---------|-----------|--------|--------|--------------|--------|--------|------------------|---------|--------|--------|--------|---------|--------|--------|
| U.S. Agency Mortgage-Backed  Securities (1) |   | $                 | – |   |     | $      | – |      |   | $      | –      |   |   | $                | 4,694   |   |   | $      | – |   |   | $ | 4,694 |   |   |   | 4.12 | % |
| Obligations of State and Political Subdivisions       |   |              | – |   |     |   | – |      |   |   | 301          |   |   |             | 23,109  |   |   |   | – |   |   |   | 23,410 |   |   |   | 6.04 |   |
| Obligations of U.S. Government Agencies               |   |              | – |   |     |   | 3,497   |      |   |   | 4,005        |   |   |             | – |   |   |   | – |   |   |   | 7,502 |   |   |   | 1.41 |   |
| Equity Securities (2)                                 |   |              | – |   |     |   | – |      |   |   | –      |   |   |             | – |   |   |   | 64      |   |   |   | 64 |   |   |   | 1.35 |   |
| Total Securities                                      |   | $                 | – |   |     | $      | 3,497   |      |   | $      | 4,306        |   |   | $                | 27,803  |   |   | $      | 64      |   |   | $ | 35,670 |   |   |   | 4.81 | % |
|                                                  |   |              |    |   |     |   |    |      |   |   |         |   |   |             |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Yield                                                 |   |              | – | %      |     |   | 0.59    | %         |   |   | 2.34         | %      |   |             | 5.73    | %      |   |   | 1.35    | %      |   |   | 4.81 | % |   |   |   |   |

|                              |   | Year Ended December 31, 2010 |   |
|-----------------------------------|--------|--------------------------------------------------|--------|
|                              |   | AverageBalance                                   |   |   | Tax-EquivalentInterest andDividends |   |   | NetRealizedGain onSale |   |   | OTTICharge |   |   | TotalReturn |   |   | Yield |   |
| U.S. Agency and Treasury Holdings |   | $                                                | 36,093 |   |   | $ | 915 |   |   | $ | 502 |   |   | $ | – |   |   | $ | 1,417 |   |   |   | 3.93 | % |
| All Other Securities              |   |                                             | 12,064 |   |   |   | 621 |   |   |   | 467 |   |   |   | (1,664 | ) |   |   | (576 | ) |   |   | (4.77 | ) |
| Total                             |   | $                                                | 48,157 |   |   | $ | 1,536 |   |   | $ | 969 |   |   | $ | (1,664 | ) |   | $ | 841 |   |   |   | 1.75 | % |

|                              |   | Year Ended December 31, 2009 |   |
|-----------------------------------|--------|--------------------------------------------------|--------|
|                              |   | AverageBalance                                   |   |   | Tax-EquivalentInterest andDividends |   |   | NetRealizedGain onSale |   |   | OTTICharge |   |   | TotalReturn |   |   | Yield |   |
| U.S. Agency and Treasury Holdings |   | $                                                | 58,661 |   |   | $ | 1,551 |   |   | $ | 1,749 |   |   | $ | – |   |   | $ | 3,300 |   |   |   | 5.63 | % |
| All Other Securities              |   |                                             | 9,600  |   |   |   | 425 |   |   |   | 92 |   |   |   | (1,504 | ) |   |   | (987 | ) |   |   | (10.28 | ) |
| Total                             |   | $                                                | 68,261 |   |   | $ | 1,976 |   |   | $ | 1,841 |   |   | $ | (1,504 | ) |   | $ | 2,313 |   |   |   | 3.39 | % |

----

|                                        |   | December 31, |   |
|---------------------------------------------|--------|-------------------|--------|
|                                        |   | 2010              |   |   | 2009 |   |
| Market Value of Debt Securities             |   | $                 | 35,606 |   |   | $ | 60,478 |   |
| Market Value of Equity Securities           |   |              | 64     |   |   |   | 68 |   |
| Total Market Value of Investment Securities |   | $                 | 35,670 |   |   | $ | 60,546 |   |

----

----

|                                                    |   | December 31, |    |
|---------------------------------------------------------|--------|-------------------|---------|
|                                                    |   | 2010              |    |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
|                                                    |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial Loans - Real Estate Secured                  |   | $                 | 169,665 |   |   | $ | 177,697 |   |   | $ | 184,519 |   |   | $ | 183,460 |   |   | $ | 169,439 |   |
| Commercial Loans – Secured, Unsecured, and Leases |   |              | 23,226  |   |   |   | 25,009 |   |   |   | 25,694 |   |   |   | 24,773 |   |   |   | 23,929 |   |
| Commercial Loans – Other                          |   |              | 40,528  |   |   |   | 42,253 |   |   |   | 46,667 |   |   |   | 52,138 |   |   |   | 46,757 |   |
| Residential Mortgage Loans                              |   |              | 11,868  |   |   |   | 16,780 |   |   |   | 18,917 |   |   |   | 28,995 |   |   |   | 33,349 |   |
| Home Equity Installments and Lines of Credit            |   |              | 75,991  |   |   |   | 71,556 |   |   |   | 75,120 |   |   |   | 66,928 |   |   |   | 59,394 |   |
| Consumer Loans – Other                            |   |              | 5,016   |   |   |   | 5,979 |   |   |   | 7,363 |   |   |   | 8,043 |   |   |   | 8,245 |   |
|                                                    |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Loans (Net of Unearned Income)                    |   | $                 | 326,294 |   |   | $ | 339,274 |   |   | $ | 358,280 |   |   | $ | 364,337 |   |   | $ | 341,113 |   |

----

|                               |   | Years to Maturity * |   |
|------------------------------------|--------|------------------------------------|--------|
|                               |   | Within1 Year                  |   |   | 1-5Years |   |   | Over 5Years |   |   | Total |   |
| Commercial, Agricultural and Other |   | $                                  | 33,873 |   |   | $ | 38,480 |   |   | $ | 122,136 |   |   | $ | 194,489 |   |
| Construction and Land Development  |   |                               | 15,775 |   |   |   | 482 |   |   |   | 1,136 |   |   |   | 17,393 |   |
| Total                              |   | $                                  | 49,648 |   |   | $ | 38,962 |   |   | $ | 123,272 |   |   | $ | 211,882 |   |
|                               |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fixed Rate Loans                   |   | $                                  | 11,006 |   |   | $ | 27,186 |   |   | $ | 8,045 |   |   | $ | 46,237 |   |
| Variable Rate Loans                |   |                               | 38,642 |   |   |   | 11,776 |   |   |   | 115,227 |   |   |   | 165,645 |   |
| Total                              |   | $                                  | 49,648 |   |   | $ | 38,962 |   |   | $ | 123,272 |   |   | $ | 211,882 |   |

|   | * | Due to interest rate levels, economic conditions and other relevant factors, it is anticipated thatthere will be  loans repaid prior to their contractual maturity dates. |
|--------|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                      |   | Allowance Amount |   |   | PercentageMix of TotalLoans |   |
|-------------------------------------------|--------|-----------------------|--------|--------|---------------------------------------|--------|
| December 31, 2010:                        |   |                  |   |   |                                  |   |
| Commercial, Industrial and Agricultural   |   | $                     | 5,979  |   |                                  |   | 71 | % |
| Real Estate – Residential Mortgages |   |                  | 54     |   |                                  |   | 4 |   |
| Consumer                                  |   |                  | 468    |   |                                  |   | 25 |   |
| Unallocated                               |   |                  | 25     |   |                                  |   | – |   |
| Total Allowance for Credit Losses         |   | $                     | 6,526  |   |                                  |   | 100 | % |
|                                      |   |                  |   |   |                                  |   |   |   |
| December 31, 2009:                        |   |                  |   |   |                                  |   |   |   |
| Commercial, Industrial and Agricultural   |   | $                     | 5,397  |   |                                  |   | 72 | % |
| Real Estate – Residential Mortgages |   |                  | 22     |   |                                  |   | 5 |   |
| Consumer                                  |   |                  | 399    |   |                                  |   | 23 |   |
| Unallocated                               |   |                  | 40     |   |                                  |   | – |   |
| Total Allowance for Credit Losses         |   | $                     | 5,858  |   |                                  |   | 100 | % |
|                                      |   |                  |   |   |                                  |   |   |   |
| December 31, 2008:                        |   |                  |   |   |                                  |   |   |   |
| Commercial, Industrial and Agricultural   |   | $                     | 3,221  |   |                                  |   | 72 | % |
| Real Estate – Residential Mortgages |   |                  | 102    |   |                                  |   | 5 |   |
| Consumer                                  |   |                  | 991    |   |                                  |   | 23 |   |
| Unallocated                               |   |                  | 44     |   |                                  |   | – |   |
| Total Allowance for Credit Losses         |   | $                     | 4,358  |   |                                  |   | 100 | % |
|                                      |   |                  |   |   |                                  |   |   |   |
| December 31, 2007:                        |   |                  |   |   |                                  |   |   |   |
| Commercial, Industrial and Agricultural   |   | $                     | 2,928  |   |                                  |   | 60 | % |
| Real Estate – Residential Mortgages |   |                  | 375    |   |                                  |   | 38 |   |
| Consumer                                  |   |                  | 243    |   |                                  |   | 2 |   |
| Unallocated                               |   |                  | 129    |   |                                  |   | – |   |
| Total Allowance for Credit Losses         |   | $                     | 3,675  |   |                                  |   | 100 | % |
|                                      |   |                  |   |   |                                  |   |   |   |
| December 31, 2006:                        |   |                  |   |   |                                  |   |   |   |
| Commercial, Industrial and Agricultural   |   | $                     | 2,291  |   |                                  |   | 60 | % |
| Real Estate – Residential Mortgages |   |                  | 469    |   |                                  |   | 38 |   |
| Consumer                                  |   |                  | 92     |   |                                  |   | 2 |   |
| Unallocated                               |   |                  | 218    |   |                                  |   | – |   |
| Total Allowance for Credit Losses         |   | $                     | 3,070  |   |                                  |   | 100 | % |

----

|                                                |   | 2010   |    |   | 2009   |   |    | 2008   |   |   | 2007    |   |   | 2006   |    |
|-----------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|
| Allowance for Credit Losses, Beginning of Year      |   | $      | 5,858   |   |   | $      | 4,358   |   |   | $      | 3,675   |   |   | $      | 3,070   |   |   | $ | 2,675 |   |
|                                                |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Charge-Offs:                                        |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Real Estate                                         |   |   | (23     | )      |   |   | (11     | )      |   |   | – |   |   |   | – |   |   |   | (11 | ) |
| Consumer                                            |   |   | (267    | )      |   |   | (152    | )      |   |   | (155    | )      |   |   | (111    | ) |   |   | (43 | ) |
| Commercial, Industrial and Agricultural             |   |   | (2,403  | )      |   |   | (1,026  | )      |   |   | (209    | )      |   |   | (526    | ) |   |   | (285 | ) |
| Total Charge-Offs                                   |   |   | (2,693  | )      |   |   | (1,189  | )      |   |   | (364    | )      |   |   | (637    | ) |   |   | (339 | ) |
|                                                |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Recoveries:                                         |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Real Estate                                         |   |   | – |   |   |   | – |   |   |   | – |   |   |   | – |   |   |   | 5 |   |
| Consumer                                            |   |   | 7       |   |   |   | 10      |   |   |   | 14      |   |   |   | 3       |   |   |   | 14 |   |
| Commercial, Industrial and Agricultural             |   |   | 19      |   |   |   | 52      |   |   |   | 6       |   |   |   | 2       |   |   |   | 43 |   |
| Total Recoveries                                    |   |   | 26      |   |   |   | 62      |   |   |   | 20      |   |   |   | 5       |   |   |   | 62 |   |
| Net Loans Charged-Off                               |   |   | (2,667  | )      |   |   | (1,127  | )      |   |   | (344    | )      |   |   | (632    | ) |   |   | (277 | ) |
|                                                |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Addition to Provision for Credit Losses             |   |   | 3,335   |   |   |   | 2,627   |   |   |   | 1,027   |   |   |   | 1,237   |   |   |   | 672 |   |
|                                                |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Allowance for Credit Losses, End of Year            |   | $      | 6,526   |   |   | $      | 5,858   |   |   | $      | 4,358   |   |   | $      | 3,675   |   |   | $ | 3,070 |   |
|                                                |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Loans – Average                               |   | $      | 333,199 |   |   | $      | 350,307 |   |   | $      | 369,554 |   |   | $      | 357,795 |   |   | $ | 318,251 |   |
| Gross Loans – Actual                          |   | $      | 326,294 |   |   | $      | 339,274 |   |   | $      | 358,280 |   |   | $      | 364,337 |   |   | $ | 341,113 |   |
|                                                |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Ratio of Net Loans Charged Off to Average Loans     |   |   | 0.80    | %      |   |   | 0.32    | %      |   |   | 0.09    | %      |   |   | 0.18    | % |   |   | 0.09 | % |
|                                                |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Ratio of Allowance for Credit Losses to Gross Loans |   |   | 2.00    | %      |   |   | 1.73    | %      |   |   | 1.22    | %      |   |   | 1.01    | % |   |   | 0.90 | % |

----

|                                                      |   | December 31, |    |
|-----------------------------------------------------------|--------|-------------------|---------|
|                                                      |   | 2010              |    |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
| Non-accruing Loans                                        |   | $                 | 4,157   |   |   | $ | 8,034 |   |   | $ | 3,271 |   |   | $ | 2,919 |   |   | $ | 2,280 |   |
| Accruing Loans – 90 days or more past due           |   |              | 326     |   |   |   | 506 |   |   |   | 1,685 |   |   |   | 120 |   |   |   | 253 |   |
| Total Nonperforming Loans                                 |   |              | 4,483   |   |   |   | 8,540 |   |   |   | 4,956 |   |   |   | 3,039 |   |   |   | 2,533 |   |
| Other Real Estate Owned                                   |   |              | 8,438   |   |   |   | 5,383 |   |   | – |   |   | – |   |   | – |   |
| Repossessed Assets                                        |   |              | 99      |   |   |   | 436 |   |   |   | 479 |   |   |   | 156 |   |   |   | 358 |   |
| Total Nonperforming Assets                                |   | $                 | 13,020  |   |   | $ | 14,359 |   |   | $ | 5,435 |   |   | $ | 3,195 |   |   | $ | 2,891 |   |
|                                                      |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross Loans                                               |   | $                 | 326,294 |   |   | $ | 339,274 |   |   | $ | 358,280 |   |   | $ | 364,337 |   |   | $ | 341,113 |   |
|                                                      |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for Credit Losses                               |   | $                 | 6,526   |   |   | $ | 5,858 |   |   | $ | 4,358 |   |   | $ | 3,675 |   |   | $ | 3,070 |   |
| Nonperforming Loans as a % of Gross Loans                 |   |              | 1.4     | % |   |   | 2.5 | % |   |   | 1.4 | % |   |   | 0.8 | % |   |   | 0.7 | % |
| Nonperforming Assets as a % of Total Assets               |   |              | 2.9     | % |   |   | 2.9 | % |   |   | 1.1 | % |   |   | 0.6 | % |   |   | 0.6 | % |
| Allowance for Credit Losses as a % of Nonperforming Loans |   |              | 146     | % |   |   | 69 | % |   |   | 88 | % |   |   | 121 | % |   |   | 121 | % |

----

----

----

----

|                                          |   | 2010 Compared to 2009      |   |   | 2009 Compared to 2008      |   |
|-----------------------------------------------|--------|-------------------------------------------|--------|--------|-------------------------------------------|--------|
|                                          |   | Increase (Decrease) Due to |   |   | Increase (Decrease) Due to |   |
|                                          |   | Volume (a)                           |   |   | Rate (a)                             |   |   | Total |   |   | Volume (a) |   |   | Rate (a) |   |   | Total |   |
| Interest Earning Assets:                      |   |                                      |   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest Bearing Deposits in Other Banks      |   | $                                         | 37     |   |                                      | $      | 4 |   |   | $ | 41 |   |   | $ | 984 |   |   | $ | (920 | ) |   | $ | 64 |   |
| Interest Bearing Time Deposits in Other Banks |   |                                      | (64    | )      |                                      |   | 24 |   |   |   | (40 | ) |   |   | 286 |   |   |   | (179 | ) |   |   | 107 |   |
| Federal Funds Sold                            |   |                                      | (13    | )      |                                      |   | 2 |   |   |   | (11 | ) |   |   | (38 | ) |   |   | (158 | ) |   |   | (196 | ) |
| Investment Securities:                        |   |                                      |   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                       |   |                                      | (669   | )      |                                      |   | (61 | ) |   |   | (730 | ) |   |   | (256 | ) |   |   | (1,219 | ) |   |   | (1,475 | ) |
| Tax-Exempt (c)                                |   |                                      | 266    |   |                                      |   | 24 |   |   |   | 290 |   |   | – |   |   |   | 242 |   |   |   | 242 |   |
| Loans – Net (b), (c)                    |   |                                      | (1,062 | )      |                                      |   | (515 | ) |   |   | (1,577 | ) |   |   | (1,293 | ) |   |   | (1,770 | ) |   |   | (3,063 | ) |
| Restricted Investment in Bank Stocks          |   | –                                   |   |   |                                      | (4     | ) |   |   | (4 | ) |   |   | 12 |   |   |   | (86 | ) |   |   | (74 | ) |
| Total Earning Assets                          |   |                                      | (1,505 | )      |                                      |   | (526 | ) |   |   | (2,031 | ) |   |   | (305 | ) |   |   | (4,090 | ) |   |   | (4,395 | ) |
|                                          |   |                                      |   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-Bearing Liabilities:                 |   |                                      |   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-Bearing Demand Deposits              |   |                                      | (126   | )      |                                      |   | (557 | ) |   |   | (683 | ) |   |   | 100 |   |   |   | (630 | ) |   |   | (530 | ) |
| Savings Deposits                              |   |                                      | 3      |   |                                      |   | (1 | ) |   |   | 2 |   |   | – |   |   |   | (2 | ) |   |   | (2 | ) |
| Brokered Deposits                             |   |                                      | (239   | )      |                                      |   | 30 |   |   |   | (209 | ) |   |   | (204 | ) |   |   | (116 | ) |   |   | (320 | ) |
| Other Time Deposits                           |   |                                      | (105   | )      |                                      |   | (1,516 | ) |   |   | (1,621 | ) |   |   | 1,209 |   |   |   | (1,433 | ) |   |   | (224 | ) |
| Total Deposits                                |   |                                      | (467   | )      |                                      |   | (2,044 | ) |   |   | (2,511 | ) |   |   | 1,105 |   |   |   | (2,181 | ) |   |   | (1,076 | ) |
| Short-Term Borrowings                         |   | –                                   |   |   | –                                   |   |   | – |   |   |   | (210 | ) |   | – |   |   |   | (210 | ) |
| Long-Term Debt                                |   |                                      | (916   | )      |                                      |   | (37 | ) |   |   | (953 | ) |   |   | (741 | ) |   | – |   |   |   | (741 | ) |
| Junior Subordinated Debentures                |   | –                                   |   |   |                                      | (68    | ) |   |   | (68 | ) |   | – |   |   |   | (266 | ) |   |   | (266 | ) |
| Total Interest-Bearing Liabilities            |   |                                      | (1,383 | )      |                                      |   | (2,149 | ) |   |   | (3,532 | ) |   |   | 154 |   |   |   | (2,447 | ) |   |   | (2,293 | ) |
| Net Interest Income                           |   | $                                         | (122   | )      |                                      | $      | 1,623 |   |   | $ | 1,501 |   |   | $ | (459 | ) |   | $ | (1,643 | ) |   | $ | (2,102 | ) |

| (a) | The change in interest due to both volume and rate has been allocated individually to the change in volume and rate proportionally. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------|

| (b) | The balance of nonaccrual loans and related income recognized have been included for computational purposes. |
|-----|--------------------------------------------------------------------------------------------------------------|

| (c) | Tax-exempt income included in loans and securities has been adjusted to a taxable-equivalent basis using an incremental rate of 34%. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------|

----

|                                          |   | Years Ended December 31, |    |
|-----------------------------------------------|--------|-----------------------------------------|---------|
|                                          |   | 2010                                    |    |   | 2009 |   |   | 2008 |   |
|                                          |   | AverageBalance                          |    |   | Interest |   |   | Yield/Rate |   |   | AverageBalance |   |   | Interest |   |   | Yield/Rate |   |   | AverageBalance |   |   | Interest |   |   | Yield/Rate |   |
| Assets                                        |   |                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-Earning Cash in Other Banks          |   | $                                       | 41,761  |   |   | $ | 111 |   |   |   | 0.27 | % |   | $ | 27,233 |   |   | $ | 70 |   |   |   | 0.26 | % |   | $ | 165 |   |   | $ | 6 |   |   |   | 3.64 | % |
| Interest-Earning Time Deposits in Other Banks |   |                                    | 5,312   |   |   |   | 103 |   |   |   | 1.94 |   |   |   | 9,622 |   |   |   | 143 |   |   |   | 1.49 |   |   |   | 1,077 |   |   |   | 36 |   |   |   | 3.34 |   |
| Federal Funds Sold                            |   |                                    | 1,951   |   |   |   | 7 |   |   |   | 0.36 |   |   |   | 7,010 |   |   |   | 18 |   |   |   | 0.26 |   |   |   | 8,503 |   |   |   | 214 |   |   |   | 2.52 |   |
| Investment Securities: (a)                    |   |                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                       |   |                                    | 39,334  |   |   |   | 1,004 |   |   |   | 2.55 |   |   |   | 64,060 |   |   |   | 1,734 |   |   |   | 2.71 |   |   |   | 69,618 |   |   |   | 3,209 |   |   |   | 4.61 |   |
| Tax-Exempt (c)                                |   |                                    | 8,823   |   |   |   | 532 |   |   |   | 6.03 |   |   |   | 4,201 |   |   |   | 242 |   |   |   | 5.76 |   |   |   | – |   |   |   | – |   |   |   | – |   |
| Total Investment Securities                   |   |                                    | 48,157  |   |   |   | 1,536 |   |   |   | 3.19 |   |   |   | 68,261 |   |   |   | 1,976 |   |   |   | 2.89 |   |   |   | 69,618 |   |   |   | 3,209 |   |   |   | 4.61 |   |
| Loans (b), (c), (d)                           |   |                                    | 333,199 |   |   |   | 20,177 |   |   |   | 6.06 |   |   |   | 350,307 |   |   |   | 21,754 |   |   |   | 6.21 |   |   |   | 369,554 |   |   |   | 24,817 |   |   |   | 6.72 |   |
| Restricted Investment in Bank Stocks          |   |                                    | 3,699   |   |   |   | 36 |   |   |   | .97 |   |   |   | 3,705 |   |   |   | 40 |   |   |   | 1.08 |   |   |   | 3,365 |   |   |   | 114 |   |   |   | 3.39 |   |
| Total Earning Assets                          |   |                                    | 434,079 |   |   |   | 21,970 |   |   |   | 5.06 | % |   |   | 466,138 |   |   |   | 24,001 |   |   |   | 5.15 | % |   |   | 452,282 |   |   |   | 28,396 |   |   |   | 6.28 | % |
| Allowance for Credit Losses                   |   |                                    | (6,067  | ) |   |   |   |   |   |   |   |   |   |   | (4,529 | ) |   |   |   |   |   |   |   |   |   |   | (3,798 | ) |   |   |   |   |   |   |   |   |
| Non Interest-Earning Assets                   |   |                                    | 50,527  |   |   |   |   |   |   |   |   |   |   |   | 40,664 |   |   |   |   |   |   |   |   |   |   |   | 40,234 |   |   |   |   |   |   |   |   |   |
| Total Assets                                  |   | $                                       | 478,539 |   |   |   |   |   |   |   |   |   |   | $ | 502,273 |   |   |   |   |   |   |   |   |   |   | $ | 488,718 |   |   |   |   |   |   |   |   |   |
|                                          |   |                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities and Stockholders’ Equity    |   |                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-Bearing Liabilities:                 |   |                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-Bearing Demand Deposits              |   | $                                       | 121,973 |   |   |   | 775 |   |   |   | 0.64 | % |   | $ | 133,525 |   |   |   | 1,458 |   |   |   | 1.09 | % |   | $ | 127,128 |   |   |   | 1,988 |   |   |   | 1.56 | % |
| Savings Deposits                              |   |                                    | 24,894  |   |   |   | 66 |   |   |   | 0.27 |   |   |   | 23,607 |   |   |   | 64 |   |   |   | 0.27 |   |   |   | 23,589 |   |   |   | 66 |   |   |   | 0.28 |   |
| Brokered Deposits                             |   |                                    | 5,746   |   |   |   | 299 |   |   |   | 5.20 |   |   |   | 10,845 |   |   |   | 508 |   |   |   | 4.68 |   |   |   | 14,381 |   |   |   | 828 |   |   |   | 5.76 |   |
| Other Time Deposits                           |   |                                    | 190,030 |   |   |   | 4,743 |   |   |   | 2.50 |   |   |   | 193,218 |   |   |   | 6,364 |   |   |   | 3.29 |   |   |   | 163,254 |   |   |   | 6,588 |   |   |   | 4.04 |   |
| Total Deposits                                |   |                                    | 342,643 |   |   |   | 5,883 |   |   |   | 1.72 |   |   |   | 361,195 |   |   |   | 8,394 |   |   |   | 2.32 |   |   |   | 328,352 |   |   |   | 9,470 |   |   |   | 2.88 |   |
| Short-Term Borrowings                         |   |                                    | – |   |   |   | – |   |   |   | – |   |   |   | – |   |   |   | – |   |   |   | – |   |   |   | 9,090 |   |   |   | 210 |   |   |   | 2.31 |   |
| Long-Term Debt                                |   |                                    | 22,375  |   |   |   | 1,101 |   |   |   | 4.92 |   |   |   | 40,386 |   |   |   | 2,054 |   |   |   | 5.09 |   |   |   | 54,501 |   |   |   | 2,795 |   |   |   | 5.13 |   |
| Junior Subordinated Debentures                |   |                                    | 17,341  |   |   |   | 770 |   |   |   | 4.44 |   |   |   | 17,341 |   |   |   | 838 |   |   |   | 4.83 |   |   |   | 17,341 |   |   |   | 1,104 |   |   |   | 6.37 |   |
| Total Interest-Bearing Liabilities            |   |                                    | 382,359 |   |   |   | 7,754 |   |   |   | 2.03 | % |   |   | 418,922 |   |   |   | 11,286 |   |   |   | 2.69 | % |   |   | 409,284 |   |   |   | 13,579 |   |   |   | 3.32 | % |
|                                          |   |                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-Interest Bearing Liabilities:             |   |                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand Deposits                               |   |                                    | 62,516  |   |   |   |   |   |   |   |   |   |   |   | 48,310 |   |   |   |   |   |   |   |   |   |   |   | 46,342 |   |   |   |   |   |   |   |   |   |
| Other Liabilities                             |   |                                    | 1,923   |   |   |   |   |   |   |   |   |   |   |   | 3,439 |   |   |   |   |   |   |   |   |   |   |   | 3,045 |   |   |   |   |   |   |   |   |   |
| Stockholders’ Equity                    |   |                                    | 31,741  |   |   |   |   |   |   |   |   |   |   |   | 31,602 |   |   |   |   |   |   |   |   |   |   |   | 30,047 |   |   |   |   |   |   |   |   |   |
| Total Stockholder’s Equity              |   | $                                       | 478,539 |   |   |   |   |   |   |   |   |   |   | $ | 502,273 |   |   |   |   |   |   |   |   |   |   | $ | 488,718 |   |   |   |   |   |   |   |   |   |
|                                          |   |                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Interest Income / Spread                  |   |                                    |    |   |   | $ | 14,216 |   |   |   | 3.03 | %  |   |   |   |   |   | $ | 12,715 |   |   |   | 2.46 | %  |   |   |   |   |   | $ | 14,817 |   |   |   | 2.96 | % |
| Net Interest Margin                           |   |                                    |    |   |   |   |   |   |   |   | 3.27 | % |   |   |   |   |   |   |   |   |   |   | 2.73 | % |   |   |   |   |   |   |   |   |   |   | 3.28 | % |

| (a) | Balances reflect amortized historical cost for available-for-sale securities. The related average unrealized holding gain or loss on securities is included in other non interest-earning assets. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b) | Balances of nonaccrual loans and related income recognized have been included for computational purposes. |
|-----|-----------------------------------------------------------------------------------------------------------|

| (c) | Tax-exempt income included in loans and securities has been adjusted to a taxable-equivalent basis using an incremental rate of 34%. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------|

| (d) | Includes loan fees of $449,000 for the year ended December 31, 2010, $481,000 for the year ended December 31, 2009, and $798,000 for the year ended December 31, 2008. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                |   | Year Ended December 31, |    |   | Increase |   |
|---------------------------------------------------------------------|--------|----------------------------------------|---------|--------|----------|--------|
| Non-Interest Income                                            |   | 2010                                   |    |   | 2009     |   |   | (Decrease) |   |
| Service Charges on Deposit Accounts                                 |   | $                                      | 1,847   |   |     | $      | 2,158 |   |   | $ | (311 | ) |
| Other Service Charges, Commissions, Fees                            |   |                                   | 1,226   |   |     |   | 1,154 |   |   |   | 72 |   |
| Alternative Investment Sales Commissions                            |   |                                   | 750     |   |     |   | 662 |   |   |   | 88 |   |
| Income from Fiduciary Activities                                    |   |                                   | 160     |   |     |   | 180 |   |   |   | (20 | ) |
| Earnings from Bank-Owned Life Insurance                             |   |                                   | 401     |   |     |   | 431 |   |   |   | (30 | ) |
| Gain on Life Insurance Proceeds                                     |   |                                   | 115     |   |     |   | – |   |   |   | 115 |   |
| Other Income                                                        |   |                                   | 158     |   |     |   | 453 |   |   |   | (295 | ) |
| Net Gain on Sale of Investment Securities                           |   |                                   | 969     |   |     |   | 1,841 |   |   |   | (872 | ) |
|                                                                |   |                                   |    |   |     |   |   |   |   |   |   |   |
| Other-than-temporary Impairments (“OTTI”) of Securities |   |                                   | (1,664  | )      |     |   | (1,504 | ) |   |   | (160 | ) |
| Portion of OTTI Recognized in Other Comprehensive Loss              |   |                                   |    |   |     |   |   |   |   |   |   |   |
| Net OTTI Losses on Securities                                       |   |                                   | – |   |     |   | – |   |   |   | – |   |
| Total Non-Interest Income                                           |   |                                   | (1,664  | )      |     |   | (1,504 | ) |   |   | (160 | ) |
|                                                                |   | $                                      | 3,962   |   |     | $      | 5,375 |   |   | $ | (1,413 | ) |

----

|                                           |   | Year Ended December 31, |   |   | Increase |    |
|------------------------------------------------|--------|----------------------------------------|--------|--------|----------|---------|
| Non-Interest Expense                      |   | 2010                                   |   |   | 2009     |    |   | (Decrease) |   |
| Salaries, Wages, and Employee Benefits         |   | $                                      | 7,101  |   |     | $       | 7,033 |   |   | $ | 68 |   |
| Net Occupancy                                  |   |                                   | 1,847  |   |     |    | 1,724 |   |   |   | 123 |   |
| Data and ATM Processing                        |   |                                   | 1,700  |   |     |    | 1,681 |   |   |   | 19 |   |
| Professional Fees and Regulatory Assessments   |   |                                   | 944    |   |     |    | 1,160 |   |   |   | (216 | ) |
| Furniture and Equipment                        |   |                                   | 827    |   |     |    | 935 |   |   |   | (108 | ) |
| FDIC Insurance                                 |   |                                   | 935    |   |     |    | 1,128 |   |   |   | (193 | ) |
| Pennsylvania Shares Tax                        |   |                                   | 381    |   |     |    | 297 |   |   |   | 84 |   |
| Advertising and Marketing                      |   |                                   | 158    |   |     |    | 211 |   |   |   | (53 | ) |
| Supplies and Postage                           |   |                                   | 246    |   |     |    | 367 |   |   |   | (121 | ) |
| Loss on Sale / Write down of Foreclosed Assets |   |                                   | 227    |   |     | – |   |   |   | 227 |   |
| Merger and Acquisition Expenses                |   |                                   | 797    |   |     | – |   |   |   | 797 |   |
| Other Expense                                  |   |                                   | 2,491  |   |     |    | 2,201 |   |   |   | 290 |   |
| Total Non-Interest Expense                     |   | $                                      | 17,654 |   |     | $       | 16,737 |   |   | $ | 917 |   |

----

|   | (i) | Non-routine expenses for the year ended December 31, 2009, included $237,000 related to the FDIC’s special assessment on deposit-insured institutions, $536,000 of penalties on the prepayment of FHLB debt, and $1,504,000 of OTTI charges primarily related to private-issuer mortgage-backed securities and pooled trust-preferred debt securities that were downgraded to below-investment-grade.  The OTTI charges were more than offset by $1,841,000 of net realized gains on the sale of primarily U.S. Government guaranteed securities that had temporarily appreciated at certain periods during 2009. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Reduced earning asset yields in the low interest rate environment, while borrowing costs remained at higher fixed rates, resulted in a lower net interest margin in 2009 versus 2008.  The variable rate structure of many of the Union National’s loans reduced overall yield due to the persistent low market interest rates.  As a result, interest and fees on Loans declined by 12% when comparing the year ended December 31, 2009 to the same period in 2008.  A decrease in loans outstanding also contributed to the decline in interest income generated from loans.  Outstanding loans decreased by $19 million from December 31, 2008 to December 31, 2009 due to (i) reduced loan demand from creditworthy borrowers, and (ii) the impact of nearly $10 million of loan participations sold for capital and risk management purposes.  The lack of income from impaired and non-accruing investments, and reduced yields on re-invested proceeds from investment maturities and sales, contributed to lower investment interest income in 2009.  Union National continued to take measures to reduce its cost of funds, prepaying $17 million of higher-cost long-term debt with the Federal Home Loan Bank (“FHLB”) of Pittsburgh during 2009, as well as prepaying an additional $2.5 million subsequent to December 31, 2009.  The taxable-equivalent net interest margin percentage for 2009 was 2.73%, as compared to 3.28% for 2008.   |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | Nonperforming loans increased to 2.52% of total loans at December 31, 2009, as compared to 1.38% at December 31, 2008.  The increasing trend in nonperforming loans is attributable primarily to stressed cash flows among certain commercial borrowers due largely to the weak economy and real estate market.  Union National continues to closely monitor the loan portfolio and the adequacy of the loan loss reserve by regularly evaluating borrower financial performance and underlying collateral values.  Accordingly, a significant provision for credit losses of $2,627,000 was made for the year ended December 31, 2009, as compared to $1,027,000 for the year ended December 31, 2008.  With the higher provision exceeding net loan charge-offs of $1,127,000 for 2009, as compared to $344,000 in 2008, the allowance for credit losses increased to 1.73% of loans at December 31, 2009, as compared to 1.22% of loans at December 31, 2008. |
|--------|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                             |   | Year Ended December 31, |   |   | Increase |   |
|--------------------------------------------------|--------|----------------------------------------|--------|--------|----------|--------|
| Non-Interest Income                         |   | 2009                                   |   |   | 2008     |   |   | (Decrease) |   |
| Service Charges on Deposit Accounts              |   | $                                      | 2,158  |   |     | $      | 1,950 |   |   | $ | 208 |   |
| Other Service Charges, Commissions, Fees         |   |                                   | 1,154  |   |     |   | 1,091 |   |   |   | 63 |   |
| Alternative Investment Sales Commissions         |   |                                   | 662    |   |     |   | 814 |   |   |   | (152 | ) |
| Income from Fiduciary Activities                 |   |                                   | 180    |   |     |   | 309 |   |   |   | (129 | ) |
| Earnings from Bank-Owned Life Insurance          |   |                                   | 431    |   |     |   | 439 |   |   |   | (8 | ) |
| Mortgage Banking/Brokerage Activities            |   |                                   | 112    |   |     |   | 56 |   |   |   | 56 |   |
| Other Income                                     |   |                                   | 341    |   |     |   | 186 |   |   |   | 155 |   |
|                                             |   |                                   |   |   |     |   |   |   |   |   |   |   |
| Net Gain on Sale of Investment Securities        |   |                                   | 1,841  |   |     |   | 252 |   |   |   | 1,589 |   |
| Less: Impairment Charge on Investment Securities |   |                                   | (1,504 | )      |     |   | (1,290 | ) |   |   | (214 | ) |
| Net Investment Securities Gains (Losses)         |   |                                   | 337    |   |     |   | (1,038 | ) |   |   | 1,375 |   |
| Total Non-Interest Income                        |   | $                                      | 5,375  |   |     | $      | 3,807 |   |   | $ | 1,568 |   |

----

|                                         |   | Year Ended December 31, |   |   | Increase |   |
|----------------------------------------------|--------|----------------------------------------|--------|--------|----------|--------|
| Non-Interest Expense                    |   | 2009                                   |   |   | 2008     |   |   | (Decrease) |   |
| Salaries, Wages, and Employee Benefits       |   | $                                      | 7,033  |   |     | $      | 7,676 |   |   | $ | (643 | ) |
| Net Occupancy                                |   |                                   | 1,724  |   |     |   | 1,818 |   |   |   | (94 | ) |
| Data and ATM Processing                      |   |                                   | 1,681  |   |     |   | 1,641 |   |   |   | 40 |   |
| Professional Fees and Regulatory Assessments |   |                                   | 1,160  |   |     |   | 1,036 |   |   |   | 124 |   |
| Furniture and Equipment                      |   |                                   | 935    |   |     |   | 1,017 |   |   |   | (82 | ) |
| FDIC Insurance                               |   |                                   | 1,128  |   |     |   | 404 |   |   |   | 724 |   |
| Pennsylvania Shares Tax                      |   |                                   | 297    |   |     |   | 273 |   |   |   | 24 |   |
| Advertising and Marketing                    |   |                                   | 211    |   |     |   | 412 |   |   |   | (201 | ) |
| Supplies and Postage                         |   |                                   | 367    |   |     |   | 401 |   |   |   | (34 | ) |
| Other Expense                                |   |                                   | 2,201  |   |     |   | 2,440 |   |   |   | (239 | ) |
| Total Non-Interest Expense                   |   | $                                      | 16,737 |   |     | $      | 17,118 |   |   | $ | (381 | ) |

----

|   | · | A growing core retail deposit base; |
|--------|--------|-------------------------------------|

|   | · | Proceeds from the sale or maturity of investment securities; |
|--------|--------|--------------------------------------------------------------|

|   | · | Payments received on loans and mortgage-backed securities; and, |
|--------|--------|-----------------------------------------------------------------|

|   | · | Overnight correspondent bank borrowings credit lines, and borrowing capacity available from the Federal Reserve Bank. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------|

----

|                           |   | Less Than 1 Year |    |   | 1-3 Years |   |    | 4-5Years |   |   | Over 5 Years |   |   | Total  |    |
|--------------------------------|--------|---------------------------------|---------|--------|----------------|--------|---------|----------|--------|--------|------------------------|--------|--------|--------|---------|
| Time Deposits                  |   | $                               | 91,906  |   |           | $      | 70,081  |     |   | $      | 19,513                 |   |   | $      | 744     |   |   | $ | 182,244 |   |
| Long-Term Debt                 |   |                            | – |   |           |   | 10,834  |     |   |   | –                |   |   |   | – |   |   |   | 10,834 |   |
| Junior Subordinated Debentures |   |                            | – |   |           |   | – |     |   |   | –                |   |   |   | 17,341  |   |   |   | 17,341 |   |
| Operating Leases               |   |                            | 394     |   |           |   | 896     |     |   |   | 755                    |   |   |   | 2,525   |   |   |   | 4,570 |   |
| Total                          |   | $                               | 92,300  |   |           | $      | 81,811  |     |   | $      | 20,268                 |   |   | $      | 20,610  |   |   | $ | 214,989 |   |

----

| ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. |
|---------|----------------------------------------------|

|                                                                                                                                                                                                                                          |   | December 31, |    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|---------|
|                                                                                                                                                                                                                                          |   | 2010         |    |   | 2009 |   |
| Assets                                                                                                                                                                                                                                        |   |         |    |   |   |   |
| Cash and Due from Banks                                                                                                                                                                                                                       |   | $            | 7,676   |   |   | $ | 8,807 |   |
| Interest-Bearing Demand Deposits in Other Banks                                                                                                                                                                                               |   |         | 36,815  |   |   |   | 34,533 |   |
| Total Cash and Cash Equivalents                                                                                                                                                                                                               |   |         | 44,491  |   |   |   | 43,340 |   |
|                                                                                                                                                                                                                                          |   |         |    |   |   |   |   |   |
| Interest-Bearing Time Deposits in Other Banks                                                                                                                                                                                                 |   |         | 1,960   |   |   |   | 9,229 |   |
| Investment Securities Available for Sale                                                                                                                                                                                                      |   |         | 35,670  |   |   |   | 60,546 |   |
|                                                                                                                                                                                                                                          |   |         |    |   |   |   |   |   |
| Loans, Net of Unearned Income                                                                                                                                                                                                                 |   |         | 326,294 |   |   |   | 339,274 |   |
| Less:  Allowance for Credit Losses                                                                                                                                                                                                  |   |         | (6,526  | ) |   |   | (5,858 | ) |
| Net Loans                                                                                                                                                                                                                                     |   |         | 319,768 |   |   |   | 333,416 |   |
|                                                                                                                                                                                                                                          |   |         |    |   |   |   |   |   |
| Premises and Equipment, Net                                                                                                                                                                                                                   |   |         | 10,553  |   |   |   | 11,403 |   |
| Restricted Investment in Bank Stocks                                                                                                                                                                                                          |   |         | 3,562   |   |   |   | 3,727 |   |
| Bank-Owned Life Insurance                                                                                                                                                                                                                     |   |         | 11,776  |   |   |   | 11,539 |   |
| Other Real Estate Owned                                                                                                                                                                                                                       |   |         | 8,438   |   |   |   | 5,383 |   |
| Other Assets                                                                                                                                                                                                                                  |   |         | 11,312  |   |   |   | 11,061 |   |
| Total Assets                                                                                                                                                                                                                                  |   | $            | 447,530 |   |   | $ | 489,644 |   |
|                                                                                                                                                                                                                                          |   |         |    |   |   |   |   |   |
| Liabilities                                                                                                                                                                                                                                   |   |         |    |   |   |   |   |   |
| Deposits:                                                                                                                                                                                                                                     |   |         |    |   |   |   |   |   |
| Noninterest-Bearing                                                                                                                                                                                                                           |   | $            | 68,022  |   |   | $ | 54,331 |   |
| Interest-Bearing                                                                                                                                                                                                                              |   |         | 319,448 |   |   |   | 350,434 |   |
| Total Deposits                                                                                                                                                                                                                                |   |         | 387,470 |   |   |   | 404,765 |   |
|                                                                                                                                                                                                                                          |   |         |    |   |   |   |   |   |
| Long-Term Debt                                                                                                                                                                                                                                |   |         | 10,834  |   |   |   | 33,334 |   |
| Junior Subordinated Debentures                                                                                                                                                                                                                |   |         | 17,341  |   |   |   | 17,341 |   |
| Other Liabilities                                                                                                                                                                                                                             |   |         | 3,382   |   |   |   | 2,868 |   |
| Total Liabilities                                                                                                                                                                                                                             |   |         | 419,027 |   |   |   | 458,308 |   |
|                                                                                                                                                                                                                                          |   |         |    |   |   |   |   |   |
| Stockholders’ Equity                                                                                                                                                                                                                    |   |         |    |   |   |   |   |   |
|                                                                                                                                                                                                                                          |   |         |    |   |   |   |   |   |
| Preferred Stock (Series A), liquidation value $1,000 per share Shares authorized - 5,000; Issued and outstanding – 0 and 1,275 at December 31, 2010 and 2009, respectively                                                              |   |         | – |   |   |   | 1,275 |   |
| Common Stock, par value $0.25 per share Shares authorized - 20,000,000; Issued – 3,427,084 and 3,109,105 at December 31, 2010 and 2009, respectively; Outstanding - 3,058,895 and 2,740,916 at December 31, 2010 and 2009, respectively |   |         | 857     |   |   |   | 777 |   |
| Surplus                                                                                                                                                                                                                                       |   |         | 15,092  |   |   |   | 13,891 |   |
| Retained Earnings                                                                                                                                                                                                                             |   |         | 21,007  |   |   |   | 22,921 |   |
| Accumulated Other Comprehensive Loss                                                                                                                                                                                                          |   |         | (1,120  | ) |   |   | (195 | ) |
| Treasury Stock, at cost;  368,189 shares                                                                                                                                                                                            |   |         | (7,333  | ) |   |   | (7,333 | ) |
| Total Stockholders’ Equity                                                                                                                                                                                                              |   |         | 28,503  |   |   |   | 31,336 |   |
| Total Liabilities and Stockholders’ Equity                                                                                                                                                                                              |   | $            | 447,530 |   |   | $ | 489,644 |   |

----

|                                                                |   | Years Ended December 31, |    |
|---------------------------------------------------------------------|--------|-----------------------------------------|---------|
|                                                                |   | 2010                                    |    |   | 2009 |   |   | 2008 |   |
| Interest Income                                                     |   |                                    |    |   |   |   |   |   |   |
| Interest and Fees on Loans                                          |   | $                                       | 20,008  |   |   | $ | 21,593 |   |   | $ | 24,594 |   |
| Investment Securities:                                              |   |                                    |    |   |   |   |   |   |   |   |   |   |
| Taxable Interest                                                    |   |                                    | 1,004   |   |   |   | 1,734 |   |   |   | 3,209 |   |
| Tax-Exempt Interest                                                 |   |                                    | 351     |   |   |   | 160 |   |   |   | – |   |
| Dividends                                                           |   |                                    | 36      |   |   |   | 40 |   |   |   | 114 |   |
| Other                                                               |   |                                    | 221     |   |   |   | 231 |   |   |   | 256 |   |
| Total Interest Income                                               |   |                                    | 21,620  |   |   |   | 23,758 |   |   |   | 28,173 |   |
|                                                                |   |                                    |    |   |   |   |   |   |   |   |   |   |
| Interest Expense                                                    |   |                                    |    |   |   |   |   |   |   |   |   |   |
| Deposits                                                            |   |                                    | 5,883   |   |   |   | 8,394 |   |   |   | 9,470 |   |
| Long-Term Debt                                                      |   |                                    | 1,101   |   |   |   | 2,054 |   |   |   | 2,795 |   |
| Junior Subordinated Debentures                                      |   |                                    | 770     |   |   |   | 838 |   |   |   | 1,104 |   |
| Short-Term Borrowings                                               |   |                                    | – |   |   |   | – |   |   |   | 210 |   |
| Total Interest Expense                                              |   |                                    | 7,754   |   |   |   | 11,286 |   |   |   | 13,579 |   |
| Net Interest Income                                                 |   |                                    | 13,866  |   |   |   | 12,472 |   |   |   | 14,594 |   |
| Provision for Credit Losses                                         |   |                                    | 3,335   |   |   |   | 2,627 |   |   |   | 1,027 |   |
| Net Interest Income after Provision for Credit Losses               |   |                                    | 10,531  |   |   |   | 9,845 |   |   |   | 13,567 |   |
|                                                                |   |                                    |    |   |   |   |   |   |   |   |   |   |
| Non-Interest Income                                                 |   |                                    |    |   |   |   |   |   |   |   |   |   |
| Service Charges on Deposit Accounts                                 |   |                                    | 1,847   |   |   |   | 2,158 |   |   |   | 1,950 |   |
| Other Service Charges, Commissions, Fees                            |   |                                    | 1,226   |   |   |   | 1,154 |   |   |   | 1,091 |   |
| Alternative Investment Sales Commissions                            |   |                                    | 750     |   |   |   | 662 |   |   |   | 814 |   |
| Earnings from Bank-Owned Life Insurance                             |   |                                    | 401     |   |   |   | 431 |   |   |   | 439 |   |
| Income from Fiduciary Activities                                    |   |                                    | 160     |   |   |   | 180 |   |   |   | 309 |   |
| Gain on Life Insurance Proceeds                                     |   |                                    | 115     |   |   |   | – |   |   |   | – |   |
| Other Income                                                        |   |                                    | 158     |   |   |   | 453 |   |   |   | 242 |   |
| Net Gain on Sale of Investment Securities                           |   |                                    | 969     |   |   |   | 1,841 |   |   |   | 252 |   |
|                                                                |   |                                    |    |   |   |   |   |   |   |   |   |   |
| Other-Than-Temporary Impairments (“OTTI”) of Securities |   |                                    | (1,664  | ) |   |   | (1,504 | ) |   |   | (1,290 | ) |
| Portion of OTTI Recognized in Other Comprehensive Loss              |   |                                    | – |   |   |   | – |   |   |   | – |   |
| Net OTTI Losses on Securities                                       |   |                                    | (1,664  | ) |   |   | (1,504 | ) |   |   | (1,290 | ) |
| Total Non-Interest Income                                           |   |                                    | 3,962   |   |   |   | 5,375 |   |   |   | 3,807 |   |
|                                                                |   |                                    |    |   |   |   |   |   |   |   |   |   |
| Non-Interest Expense                                                |   |                                    |    |   |   |   |   |   |   |   |   |   |
| Salaries, Wages, and Employee Benefits                              |   |                                    | 7,101   |   |   |   | 7,033 |   |   |   | 7,676 |   |
| Net Occupancy                                                       |   |                                    | 1,847   |   |   |   | 1,724 |   |   |   | 1,818 |   |
| Data and ATM Processing                                             |   |                                    | 1,700   |   |   |   | 1,681 |   |   |   | 1,641 |   |
| Professional Fees and Regulatory Assessments                        |   |                                    | 944     |   |   |   | 1,160 |   |   |   | 1,036 |   |
| FDIC Insurance                                                      |   |                                    | 935     |   |   |   | 1,128 |   |   |   | 404 |   |
| Furniture and Equipment                                             |   |                                    | 827     |   |   |   | 935 |   |   |   | 1,017 |   |
| Pennsylvania Shares Tax                                             |   |                                    | 381     |   |   |   | 297 |   |   |   | 273 |   |
| Supplies and Postage                                                |   |                                    | 246     |   |   |   | 367 |   |   |   | 401 |   |
| Advertising and Marketing                                           |   |                                    | 158     |   |   |   | 211 |   |   |   | 412 |   |
| Merger and Acquisition Expense                                      |   |                                    | 797     |   |   |   | – |   |   |   | – |   |
| Losses on Sale/Write down of Other Real Estate Owned                |   |                                    | 227     |   |   |   | – |   |   |   | – |   |
| Other Expense                                                       |   |                                    | 2,491   |   |   |   | 2,201 |   |   |   | 2,440 |   |
| Total Non-Interest Expense                                          |   |                                    | 17,654  |   |   |   | 16,737 |   |   |   | 17,118 |   |
| (Loss) Income Before Benefit from Income Taxes                      |   |                                    | (3,161  | ) |   |   | (1,517 | ) |   |   | 256 |   |
| Benefit from Income Taxes                                           |   |                                    | (1,282  | ) |   |   | (802 | ) |   |   | (188 | ) |
| Net (Loss) Income                                                   |   |                                    | (1,879  | ) |   |   | (715 | ) |   |   | 444 |   |
| Preferred Stock Dividends                                           |   |                                    | 35      |   |   |   | – |   |   |   | – |   |
| Net (Loss) Income Available to Common Stockholders                  |   | $                                       | (1,914  | ) |   | $ | (715 | ) |   | $ | 444 |   |
|                                                                |   |                                    |    |   |   |   |   |   |   |   |   |   |
| (Loss) Earnings Per Common Share                                    |   |                                    |    |   |   |   |   |   |   |   |   |   |
| Basic and Diluted                                                   |   | $                                       | (0.67   | ) |   | $ | (0.26 | ) |   | $ | 0.17 |   |
| Cash Dividends Paid Per Common Share                                |   |                                    | – |   |   |   | – |   |   |   | – |   |

----

|                                                                                                                                                      |   | Shares ofCommonStockOutstanding |                 |   | PreferredStock |   |           | CommonStock |   |   |  Surplus  |   |   | RetainedEarnings |           |   | AccumulatedOtherComprehensive(Loss) Income |   |       | TreasuryStock |   |   | Total   |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|----------------------|--------|----------------|--------|----------------|-------------|--------|--------|----------------|--------|--------|------------------|----------------|--------|-------------------------------------------------|--------|------------|---------------|--------|--------|---------|--------|
| Balance at December 31, 2007                                                                                                                              |   |                                 | 2,546,549            |   |           |   | –        |        |   | $      | 741            |   |   | $                | 13,313         |   |                                            | $      | 23,063     |          |   | $      | 12      |   |   | $ | (8,329 | ) |   | $ | 28,800 |   |
|                                                                                                                                                      |   |                                 |                 |   |           |   |           |        |   |   |           |   |   |             |           |   |                                            |   |       |          |   |   |    |   |   |   |   |   |   |   |   |   |
| Comprehensive Income:                                                                                                                                     |   |                                 |                 |   |           |   |           |        |   |   |           |   |   |             |           |   |                                            |   |       |          |   |   |    |   |   |   |   |   |   |   |   |   |
| Net Income                                                                                                                                                |   |                                 | –              |   |           |   | –        |        |   |   | –        |   |   |             | –        |   |                                            |   | 444        |          |   |   | – |   |   |   | – |   |   |   | 444 |   |
| Unrealized Losses on Available for Sale Securities, Net of Tax                                                                                            |   |                                 |  –        |   |           |   | –        |        |   |   | –        |   |   |             | –        |   |                                            |   | –    |          |   |   | (661    | )      |   |   | – |   |   |   | (661 | ) |
| Reclassification Adjustment for Gains Included in Net Income, Net of Tax                                                                                  |   |                                 |  –        |   |           |   | –        |        |   |   | –        |   |   |             | –        |   |                                            |   | –    |          |   |   | (166    | )      |   |   | – |   |   |   | (166 | ) |
| Reclassification Adjustment for Impairment Charges on Securities, Net of Tax                                                                              |   |                                 |  –        |   |           |   | –        |        |   |   | –        |   |   |             | –        |   |                                            |   | –    |          |   |   | 851     |   |   |   | – |   |   |   | 851 |   |
| Total Comprehensive Income                                                                                                                                |   |                                 |                 |   |           |   |           |        |   |   |           |   |   |             |           |   |                                            |   |       |          |   |   |    |   |   |   |   |   |   |   | 468 |   |
| Issuance of Common Stock under:                                                                                                                           |   |                                 |                 |   |           |   |           |        |   |   |           |   |   |             |           |   |                                            |   |       |          |   |   |    |   |   |   |   |   |   |   |   |   |
| Private Placement Offering, Net of Costs                                                                                                                  |   |                                 | 172,132              |   |           |   | –        |        |   |   | 44             |   |   |             | 1,542          |   |                                            |   | –    |          |   |   | – |   |   |   | – |   |   |   | 1,586 |   |
| Dividend Reinvestment; Stock Purchase Plans                                                                                                               |   |                                 | 745                  |   |           |   | –        |        |   |   | –        |   |   |             | 8              |   |                                            |   | –    |          |   |   | – |   |   |   | – |   |   |   | 8 |   |
| Employee Plans                                                                                                                                            |   |                                 | 650                  |   |           |   | –        |        |   |   | –        |   |   |             | 5              |   |                                            |   | –    |          |   |   | – |   |   |   | – |   |   |   | 5 |   |
| Implementation of ASC Topic 715, “Split Dollar Life Insurance Arrangements”                                                              |   |                                 |  –        |   |           |   | –        |        |   |   | –        |   |   |             | –        |   |                                            |   | (73        | )             |   |   | – |   |   |   | – |   |   |   | (73 | ) |
|                                                                                                                                                      |   |                                 |                 |   |           |   |           |        |   |   |           |   |   |             |           |   |                                            |   |       |          |   |   |    |   |   |   |   |   |   |   |   |   |
| Balance at December 31, 2008                                                                                                                              |   |                                 | 2,720,076            |   |           |   | –        |        |   |   | 785            |   |   |             | 14,868         |   |                                            |   | 23,434     |          |   |   | 36      |   |   |   | (8,329 | ) |   |   | 30,794 |   |
|                                                                                                                                                      |   |                                 |                 |   |           |   |           |        |   |   |           |   |   |             |           |   |                                            |   |       |          |   |   |    |   |   |   |   |   |   |   |   |   |
| Comprehensive Loss:                                                                                                                                       |   |                                 |                 |   |           |   |           |        |   |   |           |   |   |             |           |   |                                            |   |       |          |   |   |    |   |   |   |   |   |   |   |   |   |
| Net Loss                                                                                                                                                  |   |                                 | –              |   |           |   | –        |        |   |   | –        |   |   |             | –        |   |                                            |   | (715       | )             |   |   | – |   |   |   | – |   |   |   | (715 | ) |
| Unrealized Gains on Available for Sale Securities, Net of Tax                                                                                             |   |                                 |  –        |   |           |   | –        |        |   |   | –        |   |   |             | –        |   |                                            |   | –    |          |   |   | 193     |   |   |   | – |   |   |   | 193 |   |
| Reclassification Adjustment for Cumulative Effect of ASC Topic 320, “Investments – Debt and Equity Securities” (net of $104 tax effect) |   |                                 |    – |   |           |   |   – |        |   |   |   – |   |   |             |   – |   |                                            |   |   202 |          |   |   | (202    | )      |   |   |   – |   |   |   |   – |   |
| Reclassification Adjustment for Gains Included in Net Loss, Net of Tax                                                                                    |   |                                 |  –        |   |           |   | –        |        |   |   | –        |   |   |             | –        |   |                                            |   | –    |          |   |   | (1,215  | )      |   |   | – |   |   |   | (1,215 | ) |
| Reclassification Adjustment for Impairment Charges on Securities, Net of Tax                                                                              |   |                                 |  –        |   |           |   | –        |        |   |   | –        |   |   |             | –        |   |                                            |   | –    |          |   |   | 993     |   |   |   | – |   |   |   | 993 |   |
| Total Comprehensive Loss                                                                                                                                  |   |                                 |                 |   |           |   |           |        |   |   |           |   |   |             |           |   |                                            |   |       |          |   |   |    |   |   |   |   |   |   |   | (744 | ) |
| Issuance of Preferred Stock, Net of Costs                                                                                                                 |   |                                 | –              |   |           |   | 1,275          |        |   |   | –        |   |   |             | (57            | )      |                                            |   | –    |          |   |   | – |   |   |   | – |   |   |   | 1,218 |   |
| Issuance of Common Stock under Dividend Reinvestment Plan                                                                                                 |   |                                 | 20,840               |   |           |   | –        |        |   |   | 5              |   |   |             | 63             |   |                                            |   | –    |          |   |   | – |   |   |   | – |   |   |   | 68 |   |
| Retirement of Treasury Stock (50,000 shares)                                                                                                              |   |                                 | –              |   |           |   | –        |        |   |   | (13            | )      |   |             | (983           | )      |                                            |   | –    |          |   |   | – |   |   |   | 996 |   |   |   | – |   |
|                                                                                                                                                      |   |                                 |                 |   |           |   |           |        |   |   |           |   |   |             |           |   |                                            |   |       |          |   |   |    |   |   |   |   |   |   |   |   |   |
| Balance at December 31, 2009                                                                                                                              |   |                                 | 2,740,916            |   |           |   | 1,275          |        |   |   | 777            |   |   |             | 13,891         |   |                                            |   | 22,921     |          |   |   | (195    | )      |   |   | (7,333 | ) |   |   | 31,336 |   |
|                                                                                                                                                      |   |                                 |                 |   |           |   |           |        |   |   |           |   |   |             |           |   |                                            |   |       |          |   |   |    |   |   |   |   |   |   |   |   |   |
| Comprehensive Loss:                                                                                                                                       |   |                                 |                 |   |           |   |           |        |   |   |           |   |   |             |           |   |                                            |   |       |          |   |   |    |   |   |   |   |   |   |   |   |   |
| Net Loss                                                                                                                                                  |   |                                 | –              |   |           |   | –        |        |   |   | –        |   |   |             | –        |   |                                            |   | (1,879     | )             |   |   | – |   |   |   | – |   |   |   | (1,879 | ) |
| Unrealized Loss on Available for Sale Securities, Net of Tax                                                                                              |   |                                 |  –        |   |           |   | –        |        |   |   | –        |   |   |             | –        |   |                                            |   | –    |          |   |   | (1,384  | )      |   |   | – |   |   |   | (1,384 | ) |
| Reclassification Adjustment for Gains Included in Net Loss, Net of Tax                                                                                    |   |                                 |  –        |   |           |   | –        |        |   |   | –        |   |   |             | –        |   |                                            |   | –    |          |   |   | (639    | )      |   |   | – |   |   |   | (639 | ) |
| Reclassification Adjustment for Impairment Charges on Securities, Net of Tax                                                                              |   |                                 |  –        |   |           |   | –        |        |   |   | –        |   |   |             | –        |   |                                            |   | –    |          |   |   | 1,098   |   |   |   | – |   |   |   | 1,098 |   |
| Total Comprehensive Loss                                                                                                                                  |   |                                 |                 |   |           |   |           |        |   |   |           |   |   |             |           |   |                                            |   |       |          |   |   |    |   |   |   |   |   |   |   | (2,804 | ) |
| Preferred Stock Converted to Common Stock                                                                                                                 |   |                                 | 316,500              |   |           |   | (1,275         | )           |   |   | 79             |   |   |             | 1,196          |   |                                            |   | –    |          |   |   | – |   |   |   | – |   |   |   | – |   |
| Issuance of Common Stock under Dividend Reinvestment Plan                                                                                                 |   |                                 | 1,479                |   |           |   | –        |        |   |   | 1              |   |   |             | 5              |   |                                            |   | –    |          |   |   | – |   |   |   | – |   |   |   | 6 |   |
| Dividends Paid to Preferred Stockholders                                                                                                                  |   |                                 | –              |   |           |   | –        |        |   |   | –        |   |   |             | –        |   |                                            |   | (35        | )             |   |   | – |   |   |   | – |   |   |   | (35 | ) |
|                                                                                                                                                      |   |                                 |                 |   |           |   |           |        |   |   |           |   |   |             |           |   |                                            |   |       |          |   |   |    |   |   |   |   |   |   |   |   |   |
| Balance at December 31, 2010                                                                                                                              |   |                                 | 3,058,895            |   |           |   | –        |        |   | $      | 857            |   |   | $                | 15,092         |   |                                            | $      | 21,007     |          |   | $      | (1,120  | )      |   | $ | (7,333 | ) |   | $ | 28,503 |   |

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|                                                                                               |   | Years Ended December 31, |     |
|----------------------------------------------------------------------------------------------------|--------|-----------------------------------------|----------|
|                                                                                               |   | 2010                                    |     |   | 2009 |   |   | 2008 |   |
| Cash Flows from Operating Activities                                                               |   |                                    |     |   |   |   |   |   |   |
| Net (Loss) Income                                                                                  |   | $                                       | (1,879   | ) |   | $ | (715 | ) |   | $ | 444 |   |
| Adjustments to Reconcile Net (Loss) Income to Net Cash Provided by (Used In) Operating Activities: |   |                                    |     |   |   |   |   |   |   |   |   |   |
| Depreciation and Amortization                                                                      |   |                                    | 1,020    |   |   |   | 1,171 |   |   |   | 1,313 |   |
| Provision for Credit Losses                                                                        |   |                                    | 3,335    |   |   |   | 2,627 |   |   |   | 1,027 |   |
| Net Amortization (Accretion) of Investment Securities Premiums (Discounts)                         |   |                                    | 393      |   |   |   | 559 |   |   |   | (51 | ) |
| Net Investment Securities Gains on Sales and OTTI Losses                                           |   |                                    | 695      |   |   |   | (337 | ) |   |   | 1,038 |   |
| Benefit from Deferred Income Taxes                                                                 |   |                                    | (398     | ) |   |   | (609 | ) |   |   | (1,472 | ) |
| Earnings from Bank-Owned Life Insurance                                                            |   |                                    | (401     | ) |   |   | (431 | ) |   |   | (439 | ) |
| Gain from Life Insurance Proceeds                                                                  |   |                                    | (115     | ) |   |   | – |   |   |   | – |   |
| Decrease in Accrued Interest Receivable                                                            |   |                                    | 108      |   |   |   | 55 |   |   |   | 450 |   |
| Decrease (Increase) in Other Assets                                                                |   |                                    | 486      |   |   |   | (4,201 | ) |   |   | 131 |   |
| Increase (Decrease) in Other Liabilities                                                           |   |                                    | 514      |   |   |   | (195 | ) |   |   | (666 | ) |
| Loss on Sale of Loans                                                                              |   |                                    | –  |   |   |   | – |   |   |   | 37 |   |
| Cash Payments Related to Restructuring Charge                                                      |   |                                    | –  |   |   |   | – |   |   |   | (223 | ) |
| Net Loss on Sale of OREO                                                                           |   |                                    | 227      |   |   |   | – |   |   |   | – |   |
| Net Cash Provided by (Used In) Operating Activities                                                |   |                                    | 3,985    |   |   |   | (2,076 | ) |   |   | 1,589 |   |
|                                                                                               |   |                                    |     |   |   |   |   |   |   |   |   |   |
| Cash Flows from Investing Activities                                                               |   |                                    |     |   |   |   |   |   |   |   |   |   |
| Proceeds from Sales of Available-for-Sale Securities                                               |   |                                    | 113,296  |   |   |   | 197,637 |   |   |   | 42,463 |   |
| Proceeds from Maturities and Principal Repayments on Available-for-Sale Securities                 |   |                                    | 42,127   |   |   |   | 39,152 |   |   |   | 38,254 |   |
| Purchases of Available-for-Sale Securities                                                         |   |                                    | (133,036 | ) |   |   | (233,313 | ) |   |   | (71,780 | ) |
| Net Maturities (Purchases)of Time Deposits in Other Banks                                          |   |                                    | 7,269    |   |   |   | (7,454 | ) |   |   | (1,775 | ) |
| Sale (Purchases)of Restricted Investments in Bank Stocks, net                                      |   |                                    | 165      |   |   |   | (24 | ) |   |   | (51 | ) |
| Net Decrease (Increase) in Loans                                                                   |   |                                    | 5,148    |   |   |   | 2,347 |   |   |   | (1,090 | ) |
| Proceeds from Sale of Loans                                                                        |   |                                    | –  |   |   |   | 9,800 |   |   |   | 6,766 |   |
| Proceeds from Bank-Owned Life Insurance                                                            |   |                                    | 279      |   |   |   | – |   |   |   | – |   |
| Purchases of Premises, Equipment and Software                                                      |   |                                    | (141     | ) |   |   | (389 | ) |   |   | (4,175 | ) |
| Proceeds from Sale of Other Real Estate Owned                                                      |   |                                    | 1,883    |   |   |   | 349 |   |   |   | – |   |
| Net Cash Provided by Investing Activities                                                          |   |                                    | 36,990   |   |   |   | 8,105 |   |   |   | 8,612 |   |
|                                                                                               |   |                                    |     |   |   |   |   |   |   |   |   |   |
| Cash Flows from Financing Activities                                                               |   |                                    |     |   |   |   |   |   |   |   |   |   |
| Net (Decrease) Increase in Demand Deposits and Savings Accounts                                    |   |                                    | (7,230   | ) |   |   | 22,733 |   |   |   | (11,097 | ) |
| Net (Decrease) Increase in Time Deposits                                                           |   |                                    | (10,065  | ) |   |   | (1,545 | ) |   |   | 18,363 |   |
| Net Decrease in Short-Term Borrowings                                                              |   |                                    | –  |   |   |   | – |   |   |   | (6,629 | ) |
| Payments on Long-Term Debt                                                                         |   |                                    | (22,500  | ) |   |   | (17,000 | ) |   |   | (18,482 | ) |
| Issuance of Common Stock, Net of Costs                                                             |   |                                    | 6        |   |   |   | 68 |   |   |   | 1,599 |   |
| Issuance of Preferred Stock, Net of Costs                                                          |   |                                    | –  |   |   |   | 1,218 |   |   |   | – |   |
| Cash Dividends Paid to Preferred Stockholders                                                      |   |                                    | (35      | ) |   |   | – |   |   |   | – |   |
| Net Cash (Used In) Provided by Financing Activities                                                |   |                                    | (39,824  | ) |   |   | 5,474 |   |   |   | (16,246 | ) |
| Net Increase (Decrease) in Cash and Cash Equivalents                                               |   |                                    | 1,151    |   |   |   | 11,503 |   |   |   | (6,045 | ) |
| Cash and Cash Equivalents at Beginning of Period                                                   |   |                                    | 43,340   |   |   |   | 31,837 |   |   |   | 37,882 |   |
| Cash and Cash Equivalents at End of Period                                                         |   | $                                       | 44,491   |   |   | $ | 43,340 |   |   | $ | 31,837 |   |
|                                                                                               |   |                                    |     |   |   |   |   |   |   |   |   |   |
| Supplemental Disclosures of Cash Flow Information                                                  |   |                                    |     |   |   |   |   |   |   |   |   |   |
| Interest Paid                                                                                      |   | $                                       | 7,934    |   |   | $ | 11,771 |   |   | $ | 14,247 |   |
| Income Tax Paid                                                                                    |   |                                    | –  |   |   |   | 750 |   |   |   | 525 |   |
|                                                                                               |   |                                    |     |   |   |   |   |   |   |   |   |   |
| Supplemental Schedule of Noncash Activities                                                        |   |                                    |     |   |   |   |   |   |   |   |   |   |
| Transfers from Loans to Other Real Estate Owned                                                    |   | $                                       | 5,165    |   |   | $ | 5,732 |   |   | $ | – |   |
| Conversion of Preferred Stock to Common Stock                                                      |   | $                                       | 1,196    |   |   | $ | – |   |   | $ | – |   |
| Retirement of Treasury Stock (50,000 shares in 2009)                                               |   | $                                       | –  |   |   | $ | 996 |   |   | $ | – |   |

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| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
|--------------------------------------------|

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| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

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| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

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| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
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| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

| 1. | Lending policies and procedures, including underwriting standards and historical-based loss/collection, charge-off, and recovery practices. |
|----|---------------------------------------------------------------------------------------------------------------------------------------------|

| 2. | National, regional, and local economic and business conditions as well as the condition of various market segments, including the value of underlying collateral for collateral dependent loans. |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3. | Nature and volume of the portfolio and terms of loans. |
|----|--------------------------------------------------------|

| 4. | Experience, ability, and depth of lending management and staff. |
|----|-----------------------------------------------------------------|

| 5. | Volume and severity of past due, classified and nonaccrual loans as well as trends and other loan modifications. |
|----|------------------------------------------------------------------------------------------------------------------|

| 6. | Quality of Union National’s loan review system, and the degree of oversight by Union National’s Board of Directors. |
|----|---------------------------------------------------------------------------------------------------------------------------------|

| 7. | Existence and effect of any concentrations of credit and changes in the level of such concentrations. |
|----|-------------------------------------------------------------------------------------------------------|

| 8. | Effect of external factors, such as competition and legal and regulatory requirements. |
|----|----------------------------------------------------------------------------------------|

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| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

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| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
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| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
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| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
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|                                                 |   | Years Ended December 31, |    |
|------------------------------------------------------|--------|-----------------------------------------|---------|
|                                                 |   | 2010                                    |    |   | 2009 |   |   | 2008 |   |
|                                                 |   |                                    |    |   |   |   |   |   |   |
| Net (Loss) Income available to common shareholders   |   | $                                       | (1,914  | ) |   | $ | (715 | ) |   | $ | 444 |   |
| Weighted-average common shares outstanding           |   |                                    | 2,875   |   |   |   | 2,730 |   |   |   | 2,643 |   |
| Basic (Loss) Earnings Per Common Share               |   | $                                       | (0.67   | ) |   | $ | (0.26 | ) |   | $ | 0.17 |   |
|                                                 |   |                                    |    |   |   |   |   |   |   |   |   |   |
| Weighted-average common shares outstanding           |   |                                    | 2,875   |   |   |   | 2,730 |   |   |   | 2,643 |   |
| Effect of Dilutive Securities (1):                   |   |                                    |    |   |   |   |   |   |   |   |   |   |
| Convertible preferred stock                          |   |                                    | – |   |   |   | – |   |   |   | – |   |
| Stock options                                        |   |                                    | – |   |   |   | – |   |   |   | – |   |
| Total weighted-average common shares and equivalents |   |                                    | 2,875   |   |   |   | 2,730 |   |   |   | 2,643 |   |
| Diluted (Loss) Earnings Per Common Share             |   | $                                       | (0.67   | ) |   | $ | (0.26 | ) |   | $ | 0.17 |   |

|   | (1) | Had Union National not been in a loss position for the year ended December 31, 2010, the calculation of diluted loss per common   share would have included an additional 186,000 weighted-average common shares outstanding for convertible preferred stock that was issued beginning in September 2009.  Had Union National not been in a loss position for the year ended December 31, 2009, the calculation of diluted loss per common share would have included an additional 64,000 weighted-average common shares.  This would reflect the potential dilution that could occur for each period if all of preferred stock shares were converted to common stock shares. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

| · | A reporting entity to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers; and |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | In the reconciliation for fair value measurements using significant unobservable inputs, a reporting entity should present separately information about purchases, sales, issuances, and settlements. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | For purposes of reporting fair value measurement for each class of assets and liabilities, a reporting entity needs to use judgment in determining the appropriate classes of assets and liabilities; and |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | A reporting entity should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
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|                                                           |   | 2010   |    |   | 2009                         |   |    | 2008   |   |
|----------------------------------------------------------------|--------|--------|---------|--------|------------------------------|--------|---------|--------|--------|
|                                                           |   | Shares |    |   | WeightedAverageExercisePrice |   |    | Shares |   |   | WeightedAverageExercisePrice |   |   | Shares |   |   | WeightedAverageExercisePrice |   |
| Beginning of Year                                              |   |   | 78,674  |   |                         | $      | 18.83   |   |   |   | 93,511 |   |   | $ | 18.82 |   |   |   | 124,439 |   |   | $ | 18.32 |   |
| Granted                                                        |   |   | – |   |                         |   | – |   |   |   | – |   |   |   | – |   |   |   | – |   |   |   | – |   |
| Exercised                                                      |   |   | – |   |                         |   | – |   |   |   | – |   |   |   | – |   |   |   | (650 | ) |   |   | 8.70 |   |
| Forfeited                                                      |   |   | – |   |                         |   | – |   |   |   | (2,710 | ) |   |   | 19.77 |   |   |   | (20,886 | ) |   |   | 18.06 |   |
| Expired                                                        |   |   | (4,239  | )      |                         |   | 12.60   |   |   |   | (12,127 | ) |   |   | 18.49 |   |   |   | (9,392 | ) |   |   | 14.44 |   |
| End of Year                                                    |   |   | 74,435  |   |                         | $      | 19.19   |   |   |   | 78,674 |   |   | $ | 18.83 |   |   |   | 93,511 |   |   | $ | 18.82 |   |
|                                                           |   |   |    |   |                         |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted-average fair value of options granted during the year |   |   |    |   |                         | $      | – |   |   |   |   |   |   | $ | – |   |   |   |   |   |   | $ | – |   |

|                                          |   |               |   |   | Weighted-Average    |
|-----------------------------------------------|--------|--------------------|--------|--------|---------------------|
|  Range of Exercise Prices |   | OptionsOutstanding |   |   | Exercise Price |   | RemainingContractual Life |
| $11.52 – $13.08                         |   |               | 8,534  |   |                | $ | 12.88 |   | 0.84 years |
| $13.09 – $16.10                         |   |               | 6,909  |   |                |   | 15.86 |   | 1.84 years |
| $16.11 – $18.49                         |   |               | 2,314  |   |                |   | 17.89 |   | 2.33 years |
| $18.50 – $20.81                         |   |               | 23,325 |   |                |   | 19.00 |   | 5.02 years |
| $20.82 – $22.14                         |   |               | 33,353 |   |                |   | 21.71 |   | 3.85 years |
| Total                                         |   |               | 74,435 |   |                | $ | 19.19 |   | 3.6 years |

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| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

|                                            |   | At December 31, 2010 |   |
|-------------------------------------------------|--------|-------------------------------------|--------|
|                                            |   |                                |   |   | Gross |   |   | Gross |   |   |   |   |
|                                            |   | Amortized                           |   |   | Unrealized |   |   | Unrealized |   |   | Fair |   |
|                                            |   | Cost                                |   |   | Gains |   |   | Losses |   |   | Value |   |
| U.S. Agency Mortgage-Backed Securities          |   | $                                   | 4,723  |   |   | $ | – |   |   | $ | (29 | ) |   | $ | 4,694 |   |
| Obligations of State and Political Subdivisions |   |                                | 25,070 |   |   |   | – |   |   |   | (1,660 | ) |   |   | 23,410 |   |
| Obligations of U.S. Government Agencies         |   |                                | 7,504  |   |   |   | 5 |   |   |   | (7 | ) |   |   | 7,502 |   |
| Equity Securities                               |   |                                | 70     |   |   |   | 7 |   |   |   | (13 | ) |   |   | 64 |   |
| Total Investment Securities                     |   | $                                   | 37,367 |   |   | $ | 12 |   |   | $ | (1,709 | ) |   | $ | 35,670 |   |

|                                            |   | At December 31, 2009 |   |
|-------------------------------------------------|--------|-------------------------------------|--------|
|                                            |   |                                |   |   | Gross |   |   | Gross |   |   |   |   |
|                                            |   | Amortized                           |   |   | Unrealized |   |   | Unrealized |   |   | Fair |   |
|                                            |   | Cost                                |   |   | Gains |   |   | Losses |   |   | Value |   |
| U.S. Agency Mortgage-Backed Securities          |   | $                                   | 53,752 |   |   | $ | 26 |   |   | $ | (384 | ) |   | $ | 53,394 |   |
| Private Issuer Mortgage-Backed Securities       |   |                                | 2,468  |   |   |   | 170 |   |   |   | – |   |   |   | 2,638 |   |
| Obligations of State and Political Subdivisions |   |                                | 4,016  |   |   |   | – |   |   |   | (201 | ) |   |   | 3,815 |   |
| Corporate Securities                            |   |                                | 535    |   |   |   | 96 |   |   |   | – |   |   |   | 631 |   |
| Equity Securities                               |   |                                | 71     |   |   |   | 8 |   |   |   | (11 | ) |   |   | 68 |   |
| Total Investment Securities                     |   | $                                   | 60,842 |   |   | $ | 300 |   |   | $ | (596 | ) |   | $ | 60,546 |   |

----

| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

|                                                                                         |   | December 31, 2010 |    |
|----------------------------------------------------------------------------------------------|--------|-----------------------------|---------|
|                                                                                         |   | AmortizedCost               |    |   | Fair Value |   |
| Obligations of U.S. Government Agencies and Obligations of State and Political Subdivisions: |   |                        |    |   |   |   |
| Due in One Year or Less                                                                      |   | $                           | – |   |   | $ | – |   |
| Due After One Year Through Five Years                                                        |   |                        | 3,504   |   |   |   | 3,497 |   |
| Due After Five Years Through Ten Years                                                       |   |                        | 4,307   |   |   |   | 4,306 |   |
| Due After Ten Years                                                                          |   |                        | 24,763  |   |   |   | 23,109 |   |
|                                                                                         |   |                        | 32,574  |   |   |   | 30,912 |   |
|                                                                                         |   |                        |    |   |   |   |   |   |
| U.S. Agency Mortgage-Backed Securities                                                       |   |                        | 4,723   |   |   |   | 4,694 |   |
| Equity Securities                                                                            |   |                        | 70      |   |   |   | 64 |   |
| Total Investment Securities                                                                  |   | $                           | 37,367  |   |   | $ | 35,670 |   |

|                                                                      |   | December 31, 2009 |    |
|---------------------------------------------------------------------------|--------|-----------------------------|---------|
|                                                                      |   | AmortizedCost               |    |   | Fair Value |   |
| Obligations of State and Political Subdivisions and Corporate Securities: |   |                        |    |   |   |   |
| Due in One Year or Less                                                   |   | $                           | – |   |   | $ | – |   |
| Due After One Year Through Five Years                                     |   |                        | – |   |   |   | – |   |
| Due After Five Years Through Ten Years                                    |   |                        | – |   |   |   | – |   |
| Due After Ten Years                                                       |   |                        | 4,551   |   |   |   | 4,446 |   |
|                                                                      |   |                        | 4,551   |   |   |   | 4,446 |   |
|                                                                      |   |                        |    |   |   |   |   |   |
| U.S. Agency Mortgage-Backed Securities                                    |   |                        | 53,752  |   |   |   | 53,394 |   |
| Private Issuer Mortgage-Backed Securities                                 |   |                        | 2,468   |   |   |   | 2,638 |   |
| Equity Securities                                                         |   |                        | 71      |   |   |   | 68 |   |
| Total Investment Securities                                               |   | $                           | 60,842  |   |   | $ | 60,546 |   |

----

| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

|                                              |   | At December 31, 2010 |    |
|---------------------------------------------------|--------|-------------------------------------|---------|
|                                              |   | Less than 12 Months  |    |   | 12 Months or More |   |   | Total |   |
|                                              |   | FairValue                           |    |   | UnrealizedLosses |   |   | FairValue |   |   | UnrealizedLosses |   |   | FairValue |   |   | UnrealizedLosses |   |
| U.S. Agency Mortgage-Backed Securities            |   | $                                   | 4,694   |   |   | $ | (29 | ) |   | $ | – |   |   | $ | – |   |   | $ | 4,694 |   |   | $ | (29 | ) |
| Obligations of State & Political Subdivisions |   |                                | 23,410  |   |   |   | (1,660 | ) |   |   | – |   |   |   | – |   |   |   | 23,410 |   |   |   | (1,660 | ) |
| Obligations of U.S. Government Agencies           |   |                                | 2,495   |   |   |   | (7 | ) |   |   | – |   |   |   | – |   |   |   | 2,495 |   |   |   | (7 | ) |
| Equity Securities                                 |   |                                | – |   |   |   | – |   |   |   | 16 |   |   |   | (13 | ) |   |   | 16 |   |   |   | (13 | ) |
| Temporarily Impaired Securities                   |   | $                                   | 30,599  |   |   | $ | (1,696 | ) |   | $ | 16 |   |   | $ | (13 | ) |   | $ | 30,615 |   |   | $ | (1,709 | ) |

|                                              |   | At December 31, 2009 |    |
|---------------------------------------------------|--------|-------------------------------------|---------|
|                                              |   | Less than 12 Months  |    |   | 12 Months or More |   |   | Total |   |
|                                              |   | FairValue                           |    |   | UnrealizedLosses |   |   | FairValue |   |   | UnrealizedLosses |   |   | FairValue |   |   | UnrealizedLosses |   |
| U.S. Agency Mortgage-Backed Securities            |   | $                                   | 41,565  |   |   | $ | (384 | ) |   | $ | – |   |   | $ | – |   |   | $ | 41,565 |   |   | $ | (384 | ) |
| Obligations of State & Political Subdivisions |   |                                | 3,815   |   |   |   | (201 | ) |   |   | – |   |   |   | – |   |   |   | 3,815 |   |   |   | (201 | ) |
| Equity Securities                                 |   |                                | – |   |   |   | – |   |   |   | 18 |   |   |   | (11 | ) |   |   | 18 |   |   |   | (11 | ) |
| Temporarily Impaired Securities                   |   | $                                   | 45,380  |   |   | $ | (585 | ) |   | $ | 18 |   |   | $ | (11 | ) |   | $ | 45,398 |   |   | $ | (596 | ) |

----

| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

|                                            |   | Year Ended December 31, 2010 |   |
|-------------------------------------------------|--------|--------------------------------------------------|--------|
|                                            |   | Gross Realized Gains                   |   |   | Gross RealizedLosses |   |   | Other-than-temporaryImpairmentLosses |   |   | Net RealizedGains (Losses) |   |
| U.S. Agency Mortgage-Backed Securities          |   | $                                                | 452    |   |   | $ | – |   |   | $ | – |   |   | $ | 452 |   |
| Private Issuer Mortgage-Backed Securities       |   |                                             | 4      |   |   |   | – |   |   |   | (1,555 | ) |   |   | (1,551 | ) |
| Obligations of State and Political Subdivisions |   |                                             | 456    |   |   |   | – |   |   |   | – |   |   |   | 456 |   |
| Obligations of U.S. Government Agencies         |   |                                             | 50     |   |   |   | – |   |   |   | – |   |   |   | 50 |   |
| Corporate Securities                            |   |                                             | 5      |   |   |   | – |   |   |   | (109 | ) |   |   | (104 | ) |
| Equity Securities                               |   |                                             | 2      |   |   |   | – |   |   |   | – |   |   |   | 2 |   |
| Total                                           |   | $                                                | 969    |   |   | $ | – |   |   | $ | (1,664 | ) |   | $ | (695 | ) |

|                                            |   | Year Ended December 31, 2009 |    |
|-------------------------------------------------|--------|--------------------------------------------------|---------|
|                                            |   | Gross Realized Gains                   |    |   | Gross RealizedLosses |   |   | Other-than-TemporaryImpairmentLosses |   |   |  Net RealizedGains (Losses) |   |
| U.S. Agency Mortgage-Backed Securities          |   | $                                                | 1,685   |   |   | $ | (71 | ) |   | $ | – |   |   | $ | 1,614 |   |
| Private Issuer Mortgage-Backed Securities       |   |                                             | – |   |   |   | – |   |   |   | (645 | ) |   |   | (645 | ) |
| Obligations of State and Political Subdivisions |   |                                             | 134     |   |   |   | (4 | ) |   |   | – |   |   |   | 130 |   |
| Obligations of U.S. Government Agencies         |   |                                             | 140     |   |   |   | (24 | ) |   |   | – |   |   |   | 116 |   |
| Corporate Securities                            |   |                                             | – |   |   |   | – |   |   |   | (859 | ) |   |   | (859 | ) |
| U.S. Treasuries                                 |   |                                             | 19      |   |   |   | – |   |   |   | – |   |   |   | 19 |   |
| Equity Securities                               |   |                                             | 17      |   |   |   | (55 | ) |   |   | – |   |   |   | (38 | ) |
| Total                                           |   | $                                                | 1,995   |   |   | $ | (154 | ) |   | $ | (1,504 | ) |   | $ | 337 |   |

|                                      |   | Year Ended December 31, 2008 |   |
|-------------------------------------------|--------|--------------------------------------------------|--------|
|                                      |   | Gross Realized Gains                   |   |   | Gross RealizedLosses |   |   | Other-than-TemporaryImpairmentLosses |   |   |  Net Gains(Losses) |   |
| U.S. Agency Mortgage-Backed Securities    |   | $                                                | 159    |   |   | $ | (50 | ) |   | $ | – |   |   | $ | 109 |   |
| Private Issuer Mortgage-Backed Securities |   |                                             | 1      |   |   |   | – |   |   |   | (852 | ) |   |   | (851 | ) |
| Obligations of U.S. Government Agencies   |   |                                             | 160    |   |   |   | (13 | ) |   |   | – |   |   |   | 147 |   |
| Corporate Securities                      |   |                                             | 9      |   |   |   | (62 | ) |   |   | (438 | ) |   |   | (491 | ) |
| Equity Securities                         |   |                                             | 60     |   |   |   | (12 | ) |   |   | – |   |   |   | 48 |   |
| Total                                     |   | $                                                | 389    |   |   | $ | (137 | ) |   | $ | (1,290 | ) |   | $ | (1,038 | ) |

----

| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

| Cumulative OTTI charges at January 1, 2010          |   | $      | 3,288 |   |
|-----------------------------------------------------|--------|--------|-------|--------|
| Additional OTTI taken for credit losses during 2010 |   |   | 1,664 |   |
| Cumulative OTTI charges at December 31, 2010        |   | $      | 4,952 |   |

----

| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

|                                              |   |              |   |   | As of December 31, 2009 |   |
|---------------------------------------------------|--------|-------------------|--------|--------|---------------------------------------------|--------|
|                                              |   | OriginalAmortized |   |   | Investment Rating                      |   |   | Current Amortized |   |   | Fair |   |   | OTTI |   |
| Description of Investment Security |   | Cost              |   |   | Original                                    |   |   | Current |   |   | Cost |   |   | Value |   |   | Taken |   |
|                                              |   |              |   |   |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Private Issuer Mortgage-Backed Securities:        |   |              |   |   |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Countrywide Alt Ln 2005-83CB A3                   |   | $                 | 3,018  |   |                                        | AAA    |   |   | D |   |   | $ | - |   |   | $ | - |   |   | $ | 1,642 |   |
| Countrywide Alt Ln 2005-75CB A4                   |   |              | 2,932  |   |                                        | AAA    |   |   | CCC |   |   |   | - |   |   |   | - |   |   |   | 1,104 |   |
| Total Mortgage-Backed Securities                  |   | $                 | 5,950  |   |                                        |   |   |   |   |   |   | $ | - |   |   | $ | - |   |   | $ | 2,746 |   |
|                                              |   |              |   |   |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporate Securities:                             |   |              |   |   |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| InCaps Funding II Senior Note                     |   | $                 | 1,000  |   |                                        | A-     |   |   | CCC |   |   | $ | - |   |   | $ | - |   |   | $ | 631 |   |
| InCaps Funding II Junior Note                     |   |              | 1,000  |   |                                        | BBB    |   |   | CCC |   |   |   | - |   |   |   | - |   |   |   | 639 |   |
| USCap Funding V                                   |   |              | 1,000  |   |                                        | BBB    |   |   | C |   |   |   | - |   |   |   | - |   |   |   | 936 |   |
| Total Corporate Securities                        |   | $                 | 3,000  |   |                                        |   |   |   |   |   |   | $ | - |   |   | $ | - |   |   | $ | 2,206 |   |
|                                              |   |              |   |   |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Securities with OTTI                        |   | $                 | 8,950  |   |                                        |   |   |   |   |   |   | $ | - |   |   | $ | - |   |   | $ | 4,952 |   |

----

| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   continued |
|-----------------------------------------------------------------------|

|                                                    |   | At December 31, |    |
|---------------------------------------------------------|--------|---------------------------|---------|
|                                                    |   | 2010                      |    |   |   |   |   | 2009 |   |   |   |   |
|                                                    |   |                      |    |   |   |   |   |   |   |   |   |   |
| Commercial Loans - Real Estate Secured                  |   | $                         | 169,665 |   |   |   | 52 | % |   | $ | 177,697 |   |   |   | 52 | % |
| Commercial Loans – Secured, Unsecured, and Leases |   |                      | 23,226  |   |   |   | 7 |   |   |   | 25,009 |   |   |   | 7 |   |
| Commercial Loans – Other                          |   |                      | 40,528  |   |   |   | 12 |   |   |   | 42,252 |   |   |   | 13 |   |
| Residential Mortgage Loans                              |   |                      | 11,868  |   |   |   | 4 |   |   |   | 16,780 |   |   |   | 5 |   |
| Home Equity Installments and Lines of Credit            |   |                      | 75,991  |   |   |   | 23 |   |   |   | 71,555 |   |   |   | 21 |   |
| Consumer Loans – Other                            |   |                      | 5,016   |   |   |   | 2 |   |   |   | 5,979 |   |   |   | 2 |   |
|                                                    |   |                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                                   |   | $                         | 326,294 |   |   |   | 100 | % |   | $ | 339,274 |   |   |   | 100 | % |

|                       |   | 2010   |   |   | 2009   |   |
|----------------------------|--------|--------|--------|--------|--------|--------|
| Balance, Beginning of Year |   | $      | 3,255  |   |   | $      | 4,386 |   |
| Additions                  |   |   | 648    |   |   |   | 54 |   |
| Deletions                  |   |   | (409   | )      |   |   | (1,185 | ) |
| Balance, End of Year       |   | $      | 3,494  |   |   | $      | 3,255 |   |

|                                                |   | 2010   |    |   | 2009   |   |    | 2008   |   |
|-----------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
| Allowance for Credit Losses, Beginning of Year      |   | $      | 5,858   |   |   | $      | 4,358   |   |   | $ | 3,675 |   |
| Charge-Offs                                         |   |   | (2,693  | )      |   |   | (1,189  | )      |   |   | (364 | ) |
| Recoveries                                          |   |   | 26      |   |   |   | 62      |   |   |   | 20 |   |
| Net Charge-Offs                                     |   |   | (2,667  | )      |   |   | (1,127  | )      |   |   | (344 | ) |
| Addition to Provision for Credit Losses             |   |   | 3,335   |   |   |   | 2,627   |   |   |   | 1,027 |   |
| Allowance for Credit Losses, End of Year            |   | $      | 6,526   |   |   | $      | 5,858   |   |   | $ | 4,358 |   |
|                                                |   |   |    |   |   |   |    |   |   |   |   |   |
| Total Gross Loans at End of Year                    |   | $      | 326,294 |   |   | $      | 339,274 |   |   | $ | 358,280 |   |
| Ratio of Allowance for Credit Losses to Total Loans |   |   | 2.00    | %      |   |   | 1.73    | %      |   |   | 1.22 | % |

----

| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

|                                                         |   | At December 31, |   |
|--------------------------------------------------------------|--------|---------------------------|--------|
|                                                         |   | 2010                      |   |   | 2009 |   |   | 2008 |   |
| Impaired Loans with a Related Allowance for Credit Losses    |   | $                         | 2,269  |   |   | $ | 5,916 |   |   | $ | 5,058 |   |
| Impaired Loans without a Related Allowance for Credit Losses |   |                      | 1,323  |   |   |   | 2,799 |   |   |   | 4,302 |   |
| Total Impaired Loans                                         |   | $                         | 3,592  |   |   | $ | 8,715 |   |   | $ | 9,360 |   |
|                                                         |   |                      |   |   |   |   |   |   |   |   |   |   |
| Related Allowance for Credit Losses                          |   | $                         | 876    |   |   | $ | 1,458 |   |   | $ | 1,499 |   |
| Average Outstanding Balance for the Year                     |   |                      | 4,627  |   |   |   | 8,731 |   |   |   | 6,446 |   |
| Recognized Interest Income on Impaired Loans                 |   |                      | 183    |   |   |   | 605 |   |   |   | 705 |   |

|                                                    |   | December 31, 2010 |    |
|---------------------------------------------------------|--------|-----------------------------|---------|
|                                                    |   | Pass                        |    |   | Impaired |   |   | SpecialMention |   |   | Substandard |   |   | Doubtful |   |   | Total |   |
|                                                    |   |                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial Loans – Real Estate Secured            |   | $                           | 146,708 |   |   | $ | 1,981 |   |   | $ | 467 |   |   | $ | 20,509 |   |   | $ | – |   |   | $ | 169,665 |   |
| Commercial Loans – Secured, Unsecured, and Leases |   |                        | 16,216  |   |   |   | 511 |   |   |   | 718 |   |   |   | 5,781 |   |   |   | – |   |   |   | 23,226 |   |
| Commercial Loans - Other                                |   |                        | 33,940  |   |   |   | 995 |   |   |   | 501 |   |   |   | 5,092 |   |   |   | – |   |   |   | 40,528 |   |
| Residential Mortgage Loans                              |   |                        | 11,555  |   |   |   | 44 |   |   |   | 269 |   |   |   | – |   |   |   | – |   |   |   | 11,868 |   |
| Home Equity Installments and Lines of Credit            |   |                        | 75,356  |   |   |   | 59 |   |   |   | – |   |   |   | 576 |   |   |   | – |   |   |   | 75,991 |   |
| Consumer Loans – Other                            |   |                        | 4,970   |   |   |   | 2 |   |   |   | – |   |   |   | 44 |   |   |   | – |   |   |   | 5,016 |   |
|                                                    |   |                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                                   |   | $                           | 288,745 |   |   | $ | 3,592 |   |   | $ | 1,955 |   |   | $ | 32,002 |   |   | $ | – |   |   | $ | 326,294 |   |

|                                                    |   | At December 31, 2010 |    |
|---------------------------------------------------------|--------|-------------------------------------|---------|
|                                                    |   | Total                               |    |   | Individually Evaluated for Impairment |   |   | Collectively Evaluated for Impairment |   |
|                                                    |   | UnpaidBalance                       |    |   | Allowancefor CreditLosses |   |   | UnpaidBalance |   |   | Allowancefor CreditLosses |   |   | UnpaidBalance |   |   | Allowancefor CreditLosses |   |
|                                                    |   |                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial Loans – Real Estate Secured            |   | $                                   | 169,665 |   |   | $ | 3,238 |   |   | $ | 1,981 |   |   | $ | 508 |   |   | $ | 167,684 |   |   | $ | 2,730 |   |
| Commercial Loans – Secured, Unsecured, and Leases |   |                                | 23,226  |   |   |   | 1,301 |   |   |   | 511 |   |   |   | 7 |   |   |   | 22,715 |   |   |   | 1,294 |   |
| Commercial Loans - Other                                |   |                                | 40,528  |   |   |   | 1,440 |   |   |   | 995 |   |   |   | 345 |   |   |   | 39,533 |   |   |   | 1,095 |   |
| Residential Mortgage Loans                              |   |                                | 11,868  |   |   |   | 54 |   |   |   | 44 |   |   |   | 16 |   |   |   | 11,824 |   |   |   | 38 |   |
| Home Equity Installments and Lines of Credit       |   |                                | 75,991  |   |   |   | 362 |   |   |   | 59 |   |   |   | – |   |   |   | 75,932 |   |   |   | 362 |   |
| Consumer Loans – Other                            |   |                                | 5,016   |   |   |   | 106 |   |   |   | 2 |   |   |   | – |   |   |   | 5,014 |   |   |   | 106 |   |
| Unallocated                                             |   |                                | – |   |   |   | 25 |   |   |   | – |   |   |   | – |   |   |   | – |   |   |   | 25 |   |
|                                                    |   |                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Total                                 |   | $                                   | 326,294 |   |   | $ | 6,526 |   |   | $ | 3,592 |   |   | $ | 876 |   |   | $ | 322,702 |   |   | $ | 5,650 |   |

----

| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

|                                                    |   | At December 31, 2010 |    |
|---------------------------------------------------------|--------|-------------------------------------|---------|
|                                                    |   | RecordedInvestment                  |    |   | UnpaidPrincipalBalance |   |   | RelatedAllowance |   |   | AverageRecordedInvestment |   |   | InterestIncomeRecognized |   |
| With No Related Allowance Recorded:                     |   |                                |    |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                    |   |                                |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial Loans - Real Estate Secured                  |   | $                                   | 438     |   |   | $ | 467 |   |   | $ | – |   |   | $ | 245 |   |   | $ | – |   |
| Commercial Loans – Secured, Unsecured, and Leases |   |                                | 503     |   |   |   | 1,461 |   |   |   | – |   |   |   | 1,525 |   |   |   | 156 |   |
| Commercial Loans - Other                                |   |                                | 321     |   |   |   | 327 |   |   |   | – |   |   |   | 339 |   |   |   | 3 |   |
| Residential Mortgage Loans                              |   |                                | – |   |   |   | – |   |   |   | – |   |   |   | – |   |   |   | – |   |
| Home Equity Installments and Lines of Credit            |   |                                | 59      |   |   |   | 59 |   |   |   | – |   |   |   | 63 |   |   |   | 5 |   |
| Consumer Loans - Other                                  |   |                                | 2       |   |   |   | 2 |   |   |   | – |   |   |   | 2 |   |   |   | – |   |
| Total                                                   |   | $                                   | 1,323   |   |   | $ | 2,316 |   |   | $ | – |   |   | $ | 2,174 |   |   | $ | 164 |   |
|                                                    |   |                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| With A Related Allowance Recorded:                      |   |                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                    |   |                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial Loans - Real Estate Secured                  |   | $                                   | 1,543   |   |   | $ | 1,600 |   |   | $ | 508 |   |   | $ | 1,718 |   |   | $ | – |   |
| Commercial Loans – Secured, Unsecured, and Leases |   |                                | 8       |   |   |   | 9 |   |   |   | 7 |   |   |   | 11 |   |   |   | – |   |
| Commercial Loans - Other                                |   |                                | 674     |   |   |   | 674 |   |   |   | 345 |   |   |   | 673 |   |   |   | 15 |   |
| Residential Mortgage Loans                              |   |                                | 44      |   |   |   | 44 |   |   |   | 16 |   |   |   | 51 |   |   |   | 4 |   |
| Home Equity Installments and Lines of Credit            |   |                                | – |   |   |   | – |   |   |   | – |   |   |   | – |   |   |   | – |   |
| Consumer Loans - Other                                  |   |                                | – |   |   |   | – |   |   |   | – |   |   |   | – |   |   |   | – |   |
| Total                                                   |   | $                                   | 2,269   |   |   | $ | 2,327 |   |   | $ | 876 |   |   | $ | 2,453 |   |   | $ | 19 |   |

|                                                    |   | As of December 31, 2010 |   |
|---------------------------------------------------------|--------|---------------------------------------------|--------|
|                                                    |   | 30-59 DaysPast Due                |   |   | 60-89Days PastDue |   |   | > 90 DaysPast Due |   |   | Non-AccrualLoans |   |   | TotalPast Dueand Non-Accrual |   |   | CurrentLoans |   |   | Total LoansReceivable |   |
|                                                    |   |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial Loans – Real Estate Secured            |   | $                                           | 440    |   |   | $ | 466 |   |   | $ | - |   |   | $ | 2,225 |   |   | $ | 3,131 |   |   | $ | 166,534 |   |   | $ | 169,665 |   |
| Commercial Loans – Secured, Unsecured, and Leases |   |                                        | 209    |   |   |   | – |   |   |   | 312 |   |   |   | 513 |   |   |   | 1,034 |   |   |   | 22,192 |   |   |   | 23,226 |   |
| Commercial Loans - Other                                |   |                                        | 250    |   |   |   | – |   |   |   | – |   |   |   | 746 |   |   |   | 996 |   |   |   | 39,532 |   |   |   | 40,528 |   |
| Residential Mortgage Loans                              |   |                                        | 360    |   |   |   | – |   |   |   | – |   |   |   | 393 |   |   |   | 753 |   |   |   | 11,115 |   |   |   | 11,868 |   |
| Home Equity Installments and Lines of Credit            |   |                                        | 318    |   |   |   | 3 |   |   |   | – |   |   |   | 241 |   |   |   | 562 |   |   |   | 75,429 |   |   |   | 75,991 |   |
| Consumer Loans – Other                            |   |                                        | 45     |   |   |   | 51 |   |   |   | 14 |   |   |   | 39 |   |   |   | 149 |   |   |   | 4,867 |   |   |   | 5,016 |   |
| Total                                                   |   | $                                           | 1,622  |   |   | $ | 520 |   |   | $ | 326 |   |   | $ | 4,157 |   |   | $ | 6,625 |   |   | $ | 319,669 |   |   | $ | 326,294 |   |

----

| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

|                                            |   | At December 31, |   |
|-------------------------------------------------|--------|---------------------------|--------|
|                                            |   | 2010                      |   |   | 2009 |   |
| Non-accruing Loans                              |   | $                         | 4,157  |   |   | $ | 8,034 |   |
| Accruing Loans – 90 Days or More Past Due |   |                      | 326    |   |   |   | 506 |   |
| Total Nonperforming Loans                       |   |                      | 4,483  |   |   |   | 8,540 |   |
| Other Real Estate Owned                         |   |                      | 8,438  |   |   |   | 5,383 |   |
| Repossessed Assets                              |   |                      | 99     |   |   |   | 436 |   |
| Total Nonperforming Assets                      |   | $                         | 13,020 |   |   | $ | 14,359 |   |

|                                      |   | At December 31, |    |
|-------------------------------------------|--------|---------------------------|---------|
|                                      |   | 2010                      |    |   | 2009 |   |
| Buildings and Improvements                |   | $                         | 10,814  |   |   | $ | 10,814 |   |
| Furniture, Fixtures & Equipment       |   |                      | 8,692   |   |   |   | 9,024 |   |
| Leasehold Improvements                    |   |                      | 1,471   |   |   |   | 1,470 |   |
| Land                                      |   |                      | 1,168   |   |   |   | 1,168 |   |
| Land Improvements                         |   |                      | 1,105   |   |   |   | 1,100 |   |
| Construction and Development              |   |                      | 9       |   |   |   | – |   |
| Subtotal                                  |   |                      | 23,259  |   |   |   | 23,576 |   |
| Less:  Accumulated Depreciation |   |                      | (12,706 | ) |   |   | (12,173 | ) |
| Premises and Equipment - Net              |   | $                         | 10,553  |   |   | $ | 11,403 |   |

----

| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

|       |   | LeaseObligations |   |   | SubleaseIncome |   |   | Net LeaseObligations |   |   | Obligations toRelated Party |   |
|------------|--------|------------------|--------|--------|----------------|--------|--------|---------------------------|--------|--------|---------------------------------------|--------|
| 2011       |   | $                | 699    |   |           | $      | 305    |                      |   | $      | 394                                   |   |   | $ | 223 |   |
| 2012       |   |             | 668    |   |           |   | 254    |                      |   |   | 414                                   |   |   |   | 277 |   |
| 2013       |   |             | 632    |   |           |   | 150    |                      |   |   | 482                                   |   |   |   | 382 |   |
| 2014       |   |             | 532    |   |           |   | 153    |                      |   |   | 379                                   |   |   |   | 379 |   |
| 2015       |   |             | 532    |   |           |   | 156    |                      |   |   | 376                                   |   |   |   | 376 |   |
| Thereafter |   |             | 2,970  |   |           |   | 445    |                      |   |   | 2,525                                 |   |   |   | 2,525 |   |
|       |   | $                | 6,033  |   |           | $      | 1,463  |                      |   | $      | 4,570                                 |   |   | $ | 4,162 |   |

|                   |   | For the Year Ended December 31, |   |
|------------------------|--------|----------------------------------------------------------|--------|
|                   |   | 2010                                                     |   |   | 2009 |   |   | 2008 |   |
| Rental Expense         |   | $                                                        | 890    |   |   | $ | 845 |   |   | $ | 755 |   |
| Sublease Rental Income |   |                                                     | (320   | ) |   |   | (316 | ) |   |   | (225 | ) |
| Net Rental Expense     |   | $                                                        | 570    |   |   | $ | 529 |   |   | $ | 530 |   |

|                         |   | December 31, |    |
|------------------------------|--------|-------------------|---------|
|                         |   | 2010              |    |   | 2009 |   |
| Noninterest-Bearing Deposits |   | $                 | 68,022  |   |   | $ | 54,331 |   |
|                         |   |              |    |   |   |   |   |   |
| Money Market and NOW         |   |              | 112,119 |   |   |   | 134,600 |   |
| Savings                      |   |              | 25,085  |   |   |   | 23,526 |   |
| Certificates of Deposit      |   |              | 182,244 |   |   |   | 192,308 |   |
| Interest-Bearing Deposits    |   |              | 319,448 |   |   |   | 350,434 |   |
|                         |   |              |    |   |   |   |   |   |
| Total Deposits               |   | $                 | 387,470 |   |   | $ | 404,765 |   |

|                          |   | December 31, |    |
|-------------------------------|--------|-------------------|---------|
|                          |   | 2010              |    |
| 2011                          |   | $                 | 91,906  |   |
| 2012                          |   |              | 48,500  |   |
| 2013                          |   |              | 21,581  |   |
| 2014                          |   |              | 14,367  |   |
| 2015                          |   |              | 5,146   |   |
| Thereafter                    |   |              | 744     |   |
| Total Certificate of Deposits |   | $                 | 182,244 |   |

----

| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

|                          |   | December 31, |   |
|-------------------------------|--------|-------------------|--------|
| Maturity                      |   | 2010              |   |
| 3 months or less              |   | $                 | 4,590  |   |
| 3 - 6 months                  |   |              | 6,290  |   |
| 6 - 12 months                 |   |              | 15,863 |   |
| Over 12 months                |   |              | 32,092 |   |
| Total CDs of $100,000 or more |   | $                 | 58,835 |   |

----

| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

|                                  |   | December 31, 2010 |    |   | December 31, 2009 |   |
|---------------------------------------|--------|-----------------------------|---------|--------|-----------------------------|--------|
|                                  |   | Amount                      |    |   | Rate                        |   |   | Amount |   |   | Rate |   |
| FHLB Fixed Rate Advances:             |   |                        |    |   |                        |   |   |   |   |   |   |   |
| 2010                                  |   | $                           | – |   |                        |   | – | % |   | $ | 2,500 |   |   |   | 4.67 | % |
| 2012                                  |   |                        | 10,834  |   |                        |   | 4.31 |   |   |   | 10,834 |   |   |   | 4.31 |   |
| FHLB Convertible Fixed-Rate Advances: |   |                        |    |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| 2010                                  |   |                        | – |   |                        |   | – |   |   |   | 10,000 |   |   |   | 5.55 |   |
| 2011                                  |   |                        | – |   |                        |   | – |   |   |   | 10,000 |   |   |   | 5.23 |   |
| Total                                 |   | $                           | 10,834  |   |                        |   | 4.31 | % |   | $ | 33,334 |   |   |   | 4.98 | % |

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| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

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| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

|                                                             |   | At December 31, |    |
|------------------------------------------------------------------|--------|---------------------------|---------|
|                                                             |   | 2010                      |    |   | 2009 |   |
| Deferred Tax Assets:                                             |   |                      |    |   |   |   |
| Allowance for Credit Losses                                      |   | $                         | 2,219   |   |   | $ | 1,992 |   |
| Net Operating Loss Carryforward                                  |   |                      | 974     |   |   |   | – |   |
| Unrealized Losses on Investment Securities Available for Sale    |   |                      | 577     |   |   |   | 101 |   |
| Low Income Housing Tax Credit Carryforward                       |   |                      | 519     |   |   |   | 502 |   |
| Minimum Taxes Credit Carryforward                                |   |                      | 324     |   |   |   | 804 |   |
| SERP Executive Incentive Plan                                    |   |                      | 192     |   |   |   | 137 |   |
| Contribution Credits Carryforward                                |   |                      | 179     |   |   |   | – |   |
| Non-Accrual Loan Interest                                        |   |                      | 72      |   |   |   | 129 |   |
| Impairment Charges on Investment Securities                      |   |                      | – |   |   |   | 961 |   |
| Other                                                            |   |                      | 69      |   |   |   | 4 |   |
| Total Deferred Tax Assets                                        |   |                      | 5,125   |   |   |   | 4,630 |   |
|                                                             |   |                      |    |   |   |   |   |   |
| Deferred Tax Liabilities:                                        |   |                      |    |   |   |   |   |   |
| Depreciation                                                     |   |                      | (333    | ) |   |   | (415 | ) |
| Leasing                                                          |   |                      | (276    | ) |   |   | (585 | ) |
| Prepaid Expenses                                                 |   |                      | (134    | ) |   |   | (130 | ) |
| Deferred Net Loan Fees                                           |   |                      | (64     | ) |   |   | (61 | ) |
| Mortgage Servicing Assets and Credit Enhancement Fees Receivable |   |                      | (16     | ) |   |   | (16 | ) |
| Other                                                            |   |                      | (42     | ) |   |   | (37 | ) |
| Total Deferred Tax Liabilities                                   |   |                      | (865    | ) |   |   | (1,244 | ) |
| Net Deferred Tax Asset                                           |   | $                         | 4,260   |   |   | $ | 3,386 |   |

----

| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

|                                            |   | Years Ended December 31, |   |
|-------------------------------------------------|--------|-----------------------------------------|--------|
|                                            |   | 2010                                    |   |   | 2009 |   |   | 2008 |   |
| (Tax Benefits Receivable) Tax Currently Payable |   | $                                       | (884   | ) |   | $ | (193 | ) |   | $ | 1,284 |   |
| Deferred Income Tax Benefit                     |   |                                    | (398   | ) |   |   | (609 | ) |   |   | (1,472 | ) |
| Benefit from Income Taxes                       |   | $                                       | (1,282 | ) |   | $ | (802 | ) |   | $ | (188 | ) |

|                                                  |   | Years Ended December 31, |   |
|-------------------------------------------------------|--------|-----------------------------------------|--------|
|                                                  |   | 2010                                    |   |   | 2009 |   |   | 2008 |   |
| (Loss) Income Before Income Taxes                     |   | $                                       | (3,161 | ) |   | $ | (1,517 | ) |   | $ | 256 |   |
| Statutory Tax Rate                                    |   |                                    | 34.0   | % |   |   | 34.0 | % |   |   | 34.0 | % |
|                                                  |   |                                    |   |   |   |   |   |   |   |   |   |   |
| Federal Tax at Statutory Rate                         |   |                                    | (1,075 | ) |   |   | (516 | ) |   |   | 87 |   |
|                                                  |   |                                    |   |   |   |   |   |   |   |   |   |   |
| Tax Benefits From:                                    |   |                                    |   |   |   |   |   |   |   |   |   |   |
| Tax-Exempt Income, Net of Disallowed Interest Expense |   |                                    | (209   | ) |   |   | (146 | ) |   |   | (132 | ) |
| Earnings from Bank-Owned Life Insurance               |   |                                    | (171   | ) |   |   | (147 | ) |   |   | (149 | ) |
| Merger and Acquisition Non Deductible Expenses        |   |                                    | 165    |   |   |   | – |   |   |   | – |   |
| Other                                                 |   |                                    | 8      |   |   |   | 7 |   |   |   | 6 |   |
| Benefit from Income Taxes                             |   | $                                       | (1,282 | ) |   | $ | (802 | ) |   | $ | (188 | ) |

|                                                                |   | At December 31, |    |
|---------------------------------------------------------------------|--------|---------------------------|---------|
|                                                                |   | 2010                      |    |   | 2009 |   |
| Financial Instruments Whose Contract Amounts Represent Credit Risk: |   |                      |    |   |   |   |
| Other Unused Commitments, Principally Commercial Lines of Credit    |   | $                         | 47,290  |   |   | $ | 59,419 |   |
| Unused Portion of Home Equity, Personal and Overdraft Lines         |   |                      | 47,050  |   |   |   | 43,674 |   |
| Standby Letters of Credit                                           |   |                      | 5,021   |   |   |   | 6,199 |   |
| Commitments to Extend Credit                                        |   |                      | 665     |   |   |   | 1,499 |   |
| Total Commitments and Guarantees                                    |   | $                         | 100,026 |   |   | $ | 110,791 |   |

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| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

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| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

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| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

|                                 |   | Actual |   |   | Minimum Required For CapitalAdequacy Purposes |   |   | To Be Well-Capitalized UnderPrompt Corrective Action Provisions |   |
|--------------------------------------|--------|--------|--------|--------|-------------------------------------------------------------------|--------|--------|-----------------------------------------------------------------------------------------------|--------|
|                                 |   | Amount |   |   | Ratio                                                             |   |   | Amount                                                                                        |   |   | Ratio (1) |   |   | Amount |   |   | Ratio |   |
|                                 |   |   |   |   |                                                              |   |   |                                                                                          |   |   |   |   |   |   |   |   |   |   |
| Union National Financial Corporation |   |   |   |   |                                                              |   |   |                                                                                          |   |   |   |   |   |   |   |   |
| December 31, 2010:                   |   |   |   |   |                                                              |   |   |                                                                                          |   |   |   |   |   |   |   |   |   |   |
| Tier 1 (leverage) capital            |   | $      | 39,182 |   |                                                              |   | 8.55   | %                                                                                             |   | $ | 18,327 |   |   |   | 4.00 | % |   |   | N/A |   |   |   | N/A |   |
| Tier 1 risk-based capital            |   |   | 39,182 |   |                                                              |   | 10.45  |                                                                                          |   |   | 14,995 |   |   |   | 4.00 |   |   |   | N/A |   |   |   | N/A |   |
| Total risk-based capital             |   |   | 50,504 |   |                                                              |   | 13.47  |                                                                                          |   |   | 29,990 |   |   |   | 8.00 |   |   |   | N/A |   |   |   | N/A |   |
|                                 |   |   |   |   |                                                              |   |   |                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2009:                   |   |   |   |   |                                                              |   |   |                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier 1 (leverage) capital            |   | $      | 42,036 |   |                                                              |   | 8.52   | %                                                                                             |   | $ | 19,744 |   |   |   | 4.00 | % |   |   | N/A |   |   |   | N/A |   |
| Tier 1 risk-based capital            |   |   | 42,036 |   |                                                              |   | 9.93   |                                                                                          |   |   | 16,929 |   |   |   | 4.00 |   |   |   | N/A |   |   |   | N/A |   |
| Total risk-based capital             |   |   | 53,825 |   |                                                              |   | 12.72  |                                                                                          |   |   | 33,858 |   |   |   | 8.00 |   |   |   | N/A |   |   |   | N/A |   |
|                                 |   |   |   |   |                                                              |   |   |                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Union National Community Bank        |   |   |   |   |                                                              |   |   |                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2010:                   |   |   |   |   |                                                              |   |   |                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier 1 (leverage) capital            |   | $      | 37,586 |   |                                                              |   | 8.26   | %                                                                                             |   | $ | 18,198 |   |   |   | 4.00 | % |   | $ | 22,748 |   |   |   | 5.00 | % |
| Tier 1 risk-based capital            |   |   | 37,586 |   |                                                              |   | 10.05  |                                                                                          |   |   | 14,960 |   |   |   | 4.00 |   |   |   | 22,440 |   |   |   | 6.00 |   |
| Total risk-based capital             |   |   | 48,285 |   |                                                              |   | 12.91  |                                                                                          |   |   | 29,920 |   |   |   | 8.00 |   |   |   | 37,400 |   |   |   | 10.00 |   |
|                                 |   |   |   |   |                                                              |   |   |                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2009:                   |   |   |   |   |                                                              |   |   |                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier 1 (leverage) capital            |   | $      | 40,910 |   |                                                              |   | 8.31   | %                                                                                             |   | $ | 19,686 |   |   |   | 4.00 | % |   | $ | 24,608 |   |   |   | 5.00 | % |
| Tier 1 risk-based capital            |   |   | 40,910 |   |                                                              |   | 9.69   |                                                                                          |   |   | 16,881 |   |   |   | 4.00 |   |   |   | 25,322 |   |   |   | 6.00 |   |
| Total risk-based capital             |   |   | 52,194 |   |                                                              |   | 12.37  |                                                                                          |   |   | 33,762 |   |   |   | 8.00 |   |   |   | 42,203 |   |   |   | 10.00 |   |

|   | (1) | The OCC requires the Bank to meet higher individual minimum capital ratios effective September 30, 2009 (for additional information, refer to Note 16 – Enforcement Actions with Bank Regulatory Agencies). |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

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| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

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| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

----

| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

| Period                                        |   | Shares |    |   | GrossProceeds |   |
|-----------------------------------------------|--------|--------|---------|--------|---------------|--------|
| September 25, 2009 – September 30, 2009 |   |   | 700     |   |          | $      | 700 |   |
| October 1, 2009 – December 31, 2009     |   |   | 575     |   |          |   | 575 |   |
| January 1, 2010 – February 28, 2010 (1) |   |   | – |   |          |   | – |   |
| Total                                         |   |   | 1,275   |   |          | $      | 1,275 |   |

----

| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

| Level 1 | -      | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;                                      |
|---------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |   |                                                                                                                                                                           |
| Level 2 | -      | Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability;          |
|    |   |                                                                                                                                                                           |
| Level 3 | -      | Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). |

----

| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

----

| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

|                                            |   | At December 31, 2010 |
|-------------------------------------------------|--------|-------------------------------------|
|                                            |   | Level 1Inputs                  |   |   | Level 2Inputs |   |   | Level 3Inputs |   |   | Total FairValue |
| U.S. Agency Mortgage-Backed Securities          |   | $                                   | – |   |   | $ | 4,694 |   |   | $ | – |   |   | $ | 4,694 |   |
| Obligations of State and Political Subdivisions |   |                                | – |   |   |   | 23,410 |   |   |   | – |   |   |   | 23,410 |   |
| Obligations of U.S. Government Agencies         |   |                                | – |   |   |   | 7,502 |   |   |   | – |   |   |   | 7,502 |   |
| Equity Securities                               |   |                                | 12 |   |   |   | 52 |   |   |   | – |   |   |   | 64 |   |
| Total Investment Securities                     |   | $                                   | 12 |   |   | $ | 35,658 |   |   | $ | – |   |   | $ | 35,670 |   |

|                                            |   | At December 31, 2009 |    |
|-------------------------------------------------|--------|-------------------------------------|---------|
|                                            |   | Level 1Inputs                  |    |   | Level 2Inputs |   |   | Level 3Inputs |   |   | Total FairValue |   |
| U.S. Agency Mortgage-Backed Securities          |   | $                                   | – |   |   | $ | 53,394 |   |   | $ | – |   |   | $ | 53,394 |   |
| Private Issuer Mortgage-Backed Securities       |   |                                | – |   |   |   | – |   |   |   | 2,638 |   |   |   | 2,638 |   |
| Obligations of State and Political Subdivisions |   |                                | – |   |   |   | 3,815 |   |   |   | – |   |   |   | 3,815 |   |
| Corporate Securities                            |   |                                | – |   |   |   | – |   |   |   | 631 |   |   |   | 631 |   |
| Equity Securities                               |   |                                | 13      |   |   |   | 55 |   |   |   | – |   |   |   | 68 |   |
| Total Investment Securities                     |   | $                                   | 13      |   |   | $ | 57,264 |   |   | $ | 3,269 |   |   | $ | 60,546 |   |

|                                                       |   | Available-For-Sale Securities |    |
|------------------------------------------------------------|--------|------------------------------------|---------|
|                                                       |   | 2010                               |    |   | 2009 |   |
| Beginning Balance at January 1,                            |   | $                                  | 3,269   |   |   | $ | 4,437 |   |
| Payments received (applied to principal), net of accretion |   |                               | (540    | ) |   |   | (733 | ) |
| Net proceeds received on sales of impaired securities      |   |                               | (799    | ) |   |   | – |   |
| Total realized and unrealized losses                       |   |                               |    |   |   |   |   |   |
| Included in net loss                                       |   |                               | (1,664  | ) |   |   | (1,504 | ) |
| Included in other comprehensive loss                       |   |                               | (266    | ) |   |   | 1,069 |   |
| Ending Balance at December 31,                             |   | $                                  | – |   |   | $ | 3,269 |   |

----

| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

|                    |   | December 31, 2010 |    |
|-------------------------|--------|-----------------------------|---------|
|  Assets:           |   | Level 1Inputs          |    |   | Level 2Inputs |   |   | Level 3Inputs |   |   | Total FairValue |   |
| Impaired Loans          |   | $                           | – |   |   | $ | – |   |   | $ | 1,393 |   |   | $ | 1,393 |   |
| Other Real Estate Owned |   |                        | – |   |   |   | – |   |   |   | 8,438 |   |   |   | 8,438 |   |
| Repossessed Assets      |   |                        | – |   |   |   | – |   |   |   | 99 |   |   |   | 99 |   |
| Total                   |   | $                           | – |   |   | $ | – |   |   | $ | 9,930 |   |   | $ | 9,930 |   |

|                    |   | December 31, 2009 |    |
|-------------------------|--------|-----------------------------|---------|
|  Assets:           |   | Level 1Inputs          |    |   | Level 2Inputs |   |   | Level 3Inputs |   |   | Total FairValue |   |
| Impaired Loans          |   | $                           | – |   |   | $ | – |   |   | $ | 4,458 |   |   | $ | 4,458 |   |
| Other Real Estate Owned |   |                        | – |   |   |   | – |   |   |   | 5,383 |   |   |   | 5,383 |   |
| Repossessed Assets      |   |                        | – |   |   |   | – |   |   |   | 436 |   |   |   | 436 |   |
| Total                   |   | $                           | – |   |   | $ | – |   |   | $ | 10,277 |   |   | $ | 10,277 |   |

----

| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

|                                                             |   | December 31, 2010 |    |   | December 31, 2009 |   |
|------------------------------------------------------------------|--------|-----------------------------|---------|--------|-----------------------------|--------|
|                                                             |   | CarryingAmount              |    |   | Fair Value             |   |   | CarryingAmount |   |   | Fair Value |   |
| Assets:                                                          |   |                        |    |   |                        |   |   |   |   |   |   |   |
| Cash and Cash Equivalents                                        |   | $                           | 44,491  |   |                        | $      | 44,491 |   |   | $ | 43,340 |   |   | $ | 43,340 |   |
| Interest-Bearing Time Deposits in Other Banks                    |   |                        | 1,960   |   |                        |   | 1,976 |   |   |   | 9,229 |   |   |   | 9,252 |   |
| Investment Securities Available for Sale                         |   |                        | 35,670  |   |                        |   | 35,670 |   |   |   | 60,546 |   |   |   | 60,546 |   |
| Loans, Net                                                       |   |                        | 319,768 |   |                        |   | 308,109 |   |   |   | 333,416 |   |   |   | 317,459 |   |
| Restricted Investment in Bank Stocks                             |   |                        | 3,562   |   |                        |   | 3,562 |   |   |   | 3,727 |   |   |   | 3,727 |   |
| Accrued Interest Receivable                                      |   |                        | 1,461   |   |                        |   | 1,461 |   |   |   | 1,569 |   |   |   | 1,569 |   |
| Mortgage Servicing Assets and Credit Enhancement Fees Receivable |   |                        | 48      |   |                        |   | 192 |   |   |   | 48 |   |   |   | 267 |   |
| Liabilities:                                                     |   |                        |    |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Demand and Savings Deposits                                      |   |                        | 205,226 |   |                        |   | 205,226 |   |   |   | 212,457 |   |   |   | 212,457 |   |
| Time Deposits                                                    |   |                        | 182,244 |   |                        |   | 183,128 |   |   |   | 192,308 |   |   |   | 194,218 |   |
| Long-Term Debt                                                   |   |                        | 10,834  |   |                        |   | 11,337 |   |   |   | 33,334 |   |   |   | 34,798 |   |
| Junior Subordinated Debentures                                   |   |                        | 17,341  |   |                        |   | 17,168 |   |   |   | 17,341 |   |   |   | 17,017 |   |
| Accrued Interest Payable                                         |   |                        | 758     |   |                        |   | 758 |   |   |   | 938 |   |   |   | 938 |   |
| Off-balance-sheet Items:                                         |   |                        |    |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Commitments to Extend Credit and Standby Letters of Credit       |   |                        | – |   |                        |   | – |   |   |   | – |   |   |   | – |   |

----

| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

----

| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

|                                             |   | December 31, |   |
|--------------------------------------------------|--------|-------------------|--------|
|                                             |   | 2010              |   |   | 2009 |   |
|                                             |   |              |   |   |   |   |
| Assets                                           |   |              |   |   |   |   |
| Cash in Bank Subsidiary                          |   | $                 | 88     |   |   | $ | 505 |   |
| Interest-Bearing Deposits in Other Banks         |   |              | 5      |   |   |   | 2 |   |
| Cash and Cash Equivalents                        |   |              | 93     |   |   |   | 507 |   |
|                                             |   |              |   |   |   |   |   |   |
| Investment in Subsidiaries                       |   |              | 38,794 |   |   |   | 41,063 |   |
| Other Equity Investment Securities               |   |              | 64     |   |   |   | 68 |   |
| Investments in Limited Partnerships              |   |              | 50     |   |   |   | 109 |   |
| Other Assets                                     |   |              | 1,249  |   |   |   | 1,313 |   |
| Total Assets                                     |   | $                 | 40,250 |   |   | $ | 43,060 |   |
|                                             |   |              |   |   |   |   |   |   |
| Liabilities                                      |   |              |   |   |   |   |   |   |
| Junior Subordinated Debentures                   |   | $                 | 11,341 |   |   | $ | 11,341 |   |
| Other Liabilities                                |   |              | 406    |   |   |   | 383 |   |
| Stockholders’ Equity                       |   |              | 28,503 |   |   |   | 31,336 |   |
| Total Liabilities and Stockholders’ Equity |   | $                 | 40,250 |   |   | $ | 43,060 |   |

|                                                           |   | Years Ended December 31, |   |
|----------------------------------------------------------------|--------|-----------------------------------------|--------|
|                                                           |   | 2010                                    |   |   | 2009 |   |   | 2008 |   |
|                                                           |   |                                    |   |   |   |   |   |   |   |
| Income                                                         |   |                                    |   |   |   |   |   |   |   |
| Dividends from Subsidiaries                                    |   | $                                       | 10     |   |   | $ | 409 |   |   | $ | 537 |   |
| Dividends on Other Equity Investment Securities                |   |                                    | 1      |   |   |   | 3 |   |   |   | 10 |   |
| Interest on Deposits in Bank Subsidiary                        |   |                                    | 1      |   |   |   | 1 |   |   |   | 1 |   |
| (Loss) Gain on Sale of Securities                              |   |                                    | 2      |   |   |   | (38 | ) |   |   | 49 |   |
| Management Fees from Bank Subsidiary                           |   |                                    | 120    |   |   |   | 42 |   |   |   | 42 |   |
| Other Income – Insurance Settlement                      |   |                                    | 1      |   |   |   | 279 |   |   |   | – |   |
|  Total Income                                             |   |                                    | 135    |   |   |   | 696 |   |   |   | 639 |   |
|                                                           |   |                                    |   |   |   |   |   |   |   |   |   |   |
| Expense                                                        |   |                                    |   |   |   |   |   |   |   |   |   |   |
| Interest Expense on Junior Subordinated Debentures             |   |                                    | 340    |   |   |   | 408 |   |   |   | 673 |   |
| Other Expenses                                                 |   |                                    | 543    |   |   |   | 609 |   |   |   | 248 |   |
|  Total Expenses                                           |   |                                    | 883    |   |   |   | 1,017 |   |   |   | 921 |   |
|                                                           |   |                                    |   |   |   |   |   |   |   |   |   |   |
| Loss before Income Tax Benefit and Equity in                   |   |                                    |   |   |   |   |   |   |   |   |   |   |
| Undistributed (Loss) Income of Subsidiary                      |   |                                    | (748   | ) |   |   | (321 | ) |   |   | (282 | ) |
|                                                           |   |                                    |   |   |   |   |   |   |   |   |   |   |
| Benefit from Income Taxes                                      |   |                                    | (223   | ) |   |   | (245 | ) |   |   | (274 | ) |
| Loss before Equity in Undistributed(Loss) Income of Subsidiary |   |                                    | (525   | ) |   |   | (76 | ) |   |   | (8 | ) |
|                                                           |   |                                    |   |   |   |   |   |   |   |   |   |   |
| Equity in Undistributed (Loss) Income of Subsidiary            |   |                                    | (1,354 | ) |   |   | (639 | ) |   |   | 452 |   |
|                                                           |   |                                    |   |   |   |   |   |   |   |   |   |   |
| Net (Loss) Income                                              |   | $                                       | (1,879 | ) |   | $ | (715 | ) |   | $ | 444 |   |

----

| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued |
|------------------------------------------------------|

|                                                     |   | Years Ended December 31, |    |
|----------------------------------------------------------|--------|-----------------------------------------|---------|
|                                                     |   | 2010                                    |    |   | 2009 |   |   | 2008 |   |
|                                                     |   |                                    |    |   |   |   |   |   |   |
| Cash Flows from Operating Activities                     |   |                                    |    |   |   |   |   |   |   |
| Net (Loss) Income                                        |   | $                                       | (1,879  | ) |   | $ | (715 | ) |   | $ | 444 |   |
| Adjustments to Reconcile Net (Loss) Income to Net Cash   |   |                                    |    |   |   |   |   |   |   |   |   |   |
| Used in Operating Activities:                            |   |                                    |    |   |   |   |   |   |   |   |   |   |
| Equity In Undistributed Loss (Income) of Bank Subsidiary |   |                                    | 1,354   |   |   |   | 639 |   |   |   | (452 | ) |
| Investment Securities Losses (Gains)                     |   |                                    | (2      | ) |   |   | 38 |   |   |   | (49 | ) |
| Deferred Income Taxes (Benefit)                          |   |                                    | 272     |   |   |   | 13 |   |   |   | (274 | ) |
| Decrease (Increase) in Other Assets                      |   |                                    | (155    | ) |   |   | 93 |   |   |   | 138 |   |
| Increase (Decrease) in Other Liabilities                 |   |                                    | 23      |   |   |   | (278 | ) |   |   | (40 | ) |
| Net Cash Used in Operating Activities                    |   |                                    | (387    | ) |   |   | (210 | ) |   |   | (233 | ) |
|                                                     |   |                                    |    |   |   |   |   |   |   |   |   |   |
| Cash Flows from Investing Activities                     |   |                                    |    |   |   |   |   |   |   |   |   |   |
| Proceeds from Sales of Available for Sale Securities     |   |                                    | 2       |   |   |   | 120 |   |   |   | 180 |   |
| Investment in Subsidiaries                               |   |                                    | – |   |   |   | (742 | ) |   |   | (1,585 | ) |
| Net Cash (Used in) Provided by Investing Activities      |   |                                    | 2       |   |   |   | (622 | ) |   |   | (1,405 | ) |
|                                                     |   |                                    |    |   |   |   |   |   |   |   |   |   |
| Cash Flows from Financing Activities                     |   |                                    |    |   |   |   |   |   |   |   |   |   |
| Issuance of Common Stock, Net of Costs                   |   |                                    | 6       |   |   |   | 68 |   |   |   | 1,599 |   |
| Issuance of Preferred Stock, Net of Costs                |   |                                    | – |   |   |   | 1,218 |   |   |   | – |   |
| Cash Dividends Paid                                      |   |                                    | (35     | ) |   |   | – |   |   |   | – |   |
| Net Cash Provided by (Used in) Financing Activities      |   |                                    | (29     | ) |   |   | 1,286 |   |   |   | 1,599 |   |
|                                                     |   |                                    |    |   |   |   |   |   |   |   |   |   |
| Net Increase (Decrease) in Cash and Cash Equivalents     |   |                                    | (414    | ) |   |   | 454 |   |   |   | (39 | ) |
| Cash and Cash Equivalents at Beginning Of Period         |   |                                    | 507     |   |   |   | 53 |   |   |   | 92 |   |
| Cash and Cash Equivalents at End Of Period               |   | $                                       | 93      |   |   | $ | 507 |   |   | $ | 53 |   |

----

|                                                 |                                       |
|-------------------------------------------------|---------------------------------------|
|                                            |                                  |
| Mark D. Gainer                                  | Michael D. Peduzzi                    |
| Chairman, Chief Executive Officer and President | Treasurer and Chief Financial Officer |
| Date:  March 31, 2011                 | Date: March 31, 2011                  |

----

----

| ITEM 9A. | CONTROLS AND PROCEDURES |
|----------|-------------------------|

| ITEM 9B. | OTHER INFORMATION |
|----------|-------------------|

| ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE. |
|----------|----------------------------------------------------------|

----

----

| Name and Age |   | DirectorSince |   | Principal Occupation for the Past Five Years and Positions Held with Union National Financial Corporation andSubsidiaries                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|------------------------|--------|---------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                   |   |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                   |   |          |   | Class of A – Continuing Directors (term expires 2012)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                   |   |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Mark D. Gainer(56)     |   | 1996          |   | Effective January 1, 2006, Chairman, Chief Executive Officer & President of Union National Financial Corporation, President & Chief Executive Officer since 1999 and Vice President 1986 to 1998; effective March 29, 2007, Chairman, Chief Executive Officer & President of Union National Community Bank, Chairman and Chief Executive Officer since 2006, President and Chief Executive Officer 1999-2005, Senior Vice President 1982-1998, and Chief Operating Officer 1996-1998.  Mr. Gainer serves as a Director at the Economic Development Company of Lancaster, PA. Mr. Gainer’s active Board involvement over the past 15 years, his Executive Management experience of 25 years, and his 35 years of experience in the banking industry, as well as his in-depth understanding of and involvement in the communities served by the Corporation, qualify him to serve on the Board of Directors. |
|                   |   |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| James R. Godfrey(66)   |   | 2003          |   | Vice Chairman of Union National Financial Corporation since 2007; Executive Vice President, Teachers Protective Mutual Life Insurance Company; Senior Consultant, The Benecon Group (employee benefits consulting firm from October 2004 to December 2005); President, HealthGuard of Lancaster, Inc. from 1985 to 2004. Mr. Godfrey’s extensive knowledge of the insurance industry, his many years of business experience and his background in management and human resources qualify him to serve on the Board of Directors.                                                                                                                                                                                                                                                                                                                                                                                                 |
|                   |   |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Darwin A. Nissley(53)  |   | 1999          |   | Secretary of Union National Financial Corporation since 2007 and Partner, Nissley Brothers.  Mr. Nissley serves as a Director of the Center for Beef Excellence in Harrisburg, PA. Mr. Nissley’s expertise in the agriculture industry (Union National lends to local agricultural businesses) and demonstrated business skills in managing all aspects of his own business qualify him to serve on the Board of Directors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |

----

| Name and Age |   | DirectorSince |   | Principal Occupation for the Past Five Years and Positions Held with Union National Financial Corporation andSubsidiaries                                                                                                                                                                                                                                                                                                                                                         |
|------------------------|--------|---------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                   |   |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                   |   |          |   | Class of  B – Continuing Directors (term expires 2013)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                   |   |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| Donald Cargas, Jr.(63) |   | 2006          |   | Effective December 17, 2007, Chairman/CEO of Cargas Systems, Inc.; President/CEO 1988-2007. Mr. Cargas’ experience in founding and managing all aspects of a successful technology company, and his strong business and human resource management skills, qualify him to serve on the Board of Directors.                                                                                                                                                                                                                                         |
|                   |   |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| Barry C. Huber(59)     |   | 2006          |   | Certified Public Accountant, Partner of Trout, Ebersole & Groff, LLP and a partner in TEG Realty. Mr. Huber’s extensive financial knowledge through many years of experience as a Certified Public Accountant and firm managing partner qualify him to serve on the Board of Directors.                                                                                                                                                                                                                                                       |
|                   |   |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| Lloyd C. Pickell(64)   |   | 2001          |   | Public Accountant, Lloyd C. Pickell Public Accountant; Director & Secretary/Controller, J.B. Hostetter & Sons, Inc.; Director & Secretary/ Treasurer, Grandview Meadows, Inc.; Managing  Partner, PME Real Estate and JKL Investment Group; Managing Member, HFG Associates. LLC; and Treasurer & Former Director, House on the Rock Family Ministries. Mr. Pickell’s many years of financial management experience in public accounting and business advisory services qualify him to serve on the Board of Directors. |
|                   |   |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                   |   |          |   | Class of C  – Directors (term expires 2011)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                   |   |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| Kevin D. Dolan(57)     |   | 2005          |   | Partner and Part-Owner, Gingrich, Smith, Klingensmith & Dolan; Partner, Gingrich, Smith, Klingensmith & Dolan Real Estate; President, Elizabethtown Transfer Company, Inc. since 2001; Partner, Smith, Klingensmith, Dolan & Shank Real Estate since 2006. Mr. Dolan’s legal experience and expertise, and business and financial background and experience, qualify him to serve on the Board of Directors.                                                                                                                          |

----

| Name and Age |   | DirectorSince |   | Principal Occupation for the Past Five Years and Positions Held with Union National Financial Corporation andSubsidiaries                                                                                                                                                                                                                                                                                       |
|------------------------|--------|---------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                   |   |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| Thomas J. McGrath(53)  |   | 2006          |   | President/Owner, Donegal Animal Hospital, PC in Mount Joy, PA.  Dr. McGrath serves on the boards of Pet Emergency Treatment Services (P.E.T.S.) and Pet Emergency Services. From 2000-2009, Dr. McGrath served on the State Board of Veterinary Medicine in PA. Dr. McGrath’s many years of experience as a successful small business owner, and his in-depth involvement in many community-based organizations, qualify him to serve on the Board of Directors. |
|                   |   |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| William M. Nies(63)    |   | 2003          |   | Independent Real Estate Agent/Developer, LMS Commercial Real Estate. Mr. Nies’ many years of experience in real estate sales, leasing and development, and his in-depth knowledge of the greater Lancaster County, Pennsylvania real estate market, qualify him to serve on the Board of Directors.                                                                                                                                                                             |

----

| ITEM 11. | EXECUTIVE COMPENSATION. |
|----------|-------------------------|

| Name               |   | Fees Earnedor Paid inCash($) |      |   | All OtherCompensation($) |   |    | Total($) |   |
|--------------------|--------|---------------------------------------------|-----------|--------|-------------------------------|--------|---------|----------|--------|
| Donald Cargas, Jr. |   |                                        | 20,156.00 |   |                          |   | — |     |   |   | 20,156.00 |   |
| Kevin D. Dolan     |   |                                        | 20,849.00 |   |                          |   | — |     |   |   | 20,849.00 |   |
| James R. Godfrey   |   |                                        | 22,797.00 |   |                          |   | — |     |   |   | 22,797.00 |   |
| Barry C. Huber     |   |                                        | 21,929.00 |   |                          |   | — |     |   |   | 21,929.00 |   |
| Thomas J. McGrath  |   |                                        | 20,999.00 |   |                          |   | — |     |   |   | 20,999.00 |   |
| William M. Nies    |   |                                        | 19,463.00 |   |                          |   | — |     |   |   | 19,463.00 |   |
| Darwin A. Nissley  |   |                                        | 20,486.00 |   |                          |   | — |     |   |   | 20,486.00 |   |
| Lloyd C. Pickell   |   |                                        | 21,989.00 |   |                          |   | — |     |   |   | 21,989.00 |   |

----

| Name andPrincipalPosition                    |   | Year   |   | Base Salary($) |    |   | Bonus($) |   |    | OptionAwards($) |   |   | Change inPension Value& NonqualifiedDeferredCompensationEarnings ($) |   |   | All OtherCompensation($) |    |   | Total($) |   |
|---------------------------------------------------|--------|--------|--------|---------------------|---------|--------|----------|--------|---------|-----------------|--------|--------|----------------------------------------------------------------------------------------------|--------|--------|-------------------------------|---------|--------|----------|--------|
|                                              |   |   |   |                |    |   |     |   |    |            |   |   |                                                                                         |   |   |                          |    |   |     |   |
| Mark D. Gainer Chairman, Chief                    |   | 2010   |   | $                   | 197,505 |   |     |   | — |            |   |   | —                                                                                      |   |   | $                             | 144,552 |   |     | $      | 8,809 | (1) |   | $ | 350,866 |   |
| Executive Officer and President              |   | 2009   |   | $                   | 203,414 |   |     |   | — |            |   |   | —                                                                                      |   |   | $                             | 166,259 |   |     | $      | 8,510 | (2) |   | $ | 378,183 |   |
| Stephen D. Staman                                 |   | 2010   |   | $                   | 150,873 |   |     | $      | 1,000   |            |   |   | —                                                                                      |   |   |                          | — |   |     | $      | 12,995 | (3) |   | $ | 164,868 |   |
| Vice President                               |   | 2009   |   | $                   | 155,662 |   |     |   | — |            |   |   | —                                                                                      |   |   |                          | — |   |     | $      | 15,752 | (4) |   | $ | 171,414 |   |
| Michael D. Peduzzi                                |   | 2010   |   | $                   | 126,000 |   |     | $      | 5,000   |            |   |   | —                                                                                      |   |   |                          | — |   |     | $      | 1,209 | (5) |   | $ | 132,209 |   |
| Chief Financial Officer and Treasurer   |   | 2009   |   | $                   | 129,769 |   |     |   | — |            |   |   | —                                                                                      |   |   |                          | — |   |     | $      | 1,126 | (6) |   | $ | 130,895 |   |

| (1) | For 2010, all other compensation includes disability insurance costs of $1,172, life insurance costs of $731, and long-term care contributions of $6,906 for Mr. Gainer’s interests. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | For 2009, all other compensation includes disability insurance costs of $1,525, life insurance costs of $79, and long-term care contributions of $6,906 for Mr. Gainer’s interests. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | For 2010, all other compensation includes disability insurance costs of $752, life insurance costs of $249, and country club dues of $11,994 for Mr. Staman. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | For 2009, all other compensation includes disability insurance costs of $1,120, life insurance costs of $79, and country club dues of $14,553 for Mr. Staman. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | For 2010, all other compensation includes disability insurance costs of $841 and life insurance costs of $368 for Mr. Peduzzi. |
|-----|--------------------------------------------------------------------------------------------------------------------------------|

| (6) | For 2009, all other compensation includes disability insurance costs of $968 and life insurance costs of $158 for Mr. Peduzzi. |
|-----|--------------------------------------------------------------------------------------------------------------------------------|

----

|                                                     |   | Option Awards                                                                   |
|----------------------------------------------------------|--------|--------------------------------------------------------------------------------------|
| Name                                                     |   | Number of Securities UnderlyingUnexercised Options(#)Exercisable |   |   | Option Exercise Price($) |   | Option Expiration Date |
| Mark D. Gainer                                           |   |                                                                                 | 3,150 |   |   | $ | 16.10 |   | 12/12/12 |
| Chairman, Chief Executive Officer and President          |   |                                                                                 | 5,250 |   |   | $ | 19.93 |   | 12/11/13 |
|                                                     |   |                                                                                 | 5,250 |   |   | $ | 22.14 |   | 06/17/14 |
|                                                     |   |                                                                                 | 5,000 |   |   | $ | 21.19 |   | 06/16/15 |
|                                                     |   |                                                                                 | 5,000 |   |   | $ | 18.50 |   | 01/25/17 |
|                                                     |   |                                                                                 | Total – 23,650 |   |   |   |   |   |   |
| Stephen D. Staman                                        |   |                                                                                 | 1,625 |   |   | $ | 16.10 |   | 12/12/12 |
| Vice President                                           |   |                                                                                 | 1,050 |   |   | $ | 19.93 |   | 12/11/13 |
|                                                     |   |                                                                                 | 2,625 |   |   | $ | 22.14 |   | 06/17/14 |
|                                                     |   |                                                                                 | 2,500 |   |   | $ | 21.19 |   | 06/16/15 |
|                                                     |   |                                                                                 | 3,450 |   |   | $ | 18.50 |   | 01/25/17 |
|                                                     |   |                                                                                 | Total – 11,250 |   |   |   |   |   |   |
| Michael D. Peduzzi Chief Financial Officer and Treasurer |   |                                                                                 | None |   |   |   | — |   | — |

----

| 1. | a sale or other transfer of ownership of forty percent (40%) or more of the total gross fair market value of the assets of Corporation and Bank to any individual, corporation, partnership, trust, or other entity or organization (a “Person”) or group of Persons acting in concert as a partnership or other group, other than a Person controlling, controlled by, or under common control with Corporation or Bank; |
|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2. | any Person or group of Persons acting in concert as a partnership or other group, other than a Person controlling, controlled by, or under common control with Corporation or Bank, acquires ownership of stock in Corporation, that together with stock held by such Person or group, constitutes more than 50 percent of the total fair market value or total voting power of the stock of Corporation, provided such Person or group did not own more than 50 percent of the total fair market value or total voting power of the stock of Corporation prior to such acquisition; or |
|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3. | the replacement of a majority of members of Corporation’s Board of Directors over any period of one year or less by directors whose appointment or election is not endorsed by a majority of the members of the Corporation’s Board of Directors prior to the date of appointment or election. |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 1. | is terminated without cause; |
|----|------------------------------|

| 2. | is reassigned to a location greater than 50 miles from his office location on the date of the Change of Control; |
|----|------------------------------------------------------------------------------------------------------------------|

| 3. | has his annual base salary reduced; or |
|----|----------------------------------------|

| 4. | is not provided similar benefits or they are materially reduced. |
|----|------------------------------------------------------------------|

----

| ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. |
|----------|-------------------------------------------------------------------------------------------------|

| Name and Address ofBeneficial Owner           |   | Amount and Nature of Beneficial Ownership |    |   | Percent of Class |   |
|-------------------------------------------------------------------|--------|--------------------------------------------------------------------|---------|--------|----------------------------|--------|
| Donegal Mutual Insurance Company1195 River RoadMarietta, PA 17547 |   |                                                               | 248,999 | (1)    |                       |   | 8.14 | % |
| Loeb Partners Corporation61 BroadwayNew York, NY  10006 |   |                                                               | 168,750 | (2)    |                       |   | 5.52 | % |

|   | · | Voting power, which includes the power to vote or to direct the voting of the stock; or |
|--------|--------|-----------------------------------------------------------------------------------------|

|   | · | Investment power, which includes the power to dispose or direct the disposition of the stock; or |
|--------|--------|--------------------------------------------------------------------------------------------------|

|   | · | The right to acquire beneficial ownership within 60 days after March 31, 2011. |
|--------|--------|--------------------------------------------------------------------------------|

----

| Name of Individual or Identity of Group  |   | BeneficiallyOwned Shares |    |   | Options to Acquire Shares(Exercisable within 60 Days)* |   |    | Amount and Nature of Beneficial Ownership |   |   | Percent of Class if OptionsExercised |   |
|------------------------------------------------------------------------|--------|-------------------------------|---------|--------|--------------------------------------------------------------------------------------|--------|---------|--------------------------------------------------------------------|--------|--------|----------------------------------------------------------|--------|
| Directors and Nominees                                                 |   |                          |    |   |                                                                                 |   |    |                                                               |   |   |                                                     |   |
| Donald Cargas, Jr.                                                     |   |                          | 12,200  |   |                                                                                 |   | — |                                                               |   |   | 12,200                                                   | (1)    |   |   | — | % |
| Kevin D. Dolan                                                         |   |                          | 18,415  |   |                                                                                 |   | — |                                                               |   |   | 18,415                                                   | (2)    |   |   | — | % |
| Mark D. Gainer                                                         |   |                          | 55,126  |   |                                                                                 |   | 23,650  |                                                               |   |   | 78,776                                                   | (3)    |   |   | 2.58 | % |
| James R. Godfrey                                                       |   |                          | 4,444   |   |                                                                                 |   | 1,157   |                                                               |   |   | 5,601                                                    | (4)    |   |   | — | % |
| Barry C. Huber                                                         |   |                          | 29,837  |   |                                                                                 |   | — |                                                               |   |   | 29,837                                                   | (5)    |   |   | — | % |
| Thomas J. McGrath                                                      |   |                          | 12,191  |   |                                                                                 |   | — |                                                               |   |   | 12,191                                                   | (6)    |   |   | — | % |
| William M. Nies                                                        |   |                          | 23,930  |   |                                                                                 |   | 1,157   |                                                               |   |   | 25,087                                                   | (7)    |   |   | — | % |
| Darwin A. Nissley                                                      |   |                          | 12,316  |   |                                                                                 |   | 3,771   |                                                               |   |   | 16,087                                                   | (8)    |   |   | — | % |
| Lloyd C. Pickell                                                       |   |                          | 30,296  |   |                                                                                 |   | 2,314   |                                                               |   |   | 32,610                                                   | (9)    |   |   | 1.07 | % |
| Other Named Executives                                                 |   |                          |    |   |                                                                                 |   |    |                                                               |   |   |                                                     |   |   |   |   |   |
| Stephen D. Staman                                                      |   |                          | 24,663  |   |                                                                                 |   | 11,250  |                                                               |   |   | 35,913                                                   | (10)   |   |   | 1.17 | % |
| Michael D. Peduzzi                                                     |   |                          | 5,000   |   |                                                                                 |   | — |                                                               |   |   | 5,000                                                    | (11)   |   |   | — | % |
|                                                                   |   |                          |    |   |                                                                                 |   |    |                                                               |   |   |                                                     |   |   |   |   |   |
| All Directors, Nominees and Executive Officers as a Group (11 persons) |   |                          | 228,418 |   |                                                                                 |   | 43,299  |                                                               |   |   | 271,717                                                  |   |   |   | 8.88 | % |

|   | (1) | Includes 1,600 shares of Common Stock held individually by Mr. Cargas and 10,600 shares of Common Stock held jointly with his spouse. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Includes 9,129 shares of Common Stock held individually by Mr. Dolan, 8,788 shares of Common Stock held in a 401(k) for the benefit of Mr. Dolan, 419 shares of Common Stock held jointly with his spouse, and 79 shares of Common Stock held in a real estate partnership of which Mr. Dolan is a partner. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | Includes 3,325 shares of Common Stock held individually by Mr. Gainer, 486 shares of Common Stock held individually by his spouse, 51,315 shares of Common Stock held in an IRA, and options to purchase 23,650 shares. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4) | Includes 1,794 shares of Common Stock held individually by Mr. Godfrey, 2,650 shares of Common Stock held in an IRA, and options to purchase 1,157 shares. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (5) | Includes 29,837 shares of Common Stock held individually by Mr. Huber. |
|--------|-----|------------------------------------------------------------------------|

|   | (6) | Includes 1,782 shares of Common Stock held individually by Dr. McGrath and 10,409 shares of Common Stock held in an IRA. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------|

|   | (7) | Includes 23,930 shares of Common Stock held individually by Mr. Nies and options to purchase 1,157 shares. |
|--------|-----|------------------------------------------------------------------------------------------------------------|

|   | (8) | Includes 12,086 shares of Common Stock held individually by Mr. Nissley, 115 shares of Common Stock held individually by his spouse, 115 shares of Common Stock held by his son, and options to purchase 3,771 shares. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (9) | Includes 29,823 shares of Common Stock held individually by Mr. Pickell, 473 shares of Common Stock held jointly with his spouse, and options to purchase 2,314 shares. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (10) | Includes 24,663 shares of Common Stock held individually by Mr. Staman and options to purchase 11,250 shares. |
|--------|------|---------------------------------------------------------------------------------------------------------------|

|   | (11)  | Includes 4,000 shares of Common Stock held individually by Mr. Peduzzi and 1,000 shares of Common Stock held in an IRA. |
|--------|------------|-------------------------------------------------------------------------------------------------------------------------|

----

| ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. |
|----------|----------------------------------------------------------------------------|

| Name        |   | Independent |   | Other Transactions/Relationships/Arrangements |
|-------------|--------|-------------|--------|----------------------------------------------------|
| Mr. Cargas  |   | Yes         |   | Software consulting services                       |
| Mr. Dolan   |   | Yes         |   | Loan support services                              |
| Mr. Godfrey |   | Yes         |   | None                                               |
| Mr. Huber   |   | Yes         |   | None                                               |
| Dr. McGrath |   | Yes         |   | None                                               |
| Mr. Nissley |   | Yes         |   | None                                               |
| Mr. Pickell |   | Yes         |   | None                                               |

----

----

|                  |   | 2010   |    |   | 2009   |   |
|-----------------------|--------|--------|---------|--------|--------|--------|
| Audit Fees(1)         |   | $      | 91,048  |   |   | $      | 100,472 |   |
| Audit-related fees(2) |   |   | 15,000  |   |   |   | 5,250 |   |
| Tax Fees(3)           |   |   | 11,702  |   |   |   | 10,181 |   |
| All Other Fees(4)     |   |   | 0       |   |   |   | 1,856 |   |
| Total                 |   | $      | 117,750 |   |   | $      | 117,759 |   |

|   | (1) | Includes professional services rendered for the audit of Union National’s annual financial statements, and review of financial statements included in Forms 10-Q, or services normally provided in connection with statutory and regulatory filings including out-of-pocket expenses. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Includes S-4 filing in 2010 and review of the Form S-3 and Private Placement offering in 2009. |
|--------|-----|------------------------------------------------------------------------------------------------|

|   | (3) | Tax fees include preparation of state and federal tax returns and tax consultations. |
|--------|-----|--------------------------------------------------------------------------------------|

|   | (4) | Assistance with Affirmative Action Plan compliance monitoring in 2009. |
|--------|-----|------------------------------------------------------------------------|

| Members of the Audit Committee |
|--------------------------------|
|                           |   |
| Barry C. Huber, Chairman       | Darwin A. Nissley |
| Thomas J. McGrath              | Lloyd C. Pickell |

----

| ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES |
|----------|-----------------------------------------|

|   | 1. | Financial Statements. |
|--------|----|-----------------------|

|   | 2. | The financial statement schedules required by this Item are omitted because the information is either inapplicable, not required, or is in the consolidated financial statements in Part II, Item  8 of this Annual Report on Form 10-K. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3. | The following Exhibits are filed herewith, or incorporated by reference as a part of this Report: |
|--------|----|---------------------------------------------------------------------------------------------------|

| 3(i)   |   | Union National Financial Corporation’s Amended and Restated Articles of Incorporation. (Incorporated by reference to Exhibit 3.1 to Union National Financial Corporation’s current report on Form 8-K, filed with the Commission on May 13, 2009.)                                                                                                                                                                                               |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 3(ii)  |   | Union National Financial Corporation’s Amended and Restated By-laws.   (Incorporated by reference to Exhibit 3(ii) to Union National Financial Corporation’s current report on Form 8-K, filed with the Commission on February 27, 2009.)                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.1    |   | Rights Agreement, dated August 27, 2007, between Registrar and Transfer Company and Union National Financial Corporation.  (Incorporated by reference to Exhibit 4 to Union National Financial Corporation’s current report on Form 8-K, filed August 30, 2007.)                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.2    |   | Certificate of Designations of the Series A Preferred Stock (Incorporated by reference to Exhibit 3.1 to Union National’s Current Report on Form 8-K dated September 15, 2009).                                                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.1   | **     | Union National Financial Corporation 1988 Stock Incentive Plan. (Incorporated by reference to Exhibit 4.3 to Union National Financial Corporation’s Registration Statement No. 333-27837 on Form S-8, filed with the Commission on May 27, 1997.)                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.2   | **     | Union National Financial Corporation 1997 Stock Incentive Plan.  (Incorporated by reference to Exhibit 4.5 to Union National Financial Corporation’s Registration Statement No. 333-27837 on Form S-8, filed with the Commission on May 27, 1997 and incorporated by reference to Amendment 1 to Union National Financial Corporation’s Registration Statement No. 333-107326 on Form S-8 filed with the commission on July 25, 2003.) |

----

| 10.3   | **     | Union National Financial Corporation’s Employee Stock Purchase Plan (Incorporated by Reference to Exhibit 4.4 to Union National Financial Corporation’s Registration Statement No. 333-27837 on Form S-8, filed with the Commission on May 27, 1997).                                                                                                                                                                                     |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.4   | *      | Group Term Replacement Plan for Certain Officers, CEO, dated January 1, 2004 between Mark D. Gainer and Union National Community Bank.  (Incorporated by reference to Exhibit 10.12 to Union National Financial Corporation’s Annual Report on Form 10-K, filed with the Commission on March 30, 2004.)                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.5   | **     | Union National Financial Corporation, 1999 Independent Directors Stock Option Plan.  (Incorporated by Reference to Exhibit 4.3 to Union National Financial Corporation’s Registration Statement No. 333-80739 on Form S-8, filed with the Commission on September 15, 1999.)                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.6   |   | Office Lease between Lausch Lane Associates LP as Landlord and Union  National Community Bank as Tenant for 570 Lausch Lane, Lancaster,  PA 17601. (Incorporated by reference to Exhibit 99.1 to Union National Financial Corporation’s Current Report of Form 8-K, filed with the Commission on May 17, 2005.)                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.7   | *      | Amended and Restated Employment Agreement and Amended and Restated Executive Salary Continuation Agreement dated as of December 29, 2006, with Mark D. Gainer, Chairman, President and Chief Executive Officer.  (Incorporated by reference to Exhibit 10.15 to Union National Financial Corporation’s 2006 Annual Report on Form 10-K, filed with the Commission on March 28, 2007.)                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.8   |   | Amended and Restated Declaration of Trust of Union National Capital Trust II, dated as of October 14, 2004, among Union National Financial Corporation, as sponsor, the Delaware and institutional trustee named therein, and the administrators named therein.  (Incorporated by reference to Exhibit 10.17 to Union National Financial Corporation’s 2006 Annual Report on Form 10-K, filed with the Commission on March 28, 2007.) |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.9   |   | Indenture, dated as of October 14, 2004, between Union National Financial Corporation, as issuer, and the trustee named therein, relating to the Junior Subordinated Debt Securities due 2034.  (Incorporated by reference to Exhibit 10.18 to Union National Financial Corporation’s 2006 Annual Report on Form 10-K, filed with the Commission on March 28, 2007.)                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.10  |   | Guarantee Agreement, dated as of October 14, 2004, between Union National Financial Corporation and the guarantee trustee named therein.  (Incorporated by reference to Exhibit 10.19 to Union National Financial Corporation’s 2006 Annual Report on Form 10-K, filed with the Commission on March 28, 2007.)                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.11  |   | Indenture, dated as of July 27, 2006, between Union National Community Bank, as issuer, and the trustee named therein, relating to the Junior Subordinated Debt Securities due 2036.  (Incorporated by reference to Exhibit 4.1 to Union National Financial Corporation’s quarterly  report on Form 10-Q, filed with the Commission on August 14, 2006.)                                                                    |

----

| 10.12  | *      | Change of Control Agreement, dated September 4, 2007, between Michael D. Peduzzi, Executive Vice President, Chief Financial Officer and Union National Financial Corporation and its subsidiary, Union National Community Bank.  (Incorporated by reference to Exhibit 99.1 to Union National Financial Corporation’s current report on Form 8-K, filed with the Commission on September 6, 2007.)              |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.13  | *      | Change of Control Agreement among Union National Financial Corporation, Union National Community Bank and each of the following officers: Michael L. Maurer and Bradley A. Willow, filed August 13, 2008, as Item 10.18 to Form 10-Q for the fiscal quarter ended September 30, 2008 (No. 0-19214) and incorporated herein by reference.                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.14  | *      | Change of Control Agreement among Union National Financial Corporation, Union National Community Bank and each of the following officers: R. Michael Mohn, Steve D. Garber and Kevin Hersh, filed August 13, 2008, as Item 10.19 to Form 10-Q for the fiscal quarter ended September 30, 2008 (No. 0-19214) and incorporated herein by reference.                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.15  | ***    | Stock Bonus Plan and the 2009 Stock Purchase Plan, filed December 3, 2008, and incorporated by reference to Exhibit 99.1 to Union National Financial Corporation’s current report on Form 8-K.                                                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.16  |   | Formal agreement with the Comptroller of the Currency (“OCC”) and Union National Community Bank, filed August 31, 2009, as Item 8.01 to Form 8-K and incorporated by reference.                                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.17  |   | Form of stock subscription agreement for Series A Preferred Stock (Incorporated by reference to Exhibit 10.1 to Union National Financial Corporation’s current report on Form 8-K, filed with the Commission on October 1, 2009).                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.18  |   | Agreement and Plan of Merger among Union National Financial Corporation, Donegal Financial Services Corporation (“DFSC”) and certain affiliated entities of DFSC (Incorporated by reference to Exhibit 2.1 to Union National Financial Corporation’s current report on Form 8-K, filed with the Commission on April 23, 2010).                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.19  |   | Amended and Restated Agreement and Plan of Merger by and among Donegal Acquisition Inc., Donegal Financial Services Corporation, Donegal Mutual Insurance Company, Donegal Group Inc. and Union National Financial Corporation dated as of May 20, 2010 (Incorporated by reference to Exhibit 2.1 to Union National Financial Corporation’s current report on Form 8-K, filed with the Commission on May 21, 2010).       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.20  |   | Amendment to the Agreement and Plan of Merger by and among Donegal Acquisition Inc., Donegal Financial Services Corporation, Donegal Mutual Insurance Company, Donegal Group Inc. and Union National Financial Corporation dated as of September 1, 2010 (Incorporated by reference to Exhibit 2.1 to Union National Financial Corporation’s current report on Form 8-K, filed with the Commission on September 2, 2010). |

----

| 10.21  |   | Amendment to the Agreement and Plan of Merger by and among Donegal Acquisition Inc., Donegal Financial Services Corporation, Donegal Mutual Insurance Company, Donegal Group Inc. and Union National Financial Corporation dated as of December 8, 2010 (Incorporated by reference to Exhibit 2.1 to Union National Financial Corporation’s current report on Form 8-K, filed with the Commission on December 9, 2010). |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 14     |   | Union National Financial Corporation Directors and Senior Management Code of Ethics. (Incorporated by reference to Exhibit 14 to Union National Financial Corporation’s 2009 Annual Report on Form 10-K, filed with the Commission on March 31, 2010.)                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 21     |   | Subsidiaries of Union National Financial Corporation.                                                                                                                                                                                                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 23.1   |   | Consent of ParenteBeard LLC, Independent Registered Public Accounting Firm.                                                                                                                                                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 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, filed herewith.                                                                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 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, filed herewith.                                                                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 32     |   | Certification of Principal Executive Officer and Principal Financial Officer Pursuant to U.S.C. Section 1350 as added by Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.                                                                                                                                                                                                                                       |

| *  | Management contract or compensatory plan arrangement. |
|---------|-------------------------------------------------------|

| ** | Stockholder approved compensatory plan pursuant to which the Registrant’s Common Stock may be issued to employees of the Corporation. |
|----|---------------------------------------------------------------------------------------------------------------------------------------------|

| *** | Non-stockholder approved compensatory plan pursuant to which the Registrant's Common Stock may be issued to employees of the Corporation. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | The exhibits required to be filed by this Item are listed under Item 15(a)3, above. |
|--------|-----|-------------------------------------------------------------------------------------|

|   | (c) | NOT APPLICABLE. |
|--------|-----|-----------------|

----

|   | UNION NATIONAL FINANCIAL CORPORATION |
|--------|--------------------------------------|
|   | (Registrant)                         |
|   |                                 |   |
|   | By                                   | /s/ Mark D. Gainer |
|   |                                 | Mark D. Gainer, |
|   |                                 | Chairman of the Board of Directors, |
|   |                                 | Chief Executive Officer and President |
|   |                                 | Date: March 31, 2011 |

|   |                                                                                                                   |   |   | Date           |
|--------|------------------------------------------------------------------------------------------------------------------------|--------|--------|----------------|
|   |                                                                                                                   |   |   |           |
| By     | /s/ Mark D. Gainer                                                                                                     |   |   | March 31, 2011 |
|   | Mark D. Gainer,Chairman of the Board of Directors, Chief Executive Officer, andPresident (Principal Executive Officer) |   |   |
|   |                                                                                                                   |   |   |           |
| By     | /s/ Michael D. Peduzzi, CPA                                                                                            |   |   | March 31, 2011 |
|   | Michael D. Peduzzi, CPA,Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)         |   |
|   |                                                                                                                   |   |   |           |
| By     | /s/ Donald Cargas, Jr.                                                                                                 |   |   | March 31, 2011 |
|   | Donald Cargas, Jr., Director                                                                                           |   |   |           |
|   |                                                                                                                   |   |   |           |
| By     | /s/ Kevin D. Dolan                                                                                                     |   |   | March 31, 2011 |
|   | Kevin D. Dolan, Director                                                                                               |   |   |           |
|   |                                                                                                                   |   |   |           |
| By     | /s/ James R. Godfrey                                                                                                   |   |   | March 31, 2011 |
|   | James R. Godfrey, Director                                                                                             |   |   |           |
|   |                                                                                                                   |   |   |           |
| By     | /s/ Barry C. Huber, CPA                                                                                                |   |   | March 31, 2011 |
|   | Barry C. Huber, CPA, Director                                                                                          |   |   |           |
|   |                                                                                                                   |   |   |           |
| By     | /s/ Thomas J. McGrath, DVM                                                                                             |   |   | March 31, 2011 |
|   | Thomas J. McGrath, DVM, Director                                                                                       |   |   |           |
|   |                                                                                                                   |   |   |           |
| By     | /s/ William M. Nies                                                                                                    |   |   | March 31, 2011 |
|   | William M. Nies, Director                                                                                              |   |   |           |
|   |                                                                                                                   |   |   |           |
| By     | /s/ Darwin A. Nissley                                                                                                  |   |   | March 31, 2011 |
|   | Darwin A. Nissley, Director                                                                                            |   |   |           |
|   |                                                                                                                   |   |   |           |
| By     | /s/ Lloyd C. Pickell                                                                                                   |   |   | March 31, 2011 |
|   | Lloyd C. Pickell, Director                                                                                             |   |   |           |

----

|   | 21 | Subsidiaries of Union National Financial Corporation. |
|--------|----|-------------------------------------------------------|

|   | 23.1 | Consent of ParenteBeard LLC, Independent Registered Public Accounting Firm. |
|--------|------|-----------------------------------------------------------------------------|

|   | 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. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 32 | Certification of Principal Executive Officer and Principal Financial Officer Pursuant to U.S.C. Section 1350 as added by Section 906 of the Sarbanes-Oxley Act of 2002. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----