UNITED STATES
               SECURITIES AND EXCHANGE COMMISSION

                     Washington, DC 20549


                          FORM 10-K

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

           For the fiscal year ended December 31, 2003

                              OR

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

  For the transition period from to_____________to_____________

  Commission file number 0-19214
                        ________________

              UNION NATIONAL FINANCIAL CORPORATION
              ____________________________________
     (Exact Name of Registrant as Specified in its Charter)

            Pennsylvania                    23-2415179
            ____________                    __________
  (State or Other Jurisdiction of       (I.R.S. Employer
   Incorporation or Organization)     Identification Number)


  101 East Main Street, P.O. Box 567
     Mount Joy, Pennsylvania                  17552
     _______________________                  _____
  (Address of Principal Executive Offices)  (Zip Code)


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

 Securities registered pursuant to Section 12(b) of the Act:None

 Securities registered pursuant to Section 12(g) of the Act:
                                   Common Stock, $0.25 Par Value
                                   _____________________________
                                          (Title of Class)
<PAGE>
<PAGE>
     Indicate by check mark whether the registrant:  (1) has
filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes X    No
                                              ___     ___

     Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]

     Indicate by check mark whether the registrant is an
accelerated filer (as defined in Rule 12b-2 of the Act).  Yes __
No X
  ___

     The aggregate market value of the shares of Common Stock of
the Registrant held by nonaffiliates of the Registrant was
$46,438,227 as of June 30, 2003.  As of March 22, 2004, the
Registrant had approximately 2,412,261 shares of Common Stock
outstanding.

              DOCUMENTS INCORPORATED BY REFERENCE:

     Excerpts from Union National Financial Corporation's 2003
Annual Report to Stockholders  are incorporated by reference into
Parts I, II and IV, hereof.  Union National Financial
Corporation's Proxy Statement for its 2004 Annual Meeting is
incorporated by reference in response to Parts III and IV,
hereof.

<PAGE>

              UNION NATIONAL FINANCIAL CORPORATION
                           FORM 10-K
                             INDEX

PART I                                               PAGE NO.
     Item 1 - Business..................................... 1

     Item 2 - Properties....................................8

     Item 3 - Legal Proceedings............................10

     Item 4 - Submission of Matters to a Vote of Security
              Holders......................................10

PART II
     Item 5 - Market for Registrant's Common Equity, Related
              Shareholder Matters and Issuer Purchases of
              Equity Securities............................11

     Item 6 - Selected Financial Data......................11

     Item 7 - Management's Discussion and Analysis of
              Financial Condition and Results of Operation.12

     Item 7A- Quantitative and Qualitative Disclosure About
              Market Risk..................................12

     Item 8 - Financial Statements and Supplementary Data..12

     Item 9 - Changes In and Disagreements With Accountants
              on Accounting and Financial Disclosure.......12

     Item 9A- Controls and Procedures......................12

PART III
     Item 10- Directors and Executive Officers of the
              Registrant...................................13

     Item 11- Executive Compensation.......................13

     Item 12- Security Ownership of Certain Beneficial
              Owners and Management and Related
              Stockholder Matters..........................13

     Item 13- Certain Relationships and Related
              Transactions.................................13

     Item 14- Principal Accountant Fees and Services.......14

<PAGE>

PART IV
     Item 15- Exhibits, Financial Statements, Schedules and
              Reports on Form 8-K..........................14

     Signatures............................................17

     Exhibit Index.........................................19

<PAGE>

                             PART I
                             ______

     Union National's management has made forward-looking
statements in this document, and in documents that it
incorporates by reference, that are subject to risks and
uncertainties.  Forward-looking statements include the
information concerning possible or assumed future results of
operations of Union National Financial Corporation, Union
National Community Bank or the combined company.  When management
uses words such as "believes," "expects," "anticipates" or
similar expressions, management is making forward-looking
statements.

     Readers should note that many factors, some of which are
discussed elsewhere in this document and in the documents that
management incorporates by reference, could affect the future
financial results of Union National Financial Corporation, Union
National Community Bank or the combined company and could cause
those results to differ materially from those expressed in the
forward-looking statements contained or incorporated by reference
in this document. These factors include the following:

     * operating, legal and regulatory risks;

     * economic, political, and competitive forces;

     * rapidly changing technology; and

     * the risk that our analyses of these risks and forces could
       be incorrect and/or that the strategies developed to
       address them could be unsuccessful.

                CRITICAL ACCOUNTING POLICIES:

     Disclosure of the corporation's significant accounting
policies is included in Note 1 to the consolidated financial
statements on pages 8 through 11 and in Management's Discussion
and Analysis on page 22 of the Annual Report to Stockholders
(Exhibit 13).  The corporation's accounting policies have been
approved by the Audit Committee.

ITEM 1.      BUSINESS.
_______      _________

     Union National Financial Corporation, a Pennsylvania
business corporation, is a bank holding company registered under
the Bank Holding Company Act of 1956, as amended, and is
supervised by the Board of Governors of the Federal Reserve
System.  Union National Financial Corporation was incorporated on
June 26, 1986, under the Business Corporation Law of the
Commonwealth of Pennsylvania.  Union National Financial
Corporation commenced operations on January 2, 1987, upon
consummation of the acquisition of all of the outstanding shares
of The Union National Mount Joy Bank, which effective February 6,
1998, changed its name to Union National Community Bank.  Union
National Financial Corporation's business consists primarily of
managing and supervising Union National Community Bank, and its
principal source of income is dividends

<PAGE>

paid by Union National Community Bank.  Union National Financial
Corporation has two wholly-owned subsidiaries, Union National
Community Bank and Union National Capital Trust I, formed on
December 19, 2003.  The bank's wholly owned subsidiaries include
the Union National Insurance Agency, Inc. formed on May 21, 2001
and StoneBridge Settlement Services, LLC formed on June 17, 2003.

     Union National Community Bank was organized in 1865 under a
national charter.  Union National Community Bank is a national
banking association, a member of the Federal Reserve System and
is regulated by the Office of the Comptroller of the Currency.
The deposits of Union National Community Bank are insured by the
Federal Deposit Insurance Corporation to the maximum extent
permitted by law.  Union National Community Bank has one main
office with an annex, a commercial banking office opened in March
2004 and six branch locations within Lancaster County,
Pennsylvania.  It is a full-service commercial bank, providing a
wide range of services to individuals and small to medium-sized
businesses in its south central Pennsylvania market area.  Union
National Community Bank accepts time, demand, and savings
deposits and makes secured and unsecured commercial, real estate
and consumer loans.  Union National Community Bank also has a
full-service trust department, the Wealth Management Group
located at its main office.  Through a third party provider
affiliation, Union National Community Bank offers certain non-
depository products to its customers to include annuities and
brokerage services.

     Union National Financial Corporation's executive offices are
located at 101 East Main Street, P.O. Box 567, Mount Joy,
Pennsylvania 17552.  Its telephone number is (717) 653-1441.

     Union National Financial Corporation experiences substantial
competition in attracting and retaining deposits and in lending
funds.  Financial institutions compete for deposits by offering
attractive rates and the convenient office locations.  Direct
competition for deposits comes primarily from other commercial
banks and thrift institutions.  Competition for deposits also
comes from money market mutual funds, corporate and government
securities and credit unions.  The primary factors in the
competition for loans are interest rates, loan origination fees
and the range of products and services offered.  Competition for
origination of real estate loans normally comes from other
commercial banks, thrift institutions, mortgage bankers, mortgage
brokers and insurance companies.

     For additional information concerning Union National
Financial Corporation's business activities, see Part II, Item 7
of this Annual Report on Form 10-K.

Supervision and Regulation - Union National Financial Corporation
_________________________________________________________________

     Union National Financial Corporation operates in a heavily
regulated environment.  Changes in laws and regulations affecting
Union National Financial Corporation and its subsidiary, Union
National Community Bank, may have an impact on operations.  See
"Supervision and Regulation - Union National Financial
Corporation" and "Supervision and Regulation - Union National
Community Bank" below and page 36 of the 2003 Annual Report to
Stockholders.

<PAGE>

     Without the prior approval of the Federal Reserve, the Bank
Holding Company Act prohibits Union National Financial
Corporation from:

     * acquiring direct or indirect control of more than 5% of
       the voting stock of any bank; or

     * acquiring substantially all of the assets of any bank; or

     * merging with another bank holding company.

The Pennsylvania Department of Banking also must approve any
similar consolidation.  Pennsylvania law permits Pennsylvania
bank holding companies to control an unlimited number of banks.

     The Bank Holding Company Act restricts Union National
Financial Corporation from engaging in activities to other than
those that the Federal Reserve has found:

     * to be closely related to banking; and

     * which are expected to produce benefits for the public that
       will outweigh any potentially adverse effects.

     To this end, the Bank Holding Company Act prohibits Union
National Financial Corporation from:

     * engaging in most non-banking businesses; or

     * acquiring ownership or control of more than 5% of the
       outstanding voting stock of any company engaged in a non-
       banking business; unless

     * the Federal Reserve has determined that the non-banking
       business is closely related to banking.

     Under the Bank Holding Company Act, the Federal Reserve may
require a bank holding company to end a non-banking business if
it constitutes a serious risk to the financial soundness and
stability of any bank subsidiary of the bank holding company.

     Other than making equity investments in low to moderate
income housing limited partnerships, Union National Financial
Corporation does not at this time engage in any other permissible
activities, nor does Union National Financial Corporation have
any current plans to engage in any other permissible activities
in the foreseeable future.

<PAGE>

     Subsidiary banks of a bank holding company are subject to
restrictions imposed by the Federal Reserve Act on any extensions
of credit to the bank holding company or any of its subsidiaries,
on investments in the stock or other securities of the bank
holding company and on taking of such stock or securities as
collateral for loans to any borrower.

     Legislation and Regulatory Changes.  From time to time,
     __________________________________
Congress or the Pennsylvania legislature enacts legislation which
has the effect of increasing the cost of doing business, limiting
or expanding permissible activities or affecting the competitive
balance between banks and other financial institutions.
Proposals to change the laws and regulations governing the
operations and taxation of banks, bank holding companies and
other financial institutions are frequently made in Congress, and
before various bank regulatory agencies.  Management cannot
predict the likelihood of any major changes or the impact such
changes might have on Union National Financial Corporation and
its subsidiary.  The following paragraphs discuss legislative or
regulatory changes of potential significance to Union National
Financial Corporation which Congress has recently enacted and
others which Congress or various regulatory or professional
agencies currently are discussing.

     The Federal Reserve Board, the Federal Deposit Insurance
Corporation and the Comptroller of the Currency have issued
certain risk-based capital guidelines, which supplement existing
capital requirements.  The guidelines require all United States
banks and bank holding companies to maintain a minimum risk-based
capital ratio of 8%, of which at least 4% must be in the form of
common stockholders' equity.  Assets are assigned to five risk
categories, with higher levels of capital required for the
categories perceived as representing greater risk.  The required
capital will represent equity and (to the extent permitted)
nonequity capital as a percentage of total risk-weighted assets.
The risk-based capital rules are designed to make regulatory
capital requirements more sensitive to differences in risk
profiles among banks and bank holding companies and to minimize
disincentives for holding liquid assets.  On the basis of an
analysis of the rules and the projected composition of Union
National Financial Corporation's consolidated assets, management
does not believe that the risk-based capital rules have a
material effect on Union National Financial Corporation's
business and capital plans.  Union National Community Bank has
capital ratios exceeding the regulatory requirements.  See pages
15, 16, 34, and 35 of Union National Financial Corporation's 2003
Annual Report to Stockholders for information concerning the
corporation's and the bank's capital ratios, which are included
in Exhibit 13 and incorporated here by reference.

     Pending Legislation.  Management cannot anticipate what
     ____________________
changes Congress may enact or, if enacted, their impact on Union
National Financial Corporation's financial position and reported
results of operation.  As a consequence of the extensive
regulation of commercial banking activities in the United States,
Union National Financial Corporation's and Union National
Community Bank's businesses may be adversely affected by federal
and state legislation and regulations that may increase the costs
of doing business. See also page 36 of Union National Financial
Corporation's 2003 Annual Report to Stockholders, which is
included in Exhibit 13 and incorporated here by reference.

<PAGE>

     Effects of Inflation.  Inflation has some impact on Union
     _____________________
National Financial Corporation's and Union National Community
Bank's operating costs.  Unlike many industrial companies,
however, substantially all of Union National Community Bank's
assets and liabilities are monetary in nature.  As a result,
interest rates have a more significant impact on Union National
Financial Corporation's and Union National Community Bank's
performance than the general level of inflation.  Over short
periods of time, interest rates may not necessarily move in the
same direction or in the same magnitude as prices of goods and
services.

     Monetary Policy.  Domestic economic conditions and the
     ________________
monetary and fiscal policies of the United States Government and
its agencies affect the earnings of Union National Financial
Corporation and Union National Community Bank.  An important
function of the Federal Reserve System is to regulate the money
supply and interest rates.  Among the instruments used to
implement those objectives are open market operations in United
States government securities and changes in reserve requirements
against member bank deposits.  The Federal Reserve uses these
instruments in varying combinations to influence overall growth
and distribution of bank loans, investments and deposits, and
their use may also affect rates charged on loans or paid for
deposits.

     Union National Community Bank is a member of the Federal
Reserve System.  The policies and regulations of the Federal
Reserve Board have a significant effect on its deposits, loans
and investment growth, as well as the rate of interest earned and
paid, and are expected to affect Union National Community Bank's
operations in the future.  The effect of Federal Reserve Board
policies and regulations upon the future business and earnings of
Union National Financial Corporation and Union National Community
Bank cannot be predicted.

     Environmental Laws.  Neither Union National Financial
     ___________________
Corporation nor Union National Community Bank anticipate that
compliance with environmental laws and regulations will have any
material effect on capital, expenditures, earnings or on its
competitive position.  However, environmentally related hazards
have become a source of high risk and potentially unlimited
liability for financial institutions.  Environmentally
contaminated properties owned by an institution's borrowers may
result in a drastic reduction in the value of the collateral
securing the institution's loans to such borrowers, high
environmental clean up costs to the borrower affecting its
ability to repay the loans, the subordination of any lien in
favor of the institution to a state or federal lien securing
clean up costs, and liability to the institution for clean up
costs if it forecloses on the contaminated property or becomes
involved in the management of the borrower.  To minimize this
risk, Union National Community Bank may require an environmental
examination of and report with respect to the property of any
borrower or prospective borrower if circumstances affecting the
property indicate a potential for contamination, taking into
consideration a potential loss to the institution in relation to
the borrower.  Such examination must be performed by an
engineering firm experienced in environmental risk studies and
acceptable to the institution, and the cost of such examinations
and reports are the responsibility of the borrower.  These costs
may be substantial and may deter a prospective borrower from
entering into a loan transaction with Union National Community
Bank.  Union National Financial Corporation is not aware of any
borrower who is  currently subject to any environmental
investigation or clean up proceeding that is likely to have a
material adverse effect on the financial condition or results of
operations of Union National Community Bank.

<PAGE>

     In 1995, the Pennsylvania General Assembly enacted the
Economic Development Agency, Fiduciary and Lender Environmental
Liability Protection Act which, among other things, provides
protection to lenders from environmental liability and
remediation costs under the environmental laws for releases and
contamination caused by others.  A lender who engages in
activities involved in the routine practices of commercial
lending, including, but not limited to, the providing of
financial services, holding of security interests, workout
practices, foreclosure or the recovery of funds from the sale of
property shall not be liable under the environmental acts or
common law equivalents to the Pennsylvania Department of
Environmental Resources or to any other person by virtue of the
fact that the lender engages in such commercial lending practice.
A lender, however, will be liable if it, its employees or agents,
directly cause an immediate release or directly exacerbate a
release of regulated substances on or from the property, or
knowingly and willfully compelled the borrower to commit an
action which caused such release or violate an environmental act.
The Economic Development Agency, Fiduciary and Lender
Environmental Liability Protection Act, however, does not limit
federal liability which still exists under certain circumstances.

     As discussed above, there are several federal and state
statutes that regulate the obligations and liabilities of
financial institutions pertaining to environmental issues.  In
addition to the potential for attachment of liability resulting
from its own actions, a bank may be held liable under certain
circumstances for the actions of its borrowers, or third parties,
when such actions result in environmental problems on properties
that collateralize loans held by Union National Community Bank.
Further, the liability has the potential to far exceed the
original amount of the loan issued by Union National Community
Bank.  Currently, neither Union National Financial Corporation
nor Union National Community Bank is a party to any pending legal
proceeding pursuant to any environmental statute, nor is Union
National Financial Corporation or Union National Community Bank
aware of any circumstances that may give rise to liability under
any such statute.

Supervision and Regulation - Union National Community Bank
__________________________________________________________

     The operations of Union National Community Bank are subject
to federal and state statutes applicable to banks chartered under
the banking laws of the United States, to members of the Federal
Reserve System and to banks whose deposits are insured by the
FDIC.  Bank operations are also subject to regulations of the
Office of the Comptroller of the Currency, the Federal Reserve
Board and the FDIC.

     The primary supervisory authority of Union National
Community Bank is the Office of the Comptroller of the Currency,
which regulates and examines Union National Community Bank.  The
Comptroller  of the Currency has the authority under the
Financial Institutions Supervisory Act to prevent a national bank
from engaging in an unsafe or unsound practice in conducting its
business.

     Federal and state banking laws and regulations govern, among
other things, the scope of a bank's business, the investments a
bank may make, the reserves against deposits a bank must
maintain, loans a bank makes and collateral it takes, the maximum
interest rates a bank may pay on deposits, the activities of a
bank with respect to mergers and consolidations and the
establishment of branches.

<PAGE>

     As a subsidiary of a bank holding company, Union National
Community Bank is subject to certain restrictions imposed by the
Federal Reserve Act on any extensions of credit to the parent
bank holding company or its subsidiaries, on investments in the
stock or other securities of the bank holding company or its
subsidiaries and on taking such stock or securities as collateral
for loans.  The Federal Reserve Act and Federal Reserve Board
regulations also place certain limitations and reporting
requirements on extensions of credit by a bank to principal
shareholders of its parent holding company, among others, and to
related interests of such principal shareholders.  In addition,
such legislation and regulations may affect the terms upon which
any person becoming a principal shareholder of a holding company
may obtain credit from banks with which the subsidiary bank
maintains a correspondent relationship.  The Union National
Insurance Agency, Inc. provides insurance-related products to the
bank's customers.  The agency is subject to supervision and
regulation by the Insurance Department of the Commonwealth of
Pennsylvania, the Office of the Comptroller of Currency and other
regulatory agencies.

     Other.  From time to time, various types of federal and
     ______
state legislation have been proposed that could result in
additional regulation of, and restrictions on, the business of
Union National Community Bank.  It cannot be predicted whether
any such legislation will be adopted or, if adopted, how such
legislation would affect the business of Union National Community
Bank.  As a consequence of the extensive regulation of commercial
banking activities in the United States, Union National Community
Bank's business is particularly susceptible to being affected by
federal legislation and regulations that may increase the costs
of doing business.

     Statistical Data.  The information required by this Item is
     _________________
incorporated by reference from pages 21 through 36 of Union
National Financial Corporation's 2003 Annual Report to
Stockholders.

     Employees.  As of March 22, 2004, Union National Community
     __________
Bank had 128 full-time employees and 19 part-time employees.
None of  these employees is represented by a collective
bargaining agent, and Union National Financial Corporation
believes it enjoys good relations with its personnel.  The
corporation's website address is www.uncb.com.  The corporation
makes available free of charge its annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and
amendments to those reports as soon as reasonably practicable
after it electronically files such reports with the Securities
and Exchange Commission.  Copies of such reports are available at
no charge by contacting Clement M. Hoober, Executive VP, Chief
Financial Officer at 101 E. Main Street, Mount Joy, PA 17552.
(The information found on the corporation's website does not
constitute a part of this or any other report.)

<PAGE>

ITEM 2.      PROPERTIES.
_______      ___________

     Union National Community Bank owns its main office, six
branch offices, the administration services center and certain
parking facilities related to its banking offices, all of which
are free and clear of any lien.  Union National Community Bank's
main office is located in the central business district of Mount
Joy, Pennsylvania.  Below is a table containing the location and
date of acquisition of Union National Community Bank's
properties.  In addition, Union National Community Bank leases
office space for two branch offices and commercial banking office
located in Manheim and Manheim Township, Pennsylvania.

       PROPERTIES OWNED BY UNION NATIONAL COMMUNITY BANK
Office and Address       Description of Property  Date Acquired
__________________       _______________________  _______________

Main Office              Main Bank Office         1911
101 East Main Street     Cut limestone and brick.
Mount Joy, PA  17552     1995 addition is concrete
                         over steel construction.
                         Containing approximately
                         22,251 sq. ft. of space.

Main Office Annex        Wood frame construction  September, 1992
115 East Main Street     with aluminum siding.
Mount Joy, PA 17552      Containing approximately
                         1,632 sq. ft. of space.

Maytown Branch Office    Branch Bank              April, 1972
100 West High Street     Brick veneer, shingled roof
Maytown, PA  17550       with wood trusses.  Containing
                         approximately 4,960 sq. ft.
                         of space.

Hempfield Branch Office  Branch Bank              June, 1979
190 Stony Battery Road   Brick with wood shingle roof.
Salunga, PA 17538        Containing approximately
                         4,619 sq. ft. of space.

Elizabethtown Branch     Branch Bank              January, 1988
Office                   Brick veneer, shingled roof
1275 South Market Street with wood trusses.
Elizabethtown, PA  17022 Containing approximately
                         6,808 sq. ft. of space.

Elizabethtown MotorBank  Drive-up Bank            September, 2001
Office                   Brick on Frame
                         Containing approximately
                         574 sq. ft. of space.


<PAGE>

MotorBank Branch Office  Drive-up Bank Branch     November, 1972
21 North Barbara Street  Brick on frame.
Mount Joy, PA 17552      Containing approximately
                         445 sq. ft. of space.

Administration Services  Brick on concrete block  December, 1984
Center                   with wood and steel frame.
Bank Administration      Containing approximately
Building                 9,398 sq. ft. of space.
25 North Barbara Street
Mount Joy, PA  17552

Columbia Branch Office   Branch Bank              October, 1992
921 Lancaster Avenue     One story brick building
Columbia, PA  17512      containing approximately
                         2,257 sq. ft. of space.


                  PROPERTY LEASED BY THE BANK
Office and Address       Description of Property  Date Leased
__________________       _______________________  _______________

Manheim Branch Office    Concrete block building  January, 1995
701 Lancaster Road       containing 4,266 sq. ft.
Manheim, PA 17545        of space of which approximately
                         2,600 sq. ft. of space is
                         currently used for banking
                         purposes.

Manheim Township Branch  Branch Bank              April 22, 2003
Office                   One story brick and metal siding
38 E. Roseville          building containing approximately
Lancaster, PA 17601      2,000 sq ft of office space.

Commercial Banking       Suite 250 (a portion of  March, 2004
Office                   a three story concrete and
Suite 250                masonry office complex)
205 Granite Run Drive    approximately 3,000 sq ft of
Lancaster, PA 17601      office space.

Credit Services Office   Third floor of three     August, 1998
32 Mount Joy Street      story brick building
Mount Joy, PA 17552      containing 3,000 sq ft of
                         office space.

     In management's opinion, the above properties are in good
condition and are adequate for Union National Financial
Corporation's and Union National Community Bank's purposes.

<PAGE>

ITEM 3.      LEGAL PROCEEDINGS.
_______      __________________

     Management, after consulting with Union National Financial
Corporation's legal counsel, is not aware of any litigation that
would have a material adverse effect on the consolidated
financial position of Union National Financial Corporation.
There are no proceedings pending other than ordinary routine
litigation incident to the business of Union National Financial
Corporation and its subsidiary, Union National Community Bank.
In addition, no material proceedings are known to be contemplated
by governmental authorities against Union National Financial
Corporation or Union National Community Bank.

ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
_______      ____________________________________________________

None.  There were no matters submitted to a vote of security
holders during the fourth quarter of 2003.

<PAGE>

                              PART II
                              _______

ITEM 5.      MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED
             ______________________________________________
             STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
             __________________________________________________
             SECURITIES.
             ___________

     Market and dividend information required by this Item is
incorporated here by reference from the inside front cover of
Union National Financial Corporation's 2003 Annual Report to
Stockholders which is included in Exhibit 13 to this Annual
Report on Form 10-K.  Union National Financial Corporation's
common stock is traded on a limited basis in the local over-the-
counter market and on the OTCBB under the symbol UNNF.  Bid and
asked information is available on some internet websites
providing financial market news.  Information concerning actual
trades is included on the inside front cover of Union National
Financial Corporation's 2003 Annual Report to Stockholders and is
also available on some internet websites.  This information
represents a limited amount of share transfer activity.

     Union National Financial Corporation and, prior to Union
National Financial Corporation's organization as a bank holding
company, Union National Community Bank have paid regular cash
dividends on their common stock for more than thirty-eight years.
Union National Financial Corporation expects to pay future
dividends; however, payment of such dividends will depend upon
earnings of Union National Financial Corporation and of Union
National Community Bank, their financial condition, capital
requirements and other factors, such as regulatory and legal
requirements.  It is anticipated that substantially all of the
funds available for the payment of dividends by Union National
Financial Corporation will be derived from dividends paid to it
by Union National Community Bank.

     Information related to Securities authorized for Issuance
under Equity Compensation Plans is incorporated by reference to
page 9 of the Union National Financial Corporation 2004 Proxy
Statement.

     Additional information required by this item regarding
dividend restrictions is incorporated here by reference from Note
13 on page 15 and pages 34 and 35 of Union National Financial
Corporation's 2003 Annual Report to Stockholders, which is
included in Exhibit 13 to this Form 10-K.

     As of March 22, 2004, there were approximately 860 holders
of record of Union National Financial Corporation's common stock.

ITEM 6.      SELECTED FINANCIAL DATA.
_______      ________________________

     The information required by this Item is incorporated here
by reference from page 21 of Union National Financial
Corporation's 2003 Annual Report to Stockholders which is
included in Exhibit 13 to this Annual Report on Form 10-K.

<PAGE>

ITEM 7.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
_______      _________________________________________________
             CONDITION AND RESULTS OF OPERATIONS.
             ____________________________________

     The information required by this Item is incorporated by
reference from pages 22 through 36 of Union National Financial
Corporation's 2003 Annual Report to Stockholders which are
included in Exhibit 13 to this Annual Report on Form 10-K.

ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
________     ____________________________________________________
             RISK.
             _____

     The information required by this Item is incorporated here
by reference from pages 32 to 34 of Union National Financial
Corporation's 2003 Annual Report to Stockholders which pages are
included in Exhibit 13 to this Annual Report on Form 10-K.

ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
_______      ____________________________________________

     The information required by this Item is incorporated here
by reference from pages 4 through 20 of Union National Financial
Corporation's 2003 Annual Report to Stockholders which are
included in Exhibit 13 to this Annual Report on Form 10-K.

ITEM 9.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
_______      ________________________________________________
             ACCOUNTING AND FINANCIAL DISCLOSURE.
             ____________________________________

     NONE.

ITEM 9A.     CONTROLS AND PROCEDURES
________     _______________________

   (a)     Evaluation of disclosure controls and procedures.

     Under the supervision and with the participation of
     management, including the Chief Executive Officer and Chief
     Financial Officer, the effectiveness of the design and
     operation of the corporation's disclosure controls and
     procedures (as defined in Rule 13a-14(c) under the Exchange
     Act) was evaluated as of a date within 90 days prior to the
     filing date of this report. Based upon that evaluation, the
     Chief Executive Officer and Chief Financial Officer
     concluded that, as of the Evaluation Date, the corporation's
     disclosure controls and procedures were effective in
     alerting them to the material information relating to the
     corporation (or the corporation's consolidated subsidiaries)
     required to be included in its periodic SEC filings.

   (b)     Changes in internal controls.

     There were no significant changes made in the corporation's
     internal controls during the period covered by this report
     or, to their knowledge, in other factors that could
     significantly affect these controls subsequent to the date
     of their evaluation.

<PAGE>

                          PART III
                          ________

ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.
________     _______________________________________________

     The information required by this Item is incorporated here
by reference from pages 4 through 7 of Union National Financial
Corporation's Proxy Statement for its 2004 Annual Meeting of
Shareholders.  As of July, 2003, Union National Financial
Corporation put in place the Directors and Senior Management Code
of Ethics.  The code of ethics encourages individuals to report
any conduct that they believe in good faith to be an actual or
apparent violation of the code of ethics.  Union National
Financial Corporation has filed a copy of the code of ethics with
the SEC as Exhibit 14 to this Annual Report on Form 10-K.

ITEM 11.     EXECUTIVE COMPENSATION.
________     _______________________

     The information required by this Item is incorporated here
by reference from pages 7 through 9 of Union National Financial
Corporation's Proxy Statement for its 2004 Annual Meeting of
Shareholders.

ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
________     ___________________________________________________
             MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
             ___________________________________________

     The information required by this Item is incorporated here
by reference from pages 6, 7, and 18 Union National Financial
Corporation's Proxy Statement for its 2004 Annual Meeting of
Shareholders.  The information related to Equity Compensation
Plans as required is incorporated here by reference to the Equity
Compensation Plan Information table on pages 9 and 10 of Union
National Financial Corporation's Proxy Statement for its 2004
Annual Meeting of Shareholders.

ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
________     _______________________________________________

     The information required by this Item is incorporated here
by reference from page 13 of Union National Financial
Corporation's Proxy Statement for its 2004 Annual Meeting of
Shareholders.

<PAGE>

ITEM 14.     PRINCIPAL ACCOUNTANT FEES AND SERVICES.
________     _______________________________________

     The information required by this Item is incorporated here
by reference from pages 14 through 15 of Union National Financial
Corporation's Proxy Statement for its 2004 Annual Meeting of
Shareholders.

                            PART IV
                            _______

ITEM 15.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
________     ____________________________________________________
             ON FORM 8-K
             ___________

     (a)     1.   Financial Statements.
                  The following financial statements are included
                  by reference in Part II, Item 8 hereof.
                  Independent Auditor's Report
                  Consolidated Balance Sheets
                  Consolidated Statements of Income
                  Consolidated Statements of Changes in
                    Stockholders' Equity
                  Consolidated Statements of Cash Flows
                  Notes to Consolidated 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 as a part
                  of this Report.

             3.   The following Exhibits are filed herewith, or
                  incorporated by reference as a part of this
                  Report:
                  3(i)  Union National Community Bank's Amended
                        Articles of Incorporation.  (Incorporated
                        by reference to Exhibit 3(i) to Union
                        National Financial Corporation's
                        Registration Statement No. 333-27837 on
                        Form S-8, filed with the Commission on
                        May 27, 1997.)

                  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 March 30,
                        2001.)

                  10.1  Executive Employment Agreement dated as
                        of January 1, 2004, between Mark D.
                        Gainer, Union National Financial
                        Corporation and Union National Community
                        Bank.
<PAGE>

                  10.2  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.)

                  10.3  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 to incorporate by
                        reference Amendment 1 to Union National
                        Financial Corporation Regulation
                        Statement No. 333-107326 on Form S-8
                        filed with the commission on July 25,
                        2003.)

                  10.4  Change of Control Agreement, dated August
                        2, 2001, between Michael A. Frey and
                        Union National Financial Corporation.
                        (Incorporated by Reference to Union
                        National Financial Corporation's
                        Quarterly Report on Form 10-Q for the
                        Period Ended September 30, 2001).

                  10.5  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).

                  10.6  Change of Control Agreement, dated May
                        29, 2001, between Clement M. Hoober and
                        Union National Financial Corporation.
                        (Incorporated by Reference to Union
                        National Financial Corporation's
                        Quarterly Report on Form 10-Q for the
                        Period Ended June 30, 2001).

                  10.7  Executive Incentive Retirement Agreement,
                        CFO, dated January 1, 2004 between
                        Clement M. Hoober and Union National
                        Community Bank.

                  10.8  Group Term Replacement Plan for Certain
                        Officers, CFO, dated January 1, 2004
                        between Clement M. Hoober and Union
                        National Community Bank

                  10.9  Executive Incentive Retirement Agreement,
                        COO, dated January 1, 2004 between
                        Michael A. Frey and Union National
                        Community Bank.

                  10.10 Group Term Replacement Plan for Certain
                        Officers, COO, dated January 1, 2004
                        between Michael A. Frey and Union
                        National Community Bank.

<PAGE>

                  10.11 Executive Salary Continuation Agreement,
                        CEO, dated December 31, 2003 between Mark
                        D. Gainer and Union National Community
                        Bank.

                  10.12 Group Term Replacement Plan for Certain
                        Officers, CEO, dated January 1, 2004
                        between Mark D. Gainer and Union National
                        Community Bank.

                  10.13 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 June 15, 1999.)

                  13    Excerpts from Union National Financial
                        Corporation's 2003 Annual Report to
                        Stockholders.

                  14    Union National Financial Corporation
                        Directors and Senior Management Code of
                        Ethics

                  21    Subsidiaries of the Union National
                        Financial Corporation

                  23.1  Consent of Beard Miller Company LLP,
                        Independent Auditors.

                  31.1  Rule 13a-14(a)/15d-14(a) Certification of
                        CEO

                  31.2  Rule 13a-14(a)/15d-14(a) Certification of
                        CFO

                  32    Section 1350 Certification of CEO and CFO

     (b)     Union National filed a report on Form 8-K via EDGAR
             dated October 10, 2003.  The report was filed
             pursuant to Item 5, Other Events, and reported the
             issuance of a press release.  The press release was
             attached to the report as an exhibit and reported
             third quarter earnings and announced the fourth
             quarter cash dividend for 2003.

             On December 19, 2003, Union National Financial
             Corporation filed a report on Form 8-K under Item 5
             to report the issuance of a press release announcing
             a stock repurchase program and completion of a trust
             preferred securities offering.

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

     (d)     NOT APPLICABLE.

<PAGE>

                            SIGNATURES
                            __________

     Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
                             UNION NATIONAL FINANCIAL CORPORATION
                             ____________________________________
                                         (Registrant)
                             By /s/ Mark D. Gainer
                                _______________________________
                                Mark D. Gainer
                                President and Chief Executive
                                Officer
                                Date:March 18, 2004

     Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of Union National Financial Corporation and in
the capacities and on the dates indicated.
                                                       DATE
                                                       ____
By /s/ Mark D. Gainer                              March 18, 2004
______________________________
Mark D. Gainer
President, Chief Executive Officer
and Director (principal executive officer)

By /s/ Donald H. Wolgemuth                         March 18, 2004
______________________________
Donald H. Wolgemuth
Chairman of the Board of Directors
and Director

By /s/ William E. Eby                              March 18, 2004
______________________________
William E. Eby, Director

By /s/ Clement M. Hoober                           March 18, 2004
______________________________
Clement M. Hoober, CPA,
Chief Financial Officer (principal
financial officer and principal
accounting officer)

By /s/ Carl R. Hallgren                            March 18, 2004
______________________________
Carl R. Hallgren, Director

By /s/ Darwin A. Nissley                           March 18, 2004
______________________________
Darwin A. Nissley, Director

By /s/ Daniel H. Raffensperger                     March 18, 2004
______________________________
Daniel H. Raffensperger, Director

<PAGE>

By /s/ Benjamin W. Piersol, Jr.                    March 18, 2004
______________________________
Benjamin W. Piersol, Jr., Director

By /s/ Lloyd C. Pickell                            March 18, 2004
______________________________
Lloyd C. Pickell, Director


By /s/ Nancy Shaub Colarik                         March 18, 2004
______________________________
Nancy Shaub Colarik, Director

By /s/ William M. Nies                             March 18, 2004
______________________________
William M. Nies, Director

By /s/ James R. Godfrey                            March 18, 2004
______________________________
James R. Godfrey, Director

<PAGE>

                          EXHIBIT INDEX

Exhibit Number
______________
     3(i)    Union National Financial Corporation's Amended
             Articles of Incorporation.  (Incorporated by
             reference to Exhibit 3(i) to Union National
             Financial Corporation's Registration Statement No.
             333-27837 on Form S-8,filed with the Commission on
             May 27, 1997.)

     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 March 30, 2001.)

     10.1    Executive Employment Agreement dated as of January
             1, 2004, between Mark D. Gainer, Union National
             Financial Corporation and Union National Community
             Bank.

     10.2    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.)

     10.3    Union National Financial Corporation's 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.)

     10.4    Change in Control Agreement, dated as of August 2,
             2001, between Michael A. Frey and Union National
             Financial Corporation.  (Incorporated by Reference
             to Exhibit 10 to Union National Financial
             Corporation's Quarterly Report on Form 10-Q for the
             Period Ended September 30, 2001).

     10.5    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.)

<PAGE>

     10.6    Change in Control Agreement, dated as of May 29,
             2001, between Clement M. Hoober and Union National
             Financial Corporation.  (Incorporated by Reference
             to Exhibit 10 to Union National Financial
             Corporation's Quarterly Report on Form 10-Q for the
             Period Ended June 30, 2001).

     10.7    Executive Incentive Retirement Agreement, CFO,
             dated January 1, 2004 between Clement M. Hoober and
             Union National Community Bank.

     10.8    Group Term Replacement Plan for Certain Officers,
             CFO, dated January 1, 2004 between Clement M. Hoober
             and Union National Community Bank.

     10.9    Executive Incentive Retirement Agreement, COO,
             dated January 1, 2004 between Michael A. Frey and
             Union National Community Bank.

     10.10   Group Term Replacement Plan for Certain Officers,
             COO, dated January 1, 2004 between Michael A. Frey
             and Union National Community Bank.

     10.11   Executive Salary Continuation Agreement, CEO, dated
             December 31, 2003 between Mark D. Gainer and Union
             National Community Bank.

     10.12   Group Term Replacement Plan for Certain Officers,
             CEO, dated January 1, 2004 between Mark D. Gainer
             and Union National Community Bank.

     10.13   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 June 15, 1999.)

     13      Excerpts from Union National Financial Corporation's
             2003 Annual Report to Shareholders.

     14      Union National Financial Corporation Directors and
             Senior Management Code of Ethics.

     21      Subsidiaries of Union National Financial
             Corporation.

     23.1    Consent of Beard Miller Company LLP, Independent
             Auditors.

     31.1    Rule 13a-14(a)/15d-14(a) Certification of CEO

     31.2    Rule 13a-14(a)/15d-14(a) Certification of CFO

     32      Section 1350 Certification of CEO and CFO

<PAGE>

                          EXHIBIT 10.1
                          ____________

                      Employment Ageement,
         dated January 1, 2004 between Mark D. Gainer,
             Union National Financial Corporation
               and Union National Community Bank.

<PAGE>

                      EMPLOYMENT AGREEMENT
                      ____________________

     THIS AGREEMENT is made as of the first day of January, 2004,
between UNION NATIONAL FINANCIAL CORPORATION ("Corporation"), a
Pennsylvania business corporation having a place of business at
101 E. Main Street, Mount Joy, Pennsylvania 17552-0567,  UNION
NATIONAL COMMUNITY BANK ("Bank") a national banking association
having a place of business at 101 E. Main Street, Mount Joy,
Pennsylvania 17552-0567,  and MARK D. GAINER ("Executive"), an
individual residing at 329 Kelly Avenue, Mount Joy, Pennsylvania
17552.

                           WITNESSETH:
                           ___________

     WHEREAS, the Corporation is a registered bank holding
company;

     WHEREAS, the Bank is a subsidiary of the Corporation;

     WHEREAS, Corporation and Bank desire to employ Executive to
serve in the capacity of President and Chief Executive Officer of
each of Corporation and Bank under the terms and conditions set
forth herein;

     WHEREAS, Executive desires to accept employment with
Corporation and Bank on the terms and conditions set forth
herein.

                           AGREEMENT:
                           __________

     NOW, THEREFORE, the parties hereto, intending to be legally
bound, agree as follows:

1.   Employment.   Corporation and Bank hereby employ Executive
     __________
     and Executive hereby accepts employment with Corporation and
     Bank, under the terms and conditions set forth in this
     Agreement.

     Duties of Employee.  Executive shall perform and discharge
     __________________
     well and faithfully such duties as an executive officer of
     Corporation and Bank as may be assigned to Executive from
     time to time by the Board of Directors of Corporation and
     Bank.  Executive shall be employed as President and Chief
     Executive Officer of Corporation and Bank, and shall hold
     such other titles as may be given to him from time to time
     by the Board of Directors of Corporation and Bank.
     Executive shall devote his full time, attention and energies
     to the business of  Corporation and Bank during the
     Employment Period (as defined in Section 3 of this
     Agreement); provided, however, that this Section 2 shall not
     be construed as preventing Executive from (a) engaging in
     activities incident or necessary to personal investments so
     long as such investment does not exceed 5% of the
     outstanding shares of any publicly held company, (b) acting
     as a member of the Board of Directors of any other
     corporation or as a member of the Board of Trustees of any
     other organization, with the prior approval of the Board of
     Directors of Corporation and Bank,  or (c) being

<PAGE>

     involved in any other activity with the prior approval of
     the Board of Directors of Corporation and Bank.  The
     Executive shall not engage in any business or commercial
     activities, duties or pursuits which compete with the
     business or commercial activities of Corporation or Bank,
     nor may the Executive serve as a director or officer or in
     any other capacity in a company which competes with
     Corporation or Bank.

3.   Term of Agreement.
     _________________

     (a)   This Agreement shall be for a five (5) year period
           (the "Employment Period") beginning on the date first
           written above, and if not previously terminated
           pursuant to the terms of this Agreement, the
           Employment Period shall end five (5) years later (the
           "Initial Term").  The Employment Period shall be
           extended automatically for one additional year on the
           first annual anniversary date of the commencement of
           the Initial Term (the date first above written), and
           then on each annual anniversary date of this Agreement
           thereafter, unless any of Corporation, Bank or
           Executive gives contrary written notice to the
           other(s) not less than 180 days before any such
           anniversary date so that upon the anniversary date if
           notice had not been previously given as provided in
           this Section 3(a), the Employment Period shall be and
           continue for a five-year period thereafter.
           References in the Agreement to "Employment Period"
           shall refer to the Initial Term of this Agreement and
           any extensions to the initial term of this Agreement.

     (b)   Notwithstanding the provisions of Section 3(a) of this
           Agreement, this Agreement shall terminate
           automatically for Cause (as defined herein) upon
           written notice from the Board of Directors of each of
           Corporation and Bank to Executive.  As used in this
           Agreement, "Cause" shall mean any of the following:

           (i)   Executive's conviction of or plea of guilty or
                 nolo contendere to a felony, a crime of
                 falsehood or a crime involving moral turpitude,
                 or the actual incarceration of Executive for a
                 period of forty five (45) consecutive days or
                 more;

           (ii)  Executive's failure to follow the good faith
                 lawful instructions of the Board of Directors of
                 Corporation or Bank with respect to its
                 operations, after written notice from
                 Corporation or Bank and a failure to cure such
                 violation within  twenty (20) days of said
                 written notice;

           (iii) Executive's willful failure to substantially
                 perform Executive's duties to Corporation or
                 Bank, other than a failure resulting from
                 Executive's incapacity because of physical or
                 mental illness, as provided in subsection (d) of
                 this Section 3,  after written notice from
                 Corporation or Bank and a failure to cure such
                 violation within twenty (20) days of said
                 written notice;

<PAGE>

           (iv)  Executive's intentional violation of the
                 provisions of this Agreement, after written
                 notice from Corporation or Bank and a failure to
                 cure such violation within twenty (20) days of
                 said written notice;

           (v)   dishonesty of the Executive in the performance
                 of his duties;

           (vi)  Executive's removal or prohibition from being an
                 institutional-affiliated party by a final order
                 of an appropriate federal banking agency
                 pursuant to Section 8(e) of the Federal Deposit
                 Insurance Act or by the Office of the
                 Comptroller of the Currency pursuant to national
                 law;

           (vii) conduct by the Executive as determined by an
                 affirmative vote of seventy-five percent (75%)
                 of the disinterested members of the Board of
                 Directors which brings public discredit to
                 Corporation or Bank which results or may be
                 reasonably expected to result in material
                 financial or other harm to the Corporation or
                 Bank;

           (viii)Executive's breach of fiduciary duty involving
                 personal profit; or

           (ix)  unlawful harassment by the Executive against
                 employees, customers, business associates,
                 contractors, or vendors of Corporation or Bank
                 which results or may be reasonably expected to
                 result in material liability to Corporation or
                 Bank, as determined by an affirmative vote of
                 three-fourths (3/4) of the disinterested
                 independent members of the Board of Directors of
                 Corporation or Bank, following an investigation
                 of the claims by a third party unrelated to the
                 Bank chosen by the Executive and Corporation.
                 If the Executive and Corporation do not agree on
                 said third party, then as chosen by an
                 affirmative vote of three-fourths (3/4) of the
                 disinterested independent members of the Board
                 of Directors of the Corporation.

           (x)   Before taking any vote under subparagraphs (vii)
                 and (ix) above, Executive shall be entitled to
                 appear before the Board and present Executive's
                 position as to any issues about which Executive
                 has been notified by the Board in writing.  Such
                 appearance shall be within a reasonable period
                 of time following written notice to Executive of
                 the issues but in no event longer than thirty
                 days after the date of said written notice.

           If this Agreement is terminated for Cause, all of
           Executive's rights under this Agreement shall cease as
           of the effective date of such termination.

     (c)   Notwithstanding the provisions of Section 3(a) of this
           Agreement, this Agreement shall terminate
           automatically upon Executive's voluntary termination
           of employment (other than in accordance with Section 5
           of this Agreement) for Good Reason.  The term "Good
           Reason" shall mean (i) the assignment of duties and
           responsibilities inconsistent with Executive's status
           as President and Chief

<PAGE>

           Executive Officer of Corporation and Bank, (ii) a
           reassignment which requires Executive to move his
           principal residence or his office more than fifty (50)
           miles from the Corporation's and Bank's principal
           executive office immediately prior to this Agreement,
           (iii) any removal of the Executive from office or any
           adverse change in the terms and conditions of the
           Executive's employment, except for any termination of
           the Executive's employment under the provisions of
           Section 3(b) hereof, (iv) any reduction in the
           Executive's Annual Base Salary as in effect on the
           date hereof or as the same may be increased from time
           to time, except such reductions that are the result of
           a national financial depression or national or bank
           emergency when such reduction has been implemented by
           the Board of Directors for the Corporation and Bank's
           senior management, or (v) any failure of Corporation
           and Bank to provide the Executive with benefits at
           least as favorable as those enjoyed by the Executive
           during the Employment Period under any of the pension,
           life insurance, medical, health and accident,
           disability or other employee plans of Corporation and
           Bank, or the taking of any action that would
           materially reduce any of such benefits unless such
           reduction is part of a reduction applicable to all
           employees.  If such termination occurs for Good
           Reason, then Corporation or Bank shall pay Executive
           an amount equal to the greater of the remaining
           balance of the Agreed Compensation otherwise due to
           the Executive for the remainder of the then existing
           Employment Period or 2.99 times the Executive's Agreed
           Compensation as defined in subsection (f) of this
           Section 3, which amount shall be payable in thirty-six
           (36) equal monthly installments and shall be subject
           to federal, state and local tax withholdings.  In
           addition, for a period of three (3) years from the
           date of termination of employment, or until Executive
           secures substantially similar benefits through other
           employment, whichever shall first occur, Executive
           shall receive a continuation of all life, disability,
           medical insurance and other normal health and welfare
           benefits in effect with respect to Executive during
           the two (2) years prior to his termination of
           employment, or, if Corporation and Bank cannot provide
           such benefits because Executive is no longer an
           employee, a dollar amount equal to the cost to
           Executive of obtaining such benefits (or substantially
           similar benefits).  If permitted under the terms of
           the plan, Executive shall receive the additional
           retirement benefits to which he would have been
           entitled had his employment continued through the then
           remaining term of the Agreement.  However, in the
           event the payment described herein, when added to all
           other amounts or benefits provided to or on behalf of
           the Executive in connection with his termination of
           employment, would result in the imposition of an
           excise tax under Code Section 4999, one-half (1/2) of
           the excise tax shall be paid by the Executive and one-
           half (1/2) of the excise tax shall be paid by
           Corporation or Bank.  Notwithstanding the foregoing or
           any other provision of this contract to the contrary,
           if any portion of the amount herein payable to the
           Executive is determined to be non-deductible pursuant
           to the regulations promulgated under Section 280G of
           the Internal Revenue Code of 1986, as amended (the
           "Code"), the Corporation shall be required only to pay
           to Executive the amount determined to be deductible
           under Section 280G.

<PAGE>

           At the option of the Executive, exercisable by the
           Executive within ninety (90) days after the occurrence
           of the event constituting "Good Reason," the Executive
           may resign from employment under this Agreement by a
           notice in writing (the "Notice of Termination")
           delivered to Corporation and Bank and the provisions
           of this Section 3(c) hereof shall thereupon apply.

     (d)   Notwithstanding the provisions of Section 3(a) of this
           Agreement, this Agreement shall terminate
           automatically upon Executive's Disability and
           Executive's rights under this Agreement shall cease as
           of the date of such termination; provided, however,
           that Executive shall nevertheless be entitled to
           receive an amount equal to and no greater than 70% of
           the Executive's Agreed Compensation as defined in
           subsection (f) of this Section 3, less amounts payable
           under any disability plan of Corporation and Bank,
           until the earliest of  (i)  Executive's return to
           employment, (ii) his attainment of age 65,  (iii) his
           death, or (iv) the end of the then existing Employment
           Period.  In addition, Executive shall receive for such
           period a continuation of all life, disability, medical
           insurance and other normal health and welfare benefits
           in effect with respect to Executive during the two (2)
           years prior to his disability, or, if Corporation and
           Bank cannot provide such benefits because Executive is
           no longer an employee, a dollar amount equal to the
           cost to Executive of obtaining such benefits (or
           substantially similar benefits).  For purposes of this
           Agreement, the Executive shall have a Disability if,
           as a result of physical or mental injury or
           impairment, Executive is unable to perform all of the
           essential job functions of his position on a full time
           basis, taking into account any reasonable
           accommodation required by law, and without posing a
           direct threat to himself and others, for a period of
           one hundred eighty (180) days or more.  The Executive
           shall have no duty to mitigate any payment provided
           for in this Section 3(d) by seeking other employment.

     (e)   Executive agrees that in the event his employment
           under this Agreement is terminated, Executive shall
           resign as a director of Corporation and Bank, or any
           affiliate or subsidiary thereof, if he is then serving
           as a director of any of such entities.

     (f)   The term "Agreed Compensation" shall equal the sum of
           (A) the Executive's highest Annual Base Salary under
           the Agreement, and (B) the average of the Executive's
           annual bonuses with respect to the three (3) calendar
           years immediately preceding the Executive's
           termination.

4.   Employment Period Compensation.
     _______________________________

     (a)   Annual Base Salary.  For services performed by
           ___________________
           Executive under this Agreement, Corporation or Bank
           shall pay Executive an Annual Base Salary during the
           Employment Period at the rate of $ 200,000 per year,
                                            _________
           minus applicable withholdings and deductions,  payable
           at the same times as salaries are payable to other
           executive employees of Corporation or Bank.
           Corporation or Bank may, from time to time, increase
           Executive's Annual Base Salary, and any and all such

<PAGE>

           increases shall be deemed to constitute amendments to
           this Section 4(a) to reflect the increased amounts,
           effective as of the date established for such
           increases by the Board of Directors of Corporation or
           Bank or any committee of such Board in the resolutions
           authorizing such increases.

     (b)   Bonus.  For services performed by Executive under this
           ______
           Agreement, Corporation or Bank may, from time to time,
           pay a bonus or bonuses to Executive as Corporation or
           Bank, in its sole discretion, deems appropriate.  The
           payment of any such bonuses shall not reduce or
           otherwise affect any other obligation of Corporation
           or Bank to Executive provided for in this Agreement.

     (c)   Vacations.  During the term of this Agreement,
           _________
           Executive shall be entitled to paid annual vacation in
           accordance with the policies as established from time
           to time by the Boards of Directors of Corporation and
           Bank.  However, Executive shall not be entitled to
           receive any additional compensation from Corporation
           and Bank for failure to take a vacation, nor shall
           Executive be able to accumulate unused vacation time
           from one year to the next, except to the extent
           authorized by the Boards of Directors of Corporation
           and Bank.

     (d)   Automobile.  During the term of this Agreement,
           __________
           Corporation and Bank shall provide Executive with
           exclusive use of an automobile mutually agreed upon by
           Corporation and Bank.  Corporation and Bank shall be
           responsible and shall pay for all costs of insurance
           coverage, repairs, maintenance and other operating and
           incidental expenses, including license, fuel and oil.
           Corporation and Bank shall provide Executive with a
           replacement automobile at approximately the time
           Executive's automobile reaches three (3) years of age
           or 50,000 miles, whichever is first, and approximately
           every three (3) years or 50,000 miles thereafter, upon
           the same terms and conditions.

     (e)   Employee Benefit Plans.  During the term of this
           ______________________
           Agreement, Executive shall be entitled to participate
           in or receive the benefits of any employee benefit
           plan currently in effect at Corporation and Bank,
           subject to the terms of said plan, until such time
           that the Boards of Directors of Corporation and Bank
           authorize a change in such benefits.  Corporation and
           Bank shall not make any changes in such plans or
           benefits which would adversely affect Executive's
           rights or benefits thereunder, unless such change
           occurs pursuant to a program applicable to all
           executive officers of Corporation and Bank and does
           not result in a proportionately greater adverse change
           in the rights of or benefits to Executive as compared
           with any other executive officer of Corporation and
           Bank.  Nothing paid to Executive under any plan or
           arrangement presently in effect or made available in
           the future shall be deemed to be in lieu of the salary
           payable to Executive pursuant to Section 4(a) hereof.

<PAGE>

     (f)   Business Expenses.  During the term of this Agreement,
           _________________
           Executive shall be entitled to receive prompt
           reimbursement for all reasonable expenses incurred by
           him, which are properly accounted for, in accordance
           with the policies and procedures established by the
           Boards of Directors of Corporation and Bank for their
           executive officers.

     (g)   Club Membership.  Corporation or Bank shall provide
           _______________
           the Executive with a membership to a Country Club in
           Pennsylvania mutually agreed upon, paying initiation
           and other fees, membership dues, assessments and
           business-related expenses.

5.   Termination of Employment Following Change in Control.
     _____________________________________________________

     (a)   If a Change in Control (as defined in Section 5(b) of
           this Agreement) shall occur and thereafter, there
           shall be:

           (i)   any involuntary termination of Executive's
                 employment (other than for the reasons set
                 forth in Section 3(b) or 3(d) of this
                 Agreement);

           (ii)  any reduction in Executive's title,
                 responsibilities, including reporting
                 responsibilities, or authority, including such
                 title, responsibilities or authority as such
                 may be increased from time to time during the
                 term of this Agreement;

           (iii) the assignment to Executive of duties
                 inconsistent with Executive's office on the
                 date of the Change in Control or as the same
                 may be increased from time to time after the
                 Change in Control;

           (iv)  any reassignment of Executive to a location
                 greater than fifty (50) miles from the location
                 of Executive's office on the date of the Change
                 in Control;

           (v)   any reduction in Executive's Annual Base Salary
                 in effect on the date of the Change in Control
                 or as the same may be increased from time to
                 time after the Change in Control;

           (vi)  any failure to provide Executive with benefits
                 at least as favorable as those enjoyed by
                 Executive under any of Corporation or Bank's
                 retirement or pension, life insurance, medical,
                 health and accident, disability or other
                 employee plans in which Executive participated
                 at the time of the Change in Control, or the
                 taking of any action that would materially
                 reduce any of such benefits in effect at the
                 time of the Change in Control;

<PAGE>

           (vii) any requirement that Executive travel in
                 performance of his duties on behalf of
                 Corporation or Bank for a significantly greater
                 period of time during any year than was
                 required of Executive during the year preceding
                 the year in which the Change in Control
                 occurred;

           (viii)any sustained pattern of interruption or
                 disruption of Executive for matters
                 substantially unrelated to Executive's
                 discharge of Executive's duties on behalf of
                 Corporation and Bank; or

           (ix)  a good faith determination by Executive that he
                 can no longer work with the new management of
                 Corporation and Bank, provided, however, that
                 Executive cannot make such a determination
                 during the first six (6) months following a
                 Change in Control.

           then, at the option of Executive, exercisable by
           Executive within one hundred eighty (180) days of the
           Change in Control or occurrence of any of the
           foregoing events, Executive may resign from
           employment with Corporation and Bank (or, if
           involuntarily terminated, give notice of intention to
           collect benefits under this Agreement) by delivering
           a notice in writing (the "Notice of Termination") to
           Corporation and Bank and the provisions of Section 6
           of this Agreement shall apply.

     (b)   As used in this Agreement, "Change in Control" shall
           mean the occurrence of any of the following:

           (i)   (A) a merger, consolidation or division
                 involving Corporation or Bank, (B) a sale,
                 exchange, transfer or other disposition of
                 substantially all of the assets of Corporation
                 or Bank, or (C) a purchase by Corporation or
                 Bank of substantially all of the assets of
                 another entity, unless (y) such merger,
                 consolidation, division, sale, exchange,
                 transfer, purchase or disposition is approved in
                 advance by seventy percent (70%) or more of the
                 members of the Board of Directors of Corporation
                 or Bank who are not interested in the
                 transaction and (z) a majority of the members of
                 the Board of Directors of the legal entity
                 resulting from or existing after any such
                 transaction and of the Board of Directors of
                 such entity's parent corporation, if any, are
                 former members of the Board of Directors of
                 Corporation or Bank; or

           (ii)  any "person" (as such term is used in Sections
                 13(d) and 14(d) of the Securities Exchange Act
                 of 1934 (the "Exchange Act")), other than
                 Corporation or Bank or any "person" who on the
                 date hereof is a director or officer of
                 Corporation or Bank is or becomes the
                 "beneficial owner" (as defined in Rule 13d-3
                 under the Exchange Act), directly or indirectly,
                 of securities of Corporation or Bank
                 representing twenty-five (25%) percent or more
                 of the combined voting power of Corporation or
                 Bank's then outstanding securities, or

<PAGE>

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

           (iv)  any other change in control of Corporation and
                 Bank similar in effect to any of the foregoing.

6.   Rights in Event of Termination of Employment Following
     ______________________________________________________
     Change in Control.
     _________________

     (a)   In the event that Executive delivers a Notice of
           Termination (as defined in Section 5(a) of this
           Agreement) to Corporation and Bank, Executive shall be
           entitled to receive the compensation and benefits set
           forth below:

           If, at the time of termination of Executive's
           employment, a "Change in Control" (as defined in
           Section 5(b) of this Agreement) has also occurred,
           Corporation and Bank shall pay Executive a lump sum
           amount  equal to and no greater than 2.99 times the
           Executive's Agreed Compensation as defined in
           subsection (f) of Section 3, minus applicable taxes
           and withholdings. In addition, for a period of three
           (3) years from the date of termination of employment,
           or until Executive secures substantially similar
           benefits through other employment, whichever shall
           first occur, Executive shall receive a continuation of
           all life, disability, medical insurance and other
           normal health and welfare benefits in effect with
           respect to Executive during the two (2) years prior to
           his termination of employment, or, if Corporation and
           Bank cannot provide such benefits because Executive is
           no longer an employee, a dollar amount equal to the
           cost to Executive of obtaining such benefits (or
           substantially similar benefits).   If permitted under
           the terms of the plan, Executive shall receive
           additional retirement benefits to which he would have
           been entitled had his employment continued through the
           then remaining term of the Agreement.   However, in
           the event the payment described herein, when added to
           all other amounts or benefits provided to or on behalf
           of the Executive in connection with his termination of
           employment, would result in the imposition of an
           excise tax under Code Section 4999, one-half (1/2) of
           the excise tax shall be paid by the Executive and one-
           half (1/2) of the excise tax shall be paid by the
           Corporation or Bank.

     (b)   Executive shall not be required to mitigate the amount
           of any payment provided for in this Section 6 by
           seeking other employment or otherwise.  Unless
           otherwise agreed to in writing, the amount of payment
           or the benefit provided for in this Section 6 shall
           not be reduced by any compensation earned by Executive
           as the result of employment by another employer or by
           reason of Executive's receipt of or right to receive
           any retirement or other benefits after the date of
           termination of employment or otherwise.

<PAGE>

7.   Rights in Event of Termination of Employment Absent Change
     __________________________________________________________
     in Control.
     __________

     (a)   In the event that Executive's employment is
           involuntarily terminated by Corporation and/or Bank
           without Cause and no Change in Control shall have
           occurred at the date of such termination, Corporation
           and Bank shall pay Executive an amount equal to and no
           greater than 2.99 times the Executive's Agreed
           Compensation as defined in subsection (f) of Section
           3, and shall be payable in thirty-six (36) equal
           monthly installments and shall be subject to federal,
           state and local tax withholdings. In addition, for a
           period of three (3) years from the date of termination
           of employment, or until Executive secures
           substantially similar benefits through other
           employment, whichever shall first occur, Executive
           shall receive a continuation of all life, disability,
           medical insurance and other normal health and welfare
           benefits in effect with respect to Executive during
           the two (2) years prior to his termination of
           employment, or, if Corporation and Bank cannot provide
           such benefits because Executive is no longer an
           employee, a dollar amount equal to the cost to
           Executive of obtaining such benefits (or substantially
           similar benefits).  In addition, if permitted pursuant
           to the terms of the plan, Executive shall receive
           additional retirement benefits to which he would have
           been entitled had his employment continued through the
           then remaining term of the Agreement.   However, in
           the event the payment described herein, when added to
           all other amounts or benefits provided to or on behalf
           of the Executive in connection with his termination of
           employment, would result in the imposition of an
           excise tax under Code Section 4999, one-half (1/2) of
           the excise tax shall be paid by the Executive and one-
           half (1/2) of the excise tax shall be paid by the
           Corporation or Bank.   Notwithstanding the foregoing
           or any other provision of this contract to the
           contrary, if any portion of the amount herein payable
           to the Executive is determined to be non-deductible
           pursuant to the regulations promulgated under Section
           280G of the Internal Revenue Code of 1986, as amended
           (the "Code"), the Corporation shall be required only
           to pay to Executive the amount determined to be
           deductible under Section 280G.

     (b)   Executive shall not be required to mitigate the amount
           of any payment provided for in this Section 7 by
           seeking other employment or otherwise.  Unless
           otherwise agreed to in writing, the amount of payment
           or the benefit provided for in this Section 7 shall
           not be reduced by any compensation earned by Executive
           as the result of employment by another employer or by
           reason of Executive's receipt of or right to receive
           any retirement or other benefits after the date of
           termination of employment or otherwise.

8.   Covenant Not to Compete.
     _______________________

     (a)   Executive hereby acknowledges and recognizes the
           highly competitive nature of the business of
           Corporation and Bank and accordingly agrees that,
           during and for the applicable period set forth in
           Section 8(c) hereof, Executive shall not, except as
           otherwise permitted in writing by the Corporation and
           the Bank:

<PAGE>

           (i)   be engaged, directly or indirectly, either for
                 his own account or as agent, consultant,
                 employee, partner, officer, director,
                 proprietor, investor (except as an investor
                 owning less than 5% of the stock of a publicly
                 owned company) or otherwise of any person, firm,
                 corporation or enterprise engaged in (1) the
                 banking (including bank holding company) or
                 financial services industry, or (2) any other
                 activity in which Corporation or Bank or any of
                 their subsidiaries are engaged during the
                 Employment Period, and remain so engaged at the
                 end of the Employment Period, in any county and
                 contiguous county in which, at the date of
                 termination of the Executive's employment, a
                 branch location, office, loan production office,
                 or trust or asset and wealth management office
                 of Corporation, Bank or any of their
                 subsidiaries is located, whether inside or
                 outside of the Commonwealth of Pennsylvania,
                 (the "Non-Competition Area"); or

           (ii)  provide financial or other assistance to any
                 person, firm, corporation, or enterprise engaged
                 in (1) the banking (including bank holding
                 company) or financial services industry, or (2)
                 any other activity in which Corporation or Bank
                 or any of their subsidiaries are engaged during
                 the Employment Period, in the Non-Competition
                 Area; or

           (iii) directly or indirectly solicit persons or
                 entities who were customers or referral sources
                 of Corporation, Bank or their subsidiaries
                 within sixth (6) months of Executive's
                 termination of employment, to a become customer
                 or referral source of a person or entity other
                 than Corporation, Bank or their subsidiaries;

           (iv)  directly or indirectly solicit employees of
                 Corporation, Bank or their subsidiaries who were
                 employed within one year of Executive's
                 termination of employment to work for anyone
                 other than Corporation, Bank or their
                 subsidiaries.

     (b)   It is expressly understood and agreed that, although
           Executive and Corporation and Bank consider the
           restrictions contained in Section 8(a) hereof
           reasonable for the purpose of preserving for
           Corporation and Bank and their subsidiaries their good
           will and other proprietary rights, if a final judicial
           determination is made by a court having jurisdiction
           that the time or territory or any other restriction
           contained in Section 8(a) hereof is an unreasonable or
           otherwise unenforceable restriction against Executive,
           the provisions of Section 8(a) hereof shall not be
           rendered void but shall be deemed amended to apply as
           to such maximum time and territory and to such other
           extent as such court may judicially determine or
           indicate to be reasonable.

     (c)   The provisions of this Section 8 shall be applicable
           commencing on the date of this Agreement and ending on
           one of the following dates, as applicable:

<PAGE>

           (i)   if Executive's employment terminates in
                 accordance with the non-renewal provisions of
                 Section 3, the effective date of termination of
                 employment; or

           (ii)  if Executive's employment terminates in
                 accordance with the provisions of Section 3(b)
                 of this Agreement (relating to termination for
                 Cause), or Section 3(c) of this Agreement
                 (relating to termination for Good Reason), the
                 second anniversary date of the effective date of
                 termination of employment; or

           (iii) if the Executive voluntarily terminates his
                 employment, the second anniversary date of the
                 effective date of termination of employment; or

           (iv)  if the Executive's employment is involuntarily
                 terminated in accordance with the provisions of
                 Section 7 hereof, the second anniversary date of
                 the effective date of termination of employment.

9.   Unauthorized Disclosure.  During the term of his employment
     _______________________
     hereunder, or at any later time, the Executive shall not,
     without the written consent of the Boards of Directors of
     Corporation and Bank or a person authorized thereby,
     knowingly disclose to any person, other than an employee of
     Corporation or Bank or a person to whom disclosure is
     reasonably necessary or appropriate in connection with the
     performance by the Executive of his duties as an executive
     of Corporation and Bank, any material confidential
     information obtained by him while in the employ of
     Corporation and Bank with respect to any of Corporation and
     Bank's services, products, improvements, formulas, designs
     or styles, processes, customers, methods of business or any
     business practices the disclosure of which could be or will
     be damaging to Corporation or Bank; provided, however, that
     confidential information shall not include any information
     known generally to the public (other than as a result of
     unauthorized disclosure by the Executive or any person with
     the assistance, consent or direction of the Executive) or
     any information of a type not otherwise considered
     confidential by persons engaged in the same business of a
     business similar to that conducted by Corporation and Bank
     or any information that must be disclosed as required by
     law.

10.  Work Made for Hire.  Any work performed by the Executive
     __________________
     under this Agreement should be considered a "Work Made for
     Hire" as the phrase is defined by the U.S. patent laws and
     shall be owned by and for the express benefit of
     Corporation, Bank and their subsidiaries and affiliates.  In
     the event it should be established that such work does not
     qualify as a Work Made for Hire, the Executive agrees to and
     does hereby assign to Corporation, Bank, and their
     affiliates and subsidiaries, all of his rights, title,
     and/or interest in such work product, including, but not
     limited to, all copyrights, patents, trademarks, and
     propriety rights.

<PAGE>

11.  Return of Company Property and Documents.  The Executive
     ________________________________________
     agrees that, at the time of termination of his employment,
     regardless of the reason for termination, he will deliver to
     Corporation, Bank and their subsidiaries and affiliates, any
     and all company property, including, but not limited to,
     keys, security codes or passes, mobile telephones, records,
     data, notes, reports, proposals, lists, correspondence,
     specifications, drawings, blueprints, sketches, software
     programs, equipment, other documents or property, or
     reproductions of any of the aforementioned items developed
     or obtained by the Executive during the course of his
     employment.

12.  Liability Insurance.  Corporation and Bank shall use their
     ___________________
     best efforts to obtain insurance coverage for the Executive
     under an insurance policy covering officers and directors of
     Corporation and Bank against lawsuits, arbitrations or other
     legal or regulatory proceedings; however, nothing herein
     shall be construed to require Corporation and/or Bank to
     obtain such insurance, if the Board of Directors of the
     Corporation and/or Bank determine that such coverage cannot
     be obtained at a reasonable price.

13.  Notices.  Except as otherwise provided in this Agreement,
     _______
     any notice required or permitted to be given under this
     Agreement shall be deemed properly given if in writing and
     if mailed by registered or certified mail, postage prepaid
     with return receipt requested, to Executive's residence, in
     the case of notices to Executive, and to the principal
     executive offices of Corporation and Bank, in the case of
     notices to Corporation and Bank.

14.  Waiver.  No provision of this Agreement may be modified,
     ______
     waived or discharged unless such waiver, modification or
     discharge is agreed to in writing and signed by Executive
     and an executive officer specifically designated by the
     Boards of Directors of Corporation and Bank.  No waiver by
     either party hereto at any time of any breach by the other
     party hereto of, or compliance with, any condition or
     provision of this Agreement to be performed by such other
     party shall be deemed a waiver of similar or dissimilar
     provisions or conditions at the same or at any prior or
     subsequent time.

15.  Assignment.  This Agreement shall not be assignable by any
     __________
     party, except by Corporation and Bank to any successor in
     interest to their respective businesses.

16.  Entire Agreement.  This Agreement supersedes any and all
     ________________
     agreements, either oral or in writing, between the parties
     with respect to the employment of the Executive by the Bank
     and/or Corporation and this Agreement contains all the
     covenants and agreements between the parties with respect to
     employment.  This Agreement specifically releases all
     parties of any rights and obligations under the Executive
     Employment Agreement of Mark D. Gainer dated January 1,
     1999, between Union National Financial Corporation, Union
     National Community Bank and Mark D. Gainer and said
     agreement is hereafter null and void.

<PAGE>

17.  Successors; Binding Agreement.
     ___________
     (a)   Corporation and Bank will require any successor
           (whether direct or indirect, by purchase, merger,
           consolidation, or otherwise) to all or substantially
           all of the businesses and/or assets of Corporation and
           Bank to expressly assume and agree to perform this
           Agreement in the same manner and to the same extent
           that Corporation and Bank would be required to perform
           it if no such succession had taken place.  Failure by
           Corporation and Bank to obtain such assumption and
           agreement prior to the effectiveness of any such
           succession shall constitute a breach of this Agreement
           and the provisions of Section 3 of this Agreement
           shall apply.  As used in this Agreement, "Corporation"
           and "Bank" shall mean Corporation and Bank,  as
           defined previously and any successor to their
           respective businesses and/or assets as aforesaid which
           assumes and agrees to perform this Agreement by
           operation of law or otherwise.

     (b)   This Agreement shall inure to the benefit of and be
           enforceable by Executive's personal or legal
           representatives, executors, administrators, heirs,
           distributees, devisees and legatees.  If Executive
           should die after a Notice of Termination is delivered
           by Executive, or following termination of Executive's
           employment without Cause, and any amounts would be
           payable to Executive under this Agreement if Executive
           had continued to live, all such amounts shall be paid
           in accordance with the terms of this Agreement to
           Executive's devisee, legatee, or other designee, or,
           if there is no such designee, to Executive's estate.

18.  Arbitration.   Corporation, Bank and Executive recognize
     ___________
     that in the event a dispute should arise between them
     concerning the interpretation or implementation of this
     Agreement, lengthy and expensive litigation will not afford
     a practical resolution of the issues within a reasonable
     period of time.  Consequently, each party agrees that all
     disputes, disagreements and questions of interpretation
     concerning this Agreement (except for any enforcement sought
     with respect to Sections 8, 9, 10 or 11 which may be
     litigated in court, including an action for injunction or
     other relief) are to be submitted for resolution, in
     Philadelphia, Pennsylvania, to the American Arbitration
     Association (the "Association") in accordance with the
     Association's National Rules for the Resolution of
     Employment Disputes or other applicable rules then in effect
     ("Rules").  Corporation, Bank or Executive may initiate an
     arbitration proceeding at any time by giving notice to the
     other in accordance with the Rules.  Corporation and Bank
     and Executive may, as a matter of right, mutually agree on
     the appointment of a particular arbitrator from the
     Association's pool.  The arbitrator shall not be bound by
     the rules of evidence and procedure of the courts of the
     Commonwealth of Pennsylvania but shall be bound by the
     substantive law applicable to this Agreement.  The decision
     of the arbitrator, absent fraud, duress, incompetence or
     gross and obvious error of fact, shall be final and binding
     upon the parties and shall be enforceable in courts of
     proper jurisdiction.  Following written notice of a request
     for arbitration, Corporation, Bank and Executive shall be
     entitled to an injunction restraining all further
     proceedings in any pending or subsequently filed litigation
     concerning this Agreement, except as otherwise provided
     herein or any

<PAGE>

     enforcement sought with respect to Sections 8, 9, 10 or 11
     of this Agreement, including an action for injunction or
     other relief.

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

20.  Applicable Law.  This Agreement shall be governed by and
     ______________
     construed in accordance with the domestic, internal laws of
     the Commonwealth of Pennsylvania, without regard to its
     conflicts of laws principles.

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

     IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.


ATTEST:                           UNION NATIONAL FINANCIAL
                                  CORPORATION


 /s/ Marcene L. Camara          By /s/ Donald H. Wolgemuth
____________________________      ___________________________
     Marcene L. Camara,              Donald H. Wolgemuth,
    Assistant Secretary             Chairman of the Board


                                  UNION NATIONAL COMMUNITY
                                  BANK

 /s/ Marcene L. Camara          By /s/ Donald H. Wolgemuth
____________________________      ___________________________
Marcene L. Camara, Secretary         Donald H. Wolgemuth,
                                     Chairman of the Board


WITNESS:                          EXECUTIVE

 /s/ R. Michael Mohn               /s/ Mark D. Gainer
____________________________      ___________________________
   R. Michael Mohn                    Mark D. Gainer

<PAGE>

                          EXHIBIT 10.7
                          ____________

          Executive Incentive Retirement Agreement, CFO,
         dated January 1, 2004 between Clement M. Hoober
                and Union National Community Bank.

<PAGE>

            EXECUTIVE INCENTIVE RETIREMENT AGREEMENT

     THIS AGREEMENT is made this first day of January, 2004, by
and between Union National Community Bank (the "Bank"), a
national chartered commercial bank, located in Mount Joy, PA, and
Clement M. Hoober (the "Executive").
__________________

                         INTRODUCTION

     To encourage the Executive to remain an employee of the
Bank, the Bank is willing to provide to the Executive a deferred
incentive opportunity.  The Bank shall pay the benefits from its
general assets.

                           AGREEMENT

     The Executive and the Bank agree as follows:

                           Article 1
                          Definitions

     1.1 Definitions.  Whenever used in this Agreement, the
following words and phrases shall have the meanings specified:

          1.1.1 "Allocation Date" means January 31st of each
     year.  The Allocation Date is the date that an Executive's
     Deferral Account is credited with an Incentive Award as
     defined herein and with Interest (as defined herein) for
     the Allocation Year (as defined herein) ending on January
     31.

          1.1.2 "Allocation Year" means the period from
     February 1 through the following January 31.

          1.1.3 "Base Salary" means the total annual base
     salary payable to the Executive at the rate in effect on
     the date specified.  Base Salary shall not be reduced for
     any salary reduction contributions: (i) to cash or deferred
     arrangements under Section 401(k) of the Code; (ii) to a
     cafeteria plan under Section 125 of the Code (as defined
     herein); or (iii) to a deferred compensation plan that is
     not qualified under Section 401(a) of the Code.

          1.1.4 "Change of Control" means any of the following:

     (i)(A) a merger, consolidation or division involving Union
     National Financial Corporation ("Corporation") or Bank, (B)
     a sale, exchange, transfer or other disposition of
     substantially all of the assets of Corporation or Bank, or
     (C) a purchase by Corporation or Bank of substantially all
     of the assets of another entity, unless (y) such merger,
     consolidation, division, sale, exchange, transfer, purchase
     or disposition is approved in advance by seventy percent
     (70%) or more of the members of the

<PAGE>

     Board of Directors of Corporation or Bank who are not
     interested in the transaction and (z) a majority of the
     members of the Board of Directors of the legal entity
     resulting from or existing after any such transaction and of
     the Board of Directors of such entity's parent corporation,
     if any, are former members of the Board of Directors of
     Corporation or Bank; or

          (ii)  any "person" (as such term is used in Sections
     13(d) and 14(d) of the Securities Exchange Act of 1934 (the
     "Exchange Act")), other than Corporation or Bank or any
     "person" who on the date hereof is a director or officer of
     Corporation or Bank is or becomes the "beneficial owner" (as
     defined in Rule 13d-3 under the Exchange Act), directly or
     indirectly, of securities of Corporation or Bank
     representing twenty-five (25%) percent or more of the
     combined voting power of Corporation or Bank's then
     outstanding securities, or

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

          (iv)  any other change in control of Corporation and
     Bank similar in effect to any of the foregoing.

     1.1.5 "Code" means the Internal Revenue Code of 1986, as
amended.

     1.1.6 "Deferral Account" means the Bank's accounting of the
Executive's accumulated Deferrals plus accrued Interest.

     1.1.7 "Disability" means the Executive's inability to per
form substantially all normal duties of the Executive's position,
as defined in the Bank's disability insurance policy and as
determined by the Bank's disability insurance carrier.  As a
condition to any benefits, the Bank may require the Executive to
submit to a physical or mental evaluations and tests, as the
Board of Directors of the Bank may deem appropriate.

     1.1.8 "Disability Retirement Date" means the first day of
the month immediately following the Executive's last date of
employment resulting from an approved Disability.

     1.1.9 "Earnings" means the measurements of Bank
profitability selected annually by the Board of Directors of the
Bank to be used in the determination of incentive awards for
Executives who are participating in this Plan.

     1.1.10 "Effective Date" means January 1, 2004.

<PAGE>

     1.1.11 "Election Form" means the Form attached as Exhibit 1.

     1.1.12 "Executive" means an Executive of the Bank that has
been approved by the Board of Directors of the Bank to
participate in the Plan and who has signed this agreement.

     1.1.13 "Extraordinary Items" means those items that are
recognized under Generally Accepted Accounting Principles as
extraordinary because such items substantially affect shareholder
equity and/or the Bank's assets.  Examples of such items are
stock redemptions, mergers, acquisitions, stock splits, and other
items of that nature.

     1.1.14 "Interest Rate" means The Prime Rate plus one (1)
percentage point.

     1.1.15 "Normal Retirement Age" means the Executive's 62nd
birthday.

     1.1.16 "Normal Retirement Date" means the first day of the
month coinciding with or immediately following the later of the
Executive's Normal Retirement Age or Termination of Employment.

     1.1.17 "Plan" means the terms and provisions of this
agreement.

     1.1.18 "Plan Year" means the calendar year.

     1.1.19 "Prime Rate" means the Prime Rate as reported in the
Wall Street Journal on the business day coinciding with or
immediately prior to the Allocation Date.

     1.1.20 "Termination of Employment" means the Executive
ceasing to be employed by the Bank for any reason other than by
reason of an approved leave of absence.

     1.1.21 "Service" means the total number of twelve-month
periods and fractions thereof during which the Executive is
employed on a full-time basis by the Bank, inclusive of any
approved leave of absence.  All service periods are assumed to
begin on the first day of the month coinciding or immediately
following the initial date of employment.  All calculations of
service shall be rounded to two (2) decimal places.

<PAGE>

                           Article 2
                           Incentive

     2.1 Incentive Award.  Earnings, adjusted for Extraordinary
Items, determined as of December 31st of each Plan Year shall
determine the Executive's Incentive Award Percentage, in
accordance with the attached Schedule A.  The chart on Schedule A
is specifically subject to change annually at the sole discretion
of the Bank's Board of Directors.  The Incentive Award is
calculated annually by taking the Executive's Base Salary for the
Plan Year in which the Earnings were calculated multiplied by the
Incentive Award Percentage.  No Incentive Awards shall be
declared before January 31, 2005.

     2.2 Incentive Deferral.  On January 31st, following each
Plan Year, the Bank shall declare and pay the Incentive Award in
the form of compensation and the Executive shall defer such
amount to the Deferral Account.

                           Article 3
                       Deferral Account

     3.1 Establishing and Crediting on Allocation Dates.  The
Bank shall establish a Deferral Account on its books for the
Executive, and shall credit to the Deferral Account on each
Allocation Date the following amounts:

          3.1.1    Deferrals. The Incentive Deferral as
     determined under Article 2.

          3.1.2    Interest.  Immediately prior to the payment of
     any benefits, interest on the Executive's Deferral Account
     balance on the prior Allocation Date, if any, at an annual
     rate equal to the Interest Rate in effect on the prior
     Allocation Date.

     3.2  Partial Year Interest.  The Deferral Account of an
Executive that is terminating employment shall be credited with
interest from the February 1st prior to his termination date to
the first day of the month coinciding with or immediately
following the date of his termination from employment.  The
interest rate used for the partial year shall be the Prime Rate
in effect on the Allocation Date immediately prior to
termination.  The interest credit shall be equal to the interest
rate divided by twelve (12) and then multiplied by the number of
months between the February 1st prior to termination to the first
day of the month coinciding with or immediately following
employment termination and then multiplied by the Executive's
Deferral Account balance on the prior Allocation Date.  The
interest rate for the partial year shall be rounded to two (2)
decimal places before it is multiplied by the Deferral Account
balance.

     3.3  Statement of Accounts.  The Bank shall provide to the
Executive a statement setting forth the Deferral Account balance
within one hundred twenty (120) days after each Plan Year.

<PAGE>

     3.4  Accounting Device Only.  The Deferral Account is solely
a device for measuring amounts to be paid under this Agreement.
The Deferral Account is not a trust fund of any kind.  The
Executive is a general unsecured creditor of the Bank for the
payment of benefits.  The benefits represent a mere promise by
the Bank to pay such benefits.  The Executive's rights are not
subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment, or
garnishment by the Executive's creditors.

                           Article 4
                           Benefits

     4.1  Normal Retirement Benefit.  If the Executive terminates
employment on or after the Normal Retirement Age for reasons
other than death, the Bank shall pay to the Executive the benefit
described in this Section 4.1 in lieu of any other benefit under
this Agreement.

          4.1.1 Amount of Benefit.  The benefit under this
     Section 4.1 is the Deferral Account balance on the
     Executive's Normal Retirement Date as adjusted for Partial
     Year Interest.

          4.1.2  Payment of Benefit.  The Bank shall pay the
     benefit to the Executive commencing on the Executive's
     Normal Retirement Date pursuant to the Optional Benefit Form
     that was executed by the Executive on the Election Form.

     4.2  Disability Retirement Benefit.  If the Executive
terminates employment as a result of a Disability before Normal
Retirement Age, the Bank shall pay to the Executive the benefit
described in this Section 4.2 in lieu of any other benefit under
this Agreement.

          4.2.1 Amount of Benefit.  The benefit under this
     Section 4.2 is the Deferral Account balance on the
     Executive's Disability Retirement Date as adjusted for
     Partial Year Interest.

          4.2.2 Payment of Benefit.  The Bank shall pay the
     benefit to the Executive commencing on the Executive's
     Disability Retirement Date pursuant to the Optional Benefit
     Form that was executed by the Executive on the Election
     Form.

     4.3 Death Benefit.  If the Executive dies before the Normal
Retirement Age the Bank shall pay to the Executive the benefit
described in this Section 4.3 in lieu of any other benefits under
this Agreement.

          4.3.1 Amount of Benefit.  The benefit under this
     Section 4.3 is the Deferral Account balance on the first day
     of the month coinciding with or immediately following the
     Executive's date of death as adjusted for Partial Year
     Interest.

          4.3.2 Payment of Benefit.  The Bank shall pay the
     benefit to the Executive's beneficiary in a single lump sum
     within sixty (60) days of the date of death.

<PAGE>

     4.4 Change of Control Benefit.  In the event of Change of
Control while the Executive is in the active service of the Bank,
the Bank shall pay to the Executive the benefit described in this
Section 4.4 in lieu of any other benefit under this Agreement.

          4.4.1 Amount of Benefit.  The Executive shall become
     100% vested in his Deferral Account balance on the date of
     Change of Control.  The benefit under this Section 4.4 is
     the Deferral Account balance on the first day of the month
     coinciding with or immediately following the Termination of
     Employment date resulting from a Change of Control as
     adjusted for Partial Year Interest.

          4.4.2 Payment of Benefit.  Upon Termination of
     Employment within twelve (12) months of Change of Control,
     the Bank shall pay the benefit to the Executive in a single
     lump sum within sixty (60) days after Termination of
     Employment.

     4.5 Other Termination of Employment Benefit.  If the
Executive terminates employment before Normal Retirement Age or
for reasons other than Death, Disability, or Change in Control,
the Bank shall pay to the Executive the benefit described in this
Section 4.5 in lieu of any other benefits under this agreement.

          4.5.1 Amount of Benefit.  The benefit under this
     Section 4.5 is the vested portion of the Deferral Account
     balance on the first day of the month coinciding with or
     immediately following the Termination of Employment date as
     adjusted for Partial Year Interest.

          4.5.2 Payment of Benefit.  The Bank shall pay the
     benefit to the Executive commencing on the first day of the
     month coinciding with or immediately following the
     Termination of Employment date in the Optional Benefit Form
     elected by the Executive on the Election Form.

     4.6 Benefits upon the Death of the Executive While Receiving
Installment Payments.  If the Executive dies while Installment
Payments are being made, the Bank shall pay to the Executive's
beneficiary the benefit described in this Section 4.6 in lieu of
any other benefits under this agreement.

          4.6.1 Amount of Benefit.  The benefit under this
     Section 4.6 shall be equal to the sum of the unpaid
     installments.

          4.6.2 Payment of Benefit.  The Bank shall pay the
     benefit to the Executive's beneficiary in a single lump sum
     within sixty (60) days after the Executive's date of death.

          4.7 Excess Parachute or Golden Parachute Payment.
     Notwithstanding any provision of this Agreement to the
     contrary, the Bank shall not pay any benefit under this
     Agreement to the extent that the benefit would be a
     prohibited Golden Parachute payment pursuant to 12 C.F.R.
     Section 359.2 and for which the appropriate federal banking
     agency has not given written consent to pay pursuant to 12
     C.F.R. Section 359.4, provided however that the Bank if it
     deems it reasonable, shall request pursuant to 12 C.F.R.
     Section 359.4(a)(1) written permission to make a Golden
     Parachute Payment.

<PAGE>

                           Article 5
                     Optional Benefit Forms

     5.1  Optional Benefit Forms for Executives Terminating
Employment for Normal Retirement, Disability, and Other
Termination of Employment.  The Executive who terminates
employment for Normal Retirement, Disability, or Other
Termination of Employment may elect to receive the Benefit in one
of the following optional forms of payment.

          5.1.1 Lump Sum Payment.  Upon election by the Executive
     on the Election Form, the Bank shall pay the benefit as a
     single lump sum payment within sixty (60) days of the
     Executive's Termination of Employment date.

          5.1.2 Installment Payments.  Upon election by the
     Executive on the Election Form, the Bank shall pay the
     benefit in 180 equal monthly installments.  Installment
     payments shall be calculated to have the same present value
     as the Executive's benefit payable as a single Lump Sum
     Payment based on the Interest Rate in effect on the
     Allocation Date coinciding with or immediately preceding the
     Executive's Termination of Employment date.  The first
     installment payment shall be made on the first day of the
     second month coinciding or immediately following the
     Executive's Termination of Employment date.

     5.2 Optional Benefit Forms for Executives Terminating
Employment Because of Change of Control or Death.  The Bank shall
pay benefits to an Executive terminating employment as result of
a Change in Control or to an Executive's beneficiary as a result
of the Executive's death as a single lump sum payment within
sixty (60) days of the Executive's Termination of Employment date
or death.


                           Article 6
                            Vesting

     6.1 Vesting Deferral Account Balance.  The Executive's
Vested Deferral Account Balance is equal to the product of the
Executive's Vesting Percentage and the Deferral Account balance.

     6.2 Vesting Percentage.  The Executive's Vesting Percentage
shall be calculated on each Allocation Date while the Executive
is employed.  Except as provided below, the Vesting Percentage so
calculated shall remain unchanged until the next Allocation Date.
The Vesting Percentage shall be determined as follows:

          6.2.1 General Vesting Percentage Calculation - The
     Vesting Percentage is equal to the Executive's Service since
     his date of hire divided by the Executive's projected
     Service on his Normal Retirement Date.

<PAGE>

          6.2.2 General Vesting Percentage during First Five
     Years of Employment.  The Executive shall not accrue any
     Vesting Percentage until he attains, while employed, the
     fifth (5th) Allocation Date coincident with or following his
     date of hire.  Executive's years of service prior to the
     adoption and execution of this Agreement shall be used to
     determine Executive's vesting credits.

          6.2.3 General Vesting Upon Attainment of Normal
     Retirement Age, Disability, Death, or Change of Control.
     The Executive's Vesting Percentage shall be 100% upon
     attainment of the Normal Retirement Age, becoming eligible
     for Disability Retirement, upon Death and/or upon a Change
     in Control.

                           Article 7
                         Beneficiaries

     7.1 The Executive shall designate a beneficiary by filing a
written designation with the Bank.  The Executive may revoke or
modify the designation at any time by filing a new designation.
However, designations shall be effective only if signed by the
Executive and accepted by the Bank during the Executive's
lifetime.  The Executive's beneficiary designation shall be
deemed automatically revoked if the beneficiary predeceases the
Executive, or if the Executive names a spouse as beneficiary and
the marriage is subsequently dissolved.  If the Executive dies
without a valid beneficiary designation, all payments shall be
made to the Executive's estate.

     7.2 Facility of Payment.  If a benefit is payable to a
minor, to a person declared incompetent, or to a person incapable
of handling the disposition of his or her property, the Bank may
pay such benefit to the guardian, legal representative or person
having the care or custody of such minor, incompetent person or
incapable person.  The Bank may require proof of incompetence,
minority or guardianship as it may deem appropriate prior to
distribution of the benefit.  Such distribution shall completely
discharge the Bank from all liability with respect to such
benefit.

                           Article 8
                     General Limitations

     Notwithstanding any provision of this Agreement to the
contrary, the Bank shall not pay any benefit under this
Agreement:

     8.1 Termination for Cause.  Termination of the Executive's
employment for "Cause" shall mean termination because of personal
dishonesty by the Executive in the performance of his duties
which results in demonstrable material injury to the Bank or of
its affiliates or subsidiaries; willful misconduct by the
Executive; breach by the Executive of a fiduciary duty to the
Bank involving personal profit, intentional failure to perform
stated duties following the Bank giving written notice thereof to
the Executive; willful violation of any law, rule or regulation
(other than traffic violations or similar offenses), or final
cease-and-desist order or material breach of any provision of the
Agreement; or any other act that the Bank deems a willful or a
for Cause reason for termination of the Executive's employment.
For purposes of this paragraph, no act or failure to act on the
Executive's part shall be considered "willful" unless done, or
omitted to be done, by the Executive not in good faith and
without reasonable belief that the Executive's action or omission
was in the

<PAGE>

best interest of the Bank.

                           Article 9
                 Claims and Review Procedures

     9.1 Claims Procedure.  The Bank shall notify any person or
entity that makes a claim against the Agreement (the "Claimant")
in writing, within ninety (90) days of Claimant's written
application for benefits, of his or her eligibility or
noneligibility for benefits under the Agreement.  If the Bank
determines that the Claimant is not eligible for benefits or full
benefits, the notice shall set forth:  (1) the specific reasons
for such denial; (2) a specific reference to the provisions of
the Agreement on which the denial is based; (3) a description of
any additional information or material necessary for the Claimant
to perfect his or her claim, and a description of why it is
needed; and (4) an explanation of the Agreement's claims review
procedure and other appropriate information as to the steps to be
taken if the Claimant wishes to have the claim reviewed.  If the
Bank determines that there are special circumstances requiring
additional time to make a decision, the Bank shall notify the
Claimant of the special circumstances and the date by which a
decision is expected to be made, and may extend the time for up
to an additional ninety (90) days.

     9.2 Review Procedure.  If the Claimant is determined by the
Bank not to be eligible for benefits, or if the Claimant believes
that he or she is entitled to greater or different benefits, the
Claimant shall have the opportunity to have such claim reviewed
by the Bank by filing a petition for review with the Bank within
sixty (60) days after receipt of the notice issued by the Bank.
Said petition shall state the specific reasons that the Claimant
believes entitle him or her to benefits or to greater or
different benefits.  Within sixty (60) days after receipt by the
Bank of the petition, the Bank shall afford the Claimant (and
counsel, if any) an opportunity to present his or her position to
the Bank orally or in writing, and the Claimant (or counsel)
shall have the right to review the pertinent documents.  The Bank
shall notify the Claimant of its decision in writing within the
sixty-day period, stating specifically the basis of its decision,
written in a manner calculated to be understood by the Claimant
and the specific provisions of the Agreement on which the
decision is based.  If, because of the need for a hearing, the
sixty-day period is not sufficient, the decision may be deferred
for up to another sixty (60) days at the election of the Bank,
but notice of this deferral shall be given to the Claimant.

                           Article 10
                  Amendments and Termination

     This Agreement may be amended or terminated only by a
written agreement signed by the Bank.

                           Article 11
                         Miscellaneous

     11.1 Binding Effect.  This Agreement shall bind the
Executive and the Bank, and their beneficiaries, survivors,
executors, successors, administrators, and transferees.

<PAGE>

     11.2 No Guarantee of Employment.  This Agreement is not an
employment policy or contract.  It does not give the Executive
the right to remain an employee of the Bank, nor does it
interfere with the Bank's "at will" right to discharge the
Executive.  It also does not require the Executive to remain an
employee nor interfere with the Executive's right to terminate
employment at any time.

     11.3 Non-Transferability.  Benefits under this Agreement
cannot be sold, transferred, assigned, pledged, attached, or
encumbered in any manner.

     11.4 Assignment.  This Agreement shall be assignable by Bank
to their successors and affiliates.

     11.5 Tax Withholding.  The Bank shall withhold any taxes
that are required to be withheld from the benefits provided under
this Agreement.

     11.6 Applicable Law.  The Plan and all rights hereunder
shall be governed by and construed according to the laws of
Pennsylvania, except to the extent preempted by the laws of the
United States of America.

     11.7 Unfunded Arrangement.  The Executive and beneficiary
are general unsecured creditors of the Bank for the payment of
benefits under this Agreement.  The benefits represent the mere
promise by the Bank to pay such benefits.  The rights to benefits
are not subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors.  Any insurance on the Executive's life
that the Bank owns is a general asset of the Bank of which the
Executive and beneficiary have no preferred or secured claim.

     11.8 Entire Agreement.  This Agreement constitutes the
entire agreement between the Bank and the Executive as to the
subject matter hereof.  No rights are granted to the Executive by
virtue of this Agreement other than those specifically set forth
herein.

     11.9 Administration.  The Bank shall have powers that are
necessary to administer this Agreement, including but not limited
to:

          11.9.1 establishing and revising the method of
     accounting for the Agreement;

          11.9.2 maintaining a record of benefit payments; and

          11.9.3 establishing rules and prescribing any forms
     necessary or desirable to administer the Agreement.

     11.10 Designated Fiduciary.  The Bank shall be the named
fiduciary and plan administrator under the Agreement.  The named
fiduciary may delegate to others certain aspects of the
management and operation responsibilities of the plan including
the employment of advisors and the delegation of ministerial
duties to qualified individuals.

<PAGE>

     IN WITNESS WHEREOF, the Executive and a duly authorized Bank
officer have signed this Agreement.

EXECUTIVE:                  COMPANY:

                            Union National Community Bank


 /s/ Clement M. Hoober      By /s/ Mark D.Gainer
______________________         ___________________

  Clement M. Hoober         Title  President/CEO
______________________           _________________
(Print Name)

<PAGE>

                          EXHIBIT 10.8

                          _____________

     Group Term Replacement Plan for Certain Officers, CFO,
        dated January 1, 2004 between Clement M. Hoober
                and Union National Community Bank

<PAGE>

                  UNION NATIONAL COMMUNITY BANK
                 GROUP TERM REPLACEMENT PLAN FOR
                        CERTAIN OFFICERS

     THIS PLAN hereby made and entered into this 1st day of
January, 2004, by and between Union National Community Bank, a
national chartered commercial bank, located in Mount Joy,
Pennsylvania (the "Bank" and the Participant selected to
participate in this Plan (the "Participant").

                          INTRODUCTION

     The Bank wishes to attract and retain highly qualified vice
presidents and officers.  To further this objective, the Bank is
willing to divide the death proceeds of certain life insurance
policies which are owned by the Bank on the lives of the
participating vice presidents and officers with the designated
beneficiary of each insured participant.  The Bank will pay life
insurance premiums from its general assets. The participants
understand that the Bank is using the insurance policy in which
the participant has executed a Split Dollar Endorsement as a
means to fund employee benefits for other employees consistent
with the requirements of OCC Bulletin 2000-23 and are hereby
consenting to such use by the Bank.

                           Article 1
                     General Definitions

The following terms shall have the meanings specified:

     1.1  "Change of Control"means any of the following:

          1.1.1 (A) a merger, consolidation or division involving
          Union National Financial Corporation ("Corporation") or
          Bank, (B) a sale, exchange, transfer or other
          disposition of substantially all of the assets of
          Corporation or Bank, or (C) a purchase by Corporation
          or Bank of substantially all of the assets of another
          entity, unless (y) such merger, consolidation,
          division, sale, exchange, transfer, purchase or
          disposition is approved in advance by seventy percent
          (70%) or more of the members of the Board of Directors
          of Corporation or Bank who are not interested in the
          transaction and (z) a majority of the members of the
          Board of Directors of the legal entity resulting from
          or existing after any such transaction and of the Board
          of Directors of such entity's parent corporation, if
          any, are former members of the Board of Directors of
          Corporation or Bank; or

          1.1.2 any "person"(as such term is used in Sections
          13(d) and 14(d) of the Securities Exchange Act of 1934
          (the "Exchange Act")), other than Corporation or Bank
          or any "person" who on the date hereof is a director or
          officer of Corporation or Bank is or becomes the
          "beneficial owner"(as defined in Rule 13d-3 under the
          Exchange Act), directly or indirectly, of securities of
          Corporation or Bank representing twenty-five (25%)
          percent or more of the combined voting power of
          Corporation or Bank's then outstanding securities; or

<PAGE>

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

          1.1.4 any other change in control of Corporation and
          Bank similar in effect to any of the foregoing.

     1.2 "Compensation Committee" means either the Compensation
Committee designated from time to time by the Bank's Board of
Directors or a majority of the Bank's Board of Directors, either
of which shall hereinafter be referred to as the Compensation
Committee.

     1.3 "Disability" means the Executive's inability to perform
substantially all normal duties of the Executive's position, as
defined in the Bank's disability insurance policy and as
determined by the Bank's disability insurance carrier.  As a
condition to any benefits, the Bank may require the Executive to
submit to a physical or mental evaluations and tests, as the
Board of Directors of the Bank may deem appropriate.

     1.4 "Insured" means the individual whose life is insured.

     1.5 "Insurer" means the insurance company issuing the life
insurance policy on the life of the insured.

     1.6 "Other Group Term Coverage" means group term life
insurance maintained on a Participant's life owned by the Bank
that is in addition to the Policies covered under this Plan.

     1.7  "Normal Retirement Age" means age 62.

     1.8 "Normal Retirement Date" means the later of the Normal
Retirement Age or the date that the Participant terminates or is
terminated for any reason other than being Terminated for Cause.

     1.9 "Participant" means an employee who is a the vice
president, senior vice president, executive vice president, or
president who elects in writing to participate in the Plan using
the form attached hereto as Exhibit A, and signs a Split Dollar
Endorsement for the Policy in which he or she is the Insured.

     1.10 "Policy" or "Policies" means the individual insurance
policy (or policies) adopted by the Compensation Committee for
purposes of insuring a Participant's life under this Plan.

     1.11"Base Annual Salary" means the current base annual
salary at the earliest of (1) the date of the Participant's
death; (2) the date of the Participant's disability; (3) the
Participant's retirement age, or the date of change of control.

<PAGE>

     1.12    "Plan" means this instrument, including all
amendments thereto.

     1.13 "Terminated for Cause" means that the Bank has
terminated the Participant's employment pursuant to his or her
Employment Agreement, if any, or termination of the Executive's
employment for "Cause" shall mean termination because of personal
dishonesty by the Executive in the performance of his duties
which results in demonstrable material injury to the Bank,
willful misconduct by the Executive, breach by the Executive of a
fiduciary duty to the Bank involving personal profit, intentional
failure to perform stated duties following the Bank giving
written notice thereof to the Executive, willful violation of any
law, rule or regulation (other than traffic violations or similar
offenses) or final cease-and-desist order or material breach of
any provision of the Agreement or any other act that the Bank
deems a willful or a for cause reason for termination of the
Executive's employment.  For purposes of this paragraph, no act
or failure to act on the Executive's part shall be considered
"willful" unless done, or omitted to be done, by the Executive
not in good faith and without reasonable belief that the
Executive's action or omission was in the best interest of the
Bank.

                           Article 2
                         Participation

     2.1 Eligibility to Participate.  The Compensation Committee
in its sole discretion shall designate from time to time
Participants that are eligible to participate in this Plan.

     2.2 Participation.  The eligible vice president or officer
may participate in this Plan by executing an Election to
Participate (Exhibit A) and a Split Dollar Endorsement (Exhibit
D).  The Split Dollar Endorsement shall bind the Participant and
his or her beneficiaries, assigns and transferees, to the terms
and conditions of this Plan.  A vice president's or officer's
participation is limited to only Policies where he or she is the
Insured.  Exhibit B attached hereto sets forth the original
Participants.  It is intended that the Participant shall continue
as a Participant until death regardless of Participant's employee
status with the Bank. In the event the Bank decides to maintain
the Policy after the Participant's termination of his or her
participation in the Plan, the Bank shall be the direct
beneficiary of the entire proceeds of the Policy.

     2.3 Termination of Participation.  A Participant's rights
under this Plan shall cease and his or her participation in this
Plan shall terminate if either or both of the following events
occur:

          2.3.1 The Participant's employment with the Bank is
      Terminated for Cause; or

          2.3.2 The Participant's employment with the Bank is
      terminated prior to Normal Retirement Age for reasons other
      than Disability.

<PAGE>

     2.4 Disability.  (A) Except as otherwise provided in
paragraph (B) of this section 2.4, if the Participant's
employment with the Bank is terminated because of the
Participant's Disability, the Bank shall maintain the Policy in
full force and effect and, in no event, shall the Bank amend,
terminate or otherwise abrogate the Participant's interest in the
Policy, provided, however, that at all times the Policy shall be
subject to the claims of the Bank's creditors, and further
provided the Bank, in its sole discretion, may substitute a new
policy sufficient to provide participant with death proceeds in
such amount, as provided in this Agreement.

          (B) Notwithstanding the provisions of paragraph (A) of
this section 2.4, upon the Disabled Participant's gainful
employment with an entity other than the Bank, the Bank shall
have no further obligation to the Disabled Participant, and the
Disabled Participant's rights pursuant to the Plan shall cease.
In the event the Disabled Participant's rights are terminated
hereunder, the Bank shall be the direct beneficiary of the entire
death proceeds of the Policy upon the death of the Disabled
Participant.

     2.5 Retirement.Upon the retirement of the Participant, the
Bank shall maintain the Policy in full force and effect and in no
event shall the Bank amend, terminate or otherwise abrogate the
Participant's interest in the Policy, provided, however that at
all times the Policy shall be subject to the claims of the Bank's
creditors, and further provided the Bank, in its sole discretion,
may substitute a new policy sufficient to provide participant
with death proceeds in such amount, as provided in this
Agreement.  The Participant's interest in the Policy shall be
subject to the vesting schedule attached hereto as Exhibit C.

     2.6   Service.     For the purposes of this plan, service is
defined as the period of elapsed time from the Participant's
initial date of employment with the Bank until the Participant's
last day of employment with the Bank.

                           Article 3
                  Policy Ownership/Interests

     3.1 Bank Ownership.  The Bank shall own Policies on each
Participant's life and shall have the right to exercise all
incidents of ownership.  With respect to each Policy, the Bank
shall be the direct beneficiary of an amount of death proceeds in
excess of three times Base Annual Salary prior to retirement, or
the Multiple of the Base Annual Salary of the insured/Participant
based upon the Vesting Schedule attached hereto as Exhibit C
following retirement.

     3.2 Participant's Interest.  With respect to each Policy,
the Participant, or the Participant's assignee, shall have the
right to designate the beneficiary of an amount of death benefit
based upon the Plan formula as described in the Participant's
individual Split Dollar Endorsement.  The Participant shall also
have the right to elect and change settlement options with the
consent of the Bank and the Insurer.

<PAGE>

                           Article 4
                           Premiums

     4.1 Premium Payment.  The Bank shall pay all premiums due on
all Policies.

     4.2 Imputed Income.  The Bank shall impute income to the
Participant in an amount equal to the current term rate for the
Participant's age multiplied by the aggregate death benefit
payable to the Participant's beneficiary.  The "current term
rate" is the minimum amount required to be imputed under IRS
regulation Section 1.61-22 and Revenue Ruling 2003-105, or any
subsequent applicable authority.

                           Article 5
                          Assignment

     Any Participant may assign without consideration all
interests in his or her Policy and in this Plan to any person,
entity or trust.  In the event a Participant shall transfer all
of his/her interest in the Policy, then all of that Participant's
interest in his or her Policy and in the Plan shall be vested in
his/her transferee, who shall be substituted as a party
hereunder, and that Participant shall have no further interest in
his or her Policy or in this Plan.

                           Article 6
                            Insurer

     The Insurer shall be bound only by the terms of their
corresponding Policy.  Any payments the Insurer makes or actions
it takes in accordance with a Policy shall fully discharge it
from all claims, suits and demands of all persons relating to
that Policy.  The Insurer shall not be bound by the provisions of
this Plan.  The Insurer shall have the right to rely on the
Bank's representations with regard to any definitions,
interpretations, or Policy interests as specified under this
Plan.

                           Article 7
                       Claims Procedure

     7.1 Claims Procedure.  The Bank shall notify any person or
entity that makes a claim against this Group Term Replacement
Plan (the "Claimant") in writing, within ninety (90) days of
Claimant's written application for benefits, of Claimant's
eligibility or ineligibility for benefits under this Plan.  If
the Bank determines that Claimant is not eligible for benefits or
full benefits, the notice shall set forth (1) the specific
reasons for such denial, (2) a specific reference to the
provisions of this Plan on which the denial is based, (3) a
description of any additional information or material necessary
for the Claimant to perfect Claimant's claim, and a description
of why it is needed, and (4) an explanation of this Plan's claims
review procedure and other appropriate information as to the
steps to be taken if the Claimant wishes to have the claim
reviewed.  If the Bank determines that there are special
circumstances requiring additional time to make a decision, the
Bank shall notify the Claimant of the special circumstances and
the date by which a decision is expected to be made, and may
extend the time for up to an additional ninety-day period.

<PAGE>

     7.2 Review Procedure.  If a Claimant is determined by the
Bank not to be eligible for benefits, or if the Claimant believes
that Claimant is entitled to greater or different benefits, the
Claimant shall have the opportunity to have such claim reviewed
by the Bank by filing a petition for review with the Bank within
sixty (60) days after receipt of the notice issued by the Bank.
Said petition shall state the specific reasons which the Claimant
believes entitle Claimant to benefits or to greater or different
benefits.  Within sixty (60) days after receipt by the Bank of
the petition, the Bank shall afford the Claimant (and counsel, if
any) an opportunity to present Claimant's position to the Bank
orally or in writing, and the Claimant (or counsel) shall have
the right to review the pertinent documents.  The Bank shall
notify the Claimant of its decision in writing within the sixty-
day period, stating specifically the basis of its decision,
written in a manner calculated to be understood by the Claimant
and the specific provisions of this Plan on which the decision is
based.  If, because of the need for a hearing, the sixty-day
period is not sufficient, the decision may be deferred for up to
another sixty-day period at the election of the Bank, but notice
of this deferral shall be given to the Claimant.

                           Article 8
                   Amendments and Termination

     8.1 Amendment or Termination of Plan.  Except as otherwise
provided in sections 2.3, 2.4, 2.5 and 8.2, (i) the Bank may
amend or terminate the Plan at any time, and (ii) the Bank may
amend or terminate a Participant's rights under the Plan at any
time prior to a Participant's death by written notice to the
Participant.

     8.2 Amendment or Termination of Plan Upon Change of Control.
Notwithstanding the provisions of section 8.1, in the event of a
Change of Control, the Bank or its successor shall maintain in
full force and effect each Policy that is in existence on the
date the Change of Control occurs and not terminate or otherwise
abrogate a Participant's interest in the Policy, provided,
however, that at all times the Policy shall be subject to the
claims of the Bank's creditors.  This section 8.2 shall apply to
all Participants in the Plan on the date the Change of Control
occurs, including by not limited to (i) a retired Participant who
has an interest in the Policy pursuant to section 2.5; (ii) a
Disabled Participant who has an interest in the Policy pursuant
to section 2.4; and (iii) a Participant whose employment is
terminated as a result of a Change of Control.

     8.3 Upon Change of Control, all Participants are 100% vested
in the maximum benefit in the Participant's Split Dollar
Endorsement (Exhibit D), at the date of the Change of Control
(the greater of 1(i) or 1(ii)).

     8.4 A Participant may, in the Participant's sole and
absolute discretion, waive his or her rights under the Plan at
any time.  Any waiver permitted under this section 8.3 shall be
in writing and delivered to the Board of Directors of the Bank.

<PAGE>

                           Article 9
                         Miscellaneous

     9.1 Binding Effect.  This Plan in conjunction with each
Split Dollar Endorsement shall bind each Participant and the
Bank, their beneficiaries, survivors, executors, administrators
and transferees, and any Policy beneficiary.

     9.2 No Guarantee of Employment.  This Plan is not an
employment policy or contract.  It does not give a Participant
the right to remain an employee of the Bank, nor does it
interfere with the Bank's "at will" right to discharge a
Participant, unless an existing employment agreement is in place.
It also does not require a Participant to remain an employee nor
interfere with a Participant's right to terminate employment at
any time.

     9.3 Applicable Law.  The Plan and all rights hereunder shall
be governed by and construed according to the laws of the
Commonwealth of Pennsylvania, except to the extent preempted by
the laws of the United States of America.

     9.4 Notice.  Any notice, consent or demand required or
permitted to be given under the provisions of this Split Dollar
Plan by one party to another shall be in writing, shall be signed
by the party giving or making the same, and may be given either
by delivering the same to such other party personally, or by
mailing the same, by United States certified mail, postage
prepaid, to such party, addressed to his/her last known address
as shown on the records of the Bank.  The date of such mailing
shall be deemed the date of such mailed notice, consent or
demand.

     9.5 Entire Agreement.  This Plan constitutes the entire
agreement between the Bank and the Participant as to the subject
matter hereof.  No rights are granted to the Participant by
virtue of this Plan other than those specifically set forth
herein.

     9.6 Administration.  The Bank shall have powers which are
necessary to administer this Plan, including but not limited to:

          9.6.1 Interpreting the provisions of the Plan;

          9.6.2 Establishing and revising the method of
     accounting for the Plan;

          9.6.3 Maintaining a record of benefit payments; and

          9.6.4 Establishing rules and prescribing any forms
     necessary or desirable to administer the Plan.

     9.7 Named Fiduciary.  The Bank shall be the named fiduciary
and plan administrator under the Plan.  The named fiduciary may
delegate to others certain aspects of the management and
operation responsibilities of the plan including the employment
of advisors and the delegation of ministerial duties to qualified
individuals.

<PAGE>

IN WITNESS WHEREOF, the Bank executes this Plan as of the date
indicated above.

                                COMPANY:
                                UNION NATIONAL COMMUNITY BANK

                                By  /s/ R. Michael Mohn
                                  _______________________________
                                Title VP, Human Resources Manager
                                      ___________________________
<PAGE>

                           EXHIBIT A

                   ELECTION TO PARTICIPATE


     I,   Clement M. Hoober,      an eligible Participant of the
       ___________________________
Union National Community Bank Group Term Replacement Plan for
Certain Officers (the "Plan") dated January 1, 2004, hereby elect
and consent to become a Participant of the Plan in accordance
with Section 2.2 of the Plan.  Additionally, I acknowledge that I
have read the Plan document and agree to be bound by its terms.


     Executed this  6th  day of    January       , 2004.
                  _______      __________________     _

/s/ R. Michael Mohn            /s/ Clement M. Hoober
______________________         _____________________
Witness                        Participant

<PAGE>

                          EXHIBIT 10.9
                          ____________

           Executive Incentive Retirement Agreement, COO,
           dated January 1, 2004 between Michael A. Frey
                 and Union National Community Bank

<PAGE>

             EXECUTIVE INCENTIVE RETIREMENT AGREEMENT

     THIS AGREEMENT is made this first day of January, 2004, by
and between Union National Community Bank (the "Bank"), a
national chartered commercial bank, located in Mount Joy, PA, and
Michael A. Frey (the "Executive").
_______________

                          INTRODUCTION

     To encourage the Executive to remain an employee of the
Bank, the Bank is willing to provide to the Executive a deferred
incentive opportunity.  The Bank shall pay the benefits from its
general assets.

                           AGREEMENT

     The Executive and the Bank agree as follows:

                           Article 1
                          Definitions

     1.1  Definitions.  Whenever used in this Agreement, the
following words and phrases shall have the meanings specified:

          1.1.1 "Allocation Date" means January 31st of each
     year.  The Allocation Date is the date that an Executive's
     Deferral Account is credited with an Incentive Award as
     defined herein and with Interest (as defined herein) for the
     Allocation Year (as defined herein) ending on January 31.

          1.1.2 "Allocation Year" means the period from February
     1 through the following January 31.

          1.1.3 "Base Salary" means the total annual base salary
     payable to the Executive at the rate in effect on the date
     specified.  Base Salary shall not be reduced for any salary
     reduction contributions: (i) to cash or deferred
     arrangements under Section 401(k) of the Code; (ii) to a
     cafeteria plan under Section 125 of the Code (as defined
     herein); or (iii) to a deferred compensation plan that is
     not qualified under Section 401(a) of the Code.

          1.1.4 "Change of Control" means any of the following:

                    (i) (A) a merger, consolidation or division
               involving Union National Financial Corporation
               ("Corporation") or Bank, (B) a sale, exchange,
               transfer or other disposition of substantially all
               of the assets of Corporation or Bank, or (C) a
               purchase by Corporation or Bank of substantially
               all of the assets of another entity, unless (y)
               such merger, consolidation, division, sale,
               exchange, transfer, purchase or disposition is
               approved in advance by seventy percent (70%) or
               more of the members of the Board of Directors of
               Corporation or Bank who are not interested in the

<PAGE>

               transaction and (z) a majority of the members of
               the Board of Directors of the legal entity
               resulting from or existing after any such
               transaction and of the Board of Directors of such
               entity's parent corporation, if any, are former
               members of the Board of Directors of Corporation
               or Bank; or

                    (ii) any "person" (as such term is used in
               Sections 13(d) and 14(d) of the Securities
               Exchange Act of 1934 (the "Exchange Act")), other
               than Corporation or Bank or any "person" who on
               the date hereof is a director or officer of
               Corporation or Bank is or becomes the "beneficial
               owner" (as defined in Rule 13d-3 under the
               Exchange Act), directly or indirectly, of
               securities of Corporation or Bank representing
               twenty-five (25%) percent or more of the combined
               voting power of Corporation or Bank's then
               outstanding securities, or

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

                    (iv) any other change in control of
               Corporation and Bank similar in effect to any of
               the foregoing.

          1.1.5"Code" means the Internal Revenue Code of 1986, as
     amended.

          1.1.6 "Deferral Account" means the Bank's accounting of
     the Executive's accumulated Deferrals plus accrued Interest.

          1.1.7 "Disability" means the Executive's inability to
     perform substantially all normal duties of the Executive's
     position, as defined in the Bank's disability insurance
     policy and as determined by the Bank's disability insurance
     carrier.  As a condition to any benefits, the Bank may
     require the Executive to submit to a physical or mental
     evaluations and tests, as the Board of Directors of the Bank
     may deem appropriate.

          1.1.8 "Disability Retirement Date" means the first day
     of the month immediately following the Executive's last date
     of employment resulting from an approved Disability.

          1.1.9 "Earnings" means the measurements of Bank
     profitability selected annually by the Board of Directors of
     the Bank to be used in the determination of incentive awards
     for Executives who are participating in this Plan.

          1.1.10 "Effective Date" means January 1, 2004.

<PAGE>

          1.1.11 "Election Form" means the Form attached as
     Exhibit 1.

          1.1.12 "Executive" means an Executive of the Bank that
     has been approved by the Board of Directors of the Bank to
     participate in the Plan and who has signed this agreement.

          1.1.13 "Extraordinary Items" means those items that are
     recognized under Generally Accepted Accounting Principles as
     extraordinary because such items substantially affect
     shareholder equity and/or the Bank's assets.  Examples of
     such items are stock redemptions, mergers, acquisitions,
     stock splits, and other items of that nature.

          1.1.14 "Interest Rate" means The Prime Rate plus one
     (1) percentage point.

          1.1.15 "Normal Retirement Age" means the Executive's
     62nd birthday.

          1.1.16 "Normal Retirement Date" means the first day of
     the month coinciding with or immediately following the later
     of the Executive's Normal Retirement Age or Termination of
     Employment.

          1.1.17 "Plan" means the terms and provisions of this
     agreement.

          1.1.18 "Plan Year" means the calendar year.

          1.1.19 "Prime Rate" means the Prime Rate as reported in
     the Wall Street Journal on the business day coinciding with
     or immediately prior to the Allocation Date.

          1.1.20 "Termination of Employment" means the Executive
     ceasing to be employed by the Bank for any reason other than
     by reason of an approved leave of absence.

          1.1.21 "Service" means the total number of twelve-month
     periods and fractions thereof during which the Executive is
     employed on a full-time basis by the Bank, inclusive of any
     approved leave of absence.  All service periods are assumed
     to begin on the first day of the month coinciding or
     immediately following the initial date of employment.  All
     calculations of service shall be rounded to two (2) decimal
     places.

<PAGE>

                           Article 2
                           Incentive

     2.1 Incentive Award.  Earnings, adjusted for Extraordinary
Items, determined as of December 31st of each Plan Year shall
determine the Executive's Incentive Award Percentage, in
accordance with the attached Schedule A.  The chart on Schedule A
is specifically subject to change annually at the sole discretion
of the Bank's Board of Directors.  The Incentive Award is
calculated annually by taking the Executive's Base Salary for the
Plan Year in which the Earnings were calculated multiplied by the
Incentive Award Percentage.  No Incentive Awards shall be
declared before January 31, 2005.

     2.2 Incentive Deferral.  On January 31st, following each
Plan Year, the Bank shall declare and pay the Incentive Award in
the form of compensation and the Executive shall defer such
amount to the Deferral Account.

                           Article 3
                       Deferral Account

     3.1 Establishing and Crediting on Allocation Dates.  The
Bank shall establish a Deferral Account on its books for the
Executive, and shall credit to the Deferral Account on each
Allocation Date the following amounts:

          3.1.1 Deferrals. The Incentive Deferral as determined
     under Article 2.

          3.1.2 Interest.  Immediately prior to the payment of
     any benefits, interest on the Executive's Deferral Account
     balance on the prior Allocation Date, if any, at an annual
     rate equal to the Interest Rate in effect on the prior
     Allocation Date.

     3.2 Partial Year Interest.  The Deferral Account of an
Executive that is terminating employment shall be credited with
interest from the February 1st prior to his termination date to
the first day of the month coinciding with or immediately
following the date of his termination from employment.  The
interest rate used for the partial year shall be the Prime Rate
in effect on the Allocation Date immediately prior to
termination.  The interest credit shall be equal to the interest
rate divided by twelve (12) and then multiplied by the number of
months between the February 1st prior to termination to the first
day of the month coinciding with or immediately following
employment termination and then multiplied by the Executive's
Deferral Account balance on the prior Allocation Date.  The
interest rate for the partial year shall be rounded to two (2)
decimal places before it is multiplied by the Deferral Account
balance.

     3.3 Statement of Accounts.  The Bank shall provide to the
Executive a statement setting forth the Deferral Account balance
within one hundred twenty (120) days after each Plan Year.

<PAGE>

     3.4 Accounting Device Only.  The Deferral Account is solely
a device for measuring amounts to be paid under this Agreement.
The Deferral Account is not a trust fund of any kind.  The
Executive is a general unsecured creditor of the Bank for the
payment of benefits.  The benefits represent a mere promise by
the Bank to pay such benefits.  The Executive's rights are not
subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment, or
garnishment by the Executive's creditors.

                           Article 4
                           Benefits

     4.1 Normal Retirement Benefit.  If the Executive terminates
employment on or after the Normal Retirement Age for reasons
other than death, the Bank shall pay to the Executive the benefit
described in this Section 4.1 in lieu of any other benefit under
this Agreement.

          4.1.1 Amount of Benefit.  The benefit under this
     Section 4.1 is the Deferral Account balance on the
     Executive's Normal Retirement Date as adjusted for Partial
     Year Interest.

          4.1.2 Payment of Benefit.  The Bank shall pay the
     benefit to the Executive commencing on the Executive's
     Normal Retirement Date pursuant to the Optional Benefit Form
     that was executed by the Executive on the Election Form.

     4.2 Disability Retirement Benefit.  If the Executive
terminates employment as a result of a Disability before Normal
Retirement Age, the Bank shall pay to the Executive the benefit
described in this Section 4.2 in lieu of any other benefit under
this Agreement.

          4.2.1 Amount of Benefit. The benefit under this Section
     4.2 is the Deferral Account balance on the Executive's
     Disability Retirement Date as adjusted for Partial Year
     Interest.

          4.2.2 Payment of Benefit.  The Bank shall pay the
     benefit to the Executive commencing on the Executive's
     Disability Retirement Date pursuant to the Optional Benefit
     Form that was executed by the Executive on the Election
     Form.

     4.3 Death Benefit.  If the Executive dies before the Normal
Retirement Age the Bank shall pay to the Executive the benefit
described in this Section 4.3 in lieu of any other benefits under
this Agreement.

          4.3.1 Amount of Benefit.  The benefit under this
     Section 4.3 is the Deferral Account balance on the first day
     of the month coinciding with or immediately following the
     Executive's date of death as adjusted for Partial Year
     Interest.

          4.3.2 Payment of Benefit.  The Bank shall pay the
     benefit to the Executive's beneficiary in a single lump sum
     within sixty (60) days of the date of death.

<PAGE>

     4.4 Change of Control Benefit.  In the event of Change of
Control while the Executive is in the active service of the Bank,
the Bank shall pay to the Executive the benefit described in this
Section 4.4 in lieu of any other benefit under this Agreement.

          4.4.1 Amount of Benefit.  The Executive shall become
     100% vested in his Deferral Account balance on the date of
     Change of Control.  The benefit under this Section 4.4 is
     the Deferral Account balance on the first day of the month
     coinciding with or immediately following the Termination of
     Employment date resulting from a Change of Control as
     adjusted for Partial Year Interest.

          4.4.2 Payment of Benefit.  Upon Termination of
     Employment within twelve (12) months of Change of Control,
     the Bank shall pay the benefit to the Executive in a single
     lump sum within sixty (60) days after Termination of
     Employment.

     4.5 Other Termination of Employment Benefit.  If the
Executive terminates employment before Normal Retirement Age or
for reasons other than Death, Disability, or Change in Control,
the Bank shall pay to the Executive the benefit described in this
Section 4.5 in lieu of any other benefits under this agreement.

          4.5.1 Amount of Benefit.  The benefit under this
     Section 4.5 is the vested portion of the Deferral Account
     balance on the first day of the month coinciding with or
     immediately following the Termination of Employment date as
     adjusted for Partial Year Interest.

          4.5.2 Payment of Benefit.  The Bank shall pay the
     benefit to the Executive commencing on the first day of the
     month coinciding with or immediately following the
     Termination of Employment date in the Optional Benefit Form
     elected by the Executive on the Election Form.

     4.6 Benefits upon the Death of the Executive While Receiving
Installment Payments.  If the Executive dies while Installment
Payments are being made, the Bank shall pay to the Executive's
beneficiary the benefit described in this Section 4.6 in lieu of
any other benefits under this agreement.

          4.6.1 Amount of Benefit. The benefit under this Section
     4.6 shall be equal to the sum of the unpaid installments.

          4.6.2 Payment of Benefit.  The Bank shall pay the
      benefit to the Executive's beneficiary in a single lump sum
      within sixty (60) days after the Executive's date of death.

     4.7 Excess Parachute or Golden Parachute Payment.
Notwithstanding any provision of this Agreement to the contrary,
the Bank shall not pay any benefit under this Agreement to the
extent that the benefit would be a prohibited Golden Parachute
payment pursuant to 12 C.F.R. Section 359.2 and for which the
appropriate federal banking agency has not given written consent
to pay pursuant to 12 C.F.R. Section 359.4, provided however that
the Bank if it deems it reasonable, shall request pursuant to 12
C.F.R. Section 359.4(a)(1) written permission to make a Golden
Parachute Payment.

<PAGE>

                           Article 5
                    Optional Benefit Forms

     5.1 Optional Benefit Forms for Executives Terminating
Employment for Normal Retirement, Disability, and Other
Termination of Employment.  The Executive who terminates
employment for Normal Retirement, Disability, or Other
Termination of Employment may elect to receive the Benefit in one
of the following optional forms of payment.

          5.1.1 Lump Sum Payment.  Upon election by the Executive
     on the Election Form, the Bank shall pay the benefit as a
     single lump sum payment within sixty (60) days of the
     Executive's Termination of Employment date.

          5.1.2 Installment Payments.  Upon election by the
     Executive on the Election Form, the Bank shall pay the
     benefit in 180 equal monthly installments.  Installment
     payments shall be calculated to have the same present value
     as the Executive's benefit payable as a single Lump Sum
     Payment based on the Interest Rate in effect on the
     Allocation Date coinciding with or immediately preceding the
     Executive's Termination of Employment date.  The first
     installment payment shall be made on the first day of the
     second month coinciding or immediately following the
     Executive's Termination of Employment date.

     5.2 Optional Benefit Forms for Executives Terminating
Employment Because of Change of Control or Death.  The Bank shall
pay benefits to an Executive terminating employment as result of
a Change in Control or to an Executive's beneficiary as a result
of the Executive's death as a single lump sum payment within
sixty (60) days of the Executive's Termination of Employment date
or death.

                           Article 6
                            Vesting

     6.1 Vesting Deferral Account Balance.  The Executive's
Vested Deferral Account Balance is equal to the product of the
Executive's Vesting Percentage and the Deferral Account balance.

     6.2 Vesting Percentage.  The Executive's Vesting Percentage
shall be calculated on each Allocation Date while the Executive
is employed.  Except as provided below, the Vesting Percentage so
calculated shall remain unchanged until the next Allocation Date.
The Vesting Percentage shall be determined as follows:

          6.2.1 General Vesting Percentage Calculation - The
     Vesting Percentage
     is equal to the Executive's Service since his date of hire
     divided by the Executive's projected Service on his Normal
     Retirement Date.

          6.2.2 General Vesting Percentage during First Five
     Years of Employment.  The Executive shall not accrue any
     Vesting Percentage until he attains, while employed, the
     fifth (5th) Allocation Date coincident with or following his
     date of hire.  Executive's years of service prior to the
     adoption and execution of this Agreement shall be used to
     determine Executive's vesting credits.

<PAGE>

          6.2.3 General Vesting Upon Attainment of Normal
     Retirement Age, Disability, Death,
     or Change of Control.  The Executive's Vesting Percentage
     shall be 100% upon attainment of the Normal Retirement Age,
     becoming eligible for Disability Retirement, upon Death
     and/or upon a Change in Control.

                           Article 7
                         Beneficiaries

     7.1 The Executive shall designate a beneficiary by filing a
written designation with the Bank.  The Executive may revoke or
modify the designation at any time by filing a new designation.
However, designations shall be effective only if signed by the
Executive and accepted by the Bank during the Executive's
lifetime.  The Executive's beneficiary designation shall be
deemed automatically revoked if the beneficiary predeceases the
Executive, or if the Executive names a spouse as beneficiary and
the marriage is subsequently dissolved.  If the Executive dies
without a valid beneficiary designation, all payments shall be
made to the Executive's estate.

     7.2 Facility of Payment.  If a benefit is payable to a
minor, to a person declared incompetent, or to a person incapable
of handling the disposition of his or her property, the Bank may
pay such benefit to the guardian, legal representative or person
having the care or custody of such minor, incompetent person or
incapable person.  The Bank may require proof of incompetence,
minority or guardianship as it may deem appropriate prior to
distribution of the benefit.  Such distribution shall completely
discharge the Bank from all liability with respect to such
benefit.

                           Article 8
                     General Limitations

     Notwithstanding any provision of this Agreement to the
contrary, the Bank shall not pay any benefit under this
Agreement:

     8.1 Termination for Cause.  Termination of the Executive's
         employment for "Cause" shall mean termination because of
         personal dishonesty by the Executive in the performance
         of his duties which results in demonstrable material
         injury to the Bank or of its affiliates or subsidiaries;
         willful misconduct by the Executive; breach by the
         Executive of a fiduciary duty to the Bank involving
         personal profit, intentional failure to perform stated
         duties following the Bank giving written notice thereof
         to the Executive; willful violation of any law, rule or
         regulation (other than traffic violations or similar
         offenses), or final cease-and-desist order or material
         breach of any provision of the Agreement; or any other
         act that the Bank deems a willful or a for Cause reason
         for termination of the Executive's employment.  For
         purposes of this paragraph, no act or failure to act on
         the Executive's part shall be considered "willful"
         unless done, or omitted to be done, by the Executive not
         in good faith and without reasonable belief that the
         Executive's action or omission was in the best interest
         of the Bank.

<PAGE>

                           Article 9
                 Claims and Review Procedures

     9.1 Claims Procedure.  The Bank shall notify any person or
entity that makes a claim against the Agreement (the "Claimant")
in writing, within ninety (90) days of Claimant's written
application for benefits, of his or her eligibility or
noneligibility for benefits under the Agreement.  If the Bank
determines that the Claimant is not eligible for benefits or full
benefits, the notice shall set forth:  (1) the specific reasons
for such denial; (2) a specific reference to the provisions of
the Agreement on which the denial is based; (3) a description of
any additional information or material necessary for the Claimant
to perfect his or her claim, and a description of why it is
needed; and (4) an explanation of the Agreement's claims review
procedure and other appropriate information as to the steps to be
taken if the Claimant wishes to have the claim reviewed.  If the
Bank determines that there are special circumstances requiring
additional time to make a decision, the Bank shall notify the
Claimant of the special circumstances and the date by which a
decision is expected to be made, and may extend the time for up
to an additional ninety (90) days.

     9.2 Review Procedure.  If the Claimant is determined by the
Bank not to be eligible for benefits, or if the Claimant believes
that he or she is entitled to greater or different benefits, the
Claimant shall have the opportunity to have such claim reviewed
by the Bank by filing a petition for review with the Bank within
sixty (60) days after receipt of the notice issued by the Bank.
Said petition shall state the specific reasons that the Claimant
believes entitle him or her to benefits or to greater or
different benefits.  Within sixty (60) days after receipt by the
Bank of the petition, the Bank shall afford the Claimant (and
counsel, if any) an opportunity to present his or her position to
the Bank orally or in writing, and the Claimant (or counsel)
shall have the right to review the pertinent documents.  The Bank
shall notify the Claimant of its decision in writing within the
sixty-day period, stating specifically the basis of its decision,
written in a manner calculated to be understood by the Claimant
and the specific provisions of the Agreement on which the
decision is based.  If, because of the need for a hearing, the
sixty-day period is not sufficient, the decision may be deferred
for up to another sixty (60) days at the election of the Bank,
but notice of this deferral shall be given to the Claimant.

<PAGE>


                           Article 10
                   Amendments and Termination

          This Agreement may be amended or terminated only by a
     written agreement signed by the Bank.

                           Article 11
                         Miscellaneous

     11.1 Binding Effect.  This Agreement shall bind the
Executive and the Bank, and their beneficiaries, survivors,
executors, successors, administrators, and transferees.

     11.2 No Guarantee of Employment.  This Agreement is not an
employment policy or contract.  It does not give the Executive
the right to remain an employee of the Bank, nor does it
interfere with the Bank's "at will" right to discharge the
Executive.  It also does not require the Executive to remain an
employee nor interfere with the Executive's right to terminate
employment at any time.

     11.3 Non-Transferability.  Benefits under this Agreement
cannot be sold, transferred, assigned, pledged, attached, or
encumbered in any manner.

     11.4 Assignment.  This Agreement shall be assignable by Bank
to their successors and affiliates.

     11.5 Tax Withholding.  The Bank shall withhold any taxes
that are required to be withheld from the benefits provided under
this Agreement.

     11.6 Applicable Law.  The Plan and all rights hereunder
shall be governed by and construed according to the laws of
Pennsylvania, except to the extent preempted by the laws of the
United States of America.

     11.7 Unfunded Arrangement.  The Executive and beneficiary
are general unsecured creditors of the Bank for the payment of
benefits under this Agreement.  The benefits represent the mere
promise by the Bank to pay such benefits.  The rights to benefits
are not subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors.  Any insurance on the Executive's life
that the Bank owns is a general asset of the Bank of which the
Executive and beneficiary have no preferred or secured claim.

     11.8 Entire Agreement.  This Agreement constitutes the
entire agreement between the Bank and the Executive as to the
subject matter hereof.  No rights are granted to the Executive by
virtue of this Agreement other than those specifically set forth
herein.

     11.9 Administration.  The Bank shall have powers that are
necessary to administer this Agreement, including but not limited
to:

          11.9.1 establishing and revising the method of
     accounting for the Agreement;

<PAGE>

          11.9.2 maintaining a record of benefit payments; and

          11.9.3 establishing rules and prescribing any forms
     necessary or desirable to administer the Agreement.

     11.10 Designated Fiduciary.  The Bank shall be the
named fiduciary and plan administrator under the Agreement.
The named fiduciary may delegate to others certain aspects
of the management and operation responsibilities of the plan
including the employment of advisors and the delegation of
ministerial duties to qualified individuals.

     IN WITNESS WHEREOF, the Executive and a duly authorized Bank
officer have signed this Agreement.

EXECUTIVE:                          COMPANY:

                                    Union National Community Bank


  /s/ Michael A. Frey                By  /s/ Mark D. Gainer
_____________________________         ________________________


     Michael A. Frey                Title  President/CEO
_____________________________             ____________________
(Print Name)

<PAGE>

                        EXHIBIT 10.10
                        _____________

     Group Term Replacement Plan for Certain Officers, COO,
         dated January 1, 2004 between Michael A. Frey
               and Union National Community Bank

<PAGE>

               UNION NATIONAL COMMUNITY BANK
              GROUP TERM REPLACEMENT PLAN FOR
                     CERTAIN OFFICERS

     THIS PLAN hereby made and entered into this 1st day of
January, 2004, by and between Union National Community Bank, a
national chartered commercial bank, located in Mount Joy,
Pennsylvania (the "Bank") and the Participant selected to
participate in this Plan (the "Participant").

                        INTRODUCTION

     The Bank wishes to attract and retain highly qualified vice
presidents and officers.  To further this objective, the Bank is
willing to divide the death proceeds of certain life insurance
policies which are owned by the Bank on the lives of the
participating vice presidents and officers with the designated
beneficiary of each insured participant.  The Bank will pay life
insurance premiums from its general assets. The participants
understand that the Bank is using the insurance policy in which
the participant has executed a Split Dollar Endorsement as a
means to fund employee benefits for other employees consistent
with the requirements of OCC Bulletin 2000-23 and are hereby
consenting to such use by the Bank.

                           Article 1
                     General Definitions

The following terms shall have the meanings specified:

     1.1 "Change of Control" means any of the following:

          1.1.1 (A) a merger, consolidation or division involving
          Union National Financial Corporation ("Corporation") or
          Bank, (B) a sale, exchange, transfer or other
          disposition of substantially all of the assets of
          Corporation or Bank, or (C) a purchase by Corporation
          or Bank of substantially all of the assets of another
          entity, unless (y) such merger, consolidation,
          division, sale, exchange, transfer, purchase or
          disposition is approved in advance by seventy percent
          (70%) or more of the members of the Board of Directors
          of Corporation or Bank who are not interested in the
          transaction and (z) a majority of the members of the
          Board of Directors of the legal entity resulting from
          or existing after any such transaction and of the Board
          of Directors of such entity's parent corporation, if
          any, are former members of the Board of Directors of
          Corporation or Bank; or

          1.1.2 any "person" (as such term is used in Sections
          13(d) and 14(d) of the Securities Exchange Act of 1934
          (the "Exchange Act")), other than Corporation or Bank
          or any "person" who on the date hereof is a director or
          officer of Corporation or Bank is or becomes the
          "beneficial owner"(as defined in Rule 13d-3 under the
         Exchange Act), directly or indirectly, of securities of
         Corporation or Bank representing twenty-five (25%)
         percent or more of the combined voting power of
         Corporation or Bank's then outstanding securities; or

<PAGE>

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

          1.1.4 any other change in control of Corporation and
          Bank similar in effect to any of the foregoing.

     1.2  "Compensation Committee" means either the Compensation
Committee designated from time to time by the Bank's Board of
Directors or a majority of the Bank's Board of Directors, either
of which shall hereinafter be referred to as the Compensation
Committee.

     1.3 "Disability" means the Executive's inability to perform
substantially all normal duties of the Executive's position, as
defined in the Bank's disability insurance policy and as
determined by the Bank's disability insurance carrier.  As a
condition to any benefits, the Bank may require the Executive to
submit to a physical or mental evaluations and tests, as the
Board of Directors of the Bank may deem appropriate.

     1.4 "Insured" means the individual whose life is insured.

     1.5 "Insurer" means the insurance company issuing the life
insurance policy on the life of the insured.

     1.6 "Other Group Term Coverage" means group term life
insurance maintained on a Participant's life owned by the Bank
that is in addition to the Policies covered under this Plan.

     1.7 "Normal Retirement Age" means age 62.

     1.8 "Normal Retirement Date" means the later of the Normal
Retirement Age or the date that the Participant terminates or is
terminated for any reason other than being Terminated for Cause.

     1.9 "Participant" means an employee who is a the vice
president, senior vice president, executive vice president, or
president who elects in writing to participate in the Plan using
the form attached hereto as Exhibit A, and signs a Split Dollar
Endorsement for the Policy in which he or she is the Insured.

     1.10 "Policy" or "Policies" means the individual insurance
policy (or policies) adopted by the Compensation Committee for
purposes of insuring a Participant's life under this Plan.

<PAGE>

     1.11 "Base Annual Salary"means the current base annual
salary at the earliest of (1) the date of the Participant's
death; (2) the date of the Participant's disability; (3) the
Participant's retirement age, or the date of change of control.

     1.12 "Plan" means this instrument, including all amendments
thereto.

     1.13 "Terminated for Cause" means that the Bank has
terminated the Participant's employment pursuant to his or her
Employment Agreement, if any, or termination of the Executive's
employment for "Cause" shall mean termination because of personal
dishonesty by the Executive in the performance of his duties
which results in demonstrable material injury to the Bank,
willful misconduct by the Executive, breach by the Executive of a
fiduciary duty to the Bank involving personal profit, intentional
failure to perform stated duties following the Bank giving
written notice thereof to the Executive, willful violation of any
law, rule or regulation (other than traffic violations or similar
offenses) or final cease-and-desist order or material breach of
any provision of the Agreement or any other act that the Bank
deems a willful or a for cause reason for termination of the
Executive's employment.  For purposes of this paragraph, no act
or failure to act on the Executive's part shall be considered
"willful" unless done, or omitted to be done, by the Executive
not in good faith and without reasonable belief that the
Executive's action or omission was in the best interest of the
Bank.

                           Article 2
                         Participation

     2.1 Eligibility to Participate.  The Compensation Committee
in its sole discretion shall designate from time to time
Participants that are eligible to participate in this Plan.

     2.2 Participation.  The eligible vice president or officer
may participate in this Plan by executing an Election to
Participate (Exhibit A) and a Split Dollar Endorsement (Exhibit
D).  The Split Dollar Endorsement shall bind the Participant and
his or her beneficiaries, assigns and transferees, to the terms
and conditions of this Plan.  A vice president's or officer's
participation is limited to only Policies where he or she is the
Insured.  Exhibit B attached hereto sets forth the original
Participants.  It is intended that the Participant shall continue
as a Participant until death regardless of Participant's employee
status with the Bank. In the event the Bank decides to maintain
the Policy after the Participant's termination of his or her
participation in the Plan, the Bank shall be the direct
beneficiary of the entire proceeds of the Policy.

     2.3 Termination of Participation.  A Participant's rights
under this Plan shall cease and his or her participation in this
Plan shall terminate if either or both of the following events
occur:

          2.3.1 The Participant's employment with the Bank is
     Terminated for Cause; or

          2.3.2 The Participant's employment with the Bank is
     terminated prior to Normal Retirement Age for reasons other
     than Disability.

<PAGE>

     2.4 Disability.  (A) Except as otherwise provided in
paragraph (B) of this section 2.4, if the Participant's
employment with the Bank is terminated because of the
Participant's Disability, the Bank shall maintain the Policy in
full force and effect and, in no event, shall the Bank amend,
terminate or otherwise abrogate the Participant's interest in the
Policy, provided, however, that at all times the Policy shall be
subject to the claims of the Bank's creditors, and further
provided the Bank, in its sole discretion, may substitute a new
policy sufficient to provide participant with death proceeds in
such amount, as provided in this Agreement.

          (B) Notwithstanding the provisions of paragraph (A) of
this section 2.4, upon the Disabled Participant's gainful
employment with an entity other than the Bank, the Bank shall
have no further obligation to the Disabled Participant, and the
Disabled Participant's rights pursuant to the Plan shall cease.
In the event the Disabled Participant's rights are terminated
hereunder, the Bank shall be the direct beneficiary of the entire
death proceeds of the Policy upon the death of the Disabled
Participant.

     2.5 Retirement.  Upon the retirement of the Participant, the
Bank shall maintain the Policy in full force and effect and in no
event shall the Bank amend, terminate or otherwise abrogate the
Participant's interest in the Policy, provided, however that at
all times the Policy shall be subject to the claims of the Bank's
creditors, and further provided the Bank, in its sole discretion,
may substitute a new policy sufficient to provide participant
with death proceeds in such amount, as provided in this
Agreement.  The Participant's interest in the Policy shall be
subject to the vesting schedule attached hereto as Exhibit C.

     2.6 Service.  For the purposes of this plan, service is
defined as the period of elapsed time from the Participant's
initial date of employment with the Bank until the Participant's
last day of employment with the Bank.

                           Article 3
                  Policy Ownership/Interests

     3.1 Bank Ownership.  The Bank shall own Policies on each
Participant's life and shall have the right to exercise all
incidents of ownership.  With respect to each Policy, the Bank
shall be the direct beneficiary of an amount of death proceeds in
excess of three times Base Annual Salary prior to retirement, or
the Multiple of the Base Annual Salary of the insured/Participant
based upon the Vesting Schedule attached hereto as Exhibit C
following retirement.

     3.2 Participant's Interest.  With respect to each Policy,
the Participant, or the Participant's assignee, shall have the
right to designate the beneficiary of an amount of death benefit
based upon the Plan formula as described in the Participant's
individual Split Dollar Endorsement.  The Participant shall also
have the right to elect and change settlement options with the
consent of the Bank and the Insurer.

<PAGE>

                           Article 4
                           Premiums

     4.1 Premium Payment.  The Bank shall pay all premiums due on
all Policies.

     4.2 Imputed Income.  The Bank shall impute income to the
Participant in an amount equal to the current term rate for the
Participant's age multiplied by the aggregate death benefit
payable to the Participant's beneficiary.  The "current term
rate" is the minimum amount required to be imputed under IRS
regulation Section 1.61-22 and Revenue Ruling 2003-105, or any
subsequent applicable authority.

                           Article 5
                           Assignment

     Any Participant may assign without consideration all
interests in his or her Policy and in this Plan to any person,
entity or trust.  In the event a Participant shall transfer all
of his/her interest in the Policy, then all of that Participant's
interest in his or her Policy and in the Plan shall be vested in
his/her transferee, who shall be substituted as a party
hereunder, and that Participant shall have no further interest in
his or her Policy or in this Plan.

                           Article 6
                            Insurer

     The Insurer shall be bound only by the terms of their
corresponding Policy.  Any payments the Insurer makes or actions
it takes in accordance with a Policy shall fully discharge it
from all claims, suits and demands of all persons relating to
that Policy.  The Insurer shall not be bound by the provisions of
this Plan.  The Insurer shall have the right to rely on the
Bank's representations with regard to any definitions,
interpretations, or Policy interests as specified under this
Plan.

                           Article 7
                      Claims Procedure

     7.1 Claims Procedure.  The Bank shall notify any person or
entity that makes a claim against this Group Term Replacement
Plan (the "Claimant") in writing, within ninety (90) days of
Claimant's written application for benefits, of Claimant's
eligibility or ineligibility for benefits under this Plan.  If
the Bank determines that Claimant is not eligible for benefits or
full benefits, the notice shall set forth (1) the specific
reasons for such denial, (2) a specific reference to the
provisions of this Plan on which the denial is based, (3) a
description of any additional information or material necessary
for the Claimant to perfect Claimant's claim, and a description
of why it is needed, and (4) an explanation of this Plan's claims
review procedure and other appropriate information as to the
steps to be taken if the Claimant wishes to have the claim
reviewed.  If the Bank determines that there are special
circumstances requiring additional time to make a decision, the
Bank shall notify the Claimant of the special circumstances and
the date by which a decision is expected to be made, and may
extend the time for up to an additional ninety-day period.

<PAGE>

     7.2 Review Procedure.  If a Claimant is determined by the
Bank not to be eligible for benefits, or if the Claimant believes
that Claimant is entitled to greater or different benefits, the
Claimant shall have the opportunity to have such claim reviewed
by the Bank by filing a petition for review with the Bank within
sixty (60) days after receipt of the notice issued by the Bank.
Said petition shall state the specific reasons which the Claimant
believes entitle Claimant to benefits or to greater or different
benefits.  Within sixty (60) days after receipt by the Bank of
the petition, the Bank shall afford the Claimant (and counsel, if
any) an opportunity to present Claimant's position to the Bank
orally or in writing, and the Claimant (or counsel) shall have
the right to review the pertinent documents.  The Bank shall
notify the Claimant of its decision in writing within the sixty-
day period, stating specifically the basis of its decision,
written in a manner calculated to be understood by the Claimant
and the specific provisions of this Plan on which the decision is
based.  If, because of the need for a hearing, the sixty-day
period is not sufficient, the decision may be deferred for up to
another sixty-day period at the election of the Bank, but notice
of this deferral shall be given to the Claimant.

                           Article 8
                   Amendments and Termination

     8.1 Amendment or Termination of Plan.  Except as otherwise
provided in sections 2.3, 2.4, 2.5 and 8.2, (i) the Bank may
amend or terminate the Plan at any time, and (ii) the Bank may
amend or terminate a Participant's rights under the Plan at any
time prior to a Participant's death by written notice to the
Participant.

     8.2 Amendment or Termination of Plan Upon Change of Control.
Notwithstanding the provisions of section 8.1, in the event of a
Change of Control, the Bank or its successor shall maintain in
full force and effect each Policy that is in existence on the
date the Change of Control occurs and not terminate or otherwise
abrogate a Participant's interest in the Policy, provided,
however, that at all times the Policy shall be subject to the
claims of the Bank's creditors.  This section 8.2 shall apply to
all Participants in the Plan on the date the Change of Control
occurs, including by not limited to (i) a retired Participant who
has an interest in the Policy pursuant to section 2.5; (ii) a
Disabled Participant who has an interest in the Policy pursuant
to section 2.4; and (iii) a Participant whose employment is
terminated as a result of a Change of Control.

     8.3 Upon Change of Control, all Participants are 100% vested
in the maximum benefit in the Participant's Split Dollar
Endorsement (Exhibit D), at the date of the Change of Control
(the greater of 1(i) or 1(ii)).

     8.4 A Participant may, in the Participant's sole and
absolute discretion, waive his or her rights under the Plan at
any time.  Any waiver permitted under this section 8.3 shall be
in writing and delivered to the Board of Directors of the Bank.

<PAGE>

                           Article 9
                         Miscellaneous

     9.1 Binding Effect.  This Plan in conjunction with each
Split Dollar Endorsement shall bind each Participant and the
Bank, their beneficiaries, survivors, executors, administrators
and transferees, and any Policy beneficiary.

     9.2 No Guarantee of Employment.  This Plan is not an
employment policy or contract.  It does not give a Participant
the right to remain an employee of the Bank, nor does it
interfere with the Bank's "at will"right to discharge a
Participant, unless an existing employment agreement is in place.
It also does not require a Participant to remain an employee nor
interfere with a Participant's right to terminate employment at
any time.

     9.3 Applicable Law.  The Plan and all rights hereunder shall
be governed by and construed according to the laws of the
Commonwealth of Pennsylvania, except to the extent preempted by
the laws of the United States of America.

     9.4 Notice.  Any notice, consent or demand required or
permitted to be given under the provisions of this Split Dollar
Plan by one party to another shall be in writing, shall be signed
by the party giving or making the same, and may be given either
by delivering the same to such other party personally, or by
mailing the same, by United States certified mail, postage
prepaid, to such party, addressed to his/her last known address
as shown on the records of the Bank.  The date of such mailing
shall be deemed the date of such mailed notice, consent or
demand.

     9.5 Entire Agreement.  This Plan constitutes the entire
agreement between the Bank and the Participant as to the subject
matter hereof.  No rights are granted to the Participant by
virtue of this Plan other than those specifically set forth
herein.

     9.6 Administration.  The Bank shall have powers which are
necessary to administer this Plan, including but not limited to:

          9.6.1 Interpreting the provisions of the Plan;

          9.6.2 Establishing and revising the method of
     accounting for the Plan;

          9.6.3 Maintaining a record of benefit payments; and

          9.6.4 Establishing rules and prescribing any forms
     necessary or desirable to administer the Plan.

     9.7 Named Fiduciary.  The Bank shall be the named fiduciary
and plan administrator under the Plan.  The named fiduciary may
delegate to others certain aspects of the management and
operation responsibilities of the plan including the employment
of advisors and the delegation of ministerial duties to qualified
individuals.

<PAGE>

IN WITNESS WHEREOF, the Bank executes this Plan as of the date
indicated above.

                                COMPANY:
                                UNION NATIONAL COMMUNITY BANK

                                By  /s/ R. Michael Mohn
                                   _____________________________

                                Title VP, Human Resource Manager
                                     ___________________________

<PAGE>

                           EXHIBIT A

                   ELECTION TO PARTICIPATE


I,    Michael A. Frey    , an eligible Participant of the Union
  _______________________
National Community Bank Group Term Replacement Plan for Certain
Officers (the "Plan") dated January 1, 2004, hereby elect and
consent to become a Participant of the Plan in accordance with
Section 2.2 of the Plan.  Additionally, I acknowledge that I have
read the Plan document and agree to be bound by its terms.


Executed this    5th     day of      January     , 2004 .
              __________        _________________     __

  /s/ R. Michael Mohn         /s/ Michael A. Frey
  _______________________     _____________________
  Witness                     Participant

<PAGE>

                         EXHIBIT 10.11
                        _______________

           Executive Salary Continuation Agreement, CEO,
          dated December 31, 2003 between Mark D. Gainer
                and Union National Community Bank


<PAGE>

             EXECUTIVE SALARY CONTINUATION AGREEMENT

     THIS AGREEMENT, made and entered into this 31st day of
December, 2003, by and between Union National Community Bank (the
"Bank"), a national bank organized and existing under Federal law
and Mark D. Gainer an Executive of the Bank ("Executive").

                          WITNESSETH:

     WHEREAS, Executive has been and continues to be a valued
Executive of the Bank, and is now serving the Bank as its
President and Chief Executive Officer; and

     WHEREAS, it is the consensus of the Board of Directors of
the Bank (the "Board") that Executive's services to the Bank in
the past have been of exceptional merit and have constituted an
invaluable contribution to the general welfare of the Bank in
bringing the Bank to its present status of operating efficiency
and present position in its field of activity;

     WHEREAS, Executive's experience, knowledge of the affairs of
the Bank, reputation, and contacts in the industry are so
valuable that assurance of Executive's continued services is
essential for the future growth and profits of the Bank and it is
in the best interests of the Bank to arrange terms of continued
employment for Executive so as to reasonably assure Executive's
remaining in the Bank's employment during Executive's lifetime or
until the age of retirement;

     WHEREAS, it is the desire of the Bank that Executive's
services be retained as herein provided;

     WHEREAS, Executive is willing to continue in the employ of
the Bank provided the Bank agrees to pay Executive or Executive's
beneficiary(ies), certain benefits in accordance with the terms
and conditions hereinafter set forth;

     WHEREAS, the Bank considers the Executive's Compensation
under this Agreement to be reasonable pursuant to 12 C.F.R.
Section 359.4;

     ACCORDINGLY, it is the desire of the Bank and Executive to
enter into this Agreement under which the Bank will agree to make
certain payments to Executive upon his retirement or Executive's
beneficiary(ies) in the event of Executive's death pursuant to
this Agreement;

     FURTHERMORE, it is the intent of the parties hereto that
this Executive Plan be considered an unfunded arrangement
maintained primarily to provide supplemental retirement benefits
for Executive.  Executive is fully advised of the Bank's
financial status and has had substantial input in the design and
operation of this benefit plan; and

<PAGE>

     NOW, THEREFORE, in consideration of services performed in
the past and to be performed in the future as well as of the
mutual promises and covenants herein contained it is agreed as
follows:

I.   EMPLOYMENT

     The Bank agrees to employ Executive in such capacity as the
     Bank may from time to time determine.  Executive will
     continue in the employ of the Bank in such capacity and with
     such duties and responsibilities as may be assigned to him,
     and with such compensation as may be determined from time to
     time by the Board.

II.  FRINGE BENEFITS

     The salary continuation benefits provided by this Agreement
     are granted by the Bank as a fringe benefit to Executive and
     are not part of any salary reduction plan or an arrangement
     deferring a bonus or a salary increase.  Executive has no
     option to take any current payment or bonus in lieu of these
     salary continuation benefits except as set forth
     hereinafter.

III. BENEFIT PROVISIONS

     A.Definitions

       1. Accrued Benefit

         a. The accrued benefit will be calculated annually on
            the Calculation Date.  The value of the accrued
            benefit will remain unchanged until the next
            Calculation Date.

         b. The accrued benefit is equal to the Formula Benefit
            based on Average Monthly Earnings, Health Insurance
            Premiums, and the Increasing Life Annuity.  All
            components are determined as of the Calculation Date.

       2. Average Monthly Earnings

         a. Average Monthly Earnings equals one twelfth (1/12) of
            the three year average of Base Annual Salary as of
            the Calculation Date.

         b. Executive's Base Annual Salary on the Calculation
            Date will be one of the three Base Annual Salary
            amounts included in the calculation of Average
            Monthly Earnings.  Note: this is the Base Annual
            Salary on the December 31st Calculation Date, and not
            the Base Annual Salary that the Board of Directors
            may have elected to pay Executive for the year
            subsequent to the Calculation Date.

<PAGE>

         c. Base Annual Salary on the two Calculation Dates prior
            to the current Calculation Date will be used for the
            other two Base Annual Salary amounts needed for the
            calculation of Average Monthly Earnings.

       3. Base Annual Salary

         a. Base Annual Salary is Executive's annual base
            compensation on applicable Calculation Dates.

         b. Base Annual Salary does not include incentive
            payments of any kind.

         c. Base Annual Salary includes employee elective
            deferrals under the Company's 401(k) plan and Section
            125 Cafeteria Plan.

       4. Calculation Date

         a. The Calculation Date is December 31st of each year of
            this Agreement.

       5. Effective Date - The effective date of this Agreement
          is January 1, 2004.

       6. Formula Benefit

         a. The Formula Benefit = 70% x Average Monthly Earnings

                                + the Heath Insurance Premium

                                - the Increasing Life Annuity.

       7. Health Insurance Premium

         a. The Health Insurance Premium amount is equal to the
            estimated monthly premium that a healthy individual
            would have to pay on the Calculation Date as a self
            employed person in order to provide health insurance
            benefits similar to the benefits provided under the
            Bank's program for its employees.

       8. Increasing Life Annuity

         a. The Increasing Life Annuity is equal to the monthly
            amount that would be payable beginning on the
            Calculation Date as a life annuity increasing
            annually at a rate of three percent (3%) a year based
            on Executive's account balance on the Calculation
            Date in the Union National Community Bank 401(k)
            Profit Sharing Plan attributable to employer
            contributions.

<PAGE>

         b. Account balances attributable to employer
            contributions to the Union National Community Bank
            401(k) Profit Sharing Plan include:

            1). account balances attributable to all profit
                sharing contributions, forfeitures and investment
                earnings thereon; and

            2). account balances attributable to all matching
                employer 401(k) plan contributions, forfeitures
                and investment earnings thereon.

         c. The calculation of the Increasing Life Annuity will
            be based on the following assumptions:

            1). annual increases - monthly benefit payments will
                increase three percent (3%) after the first
                twelve (12) benefit payments have been made.
                Monthly benefit payments will increase by three
                percent (3%) thereafter at the end of each
                subsequent twelve (12) month period, and

            2). discount rate - the discount rate used in the
                calculation will be the rate specified under
                Section VII(K) of the Agreement, and

            3). mortality - the mortality table used in the
                calculation will be the most recent Group Annuity
                Mortality Table for Males published by the
                Society of Actuaries.

       9. Spouse - Spouse means Michele L. Gainer, Executive's
          spouse on the Effective Date.

     B. Normal Retirement

       1. Normal Retirement Date - Executive's Normal Retirement
          Date will be January 1, 2017, which is the January 1st
          that follows his 62nd birthday.

       2. Normal Retirement Benefit

         a. Executive's Normal Retirement Benefit is the accrued
            benefit calculated on December 31, 2016.

         b. The benefit is a monthly benefit payable for the life
            of Executive.

         c. The first benefit payment will be made January 1,
            2017.

         d. The last benefit payment will be made on the first
            day of the month that Executive dies.

<PAGE>

         e. The monthly benefit will increase by three percent
            (3%) after twelve (12) benefit payments have been
            made.  The benefit will increase thereafter by three
            percent (3%) at the end of each subsequent twelve
            (12) month period.

         f. A single lump sum benefit amount will be paid to
            Spouse, if Executive dies before January 1, 2035.  If
            Spouse predeceases Executive said amount will be paid
            to his Estate and/or other beneficiaries.  The
            benefit shall be determined in the following manner:

            1). First, determine the monthly benefit payments
                that Executive would have received between the
                date of his death and December 31, 2034.

            2). Next, determine the present value of the benefit
                payments identified in Section III(B)(2)(f)(1) of
                this Agreement as of the first day of the month
                following Executive's date of death.  The present
                value will be based on the discount rate
                specified in Section VII(K) of this Agreement.

            3). Within sixty (60) days following Executive's
                death,the Bank will pay to Spouse (or his Estate
                and/or other beneficiary) a lump sum amount equal
                to the present value determined under Section
                III(B)(2)(f)(2) of this Agreement.

            4). This benefit is in addition to any benefit
                payable under the Group Term Replacement Plan for
                Certain Officers.

     C. Late Retirement

       1. Late Retirement Date - Executive's Late Retirement Date
          will be the first day of any month following the
          January 1 following his 62nd birthday.

       2. Late Retirement Benefit

         a. Executive's Late Retirement Benefit is the accrued
            benefit calculated on December 31, 2016 adjusted
            actuarially to reflect the late retirement date.
            Benefits payable on Executive's Late Retirement Date
            shall have an equivalent actuarial value to benefits
            payable on his Normal Retirement Date.

         b. The benefit is a monthly benefit payable for the life
            of Executive.

         c. The first benefit payment will be made on Executive's
            Late Retirement Date.

         d. The last benefit payment will be made on the first
            day of the month that Executive dies.

<PAGE>

         e. The monthly benefit will increase by three percent
            (3%) after twelve 12 benefit payments have been made.
            The benefit will increase thereafter by three percent
            (3%) at the end of each subsequent twelve (12) month
            period.

         f. A single lump sum benefit amount will be paid to
            Spouse, if Executive dies before January 1, 2035.  If
            Spouse predeceases Executive said amount will be paid
            to his Estate and/or other beneficiaries.  The
            benefit shall be determined in the following manner:

            1). First, determine the monthly benefit payments
                that Executive would have received between the
                date of his death and January 1, 2035.

            2). Next, determine the present value of the benefit
                payments identified in Section III(C)(2)(f)(1) of
                this Agreement as of the first day of the month
                following Executive's date of death.  The present
                value will be based on the discount rate
                specified in Section VII(K) of this Agreement.

            3). Within sixty (60) days following Executive's
                death, the Bank will pay to Spouse (or his Estate
                and/or other beneficiary) a lump sum amount equal
                to the present value determined under Section III
                (C)(2)(f)(2) of this Agreement.

            4). This benefit is in addition to any benefit
                payable under the Group Term Replacement Plan for
                Certain Officers.

     D. Disability Retirement

       1. Disability

         a. Disability is defined in accordance with the terms
            and provisions of Executive's Employment Agreement by
            and among Union National Financial Corporation, the
            Bank, and Executive dated January 1, 2004.

         b. Disability Benefit

            1). Upon Executive's termination of employment due to
                a Disability as defined in his Employment
                Agreement and before he attains his Normal
                Retirement Age, the Bank shall deposit into
                Executive's Contingent Disability Trust (Appendix
                A) an amount equal to the accrued liability that
                is used in the FASB 87 calculations for the plan
                as of the Calculation Date prior to the date of
                Disability.  Except as provided under Section
                III(D)(1)(b)(3) of this Agreement, no further
                benefits shall be payable to the Executive under
                this Agreement during the period of Disability.

<PAGE>

            2). If Executive attains his Normal Retirement Date
                while Disabled, no benefits will be paid under
                this Agreement and this Agreement will terminate.

            3). If he returns to employment following a period of
                Disability, Executive's benefit upon a subsequent
                termination of employment, if any, shall be
                reduced by amounts payable from the Executive's
                Contingent Disability Trust in accordance with
                its terms.

     E. Pre-Retirement Death

       1. Benefit Description

         a. A single lump sum benefit amount will be paid to
            Spouse if Executive should die before the later of
            his Normal or Late Retirement Date.  If Spouse
            predeceases Executive said amount will be paid to his
            Estate and/or other beneficiaries.  The benefit shall
            be determined in the following manner:

            1). First, determine the monthly benefit payments
                that Executive would have received between his
                Normal Retirement Date (or Late Retirement Date,
                if applicable, assuming he retired on his date of
                death and monthly benefit commenced on the first
                day of the month following his date of death) and
                January 1, 2035.

            2). Next, determine the present value of the benefit
                payments identified in Section III(E)(1)(a)(1) of
                this Agreement as of the first day of the month
                following Executive's date of death.  The present
                value will be based on the discount rate
                specified in Section VII(K) of this Agreement.

            3). Within sixty (60) days following Executive's
                death, the Bank will pay to Spouse (or his Estate
                and/or other beneficiary) a lump sum amount that
                is equal to the present value as determined under
                Section III(E)(1)(a)(2) of this Agreement.

            4). This benefit is in addition to any benefit
                payable under the Group Term Replacement Plan for
                Certain Officers.

     F. Change in Control

       1. Change in Control Retirement Date

         a. Executive's Change in Control Retirement Date is the
            first day of the month following a termination of
            employment as a result of a Change in Control as
            defined in Section V of this Agreement.

<PAGE>

       2. Change in Control Retirement Benefit

         a. Executive's Change in Control Retirement Benefit is
            the accrued benefit calculated on the December 31st
            immediately prior to his Change in Control Retirement
            Date.

         b. The benefit is a monthly benefit payable for the life
            of Executive.

         c. The first benefit payment will be made on the Change
            of Control Retirement Date.

         d. The last benefit payment will be made on the first
            day of the month that Executive dies.

         e. The monthly benefit will increase by three percent
            (3%) after twelve (12) benefit payments have been
            made.  The benefit will increase thereafter by three
            percent (3%) at the end of each subsequent twelve
            (12) month period.

         f. A single lump sum benefit amount will be paid to
            Spouse if Executive dies before January 1, 2035.  If
            Spouse predeceases Executive said amount will be paid
            to his Estate and/or other beneficiaries.  The
            benefit shall be determined in the following manner:

            1). First, determine the monthly benefit payments
                that Executive would have received between his
                date of his death and January 1, 2035.

            2). Next, determine the present value of the benefit
                payments identified in Section III (F)(2)(f)(1)
                of this Agreement as of the first day of the
                month following Executive's date of death.  The
                present value will be based on the discount rate
                specified in Section VII(K) of this Agreement.

            3). Within sixty (60) days following Executive's
                death, the Bank will pay to Spouse (or his Extate
                and/or other beneficiary) a lump sum amount that
                is equal to the present value as determined under
                Section III(F)(2)(f)(2) of this Agreement above.

            4). This benefit is in addition to any benefit
                payable under the Group Term Replacement Plan for
                Certain Officers.

         g. Within sixty (60) days following his Change in
            Control Retirement Date, Executive may elect to
            receive a single lump sum payment that is equal to
            the present value of the retirement and death
            benefits that would be payable to him and/or his
            Spouse as a result of his Change of Control
            Retirement.  The present value will be based on the
            discount rate specified in Section VII(K) of this
            Agreement and the 1983 Group Annuity Mortality Table.

<PAGE>

     G. Termination of Employment

       1. Definition

         a. Executive shall be entitled to a benefit under this
            Agreement if he terminates employment before age 62
            for any reason other than Death, Disability, or
            Change in Control.

       2. Termination Benefit

         a. The benefit amount will be calculated in the
            following manner:

               Benefit = Vesting Percentage x Accrued Benefit

         b. Vesting Percentage - the vesting percentage will be
            based on the chart below:

<TABLE>

<CAPTION>
     Year of Termination        Vesting Percentage
             <S>                        <C>
             2004                       0%
             2005                       0%
             2006                       0%
             2007                       0%
             2008                       0%
             2009                       0%
             2010                      46%
             2011                      54%
             2012                      62%
             2013                      69%
             2014                      77%
             2015                      85%
             2016                      92%

</TABLE>

         c. The initial benefit payment will be equal to the
            Benefit as calculated above in Section III(G)(2)(c)
            multiplied by (1.03)n where n = 2016 - the year of
            Executive's employment termination.

         d. Benefit payments will begin on January 1, 2017.

         e. Monthly benefits will increase by three percent (3%)
            on each January 1st after 2017.

<PAGE>

         f. A single lump sum benefit amount will be paid to
            Spouse if Executive dies before January 1, 2035.  If
            Spouse predeceases Executive said amount will be paid
            to his Estate and/or other beneficiaries.  The
            benefit shall be determined in the following manner:

            1). First, determine the monthly benefit payments
                that Executive would have received between his
                date of death and January 1, 2035.

            2). Next, determine the present value of the benefit
                payments identified in Section III(G)(2)(f)(1) of
                this Agreement as of the first day of the month
                following Executive's date of death.  The present
                value will be based on the discount rate
                specified in Section VII(K) of this Agreement.

            3). Within sixty (60) days following Executive's
                death, the Bank will pay to Spouse (or his Estate
                and/or other beneficiary) a lump sum amount equal
                to the present value determined under Section III
                (G)(2)(f)(2) of this Agreement.

            4). This benefit is in addition to any benefit
                payable under the Group Term Replacement Plan for
                Certain Officers.

     H. Long Term Care

       1. Acquisition of Insurance Protection

         a. The Bank shall purchase on or before the Effective
            Date a Long Term Care insurance policy that will
            provide benefits to Executive and/or his Spouse in
            the event either or both should require long term
            care on or after the Effective Date.

         b. The specific terms and conditions of the long term
            care benefits payable under this Section will be
            specified in the Long Term Care insurance policy
            which will be attached to this Agreement as an
            [Appendix B].

       2. Long Term Care Benefit for Executive

         a. The amount of benefit that will be acquired for
            Executive is summarized below.

            1). A benefit of $200 a day will be paid to Executive
                if he should have a need for long term care on or
                after the Effective Date.

            2). The insured benefit payment amount will increase
                five percent (5%) a year, with the first increase
                to occur effective January 1, 2005.

<PAGE>

            3). Benefits in pay status will also increase five
                percent (5%) on each January 1st following
                benefit commencement.

       3. Long Term Care Benefit for Spouse

         a. The amount of benefit that will be acquired for
            Spouse is summarized below.

            1). A benefit of $150 a day will be paid to Spouse if
                she should have a need for long term care on or
                after the Effective Date.

            2). The insured benefit payment amount will increase
                five percent (5%) a year, with the first increase
                to occur effective January 1, 2005.

            3). Benefits in pay status will also increase five
                percent (5%) on each January 1st following
                benefit commencement.

       4. Insurance Premiums

         a. The Bank will acquire a policy that provides for the
            payment of ten (10) annual premiums with the first
            premium due January 1, 2004.

         b. The Bank is responsible for the payment of all
            premiums unless Executive terminates employment on or
            after January 1, 2010 or for other than Normal
            Retirement, Late Retirement, Disability Retirement,
            Death, or Change in Control Retirement.

         c. Executive may elect to assume responsibility for the
            payment of the remainder of the premiums if Executive
            terminates employment before January 1, 2010 or for
            any reason other than Normal Retirement, Late
            Retirement, Disability Retirement, Death, or Change
            in Control Retirement.

         d. Executive may require the Bank to pay all remaining
            premiums to him as a lump sum if he terminates
            employment as a result of a Change in Control
            Retirement.

IV.  BENEFIT ACCOUNTING

     The Bank shall account for this benefit using the regulatory
     accounting principles of the Bank's primary federal
     regulator.  The Bank shall establish an accrued liability
     retirement account for Executive into which appropriate
     reserves shall be accrued.

<PAGE>

V.CHANGE OF CONTROL

     As used in this Agreement, "Change in Control" shall mean
     the occurrence of any of the following:

     A.  (A) a merger, consolidation or division involving Union
       National Financial Corporation ("Corporation") or Bank,
       (B) a sale, exchange, transfer or other disposition of
       substantially all of the assets of Corporation or Bank, or
       (C) a purchase by Corporation or Bank of substantially all
       of the assets of another entity, unless (y) such merger,
       consolidation, division, sale, exchange, transfer,
       purchase or disposition is approved in advance by seventy
       percent (70%) or more of the members of the Board of
       Directors of Corporation or Bank who are not interested in
       the transaction and (z) a majority of the members of the
       Board of Directors of the legal entity resulting from or
       existing after any such transaction and of the Board of
       Directors of such entity's parent corporation, if any, are
       former members of the Board of Directors of Corporation or
       Bank; or

     B. any "person" (as such term is used in Sections 13(d) and
       14(d) of the Securities Exchange Act of 1934 (the
       "Exchange Act")), other than Corporation or Bank or any
       "person" who on the date hereof is a director or officer
       of Corporation or Bank is or becomes the "beneficial
       owner" (as defined in Rule 13d-3 under the Exchange Act),
       directly or indirectly, of securities of Corporation or
       Bank representing twenty-five (25%) percent or more of the
       combined voting power of Corporation or Bank's then
       outstanding securities, or

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

     D. any other change in control of Corporation and Bank
       similar in effect to any of the foregoing.

VI.RESTRICTIONS ON FUNDING

     The Bank shall have no obligation to set aside, earmark, or
entrust any fund or money in order to pay its obligations under
this Agreement.  Executive, their beneficiary(ies), or any
successor in interest shall be and remain simply a general
creditor of the Bank in the same manner as any other creditor
having a general claim for matured and unpaid compensation.

<PAGE>

     The Bank reserves the absolute right, at its sole
discretion, to either fund the obligations undertaken by this
Agreement or to refrain from funding the same and to determine
the extent, nature and method of such funding.  Should the Bank
elect to fund this Agreement, in whole or in part, through the
purchase of life insurance, mutual funds, disability policies or
annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in
part.  At no time shall any Executive be deemed to have any lien,
right, title or interest in any specific funding investment or
assets of the Bank.

     If the Bank elects to invest in a life insurance, disability
or annuity policy on the life of Executive, then Executive shall
assist the Bank by freely submitting to a physical exam and
supplying such additional information necessary to obtain such
insurance or annuities.

     All purchases of insurance are subject to and must comply
with any requirement of Section 402 of GLBA as determined by the
SEC.  The Bank may rely on an opinion of counsel in absence of
any written guidance by the Securities and Exchange Commission or
case law.

VII. MISCELLANEOUS

     A. Alienability and Assignment Prohibition:
        _______________________________________

        Neither Executive, nor Executive's surviving spouse, nor
        any other beneficiary(ies) under this Agreement shall
        have any power or right to transfer, assign, anticipate,
        hypothecate, mortgage, commute, modify or otherwise
        encumber in advance any of the benefits payable hereunder
        nor shall any of said benefits be subject to seizure for
        the payment of any debts, judgments, alimony or separate
        maintenance owed by Executive or Executive's
        beneficiary(ies), nor be transferable by operation of law
        in the event of bankruptcy, insolvency or otherwise.

     B. Assignment:
        __________

        This Agreement shall be assignable by Bank to their
        successors and affiliates.

     C. Amendment or Revocation:
        _______________________

        It is agreed by and between the parties hereto that,
        during the lifetime of Executive, this Agreement may be
        amended or revoked at any time or times, in whole or in
        part, by the mutual written consent of Executive and the
        Bank.

     D. Gender:
        _______

        Whenever in this Agreement words are used in the
        masculine or neuter gender, they shall be read and
        construed as in the masculine, feminine or neuter gender,
        whenever they should so apply.

<PAGE>

     E. Effect on Other Bank Benefit Plans:
        __________________________________

        Nothing contained in this Agreement shall affect the
        right of Executive to participate in or be covered by any
        qualified or non-qualified pension, profit-sharing,
        group, bonus or other supplemental compensation or fringe
        benefit plan constituting a part of the Bank's existing
        or future compensation structure.

     F. Headings:
        ________

        Headings and subheadings in this Agreement are inserted
        for reference and convenience only and shall not be
        deemed a part of this Agreement.

     G. Applicable Law:
        ______________

        The validity and interpretation of this Agreement shall
        be governed by the laws of the State of Pennsylvania.

     H. 12 U.S.C. Section 1828(k):
        __________________________

        Although the Bank considers the Executive's Compensation
        under this Agreement to be reasonable, any payments made
        to Executive pursuant to this Agreement, or otherwise,
        may be subject to and conditioned upon their compliance
        with 12 U.S.C. Section 1828(k) or any regulations
promulgated            thereunder.

     I. Partial Invalidity:
        __________________

        If any term, provision, covenant, or condition of this
        Agreement is determined by an arbitrator or a court, as
        the case may be, to be invalid, void, or unenforceable,
        such determination shall not render any other term,
        provision, covenant, or condition invalid, void, or
        unenforceable, this Agreement shall remain in full force
        and effect notwithstanding such partial invalidity.

     J. Not a Contract of Employment:
        ____________________________

        This Agreement shall not be deemed to constitute a
        contract of employment between the parties hereto, nor
        shall any provision hereof restrict the right of the Bank
        to discharge Executive, or restrict the right of
        Executive to terminate employment.

     K. Present Value:
        _____________

        All present value calculations under this Agreement shall
        be based on the following
        discount rate:

<PAGE>

        Discount Rate:  The discount rate as used in the FASB 87
calculations for Executive Plan.

        Mortality Table:  For Executive - the most recent Group
Annuity Mortality Table for Males published by the Society of
Actuaries.

        For Spouse - the most recent Group Annuity Mortality
Table for Females published by the Society of Actuaries.

VIII. Named Fiduciary and Plan Administrator

          The "Named Fiduciary and Plan Administrator" of this
          Agreement shall be the Vice President, Human Resources
          for the Bank until his or her resignation or removal by
          the Board.  As Named Fiduciary and Plan Administrator,
          the Bank shall be responsible for the management,
          control and administration of Agreement.  The Named
          Fiduciary may delegate to others certain aspects of the
          management and operation responsibilities of Agreement
          including the employment of advisors and the delegation
          of ministerial duties to qualified individuals.

IX. Claims Procedure and Arbitration

          In the event a dispute arises over benefits under this
          Agreement and benefits are not paid to Executive and
          such claimant feels he or she is entitled to receive
          such benefits, then a written claim must be made to the
          Named Fiduciary and Plan Administrator named above
          within sixty (60) days from the date payments are
          refused.  The Named Fiduciary and Plan Administrator
          shall review the written claim and if the claim is
          denied, in whole or in part, they shall provide in
          writing within sixty (60) days of receipt of such claim
          the specific reasons for such denial, reference to the
          provisions of this Agreement upon which the denial is
          based and any additional material or information
          necessary to perfect the claim.  Such written notice
          shall further indicate the additional steps to be taken
          by claimant if a further review of the claim denial is
          desired.  A claim shall be deemed denied if the Named
          Fiduciary and Plan Administrator fail to take any
          action within the aforesaid sixty-day period.

          If a claimant desires a second review he or she shall
          notify the Named Fiduciary and Plan Administrator in
          writing within sixty (60) days of the first claim
          denial.  Claimant may review this Executive Plan or any
          documents relating thereto and submit any written
          issues and comments he or she may feel appropriate.  In
          their sole discretion, the Named Fiduciary and Plan
          Administrator shall then review the second claim and
          provide a written decision within sixty (60) days of
          receipt of such claim.  This decision shall likewise
          state the specific reasons for the decision and shall
          include reference to specific provisions of the Plan
          Agreement upon which the decision is based.

<PAGE>

          If a claimant continues to dispute the benefit denial
          based upon completed performance of this Executive or
          the meaning and effect of the terms and conditions
          thereof, then the claimant may submit the dispute to an
          arbitrator for final arbitration.  Any controversy,
          claim or dispute between the parties concerning this
          Agreement or the breach thereof shall be finally
          settled by arbitration in Lancaster County,
          Pennsylvania pursuant to the rules of the American
          Arbitration Association regarding employment disputes.
          In such instances, it is agreed that the dispute shall
          be submitted to final and binding arbitration by one
          arbitrator; provided, however, that either party may
          request that there be three arbitrators, in which case
          each party shall select one arbitrator, and the two
          arbitrators so selected shall select a third.  All
          costs of arbitration (other than the costs of a party's
          own witnesses and professional advisors) shall be paid
          by the nonprevailing party. The parties hereto agree
          that they and their heirs, personal representatives,
          successors and assigns shall be bound by the decision
          of such arbitrator with respect to any controversy
          properly submitted to it for determination.

          Where a dispute arises as to the Bank's discharge of
          Executive "for cause," such dispute shall likewise be
          submitted to arbitration as above described and the
          parties hereto agree to be bound by the decision
          thereunder.

X.   TERMINATION OR MODIFICATION OF AGREEMENT BY REASON
     OF CHANGES IN THE LAW, RULES OR REGULATIONS

     The Bank is entering into this Agreement upon the assumption
     that certain existing tax laws, rules and regulations will
     continue in effect in their current form.  If any said
     assumptions should change and said change has a detrimental
     effect on this Agreement, then the Bank reserves the right
     to terminate or modify this Agreement accordingly.  Upon a
     Change of Control (Paragraph V), this paragraph shall become
     null and void effective immediately upon said Change of
     Control.

XI.  DEATH OF EXECUTIVE

     Notwithstanding anything herein to the contrary, this
     Agreement shall terminate upon the death of Executive and
     the full and complete payment of all benefits provided for
     under this agreement.

<PAGE>

     IN WITNESS WHEREOF, the parties hereto acknowledge that each
has carefully read this Agreement and executed the original
thereof on the first date set forth hereinabove, and that, upon
execution, each has received a conforming copy.


                 Union National Community Bank
                    Mount Joy, Pennsylvania

  /s/ R. Michael Mohn              By:/s/ Clement M. Hoober, CFO
________________________              _________________________
Witness                               Title



  /s/ R. Michael Mohn                 /s/ Mark D. Gainer
________________________              _________________________
Witness                               Executive

<PAGE>

                           APPENDIX A


             Contingent Disability Trust Agreement for

                         Mark D. Gainer
                         ______________



                         BENMARK, INC.
              1100 Circle 75 Parkway, Suite 300
                  Atlanta, Georgia  30339
                 Telephone:(770) 952-1529
                 Facsimile:(770) 952-8029

<PAGE>

            CONTINGENT DISABILITY TRUST AGREEMENT FOR
                         Mark D. Gainer

     This Contingent Disability Trust Agreement for
Mark D. Gainer made effective the 31st day of December, 2003, by
______________
and between Union National Community Bank (hereinafter "Bank")
            _____________________________
and Eastern Bank (hereinafter "Trustee");

     WHEREAS, Bank has adopted the Executive/Director Salary
Continuation Agreement (hereinafter "Plan") as listed in Appendix
A;

     WHEREAS, Bank has incurred or expects to incur liability
under the terms of such Plan with respect to Mark D. Gainer, a
                                             ______________
participant of such Plan (hereafter "Participant");

     WHEREAS, Bank wishes to establish a Trust (hereinafter
called "Trust") that is to be unfunded until such time that the
Participant experiences a qualified Period of  Disability, as
defined in the Mass Mutual disability policy referenced below,
and if after any such qualified Period of Disability, disability
benefits pursuant to said policy will be contributed to this
Trust, and will be held therein, until paid to Participant and
his or her beneficiaries in such manner and at such times as
specified below;

     WHEREAS the Bank has purchased the following disability
income insurance policy from Mass Mutual that will make
contributions to the Trust only upon the contingency of
disability of said Participant, in order to provide the Trust
with a source of funds to provide a benefit to the Participant at
Normal Retirement Age under the Plan:

          Insured:           Mark D. Gainer
          Insurance Company: Mass Mutual Life Insurance Company
          Policy Form:       Disability
          Policy Name:       Radius
          Policy Number:     ____________________


     Now, therefore, the parties do hereby establish the Trust
and agree that the Trust shall be comprised, held and disposed of
as follows:

     Section 1.  Establishment of Trust and Funding on Disability
     ____________________________________________________________
     The Trust shall remain unfunded until the Participant
experiences any qualifying Period of Disability, as defined in
the Plan.  In the event that there is no qualifying Period of
Disability during the term of the Plan prior to Normal Retirement
Age and/or upon the Participant's termination from the Bank for
any reason, this Trust shall immediately terminate pursuant to
Section 10 of this Trust Agreement.

     Following any qualifying Period of Disability, the Trustee
shall receive deposits from Mass Mutual in the form of
disbursements made arising out of the disability policy on the
Participant (hereafter "Contributions.")   The Trustee is also
authorized to accept deposits from Bank, or other sources.  Any
and all deposits made to the Trust will constitute the Trust
Account ("Account") which shall be held, administered and
disposed of by Trustee as provided below.

<PAGE>

     The Trustee shall be accountable for all property and
deposits received, but the Trustee shall have no duty to see that
the balance of the Account is sufficient to provide for the
retirement, disability, death or other benefits provided under
the Plan, nor shall the Trustee be obligated or have any right to
enforce or collect any funds from the Bank.

     The principal of the Trust, and any earnings therefrom shall
be held separate and apart from other funds of Bank and shall be
used exclusively for the uses and purposes of the Participant.
No part of the Trust corpus is intended at any time or under any
circumstances to revert to the Bank.   All deposits so received
with the income therefrom and any other increment thereon shall
be held, managed and administered by the Trustee pursuant to the
terms of this Trust.

     As of the end of each calendar year after the Trust is
funded, the Trustee shall determine the fair market value of the
Trust investments, after adding any deposits made to the Trust
and deducting distributions and any expenses of administration
paid out of the Trust during such year.  In determining such
value, the Trustee shall use such generally accepted methods and
basis as the Trustee, in its discretion, shall deem advisable;
provided, however, that the Trustee shall be entitled to request,
receive and rely conclusively on the value of any insurance
policy as set forth in documents or schedules provided to the
Trustee by the issuer.  All income of the Trust earned during
each calendar year shall become principal as of the end of such
year.

     The Contributions, as well as earnings thereon, shall be
used by the Trustee:
     (i)  to provide the applicable portion of the retirement
          benefit or disability benefit payable to the
          Participant pursuant to the Plan and the Trust,
     (ii) to provide the applicable portion of the pre-retirement
          death benefit payable to the Participant pursuant to
          the Plan and the Trust,
     (iii)for the reasonable compensation of, and reasonable
          expenses incurred by, the Trustee in connection with
          the administration of the Trust, pursuant to the terms
          of the Trust, to the extent such compensation and
          expenses are not paid directly by the Bank.  The Bank
          may, from time to time, make additional contributions
          to the Account in such amount as shall be required to
          compensate the Trustee as well as any actuarial firm
          employed to provide actuarial services to the Bank,
          and/or the Trustee; provided, however, that the Trustee
          shall have the authority to pay the reasonable
          compensation and expenses set forth in this subsection
     (iv) whether or not such additional contributions are made
          by the Bank; and provided further, that the Trustee
          shall not be required to pay any such actuarial
          expenses unless directed to do so by the Bank.

<PAGE>

     Section 2.  Payments to Plan Participants and Their
     ___________________________________________________
     Beneficiaries
     _____________
     On the Participant attaining the Normal Retirement Age as
specified in the Plan, if there has been any qualifying Period of
Disability and if there exist any funds in said Account, the
Trustee shall pay to the Participant any amounts that would have
been due to the Participant under the Plan had no disability
existed, for such period of time that is sufficient to deplete
the Account.

     If applicable, the Trustee shall make provision for the
reporting and withholding of any federal, state or local taxes
that may be required to be withheld with respect to the payment
of benefits pursuant to the terms of the Plan(s) and shall pay
amounts withheld to the appropriate taxing authorities or
determine that such amounts have been reported, withheld and paid
by Bank.

     The entitlement of a Plan participant or his or her
beneficiaries to benefits under the Plan shall be determined by
Bank or such party as it shall designate under the Plan, and any
claim for such benefits shall be considered and reviewed under
the procedures set out in the Plan.

     In all instances, to the extent the language in the Plan
conflicts with the language in this Trust, the Trust shall be
controlling.  Nothing in this Trust Agreement shall require the
Trustee to enforce the payment of any Benefit under the Plan that
is not met by the application of assets in the Account.

     Section 3.  Spendthrift Provision
     _________________________________
     Except as otherwise required by law, no interest of any
Beneficiary in, or right to receive distribution from, assets
held in the Account shall be subject in any manner to sale,
anticipation, transfer, assignment, pledge, mortgage,
encumberment, hypothecation, attachment, garnishment, discharge
or other alienation or encumbrance of any kind, nor shall such
interest or right to receive distributions be taken, either
voluntarily or involuntarily, for the satisfaction of the debts
of, or obligations or claims against, the Participant or the
Participant's Beneficiary, including claims in bankruptcy
proceeds.

     Section 4.  Trustee's Powers
     ____________________________
     The Trustee shall have the following powers and authority in
the administration of the Trust, in addition to those vested in
it elsewhere in this Trust Agreement or by law:
     (a)  To invest and reinvest Trust assets, without
          distinction between principal and income, in any kind
          of property, real, personal or mixed, tangible or
          intangible, and in any kind of investment, security or
          obligation suitable for the investment of Trust assets,
          including federal, state and municipal tax-free
          obligations and other tax-free investment vehicles,
          insurance policies and annuity contracts, and any
          common Trust fund, group Trust, pooled fund, or other
          commingled investment fund maintained by the Trustee or
          any other bank or entity for Trust investment purposes
          in which the Trust is eligible to invest and the
          provisions governing such fund shall be part of the
          Trust Agreement as though fully restated herein.

<PAGE>

     (b)  To purchase, and maintain as owner, a life insurance
          policy or policies with respect to the above Plan
          participant; provided, however, the Trustee shall not
          be required to purchase or take any action under any
          life insurance policy or policies that shall designate
          the face amount of and terms of such policy and the
          insurance company;
     (c)  To sell for cash or on credit, to grant options,
          convert, redeem, exchange for other securities or other
          property, or otherwise to dispose of, any security or
          other property at any time held except that the Trustee
          shall have no right or obligation to take any action
          with respect to any insurance contract or policy;
     (d)  To settle, compromise or submit to arbitration, any
          claims, debts or damages, due or owing to or from the
          Trust, to commence or defend suits or legal proceedings
          and to represent the Trust in all suits or legal
          proceedings; provided, however, the Trustee shall not
          be expected or required to undertake any of the
          foregoing unless there are sufficient assets in the
          Trust with which to do so, or the Trustee has received
          assurances by a party to this Trust, satisfactory to
          the Trustee, of the payment or reimbursement of the
          expenses connected therewith;
     (e)  To exercise any conversion privilege (other than
          conversion privileges with respect to any insurance
          policy which shall be exercised only upon direction of
          the Bank) and/or subscription right available in
          connection with securities or other property at any
          time held, to oppose or to consent to the
          reorganization, consolidation, merger or readjustment
          of the finances of any corporation, bank or association
          or to the sale, mortgage, pledge or lease of the
          property of any corporation, bank or association any of
          the securities of which may at any time be held and to
          do any act with reference thereto, including the
          exercise of options, the making of agreement or
          subscription, which may be deemed necessary or
          advisable in connection therewith, and to hold and
          retain any securities or other properties so acquired;
     (f)  To hold cash uninvested for a reasonable period of time
          (not in excess of thirty (30) days) under the
          circumstances without liability for interest, pending
          investment thereof or the payment of expenses or making
          distributions therewith;
     (g)  To form corporations and to create Trusts to hold title
          to any securities or other property, all upon such
          terms and conditions as may be deemed advisable;
     (h)  To employ suitable agents and counsel and to pay their
          reasonable expenses and compensation;
     (i)  To register any securities held hereunder in the name
          of the Trustee or in the name of a nominee with or
          without the addition of words indicating that such
          securities are held in a fiduciary capacity and to hold
          any securities in bearer form and to combine
          certificates representing such securities with
          certificates of the same issue held by Trustee in other
          fiduciary or representative capacities, or to deposit
          securities in any qualified central depository where
          such securities may be held in bulk in the name of the
          nominee of such depository with securities deposited by
          other depositors, or deposit securities issued by the
          United States Government, or any agency or
          instrumentalities thereof, with a Federal Reserve Bank;
     (j)  To make, execute and deliver, as Trustee, any and all
          conveyances, contracts, waivers, releases or other
          instruments in writing necessary or proper for the
          accomplishment of any of the foregoing powers; and

<PAGE>

     (k)  To have any and all other powers or authority, under
          the laws of the state in which the Trustee's principal
          executive offices are located, relevant to performance
          in the capacity as Trustee.

     When and if requested to do so by the Bank, significant and
material actions taken by the Trustee in connection with the
administration of the Trust shall be evidenced by a written
instrument signed by the Trustee.  The Bank shall be entitled to
receive a copy of said written instrument, upon written request
delivered to the Trustee.


     Section 5.  Payment of Taxes and Expenses
     _________________________________________
     The Trustee shall pay out of the Trust, all incremental
taxes of any and all kinds levied or assessed with respect to the
principal or earnings of the Trust.

     The Trustee shall be paid such reasonable compensation as
shall from time to time be agreed upon by the Bank and the
Trustee.  Such compensation and all reasonable costs, charges,
taxes and expenses incurred by the Trustee in connection with the
administration of the Trust, including counsel fees, shall be
withdrawn by the Trustee out of the Trust unless paid or advanced
by the Bank.  In the event that the assets of the Trust are not
sufficient to pay such costs, charges, taxes and expenses, such
costs, charges and expenses shall be paid to the Trustee by the
Bank.

     Section 6.  Records and Accounts of Trustee
     ___________________________________________
     The Trustee shall keep accurate and detailed accounts of all
investments, receipts, disbursements and other transactions
hereunder, and all accounts, books and records relating thereto
shall be open to inspection and audit at all reasonable times by
any person designated by the Bank, or by the Participant.

     Within thirty (30) days after the close of each fiscal year
of the Trust or such date as may be agreed upon in writing
between the Bank and the Trustee, and within forty-five (45) days
after the effective date of the resignation or removal of the
Trustee as provided hereunder, the Trustee shall file with the
Participant and the Bank a written accounting setting forth all
investments, receipts, disbursements and other transactions
effected by it during the year ending on such date (but not
including any part of such year for which such an accounting has
previously been filed) and certified as to the accuracy of the
information set forth therein.  In valuing any policy or contract
issued by an insurance company, the Trustee may rely conclusively
on any value placed thereon by the issuer thereof.  Such
accounting may incorporate by reference any and all schedules and
other statements setting forth investments, receipts,
disbursements and other transactions effected during the period
for which such accounting is rendered that the Trustee has
furnished prior to the filing of such accounting.  Each
accounting so filed (and copies of any schedules and statements
incorporated therein by reference as aforesaid) shall be open to
inspection during business hours by the Bank, Participant or any
other person so designated by Participant or, after Participant's
death, by Participant's said Beneficiary, for a period of sixty
(60) days immediately following the date on which the accounting
is filed. In the absence of written exceptions or objections to
any such accounting filed within ninety (90) days, the
Participant and the Bank shall be deemed to have jointly approved
such accounting; and in such case, or upon the written approval
of any such

<PAGE>

accounting, the Trustee shall be released, relieved and
discharged with respect to all matters set forth in such
accounting as though such accounting had been settled by the
decree of a court of competent jurisdiction.

     Section 7.  Protection of the Trustee
     _____________________________________
     The Trustee shall be fully protected by the Bank and the
Participant in relying upon a certification of the Participant,
or when appropriate, an authorized representative of the Bank
with respect to any instruction, direction or approval of the
Participant, or when appropriate, the Bank required or permitted
hereunder, and protected also in relying upon the certification
until a subsequent certification is filed with the Trustee.
     The Trustee shall be fully protected in acting or relying
upon any instrument, certificate, or paper believed by it to be
genuine and to be signed or presented by the proper person or
persons, and the Trustee shall be under no duty to make any
investigation or inquiry as to any statement contained in any
such writing, but may accept the same as conclusive evidence of
the Trust and accuracy contained therein.
     The Trustee's obligations hereunder shall be determined
solely by the terms of this Trust Agreement.  The Trustee shall
not be liable hereunder for any loss or diminution of the Trust
resulting from any reasonable action taken or omitted or any
action taken by the Trustee in accordance with this Trust
Agreement.
      Nothing contained in this Trust Agreement shall require the
Trustee to risk or expend its own funds in the performance of its
duties hereunder.  In the acceptance and performance of its
duties hereunder, the Trustee acts solely as Trustee of the Trust
and not in its individual capacity, and all persons, other than
Bank, Participant, or the Participant's Beneficiary having any
claim against the Trustee related to this Trust Agreement or the
actions or agreements of the Trustee contemplated hereby shall
look solely to the Trust for the payment or satisfaction thereof,
except to the extent that the Trustee has engaged in willful
misconduct or gross negligence, or the Trustee has willfully
breached its obligation under this Trust Agreement.

     Section 8.  Resignation, Removal and Succession of Trustee
     __________________________________________________________
     The Trustee acting hereunder may resign at any time by
giving at least ninety (90) days written notice to the
Participant.

     The Participant and the Bank may jointly remove the Trustee
at any time by giving at least ninety (90) days prior written
notice to the Trustee.  The Participant and the Bank shall
jointly appoint a successor Trustee to fill any vacancy in the
office of Trustee, howsoever caused, which successor Trustee
shall be a bank or Trust company located in the continental
United States.

     Each successor Trustee shall succeed to the title to the
Trust vested in its predecessor, without the signing or filing of
any further instrument, but any resigning or removed Trustee
shall execute all documents and do any acts reasonably necessary
to vest such title of record in any successor Trustee.  Each
successor Trustee shall have and enjoy all powers, both
discretionary and ministerial, of its predecessor.  No successor
shall be personally liable for any act or failure to act of any
predecessor Trustee; and, with the joint approval of the
Participant

<PAGE>

and Bank, a successor Trustee may accept the account rendered and
the property delivered to it by its predecessor Trustee as a full
and complete discharge of the predecessor Trustee without
incurring any liability or responsibility for so doing.

     Section 9.  Trust Irrevocable
     _____________________________
     Except as provided herein, there are no conditions or
reservations of power in any person to revoke this Trust, in
whole or in part.  This Trust shall be irrevocable.  There are no
conditions or reservations of power in any person to free any or
all of the property constituting the Account from the terms of
the Trust.

     Section 10.   Termination of Trust
     __________________________________
     The Trust Account shall only be funded on the occurrence of
any qualified Period of Disability of the Participant as defined
in the Plan.  If, when the Participant reaches Normal Retirement
Age or the Participant's employment with the Bank is terminated,
and the Participant has had no qualifying Period of Disability
sufficient to invoke funding of the Trust, the Trust will
automatically terminate unfunded.   The Trust will also terminate
unfunded if at any time the above referenced Disability Policy
with Mass Mutual lapses, terminates, or is surrendered, cancelled
or ceases to be owned by the Bank for any reason.

     If the Participant experiences a qualifying Period of
Disability sufficient to fund the Trust, the Trust shall continue
as set forth herein until all funds payable from the Account are
paid, at which time the Trust will terminate. If necessary, the
Trust shall continue throughout the life of Participant until the
remaining retirement or disability benefits are paid or until any
pre-retirement death benefits payable from the Account are paid.
Upon the death of the Participant, the Trust will terminate, and
all remaining funds in the Account will be paid to the
Participant's named beneficiary.

     Once funded, the Trust shall terminate upon:
     (i)  the complete satisfaction of all Benefit obligations
          pursuant to this Trust Agreement, and
     (ii) the complete distribution of all of the assets of the
          Account pursuant to the terms of the Agreement.
     (iii)death of the Participant.

     Upon termination of the Trust, the Trustee shall continue to
have such powers as are necessary or desirable to wind up the
business of the Trust, including the preparation of the final
accounting and filing of any tax returns and/or payment of any
taxes due and owing in connection with the Trust.  Upon
termination of the Trust and following the satisfaction of all
liabilities of the Trust, all assets remaining in the Trust, if
any, shall be distributed to the Participant or to the
Participant's Beneficiary, as applicable.

<PAGE>

     Section 11.  Exclusive Benefit
     ______________________________
     The Account shall be held by the Trustee in accordance with
the terms of this Trust and the Agreement for the exclusive
benefit of Participant, and shall be applied to provide Benefits
under the Agreement in accordance with the terms thereof, to pay
taxes and compensation, costs and expenses of the Trustee to the
extent not otherwise paid by the Bank and to make such other
payments authorized hereinabove.

     Section 12.  Fiduciary Responsibility and Liability
     ___________________________________________________
     In carrying out its responsibilities under the Trust, the
Trustee and any other fiduciary hereunder shall act solely in the
interest of the Participant and with the care, skill, prudence
and diligence under the circumstances then prevailing that a
prudent individual acting in a like capacity and familiar with
such matters would use in the conduct of an enterprise of a like
character and with like aims.  Nothing contained herein shall be
construed to narrow or limit the Trustee's right to rely on the
certifications, instruments, or papers upon which it relies in
good faith in carrying out its duties and responsibilities
hereunder, as more fully set forth above.

     The Bank shall, to the extent permitted by law, indemnify
the Trustee and hold it harmless from and against any claims or
liabilities, losses, costs or expenses (including reasonable
attorney's fees) of whatsoever kind and nature that may be
asserted against or incurred by the Trustee by reason of its
taking or refraining from taking action hereunder, except to the
extent due the Trustee's gross negligence or willful misconduct,
as finally determined by a court of law or pursuant to binding
arbitration.

     Section 13.  Payments to Minors
     _______________________________
     In the event that any amounts due and owing hereunder are
payable to any Beneficiary who is a minor, such amounts shall not
be paid to such Beneficiary but shall be paid instead to such
person' parent or legal guardian or a custodian under the Uniform
Gifts to Minor's Act or Uniform Transfers to Minors Act of any
jurisdiction, in any case   for the benefit of such Beneficiary,
until such Beneficiary reaches the age of majority, and the
Trustee shall have no obligation to see to the proper application
thereof.

     Section 14.  Rule Against Perpetuities
     ______________________________________
     Notwithstanding any other provision of this Trust, unless
sooner terminated in accordance with its provisions, this Trust
shall cease and terminate within twenty-one (21) years (plus any
required period of gestation) after the death of the last
survivor of the following persons: (i) the Participant, or (ii)
any individual Beneficiary living at the date of the
Participant's death.  If the designated Beneficiary hereunder is
a Trust, the persons who are beneficiaries of said Trust shall be
deemed to be the individual Beneficiaries hereunder.  If on the
day preceding the expiration of such period any property is still
held in Trust hereunder, such property shall immediately vest in
and be distributed to the designated Beneficiary hereunder.

<PAGE>

     Section 15.  Governing Laws
     ___________________________
     This Trust Agreement and the Trust created herein shall be
constructed, regulated and administered under the laws of the
Commonwealth of Massachusetts.  All contributions to the Trust
shall be deemed to take place in such state.  The Trustee may at
any time initiate an action or proceeding for the settlement of
its accounts or for the determination of any question of
construction that may arise or for instructions, and the only
necessary parties defendant to such action shall be the Bank and
Participant, except that the Trustee may, if it so elects, bring
in as parties defendant any other person or persons.

     Section 16.  Counterparts
     _________________________
     This Trust Agreement shall be executed in any number of
counterparts, each one of which shall be deemed to be an
original, but all of which shall together constitute only one
agreement.

     Section 17.  Notice
     ___________________
     Every direction, revocation or notice authorized or required
hereunder shall be deemed delivered to the Bank or the Trustee:

     (i)  on the date it is personally delivered to the Bank or
          the Trustee at its respective principal executive
          offices, or

     (ii) three (3) business days after it is sent by registered
          or certified mail, postage prepaid, addressed to the
          Bank or the Trustee at such principal executive
          offices.

     Every direction, revocation or notice authorized or required
hereunder shall be deemed delivered to the Participant or
Beneficiary as the case may be:

     (i)  on the date it is personally delivered to him or her,
          or

     (ii) three (3) business days after it is sent by registered
          or certified mail, postage prepaid, addressed to him or
          her at the last address shown for him or her on the
          records of the Bank.

     Participant shall keep the Bank and the Trustee informed of
his or her current address and the current address of his or her
Beneficiary.  Neither the Bank nor the Trustee shall be obligated
to search for the whereabouts of any person.  If the location of
Participant is not made known to the Bank or the Trustee within
one (1) year after the date on which distribution of retirement
benefits from the Account is to first be made per the Agreement,
distribution may be made as though Participant had died at the
end of the one (1) year period.

<PAGE>

     Communications under this Trust Agreement shall be in
writing and, unless notification of a change of address is
received by the appropriate parties, shall be sent to the
following addresses:
             Trustee:   Thomas A. Nussbaum
                        Eastern Bank
                        2 Adams Place, AP06
                        Quincy, MA  02169-7456
             Bank:      Union National Community Bank
                        101 East Main Street
                        Mount Joy, PA 17552

     Section 18.  Waiver of Notice
     _____________________________
     Any notice required hereunder may be waived by the person
entitled thereto.

     Section 19.  Gender and Number
     ______________________________
     Where the context permits, words in the masculine gender
shall include the feminine and neuter genders, the singular shall
include the plural, and the plural shall include the singular.

     Section 20.  Headings
     _____________________
     The headings of Sections of this Trust Agreement are for
convenience of reference only and shall have no substantive
effect on the provisions of this Trust Agreement.

     Section 21.  Severability
     _________________________
     In the event any provision of this Trust Agreement shall be
held illegal or invalid for any reason, such illegality or
invalidity shall not affect the remaining provisions of the Trust
Agreement, and the Trust Agreement shall be construed and
enforced as if such illegal or invalid provision had never been
contained herein.

     Section 22.  Merger or Consolidation or Sale of Assets of
     _________________________________________________________
     Bank
     ____
     In the event of the merger or consolidation of the Bank with
or into any other corporation, or in the event substantially all
of the assets of the Bank shall be transferred to another
corporation, the successor corporation resulting from the merger
or consolidation, or the transferee of such assets, as the case
may be, shall, as a condition to the consummation of the merger,
consolidation or sale, assume the obligations of the Bank
hereunder and shall be substituted for the Bank hereunder.

     Section 23.  Agreement Binding
     ______________________________
     The Trustee by executing this Trust Agreement agrees to be
bound by the terms hereof and agrees to hold any property
acceptable to the Trustee added hereto in accordance with the
terms and conditions hereof.  This Trust Agreement shall extend
to be binding upon the successors of the parties hereto.

<PAGE>

     IN WITNESS WHEREOF, this instrument has been executed as of
the day and year first above written.
                       Union National Community Bank
                       Mount Joy, PA


Attest:                By:  /s/ Clement M. Hoober
                          __________________________
                       Bank Officer (other than Plan Participant)
/s/ Marcene L. Camara
_____________________

_____________________

Attest:                By:  /s/ Thomas A. Nussbaum
                          __________________________
                          Eastern Bank
                          Trustee
/s/ William G. Borchert
_____________________

_____________________


Attest:                By:  /s/ Mark D. Gainer
                          __________________________
                          Mark D. Gainer
/s/ Dwight N. Kreiser
_____________________

_____________________

<PAGE>

                         EXHIBIT 10.12
                         _____________

      Group Term Replacement Plan for Certain Officers, CEO
           dated January 1, 2004 between Mark D. Gainer
                 and Union National Community Bank

<PAGE>

                 UNION NATIONAL COMMUNITY BANK
                GROUP TERM REPLACEMENT PLAN FOR
                       CERTAIN OFFICERS

     THIS PLAN hereby made and entered into this 1st day of
January, 2004, by and between Union National Community Bank, a
national chartered commercial bank, located in Mount Joy,
Pennsylvania (the "Bank") and the Participant selected to
participate in this Plan (the "Participant").

                         INTRODUCTION

     The Bank wishes to attract and retain highly qualified vice
presidents and officers.  To further this objective, the Bank is
willing to divide the death proceeds of certain life insurance
policies which are owned by the Bank on the lives of the
participating vice presidents and officers with the designated
beneficiary of each insured participant.  The Bank will pay life
insurance premiums from its general assets. The participants
understand that the Bank is using the insurance policy in which
the participant has executed a Split Dollar Endorsement as a
means to fund employee benefits for other employees consistent
with the requirements of OCC Bulletin 2000-23 and are hereby
consenting to such use by the Bank.

                           Article 1
                     General Definitions

The following terms shall have the meanings specified:

     1.1  "Change of Control" means any of the following:

          1.1.1 (A) a merger, consolidation or division involving
     Union National Financial Corporation ("Corporation") or
     Bank, (B) a sale, exchange, transfer or other disposition of
     substantially all of the assets of Corporation or Bank, or
     (C) a purchase by Corporation or Bank of substantially all
     of the assets of another entity, unless (y) such merger,
     consolidation, division, sale, exchange, transfer, purchase
     or disposition is approved in advance by seventy percent
     (70%) or more of the members of the Board of Directors of
     Corporation or Bank who are not interested in the
     transaction and (z) a majority of the members of the Board
     of Directors of the legal entity resulting from or existing
     after any such transaction and of the Board of Directors of
     such entity's parent corporation, if any, are former members
     of the Board of Directors of Corporation or Bank; or

          1.1.2 any "person" (as such term is used in Sections
     13(d) and 14(d) of the Securities Exchange Act of 1934 (the
     "Exchange Act")), other than Corporation or Bank or any
     "person" who on the date hereof is a director or officer of
     Corporation or Bank is or becomes the "beneficial owner" (as
     defined in Rule 13d-3 under the Exchange Act), directly or
     indirectly, of securities of Corporation or Bank
     representing twenty-five (25%) percent or more of the
     combined voting power of Corporation or Bank's then
     outstanding securities; or

<PAGE>

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

          1.1.4 any other change in control of Corporation and
     Bank similar in effect to any of the foregoing.

     1.2  "Compensation Committee" means either the Compensation
Committee designated from time to time by the Bank's Board of
Directors or a majority of the Bank's Board of Directors, either
of which shall hereinafter be referred to as the Compensation
Committee.

     1.3  "Disability" means the Executive's inability to perform
substantially all normal duties of the Executive's position, as
defined in the Bank's disability insurance policy and as
determined by the Bank's disability insurance carrier.  As a
condition to any benefits, the Bank may require the Executive to
submit to a physical or mental evaluations and tests, as the
Board of Directors of the Bank may deem appropriate.

     1.4 "Insured" means the individual whose life is insured.

     1.5 "Insurer" means the insurance company issuing the life
insurance policy on the life of the insured.

     1.6 "Other Group Term Coverage" means group term life
insurance maintained on a Participant's life owned by the Bank
that is in addition to the Policies covered under this Plan.

     1.7 "Normal Retirement Age" means age 62.

     1.8 "Normal Retirement Date" means the later of the Normal
Retirement Age or the date that the Participant terminates or is
terminated for any reason other than being Terminated for Cause.

     1.9 "Participant" means an employee who is a the vice
president, senior vice president, executive vice president, or
president who elects in writing to participate in the Plan using
the form attached hereto as Exhibit A, and signs a Split Dollar
Endorsement for the Policy in which he or she is the Insured.

<PAGE>

     1.10 "Policy" or "Policies" means the individual insurance
policy (or policies) adopted by the Compensation Committee for
purposes of insuring a Participant's life under this Plan.

     1.11 "Base Annual Salary" means the current base annual
salary at the earliest of (1) the date of the Participant's
death; (2) the date of the Participant's disability; (3) the
Participant's retirement age, or the date of change of control.

     1.12 "Plan" means this instrument, including all amendments
thereto.

     1.13 Terminated for "Cause" means that the Bank has
terminated the Participant's employment pursuant to his or her
Employment Agreement, if any, or termination of the Executive's
employment for "Cause" shall mean termination because of personal
dishonesty by the Executive in the performance of his duties
which results in demonstrable material injury to the Bank,
willful misconduct by the Executive, breach by the Executive of a
fiduciary duty to the Bank involving personal profit, intentional
failure to perform stated duties following the Bank giving
written notice thereof to the Executive, willful violation of any
law, rule or regulation (other than traffic violations or similar
offenses) or final cease-and-desist order or material breach of
any provision of the Agreement or any other act that the Bank
deems a willful or a for cause reason for termination of the
Executive's employment.  For purposes of this paragraph, no act
or failure to act on the Executive's part shall be considered
"willful" unless done, or omitted to be done, by the Executive
not in good faith and without reasonable belief that the
Executive's action or omission was in the best interest of the
Bank.

                           Article 2
                         Participation

     2.1 Eligibility to Participate.The Compensation Committee in
its sole discretion shall designate from time to time
Participants that are eligible to participate in this Plan.

     2.2 Participation.  The eligible vice president or officer
may participate in this Plan by executing an Election to
Participate (Exhibit A) and a Split Dollar Endorsement (Exhibit
D).  The Split Dollar Endorsement shall bind the Participant and
his or her beneficiaries, assigns and transferees, to the terms
and conditions of this Plan.  A vice president's or officer's
participation is limited to only Policies where he or she is the
Insured.  Exhibit B attached hereto sets forth the original
Participants.  It is intended that the Participant shall continue
as a Participant until death regardless of Participant's employee
status with the Bank. In the event the Bank decides to maintain
the Policy after the Participant's termination of his or her
participation in the Plan, the Bank shall be the direct
beneficiary of the entire proceeds of the Policy.

     2.3 Termination of Participation.  A Participant's rights
under this Plan shall cease and his or her participation in this
Plan shall terminate if either or both of the following events
occur:

<PAGE>

          2.3.1 The Participant's employment with the Bank is
     Terminated for Cause; or

          2.3.2 The Participant's employment with the Bank is
     terminated prior to Normal Retirement Age for reasons other
     than Disability.

     2.4 Disability.  (A) Except as otherwise provided in
paragraph (B) of this section 2.4, if the Participant's
employment with the Bank is terminated because of the
Participant's Disability, the Bank shall maintain the Policy in
full force and effect and, in no event, shall the Bank amend,
terminate or otherwise abrogate the Participant's interest in the
Policy, provided, however, that at all times the Policy shall be
subject to the claims of the Bank's creditors, and further
provided the Bank, in its sole discretion, may substitute a new
policy sufficient to provide participant with death proceeds in
such amount, as provided in this Agreement.

        (B) Notwithstanding the provisions of paragraph (A) of
this section 2.4, upon the Disabled Participant's gainful
employment with an entity other than the Bank, the Bank shall
have no further obligation to the Disabled Participant, and the
Disabled Participant's rights pursuant to the Plan shall cease.
In the event the Disabled Participant's rights are terminated
hereunder, the Bank shall be the direct beneficiary of the entire
death proceeds of the Policy upon the death of the Disabled
Participant.

     2.5 Retirement.Upon the retirement of the Participant, the
Bank shall maintain the Policy in full force and effect and in no
event shall the Bank amend, terminate or otherwise abrogate the
Participant's interest in the Policy, provided, however that at
all times the Policy shall be subject to the claims of the Bank's
creditors, and further provided the Bank, in its sole discretion,
may substitute a new policy sufficient to provide participant
with death proceeds in such amount, as provided in this
Agreement.  The Participant's interest in the Policy shall be
subject to the vesting schedule attached hereto as Exhibit C.

     2.6   Service.     For the purposes of this plan, service is
defined as the period of elapsed time from the Participant's
initial date of employment with the Bank until the Participant's
last day of employment with the Bank.

                           Article 3
                   Policy Ownership/Interests

     3.1 Bank Ownership.  The Bank shall own Policies on each
Participant's life and shall have the right to exercise all
incidents of ownership.  With respect to each Policy, the Bank
shall be the direct beneficiary of an amount of death proceeds in
excess of three times Base Annual Salary prior to retirement, or
the Multiple of the Base Annual Salary of the insured/Participant
based upon the Vesting Schedule attached hereto as Exhibit C
following retirement.

<PAGE>

     3.2 Participant's Interest.  With respect to each Policy,
the Participant, or the Participant's assignee, shall have the
right to designate the beneficiary of an amount of death benefit
based upon the Plan formula as described in the Participant's
individual Split Dollar Endorsement.  The Participant shall also
have the right to elect and change settlement options with the
consent of the Bank and the Insurer.

                           Article 4
                           Premiums

     4.1 Premium Payment.  The Bank shall pay all premiums due on
all Policies.

     4.2 Imputed Income.  The Bank shall impute income to the
Participant in an amount equal to the current term rate for the
Participant's age multiplied by the aggregate death benefit
payable to the Participant's beneficiary.  The "current term
rate" is the minimum amount required to be imputed under IRS
regulation Section 1.61-22 and Revenue Ruling 2003-105, or any
subsequent applicable authority.

                           Article 5
                          Assignment

     Any Participant may assign without consideration all
interests in his or her Policy and in this Plan to any person,
entity or trust.  In the event a Participant shall transfer all
of his/her interest in the Policy, then all of that Participant's
interest in his or her Policy and in the Plan shall be vested in
his/her transferee, who shall be substituted as a party
hereunder, and that Participant shall have no further interest in
his or her Policy or in this Plan.

                           Article 6
                            Insurer

     The Insurer shall be bound only by the terms of their
corresponding Policy.  Any payments the Insurer makes or actions
it takes in accordance with a Policy shall fully discharge it
from all claims, suits and demands of all persons relating to
that Policy.  The Insurer shall not be bound by the provisions of
this Plan.  The Insurer shall have the right to rely on the
Bank's representations with regard to any definitions,
interpretations, or Policy interests as specified under this
Plan.

                           Article 7
                       Claims Procedure

     7.1 Claims Procedure.  The Bank shall notify any person or
entity that makes a claim against this Group Term Replacement
Plan (the "Claimant") in writing, within ninety (90) days of
Claimant's written application for benefits, of Claimant's
eligibility or ineligibility for benefits under this Plan.  If
the Bank determines that Claimant is not eligible for benefits or
full benefits, the notice shall set forth (1) the specific
reasons for such denial, (2) a specific reference to the
provisions of this Plan on which the denial is based, (3) a
description of any additional information

<PAGE>

or material necessary for the Claimant to perfect Claimant's
claim, and a description of why it is needed, and (4) an
explanation of this Plan's claims review procedure and other
appropriate information as to the steps to be taken if the
Claimant wishes to have the claim reviewed.  If the Bank
determines that there are special circumstances requiring
additional time to make a decision, the Bank shall notify the
Claimant of the special circumstances and the date by which a
decision is expected to be made, and may extend the time for up
to an additional ninety-day period.

     7.2 Review Procedure.  If a Claimant is determined by the
Bank not to be eligible for benefits, or if the Claimant believes
that Claimant is entitled to greater or different benefits, the
Claimant shall have the opportunity to have such claim reviewed
by the Bank by filing a petition for review with the Bank within
sixty (60) days after receipt of the notice issued by the Bank.
Said petition shall state the specific reasons which the Claimant
believes entitle Claimant to benefits or to greater or different
benefits.  Within sixty (60) days after receipt by the Bank of
the petition, the Bank shall afford the Claimant (and counsel, if
any) an opportunity to present Claimant's position to the Bank
orally or in writing, and the Claimant (or counsel) shall have
the right to review the pertinent documents.  The Bank shall
notify the Claimant of its decision in writing within the sixty-
day period, stating specifically the basis of its decision,
written in a manner calculated to be understood by the Claimant
and the specific provisions of this Plan on which the decision is
based.  If, because of the need for a hearing, the sixty-day
period is not sufficient, the decision may be deferred for up to
another sixty-day period at the election of the Bank, but notice
of this deferral shall be given to the Claimant.

                           Article 8
                   Amendments and Termination

     8.1 Amendment or Termination of Plan.  Except as otherwise
provided in sections 2.3, 2.4, 2.5 and 8.2, (i) the Bank may
amend or terminate the Plan at any time, and (ii) the Bank may
amend or terminate a Participant's rights under the Plan at any
time prior to a Participant's death by written notice to the
Participant.

     8.2 Amendment or Termination of Plan Upon Change of Control.
Notwithstanding the provisions of section 8.1, in the event of a
Change of Control, the Bank or its successor shall maintain in
full force and effect each Policy that is in existence on the
date the Change of Control occurs and not terminate or otherwise
abrogate a Participant's interest in the Policy, provided,
however, that at all times the Policy shall be subject to the
claims of the Bank's creditors.  This section 8.2 shall apply to
all Participants in the Plan on the date the Change of Control
occurs, including by not limited to (i) a retired Participant who
has an interest in the Policy pursuant to section 2.5; (ii) a
Disabled Participant who has an interest in the Policy pursuant
to section 2.4; and (iii) a Participant whose employment is
terminated as a result of a Change of Control.

     8.3 Upon Change of Control, all Participants are 100% vested
in the maximum benefit in the Participant's Split Dollar
Endorsement (Exhibit D), at the date of the Change of Control
(the greater of 1(i) or 1(ii)).

<PAGE>

     8.4 A Participant may, in the Participant's sole and
absolute discretion, waive his or her rights under the Plan at
any time.  Any waiver permitted under this section 8.3 shall be
in writing and delivered to the Board of Directors of the Bank.

                           Article 9
                         Miscellaneous

     9.1 Binding Effect.  This Plan in conjunction with each
Split Dollar Endorsement shall bind each Participant and the
Bank, their beneficiaries, survivors, executors, administrators
and transferees, and any Policy beneficiary.

     9.2 No Guarantee of Employment.  This Plan is not an
employment policy or contract.  It does not give a Participant
the right to remain an employee of the Bank, nor does it
interfere with the Bank's "at will" right to discharge a
Participant, unless an existing employment agreement is in place.
It also does not require a Participant to remain an employee nor
interfere with a Participant's right to terminate employment at
any time.

     9.3 Applicable Law.  The Plan and all rights hereunder shall
be governed by and construed according to the laws of the
Commonwealth of Pennsylvania, except to the extent preempted by
the laws of the United States of America.

     9.4 Notice.  Any notice, consent or demand required or
permitted to be given under the provisions of this Split Dollar
Plan by one party to another shall be in writing, shall be signed
by the party giving or making the same, and may be given either
by delivering the same to such other party personally, or by
mailing the same, by United States certified mail, postage
prepaid, to such party, addressed to his/her last known address
as shown on the records of the Bank.  The date of such mailing
shall be deemed the date of such mailed notice, consent or
demand.

     9.5 Entire Agreement.  This Plan constitutes the entire
agreement between the Bank and the Participant as to the subject
matter hereof.  No rights are granted to the Participant by
virtue of this Plan other than those specifically set forth
herein.

     9.6 Administration. The Bank shall have powers which are
necessary to administer this Plan, including but not limited to:

          9.6.1 Interpreting the provisions of the Plan;

          9.6.2 Establishing and revising the method of
     accounting for the Plan;

          9.6.3 Maintaining a record of benefit payments; and

          9.6.4 Establishing rules and prescribing any forms
     necessary or desirable to administer the Plan.

<PAGE>

     9.7 Named Fiduciary.  The Bank shall be the named fiduciary
and plan administrator under the Plan.  The named fiduciary may
delegate to others certain aspects of the management and
operation responsibilities of the plan including the employment
of advisors and the delegation of ministerial duties to qualified
individuals.

     IN WITNESS WHEREOF, the Bank executes this Plan as of the
date indicated above.

                              COMPANY:
                              UNION NATIONAL COMMUNITY BANK

                              By  /s/ R. Michael Mohn
                                ________________________________
                              Title  VP, Human Resources Manager
                                   _____________________________

<PAGE>

                           EXHIBIT A

                   ELECTION TO PARTICIPATE


I,    Mark D. Gainer    , an eligible Participant of the Union
  ______________________
National Community Bank Group Term Replacement Plan for Certain
Officers (the "Plan") dated January 1, 2004, hereby elect and
consent to become a Participant of the Plan in accordance with
Section 2.2 of the Plan.  Additionally, I acknowledge that I have
read the Plan document and agree to be bound by its terms.


Executed this   31st   day of   December  , 2003.
             __________      _____________     _

 /s/ R. Michael Mohn                 /s/ Mark D. Gainer
__________________________          __________________________
Witness                             Participant

<PAGE>

                           EXHIBIT 13
                           __________

       Excerpts From Union National Financial Corporation's
               2003 Annual Report to Stockholders

<PAGE>


<PAGE>

                       ANNUAL REPORT 2003
             A solid foundation.  A soaring future.
              UNION NATIONAL FINANCIAL CORPORATION

<PAGE>

TABLE OF CONTENTS

Financial Highlights . . . . . . . . . . . . . . . . . . . . . .1
To Our Stockholders . . . . . . . . . . . . . . . . . . . . . 2-3
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Income . . . . . . . . . . . . . . . 5
Consolidated Statements of Changes in Stockholders' Equity . . .6
Consolidated Statements of Cash Flows . . . . . . . . . . . . . 7
Notes to Consolidated Financial Statements . . . . . . . . . 8-19
Independent Auditor's Report . . . . . . . . . . . . . . . . . 20
Summary of Quarterly Financial Data . . . . . . . . . . . . . .20
Selected Financial Data . . . . . . . . . . . . . . . . . . . .21
Management's Discussion and Analysis . . . . . . . . . . . .22-36
Board of Directors . . . . . . . . . . . . . . . . . . . . . . 37

STOCK, BROKER AND DIVIDEND INFORMATION

Union National Financial Corporation has only one class of common
stock authorized, issued and outstanding.  The outstanding common
stock is traded on the OTC Bulletin Board (OTCBB), primarily in
Lancaster County, Pennsylvania, under the symbol UNNF. Prices
presented in the table below reflect actual transactions known to
management. Cash dividends, when declared by the Board of
Directors, are payable on the 20th day of February, May, August
and November. Stockholders of record may elect to have cash
dividends deposited directly to their checking or savings
account.  Union National offers its stockholders a Dividend
Reinvestment and Stock Purchase Plan, whereby holders of stock
may have their quarterly cash dividends automatically invested in
additional shares of common stock of the corporation and may
purchase additional shares within specified limits.

<TABLE>
<CAPTION>

                             Stock Price
                       ________________________       Dividends
Quarter                 High             Low          Per Share
_________________________________________________________________
<S>                     <C>               <C>             <C>
First, 2003............$19.00           $16.40          $0.155
Second................. 21.25            18.65           0.155
Third.................. 21.50            19.85           0.160
Fourth................. 22.00            20.00           0.160

First, 2002............$15.50           $13.90          $0.125
Second................. 15.75            15.10           0.140
Third.................. 16.50            15.20           0.155
Fourth................. 17.25            16.20           0.155

</TABLE>

CORPORATE INTRODUCTION

Union National Financial Corporation, headquartered in Mount Joy,
Pennsylvania, is the holding company of Union National Community
Bank. The bank provides a full range of financial services for
both retail and business customers in Lancaster County,
Pennsylvania. In addition to traditional banking services, Union
National also offers insurance, retirement plan services and
wealth management services through its UnionNationalAdvisors
Group.  Union National Community Bank has seven full-service
offices in Columbia, Elizabethtown, Hempfield, Manheim, Manheim
Township, Maytown and Mount Joy.  The deposits of Union National
Community Bank are insured by the Federal Deposit Insurance
Corporation (FDIC) to the maximum extent provided by law.

CORPORATE OFFICERS

Donald H. Wolgemuth, Chairman of the Board;  Mark D. Gainer,
President/CEO;  Michael A. Frey, Vice President;  Carl R.
Hallgren, Esq., Secretary;  Clement M. Hoober, CPA, Treasurer/CFO

REGARDING FORWARD-LOOKING INFORMATION

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

Union National undertakes no obligation to publicly revise or
update these forward-looking statements to reflect events or
circumstances that arise after the date of this report.

REGISTRAR AND TRANSFER AGENT

Union National Community Bank
Attn: Stock Transfer Department
P.O. Box 567
Mount Joy, PA 17552-0567

FOR FURTHER INFORMATION ON PURCHASING OUR STOCK, WE REFER YOU TO:

Ferris Baker Watts
3100 Market Street
Camp Hill, PA 17011
(877) 519-5953

F. J. Morrissey & Company, Inc.
4 Tower Bridge, Suite 300
200 Barr Harbor Drive
West Conshohocken, PA 19428
(800) 842-8928

Hazlett, Burt & Watson, Inc.
100 East King Street
P. O. Box 1267
Lancaster, PA  17608
(717) 397-5515

Janney Montgomery Scott, LLC
61 North Duke Street
Lancaster, PA  17602
(717) 293-4100

Ryan Beck & Co., Inc.
220 South Orange Avenue
Livingston, NJ 07039
(973) 597-6000

FORM 10-K REQUEST

The Form 10-K Report filed with the Securities & Exchange
Commission may be obtained, without charge, by writing to:
     Clement M. Hoober, CPA
     Treasurer/CFO
     Union National Financial Corporation
     P.O. Box 567
     Mount Joy, PA 17552

The annual report and other company reports are also filed
electronically through the Electronic Data Gathering, Analysis
and Retrieval System (EDGAR) which performs automated collection,
validation, indexing, acceptance and forwarding of submissions to
the Securities and Exchange Commission (SEC) and is accessible by
the public using the internet at http://www.sec.gov/edgar.shtml.

NOTICE OF ANNUAL MEETING

The Annual Meeting of Stockholders will be held on Wednesday,
April 28, 2004 at: The Gathering Place, 6 Pine Street, Mount Joy,
PA 17552.

<PAGE>
<TABLE>
                          FINANCIAL HIGHLIGHTS
<CAPTION>
(Dollars in thousands, except per share data)
                            December 31,  December 31, % Increase
                                2003         2002      (Decrease)
_________________________________________________________________
<S>                               <C>           <C>         <C>
For the Year
  Total Interest Income......$ 18,034       $ 19,561      (7.8%)
  Total Interest Expense.....   6,703          8,107     (17.3%)
  Net Interest Income........  11,331         11,454      (1.1%)
  Net Income.................   3,216          3,160       1.8%

Per Share
  Net Income (Basic).........$   1.29       $   1.24       4.0%
  Net Income (Assuming Dilution) 1.27           1.23       3.3%
  Cash Dividends Paid........   0.630          0.575       9.6%
  Stockholders' Equity.......   11.03          10.62       3.9%

Average Balances
  Loans......................$200,808       $ 201,976     (0.6%)
  Investments and Other
     Earning Assets.......... 105,036          87,939     19.4%
  Total Assets............... 327,644         308,584      6.2%
  Total Deposits............. 226,781         215,242      5.4%
  Stockholders' Equity.......  27,046          25,900      4.4%

Return on Average
   Assets....................    0.98%           1.02%
   Stockholders' Equity......   11.89%          12.20%
   Realized Stockholders'
     Equity (1)..............   12.38%          12.51%

(1) Excludes the impact of accumulated other comprehensive income
on total stockholders' equity.

</TABLE>
<PAGE>
                        TO OUR STOCKHOLDERS:

As Union National begins its 151st year, I would like to express
my gratitude to everyone who has helped us build a solid
foundation.  It is because of the support of our stockholders,
the commitment of our employees and the dedication of our
customers, that we are able to remain a strong, independent
community bank in the midst of a very unpredictable economic
environment.  With our firm foundation, we can confidently look
forward to a soaring future.

We reflect on a year of great growth and achievement, which has
set a new standard for the years to come.  Union National has
once again achieved record earnings as a result of many
profitable initiatives in 2003.  Following are just a few
highlights of our accomplishments this past year:

* Our UnionNationalAdvisors group continued to expand the sale of
annuities, mutual funds and other alternative investment
products.  These increased sales efforts resulted in increased
revenues of $282,000 in 2003 over 2002.

* We recognized a significant increase in mortgage activity
during 2003 resulting in revenues of $909,000, an increase of 95%
as compared to 2002.  With historically-low long-term interest
rates, the mortgage business was flourishing as real estate sales
increased and refinancings were at an all-time high.

* Union National generated significant commercial and consumer
loan growth in 2003.  With an expanded commercial banking
department, we were better able to meet the diverse needs of the
business community.  We have also been able to extend our
commercial services into new markets.  Consumer loan growth was
fueled primarily by our competitive home equity line of credit
which is available at rates as low as 1/2% below prime.

* In November, we opened our newest community office at 38 East
Roseville Road in Manheim Township.  This office has been well
received and we anticipate continued strong growth in this
market.

* In early 2003, we introduced an innovative new product to our
markets, Cash Back Checking.  This is a free checking account
that is augmented with a cash back feature that pays customers
for pinless check card purchases on a monthly basis.

* In December, we introduced our customers to Overdraft
Privilege, an extension of our current deposit services.  This
program offers customers enhanced flexibility when dealing with
unexpected banking needs.  This product enhances deposit fee
income for Union National.

In addition to these accomplishments, Union National was named
one of the "100 Best Places to Work in Pennsylvania!"  Our
commitment to our team members has always been a top priority and
we are glad that Union National has been recognized as a place
that emphasizes the value of our team members.  Union National
believes that its commitment to its employees is key to customer
satisfaction and ultimately to increasing shareholder value.  We
believe that Union National is one of the "Best Places to Work"
simply because we have the best employees.

As part of Union National's plan to enhance long-term shareholder
value, the Board of Directors announced in December the approval
of a plan to purchase, in open market and privately negotiated
transactions, up to 120,000 shares of its outstanding common
stock.  Funding for the stock repurchase plan came from the
completion of a private sale of $8,000,000 of floating-rate trust
preferred securities by Union National Capital Trust I, a wholly-
owned subsidiary of Union National Financial Corporation.  In
addition, the remaining funds will be utilized to provide capital
for Union National Community Bank to fund initiatives for future
growth.

As we close the door on a year of great success and achievement,
we recognize that many windows of opportunity will be available
to us as we soar into an exciting future.  We are confident the
strategic initiatives that we will undertake will lead us to new
heights.  Following are a few of the initiatives that we believe
will take Union National to the next level:

<PAGE>

* We will continue to focus on the expansion of our community
office network.  We believe Union National is poised and ready to
meet the needs of customers in a greater market area.  By
expanding our branch network, we will be able to share the
products and services that have made us a dominant community bank
in our current markets.

* We will relocate our Commercial Banking Department in the
Spring of 2004 to office space in Manheim Township to afford
Union National the opportunity to further penetrate the greater
Lancaster market.

* We will further grow Union National through expanded efforts
and initiatives in the markets we currently serve.  We will
continue to seek new relationships with those who have yet to
discover the value of being a Union National customer.

* We will continue to evaluate our product offerings and look for
innovative products that our customers will find beneficial and
allow us to increase profitability.  In January 2004, we
introduced our customers to CDARS, a unique certificate of
deposit product that allows customers to obtain FDIC insurance
coverage for deposits well in excess of $100,000 without having
to have relationships with multiple financial institutions.

* We will continue to seek and hire experienced team members with
the talent and knowledge to help Union National expand market
share.  New team members hired in early 2004 include an
experienced  agricultural lender, an experienced commercial and
business banker and a sales person for trust and investment
management products and services.

The end of 2003 also marked the retirement of two long-serving
members of our Board of Directors, Frank Eichler and Dave Heisey.
I appreciate their many years of service and their willingness to
share their wisdom and expertise to help guide Union National.
In addition, three new members were added to the Board of
Directors in 2003.  Nancy Shaub Colarik, Jim Godfrey and Bill
Nies joined the Board and bring with them diverse business
backgrounds and are representative of the larger Lancaster County
market.  The Board of Directors also appointed Ben Piersol to the
position of Vice Chairman.  I look forward to benefiting from
their guidance and business expertise as the Board helps lead
Union National into the future.

Our firm foundation, which was established over 150 years ago,
will continue to be our cornerstone as we build upon those
principles and values that have guided Union National in the
past.  As always, our focus remains on the service we provide and
the people we serve.  As we create opportunities and continue to
grow profitably, I want to express a very sincere "Thank You"
for your part in helping us build a solid foundation.  With the
support of our employees, customers and shareholders, this
foundation will serve as a platform from which we can launch into
the future and soar to a new level of success.


Sincerely yours,

/s/ Mark D. Gainer

Mark D. Gainer
President/CEO

<PAGE>
<TABLE>
                   CONSOLIDATED BALANCE SHEETS
<CAPTION>

(Dollars in thousands, except per share data)

                                     December 31,    December 31,
                                        2003            2002
                                    ____________     ____________
<S>                                     <C>              <C>
ASSETS
Cash and Due from Banks.............$    8,426       $    7,215
Interest-Bearing Deposits
  in Other Banks....................       253               70
Federal Funds Sold..................         -            2,260
Short-Term Investments..............         -            5,000
                                    ____________     ____________
 Total Cash and Cash Equivalents....     8,679           14,545
Investment Securities Available-
 for-Sale...........................    97,066           90,679
Loans Held for Sale.................       197              892
Loans(Net of Unearned Income).......   225,381          199,065
 Less: Allowance for Loan Losses....    (1,985)          (1,812)
                                    ___________      ____________
         Net Loans..................   223,396          197,253

Premises and Equipment - Net........     6,625            6,320
Restricted Investment in Bank Stocks     4,092            3,772
Other Assets........................    11,837            7,048
                                    ____________     ____________
   TOTAL ASSETS.....................$  351,892       $  320,509
                                    ============     ============
LIABILITIES
Deposits:
 Noninterest-Bearing................$   30,687       $   31,141
 Interest-Bearing...................   200,387          192,209
                                    ____________     ____________
  Total Deposits....................   231,074          223,350
Short-Term Borrowings...............     9,981            3,387
Long-Term Debt......................    73,874           65,299
Junior Subordinated Debentures......     8,248                -
Other Liabilities...................     1,591            1,738
                                    ____________     ____________
  TOTAL LIABILITIES.................   324,768          293,774

STOCKHOLDERS' EQUITY
Common Stock (Par Value $.25 per share)    690              688
Shares: Authorized - 20,000,000; Issued -
  2,762,099 in 2003 (2,753,243 in 2002)
  Outstanding - 2,458,748 in 2003
  (2,517,469 in 2002)
Surplus   ..........................     9,090            8,939
Retained Earnings...................    21,963           20,319
Accumulated Other Comprehensive
  Income............................     1,035            1,120
Treasury Stock - 303,351 shares in 2003
  (235,774 in 2002), at cost........    (5,654)          (4,331)
                                    ____________     ____________
  TOTAL STOCKHOLDERS' EQUITY........    27,124           26,735
                                    ____________     ____________
  TOTAL LIABILITIES and
     STOCKHOLDERS' EQUITY...........$  351,892       $  320,509
                                    ============     ============
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
                CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
(Dollars in thousands, except per share data)

                                      Years Ended December 31,
                                    _____________________________
                                          2003            2002
                                    ______________   ____________
<S>                                       <C>              <C>
INTEREST INCOME
Interest and Fees on Loans..........$     13,948     $    15,330
Investment Securities:
 Taxable Interest...................       2,706           2,949
 Tax-Exempt Interest................       1,232           1,085
 Dividends..........................         100             130
Other...............................          48              67
                                    ______________   ____________
 Total Interest Income..............      18,034          19,561

INTEREST EXPENSE
Deposits............................       3,362           4,587
Short-Term Borrowings...............          28              50
Long-Term Debt......................       3,301           3,470
Junior Subordinated Debentures......          12               -
                                    ______________   ____________
 Total Interest Expense.............       6,703           8,107
                                    ______________   ____________
 Net Interest Income................      11,331          11,454

PROVISION for LOAN LOSSES...........         274             184
                                    ______________   ____________
Net Interest Income after Provision
  for Loan Losses...................      11,057          11,270

OTHER OPERATING INCOME
Income from Fiduciary Activities....         161             127
Service Charges on Deposit Accounts.       1,078           1,008
Other Service Charges, Commissions, Fees   1,220             948
Investment Securities Gains.........         446             327
Mortgage Banking Activities.........         909             466
Earnings from Bank-Owned Life Insurance      282             211
Other Income........................         125              88
                                    ______________   ____________
  Total Other Operating Income......       4,221           3,175

OTHER OPERATING EXPENSES
Salaries and Wages..................       5,055           4,547
Retirement Plan and Other Employee
   Benefits.........................       1,189           1,133
Net Occupancy Expense...............         702             714
Furniture and Equipment Expense.....         606             603
Professional Fees...................         476             496
Data Processing Services............         672             576
Pennsylvania Shares Tax.............         259             266
Advertising and Marketing Expenses..         288             265
ATM Processing Expenses.............         273             251
Other Operating Expenses............       1,861           1,698
                                    ______________   ____________
  Total Other Operating Expenses....      11,381          10,549
                                    ______________   ____________
  Income before Income Taxes........       3,897           3,896

PROVISION for INCOME TAXES..........         681             736
                                    ______________   ____________
  NET INCOME........................ $     3,216     $     3,160
                                    ==============   ============
PER SHARE INFORMATION
  Net Income for Year - Basic....... $      1.29     $      1.24
  Net Income for Year - Assuming
   Dilution.........................        1.27            1.23
  Cash Dividends....................       0.630           0.575

See notes to consolidated financial statements.

<CAPTION>
                                      Years Ended December 31,
                                    _____________________________
                                          2001
                                    ______________
<S>                                       <C>
INTEREST INCOME
Interest and Fees on Loans..........$     15,718
Investment Securities:
 Taxable Interest...................       3,830
 Tax-Exempt Interest................       1,117
 Dividends..........................         211
Other...............................         209
                                    ______________
 Total Interest Income..............      21,085

INTEREST EXPENSE
Deposits............................       7,246
Short-Term Borrowings...............         340
Long-Term Debt......................       2,604
Junior Subordinated Debentures......           -
                                    ______________
 Total Interest Expense.............      10,190
                                    ______________
 Net Interest Income................      10,895

PROVISION for LOAN LOSSES...........         576
                                    ______________
Net Interest Income after Provision
  for Loan Losses...................      10,319

OTHER OPERATING INCOME
Income from Fiduciary Activities....         157
Service Charges on Deposit Accounts.         991
Other Service Charges, Commissions, Fees     850
Investment Securities Gains.........          75
Mortgage Banking Activities.........           9
Earnings from Bank-Owned Life Insurance      206
Other Income........................          68
                                    ______________
 Total Other Operating Income.......       2,356

OTHER OPERATING EXPENSES
Salaries and Wages..................       4,471
Retirement Plan and Other Employee
   Benefits.........................       1,066
Net Occupancy Expense...............         678
Furniture and Equipment Expense.....         596
Professional Fees...................         554
Data Processing Services............         537
Pennsylvania Shares Tax.............         254
Advertising and Marketing Expenses..         220
ATM Processing Expenses.............         262
Other Operating Expenses............       1,564
                                    ______________
 Total Other Operating Expenses.....      10,202
                                    ______________
 Income before Income Taxes.........       2,473

PROVISION for INCOME TAXES..........         231
                                    ______________
 NET INCOME.........................$      2,242
                                    ==============
PER SHARE INFORMATION
  Net Income for Year - Basic.......$       0.87
  Net Income for Year - Assuming
   Dilution.........................        0.86
  Cash Dividends....................       0.425

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

<TABLE>

   CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<CAPTION>
(Dollars in thousands, except per share data)
                                          Shares of
                                        Common stock
                                         Outstanding
                                        ____________
<S>                                           <C>

BALANCE, December 31, 2000                2,575,218
Comprehensive Income:...................
 Net Income.............................
 Unrealized Holding Gains on Investment
   Securities Available-for-Sale
   Arising During the Year, Net of
   Tax of $352..........................
 Reclassification Adjustment
   for Gains Included in Net Income,
   Net of Tax of $25....................
    Total Comprehensive Income..........
Acquisition of Treasury Stock...........     (4,213)
Issuance of Common Stock under Dividend
  Reinvestment and Stock Purchase Plan..     17,339
Issuance of Common Stock under Employee
  & Director Stock Plans................      2,093
Issuance of Treasury Stock..............        527
Retirement of Treasury Stock
   (18,000 shares)......................
Cash Dividends ($.425 per share)........
                                        ____________
BALANCE, December 31, 2001..............  2,590,964

Comprehensive Income:
 Net Income.............................
 Unrealized Holding Gains on Investment
   Securities Available-for-Sale Arising
   During the Year, Net of Tax of $478...
 Unrealized Holding Losses on Investment
   Securities Transferred to Available-for
   Sale During the Year, Net of Tax
   of $14...............................
 Reclassification Adjustment for Gains
   Included in Net Income, Net of Tax
   of $111..............................
     Total Comprehensive Income.........
Acquisition of Treasury Stock...........    (97,238)
Issuance of Common Stock under Dividend
  Reinvestment and Stock Purchase Plan..     17,734
Issuance of Common Stock under Employee
  & Director Stock Plans................      6,009
Retirement of Treasury Stock
    (20,000 shares).....................
Cash Dividends ($.575 per share)........
                                        _____________
BALANCE, December 31, 2002..............  2,517,469
Comprehensive Income:
  Net Income............................
  Unrealized Holding Gains on Investment
    Securities Available-for-Sale
    Arising During the Year, Net of Tax
    of $108.............................
  Reclassification Adjustment for Gains
    Included in Net Income, Net of Tax
    of $152.............................
      Total Comprehensive Income........
Acquisition of Treasury Stock...........    (83,577)
Issuance of Common Stock under Dividend
  Reinvestment and Stock Purchase Plan..     16,118
Issuance of Common Stock under Employee
  & Director Stock Plans................      8,738
Retirement of Treasury Stock
    (16,000 shares).....................
Cash Dividends ($.63 per share).........
                                        _____________
BALANCE, December 31, 2003..............  2,458,748
                                        =============

See notes to consolidated financial statements.


   CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<CAPTION>
(Dollars in thousands, except per share data)
                               Common                  Retained
                               Stock       Surplus     Earnings
                             __________  __________   __________
<S>                               <C>         <C>         <C>
BALANCE, December 31, 2000...$      687  $    9,078   $  17,487
Comprehensive Income:
 Net Income..................                             2,242
 Unrealized Holding Gains on Investment
   Securities Available-for-Sale
   Arising During the Year, Net of
   Tax of $352...............
 Reclassification Adjustment
   for Gains Included in Net Income,
   Net of Tax of $25.........
    Total Comprehensive Income
Acquisition of Treasury Stock
Issuance of Common Stock Under Dividend
  Reinvestment and Stock Purchase
    Plan.....................         4         221
Issuance of Common Stock under Employee
  & Director Stock Plans.....         1          23
Issuance of Treasury Stock...                    (4)
Retirement of Treasury Stock
   (18,000 shares)...........        (5)       (358)
Cash Dividends ($.425 per share).                        (1,098)
                             __________  __________   __________
                                    687       8,960      18,631
BALANCE, December 31, 2001

Comprehensive Income:
 Net Income..................                              3,160
 Unrealized Holding Gains on Investment
   Securities Available-for-Sale Arising
   During the Year, Net of Tax of $478...
 Unrealized Holding Losses on Investment
   Securities Transferred to Available-for
   Sale During the year, Net of Tax
   of $14....................
 Reclassification Adjustment for Gains
   Included in Net Income, Net of Tax
   of $111...................
     Total Comprehensive Income
Acquisition of Treasury Stock
Issuance of Common Stock under Dividend
  Reinvestment and Stock Purchase
    Plan.....................         4         274
Issuance of Common Stock under Employee
  & Director Stock Plans.....         2          72
Retirement of Treasury Stock
    (20,000 shares)..........        (5)       (367)
Cash Dividends ($.575 per share)                          (1,472)
                             __________  __________   __________
BALANCE, December 31, 2002...       688       8,939       20,319
Comprehensive Income:
  Net Income.................                              3,216
  Unrealized Holding Gains on Investment
    Securities Available-for-Sale
    Arising During the Year, Net of Tax
    of $108..................
  Reclassification Adjustment for Gains
    Included in Net Income, Net of Tax
    of $152..................
      Total Comprehensive Income
Acquisition of Treasury Stock
Issuance of Common Stock under Dividend
  Reinvestment and Stock Purchase
    Plan.....................         4         306
Issuance of Common Stock under Employee
  & Director Stock Plans.....         2         139
Retirement of Treasury Stock
    (16,000 shares)..........        (4)       (294)
Cash Dividends ($.63 per share)                           (1,572)
                             __________  __________   __________
BALANCE, December 31, 2003...$      690  $    9,090   $   21,963
                             ==========  ==========   ==========

                             Accumlated
                               Other
                           Comprehensive  Treasury
                           Income (Loss)    Stock        Total
                             __________  __________   __________
<S>                               <C>         <C>         <C>
BALANCE, December 31, 2000...$     (201) $   (3,489)  $  23,562
Comprehensive Income:
 Net Income..................                             2,242
 Unrealized Holding Gains on Investment
   Securities Available-for-Sale
   Arising During the Year, Net of
   Tax of $352...............       685                     685
 Reclassification Adjustment
   for Gains Included in Net Income,
   Net of Tax of $25.........       (50)                    (50)
                                                      _________
    Total Comprehensive Income                            2,877
                                                      _________
Acquisition of Treasury Stock                   (52)        (52)
Issuance of Common Stock Under Dividend
  Reinvestment and Stock Purchase
    Plan.....................                               225
Issuance of Common Stock under Employee
  & Director Stock Plans.....                                24
Issuance of Treasury Stock...                    11           7
Retirement of Treasury Stock
   (18,000 shares)...........                   363           -
Cash Dividends ($.425 per share)                         (1,098)
                             __________  __________   __________
BALANCE, December 31, 2001...       434      (3,167)     25,545

Comprehensive Income:
 Net Income..................                              3,160
 Unrealized Holding Gains on Investment
   Securities Available-for-Sale Arising
   During the Year, Net of Tax
   of $478...................       929                      929
 Unrealized Holding Losses on Investment
   Securities Transferred to Available-for
   Sale During the Year, Net of Tax
   of $14....................       (27)                     (27)

 Reclassification Adjustment for Gains
   Included in Net Income, Net of Tax
   of $111...................      (216)                    (216)
                                                      __________
                                                           3,846
                                                      __________
    Total Comprehensive Income.              (1,536)      (1,536)

Acquisition of Treasury Stock.
Issuance of Common Stock under Dividend
  Reinvestment and Stock Purchase
    Plan....................                                 278
Issuance of Common Stock under Employee
  & Director Stock Plans....                                  74
Retirement of Treasury Stock
    (20,000 shares)..........                   372            -
Cash Dividends ($.575 per share).                         (1,472)
                             __________  __________   __________
BALANCE, December 31, 2002...     1,120      (4,331)      26,735
Comprehensive Income:
  Net Income..................                             3,216
  Unrealized Holding Gains on Investment
    Securities Available-for-Sale
    Arising During the Year, Net of Tax
    of $108...................      209                      209
  Reclassification Adjustment for Gains
    Included in Net Income, Net of Tax
    of $152...................     (294)                    (294)
                                                      __________
      Total Comprehensive Income.                          3,131
                                                      __________
Acquisition of Treasury Stock.               (1,621)      (1,621)
Issuance of Common Stock under Dividend
  Reinvestment and Stock Purchase
    Plan.....................                                310
Issuance of Common Stock under Employee
  & Director Stock Plans.....                                141
Retirement of Treasury Stock
    (16,000 shares)..........                   298            -
Cash Dividends ($.63 per share)                           (1,572)
                             __________  __________   __________
BALANCE, December 31, 2003...$    1,035  $   (5,654)  $   27,124
                             ==========  ==========   ==========
 See notes to consolidated financial statements.

</TABLE>

<PAGE>
<TABLE>

           CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
(In thousands)
                                       Years Ended December 31,
                                   ______________________________
                                          2003           2002
                                   ______________     ___________
<S>                                        <C>             <C>
CASH FLOWS from OPERATING ACTIVITIES
Net Income............................$     3,216    $     3,160
Adjustments to Reconcile Net Income to Net
  Cash Provided by Operating Activities:
Depreciation and Amortization.........        831            776
Provision for Loan Losses.............        274            184
Net Amortization of Investment
  Securities' Premiums................      1,609            829
Investment Securities Gains...........       (446)          (327)
Provision for Deferred Income Taxes...        100             70
Earnings from Bank-Owned Life Insurance      (282)          (211)
Gains on Loans Sold...................       (647)          (372)
Proceeds from Sales of Loans..........     26,300         13,159
Loans Originated for Sale.............    (24,958)       (13,105)
(Increase)/Decrease in Accrued
  Interest Receivable.................        (46)            13
(Increase)/Decrease in Other Assets...       (592)          (441)
Decrease in Other Liabilities.........       (135)          (194)
                                       ____________   ___________
    Net Cash Provided by
      Operating Activities............      5,224          3,541

CASH FLOWS from INVESTING ACTIVITIES
Proceeds from Sales of
  Available-for-Sale Securities.......     29,234         28,621
Proceeds from Maturities of
  Available-for-Sale Securities.......     35,441         22,310
Proceeds from Maturities of
  Held-to-Maturity Securities.........          -            495
Purchases of Available-for-Sale
  Securities..........................    (72,354)       (66,353)
Purchases of Held-to-Maturity
  Securities..........................          -              -
Net Purchases of Restricted
  Investments in Bank Stocks..........       (320)          (619)
(Net Loans Made to Customers)/Net
  Principal Collected on Loans........    (14,219)         4,251
Purchase of Consumer and Residential
  Mortgage Loans......................    (12,198)             -
Purchases of Premises and Equipment...       (901)          (174)
Purchase of Bank-Owned Life Insurance.     (4,000)             -
                                      ____________   ____________
    Net Cash Used in Investing
       Activities.....................    (39,317)       (11,469)

CASH FLOWS from FINANCING ACTIVITIES
Net Increase in Demand Deposits and
  Savings Accounts....................     13,060         11,017
Decrease in Time Deposits.............     (5,336)        (3,211)
Net Increase/(Decrease) in Short-Term
  Borrowings..........................      6,594            (13)
Proceeds from Issuance of Long-Term
  Debt................................     19,183         19,580
Payment on Long-Term Debt.............    (10,608)       (15,533)
Proceeds from Issuance of Junior
  Subordinated Debentures.............      8,248              -
Issuance Costs of Junior
  Subordinated Debentures.............       (160)             -
Acquisition of Treasury Stock.........     (1,621)        (1,536)
Issuance of Treasury Stock............          -              -
Issuance of Common Stock..............        439            352
Cash Dividends Paid...................     (1,572)        (1,472)
                                     ____________     ___________
    Net Cash Provided by
       Financing Activities...........     28,227          9,184
                                     ____________     ___________
Net Increase/(Decrease) in Cash
  and Cash Equivalents................     (5,866)         1,256

CASH and CASH EQUIVALENTS-
  Beginning of Year...................     14,545         13,289
                                     ____________    ____________
CASH and CASH EQUIVALENTS-
  End of Year.........................$     8,679    $    14,545
                                     ============   =============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash Payments for:
  Interest............................$     6,862    $     8,362
  Income Taxes........................        752            495

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES
Reclassification of Held-to-
  Maturity Investment Securities
  to Available-for-Sale...............$         -    $    10,358

See notes to consolidated financial statements.
<CAPTION>
(In thousands)
                                       Years Ended December 31,
                                   ______________________________
                                          2001
                                   ______________
<S>                                        <C>
CASH FLOWS from OPERATING ACTIVITIES
Net Income............................$     2,242
Adjustments to Reconcile Net Income to Net
  Cash Provided by Operating Activities:
Depreciation and Amortization.........        764
Provision for Loan Losses.............        576
Net Amortization of Investment
  Securities' Premiums................        152
Investment Securities Gains...........        (75)
Provision for Deferred Income Taxes...       (107)
Earnings from Bank-Owned Life Insurance      (206)
Gains on Loans Sold...................         (9)
Proceeds from Sales of Loans..........        792
Loans Originated for Sale.............     (1,357)
(Increase)/Decrease in Accrued
  Interest Receivable.................         10
(Increase)/Decrease in Other Assets...         22
Decrease in Other Liabilities.........       (411)
                                       ____________
    Net Cash Provided by
      Operating Activities............      2,393

CASH FLOWS from INVESTING ACTIVITIES
Proceeds from Sales of
  Available-for-Sale Securities.......     30,253
Proceeds from Maturities of
  Available-for-Sale Securities.......     18,657
Proceeds from Maturities of
  Held-to-Maturity Securities.........        999
Purchases of Available-for-Sale
  Securities..........................    (49,563)
Purchases of Held-to-Maturity
  Securities..........................       (210)
Net Purchases of Restricted
  Investments in Bank Stocks..........        (51)
(Net Loans Made to Customers)/Net
  Principal Collected on Loans........      7,125
Purchase of Consumer and Residential
  Mortgage Loans......................    (25,196)
Purchases of Premises and Equipment...     (1,360)
Purchase of Bank-Owned Life Insurance.          -
                                      ____________
    Net Cash Used in Investing
       Activities.....................    (19,346)

CASH FLOWS from FINANCING ACTIVITIES
Net Increase in Demand Deposits and
  Savings Accounts....................     20,317
Decrease in Time Deposits.............    (17,318)
Net Increase/(Decrease) in Short-Term
  Borrowings..........................    (10,095)
Proceeds from Issuance of Long-Term
  Debt................................     31,325
Payment on Long-Term Debt.............       (808)
Proceeds from Issuance of Junior
  Subordinated Debentures.............          -
Issuance Costs of Junior
  Subordinated Debentures.............          -
Acquisition of Treasury Stock.........        (52)
Issuance of Treasury Stock............          7
Issuance of Common Stock..............        249
Cash Dividends Paid...................     (1,098)
                                     ____________
    Net Cash Provided by
       Financing Activities...........     22,527
                                     ____________
Net Increase/(Decrease) in Cash
  and Cash Equivalents................      5,574

CASH and CASH EQUIVALENTS-
  Beginning of Year...................      7,715
                                     ____________
CASH and CASH EQUIVALENTS-
  End of Year.........................$    13,289
                                     ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash Payments for:
  Interest............................$    10,351
  Income Taxes........................        370

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES
Reclassification of Held-to-
  Maturity Investment Securities
  to Available-for-Sale...............$         -

See notes to consolidated financial statements.


</TABLE>
<PAGE>

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies of Union National Financial
Corporation and its subsidiary, Union National Community Bank,
conform with generally accepted accounting principles and
prevailing practices within the banking industry.  Union
National's other subsidiary, Union National Capital Trust I was
established during December 2003 for the purpose of issuing
$8,000,000 of trust capital securities (for additional
information, see Note 9).

Union National Community Bank operates seven retail office
locations in Lancaster County, Pennsylvania.  The bank is a full-
service commercial bank, providing a wide range of services to
individuals and businesses.  The bank accepts time, demand and
savings deposits and offers secured and unsecured commercial,
real estate and consumer loans.  The bank also offers investment,
custodial, estate planning and trust services.  The bank is
subject to government regulation and undergoes periodic
examinations by its federal regulator, the Office of the
Comptroller of the Currency.

Union National Insurance Agency, which operates as a wholly-owned
subsidiary of the bank, offers various insurance products at the
bank's retail offices through an agreement with the Wiley
Insurance Agency of Mount Joy, PA.  During 2003, Union National
formed StoneBridge Settlement Services, LLC along with Title
Strategies, LLC of North Huntingdon, PA.  StoneBridge is 70%
owned by Union National Community Bank.  StoneBridge offers
settlement services and title insurance for residential and
commercial mortgage transactions through relationships with local
attorneys.  The operating results of StoneBridge and the
insurance agency are not significant to the consolidated
financial statements.

BASIS OF PRESENTAION
The consolidated financial statements include the accounts of
Union National, the bank, the insurance agency and StoneBridge.
All material intercompany accounts and transactions have been
eliminated in the consolidation.

USE OF ESTIMATES
The process of preparing financial statements in conformity with
generally accepted accounting principles requires the use of
estimates and assumptions regarding certain types of assets,
liabilities, revenues and expenses.  Accordingly, actual results
may differ from estimated amounts.

SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK
Most of Union National's activities are with customers primarily
located in Lancaster County, PA.  Note 2 discusses the types of
securities that Union National invests in.  Note 3 discusses the
types of lending that Union National engages in.  Union National
does not have any significant concentrations to any one industry
or customer.

INVESTMENT SECURITIES
Investment securities include both debt securities and equity
securities.  As of December 31, 2003, all of Union National's
investment securities have been classified as "available-for-
sale."

Securities classified as available-for-sale are those debt
securities that Union National intends to hold for an indefinite
period of time, but not necessarily to maturity, and marketable
equity securities.  Any decision to sell a security classified as
available-for-sale would be based on various factors, including
significant movements in interest rates, changes in maturity mix
of Union National's assets and liabilities, liquidity needs,
regulatory capital considerations and other similar factors.
Available-for-sale securities are carried at fair value with
premiums and discounts amortized or accreted to interest income
using the interest method.  Changes in unrealized gains or losses
on available-for-sale securities, net of taxes, are recorded as
other comprehensive income, a component of stockholders' equity.

During the second quarter of 2002, Union National reclassified
all of its held-to-maturity investment securities to available-
for-sale.  The transfer of these securities to available-for-sale
allows Union National greater flexibility in managing its
investment securities portfolio and overall interest rate risk.
After a thorough evaluation of these held-to-maturity investment
securities, Union National identified several securities to be
sold.  Under the Financial Accounting Standards Board's (FASB)
Statement of Financial Accounting Standards (SFAS) No. 115, the
sale of these securities required that all of Union National's
investment securities be classified as available-for-sale.
Investment securities with a total cost of $10,399,000 and a fair
value of $10,358,000 were transferred to available-for-sale
during the second quarter.  The unrealized losses on these
investment securities were recorded net of tax as accumulated
other comprehensive income, an adjustment to stockholders'
equity.

When a determination is made that a fair value decline below cost
on a marketable equity or debt security is other than temporary,
the cost basis of the individual security is written down to the
fair value.  The amount of the write-down is charged to expense.
Realized gains and losses, determined on the basis of the cost of
specific securities sold, are included in earnings.

In accordance with SFAS No. 133, Union National recognizes
derivatives on the balance sheet at fair value.  To date, the use
of derivatives has consisted of one interest rate cap with a
notional value of $10,000,000 that matured in October 2003.  No
value remained on the balance sheet at December 31, 2003 or 2002.
Since the transaction did not meet the criteria for a hedge under
SFAS No. 133, a write-down to current fair market value was
recorded in the financial statements as an increase in interest
expense.  This write-down amounted to $32,000 for the year ended
December 31, 2001.

LOANS HELD FOR SALE
Loans held for sale consist of residential mortgage loans that
are originated and are intended to be sold through an agreement
the bank has with the Federal Home Loan Bank of Pittsburgh
(FHLB).  Realized gains and losses on sales are computed using
the specific identification method.  These loans are carried on
the balance sheet at the lower of cost or estimated fair value,
which is determined in the aggregate.

The maximum to be sold to the FHLB under the agreement is
$45,000,000 and $39,223,000 has been sold under this agreement as
of December 31, 2003.  The agreement includes a maximum credit
enhancement liability of $626,000, which Union National may be
required to pay if realized losses on any of the sold mortgages
exceed the amount held in the FHLB's spread account.  The FHLB is
funding the spread account annually at 0.04% of the outstanding
balance of loans sold.  Union National's historical losses on
residential mortgages have been lower than the amount being
funded to the spread account.  As such, Union National does not
anticipate recognizing any losses and accordingly, has not
recorded a liability for the credit enhancement.  As compensation
for the credit enhancement, the FHLB is paying Union National
0.10% of the outstanding loan balance in the portfolio on a
monthly basis.  Union National records credit enhancement fees
receivable based upon the present value of estimated future cash
flows as loans are sold.  The credit enhancement fees receivable
amounted to $98,000 at December 31, 2003, and $51,000 at December
31, 2002, and are amortized as principal is received on loans
sold.

Union National retains the servicing on the loans sold to the
FHLB and receives a fee based upon the principal balance
outstanding.  Following is a summary of information related to
servicing assets:

<TABLE>
<CAPTION>

<S>                               <C>               <C>
                            Servicing Assets    Amortization
(In thousands)                Capitalized          Expense
                            ________________   _______________

Years Ended:
   December 31, 2003........$            193   $            39
   December 31, 2002........              78                10
   December 31, 2001........               8                 -


                              Book Value         Fair Value
                            ________________    _____________
Servicing Assets as of:

   December 31, 2003........$            230    $         345
   December 31, 2002........              76               78

</TABLE>

The fair value of servicing assets is based on the present value
of estimated future cash flows for pools of mortgages stratified
by rate and maturity date.  Total loans serviced for others
amounted to $36,003,000 at December 31, 2003, and $13,266,000 at
December 31, 2002.

LOANS
Loans generally are stated at their outstanding unpaid principal
balances, plus any unamortized premiums on purchased loans, net
of any deferred fees or costs on originated loans.  Interest
income is accrued on the unpaid principal balance.  Loan
origination

<PAGE>

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued

fees, net of certain direct origination costs, are deferred and
recognized as an adjustment to interest income generally over the
contractual life of the related loans.

IMPAIRED LOANS - Union National considers a loan to be impaired
when, based on current information and events, it is probable
that all interest and principal payments due according to the
contractual terms of the loan agreement will not be collected.
An insignificant delay or shortfall in the amounts of payments
would not cause a loan to be rendered impaired.  Management
determines the significance of payment delays and payment
shortfalls on a case-by-case basis, taking into consideration all
of the circumstances surrounding the loan and the borrower,
including the length of the delay, the reasons for the delay, the
borrower's prior payment record and the amount of the shortfall
in relation to the principal and interest owed.  Larger groups of
small-balance loans, such as residential mortgages and consumer
installment loans, are collectively evaluated for impairment.
Union National measures impairment of commercial loans on a loan-
by-loan basis based on the present value of expected future cash
flows discounted at the loan's effective interest rate or the
fair value of the collateral for certain collateral-dependent
loans.

ALLOWANCE FOR LOAN LOSSES - The allowance for loan losses is
established through provisions for loan losses charged against
income.  Loans, including impaired loans, deemed to be
uncollectible are charged against the allowance for loan losses,
and subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is maintained at a level believed
adequate by management to absorb estimated probable loan losses.
Management's periodic evaluation of the adequacy of the allowance
is based on Union National's past loan loss experience, known and
inherent risks in the portfolio, adverse situations that may
affect the borrower's ability to repay (including the timing of
future payments), the estimated value of any underlying
collateral, composition of the loan portfolio, current economic
conditions and other relevant factors.  This evaluation is
inherently subjective as it requires material estimates including
the amounts and timing of future cash flows expected to be
received on impaired loans that may be susceptible to significant
change.

The allowance consists of specific, general and unallocated
components.  The specific component relates to loans that are
classified as impaired.  For such loans, an allowance is
established when the discounted cash flows (or collateral value
or observable market price) of the impaired loan is lower than
the carrying value of that loan.  The general component covers
non-classified loans and is based on historical loss experience
adjusted for qualitative factors.  An unallocated component is
maintained to cover uncertainties that could affect management's
estimate of probable losses.  The unallocated component of the
allowance reflects the margin of imprecision inherent in the
underlying assumptions used in the methodologies for estimating
specific and general losses in the portfolio.

NONACCRUAL LOANS - Generally, a loan (including an impaired loan
as discussed above) is classified as nonaccrual and the accrual
of interest on such loan is discontinued when the contractual
payment of principal or interest has become 90 days past due or
management has serious doubts about further collectibility of
principal or interest.  A loan may remain on accrual status if it
is in the process of collection and is either guaranteed or well-
secured.  When a loan is placed on nonaccrual status, unpaid
interest previously credited to interest income, that is now
deemed uncollectible, is reversed.  Interest received on
nonaccrual loans is either applied against principal or reported
as interest income, according to management's judgment as to the
collectibility of principal.  Generally, loans are restored to
accrual status when both principal and interest are brought
current, the loan has performed in accordance with the
contractual terms for a reasonable period of time and the
ultimate collectibility of the total contractual principal and
interest is no longer in doubt.

TRANSFERS OF FINANCIAL ASSETS
Transfers of financial assets are accounted for as sales, when
control over the assets has been surrendered.  Control over
transferred assets is deemed to be surrendered when (1) the
assets have been isolated from Union National, (2) the transferee
obtains the right (free of conditions that constrain it from
taking advantage of that right) to pledge or exchange the
transferred assets and (3) Union National does not maintain
effective control over the transferred assets through an
agreement to repurchase them before their maturity.

FORECLOSED REAL ESTATE
Foreclosed real estate includes assets acquired through
foreclosure and loans identified as in-substance foreclosures.  A
loan is classified as in-substance foreclosure when Union
National has taken possession of the collateral regardless of
whether formal foreclosure proceedings have taken place.
Foreclosed real estate is valued at its estimated fair market
value, net of selling costs, at the time of foreclosure and is
included in other assets.  Gains and losses resulting from the
sale or write-down of foreclosed real estate and income and
expenses related to the operation of foreclosed real estate are
recorded in other expenses.  Foreclosed real estate amounted to
$104,000 at December 31, 2003, and $307,000 at December 31, 2002.


PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated
depreciation, which is computed over the assets' estimated useful
lives on both the accelerated and the straight-line methods.
Leasehold improvements are stated at cost less accumulated
amortization, which is computed over the term of the lease,
including renewal options, on the straight-line method.  Gains
and losses on premises and equipment are recognized upon disposal
of the asset.  Charges for maintenance and repairs are charged to
expense as incurred.

RESTRICTED INVESTMENT IN BANK STOCKS
Union National owns several restricted investments in bank stocks
including stock in the FHLB, the Federal Reserve Bank of
Philadelphia and the Atlantic Central Bankers Bank.  These stocks
are reflected on the balance sheet at historical cost.  Under the
bank's membership agreement with the FHLB, required stock
purchases are based on a percentage of outstanding borrowings, a
percentage of unused borrowing capacity and may also include a
percentage of assets sold to the FHLB.

BANK-OWNED LIFE INSURANCE
Union National invests in bank-owned life insurance (BOLI) as a
source of funding for employee benefit expenses.  BOLI involves
the purchasing of life insurance by the bank on a chosen group of
employees.  The bank is the owner and beneficiary of the
policies.  This life insurance investment is carried at the cash
surrender value of the underlying policies and is included in
other assets in the amount of $7,804,000 at December 31, 2003,
and $3,522,000 at December 31, 2002.  Income from the increase in
cash surrender value of the policies is included in other income
on the income statement.

TRUST ASSETS
Assets held in a fiduciary capacity are not assets of Union
National and are therefore not included in the consolidated
financial statements.  The market value of trust assets amounted
to $60,793,000 at December 31, 2003, and $33,061,000 at December
31, 2002.

ADVERTISING COSTS
Advertising costs are charged to expense when incurred.

STOCK-BASED COMPENSATION
Stock options and shares issued under Union National's Employee
Stock Purchase Plan, Stock Incentive Plan and the Independent
Directors' Stock Option Plan are accounted for under SFAS No.
123.  As permitted by this statement, Union National has chosen
to apply Accounting Principles Board Opinion (APB) No. 25.  Under
APB No. 25, no compensation expense is recognized related to
these plans.

<PAGE>

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued

Had Union National determined compensation cost based on the fair
value at the grant date for its stock options under SFAS No. 123,
Union National's net income and earnings per share would have
been reduced to the pro forma amounts as follows:

<TABLE>

<CAPTION>
(In thousands, except per share data)

                                   Years Ended December 31,
                               ________________________________
                                  2003       2002       2001
                               __________ __________ __________
  <S>                              <C>        <C>        <C>
  Net Income - As Reported.....$    3,216 $    3,160 $   $2,242
    Less: Stock-Based
      Compensation Cost........       (80)      (138)      (133)
                               __________ __________ __________
    Net Income - Pro Forma.....$    3,136 $    3,022 $    2,109
                               ========== ========== ==========

  Net Income per Share
    As Reported (Basic)........$     1.29 $     1.24 $     0.87
    As Reported (Assuming
      Dilution)................      1.27       1.23       0.86
    Pro Forma (Basic)..........      1.26       1.18       0.82
    Pro Forma (Assuming
      Dilution)................      1.24       1.17       0.81

</TABLE>

The fair value of each option is estimated on the date of grant
using the Black-Scholes option-pricing model.  The per share
weighted-average fair value of stock options granted is as
follows with the weighted-average assumptions also noted for the
year:

<TABLE>
<CAPTION>
                                    Years Ended December 31,
                               ________________________________
                                  2003       2002       2001
                               __________ __________ __________
<S>                               <C>         <C>        <C>

Weighted-Average Fair Value
  of Options Granted:
Employee Stock Purchase Plan
  (granted at 85% of fair
  value on the date of grant):.$     2.76 $        - $     2.23
Stock Incentive Plan and
  Independent Directors' Stock
  Option Plan (granted at fair
  value on the date of grant):.$     3.15 $     2.41 $     2.35
Weighted-Average Assumptions:
Expected Dividend Yield........      3.24%      3.81%      3.77%
Risk-Free Interest Rate........      3.29%      4.26%      4.74%
Expected Life (Years)..........       6.6        8.0        6.7
Expected Volatility Over the
  Expected Life................      40.9%      47.5%      43.7%

</TABLE>

INCOME TAXES
The provision for income taxes is based upon the results of
operations, adjusted principally for tax-exempt income.
Accounting for income taxes is under the liability method.  Under
this method, a deferred tax asset or liability is recorded based
on the difference between the tax basis of assets and liabilities
and their carrying amounts for financial reporting purposes.  The
deferred tax assets and liabilities are adjusted for the impact
of tax-rate changes.  Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to
be realized in the future.  Income tax expense or benefit is the
tax payable or refundable for the period plus or minus the change
during the period in deferred tax assets and liabilities.

NET INCOME PER SHARE
Basic earnings per share excludes dilution and is computed by
dividing net income by the weighted-average number of common
shares outstanding for the period.  Diluted earnings per share
reflects the potential dilution that could occur if options or
other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock
that then shared in the earnings of the entity.  Potential common
shares that may be issued relate solely to outstanding stock
options and are determined using the treasury stock method.

COMPREHENSIVE INCOME
Union National reports comprehensive income and the components of
other comprehensive income in the Consolidated Statements of
Changes in Stockholders' Equity.  Union National's comprehensive
income consists of net income and unrealized gains and losses on
available-for-sale investment securities arising during the
period.

TREASURY STOCK
The acquisition of treasury stock is recorded under the cost
method.  The subsequent disposition or sale of the treasury stock
is recorded using the average cost method.

SEGMENT REPORTING
Based on the way management monitors financial results, Union
National has only one operating segment consisting primarily of
its banking and fiduciary activities.  Activities of the
insurance agency and StoneBridge Settlement Services are not
material to the consolidated financial statements.

STATEMENTS OF CASH FLOWS
For purposes of the statements of cash flows, Union National
considers cash, amounts due from banks and short-term investments
with maturities less than 90 days at the time of purchase to be
cash equivalents.

RECENT ACCOUNTING STANDARDS ISSUED
In November 2002, the Financial Accounting Standards Board (FASB)
issued FASB Interpretation No. 45 (FIN 45), "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others."  This
Interpretation expands the disclosures to be made by a guarantor
in its financial statements about its obligations under certain
guarantees and requires the guarantor to recognize a liability
for the fair value of an obligation assumed under certain
specified guarantees.  Under FIN 45, Union National does not
issue any guarantees that would require liability recognition or
disclosure, other than its standby letters of credit, as
discussed in Note 12.

In January 2003, the Financial Accounting Standards Board issued
FASB Interpretation No. 46 (FIN 46), "Consolidation of Variable
Interest Entities, an Interpretation of ARB No. 51."  FIN 46 was
revised in December 2003.  This Interpretation provides new
guidance for the consolidation of variable interest entities
(VIEs) and requires such entities to be consolidated by their
primary beneficiaries if the entities do not effectively disperse
risk among parties involved.  The Interpretation also adds
disclosure requirements for investors that are involved with
unconsolidated VIEs.  The disclosure requirements apply to all
financial statements issued after December 31, 2003.  The
consolidation requirements apply to companies that have interests
in special-purpose entities for periods ending after December 15,
2003.  Consolidation of other types of VIEs is required in
financial statements for periods ending after March 15, 2004.

In accordance with the guidance provided by FIN 46, Union
National did not consolidate the accounts of its wholly-owned
trust subsidiary, Union National Capital Trust I.  As discussed
in Note 9, Union National issued junior subordinated debentures
to its trust subsidiary which then issued trust capital
securities in a private sale.  The net effect of not
consolidating the accounts of the trust subsidiary is to include
Union National's $248,000 equity interest in the trust subsidiary
as an "Other Asset" on the balance sheet and to report the total
$8,248,000 of junior subordinated debentures as an outstanding
liability.  For regulatory reporting purposes, the Federal
Reserve Board has indicated that the trust capital securities
will continue to qualify as Tier 1 capital subject to certain
limitations.  The total trust capital securities are included in
Tier I capital of Union National Financial Corporation detailed
in Note 13.  If the Federal Reserve changes its position
regarding the inclusion of trust capital securities in Tier I
capital, Union National and the bank will still meet all
regulatory capital requirements.

In April 2003, the Financial Accounting Standards Board issued
Statement No. 149, "Amendment of Statement No. 133, Accounting
for Derivative Instruments and Hedging Activities."  This
Statement clarifies the definition of a derivative and
incorporates certain decisions made by the Board as part of the
Derivatives Implementation Group

<PAGE>

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued

process.  This Statement is effective for contracts entered into
or modified and for hedging relationships designated after
June 30, 2003, and should be applied prospectively.  The
provisions of the Statement that relate to implementation issues
addressed by the Derivatives Implementation Group that have been
effective should continue to be applied in accordance with their
respective dates.

In May 2003, the Financial Accounting Standards Board issued
Statement No. 150, "Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equity."   This
Statement requires that an issuer classify a financial instrument
that is within its scope as a liability.  Many of these
instruments were previously classified as equity.  This Statement
was effective for financial instruments entered into or modified
after May 31, 2003, and otherwise was effective beginning July 1,
2003.

Except as discussed above, regarding FIN 46, the provisions of
the above interpretations and statements did not have or are not
expected to have a significant impact on the financial condition
or results of operations of Union National.

RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform
with the 2003 presentation.  Such reclassifications did not
impact net income.


NOTE 2 - INVESTMENT SECURITIES AVAILABLE-FOR-SALE

The amortized cost and fair value of investment securities are
as follows:
<TABLE>
<CAPTION>
                                       AT DECEMBER 31, 2003
                                 ________________________________
                                                         GROSS
                                   AMORTIZED           UNREALIZED
                                      COST               GAINS
(In thousands)                   _______________   ______________
<S>                                    <C>                <C>
Obligations of State and
 Political Subdivisions......... $     25,849       $        900
Mortgage-Backed Securities......       47,012                447
Asset-Backed Securities.........        2,177                 51
Corporate Securities............       20,277                482
Equity Securities...............          183                215
                                 _______________   ______________
  Total......................... $     95,498       $      2,095
                                 ===============   ==============

<CAPTION>
(In thousands)
                                       At DECEMBER 31, 2003
                                ________________________________
                                     GROSS
                                  UNREALIZED           FAIR
                                    LOSSES             VALUE
                                 _______________   ______________
<S>                                    <C>              <C>
Obligations of State and
 Political Subdivisions......... $       (128)      $     26,621
Mortgage-Backed Securities......         (239)            47,220
Asset-Backed Securities.........            -              2,228
Corporate Securities............         (156)            20,603
Equity Securities...............           (4)               394
                                 _______________   ______________
  Total......................... $       (527)      $     97,066
                                 ===============   ==============
</TABLE>
<TABLE>
<CAPTION>
(In thousands)                         At December 31, 2002
                                 ________________________________
                                                         Gross
                                   Amortized           Unrealized
                                      Cost               Gains
                                 _______________   ______________
<S>                                    <C>                <C>
Obligations of State and
  Political Subdivisions........ $    23,448       $        826
Mortgage-Backed Securities......      44,873                589
Asset-Backed Securities.........       3,344                126
Corporate Securities............      17,148                430
Equity Securities...............         169                171
                                 ______________    ______________
 Total.......................... $    88,982       $      2,142
                                 ==============    ==============
<CAPTION>
(In thousands)                         At December 31, 2002
                                 ________________________________
                                     Gross
                                   Unrealized           Fair
                                     Losses            Value
                                 _______________   ______________
<S>                                    <C>                <C>
Obligations of State and
  Political Subdivisions........ $       (12)      $     24,262
Mortgage-Backed Securities......         (70)            45,392
Asset-Backed Securities.........           -              3,470
Corporate Securities............        (354)            17,224
Equity Securities...............          (9)               331
                                 ______________    ______________
 Total.......................... $      (445)      $     90,679
                                 ==============    ==============
</TABLE>

The following table shows Union National's investments' gross
unrealized losses and fair value, aggregated by investment
category and length of time that individual securities have been
in a continuous unrealized loss position at December 31, 2003:

<TABLE>

<CAPTION>
(In thousands)                        LESS THAN 12 MONTHS
                                 ________________________________
                                      FAIR          UNREALIZED
                                     VALUE            LOSSES
                                 ______________    ______________
<S>                                    <C>               <C>
Obligations of State and
  Political Subdivisions........ $     5,605       $       (128)
Mortgage-Backed Securities......      20,035               (232)
Asset-Backed Securities.........           -                  -
Corporate Securities............       5,692               (156)
Equity Securities...............           -                  -
                                 ______________    ______________
 Total Temporarily Impaired
   Securities................... $    31,332       $       (516)
                                 ==============    ==============
<CAPTION>
(In thousands)                          12 MONTHS OR MORE
                                 ________________________________
                                      FAIR          UNREALIZED
                                     VALUE            LOSSES
                                 ______________    ______________
<S>                                    <C>               <C>
Obligations of State and
  Political Subdivisions........ $         -       $          -
Mortgage-Backed Securities......       1,136                 (7)
Asset-Backed Securities.........           -                  -
Corporate Securities............           -                  -
Equity Securities...............          21                 (4)
                                 ______________    ______________
 Total Temporarily Impaired
   Securities................... $     1,157       $        (11)
                                 ==============    ==============
<CAPTION>
(In thousands)                                 TOTAL
                                 ________________________________
                                      FAIR          UNREALIZED
                                     VALUE            LOSSES
                                 ______________    ______________
<S>                                    <C>               <C>
Obligations of State and
  Political Subdivisions........ $     5,605       $       (128)
Mortgage-Backed Securities......      21,171               (239)
Asset-Backed Securities.........           -                  -
Corporate Securities............       5,692               (156)
Equity Securities...............          21                 (4)
                                 ______________    ______________
 Total Temporarily Impaired
   Securities................... $    32,489       $       (527)
                                 ==============    ==============
</TABLE>

In management's opinion, the unrealized losses primarily reflect
changes in interest rates subsequent to the acquisition of
specific securities.  Management believes that the unrealized
losses represent temporary impairment of the securities.

Investment securities carried at $39,290,000 at December 31,
2003, and $29,226,000 at December 31, 2002, were pledged to
secure public, trust and government deposits and for other
purposes.  In addition, securities carried at $2,995,000 ad
December 31, 2003, and $3,231,000 at December 31, 2002, were
pledged for repurchase agreements.

The amortized cost and fair value of debt securities at December
31, 2003, by contractual maturity, are shown below.  Expected
maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with
or without call or prepayment penalties.

<TABLE>

<CAPTION>
(In thousands)
                              Amortized               Fair
                                Cost                 Value
                             _____________       ________________
<S>                               <C>                 <C>
Due in One Year or Less......$      1,210        $     1,226
Due After One Year Through
 Five Years..................       7,855              7,998
Due After Five Years Through
 Ten Years...................       8,929              9,119
Due After Ten Years..........      30,309             31,109
                             _____________       ________________
                                   48,303             49,452

Mortgage-Backed Securities...      47,012             47,220
                             _____________       ________________
                             $     95,315        $    96,672
                             =============       ================

</TABLE>

<PAGE>

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued

Following is information related to the sales of available-for-
sale securities:
<TABLE>
<CAPTION>
(In thousands)
                     Realized     Realized        Income Tax
                      Gains        Losses           Expense
                     ________    ____________   _________________
<S>                  <C>         <C>            <C>
The year ended
  December 31, 2003..$    783      $     (337)    $     152
The year ended
 December 31, 2002...     386             (59)          111
The year ended
 December 31, 2001...     228            (153)           25

</TABLE>




NOTE 3 - LOANS

Loans, net of unamortized loan origination fees of $743,000 at
December 31, 2003 and $868,000 at December 31, 2002, are
summarized as follows:

<TABLE>
<CAPTION>
(In thousands)
                                           December 31,
                                   ___________________________
                                       2003           2002
                                   ____________   ____________
<S>                                     <C>           <C>
Real Estate-Mortgages:
  First and Second Residential.....$    116,173   $    114,441
  Commercial and Industrial........      64,589         48,411
  Construction and Land Development       5,337          5,405
  Agricultural.....................       8,400          7,147
Commercial and Industrial..........      10,075          9,109
Consumer...........................      11,089          5,416
Agricultural.......................         478            516
Political Subdivisions.............       7,786          6,769
Other..............................       1,143          1,546
                                   ____________   ____________
   TOTAL LOANS.....................     225,070        198,760

Add:  Unamortized Premium on
      Purchased Loans..............         371            358
Less: Unearned Income..............         (60)           (53)
                                   ____________   ____________
   LOANS (NET OF UNEARNED INCOME)..$    225,381   $    199,065
                                   ============   ============
</TABLE>

Union National grants commercial, residential and consumer loans
to customers primarily located in Lancaster County, Pennsylvania.
Although Union National has a diversified loan portfolio, its
debtors' ability to honor their contracts is influenced by the
region's economy.

Union National's nonperforming loans consisted of the following:

<TABLE>
<CAPTION>

(In thousands)                             December 31,
                                  _______________________________
                                      2003            2002
                                  _____________   _______________
<S>                                    <C>             <C>
Nonaccruing Loans.................$       1,334   $      1,310
Accruing Loans - 90 Days or
  More Past Due...................            8            364
                                  _____________   _______________
Total Nonperforming Loans.........$       1,342   $      1,674
                                  =============   ===============
</TABLE>

Following is a summary of information related to impaired loans:
<TABLE>

<CAPTION>
(In thousands)

                                           December 31,
                                _________________________________
                                   2003       2002        2001
                                __________ __________  __________
<S>                                 <C>        <C>         <C>
Impaired Loans with a Related
  Allowance for Loan Losses.....$   2,192  $   1,128   $    681
Impaired Loans without a Related
  Allowance for Loan Losses.....      226          -          -
                                __________ __________  __________
Total Outstanding Balance at
  Year End..................... $   2,418  $   1,128   $    681
                                ========== ==========  ==========

Related Allowance for Loan
  Losses........................      373        194        107
Average Outstanding Balance for
  the Year......................    2,022      1,242        968
Recognized Interest Income......      107         47          -
Cash Basis Interest Income......       90         47          -
</TABLE>

Loans to certain directors and principal officers of Union
National, including their immediate families and companies in
which they are principal owners (more than 10%), amounted to
$5,308,000 at December 31, 2003.  Such loans were made in the
ordinary course of business at Union National's normal credit
terms, including interest rates and security, and do not
represent more than a normal risk of collection.  Transactions on
these loans for the year ended December 31, 2003 are as follows
(in thousands):

<TABLE>
<CAPTION>
<S>                                                     <C>
Balance, Beginning of Year...........................$    4,962
Additions............................................     1,824
Deductions...........................................    (1,478)
                                                     ____________

Balance, End of Year.................................$    5,308

                                                     ============
</TABLE>

NOTE 4 - ALLOWANCE FOR LOAN LOSSES

An analysis of changes in the allowance for loan losses for the
years ended December 31 is as follows:
<TABLE>
<CAPTION>
(In thousands)
                                2003         2002        2001
                             __________   __________  __________
<S>                             <C>           <C>         <C>
Balance, Beginning of Year...$    1,812   $    1,893  $    1,787
Provision Charged to
   Operating Expense.........       274          184         576
Recoveries of Charged-Off Loans      21          110          70
Charged-Off Loans............      (122)        (375)       (540)
                             __________   __________  __________
Balance, End of Year.........$    1,985   $    1,812  $    1,893
                             ==========   ==========  ==========
</TABLE>
<PAGE>

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued

NOTE 5 - PREMISES AND EQUIPMENT
A summary of premises and equipment is as follows:
<TABLE>
<CAPTION>
(In thousands)

                       Estimated    December 31,   December 31,
                      Useful Lives      2003           2002
                      ____________  ____________   ____________
<S>                       <C>            <C>           <C>
Construction & Development          $         9    $         -
Land...................                     644            644
Land Improvements......   20 years        1,055          1,055
Buildings and
  Improvements.........15-50 years        5,675          5,646
Leasehold Improvements.   20 years          660            308
Furniture, Fixtures and
   Equipment........... 5-20 years        5,505          4,994
                                    ____________   ____________

    Subtotal..........                   13,548         12,647

Less:  Accumulated Depreciation          (6,923)        (6,327)
                                    ____________   ____________
Premises and Equipment - Net        $     6,625    $     6,320
                                    ============   ============
</TABLE>

Depreciation expense amounted to $596,000 in 2003 , $588,000 in
2002 and $601,000 in 2001.

Total rental expense amounted to $119,000 in 2003, $169,000 in
2002 and $144,000 in 2001.

At December 31, 2003, Union National was obligated under
noncancelable operating leases for real estate with future
minimum payments as follows (in thousands):
<TABLE>
<CAPTION>
          <S>                                           <C>
          2004....................................... $    122
          2005.......................................       66
          2006.......................................       40
          2007.......................................       41
          2008.......................................       43
          Thereafter.................................      228
                                                      _________
                                                      $    540
                                                      =========
</TABLE>

NOTE 6 - TIME DEPOSITS

At December 31, 2003, the scheduled maturities of certificates of
deposit are as follows (in thousands):

<TABLE>
<CAPTION>
          <S>                                         <C>
          2004........................................$ 52,382
          2005........................................  18,121
          2006........................................   6,548
          2007........................................   7,093
          2008........................................   3,451
                                                      _________
                                                      $ 87,595
                                                      =========
</TABLE>

Certificates of deposit in denominations of $100,000 or more
amounted to $26,150,000 at December 31, 2003, and $24,279,000 at
December 31, 2002.  The maturities of these certificates of
deposit of $100,000 or more at December 31, 2003, is as follows
(in thousands):

<TABLE>
<CAPTION>
          <S>                                         <C>
          Three months or less........................$  8,965
          Over three months through six months........   3,754
          Over six months through twelve months.......   3,059
          Over twelve months..........................  10,372
                                                      _________
            Total.....................................$ 26,150
                                                      =========
</TABLE>

NOTE 7 - SHORT-TERM BORROWINGS
Short-term borrowings and weighted-average interest rates at
December 31 are as follows:
<TABLE>
<CAPTION>

(Dollars in thousands)
                                      2003             2002
                           ____________________ _________________
                              Amount      Rate    Amount    Rate
                           ___________    _____ __________ ______
<S>                            <C>         <C>      <C>      <C>
Treasury Tax and Loan Notes$       379    0.73% $     900   0.99%
Federal Funds Purchased....      6,155    1.13          -      -
Securities Sold Under
 Repurchase Agreements.....      2,447    0.58      2,487   0.95
FHLB Short-Term Advances...      1,000    1.05          -      -
                           ___________    _____ __________ ______
Total......................$     9,981    0.97% $   3,387   0.96%
                           ===========    ===== ========== ======
<CAPTION>

(Dollars in thousands)
                                      2001
                           ____________________
                              Amount      Rate
                           ___________    _____

<S>                            <C>         <C>
Treasury Tax and Loan Notes$       109    1.41%
Federal Funds Purchased....        820    2.00
Securities Sold Under
 Repurchase Agreements.....      2,471    1.69
FHLB Short-Term Advances...          -       -
                           ___________    _____
Total......................$     3,400    1.76%
                           ===========    =====
</TABLE>

Short-term borrowings had an average outstanding balance of
$3,415,000 during 2003 at a weighted-average interest rate of
0.82%.  The highest balance outstanding at a month-end during
2003 was $9,981,000.  During 2002, short-term borrowings had an
average outstanding balance of $3,501,000 at a weighted-average
interest rate of 1.43%.  The highest balance outstanding at a
month-end during 2002 was $5,812,000.  During 2001, short-term
borrowings had an average outstanding balance of $6,672,000 at a
weighted-average interest rate of 5.10%.  The highest balance at
a month-end during 2001 was $12,830,000.

Under an agreement with the FHLB, Union National has a line of
credit available in the amount of $15,000,000 of which no balance
was outstanding at December 31, 2003.  All FHLB advances are
collateralized by a security agreement covering qualifying loans
and unpledged treasury, agency and mortgage-backed securities.
In addition, all FHLB advances are secured by the FHLB capital
stock owned by Union National having a par value of $4,002,000 at
December 31, 2003, and $3,681,000 at December 31, 2002.  In
addition, Union National has lines of credit that total
$11,000,000 with correspondent banks for overnight fed funds
borrowings.

Union National offers a short-term investment program for
corporate customers for secured investing.  This program consists
of overnight and short-term repurchase agreements that are
secured by designated investment securities of the bank.

<PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued

NOTE 8 - LONG-TERM DEBT

A summary of long-term debt as of December 31 is as follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
                                 2003                2002
                       ____________________   ___________________
                         Amount      Rate       Amount      Rate
                       __________   _______   __________   ______
<S>                       <C>         <C>         <C>        <C>
FHLB fixed-rate advances maturing:
   2003................$        -        -%   $    5,347    5.25%
   2004................     7,250     3.98         7,250    3.98
   2005................    20,450     2.59         8,355    4.21
   2006................    12,587     2.60        10,300    3.10
   2007................         -        -         2,460    5.31
   2013................     2,000     4.39             -       -
FHLB floating-rate advance maturing:
   2004................     1,587     1.11         1,587    1.36
FHLB convertible fixed-rate advances maturing:
   2010................    20,000     5.70        20,000    5.70
   2011................    10,000     5.23        10,000    5.23
                       __________     _____  ___________   ______
Total..................$   73,874     3.90%  $    65,299    4.68%
                       ==========     =====  ===========   ======
</TABLE>

The FHLB advances are collateralized by the security agreement
and FHLB capital stock described in Note 7.  Union National can
borrow a maximum of $135,390,000 from the FHLB, of which
$60,516,000 was available at December 31, 2003.  The FHLB's
convertible fixed-rate advances allow the FHLB the periodic
option to convert to a LIBOR adjustable-rate advance at the
three-month LIBOR plus .08% to .20%.  The FHLB currently has the
option to convert $20,000,000 of the outstanding convertible
advances on a quarterly basis.  Options to convert $5,000,000
commence in 2004 and options to convert the remaining $5,000,000
commence in 2006.  Upon the FHLB's conversion, the bank has the
option to repay the respective advances in full.

NOTE 9 - JUNIOR SUBORDINATED DEBENTURES

On December 19, 2003, Union National issued $8,248,000 in junior
subordinated debentures due January 23, 2034, to Union National
Capital Trust I.  Union National owns all of the $248,000 in
common equity of the trust and the debentures are the sole asset
of the trust.  The trust issued $8,000,000 of floating-rate trust
capital securities in a private sale.  The floating-rate capital
securities provide for quarterly distributions at a variable
annual coupon rate, reset quarterly, based on three-month LIBOR
plus 2.85%.  The coupon rate was 4.02% at December 31, 2003.  The
securities are callable by Union National, subject to any
required regulatory approval, at par, after 5 years.  Union
National unconditionally guarantees the trust capital securities.
In December 2003, Union National used the net proceeds from this
offering to fund an additional $4,000,000 capital investment in
Union National Community Bank to fund its operations and future
growth.  Union National plans to use the balance of the funding
for the repurchase of common stock and general corporate
purposes.  The terms of the junior subordinated debentures and
the common equity of the trust mirror the terms of the trust
capital securities issued by the trust.

In accordance with FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities," the accounts of Union National
Capital Trust I are not included in the consolidated financial
statements of Union National.  However, for regulatory purposes,
the trust capital securities qualify as Tier I capital of Union
National subject to a 25% of capital limitation under risk-based
capital guidelines developed by the Federal Reserve.  The portion
that exceeds the 25% of capital limitation qualifies as Tier II
capital.  At December 31, 2003, all $8,000,000 of Union
National's trust capital securities qualified as Tier I capital.

NOTE 10 - PROFIT-SHARING PLAN

The bank has a 401(k) profit-sharing plan that covers
substantially all full-time employees.  This plan allows
employees to contribute a portion of their salaries and wages to
the plan.  The bank may elect to make a discretionary
contribution to the plan and may also match a portion of
employee-elected salary deferrals, subject to a 6% maximum of
their salaries and wages.  For 2003, the bank elected to make a
discretionary contribution of 4.25% of eligible salaries and to
match 50% of employee-elected salary deferrals that do not exceed
6% of their salaries and wages.

The bank's expense relative to its profit-sharing plan amounted
to $289,000 for the year ended December 31, 2003, $293,000 for
2002 and $278,000 for 2001.

NOTE 11 - INCOME TAXES

The net deferred tax asset consists of the following components
as of December 31:

<TABLE>
<CAPTION>
(In thousands)

                                            2003       2002
                                          _________   _________
<S>                                          <C>         <C>
Deferred Tax Assets:
    Allowance for Loan Losses.............$    568     $   509
    Recoverable Alternative Minimum Taxes.     336         328
    Income Tax Credit Carryforward........     298         217
    Other.................................      39          27
                                          _________   _________
Total Deferred Tax Assets.................   1,241       1,081
Deferred Tax Liabilities:
    Unrealized Gains on Investment
      Securities Available-for-Sale.......    (533)       (577)
    Deferred Net Loan Fees................     (61)        (59)
    Depreciation..........................    (306)       (249)
    Prepaid Expenses......................     (75)          -
    Mortgage Servicing Assets and Credit
      Enhancement Fees Receivable.........    (111)          -
    Other.................................     (78)        (63)
                                          _________   _________
Total Deferred Tax Liabilities............  (1,164)       (948)
                                          _________   _________
Net Deferred Tax Asset.................... $    77     $   133
                                          =========   =========
</TABLE>

<PAGE>

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued

An analysis of the income tax expense included in the
consolidated statements of income for the years ended December 31
is as follows:
<TABLE>
<CAPTION>
(In thousands)
                          2003           2002           2001
                     _____________   _____________   ____________
<S>                       <C>             <C>            <C>
Taxes Currently Payable $    581        $    666       $    338
Deferred Income Taxes/
  (Benefit)............      100              70           (107)
                     _____________   _____________   ____________
Provision for Income
  Taxes................ $    681        $    736      $     231
                     =============   =============   ============

</TABLE>

The reasons for the difference between Union National's provision
for income taxes and the amount computed by applying the
statutory federal income tax rate to income before income taxes
for the years ended December 31 are as follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
                       2003          2002            2001
                   ___________    ___________     ___________
                   Amount    %    Amount    %     Amount      %
                 _________ ____ __________ ____ ___________ _____
<S>                 <C>    <C>      <C>    <C>      <C>      <C>
Tax at Statutory
  Federal Income
    Tax Rate.....$1,325   34.0%   $ 1,325  34.0%  $  841   34.0%
Tax-Exempt Income,
  Net of Disallowed
    Interest
      Expense....  (489) (12.5)      (427)(11.0)    (425) (17.2)
Earning from Bank-
  Owned Life
    Insurance....   (96)  (2.5)       (72) (1.8)     (70)  (2.8)
Income Tax Credits  (72)  (1.8)       (85) (2.2)    (118)  (4.8)
Other............    13     .3         (5)  (.1)       3     .1
                _________ ____ ___________ _____ __________ _____
Provision for
  Income Taxes... $ 681   17.5%   $   736  18.9%  $  231    9.3%
                ========= ==== =========== ===== ========== =====
</TABLE>

Income tax credit carryforwards begin to expire in 2020.  Income
tax credits are recognized as earned.  Credits earned were
$72,000 in 2003, $85,000 in 2002 and $118,000 in 2001.  Projected
tax credits are $72,000 for 2004 to 2006 and $38,000 for 2007.

NOTE 12 - COMMITMENTS AND CONTINGENT LIABILITIES

The bank is a party to financial instruments with off-balance
sheet risk in the normal course of business to meet the financing
needs of its customers.  These financial instruments include
commitments to extend credit and standby letters of credit.
These instruments involve, to varying degrees, elements of credit
risk and interest rate risk in excess of the amount recognized in
the consolidated balance sheets.  The contract amounts of these
instruments reflect the exposure to credit loss in the event of
nonperformance by the other party to the financial instrument.

<TABLE>
<CAPTION>
(In thousands)

                                  December 31,     December 31,
                                      2003             2002
                                  _____________   _____________
<S>                                    <C>              <C>
Financial Instruments Whose Contract
 Amounts Represent Credit Risk:
Commitments to Extend Credit.......$ 27,930          $  8,715
Unused Portion of Home Equity,
 Personal and Overdraft Lines......  29,613            18,548
Other Unused Commitments,
 Principally Commercial
 Lines of Credit...................  18,495            15,791
Standby Letters of Credit..........   3,133             3,069

</TABLE>

Commitments to extend credit are agreements to lend to a customer
as long as there is no violation of any condition established in
the contract.  Commitments generally have fixed expiration dates
or other termination clauses and may require payment of a fee.
Certain commitments may expire without being drawn upon and,
therefore, future cash may not be required.  The bank evaluates
each customer's creditworthiness on a case-by-case basis.  The
bank generally requires collateral or other security to support
financial instruments with credit risk.  Collateral held varies
but may include residential or commercial real estate, equipment,
inventory and accounts receivable.

Standby letters of credit are conditional commitments issued by
the bank to guarantee the performance of a customer to a third
party.  These letters of credit are primarily issued to support
public and private borrowing arrangements and have terms of less
than two years.  The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending loan
advances to customers.  The Bank requires collateral supporting
these letters of credit as deemed necessary.  Based on the
creditworthiness of the borrowers, Union National had unsecured
letters of credit outstanding that totaled $285,000 at December
31, 2003.  Management believes that the proceeds obtained through
a liquidation of collateral on secured letters of credit would be
sufficient to cover the maximum potential amount of future
payments required under the corresponding guarantees.  The
current amount of the liability as of December 31, 2003, for
guarantees under standby letters of credit issued is not
material.


NOTE 13 - REGULATORY RESTRICTIONS

The bank is required to maintain reserves, in the form of cash
and balances with the Federal Reserve Bank, against its deposit
liabilities.  The average amount of required reserves during 2003
was approximately $3,284,000 and during 2002 it was approximately
$2,765,000.

The bank is also subject to certain restrictions in connection
with the payment of dividends.  National banking laws require the
approval of the Comptroller of the Currency if the total of all
dividends declared by a national bank in any calendar year
exceeds the net profits of the bank (as defined) for that year
combined with its retained net profits for the preceding two
calendar years.  Under this formula, the bank may declare
dividends to its parent corporation in 2004 of approximately
$1,179,000 plus an amount equal to the net profits of the bank in
2004 up to the date of any such dividend declaration.

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

Quantitative measures established by regulation to ensure capital
adequacy require Union National and the bank to maintain minimum
amounts and ratios (set forth below) of Tier I capital to average
assets and of Tier I and total capital (as defined in the
regulations) to risk-weighted assets.  Management believes, as of
December 31, 2003, that Union National and the bank meet all
capital adequacy requirements to which they are subject.

As of December 31, 2003, the most recent notification from the
regulators categorized the bank as "well-capitalized" under the
regulatory framework for prompt corrective action.  There are no
conditions or events since that notification that management
believes have changed the bank's category.

<PAGE>

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued


Union National maintained the following capital levels and
leverage and risk-based capital ratios:

<TABLE>
<CAPTION>
(Dollars in thousands)

                         December 31, 2003    December 31, 2002
                         _________________    _________________

                           Amount      %        Amount      %
                         ___________ _____    ___________ _____
<S>                          <C>      <C>         <C>      <C>
Union National Financial Corporation
____________________________________
Leverage Ratio:
 Tier I Capital to
  Average Total Assets..$    34,047 10.10%   $    25,602  8.17%
 Minimum Required for
  Capital Adequacy
  Purposes..............     13,488  4.00         12,536  4.00


Risk-based Capital Ratios:
 Tier I Capital Ratio
   - Actual.............     34,047 12.39         25,602 11.31
 Minimum Required for
  Capital Adequacy
  Purposes..............     10,996  4.00          9,055  4.00

 Total Capital Ratio
  - Actual..............     36,127 13.14         27,486 12.14
 Minimum Required for
   Capital Adequacy
   Purposes.............     21,991  8.00         18,110  8.00

Union National Community Bank
_____________________________
Leverage Ratio:
 Tier I Capital to
  Average Total Assets..$    29,125  8.65%   $    24,621  7.88%
 Minimum Required for
  Capital Adequacy
  Purposes..............     13,463  4.00         12,504  4.00
 To Be Well-Capitalized
  Under Prompt Corrective
  Action Provisions.....     16,829  5.00         15,629  5.00


Risk-based Capital Ratios:
 Tier I Capital Ratio
   - Actual.............     29,125 10.63         24,621 10.92
 Minimum Required for
  Capital Adequacy
  Purposes..............     10,958  4.00          9,023  4.00
 To Be Well-Capitalized
  Under Prompt Corrective
  Action Provisions.....     16,437  6.00         13,534  6.00

 Total Capital Ratio
  - Actual..............     31,110 11.36         26,433 11.72
 Minimum Required for
   Capital Adequacy
   Purposes.............     21,917  8.00         18,045  8.00
 To Be Well-Capitalized
  Under Prompt Corrective
  Action Provisions.....     27,396 10.00         22,557 10.00

</TABLE>

Additionally, banking regulations limit the amount of
investments, loans, extensions of credit and advances the bank
can make to Union National at any time to 10% of the bank's total
regulatory capital.  At December 31, 2003, this limitation
amounted to approximately $3,111,000.  These regulations also
require that any such investment, loan, extension of credit or
advance be secured by securities having a market value in excess
of the amount thereof.

NOTE 14 - STOCKHOLDERS' EQUITY

Union National maintains a Dividend Reinvestment and Stock
Purchase Plan.  Stockholders may participate in the plan, which
provides that additional shares of common stock may be purchased
with reinvested dividends and optional cash payments within
specified limits at prevailing market prices.  To the extent that
shares are not available for purchase by the plan in the open
market, Union National has reserved 173,644 shares of common
stock to be issued under the plan.  At December 31, 2003, 115,828
shares have been issued under the plan.  Open-market purchases
are usually made by an independent purchasing agent retained to
act as agent for plan participants, and the purchase price to
participants will be the actual price paid, excluding brokerage
commissions and other expenses that will be paid by Union
National.

Earnings per share, net income and weighted-average number of
shares outstanding for the years ended December 31, 2003, 2002
and 2001, as computed under the basic and diluted earnings per
share methods are as follows:

<TABLE>
<CAPTION>
(In thousands, except per share data)
                               Net Income    Shares   Per Share
                              ____________ __________ ___________
<S>                                <C>        <C>        <C>
Year Ended December 31, 2003:
 Basic Earnings per Share:
  Net Income..................$    3,216        2,498     $1.29
 Effect of Dilutive Options            -           37
                              ____________ ___________ __________
 Diluted Earnings per Share...$    3,216        2,535     $1.27
                              ============ =========== ==========

Year Ended December 31, 2002:
 Basic Earnings per Share:
  Net Income..................$    3,160        2,557     $1.24
 Effect of Dilutive Options...         -           21
                              ____________ ___________ __________
 Diluted Earnings per Share...$    3,160        2,578     $1.23
                              =========== ============ ==========

Year Ended December 31, 2001:
 Basic Earnings per Share:
  Net Income..................$    2,242        2,584     $ .87
 Effect of Dilutive Options...         -           11
                              ___________ ____________ __________
 Diluted Earnings per Share...$    2,242        2,595     $ .86
                              =========== ============ ==========
</TABLE>

<PAGE>

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued

The following options to purchase shares of common stock were
outstanding at year-end, but were not included in the computation
of diluted earnings per share for the year because the options'
exercise price was greater than the average market price of the
common shares:

<TABLE>
<CAPTION>
                                    Options        Average
                                  Outstanding   Exercise Price
                                  ___________  _________________
<S>                                   <C>            <C>
December 31, 2003.................  10,728     $      21.51
December 31, 2002.................  60,690            18.91
December 31, 2001................. 112,379            16.53

</TABLE>

NOTE 15 - STOCK OPTION PLANS

Union National currently has three separate stock option plans in
place.  First, there is the Employee Stock Purchase Plan, which
allows eligible employees to purchase stock in Union National.
There are 110,250 shares reserved for issuance under this plan.
Options granted under this plan have a five-year term and can be
exercised at 85% of the fair market value of the stock on the
date of exercise.  The other two plans are the Employee Stock
Incentive Plan and the Independent Directors' Stock Option Plan.
There are 237,625 shares reserved for issuance under the Employee
Stock Incentive Plan and 66,150 shares reserved for issuance
under the Independent Directors' Stock Option Plan.  Options
granted under these two plans have terms up to 10 years, have
option prices equal to the fair value of the shares on the date
of the grant and are exercisable six months after their grant
date.

Stock option transactions for the years ended December 31, 2003,
2002 and 2001, are summarized below:

<TABLE>
<CAPTION>
                                   Stock       Weighted-Average
                                  Options       Exercise Price
                                  ________     _________________
<S>                                 <C>               <C>
Options Outstanding at December 31, 2000
   (Prices range from $10.29
   to $21.67)..................... 147,104        $   14.46
Year Ended December 31, 2001:
Options Granted...................  82,168            12.84
Options Exercised.................  (2,093)           11.63
Options Forfeited................. (18,058)           13.30
                                  _________     ________________
Options Outstanding at December 31, 2001
   (Prices range from $11.70
   to $21.67)..................... 209,121            14.36

Year Ended December 31, 2002:
Options Granted...................  23,918            16.30
Options Exercised.................  (6,009)           12.26
Options Forfeited................. (11,035)           15.61
Options Expired...................  (8,250)           13.18
                                 __________     ________________
Options Outstanding at December 31, 2002
  (Prices range from $12.10
   to $21.67)..................... 207,745            15.31

Year Ended December 31, 2003:
Options Granted...................  30,986            18.98
Options Exercised.................  (8,738)           14.70
Options Forfeited.................  (2,776)           14.50
Options Expired................... (10,752)           18.25
                                 __________     ________________
Options Outstanding at December 31, 2003
  (Prices range from $12.10
   to $21.67)..................... 216,465        $   16.92
                                 ==========     ================
</TABLE>

Options outstanding at December 31, 2003, consisted of the
following:

<TABLE>

<CAPTION>
   Range of         Options   Weighted-Average  Average Remaining
Exercise Prices   Outstanding  Exercise Price    Contractual Life
________________  ___________ ________________  _________________
<S>                 <C>       <C>               <C>
$12.10 to $14.50      70,272    $    13.20            7.6 years
$14.51 to $16.90      27,830         16.36            8.1 years
$16.91 to $19.30      69,301         18.50            3.2 years
$19.31 to $21.67      49,062         20.32            6.9 years
________________  ___________ ________________  _________________
$12.10 to $21.67     216,465    $    16.92            6.1 years
================  =========== ================  =================
</TABLE>

Of the total options outstanding, 201,965 were exercisable at
December 31, 2003, at an average exercise price of $16.63.

<PAGE>

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued

NOTE 16 - FAIR VALUE OF FINANCIAL INSTRUMENTS

As required by SFAS No. 107, "Disclosures about Fair Value of
Financial Instruments," Union National has presented estimated
fair value information about financial instruments, whether or
not recognized in the consolidated balance sheets, for which it
is practicable to estimate that value.  Fair value is best
determined by values quoted through active trading markets.
Because no active trading market exists for various types of
financial instruments, many of the fair values disclosed were
derived using present value or other valuation techniques.  These
fair values are significantly affected by assumptions used,
principally the timing of future cash flows and the discount
rate.  As a result, Union National's ability to realize these
derived values cannot be assured.  Further, certain financial
instruments and all nonfinancial instruments are excluded.
Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of Union National.

The following methods and assumptions were used by Union National
in estimating the fair value of its financial instruments:

Cash and cash equivalents: The carrying amounts reported in the
consolidated balance sheets for cash and short-term investments
approximate their fair values.

Investment securities: Fair values for investment securities are
based on quoted prices, where available.  If quoted prices are
not available, fair values are based on quoted prices of
comparable instruments.

Loans held for sale: Fair value is based on a quoted sales price
from the Federal Home Loan Bank of Pittsburgh.

Loans: For variable-rate loans that reprice frequently and with
no significant change in credit risk, fair values are based on
carrying values.  The fair values of other loans are determined
using estimated future cash flows, discounted at the interest
rates currently being offered for loans with similar terms to
borrowers with similar credit quality.

Restricted investment in bank stocks:  The carrying amounts
reported in the consolidated balance sheets for restricted
investment in bank stocks approximate their fair values.

Accrued interest receivable:  The carrying amount of accrued
interest receivable approximates its fair value.

Mortgage servicing assets and credit enhancement fees receivable:
The fair value of servicing assets and credit enhancement fees
receivable is based on the present value of estimated future cash
flows for pools of mortgages stratified by rate and maturity
date.

Deposit liabilities: The fair values of deposits with no stated
maturities, such as demand deposits, savings accounts, NOW and
money market deposits, equal their carrying amounts, which
represent the amount payable on demand.  Fair values for fixed-
rate certificates of deposit are estimated using a discounted
cash flow calculation that applies interest rates currently being
offered on certificates to a schedule of aggregated expected
monthly maturities on time deposits.

Short-term borrowings: The carrying amounts of federal funds
purchased, advances from the Federal Home Loan Bank and other
short-term borrowings approximate their fair values.

Long-term debt: The fair values of Union National's long-term
debt are estimated using discounted cash flow analyses, based on
Union National's incremental borrowing rates for similar types of
borrowing arrangements.

Junior subordinated debentures: The carrying amount of these
floating-rate debentures approximates its fair value.

Accrued interest payable:  The carrying amount of accrued
interest payable approximates its fair value.

Off-balance sheet instruments: For Union National's off-balance
sheet instruments, consisting of commitments to extend credit and
financial and performance standby letters of credit, the
estimated fair value is based on fees currently charged to enter
into similar agreements, taking into account the remaining term
of the agreements and the present creditworthiness of the counter
parties.  For fixed-rate loan commitments, fair value also
considers the difference between current levels of interest rates
and the committed rates.

At December 31, 2003 and 2002, the estimated fair values of
financial instruments based on the disclosed assumptions are as
follows:

<TABLE>
<CAPTION>
(In thousands)
                                        December 31, 2003
                                ______________________________
                                   Carrying
                                    Amount         Fair Value
                                ______________   _____________
<S>                                    <C>             <C>
Assets:
 Cash and Cash Equivalents........$      8,679    $      8,679
 Investment Securities
  Available-for-Sale..............      97,066          97,066
 Loans Held for Sale..............         197             202
 Loans, Net of Unearned Income
  and Allowance for Loan Losses...     223,396         228,252
 Restricted Investment in Bank Stocks    4,092           4,092
 Accrued Interest Receivable......       1,818           1,818
 Mortgage Servicing Assets and
  Credit Enhancement Fees Receivable       328             485

Liabilities:
 Demand and Savings Deposits......     143,479         143,479
 Time Deposits....................      87,595          88,803
 Short-term Borrowings............       9,981           9,981
 Long-term Debt...................      73,874          77,719
 Junior Subordinated Debentures...       8,248           8,248
 Accrued Interest Payable.........         743             743

Off-balance sheet Items:
 Commitments to Extend Credit
   and Standby Letters of Credit..           -               -

<CAPTION>
(In thousands)
                                        December 31, 2002
                                ______________________________
                                   Carrying
                                    Amount         Fair Value
                                ______________   _____________
<S>                                    <C>             <C>
Assets:
 Cash and Cash Equivalents........$     14,545    $     14,545
 Investment Securities
  Available-for-Sale..............      90,679          90,679
 Loans Held for Sale..............         892             926
 Loans, Net of Unearned Income
  and Allowance for Loan Losses...     197,253         203,902
 Restricted Investment in Bank Stocks    3,772           3,772
 Accrued Interest Receivable......       1,772           1,772
 Mortgage Servicing Assets and
  Credit Enhancement Fees Receivable       127             129

Liabilities:
 Demand and Savings Deposits......     130,419         130,419
 Time Deposits....................      92,931          95,032
 Short-term Borrowings............       3,387           3,387
 Long-term Debt...................      65,299          70,694
 Junior Subordinated Debentures...           -               -
 Accrued Interest Payable.........         902             902

Off-balance sheet Items:
 Commitments to Extend Credit
   and Standby Letters of Credit..           -               -

</TABLE>

<PAGE>

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued

NOTE 17 - UNION NATIONAL FINANCIAL CORPORATION (PARENT COMPANY
ONLY)

<TABLE>
CONDENSED BALANCE SHEETS
<CAPTION>
(In thousands)
                                     December 31,   December 31,
                                        2003           2002
                                    ____________   _____________
<S>                                      <C>             <C>
ASSETS
   Cash in Bank Subsidiary..........$     3,873    $         66
   Interest-Bearing Deposits
       in Other Banks...............         64               7
   Investment in Subsidiaries.......     30,301          25,647
   Other Equity Investment Securities       395             331
   Investments in Limited
       Partnerships.................        570             637
   Recoverable Federal Income Taxes.        108             110
   Other Assets.....................        159               -
                                    ____________   _____________
       Total Assets.................$    35,470    $     26,798
                                    ============   =============
LIABILITIES
   Junior Subordinated Debentures...$     8,248    $          -
   Other Liabilites.................         98              63

STOCKHOLDERS' EQUITY................     27,124          26,735
                                    ____________   _____________
   Total Liabilities and
          Stockholders' Equity......$    35,470    $     26,798
                                    ============   =============
</TABLE>
<TABLE>
CONDENSED STATEMENTS OF INCOME
<CAPTION>
(In thousands)
                                   Years Ended December 31,
                                  __________________________
                                      2003          2002
                                  _____________  ___________
<S>                                    <C>           <C>
INCOME
 Dividends from Subsidiaries.......$    2,648    $    2,482
 Dividends on Other Equity
   Investment Securities...........        11            10
 Interest on Deposits in Bank
   Subsidiary......................         2             3
 Gain on Sale of Securities........        49             -
 Management Fees from Bank
   Subsidiary......................        42            42
                                   _____________  ___________
      Total Income.................     2,752         2,537

EXPENSES
 Interest Expense on Junior
   Subordinated Debentures.........        12             -
 Other Expenses....................       138           134
                                   ____________  ___________
      Total Expenses...............       150           134

 Income before Income Taxes and
   Equity in Undistributed Income
   of Bank Subsidiary..............     2,602         2,403
Provision for Income Taxes/(Benefit)      (90)         (102)
                                   ____________  ___________
                                        2,692         2,505
EQUITY in UNDISTRIBUTED INCOME
 of BANK SUBSIDIARY................       524           655
                                   ____________  ___________
  NET INCOME.......................$    3,216    $    3,160
                                   ============  ===========
<CAPTION>
(In thousands)
                                   Years Ended December 31,
                                  __________________________
                                      2001
                                  _____________
<S>                                    <C>
INCOME
 Dividends from Subsidiary.........$      788
 Dividends on Other Equity
   Investment Securities...........         9
 Interest on Deposits in Bank
   Subsidiary......................         4
 Gain on Sale of Securities........         6
 Management Fees from Bank
   Subsidiary......................        42
                                   _____________
      Total Income.................       849

EXPENSES
 Interest Expense on Junior
   Subordinated Debentures.........         -
 Other Expenses....................       112
                                   _____________
      Total Expenses...............       112

 Income before Income Taxes and
   Equity in Undistributed Income
   of Bank Subsidiary..............       737
Provision for Income Taxes/(Benefit)     (138)
                                   ____________
                                          875
EQUITY in UNDISTRIBUTED INCOME
 of BANK SUBSIDIARY................     1,367
                                   ____________
  NET INCOME.......................$    2,242
                                   ============

</TABLE>

<TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
<CAPTION>
(In thousands)
                                       Years Ended December 31,
                                      ___________________________
                                          2003           2002
                                      ____________  _____________
<S>                                      <C>            <C>
CASH FLOWS from OPERATING ACTIVITIES
   Net Income.........................$    3,216    $    3,160
   Adjustments to Reconcile Net Income to Net
     Cash Provided by Operating Activities:
      Equity In Undistributed
          Income of Bank Subsidiary...      (524)         (655)
      Investment Securities Gains.....       (49)            -
      Provision for Deferred Income Taxes     (4)           (3)
      Decrease/(Increase) in Other
          Assets......................        82            67
      (Decrease)/Increase in Other
          Liabilities.................        22            (2)
                                      ____________  _____________
     Net Cash Provided by Operating
        Activities....................     2,743         2,567

CASH FLOWS from INVESTING ACTIVITIES
   Proceeds from Sales of Available-
    for-Sale Securities...............        59             -
   Purchases of Available-for-Sale
    Securities........................       (24)          (20)
   Investment in Subsidiaries.........    (4,248)            -
                                      ____________  _____________
   Net Cash Provided by/(Used in)
         Investing Activities.........    (4,213)          (20)

CASH FLOWS from FINANCING ACTIVITIES
   Proceeds from Issuance of Junior
      Subordinated Debentures.........     8,248             -
   Issuance Costs of Junior
      Subordinated Debentures.........      (160)            -
   Acquisition of Treasury Stock......    (1,621)       (1,536)
   Issuance of Common and Treasury Stock     439           352
   Cash Dividends Paid................    (1,572)       (1,472)
                                      ____________  _____________
   Net Cash Provided by/(Used in)
      Financing Activities............     5,334        (2,656)
                                      ____________  _____________
         NET INCREASE/(DECREASE) in CASH   3,864          (109)

     CASH - Beginning of Year.........        73           182
                                      ____________  _____________
     CASH - End of Year...............$    3,937    $       73
                                      ============  =============

<CAPTION>
(In thousands)
                                       Years Ended December 31,
                                      ___________________________
                                          2001
                                      ____________
<S>                                      <C>
CASH FLOWS from OPERATING ACTIVITIES
   Net Income.........................$    2,242
   Adjustments to Reconcile Net Income to Net
     Cash Provided by Operating Activities:
      Equity In Undistributed
          Income of Bank Subsidiary...    (1,367)
      Investment Securities Gains.....        (6)
      Provision for Deferred Income Taxes     (3)
      Decrease/(Increase) in Other
          Assets......................       (42)
      (Decrease)/Increase in Other
          Liabilities.................         2
                                      ____________
     Net Cash Provided by Operating
        Activities....................       826

CASH FLOWS from INVESTING ACTIVITIES
   Proceeds from Sales of Available-
    for-Sale Securities...............        31
   Purchases of Available-for-Sale
    Securities........................       (25)
   Investment in Subsidiaries.........         -
                                      ____________
     Net Cash Provided by/(Used in)
         Investing Activities.........         6

CASH FLOWS from FINANCING ACTIVITIES
   Proceeds from Issuance of Junior
      Subordinated Debentures.........         -
   Issuance Costs of Junior
      Subordinated Debentures.........         -
   Acquisition of Treasury Stock......       (52)
   Issuance of Common and Treasury Stock     256
   Cash Dividends Paid................    (1,098)
                                      ____________
   Net Cash Provided by/(Used in)
      Financing Activities............      (894)
                                      ____________
         NET INCREASE/(DECREASE) in CASH     (62)

     CASH - Beginning of Year.........       244
                                      ____________
     CASH - End of Year...............$      182
                                      ============


</TABLE>

<PAGE>
INDEPENDENT AUDITOR'S REPORT


To the Board of Directors
Union National Financial Corporation
Mount Joy, Pennsylvania

     We have audited the accompanying consolidated balance sheets
of Union National Financial Corporation and subsidiaries as of
December 31, 2003 and 2002, and the related consolidated
statements of income, changes in stockholders' equity and cash
flows for each of the three years in the period ended December
31, 2003.  These financial statements are the responsibility of
the Corporation's management.  Our responsibility is to express
an opinion on these financial statements based on our audits.

     We conducted our audits in accordance with auditing
standards generally accepted in the United States of America.
Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation.  We believe that our audits
provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
consolidated financial position of Union National Financial
Corporation and subsidiaries as of December 31, 2003 and 2002,
and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 2003, in
conformity with accounting principles generally accepted in the
United States of America.


                                   /s/ Beard Miller Company LLP

Harrisburg, Pennsylvania
January 23, 2004



              SUMMARY OF QUARTERLY FINANCIAL DATA

The unaudited quarterly results of operations for the years ended
December 31, 2003 and 2002, are as follows:

<TABLE>
<CAPTION>
(Dollars in thousands, except per share data)

                                         2003
                       __________________________________________
                          March    June    September   December
                           31       30        30          31
                         _______   ______   ________    ________
<S>                        <C>      <C>       <C>          <C>
Interest Income..........$4,543    $4,548    $4,508      $4,435
Interest Expense......... 1,720     1,805     1,666       1,512
                         _______   ______   ________    ________
 Net Interest Income..... 2,823     2,743     2,842       2,923
Provision for Loan Losses     7        39        69         159
                         _______   ______   ________    ________
 Net Interest Income after
   Provision for Loan
   Losses................ 2,816     2,704     2,773       2,764
Other Operating Income...   825     1,167       866         917
Investment Securities
   Gains/(Losses)........    71        12       203         160
Other Operating Expenses. 2,715     2,820     2,866       2,980
                         _______   ______   ________    ________
 Income before Income Taxes 997     1,063       976         861

Provision for Income
   Taxes.................   193       208       164         116
                         _______   ______   ________    ________
 Net Income..............$  804    $  855   $   812     $   745
                         =======   ======   ========    ========
 Net Income per Common Share
   (Basic and Assuming
   Dilution).............$ 0.32    $ 0.34   $  0.32     $  0.30
                         =======   ======   ========    ========

Note: Due to rounding, quarterly earnings per share may not add
up to reported annual earnings per share.

<CAPTION>
(Dollars in thousands, except per share data)

                                         2002
                       __________________________________________
                          March    June    September   December
                           31       30        30          31
                         _______   ______   ________    ________
<S>                        <C>      <C>       <C>          <C>
Interest Income..........$5,048    $4,878   $ 4,862     $ 4,773
Interest Expense......... 2,210     2,005     1,998       1,894
                         _______   ______   ________    ________
 Net Interest Income..... 2,838     2,873     2,864       2,879
Provision for Loan Losses    25        59        43          57
                         _______   ______   ________    ________
 Net Interest Income after
   Provision for Loan
   Losses................ 2,813     2,814     2,821       2,822
Other Operating Income...   664       712       701         771
Investment Securities
   Gains/(Losses)........   (20)      140       138          69
Other Operating Expenses. 2,596     2,619     2,674       2,660
                         _______   ______   ________    ________
 Income before Income Taxes 861     1,047       986       1,002

Provision for Income
   Taxes.................   144       215       184         193
                         _______   ______   ________    ________
 Net Income..............$  717    $  832   $   802     $   809
                         =======   ======   ========    ========
 Net Income per Common Share
   (Basic and Assuming
   Dilution).............$ 0.28    $ 0.32   $  0.31     $  0.32
                         =======   ======   ========    ========

Note: Due to rounding, quarterly earnings per share may not add
up to reported annual earnings per share.


</TABLE>
<PAGE>

                    SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>

(Dollars in thousands, except per share data)
                                  Years Ended December 31,
                             ____________________________________

                                2003         2002        2001
                             __________   __________   __________
<S>                              <C>          <C>          <C>
INCOME STATEMENT
Interest Income..............$  18,034    $  19,561    $  21,085
Interest Expense.............    6,703        8,107       10,190
                             __________   __________   __________
Net Interest Income..........   11,331       11,454       10,895
Provision for Loan Losses....      274          184          576
                             __________   __________   __________
Net Interest Income
  after Provision for
  Loan Losses................   11,057       11,270       10,319
Other Operating Income.......    4,221        3,175        2,356
Other Operating Expenses.....   11,381       10,549       10,202
                             __________   __________   __________
Income before Income Taxes...    3,897        3,896        2,473
Provision for Income Taxes/
 (Benefit)...................      681          736          231
                             __________   __________   __________
Net Income for Year..........$   3,216     $  3,160    $   2,242
                             ==========   ==========   ==========
SHARE INFORMATION
Net Income Per Share (Basic).$    1.29     $   1.24    $    0.87
Cash Dividends Per Share.....    0.630        0.575        0.425
Average Shares Outstanding
 (Basic).....................    2,498        2,557        2,584

FINANCIAL RATIOS
Return on Average Assets.....     0.98%        1.02%        0.76%
Return on Average
  Stockholders' Equity.......    11.89%       12.20%        9.07%
Return on Average Realized
  Stockholders' Equity (1)...    12.38%       12.51%        9.21%
Dividend Payout Ratio........    48.90%       46.58%       48.95%
Average Stockholders' Equity
 to Average Assets...........     8.25%        8.39%        8.40%

AVERAGE BALANCE SHEET
Loans........................$ 200,808    $ 201,976    $ 186,877
Investment Securities........   96,650       80,558       81,644
Other Earning Assets.........    8,386        7,381        8,677
Total Assets.................  327,644      308,584      294,401
Deposits.....................  226,781      215,242      214,297
Short-Term Borrowings........    3,415        3,501        6,672
Long-Term Debt...............   68,623       62,322       46,907
Junior Subordinated
  Debentures.................      294            -            -
Stockholders' Equity.........   27,046       25,900       24,730

BALANCE SHEET AT YEAR-END
Loans........................$ 225,381    $ 199,065    $ 203,581
Investment Securities........   97,066       90,679       75,215
Total Earning Assets.........  326,989      301,738      287,522
Total Assets.................  351,892      320,509      307,673
Deposits.....................  231,074      223,350      215,544
Short-Term Borrowings........    9,981        3,387        3,400
Long-Term Debt...............   73,874       65,299       61,252
Junior Subordinated
  Debentures.................    8,248            -            -
Stockholders' Equity.........   27,124       26,735       25,545

(1) Excludes the impact of accumulated other comprehensive income
on total stockholders' equity.

<CAPTION>

(Dollars in thousands, except per share data)
                                  Years Ended December 31,
                             ____________________________________

                                2000         1999
                             __________   __________
<S>                             <C>           <C>
INCOME STATEMENT
Interest Income..............$  20,583    $  19,080
Interest Expense.............   10,352        8,811
                             __________   __________
Net Interest Income..........   10,231       10,269
Provision for Loan Losses....      397          214
                             __________   __________
Net Interest Income
  after Provision for
  Loan Losses................    9,834       10,055
Other Operating Income.......    1,732        1,477
Other Operating Expenses.....    9,949        7,725
                             __________   __________
Income before Income Taxes...    1,617        3,807
Provision for Income Taxes/
 (Benefit)...................      (50)         722
                             __________   __________
Net Income for Year..........$   1,667    $   3,085
                             ==========   ==========
SHARE INFORMATION
Net Income Per Share (Basic).$    0.65    $    1.17
Cash Dividends Per Share.....    0.576        0.540
Average Shares Outstanding
 (Basic).....................    2,576        2,633

FINANCIAL RATIOS
Return on Average Assets.....     0.60%        1.17%
Return on Average
  Stockholders' Equity.......     7.21%       13.29%
Return on Average Realized
  Stockholders' Equity (1)...     6.99%       13.08%
Dividend Payout Ratio........    89.16%       46.18%
Average Stockholders' Equity
 to Average Assets...........     8.30%        8.83%

AVERAGE BALANCE SHEET
Loans........................$ 182,728    $ 169,667
Investment Securities........   78,868       76,377
Other Earning Assets.........    3,395        5,007
Total Assets.................  278,416      263,075
Deposits.....................  214,464      206,470
Short-Term Borrowings........   11,314        2,020
Long-Term Debt...............   27,920       29,882
Junior Subordinated
  Debentures.................        -            -
Stockholders' Equity.........   23,110       23,218

BALANCE SHEET AT YEAR-END
Loans........................$ 185,981    $ 174,854
Investment Securities........   74,466       77,724
Total Earning Assets.........  263,549      255,680
Total Assets.................  282,680      269,579
Deposits.....................  212,545      209,181
Short-Term Borrowings........   13,495        9,100
Long-Term Debt...............   30,735       27,035
Junior Subordinated
  Debentures.................        -            -
Stockholders' Equity.........   23,562       23,063

(1) Excludes the impact of accumulated other comprehensive income
on total stockholders' equity.


</TABLE>
<PAGE>

            MANAGEMENT'S DISCUSSION AND ANALYSIS OF
          FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is management's discussion and analysis of the
significant changes in the results of operations, capital
resources and liquidity presented in the accompanying
consolidated financial statements for Union National Financial
Corporation, a bank holding company, and its wholly-owned
subsidiary, Union National Community Bank.  Union National's
consolidated financial condition and results of operations
consist almost entirely of the bank's financial condition and
results of operations.  Union National's other subsidiary, Union
National Capital Trust I, was established during December 2003
for the purpose of issuing $8,000,000 of trust capital
securities.  This discussion should be read in conjunction with
the financial tables/statistics, financial statements and notes
to financial statements appearing elsewhere in this annual
report.  Current performance does not guarantee, assure or
indicate similar performance in the future.

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

Shareholders should note that many factors, some of which are
discussed elsewhere in this document and in the documents that we
incorporate by reference, could affect the future financial
results of Union National Financial Corporation, Union National
Community Bank or the combined company and could cause those
results to differ materially from those expressed in our forward-
looking statements contained or incorporated by reference in this
document.  These factors include the following:

  * operating, legal and regulatory risks;
  * economic, political and competitive forces; and
  * the risk that our analyses of these risks and forces could be
    incorrect and/or that the strategies developed to address
    them could be unsuccessful.

Union National undertakes no obligation to publicly revise or
update these forward-looking statements to reflect events or
circumstances that arise after the date of this report.  Readers
should carefully review the risk factors described in other
documents that Union National periodically files with the
Securities and Exchange Commission.

CRITICAL ACCOUNTING POLICIES

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

Union National's provision for loan losses and the level of the
allowance for loan losses involve significant estimates by
management in evaluating the adequacy of the allowance for loan
losses.  The allowance for loan losses is increased by a charge
to the provision for loan losses.  Management's evaluation is
based on Union National's past loan loss experience, known and
inherent risks in the portfolio, adverse situations that may
affect the borrower's ability to repay (including the timing of
future payments), the estimated value of any underlying
collateral, composition of the loan portfolio, current economic
conditions and other relevant factors.  While management uses
available information to make such evaluations, future
adjustments to the allowance and the provision for loan losses
may be necessary if economic conditions or loan credit quality
differ substantially from the assumptions used in making the
evaluation.

Union National carries all of its investments at fair value with
any unrealized gains or losses reported net of tax as an
adjustment to stockholders' equity.  Based on management's
assessment, at December 31, 2003, Union National did not hold any
security that had a fair value decline that is currently expected
to be other than temporary.  Consequently, any declines in a
specific security's fair value below amortized cost have not been
provided for in the income statement.  Union National's ability
to fully realize the value of its investment in various
securities, including corporate debt securities, is dependent on
the underlying creditworthiness of the issuing organization.

As permitted by SFAS No. 123, Union National accounts for stock-
based compensation in accordance with Accounting Principles Board
Opinion (APB) No. 25.  Under APB No. 25, no compensation expense
is recognized in the income statement related to any options
granted under Union National's stock option plans.  The pro forma
impact to net income and earnings per share that would occur if
compensation expense was recognized, based on the estimated fair
value of the options on the date of the grant, is disclosed in
the notes to the consolidated financial statements.  Union
National intends to continue to account for stock-based
compensation in this manner unless there is more specific
guidance issued by the Financial Accounting Standards Board or
unless a clear consensus develops in the financial services
industry on the application of accounting methods.

RESULTS OF OPERATIONS

OVERVIEW

Consolidated net income for 2003 was $3,216,000, an increase of
1.8%, as compared to consolidated net income of $3,160,000 for
2002  Consolidated net income for 2002 was an increase of 40.9%,
as compared to consolidated net income of $2,242,000 for 2001.

Basic earnings per share for 2003 amounted to $1.29 and diluted
earnings per share amounted to $1.27, as compared to basic
earnings per share of $1.24 and diluted earnings per share of
$1.23 for 2002 and basic earnings per share of 87 cents and
diluted earnings per share of 86 cents for 2001.

The following items impacted results of operations for 2003 as
compared to 2002:

  * Net income increased due to growth of 5.5% in average earning
    assets, which was funded by increased deposits and long-term
    borrowings.

  * Net income decreased due to the narrowing of the interest
    rate spread between the interest earnings on assets and the
    interest cost of liabilities.

  * Net income decreased due to an increase in the provision for
    loan losses of $90,000.

  * Net income increased due to an increase of $119,000 in
    realized gains on the sale of investment securities.  In
    2003, total gains on the sale of investment securities of
    $446,000 offset early payoff costs of $359,000 on borrowings
    from the Federal Home Loan Bank of Pittsburgh (FHLB).

  * Net income increased due to an increase in other operating
    income (excluding investment securities gains) of $927,000,
    or 32.5%, which was primarily a result of increased revenues
    from mortgage banking activities and commissions on the sale
    of alternative investment products.

  * Net income decreased due to an increase in other operating
    expenses of $832,000, or 7.9%.

The above items are quantified and discussed in further detail
under their respective sections below.

The following items impacted results of operations for 2002 as
compared to 2001:

  * Net income increased due to growth of 4.6% in average earning
    assets, which was funded primarily by additional long-term
    borrowings.

  * Net income decreased due to costs of $382,000 incurred on the
    early payoff of $12,000,000 of FHLB borrowings.

  * Net income increased due to a decrease in the provision for
    loan losses of $392,000.

  * Net income increased due to an increase of $252,000 in
    realized gains on the sale of investment securities, which
    partially offset the early payoff costs on FHLB borrowings
    detailed above.

  * Net income increased due to an increase in other operating
    income (excluding investment securities gains) of $567,000,
    or 24.9%, which was primarily a result of increased revenues
    from mortgage banking activities.

  * Net income decreased due to an increase in other operating
    expenses of $347,000, or 3.4%.

The above items are quantified and discussed in further detail
under their respective sections below.

Net income as a percent of total average assets, also known as
return on average assets (ROA), was 0.98% for 2003, 1.02% for
2002 and 0.76% for 2001.  Net income as a percent of average
stockholders' equity, also known as return on average equity
(ROE), was 11.89% for 2003, 12.20% for 2002 and 9.07% for 2001.
Net income as a percent of average realized stockholders' equity,
which excludes the impact of accumulated other comprehensive
income, was 12.38% for 2003, 12.51% for 2002 and 9.21% for 2001.
For Union National, accumulated other comprehensive income is the
amount of unrealized gains or losses on available-for-sale
investment securities, net of tax.

<PAGE>

       MANAGEMENT'S DISCUSSION AND ANALYSIS continued

Management currently expects relatively strong growth in loans
and deposits for 2004.  It is expected that loan growth will be
driven largely by strong commercial loan demand and a slowdown in
the refinancing and payoff of residential mortgages.  Deposit
growth is expected to result from the acquisition of new
commercial business relationships and a new office at 38 East
Roseville Road in Manheim Township, PA that opened in November
2003.  Management also continues to develop and promote
additional loan and deposit products, to implement various sales
strategies and to offer incentives to employees to generate loan
and deposit growth.

During 2003, Union National experienced strong commercial loan
demand and moderate growth in consumer loans.  The growth in
consumer loans was primarily a result of an increase in home
equity lines of credit which are offered at rates as low as one-
half percent below prime.  However, residential mortgage balances
declined during 2003, primarily as a result of increased
refinancing activity.  Union National now sells most of its new
residential mortgage loans under a program that was implemented
in the fourth quarter of 2001.  Mortgages generated for sale
under this program amounted to $24,958,000 for the year ended
December 31, 2003, and $13,105,000 for 2002.  In addition, there
was a decline in the balance of a pool of residential mortgage
loans that Union National purchased in November 2001.  These
purchased mortgage loans had an outstanding balance of $9,358,000
at December 31, 2003, a decline of $8,626,000 from December 31,
2002.  Also impacting loan growth during 2003 was the purchase of
approximately $12,000,000 in manufactured housing loans in
December 2003.  These loans are secured by liens on manufactured
homes, 40% of which are additionally secured by the underlying
real estate.  Overall loan balances have increased by $26,316,000
over 2002.

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

NET INTEREST INCOME

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

Net interest income and corresponding yields are presented in the
tables and related discussion on a taxable equivalent basis.
Income from tax-exempt assets, primarily loans to or securities
issued by state and local governments, is adjusted by an amount
equivalent to the federal income taxes which would have been paid
if the income received on these assets was taxable at the
statutory rate of 34%.

In order to enhance the net interest income in future periods,
management has entered into transactions that increase earning
assets funded by advances from the FHLB.  As of December 31,
2003, the bank had received long-term advances of $73,874,000 and
short-term advances of $1,000,000 from its available credit of
$135,390,000 at the FHLB for purposes of funding loan demand and
security purchases.  The total advances have maturities that
range from January 2004 to December 2013.

Furthermore, in December 2003, Union National obtained net
funding of $8,000,000 from the issuance of junior subordinated
debentures to a trust subsidiary that then issued trust capital
securities.  The floating-rate debentures provide for quarterly
distributions at a variable annual coupon rate, reset quarterly,
based on three-month LIBOR plus 2.85%.  The coupon rate was 4.02%
at December 31, 2003.  The debentures have a 30-year maturity,
but are callable by Union National, at par, after 5 years.  Union
National used the net proceeds from this offering to fund an
additional $4,000,000 capital investment in Union National
Community Bank to fund its operations and future growth.  Union
National plans to use the balance of the funding for the
repurchase of common stock and general corporate purposes.  The
terms and amounts of the FHLB borrowings and the issuance of the
junior subordinated debentures, when combined with Union
National's overall balance sheet structure, maintain Union
National within its interest rate risk policies.

Impacting net interest income during 2003 was $359,000 in
additional costs incurred on the early payoff of FHLB borrowings.
These additional costs were reflected as increased interest
expense on the related long-term borrowings.  During 2003, Union
National restructured $7,261,000 in long-term borrowings with the
FHLB.  Paid-off borrowings had a weighted-average rate of 4.38%
and were primarily replaced with lower current-rate borrowings.
Gains on the sale of investment securities offset the costs
associated with these payoffs.  The restructuring of these
borrowings will benefit Union National with lower funding costs
in future periods.  Total long-term FHLB advances outstanding at
December 31, 2003, represent an increase of $8,575,000 from the
prior year and the average interest rate on these borrowings has
decreased to 3.90% from 4.68%.  In the following discussion, the
interest rate on average interest-bearing liabilities and the net
interest margin percentage is shown both with and without the
impact of these one-time early payoff costs to provide a better
comparison to prior periods.

2003 Compared to 2002

Net interest income for 2003 decreased by $28,000, or 0.2%, over
2002 ($51,000 or 0.4% without the impact of early payoff costs on
long-term FHLB borrowings).  For 2003, average earning asset
growth of $15,929,000, was funded by increased demand and savings
deposits and additional long-term borrowings.  The volume growth
in earning assets and interest-bearing liabilities increased net
interest income by the amount of $501,000 in 2003 over 2002.

The overall interest rate on the average total earning assets
decreased to 6.16% for 2003, as compared to 7.00% for 2002.
However, the overall interest rate on the average interest-
bearing liabilities also decreased to 2.48% (2.34% without the
impact of payoff costs) for 2003, as compared to 3.17% for 2002
(3.02% without the impact of payoff costs).  The net effect of
all interest rate fluctuations and funding changes was to
decrease net interest income in the amount of $529,000 for 2003
from 2002.  The net interest margin percentage was 3.97% for 2003
(4.09% without the impact of payoff costs) as compared to 4.20%
for 2002 (4.33% without the impact of payoff costs).  See
management's discussion below concerning the anticipated impact
of these interest rate fluctuations on the results of operations
for 2004.

The overall decline in interest rates has been prompted by
actions of the Federal Reserve Bank, which started reducing
interest rates in January 2001.  Since that time, the prime
interest rate has declined from 9.50% to 4.00%.  The following
chart details recent rate history for certain key interest rates
that impact rates on Union National's interest-bearing assets and
liabilities:

<TABLE>
<CAPTION>
                                    12/31/03  12/31/02  12/31/01
                                    ________  ________  ________
<S>                                   <C>       <C>       <C>
Fed Funds Target Rate...............   1.00%     1.25%     1.75%
Prime Rate..........................   4.00%     4.25%     4.75%
3-Year Treasury Constant Maturity*..   2.44%     2.23%     3.62%
10-Year Treasury Constant Maturity*.   4.27%     4.03%     5.09%
Conventional Mortgage Rate*.........   5.88%     6.05%     7.07%

*These rates are the average rates for December as published by
the Federal Reserve in Statistical Release H.15.

</TABLE>


As detailed in the above table, there has been a decline in not
only short-term rates, such as the fed funds target rate and the
prime rate, but also in longer-term interest rates.  In fact,
longer-term interest rates have declined more significantly than
short-term rates over the periods shown.  As indicated by the
yields discussed above, this decline in interest rates has
negatively impacted the yield on Union National's earning assets,
but this interest rate decline has also reduced Union National's
funding costs due to a decrease in rates Union National must pay
to attract and retain deposits and must pay on maturing or
repricing advances from the FHLB.

2002 Compared to 2001

Net interest income for 2002 increased by $537,000, or 4.6%, over
2001 ($919,000 or 7.9% without the impact of early payoff costs
of $382,000 on long-term FHLB borrowings).  For 2002, average
earning asset growth of $12,717,000 was funded primarily by
additional long-term borrowings.  The volume growth in earning
assets and interest-bearing liabilities increased net interest
income by the amount of $809,000 in 2002 over 2001.

The overall interest rate on the average total earning assets
decreased to 7.00% for 2002, as compared to 7.87% for 2001.
However, the overall interest rate on the average interest-
bearing liabilities also decreased to 3.17% (3.02% without the
impact of payoff costs) for 2002, as compared to 4.16% for 2001.
The net effect of all interest rate fluctuations and funding
changes was to decrease net interest income in the amount of
$272,000 for 2002 from 2001.  The net interest margin percentage
was 4.20% for both 2002 and 2001 (2002 would have been 4.33%
without the impact of payoff costs).

<PAGE>
          MANAGEMENT'S DISCUSSION AND ANALYSIS  continued

2004 Net Interest Income

For 2004, it is currently anticipated that Union National's net
interest margin percentage will be comparable to current levels.
However, income from growth in earning assets which occurred
during 2003, net of costs resulting from growth in deposits and
borrowings, should increase net interest income for 2004.  The
netting of these two factors, as reflected in Union National's
current simulation model and estimates as of December 31, 2003,
may result in net interest income for 2004 that reflects a
moderate increase over the net interest income earned during
2003.  Expected growth in earning assets during 2004 should also
increase Union National's net interest margin.  This expected
growth was not reflected in the model at December 31, 2003.
However, Union National's net interest income may be impacted by
future actions of the Federal Reserve Bank.

Union National's current net interest income simulation model
includes an investment in BOLI that had a value of $7,804,000 at
December 31, 2003.  This is a financial transaction reflected in
the net interest margin of the model, but for financial reporting
purposes the increase in the cash surrender value of the life
insurance is recorded as other noninterest income.  Although the
effective interest rate impact of expected cash flows on
investments and of renewing certificates of deposit can be
reasonably estimated at current interest rate levels, the yield
curve during 2004, the options selected by customers and the
future mix of the loan, investment and deposit products in the
bank's portfolios may significantly change the estimates used in
the simulation models.  See discussions on Liquidity and Market
Risk - Interest Rate Risk.

PROVISION FOR LOAN LOSSES

The loan loss provision is an estimated expense charged to
earnings to provide for losses attributable to uncollectible
loans.  The provision is based on management's analysis of the
adequacy of the allowance for loan losses.  The provision for
loan losses was $274,000 in 2003, $184,000 in 2002 and $576,000
in 2001.  Net charge-offs amounted to $101,000 for 2003, as
compared to $265,000 for 2002 and $470,000 for 2001.  The
increased provision for loan losses in 2003 can be primarily
attributed to increased outstanding loan balances.  The lower
provision for loan losses in 2002 can be attributed to a decrease
in net charge-offs, declining levels of nonperforming loans and
overall stable credit quality.  Future adjustments to the
allowance, and consequently the provision for loan losses, may be
necessary if economic conditions or loan credit quality differ
substantially from the assumptions used in making management's
evaluation of the level of the allowance for loan losses as
compared to the balance of outstanding loans.  See discussion on
Loan Quality/Allowance for Loan Losses.

<TABLE>
  Distribution of Assets, Liabilities and Stockholders' Equity;
  Interest Rates and Interest Differential (Taxable Equivalent
                              Basis)
<CAPTION>
                                             Year Ended
                                          December 31, 2003
                              ___________________________________
(In thousands)                  Average
                                Balance       Interest      Rate
                              __________      ________     ______
<S>                               <C>           <C>         <C>
ASSETS
 Interest-Bearing Deposits
  in Other Banks..............$     316       $      3      0.95%
 Federal Funds Sold...........    4,015             45      1.12
 Short-Term Investments.......       27              -      0.00
 Investment Securities:
  Taxable.....................   71,260          2,717      3.81
  Tax-Exempt..................   25,390          1,867      7.35
 Loans-Net*...................  200,808         14,127      7.04
 Restricted Invest. - Bank Stocks 4,028             89      2.21
                              __________      ________     ______
  Total Earning Assets........  305,844         18,848      6.16
 Allowance for Loan Losses....   (1,858)
 Other Nonearning Assets......   23,658
                              __________
 TOTAL ASSETS.................$ 327,644
                              ==========

LIABILITIES and STOCKHOLDERS' EQUITY
 Deposits:
  Interest-Bearing Demand.....$  78,758       $    424      0.54%
  Savings.....................   30,614            138      0.45
  Time........................   88,984          2,800      3.15
 Short-Term Borrowings........    3,415             28      0.82
 Long-Term Debt**.............   68,623          3,301      4.81
 Junior Subordinated
   Debentures.................      294             12      4.08
                              __________      ________     ______
 Total Interest-Bearing
   Liabilities................  270,688          6,703      2.48
                                              ________     ______
 Demand Deposits..............   28,425
 Other Liabilities............    1,485
                              __________
  TOTAL LIABILITIES...........  300,598
Stockholders' Equity..........   27,046
                              __________
 TOTAL LIABILITIES and
   STOCKHOLDERS' EQUITY.......$ 327,644
                              ==========
 Net Interest Income/
   Interest Rate Spread.......                $ 12,145      3.68%
                                              ========     ======
 Net Interest Margin..........                              3.97%
                                                           ======

Balances of nonaccrual loans and related income recognized have
been included for computational purposes.

Balances reflect amortized historical cost for available for sale
securities. The related average unrealized holding gain or loss
on securities is included in other nonearning assets.

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

*Includes loan fees of $920,000 for the year ended December 31,
2003, $816,000 for the year ended December 31, 2002 and $802,000
for the year ended December 31, 2001.

**Includes early payoff costs on FHLB Borrowings of $359,000 for
the year ended December 31, 2003, $382,000 for 2002 and $0 for
2001.  Rates excluding these payoffs costs are as follows:
   Long-Term Debt.............                              4.29%
   Total Interest-Bearing
     Liabilites...............                              2.34
   Interest Rate Spread.......                              3.82
   Net Interest Margin........                              4.09

<CAPTION>
                                             Year Ended
                                          December 31, 2002
                              ___________________________________
(In thousands)                  Average
                                Balance       Interest      Rate
                              __________      ________     ______
<S>                               <C>           <C>         <C>
ASSETS
 Interest-Bearing Deposits
  in Other Banks..............$     157       $      2      1.27%
 Federal Funds Sold...........    2,925             50      1.71
 Short-Term Investments.......      986             15      1.52
 Investment Securities:
  Taxable.....................   59,005          2,959      5.01
  Tax-Exempt..................   21,553          1,644      7.63
 Loans-Net*...................  201,976         15,490      7.67
 Restricted Invest. - Bank Stocks 3,313            120      3.62
                              __________      ________     ______
  Total Earning Assets........  289,915         20,280      7.00
 Allowance for Loan Losses....   (1,870)
 Other Nonearning Assets......   20,539
                              __________
 TOTAL ASSETS.................$ 308,584
                              ==========

LIABILITIES and STOCKHOLDERS' EQUITY
 Deposits:
  Interest-Bearing Demand.....$  68,498       $    631      0.92%
  Savings.....................   28,025            276      0.98
  Time........................   93,785          3,680      3.92
 Short-Term Borrowings........    3,501             50      1.43
 Long-Term Debt**.............   62,322          3,470      5.57
 Junior Subordinated
   Debentures.................        -              -         -
                              __________      ________     ______
 Total Interest-Bearing
   Liabilities................  256,131          8,107      3.17
                                              ________     ______
 Demand Deposits..............   24,934
 Other Liabilities............    1,619
                              __________
  TOTAL LIABILITIES...........  282,684
Stockholders' Equity..........   25,900
                              __________
 TOTAL LIABILITIES and
   STOCKHOLDERS' EQUITY.......$ 308,584
                              ==========
 Net Interest Income/
   Interest Rate Spread.......                $ 12,173      3.83%
                                              ========     ======
 Net Interest Margin..........                              4.20%
                                                           ======

Balances of nonaccrual loans and related income recognized have
been included for computational purposes.

Balances reflect amortized historical cost for available for sale
securities. The related average unrealized holding gain or loss
on securities is included in other nonearning assets.

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

*Includes loan fees of $920,000 for the year ended December 31,
2003, $816,000 for the year ended December 31, 2002 and $802,000
for the year ended December 31, 2001.

**Includes early payoff costs on FHLB Borrowings of $359,000 for
the year ended December 31, 2003, $382,000 for 2002 and $0 for
2001.  Rates excluding these payoffs costs are as follows:
   Long-Term Debt.............                              4.95%
   Total Interest-Bearing
     Liabilites...............                              3.02
   Interest Rate Spread.......                              3.98
   Net Interest Margin........                              4.33

<CAPTION>
                                             Year Ended
                                          December 31, 2001
                              ___________________________________
(In thousands)                  Average
                                Balance       Interest      Rate
                              __________      ________     ______
<S>                               <C>           <C>         <C>
ASSETS
 Interest-Bearing Deposits
  in Other Banks..............$      72       $      1      1.39%
 Federal Funds Sold...........    3,901            163      4.18
 Short-Term Investments.......    1,599             45      2.81
 Investment Securities:
  Taxable.....................   59,809          3,840      6.42
  Tax-Exempt..................   21,835          1,693      7.75
 Loans-Net*...................  186,877         15,883      8.50
 Restricted Invest. - Bank Stocks 3,105            201      6.47
                              __________      ________     ______
  Total Earning Assets........  277,198         21,826      7.87
 Allowance for Loan Losses....   (1,944)
 Other Nonearning Assets......   19,147
                              __________
 TOTAL ASSETS.................$ 294,401
                              ==========

LIABILITIES and STOCKHOLDERS' EQUITY
 Deposits:
  Interest-Bearing Demand.....$  60,690       $  1,072      1.77%
  Savings.....................   25,126            343      1.37
  Time........................  105,478          5,831      5.53
 Short-Term Borrowings........    6,672            340      5.10
 Long-Term Debt**.............   46,907          2,604      5.55
 Junior Subordinated
   Debentures.................        -              -         -
                              __________      ________     ______
 Total Interest-Bearing
   Liabilities................  244,873         10,190      4.16
                                              ________     ______
 Demand Deposits..............   23,003
 Other Liabilities............    1,795
                              __________
  TOTAL LIABILITIES...........  269,671
Stockholders' Equity..........   24,730
                              __________
 TOTAL LIABILITIES and
   STOCKHOLDERS' EQUITY.......$ 294,401
                              ==========
 Net Interest Income/
   Interest Rate Spread.......                $ 11,636      3.71%
                                              ========     ======
 Net Interest Margin..........                              4.20%
                                                           ======

Balances of nonaccrual loans and related income recognized have
been included for computational purposes.

Balances reflect amortized historical cost for available for sale
securities. The related average unrealized holding gain or loss
on securities is included in other nonearning assets.

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

*Includes loan fees of $920,000 for the year ended December 31,
2003, $816,000 for the year ended December 31, 2002 and $802,000
for the year ended December 31, 2001.

**Includes early payoff costs on FHLB Borrowings of $359,000 for
the year ended December 31, 2003, $382,000 for 2002 and $0 for
2001.  Rates excluding these payoffs costs are as follows:
   Long-Term Debt.............                              5.55%
   Total Interest-Bearing
     Liabilites...............                              4.16
   Interest Rate Spread.......                              3.71
   Net Interest Margin........                              4.20

</TABLE>

<PAGE>

        MANAGEMENT'S DISCUSSION AND ANALYSIS  continued

<TABLE>
 Rate/Volume Analysis of Changes in Net Interest Income (Taxable
                        Equivalent Basis)
<CAPTION>
                                        2003 Compared to 2002
                                    _____________________________
                                     Total
(In thousands)                       Change      Volume     Rate
                                    ________     ________   _____
<S>                                   <C>         <C>        <C>
 Interest Income From
   Interest-Bearing Deposits
     in Other Banks.................$     1      $     2   $  (1)
 Federal Funds Sold.................     (5)          15     (20)
 Short-Term Investments.............    (15)          (8)     (7)
 Investment Securities:
    Taxable.........................   (242)         546    (788)
    Tax-Exempt......................    223          284     (61)
 Loans-Net.......................... (1,363)         (89) (1,274)
 Restricted Invest. - Bank Stocks...    (31)          20     (51)
                                    ________     ________   _____
    Total Earning Assets............ (1,432)         770  (2,202)

 Interest Expense On Deposits:
    Interest-Bearing Demand.........   (207)          84    (291)
    Savings.........................   (138)          23    (161)
    Time............................   (880)        (180)   (700)
 Short-Term Borrowings..............    (22)          (1)    (21)
 Long-Term Debt.....................   (169)         331    (500)
 Junior Subordinated Debentures.....     12           12       -
                                    ________     ________ _______
   Total Interest-Bearing
      Liabilities................... (1,404)         269  (1,673)
                                    ________     ________ _______
   Net Interest Income..............$   (28)     $   501  $ (529)
                                    ========     ======== =======

Balances of nonaccrual loans and related income recognized have
been included for computational purposes.

The change in interest due to both volume and rate has been
allocated individually to the change in volume and rate on a
proportional basis.

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

<CAPTION>
                                        2002 Compared to 2001
                                    _____________________________
                                     Total
(In thousands)                       Change      Volume     Rate
                                    ________     ________   _____
<S>                                   <C>         <C>        <C>
 Interest Income From
   Interest-Bearing Deposits
     in Other Banks.................$     1      $     1   $   -
 Federal Funds Sold.................   (113)         (34)    (79)
 Short-Term Investments.............    (30)         (13)    (17)
 Investment Securities:
    Taxable.........................   (881)         (51)   (830)
    Tax-Exempt......................    (49)         (22)    (27)
 Loans-Net..........................   (393)       1,226  (1,619)
 Restricted Invest. - Bank Stocks...    (81)          12     (93)
                                    ________     ________   _____
    Total Earning Assets............ (1,546)       1,119  (2,665)

 Interest Expense On Deposits:
    Interest-Bearing Demand.........   (441)         124    (565)
    Savings.........................    (67)          37    (104)
    Time............................ (2,151)        (594) (1,557)
 Short-Term Borrowings..............   (290)        (115)   (175)
 Long-Term Debt.....................    866          858       8
 Junior Subordinated Debentures.....      -            -       -
                                    ________     ________ _______
   Total Interest-Bearing
      Liabilities................... (2,083)         310  (2,393)
                                    ________     ________ _______
   Net Interest Income..............$   537      $   809  $ (272)
                                    ========     ======== =======

Balances of nonaccrual loans and related income recognized have
been included for computational purposes.

The change in interest due to both volume and rate has been
allocated individually to the change in volume and rate on a
proportional basis.

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


</TABLE>

OTHER OPERATING INCOME

2003 Compared to 2002

Other operating income for 2003 was $4,221,000, representing an
increase of $1,046,000, or 32.9%, over 2002.  Contributing to
this increase were the following items:

  * an increase in revenue from mortgage banking activities in
    the amount of $443,000;

  * an increase in investment securities gains of $119,000;

  * an increase in commission earnings from the sale of
    alternative investment products in the amount of $282,000;

  * an increase in earnings on deposit fees related to
    insufficient funds charges in the amount of $116,000; and

  * an increase in earnings on BOLI of $71,000 as a result of an
    additional $4,000,000 investment in BOLI during the third
    quarter of 2003.

The increase in income from mortgage banking activities related
to a mortgage program that Union National implemented in November
2001.  Through this program, Union National is able to offer
expanded mortgage products at competitive rates.  These mortgages
are sold to the FHLB, but the servicing is retained by Union
National.  As of December 31, 2003, Union National was servicing
369 loans through this program with an outstanding balance of
approximately $36,000,000.

Investment securities gains in 2003 were a result of some
restructuring in the investment security portfolio.  After a
thorough analysis, certain securities were sold at a net gain and
the funds were invested in other securities that management
believed had better structures with comparable earnings rates.
Management believes these securities are positioned better for
various changes in interest rates.  In addition, these gains
offset the one-time costs associated with the early payoff and
restructuring of FHLB borrowings.

The increase in commission earnings on the sale of alternative
investment products resulted from the expanded sales of
annuities, mutual funds and brokerage services.  Union National
now has a licensed representative in each retail office location
to sell these alternative investment products.

The increased earnings on deposit fees related to an increase in
insufficient funds charges.  This resulted from increased
activity and a new product called "Overdraft Privilege"
introduced to customers in November 2003.  With Overdraft
Privilege customers are permitted to overdraw their accounts
subject to certain limits.  This service can help customers avoid
merchant costs and the embarrassment of having checks returned.
Overdraft Privilege should also generate increased fee income for
Union National in 2004.  With increased overdrafts there is also
increased credit exposure, however, the increased revenue is
currently expected to more than offset any related credit losses.

2002 Compared to 2001

Other operating income for 2002 was $3,175,000, representing an
increase of $819,000, or 34.8%, over 2001.  Contributing to this
increase were the following items:

  * an increase in revenue from mortgage banking activities in
    the amount of $457,000;

  * an increase in investment securities gains of $252,000;

  * an increase in commission earnings from the sale of
    alternative investment products in the amount of $105,000;
    and

  * increased usage of the bank's debit cards, resulting in
    additional earnings in interchange fee income in the amount
    of $67,000.

Other operating income (excluding investment securities gains or
losses) as a percentage of total revenue (net interest income and
other operating income) was 25.0% for 2003, 19.9% for 2002 and
17.3% for 2001.

OTHER OPERATING EXPENSES

2003 Compared to 2002

The aggregate of other operating expenses for 2003 increased by
$832,000, or 7.9%, over 2002.  This increase in other operating
expenses is discussed below as it pertains to the various expense
categories.

Salaries and wages increased by $508,000, or 11.2%, over 2002.
This increase was essentially due to staff additions, annual
merit and cost-of-living increases and increased incentives for
staff for reaching certain sales and profitability goals.  Staff
additions include staff for our new office located on Roseville
Road in Manheim Township, an experienced business development
officer who will lead our business banking group, business and
credit specialists and other support staff and sales positions.

Employee benefit costs increased by $56,000, or 4.9%, over 2002.
Increased employee benefit costs relate primarily to increased
staff and salary levels.

Other changes in operating expenses for 2003 included the
following:

  * an increase in data processing fees of $96,000;

  * an increase in advertising and marketing expenses of $23,000,
    primarily as a result of the opening of our new Manheim
    Township office;

  * an increase in ATM processing expenses of $22,000;

<PAGE>

       MANAGEMENT'S DISCUSSION AND ANALYSIS  continued

  * an increase in foreclosed real estate expenses of $24,000;

  * an increase in director fees in the amount of $32,000, as a
    result of the addition of three new directors in 2003;

  * an increase in appraisal costs of $31,000;

  * an increase in donations of $24,000;

  * an increase in supplies costs in the amount of $24,000;

  * a decrease in postage costs of $32,000; and

  * an increase in the amortization of mortgage servicing assets
    and credit enhancement fees receivable in the amount of
    $45,000.

The increase in data processing costs related to the
implementation of a new data communications system and the
associated costs.  The increase in donations was a result of
contributions that Union National made under the PA Educational
Improvement Tax Credit program.  Through this program, Union
National receives a 90% tax credit for contributions made to
certain organizations.  The increase in appraisal fees and
amortization of mortgage servicing assets and credit enhancement
fees receivable was related to an increase in mortgage banking
activities.  The decrease in postage costs was a result of a cost
savings that resulted from a change in the sorting of outgoing
mail.

2002 Compared to 2001

The aggregate of other operating expenses for 2002 increased by
$347,000, or 3.4%, over 2001.  This increase in other operating
expenses is discussed below as it pertains to the various expense
categories.

Salaries and wages increased by $76,000, or 1.7%, over 2001.
This increase was essentially due to annual merit and cost-of-
living increases in employee salaries and wages and increased
incentives for staff for reaching certain sales and profitability
goals.  These items were partially offset by a small reduction in
average full-time equivalent employees during 2002 as compared to
2001.

Employee benefit costs increased by $67,000, or 6.3%, over 2001.
For 2002, there was an increase in health insurance costs, an
increase in profit sharing costs as a result of increased
employee participation in the 401(k) profit-sharing plan and an
increase in payroll tax costs that resulted from the overall
increase in salaries and wages.

Other changes in operating expenses for 2002 included the
following:

  * an increase in net occupancy expense of $36,000;

  * a decrease in professional fees of $58,000, primarily as a
    result of decreased consulting fees incurred in 2002;

  * an increase in data processing fees of $39,000;

  * an increase in advertising and marketing expenses of $45,000;

  * an increase in liability insurance costs of $26,000;

  * an increase in appraisal costs of $38,000 as a result of
    increased mortgage activities;

  * a decrease in supplies costs in the amount of $61,000;

  * an increase in software amortization and maintenance costs of
    $22,000;

  * an increase in other services costs of $38,000, primarily as
    a result of the increased usage of temporary employment
    services;

  * an increase in check losses of $30,000, primarily a result of
    a large recovery in 2001; and

  * an increase in other losses in the amount of $24,000 as a
    result of a robbery loss at a retail branch location.

INCOME TAXES

Union National had income tax expense of $681,000 for 2003,
$736,000 for 2002 and $231,000 for 2001.  The effective tax rate
for 2003 was 17.5%, as compared to 18.9% for 2002 and 9.3% for
2001.  The decrease in income tax expense in 2003 was primarily
due to an increase in tax-exempt earnings.  The realization of
net deferred tax assets, which amounted to $77,000 at December
31, 2003, is dependent on future earnings of Union National.
Management currently anticipates future earnings will be adequate
to utilize these deferred tax assets.

RECENT ACCOUNTING STANDARDS ISSUED

In November 2002, the Financial Accounting Standards Board (FASB)
issued FASB Interpretation No. 45 (FIN 45), "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others."  This
Interpretation expands the disclosures to be made by a guarantor
in its financial statements about its obligations under certain
guarantees and requires the guarantor to recognize a liability
for the fair value of an obligation assumed under certain
specified guarantees.  Under FIN 45, Union National does not
issue any guarantees that would require liability recognition or
disclosure, other than its standby letters of credit, as
discussed in Note 12.

In January 2003, the Financial Accounting Standards Board issued
FASB Interpretation No. 46(FIN 46), "Consolidation of Variable
Interest Entities, an Interpretation of ARB No. 51."  FIN 46 was
revised in December 2003.  This Interpretation provides new
guidance for the consolidation of variable interest entities
(VIEs) and requires such entities to be consolidated by their
primary beneficiaries if the entities do not effectively disperse
risk among parties involved.  The Interpretation also adds
disclosure requirements for investors that are involved with
unconsolidated VIEs.  The disclosure requirements apply to all
financial statements issued after December 31, 2003.  The
consolidation requirements apply to companies that have interests
in special-purpose entities for periods ending after December 15,
2003.  Consolidation of other types of VIEs is required in
financial statements for periods ending after March 15, 2004.

In accordance with the guidance provided by FIN 46, Union
National did not consolidate the accounts of its wholly-owned
trust subsidiary, Union National Capital Trust I.  As detailed in
the notes to the consolidated financial statements, Union
National issued junior subordinated debentures to its trust
subsidiary which then issued trust capital securities in a
private sale.  The net effect of not consolidating the accounts
of the trust subsidiary is to include Union National's $248,000
equity interest in the trust subsidiary as an "Other Asset" on
the balance sheet and to report the total $8,248,000 of junior
subordinated debentures as an outstanding liability.  For
regulatory reporting purposes, the Federal Reserve Board has
indicated that the trust capital securities will continue to
qualify as Tier 1 capital subject to certain limitations.  The
total trust capital securities are included in regulatory Tier 1
capital of Union National Financial Corporation.  If the Federal
Reserve Board changes its position regarding the inclusion of
trust capital securities in Tier 1 capital, Union National and
the bank will still meet all regulatory capital requirements.

In April 2003, the Financial Accounting Standards Board issued
Statement No. 149, "Amendment of Statement No. 133, Accounting
for Derivative Instruments and Hedging Activities."  This
Statement clarifies the definition of a derivative and
incorporates certain decisions made by the Board as part of the
Derivatives Implementation Group process.  This Statement is
effective for contracts entered into or modified and for hedging
relationships designated after June 30, 2003, and should be
applied prospectively.  The provisions of the Statement that
relate to implementation issues addressed by the Derivatives
Implementation Group that have been effective should continue to
be applied in accordance with their respective dates.

In May 2003, the Financial Accounting Standards Board issued
Statement No. 150, "Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equity."  This
Statement requires that an issuer classify a financial instrument
that is within its scope as a liability.  Many of these
instruments were previously classified as equity.  This Statement
was effective for financial instruments entered into or modified
after May 31, 2003, and otherwise was effective beginning July 1,
2003.

Except as discussed above regarding FIN 46, The provisions of the
above interpretations and statements did not have or are not
expected to have a significant impact on the financial condition
or results of operations of Union National.

FINANCIAL CONDITION

INVESTMENT SECURITIES

As of December 31, 2003, all of Union National's investment
securities have been classified as available-for-sale.
Securities classified as available-for-sale are those debt
securities that Union National intends to hold for an indefinite
period of time, but not necessarily to maturity, and marketable
equity securities.  Union National possesses the ability, subject
to credit impairment, to hold each security in its investment
portfolio to maturity.  However, Union National recognizes that
the investment portfolio serves other functions including an
ultimate source of liquidity and a tool to manage interest rate
risk.  In order to acknowledge these functions, Union National
has designated its

<PAGE>
          MANAGEMENT'S DISCUSSION AND ANALYSIS  continued

investment securities as being available-for-sale.  Any decision
to sell a security classified as available-for-sale would be
based on various factors, including significant movements in
interest rates, changes in maturity mix of Union National's
assets and liabilities, liquidity needs, regulatory capital
considerations and other similar factors.  Changes in unrealized
gains or losses on available-for-sale securities, net of taxes,
are recorded as other comprehensive income, a component of
stockholders' equity.

During the second quarter of 2002, Union National reclassified
all of its held-to-maturity investment securities to available-
for-sale.  The transfer of these securities to available-for-sale
allows Union National greater flexibility in managing its
investment securities portfolio and overall interest rate risk.
After a thorough evaluation of these held-to-maturity investment
securities, Union National identified several securities to be
sold.  Under the Financial Accounting Standards Board's Statement
of Financial Accounting Standards (SFAS) No. 115, the sale of
these securities required that all of Union National's investment
securities be classified as available-for-sale.  Investment
securities with a total cost of $10,399,000 and a fair value of
$10,358,000 were transferred to available-for-sale during the
second quarter.  The unrealized losses on these investment
securities were recorded net of tax as accumulated other
comprehensive income, an adjustment to stockholders' equity.

During 2002, in light of record-low interest rates, Union
National began to purchase certain types of mortgage-backed and
asset-backed securities to better position its investment
portfolio for a subsequent increase in interest rates.  At
December 31, 2003, the total amortized cost of Union National's
mortgage-backed and asset-backed securities amounted to
$49,189,000.  These security purchases were funded through
investment cash flows, payments received on Union National's
investment in a pool of residential mortgage loans and additional
FHLB borrowings.  These securities were generally purchased at a
premium as their coupons were higher than current market interest
rates.  Based on high prepayment speeds on these securities, the
premium paid for these bonds has been amortized quickly which has
reduced recorded yields.  In the future, as interest rates rise
and prepayment speeds slow down, the recorded yields on the
remaining balance of these securities will increase.  The
weighted-average yield on mortgage-backed and asset-backed
securities was 3.57% at December 31, 2003, as compared to 3.43%
at December 31, 2002, and 6.09% at December 31, 2001.  With high
prepayment speeds experienced in 2002 and 2003, the estimated
average life of these securities is relatively short and the
recorded yield on these securities is still comparable to other
investments with similar maturities and also compares favorably
to current short-term market interest rates.  Cash flows from
these securities and changes in market interest rates are
considered in the bank's net interest income simulation model.
See sections on Liquidity and Market Risk - Interest Rate Risk
for further discussion.

Total expected cash flows from investment securities, including
estimated prepayments and expected call options, is currently
estimated at $26,259,000 for 2004, which represents approximately
28% of the bank's investment securities as compared to 38% as
estimated at December 31, 2002, for 2003.  The estimated amount
of expected cash flows from investment securities will vary
significantly with changes in assumed interest rates.  For
example, an increase in interest rates will decrease the level of
prepayments received on mortgage-backed securities.  These
factors affecting the bank's investment securities are included
in the bank's net interest income simulation model.  See sections
on Liquidity and Market Risk - Interest Rate Risk for further
discussions on these risks.

Management periodically assesses the strategy of selling
mortgage-backed securities and other available-for-sale
securities.  Investment security purchases and sales are effected
in order to enhance the bank's net interest margin, while
managing liquidity and interest rate risk within specified
limits.  Based on the current interest rate environment,
management will be evaluating its available-for-sale portfolio
for possible opportunities to increase its earnings for the year
2004 and future years through potential investment security
sales.  Generally, management will utilize net investment
security gains to offset other balance sheet restructuring costs
including early payoff costs on FHLB borrowings.

In addition to the credit risk present in the loan portfolio,
Union National also has credit risk associated with its
investment security holdings.  Based on recent national economic
trends and other factors, Union National has increased its
monitoring of its corporate debt securities and changes in their
credit ratings as published by bond rating agencies.  As of
December 31, 2003, Union National had corporate debt securities
that were rated below investment grade and were carried at a fair
value of $702,000 and had unrealized gains of $9,000.  Union
National's ability to fully realize the value of its investment
in various securities, including corporate debt securities, is
dependent on the underlying creditworthiness of the issuing
organization.  This creditworthiness may be impacted by various
national economic trends and other factors.  As discussed
earlier, Union National carries all of its investments at fair
value with any unrealized gains or losses reported net of tax as
an adjustment to stockholders' equity.  Based on management's
assessment, at December 31, 2003, Union National did not hold any
security that had a fair value decline that is currently expected
to be other than temporary.  Consequently, any declines in a
specific security's fair value below amortized cost have not been
provided for in the income statement because management currently
expects these fair value declines to be temporary.  As of
December 31, 2003, Union National held corporate debt securities
with a total fair value of $20,603,000, and net unrealized gains
on these securities amounted to $326,000.  In addition, there are
no significant concentrations of investments (greater than 10% of
stockholders' equity) in any individual security issuer.

At December 31, 2003, net unrealized gains for securities
classified as available-for-sale were $1,568,000.  In comparison,
at December 31, 2002, net unrealized gains for securities
classified as available-for-sale were $1,697,000.  The unrealized
gains on the available-for-sale securities, net of income tax
effect, amounted to an increase in stockholders' equity of
$1,035,000 at December 31, 2003, and $1,120,000 at December 31,
2002.  Except as discussed under the Net Interest Income section
with regards to the impact of interest rate changes on the
results of operations, management believes that the effects of
any unrealized losses in the available-for-sale investment
portfolio on future earnings, liquidity and capital resources to
be immaterial.

The following shows the summary of investment securities held by
Union National:

<TABLE>
<CAPTION>
  (In thousands)                Carrying Value at December 31,
                             ____________________________________
                                   2003         2002
                               ___________    __________

                                Available-    Available-
                                 for-Sale      for-Sale
                               ___________    __________
<S>                                 <C>          <C>
Obligations of U.S.
 Government Agencies............$      -      $      -
Obligations of State
 and Political Subdivisions.....  26,621        24,262
Corporate Securities............  20,603        17,224
Mortgage-Backed Securities......  47,220        45,392
Asset-Backed Securities.........   2,228         3,470
Equity Securities...............     394           331
                                __________    __________
Total...........................$ 97,066      $ 90,679
                                ==========    ==========


<CAPTION>

    (In thousands)            Carrying Value at December 31,

                              __________________________________
                                             2001

                                 ________________________
                                  Available-    Held-to-
                                  for-Sale      Maturity

                                 ___________    ________
<S>                                 <C>          <C>
Obligations of U.S.
 Government Agencies............$    1,024      $      -
Obligations of State
 and Political Subdivisions.....     9,824        11,835
Corporate Securities............    16,264         1,500
Mortgage-Backed Securities......    34,484             -
Asset-Backed Securities.........         -             -
Equity Securities...............       284             -
                                ____________    _________
Total...........................$   61,880      $ 13,335
                                ============    =========
</TABLE>

<PAGE>

The following table illustrates the maturities of investment
securities and the weighted-average yields based upon amortized
cost as of December 31, 2003.  Yields are shown on a taxable
equivalent basis, assuming a 34% federal income tax rate.

<TABLE>

<CAPTION>
                          Within     1 - 5     5 - 10     Over
    (In thousands)        1 Year     Years      Years   10 Years
                         ________   _______   ________  _________
<S>                        <C>       <C>       <C>        <C>
Available-for-Sale Securities:
Obligations of State and Political Subdivisions:
  Fair Value..............$   201   $   169    $ 3,602   $22,649
  Amortized Cost..........    200       154      3,442    22,053
  Yield...................   8.25%     6.25%      8.04%     7.41%

Mortgage-Backed Securities by Contractual Maturity:*
  Fair Value..............      -       130      2,074    45,016
  Amortized Cost..........      -       129      2,027    44,856
  Yield...................      -      2.84%      3.56%     3.47%

Asset-Backed Securities by Contractual Maturity:*
  Fair Value..............      -         -          -     2,228
  Amortized Cost..........      -         -          -     2,177
  Yield...................                                  5.72%

Corporate Securities:
  Fair Value..............  1,025     7,829      5,517     6,232
  Amortized Cost..........  1,010     7,701      5,487     6,079
  Yield...................   5.28%     5.95%      4.71%     5.92%

Equity Securities:
  Fair Value..............
  Amortized Cost..........
  Yield...................
                         ________   _______   ________  _________
Total Securities:
  Fair Value..............$ 1,226   $ 8,128    $11,193   $76,125
  Amortized Cost..........  1,210     7,984     10,956    75,165
  Yield...................   5.77%     5.91%      5.54%     4.89%
                         ========   =======   ========  =========

* It is anticipated that these mortgage-backed and asset-backed
securities will be repaid prior to their contractual maturity
dates.  The weighted-average yield for these securities is
impacted for normal amortization and estimated prepayments based
on current market interest rates.

<CAPTION>

    (In thousands)           Total
                          ________
<S>                          <C>
Available-for-Sale Securities:
Obligations of State and Political Subdivisions:
  Fair Value..............$26,621
  Amortized Cost.......... 25,849
  Yield...................   7.49%

Mortgage-Backed Securities by Contractual Maturity:*
  Fair Value.............. 47,220
  Amortized Cost.......... 47,012
  Yield...................   3.47%

Asset-Backed Securities by Contractual Maturity:*
  Fair Value..............  2,228
  Amortized Cost..........  2,177
  Yield...................   5.72%

Corporate Securities:
  Fair Value.............. 20,603
  Amortized Cost.......... 20,277
  Yield...................   5.57%

Equity Securities:
  Fair Value..............    394
  Amortized Cost..........    183
  Yield...................   5.93%
                          ________

Total Securities:
  Fair Value..............$97,066
  Amortized Cost.......... 95,498
  Yield...................   5.06%
                          ========

* It is anticipated that these mortgage-backed and asset-backed
securities will be repaid prior to their contractual maturity
dates.  The weighted-average yield for these securities is
impacted for normal amortization and estimated prepayments based
on current market interest rates.

</TABLE>

LOANS

Net loans were $225,381,000 at December 31, 2003, representing a
13.2% increase over net loans of $199,065,000 at December 31,
2002.  As shown in the following table, the increase in loans was
primarily due to an increase in commercial and industrial
mortgage loans and consumer loans.  In addition, during 2003
there was a decrease in conventional residential mortgage loans
outstanding that was offset by an increase in second mortgage
consumer loans, specifically home equity lines of credit.  The
decline in residential mortgage loans was a result of significant
refinancing activity in 2003 due to low long-term mortgage rates.
This refinancing activity reduced outstanding mortgage balances
as Union National now sells a majority of its new residential
mortgage loans to the FHLB.  In addition, there was a decline in
the balance of a pool of residential mortgage loans that Union
National purchased in November 2001.  These purchased mortgage
loans had an outstanding balance of $9,358,000 at December 31,
2003, a decline of $8,626,000 from December 31, 2002.  Impacting
both consumer and residential mortgage loan growth during 2003
was the purchase of approximately $12,000,000 in manufactured
housing loans in December 2003.  These loans are secured by liens
on manufactured homes, 40% of which are additionally secured by
the underlying real estate.

At December 31, 2003, there were no loan concentrations over 10%
of loans outstanding to any one category or borrower.  However,
loans secured by real estate constitute 86% of the bank's loan
portfolio; consequently, the quality of these loans is affected
by the region's economy and real estate market.  Total net loans
with variable-rate pricing amounted to $126,380,000 at December
31, 2003, and $89,541,000 at December 31, 2002.  See section on
Market Risk - Interest Rate Risk.

Other than as described herein, management does not believe there
are any trends, events or uncertainties which are reasonably
expected to have a material adverse impact on future results of
operations, liquidity or capital resources.  Further, based on
known information, management believes that the effects of
current and past economic conditions and other unfavorable
business conditions may result in the inability of loans
amounting to $1,879,000 to comply with their respective repayment
terms.  These loans are not considered impaired as defined by
current generally accepted accounting principles since it is only
possible, but not probable that they will not be

<PAGE>
          MANAGEMENT'S DISCUSSION AND ANALYSIS  continued

able to comply with their respective repayment terms.  This
represents an increase from the amount of $1,689,000 at December
31, 2002.  These loans are secured with real estate, equipment,
inventory and vehicles.  Management currently believes that
potential losses on these loans have already been provided for in
the allowance for loan losses.  The borrowers are of special
mention since they have shown a decline in financial strength and
payment quality.  Management has increased its monitoring of the
borrowers' financial strength.  In addition, management expects
that a portion of these loans may be classified as nonperforming
in 2004.  The nonperforming loans table, appearing in the section
entitled Nonperforming Assets, does not include the
aforementioned loans.

Loans are composed of the following:


<TABLE>
<CAPTION>
                                           December 31,
                              __________________________________
      (In thousands)             2003        2002       2001
                               _________   _________   __________
<S>                              <C>         <C>         <C>
Real Estate Mortgages:
  First and Second Residential.$116,173    $114,441    $127,547
  Commercial and Industrial....  64,589      48,411      35,842
  Construction and Land
   Development.................   5,337       5,405       8,388
  Agricultural.................   8,400       7,147       7,752
Commercial and Industrial......  10,075       9,109       9,141
Consumer.......................  11,089       5,416       7,649
Agricultural...................     478         516         569
Other..........................   8,929       8,315       6,172
                               _________   _________   __________
   Total Loans................. 225,070     198,760     203,060
Add: Unamortized Premium on
     Purchased Loans...........     371         358         558
Less: Unearned Income..........     (60)        (53)        (37)
                               _________   _________   __________
   Loans (Net of Unearned
      Income)..................$225,381    $199,065    $203,581
                               =========   =========   ==========

<CAPTION>
                                           December 31,
                             ____________________________________
      (In thousands)             2000        1999
                               _________   _________
<S>                               <C>         <C>
Real Estate Mortgages:
  First and Second Residential.$105,903    $103,264
  Commercial and Industrial....  39,126      34,332
  Construction and Land
   Development.................   4,868       5,943
  Agricultural.................   8,763       6,355
Commercial and Industrial......   9,446       7,571
Consumer.......................   8,854       8,725
Agricultural...................     987       2,073
Other..........................   8,080       6,653
                               _________   _________
   Total Loans................. 186,027     174,916
Add: Unamortized Premium on
     Purchased Loans...........       -           -
Less: Unearned Income..........     (46)        (62)
                               _________   _________
   Loans (Net of Unearned
     Income)...................$185,981    $174,854
                               =========   =========
</TABLE>

The loan maturities and interest sensitivity of total loans,
excluding residential real estate mortgages and consumer loans at
December 31, 2003, are as follows:

<TABLE>
<CAPTION>
                                      Years to Maturity*
                            Within    1 - 5    Over
    (In thousands)          1 Year    Years   5 Years   Total
                            _______ ________  _______  _______
<S>                           <C>       <C>     <C>      <C>
Commercial,
  Agricultural and Other....$ 9,673  $10,520  $72,278  $92,471
Construction and Land
   Development..............  5,337        -        -    5,337
                            _______ ________  _______  _______
   Total....................$15,010  $10,520  $72,278  $97,808
                            ======= ========  =======  =======
Fixed Interest Rates........$ 3,519  $ 6,011  $ 9,647  $19,177
Floating or Adjustable
   Interest Rates........... 11,491    4,509   62,631   78,631
                            _______ ________  _______  _______
   Total....................$15,010  $10,520  $72,278  $97,808
                            ======= ========  =======  =======
* Due to interest rate levels, economic conditions and other
relevant factors, it is anticipated that there will be loans that
are repaid prior to their contractual maturity dates.

</TABLE>

NONPERFORMING ASSETS

Nonperforming loans consist of nonaccruing loans and loans 90
days or more past due. Nonaccruing loans are comprised of loans
that are no longer accruing interest income because of apparent
financial difficulties of the borrower.  Interest on nonaccruing
loans is recorded when received only after the past due principal
is brought current and deemed collectible in full. If nonaccrual
loans had been current and in accordance with their original
terms, gross interest income of approximately $113,000 would have
been recorded on such loans for the year ended December 31, 2003,
and $92,000 for the year ended December 31, 2002.  No interest
income was recognized on such loans for the year ended December
31, 2003, and $2,000 was recognized for the year ended December
31, 2002.  At December 31, 2003, total nonperforming loans
amounted to $1,342,000, or 0.6%, of net loans, as compared to
$1,674,000, or 0.8% of net loans, at December 31, 2002.
Historically, the percent of nonperforming loans to net loans as
of December 31, for the previous five-year period, was an average
of 0.9%.  There are no troubled debt restructurings.

At December 31, 2003, the recorded investment in loans that are
considered to be impaired under generally accepted accounting
principles was $2,418,000 as compared to $1,128,000 at December
31, 2002.  The measure of impairment is based on the fair value
of collateral securing these loans.  The related allowance for
loan losses amounted to $373,000 at December 31, 2003, and
$194,000 at December 31, 2002.  The average recorded investment
in impaired loans was $2,022,000 during the year ended December
31, 2003, and $1,242,000 during the year ended December 31, 2002.

<PAGE>

        MANAGEMENT'S DISCUSSION AND ANALYSIS continued

The following shows the summary of nonperforming loans:


<TABLE>
<CAPTION>

                                            December 31,
                                _________________________________
      (In thousands)               2003        2002      2001
                                ________     ________   _________
<S>                                <C>         <C>        <C>
Nonaccruing Loans...............$ 1,334     $ 1,310     $ 1,589
Accruing Loans - 90 days or
  more past due.................      8         364         615
                                ________    ________   __________
  Total Nonperforming
    Loans.......................$ 1,342     $ 1,674     $ 2,204
                                ========    ========   ==========
Nonperforming Loans
  as a % of Net Loans...........     .6%         .8%        1.1%
                                ========    ========   ==========
Allowance for Loan
  Losses as a % of
    Nonperforming Loans.........    148%        108%         86%
                                ========    ========   ==========
<CAPTION>
                                     December 31,
                                _________________________
      (In thousands)               2000       1999
                                ________    ________
<S>                                <C>          <C>
Nonaccruing Loans...............$ 1,625     $ 1,343
Accruing Loans - 90 days or
  more past due.................    164         132
                                ________    ________
  Total Nonperforming
    Loans.......................$ 1,789     $ 1,475
                                ========    ========
Nonperforming Loans
  as a % of Net Loans...........    1.0%         .8%
                                ========    ========
Allowance for Loan
  Losses as a % of
  Nonperforming Loans...........    100%        121%
                                ========    ========
</TABLE>

Foreclosed real estate includes assets acquired through
foreclosure and loans identified as in-substance foreclosures.  A
loan is classified as in-substance foreclosure when Union
National has taken possession of the collateral regardless of
whether formal foreclosure proceedings have taken place.
Foreclosed real estate is valued at fair market value, net of
selling costs, at the time of foreclosure and is included in
other assets.  Gains and losses resulting from the sale or write-
down of foreclosed real estate and income and expenses related to
the operation of foreclosed real estate are recorded in other
expenses.  Foreclosed real estate amounted to $104,000 at
December 31, 2003, and $307,000 at December 31, 2002.  Foreclosed
real estate as of December 31, 2003, consisted of one mixed-use
property.  The foreclosed real estate expense, including cost
write-downs to fair value, which impacted the results of
operations amounted to $46,000 for the year ended December 31,
2003, and $22,000 for the year ended December 31, 2002.

LOAN QUALITY/ALLOWANCE FOR LOAN LOSSES

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

During 2003, an ongoing loan review was performed on selected
portions of the loan portfolio by an independent consultant.
Senior management evaluates credit risk on a quarterly basis, or
more frequently, as circumstances dictate.  At December 31, 2003,
the percent of loans secured by real estate was 86% of the
overall loan portfolio.  Union National's current policy
generally requires that the borrower provide 20% equity for
residential mortgage loans.  However, certain home equity loans
will be made with less than 20% equity and the interest rate on
the loan is adjusted to reflect this increased risk.

The allowance for loan losses at December 31, 2003, increased by
$173,000 over the prior year.  This increase was primarily a
result of increased loan balances.  The ratio of the allowance
for loan losses to net loans was 0.88% at December 31, 2003, as
compared to 0.91% at December 31, 2002.  The overall level of the
allowance for loan losses has increased over the previous five-
year period primarily as a result of loan growth.  During the
same period, the allowance for loan losses to total loans has
declined from 1.02% to 0.88% as a result of increased credit
quality and a decline in delinquencies.  Management believes,
based on information currently available, that the current
allowance for loan losses of $1,985,000 is adequate to meet
potential loan losses.  For



            ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
                                      Years Ended December 31,
                                _________________________________
    (In thousands)                 2003        2002       2001
                                ________     ________   ________
<S>                                 <C>        <C>        <C>
Average Loans Outstanding.......$200,808     $201,976   $186,877
                                ========     ========   ========
Allowance for Loan Losses,
  Beginning of Year.............$  1,812     $  1,893   $  1,787
Loans Charged-Off During Year:
   Real Estate*.................      98          112        133
   Consumer.....................      23           86        167
   Commercial, Industrial
     and Agricultural...........       1          177        240
                                ________     ________   ________
     Total Charge-Offs..........     122          375        540
Recoveries of Loans
  Previously Charged-Off:
   Real Estate*.................       -           53          5
   Consumer.....................      21           52         54
   Commercial, Industrial
     and Agricultural...........       -            5         11
                                ________     ________   ________
    Total Recoveries............      21          110         70
                                ________     ________   ________
     Net Loans Charged-Off......     101          265        470
Provision for Loan Losses
  Charged to Operations.........     274          184        576
                                ________     ________   ________
Allowance for Loan Losses,
  End of Year...................$  1,985     $  1,812   $  1,893
                                ========     ========   ========
Ratio of Net Loans
  Charged-Off to Average
  Loans Outstanding.............    .05%         .13%       .25%
                                ========     ========   ========
Ratio of Allowance for
  Loan Losses to Net Loans
  at End of Year................    .88%         .91%       .93%
                                ========     ========   ========

* During this five-year period, there were no charge-offs or
recoveries of real estate construction loans.

<CAPTION>
                                      Years Ended December 31,
                                _________________________________
    (In thousands)                2000         1999
                                ________     ________
<S>                                 <C>        <C>
Average Loans Outstanding.......$182,728    $ 169,667
                                ========     ========
Allowance for Loan Losses,
  Beginning of Year.............$  1,783     $  1,743
Loans Charged-Off During Year:
   Real Estate*.................     162           72
   Consumer.....................      92           74
   Commercial, Industrial
     and Agricultural...........     169           77
                                ________     ________
     Total Charge-Offs..........     423          223
Recoveries of Loans
  Previously Charged-Off:
   Real Estate*.................       1            -
   Consumer.....................      22           35
   Commercial, Industrial
     and Agricultural...........       7           14
                                ________     ________
    Total Recoveries............      30           49
                                ________     ________
     Net Loans Charged-Off......     393          174
Provision for Loan Losses
  Charged to Operations.........     397          214
                                ________     ________
Allowance for Loan Losses,
  End of Year...................$  1,787     $  1,783
                                ========     ========
Ratio of Net Loans
  Charged-Off to Average
  Loans Outstanding.............    .22%         .10%
                                ========     ========
Ratio of Allowance for
  Loan Losses to Net Loans
  at End of Year................    .96%        1.02%
                                ========     ========

* During this five-year period, there were no charge-offs or
recoveries of real estate construction loans.


</TABLE>
<PAGE>

        MANAGEMENT'S DISCUSSION AND ANALYSIS  continued

2004, management expects loan charge-offs, net of recoveries, to
be comparable to the level of net loan charge-offs for 2003.

The allowance for loan losses is evaluated based on an assessment
of the losses inherent in the loan portfolio.  This assessment
results in an allowance that consists of specific, general and
unallocated components.  The specific component relates to loans
that are classified as impaired.  For such loans, an allowance is
established when the discounted cash flows (or collateral value
or observable market price) of the impaired loan is lower than
the carrying value of that loan.  The general component covers
all other loans and is based on historical loss experience
adjusted for qualitative factors.  An unallocated component is
maintained to cover uncertainties that could affect management's
estimate of probable losses.  The unallocated component of the
allowance reflects the margin of imprecision inherent in the
underlying assumptions used in the methodologies for estimating
specific and general losses in the portfolio.

The following sets forth an allocation of the allowance for loan
losses by category.  The specific allocation in any particular
category may be reallocated in the future to reflect current
conditions.  Accordingly, management considers the entire
allowance to be available to absorb losses in any category.

<TABLE>
<CAPTION>

                              Amount          Percent of Loans
                          (In thousands)      in each Category
                        _________________     __________________
<S>                            <C>                   <C>
December 31, 2003:
 Commercial, Industrial
  and Agricultural...........$  1,091                 43%
 Real Estate-
  Residential Mortgages......     450                 52
 Consumer....................     152                  5
 Unallocated.................     292                  -
                             __________              _____
    Total Allowance for
       Loan Losses...........$  1,985                100%
                             ==========              =====
December 31, 2002:
 Commercial, Industrial
  and Agricultural...........$  1,078                 39%
 Real Estate-
  Residential Mortgages......     231                 58
 Consumer....................     184                  3
 Unallocated.................     319                  -
                             __________              _____
    Total Allowance for
       Loan Losses...........$  1,812                100%
                             ==========              =====
December 31, 2001:
 Commercial, Industrial
  and Agricultural...........$  1,131                 33%
 Real Estate-
  Residential Mortgages......     250                 63
 Consumer....................     266                  4
 Unallocated.................     246                  -
                             __________              _____
    Total Allowance for
       Loan Losses...........$  1,893                100%
                             ==========              =====
December 31, 2000:
 Commercial, Industrial
  and Agricultural...........$    971                 38%
 Real Estate-
  Residential Mortgages......     430                 57
 Consumer....................     129                  5
 Unallocated.................     257                  -
                             __________              _____
    Total Allowance for
       Loan Losses...........$  1,787                100%
                             ==========              =====
December 31, 1999:
 Commercial, Industrial
  and Agricultural...........$    857                 36%
 Real Estate-
  Residential Mortgages......     460                 59
 Consumer....................     142                  5
 Unallocated.................     324                  -
                             __________              _____
    Total Allowance for
       Loan Losses...........$  1,783                100%
                             ==========              =====

</TABLE>

LIQUIDITY

Union National's objective is to maintain adequate liquidity to
fund needs at a reasonable cost and to provide contingency plans
to meet unanticipated funding needs or a loss of funding sources,
while minimizing interest rate risk.  Adequate liquidity provides
resources for credit needs of borrowers, for depositor
withdrawals and for funding corporate operations.  Sources of
liquidity are as follows:

  * proceeds from the sale or maturity of investment securities;

  * overnight correspondent bank borrowings on various credit
    lines and borrowing capacity available from the FHLB;

  * acquisition of brokered certificates of deposit (CDs);

  * payments on loans and mortgage-backed securities; and

  * a growing core deposit base.

Management believes that its core deposits are fairly stable even
in periods of changing interest rates.  Liquidity management is
governed by policies and measured on a quarterly basis.  These
measurements indicate that liquidity generally remains stable and
consistently exceeds the bank's minimum defined level.  There are
no known trends, or any known demands, commitments, events or
uncertainties that will result in, or that are reasonably likely
to result in, liquidity increasing or decreasing in any material
way.

Membership in the FHLB provides the bank with additional
liquidity alternatives such as short- or long-term funding on
fixed- or variable-rate terms.  As of December 31, 2003, the bank
had received long-term advances of $73,874,000 and short-term
advances of $1,000,000 from its available credit of $135,390,000
at the FHLB for purposes of funding loan demand and mortgage-
backed security purchases.  Total outstanding long-term
borrowings at December 31, 2003, had a weighted-average rate of
3.90% and total long-term borrowings of $65,299,000 at December
31, 2002, had a weighted-average rate of 4.68%.  As of December
31, 2003, advances of $9,837,000 are due in 2004 and advances of
$20,000,000 are currently convertible by the FHLB on a quarterly
basis.  The FHLB's convertible fixed-rate advances allow the FHLB
the periodic option to convert to a LIBOR adjustable-rate
advance.  Upon the FHLB's conversion, the bank has the option to
repay the respective advances in full.  See section on Market
Risk - Interest Rate Risk for further analysis of these advances.

As indicated above, another alternative source of liquidity for
Union National is the use of brokered CDs.  As of December 31,
2003, Union National had $2,000,000 in brokered CDs outstanding
that mature in June 2004.

<PAGE>

        MANAGEMENT'S DISCUSSION AND ANALYSIS  continued

           Off-Balance Sheet Arrangements and Aggregate
                     Contractual Obligations

The following table represents Union National's on- and off-
balance sheet aggregate contractual obligations to make future
payments as of December 31, 2003:

<TABLE>
<CAPTION>
(In thousands)    Less Than    1-3      4-5    Over 5
                   1 Year     Years    Years    Years    Total
                 __________  _______  _______  _______  ________
<S>                 <C>       <C>      <C>      <C>       <C>
Time Deposits..... $52,382   $24,669  $10,544  $     -  $ 87,595
Long-Term Debt....   8,837    33,037        -   32,000    73,874
Junior Subordinated
  Debentures......       -         -        -    8,248     8,248
Operating Leases..     122       106       84      228       540
                  _________  _______  _______  _______  ________
 Total............ $61,341   $57,812  $10,628  $40,476  $170,257
                  =========  =======  =======  =======  ========

</TABLE>

In addition, Union National, in the conduct of business
operations, routinely enters into contracts for services.  These
contracts may require payment for services to be provided in the
future and may also contain penalty clauses for the early
termination of the contracts.  Union National is contracted with
its core date processor for the provision of certain services
including transaction processing, branch automation and
communication services, trust processing, ATM processing and
other various services.  Payments under these contracts amounted
to $747,000 for the year ended December 31, 2003.  Future
payments under these contracts will vary based on transaction and
account volumes and may also reflect inflationary cost
adjustments.  The majority of this contract expires in November
2008 and any early termination will require the payment of a
substantial penalty.  Management is not aware of any other
commitments or contingent liabilities which may have a material
adverse impact on the liquidity or capital resources of Union
National.

Union National is also party to financial instruments with off-
balance sheet risk in the normal course of business to meet the
financing needs of its customers.  These financial instruments
include commitments to extend credit and standby letters of
credit (See Note 12 for additional details).

INFLATION

Inflation has some impact on Union National's operating costs,
but unlike many other companies, substantially all of Union
National's assets and liabilities are monetary in nature.  As a
result, interest rates have a more significant impact on Union
National's performance than the general level of inflation.
Interest rates do not necessarily move in the same direction or
in the same magnitude as prices of goods and services.  The
effects of changes in interest rates are discussed in the
following section on Market Risk - Interest Rate Risk.

MARKET RISK - INTEREST RATE RISK

As a financial institution, Union National's primary component of
market risk is interest rate volatility.  Fluctuations in
interest rates will ultimately impact the level of income and
expense recorded on a large portion of Union National's assets
and liabilities.  The nature of Union National's current
operations is such that Union National is not subject to foreign
currency exchange or commodity price risk.  Union National does
not own any trading assets.

The objectives of interest rate risk management are to maintain
or increase net interest income over a broad range of market
interest rate movements.  The Asset and Liability Management
Committee is responsible for managing interest rate risk using
policies approved by Union National's Board of Directors.  Union
National manages interest rate risk by changing the mix or
repricing characteristics of its investment securities portfolio
and borrowings from the FHLB and by the promotion or development
of specific loan and deposit products.  Union National retains an
outside consulting group to assist in monitoring its interest
rate risk using a net interest income simulation model on a
quarterly basis.  The simulation model measures the sensitivity
of future net interest income to hypothetical changes in market
interest rates.

In addition, Union National utilizes an interest rate-sensitivity
report called a "GAP" report, which illustrates the time
intervals of cash flows or the next repricing date of interest-
earning assets and interest-bearing liabilities.  Union
National's GAP report at December 31, 2003, reflects a positive
rate-sensitivity position throughout the first year, in that
rate-sensitive assets exceed rate-sensitive liabilities.  The
following analysis reflects cumulative rate-sensitive assets of
$159,919,000, as compared to cumulative rate-sensitive
liabilities of $125,382,000 as of the one-year time frame.  Union
National's cumulative interest-sensitivity gap for the one-year
time frame is 9.8% of total assets at December 31, 2003, as
compared to 14.0% at December 31, 2002. Union National manages
the interest-sensitivity gap for the one-year time frame with a
guideline of plus 15% to negative 15% of total assets.

<PAGE>

        MANAGEMENT'S DISCUSSION AND ANALYSIS  continued

The interest rate sensitivity analysis for Union National with
investment securities at amortized cost at December 31, 2003, is
as follows:

                    INTEREST RATE SENSITIVITY
<TABLE>
<CAPTION>
                          1 - 90   91 - 365    1 - 3     3 - 5
  (In thousands)           Days      Days      Years     Years
                         ________  ________  ________  _________
<S>                         <C>       <C>       <C>       <C>
ASSETS
Earning Assets:
 Mortgage-Backed and Asset-Backed Securities:
  Variable...............$    387  $  1,597  $    140  $      59
  Fixed..................   5,108    16,631    22,059      1,740
 Other Investment
    Securities and
    Other Earning Assets.   6,884     4,836     7,347      9,247
 Net Loans:
  Variable...............  65,507    20,971    27,216     12,686
  Fixed..................  12,497    25,501    35,202     14,227
                         ________  ________  ________  _________
  TOTAL..................$ 90,383  $ 69,536  $ 91,964  $  37,959
                         ========  ========  ========  =========
LIABILITIES
Deposits:
 Interest-Bearing Demand.$    706  $      -  $      -  $       -
 Money Market............  43,653         -         -          -
 Savings.................     408     1,167         -          -
 Time....................  19,993    32,389    24,688     10,525

FHLB Advances and
 Other Borrowings........  20,816     6,250    33,037          -
                         ________  ________  ________  _________
   TOTAL.................$ 85,576  $ 39,806  $ 57,725  $  10,525
                         ========  ========  ========  =========
Cumulative Interest-
 Sensitivity Gap.........$  4,807  $ 34,537  $ 68,776  $  96,210
                         ========  ========  ========  =========
Cumulative Interest-
 Sensitivity Gap as a Percent
 of Total Assets.........     1.4%      9.8%     19.5%      27.3%
                         ========  ========  ========  =========
<CAPTION>
                          Over 5
  (In thousands)           Years     Total
                         ________  ________
<S>                         <C>       <C>
ASSETS
Earning Assets:
 Mortgage-Backed and Asset-Backed Securities:
  Variable...............$      -  $  2,183
  Fixed..................   1,468    47,006
 Other Investment Securities
    and Other
    Earning Assets.......  22,340    50,654
 Net Loans:
  Variable...............       -   126,380
  Fixed..................  11,771    99,198
                          ________ _________
  TOTAL.................. $35,579  $325,421
                          ======== =========
LIABILITIES
Deposits:
 Interest-Bearing Demand. $37,232  $ 37,938
 Money Market............       -    43,653
 Savings.................  29,626    31,201
 Time....................       -    87,595

FHLB Advances and
 Other Borrowings........  32,000    92,103
                          ________ _________
   TOTAL................. $98,858  $292,490
                          ======== =========
Cumulative Interest-
 Sensitivity Gap......... $32,931
                          ========
Cumulative Interest-
  Sensitivity Gap as a Percent
  of Total Assets........     9.4%
                          ========
</TABLE>

The amount of assets and liabilities shown, which reprice or
mature during a particular period, were determined based on the
earlier of when it reprices or when it is to be repaid for each
asset or liability.  Callable investment securities are reflected
based on the security's anticipated call date, where the call on
the security is likely when compared to the current interest rate
yield curve.  Also, loans and mortgage-backed securities are
reflected based on contractual amortization or contractual
interest rate adjustments and on estimates for prepayments and
refinancings based on current market interest rates.  Interest-
bearing demand and savings deposits have always been considered a
stable source of funds, and although the rates are subject to
change, rates on these accounts historically have not changed as
quickly or as often as other loan and deposit rates.  Based on an
historical analysis during periods of rising interest rates, a
portion of these deposits will invest in higher yielding
instruments.  This portion is determined to be sensitive to
interest rate fluctuations in the earliest periods.  Management
believes that the remaining balances of these deposits are not
repriceable based on current industry experience.  Management
currently does not expect to fluctuate the interest rates on
these deposit balances in any significant amount that would
materially affect its GAP or income simulation models.

Certain shortcomings are inherent in the method of analysis
presented in the foregoing schedule.  For example, although
certain assets and liabilities may have similar maturities or
periods to repricing, they may react in different degrees to
changes in market interest rates.  Interest rates on certain
types of assets and liabilities may fluctuate in advance of or
lag behind changes in market interest rates.  Additionally,
certain repriceable assets, such as adjustable-rate securities or
loans, have features like annual and lifetime rate caps or floors
that restrict changes in interest rates both on a short-term
basis and over the life of the asset.  Further, a change in
market interest rates from the interest rate scenarios that
existed on December 31, 2003, would likely cause assumptions,
such as estimated prepayment speeds, refinancings, imbedded
options, early withdrawals and FHLB advance conversion clauses to
significantly change the GAP results above.  Based on current
market interest rates, the $20,000,000 in FHLB convertible
advances that are currently convertible on a quarterly basis will
not convert and are shown in the GAP report above based on their
maturity date.  In addition, as included in the bank's simulation
model these advances will also not convert if market interest
rates increase 2%.

In an effort to assess market risk, Union National utilizes a
simulation model to determine the effect of gradual increases or
decreases in market interest rates on net interest income and net
income.  The aforementioned assumptions are revised based on
defined scenarios of assumed speed and direction changes of
market interest rates.  These assumptions are inherently
uncertain due to the timing, magnitude and frequency of rate
changes and changes in market conditions, as well as management
strategies, among other factors.  Because it is difficult to
accurately quantify into assumptions the reaction of depositors
and borrowers to market interest rate changes, the actual net
interest income and net income results may differ from simulated
results.  While assumptions are developed based upon current
economic and local market conditions, management cannot make any
assurances as to the predictive nature of these assumptions.

The simulation model assumes a hypothetical gradual shift in
market interest rates over a twelve-month period.  This is based
on a review of historical changes in market interest rates and
the level and curve of current interest rates.  The simulated
results represent the hypothetical effects to Union National's
net interest income and net income.  Projections for loan and
deposit growth were ignored in the simulation model.  The
simulation model includes all of Union National's earning assets
and interest-bearing liabilities and assumes a parallel and
prorated shift in interest rates over a twelve-month period.  The
results of the simulation model could change significantly if
there was not a parallel shift in interest rates and there was a
resulting change in the assumed shape of the interest rate yield
curve.  The percentage declines in the table below are measured
as percentage changes from the values of simulated net interest
income in the current rate scenario and the impact of those
changes on the prior year's net income.

<PAGE>

        MANAGEMENT'S DISCUSSION AND ANALYSIS  continued

As a result of the simulation model, the following reflects Union
National's net interest income and net income sensitivity
analysis as of December 31, 2003 and 2002:

                     SENSITIVITY ANALYSIS
<TABLE>
<CAPTION>
                                 Percent Decrease in Categories
                            _____________________________________
                             Market    Market             Market
                            Interest  Interest  Current  Interest
                              Rate      Rate     Market    Rate
                            Decline    Decline Interest Increase
                             of 2%      of 1%    Rates     of 2%
                           __________ _______ _________ _________
<S>                           <C>      <C>     <C>        <C>
Net Interest Income:
 Policy Limit..............   <10%       -         -       <10%
 Hypothetical Percent Decrease
  In Net Interest Income
  from Current Rate Scenario:
   As of December 31, 2003. Not Modeled  -         -         -
   As of December 31, 2002. Not Modeled  -         -         -

Net Income:
 Hypothetical Percent Decrease
  from Prior Year's Net Income:
   As of December 31, 2003. Not Modeled  -         -         -
   As of December 31, 2002. Not Modeled  -         -         -

</TABLE>

As of December 31, 2003 and 2002, only a one-percent decline in
interest rates was modeled based on management's assessment of
potential future interest rate levels.  The preceding schedule
indicates that as of December 31, 2003 and 2002, a hypothetical
1% decline or 2% increase in prevailing market interest rates
would have an immaterial positive impact to Union National's net
interest income and net income.  These computations do not
contemplate any actions management or the Asset Liability
Management Committee could undertake in response to changes in
market conditions or market interest rates.

Union National managed its interest rate risk position in 2003 by
the following:

  * increasing its use of adjustable- and floating-rate loans for
    new or refinanced commercial and agricultural loans;

  * repositioning of its investment security portfolio into
    certain types of mortgage-backed and asset-backed securities
    to better prepare for any future increase in interest rates;

  * managing and expanding the bank's core deposit base including
    deposits obtained in the bank's commercial cash management
    programs and premium money market accounts;

  * additions to or restructuring of fixed-rate advances from the
    FHLB; and

  * the issuance of $8,248,000 in junior subordinated debentures.

The above strategies and actions impact interest rate risk and
are all included in Union National's quarterly simulation models
in order to determine future asset and liability management
strategies.  See the related discussions in the section on Net
Interest Income.

STOCKHOLDERS' EQUITY

Union National and the bank maintain capital ratios that are well
above the minimum total capital levels required by federal
regulatory authorities.  Except as discussed below concerning
Union National's common stock repurchase plan, there are no known
trends or uncertainties, including regulatory matters that are
expected to have a material adverse impact on the capital
resources of Union National for 2004.

On December 19, 2003, the Board of Directors of Union National
authorized and approved a plan to purchase up to 120,000 shares
of its outstanding common stock in open market or privately
negotiated transactions.  The number of shares to be purchased
under the plan represents approximately 4.9% of the outstanding
shares of Union National.  The Board of Directors believes that a
redemption or repurchase of this type is in the best interests of
Union National and its stockholders as a method to enhance long-
term shareholder value.  Currently, the shares are to be held as
treasury shares (issued, but not outstanding shares).

Union National's average stockholders' equity to average assets
ratio, which measures the adequacy of capital, was 8.25% for
2003, as compared to 8.39% for 2002.  The dividend payout ratio,
which represents the percentage of earnings returned to the
stockholders in the form of cash dividends, was 48.9% for 2003
and 46.6% for 2002.

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

Quantitative measures established by regulation to ensure capital
adequacy require Union National and the bank to maintain minimum
amounts and ratios (set forth below) of Tier 1 capital to average
assets and of Tier 1 and total capital (as defined in the
regulations) to risk-weighted assets.  Management believes, as of
December 31, 2003, that Union National and the bank meet all
capital adequacy requirements to which they are subject.

As of December 31, 2003, the most recent notification from the
regulators categorized the bank as "well-capitalized" under the
regulatory framework for prompt corrective action.  There are no
conditions or events since that notification that management
believes have changed the bank's category.




<PAGE>

        MANAGEMENT'S DISCUSSION AND ANALYSIS  continued

Union National and the bank maintained the following regulatory
capital levels and leverage and risk-based capital ratios:

<TABLE>
<CAPTION>
      (In thousands)                 December 31,  December 31,
                                        2003          2002
                                     ____________  ____________
<S>                                      <C>           <C>
Union National Financial Corporation:
____________________________________
Tier I Capital........................$   34,047   $    25,602
Tier II Capital.......................     2,080         1,884
                                      ___________  ____________
   Total Qualifying Capital...........$   36,127   $    27,486
                                      ===========  ============
Risk-adjusted On-balance sheet Assets $  246,617   $   208,261
Risk-adjusted Off-balance sheet
   Exposure...........................    28,271        18,108
                                      ___________  ____________
   Total Risk-adjusted Assets.........$  274,888   $   226,369
                                      ===========  ============
Actual Capital Ratio:
 Tier I Capital to Average Total Assets    10.10%         8.17%
 Minimum Required.....................      4.00          4.00

Risk-based Capital Ratios:
 Tier I Capital Ratio - Actual........     12.39%        11.31%
 Minimum Required.....................      4.00          4.00

 Total Capital Ratio - Actual.........     13.14%        12.14%
 Minimum Required.....................      8.00          8.00

Total Risk-Based Capital in Excess of the
  Minimum Regulatory Requirement......$   14,136   $     9,376
                                      ===========  ============
Union National Community Bank:
______________________________
Tier I - Total Stockholders' Equity...$   29,125   $    24,621
Tier II - Allowance for Loan Losses...     1,985         1,812
                                      ___________  ____________
   Total Qualifying Capital...........$   31,110   $    26,433
                                      ===========  ============
Risk-adjusted On-balance sheet Assets $  245,686   $   207,458
Risk-adjusted Off-balance sheet
   Exposure...........................    28,271        18,108
                                      ___________  ____________
   Total Risk-adjusted Assets.........$  273,957   $   225,566
                                      ===========  ============
Actual Capital Ratio:
 Tier I Capital to Average Total Assets     8.65%         7.88%
 Minimum Required.....................      4.00          4.00
 To Be Well-Capitalized Under Prompt
  Corrective Action Provisions........      5.00          5.00

Risk-based Capital Ratios:
 Tier I Capital Ratio - Actual........     10.63%        10.92%
 Minimum Required.....................      4.00          4.00
 To Be Well-Capitalized under Prompt
  Corrective Action Provisions........      6.00          6.00

 Total Capital Ratio - Actual.........     11.36%        11.72%
 Minimum Required.....................      8.00          8.00
 To Be Well-Capitalized under Prompt
  Corrective Action Provisions........     10.00         10.00

Total Risk-Based Capital in Excess of the
  Minimum Regulatory Requirement......$    9,193   $     8,388
                                      ===========  ============
</TABLE>

Included in Tier 1 regulatory capital of Union National Financial
Corporation detailed above is $8,000,000 of trust capital
securities issued through Union National Capital Trust I, a
wholly-owned subsidiary of Union National.

Union National is subject to restrictions on the payment of
dividends to its stockholders pursuant to the Pennsylvania
Business Corporation Law of 1988, as amended (the BCL).  The BCL
operates generally to preclude dividend payments if the effect
thereof would render Union National insolvent, or result in
negative net worth, as defined.  As a practical matter, Union
National's payment of dividends is contingent upon its ability to
obtain funding in the form of dividends from the bank.  Payment
of dividends to Union National by the bank is subject to the
restrictions set forth in the National Bank Act.  Generally, the
National Bank Act would permit the bank to declare dividends in
2004 of approximately $1,179,000, plus an amount equal to the net
profits of the bank in 2004 up to the date of any such dividend
declaration.

Union National maintains a Dividend Reinvestment and Stock
Purchase Plan. Stockholders of common stock may participate in
the plan, which provides that additional shares of common stock
may be purchased with reinvested dividends and optional cash
payments within specified limits at prevailing market prices.  At
December 31, 2003, the enrollment in the plan was approximately
19% of the shares outstanding.  As of December 31, 2003, 115,828
shares have been issued under Union National's Dividend
Reinvestment and Stock Purchase Plan.  Union National had
approximately 1,403 stockholders (including stockholders of
record and individual participants in security position listings)
at December 31, 2003, and approximately 1,322 stockholders at
December 31, 2002.

<PAGE>

         MANAGEMENT'S DISCUSSION AND ANALYSIS  continued

REGULATORY ACTIVITY

From time to time, various types of federal and state legislation
have been proposed that could result in additional regulation of,
and restrictions on, the business of Union National and the bank.
As a consequence of the extensive regulation of commercial
banking activities in the United States, Union National's and the
bank's business is particularly susceptible to being affected by
federal legislation and regulations that may increase the cost of
doing business.  Specifically, Union National is susceptible to
changes in tax law that may increase the cost of doing business
or impact Union National's ability to realize the value of
deferred tax assets.  Management is not aware of any current
specific recommendations by regulatory authorities or proposed
legislation, which if they were implemented, would have a
material adverse effect upon the liquidity, capital resources or
results of operations.  However, the general cost of compliance
with numerous federal and state laws and regulations does have,
and in the future may have, a negative impact on Union National's
results of operations.

Further, the business of Union National is affected by the state
of the financial services industry in general. The bank is also
routinely examined by the OCC and no material adverse impact is
anticipated on current or future operations and financial
position as a result of this process.

USA PATRIOT Act

On October 26, 2001, the USA Patriot Act of 2001 was enacted.
This act contains the International Money Laundering Abatement
and Financial Anti-Terrorism Act of 2001, which sets forth anti-
money laundering measures affecting insured depository
institutions, broker-dealers and other financial institutions.
The Act requires U.S. financial institutions to adopt new
policies and procedures to combat money laundering and grants the
Secretary of the Treasury broad authority to establish
regulations and to impose requirements and restrictions on the
operations of financial institutions.  Union National has not as
yet fully determined the impact that this act will have on our
operations although the impact is not expected to be material.

Sarbanes-Oxley Act of 2002

On July 30, 2002, the Sarbanes-Oxley Act of 2002 was enacted.
The Sarbanes-Oxley Act represents a comprehensive revision of
laws affecting corporate governance, accounting obligations and
corporate reporting.  The Sarbanes-Oxley Act is applicable to all
companies with equity securities registered or that file reports
under the Securities Exchange Act of 1934.  In particular, the
Sarbanes-Oxley Act established: (i) new requirements for audit
committees, including independence, expertise and
responsibilities; (ii) additional responsibilities regarding
financial statements for the Chief Executive Officer and Chief
Financial Officer of the reporting company; (iii) new standards
for auditors and regulation of audits; (iv) increased disclosure
and reporting obligations for the reporting company and its
directors and executive officers; and (v) new and increased civil
and criminal penalties for violations of the securities laws.
Many of the provisions were effective immediately while other
provisions became effective over a period of time and are subject
to rulemaking by the SEC. Because Union National's common stock
is registered with the SEC, it is currently subject to this Act.

Throughout 2002 and 2003, the SEC and Nasdaq Stock Market issued
new regulations affecting our corporate governance and
heightening our disclosure requirements.  Among the many new
changes this year are enhanced proxy statement disclosures on
corporate governance, stricter independence requirements for the
Board of Directors and its committees, and posting of various SEC
reports on our website.  The full impact of the Sarbanes-Oxley
Act and the increased costs related to Union National's
compliance are still uncertain and evolving.

We cannot predict what other legislation might be enacted or what
regulations might be adopted, or if enacted or adopted, the
effect thereof on our operations.

<PAGE>

                            BOARD OF DIRECTORS


Nancy Shaub Colarik
Retired

William E. Eby
Retired

Mark D. Gainer
President/CEO, Union National Financial Corporation and Union
National Community Bank

James R. Godfrey
President, HealthGuard of Lancaster

Carl R. Hallgren, Esq.
Attorney-Treasurer, Morgan, Hallgren, Croswell and Kane P.C.

William M. Nies
Real Estate Developer/Sales L.M.S. Commercial Real Estate

Darwin A. Nissley
Partner, Nissley Brothers

Lloyd C. Pickell
Lloyd C. Pickell, PA

Benjamin W. Piersol, Jr., R.Ph.
Vice President and Co-Owner, Sloan's Pharmacy, Inc.

Daniel H. Raffensperger
President, Continental Press, Inc.

Donald H. Wolgemuth
Partner, Donegal Producers

RETIRED DIRECTORS

Franklin R. Eichler
Treasurer, Clarence Schock Foundation

Frank began his tenure with Union National in 1983.  He retired
from the Financial Corporation in March of 2003, and from the
bank's Board of Directors in December 2003.  Frank held the
position of Vice Chairman on the aforementioned boards and also
chaired the Audit and Human Resources Committees.  Frank
continues to spend much of his time at the Clarence Schock
Foundation, and also enjoys reading and traveling with his wife,
Love.

David G. Heisey
President, David G. Heisey, Inc.

Dave began his tenure with Union National in 1977.  He retired
from the Financial Corporation in October 2003, and from the
bank's Board of Directors in December of 2003.  Dave was very
active in the construction and development business with his
expertise shown in many building projects throughout
Pennsylvania.  He was Chairman of the bank's Property and
Building Committee. Much of Dave's time will be spent continuing
as an avid sportsman and spending time with his family.

<PAGE>

                       Office Locations

COLUMBIA
921 Lancaster Avenue, Columbia, PA 17512

ELIZABETHTOWN
1275 South Market Street, Elizabethtown, PA 17022

HEMPFIELD
190 Stony Battery Road, Landisville, PA 17538

MANHEIM
701 Lancaster Road, Manheim, PA 17545

MANHEIM TWP
38 East Roseville Road, Lancaster, PA 17601

MAYTOWN
100 West High Street, Maytown, PA 17550

MOUNT JOY
101 East Main Street, Mount Joy, PA 17552

www.uncb.com

717-492-2222


<PAGE>

                           EXHIBIT 14
                           __________

              Union National Financial Corporation
                 Directors and Senior Management
                         Code of Ethics

<PAGE>

              UNION NATIONAL FINANCIAL CORPORATION
                DIRECTORS AND SENIOR MANAGEMENT
                       CODE OF ETHICS

     Directors and senior management, including senior financial
officers, hold an important and elevated role in corporate
governance at Union National Financial Corporation.  They are
vested with both the responsibility and authority to protect and
preserve the interests of all of our constituents, including
shareholders, employees, customers and citizens of the
communities in which we conduct business.  The maintenance of
extremely high standards of honest, ethical and impartial conduct
is essential to assure the proper performance of the company's
business and the maintenance of the public's trust.  This Code of
Ethics prescribes the policies and procedures to be employed and
enforced in the operations of Union National Financial
Corporation (the "Company").

          It is your responsibility to comply with the law and
          behave in an ethical manner.  This responsibility
          cannot be delegated or assumed by the company.

          This code cannot anticipate every possible situation or
          cover every topic in detail.  From time-to-time, the
          company may establish compliance programs to address
          specific subjects or you may find certain topics also
          covered by an Employee Handbook.  If you are unclear
          about a situation, seek guidance before taking action.

          The standards in this code do not necessarily take into
          account all legal requirements.  Where more restrictive
          local laws or requirements exist, those take
          precedence.

          Comply with all applicable governmental rules and
          regulations.  Failure to obey laws and regulations
          violates this code and may expose both you and the
          Company to criminal or civil prosecution.  Any
          violation of this code or other compliance programs may
          result in corrective action, up to and including
          termination.  The Company may also seek civil remedies
          from you and even refer criminal misconduct to law
          enforcement agencies.

          You are responsible for reporting suspected violations
          of this code, immediately to Mark D. Gainer, our
          Corporate Compliance Officer.

          If you have a question about a topic covered in this
          code, please review the Employee Handbook.  If you
          still have a concern regarding any possible unethical
          or illegal conduct, please contact Mark D. Gainer, our
                                            _______________
          Corporate Compliance Officer.

<PAGE>

Conflicts of Interest
_____________________

     A "conflict of interest" exists any time one faces a choice
between what is in his/her personal interest (financial or
otherwise) and the interest of our Company.  These situations are
not always easy to avoid.  When a conflict of interest arises, it
is important to act with great care to avoid even the appearance
that your actions are not in the best interest of the Company.
If you find yourself in a position where your objectivity may be
questioned because of individual interest or family or personal
relationships, notify Mark D. Gainer, our Corporate Compliance
                      ______________
Officer, immediately.

Ownership Interests
___________________

     Board of Directors approval is required for our Company to
do business with a company in which a senior officer or family
member owns - directly or indirectly - an interest.  If you or a
family member own or acquire an interest that is greater than 5%
in any company, Board approval is needed.

            Gifts, Meals, Services and Entertainment

     One should not request or accept anything that might be used
as a means to influence, or even appear to influence, you against
the Company's best interests.  Personal gifts should not be
accepted other than those considered common business courtesies
and for which one would reasonably expect to give something
similar in return in the normal course of business.  One must not
accept or give any gift in excess of $100 in value without the
prior approval of Mark D. Gainer, our Compliance Officer.
                 _______________

    Safeguarding Company Assets/Accuracy of Books And Records

     We maintain internal controls to provide direction on
protecting Company assets and financial accountability.  The
controls are based upon the following principles.

DO NOT:
          * Make personal use of Company assets that creates
            additional costs for the Company, interferes with
            work duties or violates any Company policy;

          * Allow Company property to be used to help carry out
            illegal acts;

          * Manipulate financial accounts, records or reports for
            personal gain;

          * Maintain off-the-book accounts to facilitate
            questionable or illegal payments; or

          * Violate any law or regulation.

<PAGE>

DO:
          * Prepare project budget proposals with accurate
            information;

          * Maintain books, accounts and records according to
            generally accepted accounting principles, using
            enough detail to reflect accurately and fairly
            Company transactions;

          * Record transactions in a timely manner, so that no
            misleading financial information is created.  (These
            transactions include, but are not limited to, income,
            expense, indebtedness, obligation, reserves and
            acquisition or disposition of assets, etc.);

          * Retain Company records in accordance with established
            policies and applicable legal and regulatory
            requirements; and

          * Give full, fair, accurate, timely, and understandable
            disclosure in any and all periodic reports filed with
            the United States Securities and Exchange Commission.

Insider Trading
_______________

     Insider trading is a crime that can carry severe penalties.
If you know material, confidential information about our Company
or any company with whom we have a business relationship and you
trade company securities, such as stocks or bonds, while in
possession of that information or tell others about it before it
is made public, you may have violated the insider trading laws.
Please review the Company's Insider Trading Policy for details on
our insider trading policy.

     Material information is the type of news that would affect a
reasonable investor's decision on whether or not to invest in the
Company's stock.  Examples include plans to issue securities,
sharp changes in earnings patterns, changes in dividend rates,
changes in key management personnel, mergers, acquisitions, and
important regulatory actions affecting the Company.  This policy
forbids you from trading not only in our stock, but also in those
of our suppliers, customers or other companies with whom we have
a business relationship while in possession of material inside
information learned in the course of your employment at our
Company.

     We encourage you to invest in our stock.  However, if you
have access to any information not readily available to the
public, you must be sure you do not trade while in possession of
material non-public information.  When you have such information:

          Do not tell anyone not authorized to have the
          information.  A casual remark to a friend may find its
          way to a broker and eventually to the entire financial
          community thereby requiring the Company to make a
          premature or unplanned public announcement.  This
          "tipping" may be illegal and damaging to the Company.

<PAGE>

          Do not trade in our Company's stock (or that of an
          applicable outside company) until the news has been
          made public.  Circumstances suggesting the possibility
          of insider trading may result in an investigation by
          governmental authorities of Company and stockbroker
          records of stock trading transactions.  This
          investigation could damage the Company's reputation and
          result in liability or penalties, including criminal
          charges and fines against you.

          This policy against insider trading also covers
          transfers into and out of Company stock or savings
          plans and changes in patterns involving purchases of
          our stock within the plans.  However, generally,
          regular scheduled monthly purchases of our stock within
          plans are not prohibited.

If you are planning to effect a transaction in our securities,
you must contact Charles R. Starr, our Insider Trading Officer,
                 ________________
in advance.

Bribery, Kickbacks And Other Improper Payments
______________________________________________

     Our Company and its officers must maintain high ethical and
professional standards in all dealings.

          Do not directly or indirectly promise, offer or make
          payment in money or anything of value to anyone,
          including a government official, agent or employee of a
          government, political party, labor organization or
          business entity or a candidate of a political party,
          with the intent to induce favorable business treatment
          or to improperly affect business or governmental
          decisions.

          Our code does not necessarily take into account all
          local legal requirements.  Where more restrictive local
          laws exist, those take precedence.  In general, we do
          not consider ordinary and reasonable business
          entertainment or gifts of insubstantial value that are
          customary and legal in the local market to be improper.

          Document any entertainment of and gifts to customers,
          vendors, suppliers and potential customers, vendors and
          suppliers.

          Loans are made by our banking subsidiaries and comply
          with all federal and state laws, statutes and
          regulations.  These loans are subject to Reg O and
          require approval by Board of Directors.

<PAGE>

                         ACKNOWLEDGMENT

     I, the undersigned, hereby acknowledge that I have received
a copy of the Union National Financial Corporation Directors and
Senior Management Code of Ethics.  I certify that I have reviewed
the Code of Ethics, I have had an opportunity to ask questions;
and I understand its provisions and what they require of me.  I
understand that a violation of the Code of Ethics may result in
the termination of my employment or a request that I terminate my
relationship with the Company.

________________                          ____________________
Date                                      Signature

                                          ____________________
                                          Print Name and Title

<PAGE>

                          EXHIBIT 21
                          __________

               SUBSIDIARIES OF THE REGISTRANT

<PAGE>

                          EXHIBIT 21
                          __________

             UNION NATIONAL FINANCIAL CORPORATION
                SUBSIDIARIES OF REGISTRANT

Subsidiary                           Incorporation
__________                           _____________

Union National Community Bank        National Banking Association

Union National Capital Trust I       Delaware Statutory Trust

<PAGE>

                          EXHIBIT 23.1
                          ____________

   Consent of Beard Miller Company LLP, Independent Auditors

<PAGE>

                          EXHIBIT 23.1
              CONSENT OF BEARD MILLER COMPANY LLP
                     INDEPENDENT AUDITORS

Regarding:

Registration Statements, File No. 33-80093, 333-8073, 333-27837
and 333-107326

     We consent to the incorporation by reference in the above
listed Registration Statements of our report dated January 23,
2004, relating to the consolidated financial statements of Union
National Financial Corporation incorporated by reference in its
Annual Report (Form 10-K) for the year ended December 31, 2003.

                       /s/ BEARD MILLER COMPANY LLP

Harrisburg, Pennsylvania
March 24, 2004

<PAGE>

                          EXHIBIT 31.1

         Rule 13a-14(a)/15d-14(a) Certification of CEO

<PAGE>

                          EXHIBIT 31.1
         RULE 13A-14(A)/15D-14(A) CERTIFICATION OF CEO

I, Mark D. Gainer, President/CEO, certify, that:
     1.  I have reviewed this annual report on Form 10-K of Union
National Financial Corporation.

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

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

     4.  Union National's other certifying officer and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the registrant and we have:
          (a)  designed such disclosure controls and procedures,
or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual
report is being prepared;

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

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

     5.  Union National's other certifying officer and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent function):
           (a)  all significant deficiencies and material
weaknesses in the design or operation of the internal control
over financial reporting which are reasonably likely to adversely
affect the registrant's ability to record, process, summarize and
report financial information; and

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

                              By /s/ Mark D. Gainer
                                 ___________________
                                     President/CEO
                               Date: March 30, 2004

<PAGE>

                         EXHIBIT 31.2
                         ____________

         Rule 13a-14(a)/15d-14(a) Certification of CFO

<PAGE>

                         EXHIBIT 31.2
          RULE 13A-14(A)/15D-14(A) CERTIFICATION OF CFO

I, Clement M. Hoober, Treasurer/CFO, certify, that:
     1.  I have reviewed this annual report on Form 10-K of Union
National Financial Corporation.

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

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

     4.  Union National's other certifying officer and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the registrant and we have:
          (a)  designed such disclosure controls and procedures,
or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual
report is being prepared;

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

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

     5.  Union National's other certifying officer and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent function):
           (a)  all significant deficiencies and material
weaknesses in the design or operation of the internal control
over financial reporting which are reasonably likely to adversely
affect the registrant's ability to record, process, summarize and
report financial information; and

           (b)  any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls over financial reporting.
                                     By   /s/ Clement M. Hoober
                                        _____________________
                                          Treasurer/CFO

                                     Date: March 30, 2004

<PAGE>

                         EXHIBIT 32

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

<PAGE>

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


     In connection with the annual report of Union National
Financial Corporation on Form 10-K for the period ending December
31, 2003, as filed with the Securities and Exchange Commission
(the "Report"), I, Mark D. Gainer, President/CEO, and I, Clement
M. Hoober, Treasurer/CFO, certify, pursuant to 18 U.S.C. Section
1350, as added pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that:

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

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


                          By    /s/ Mark D. Gainer
                             __________________
                                 President/CEO

                          Date: March 30, 2004


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

                           Date: March 30, 2004

<PAGE>