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, 2007





OR





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





For
      the
      transition period from __________  to __________




Commission
      file number  0-19214





**UNION
      NATIONAL FINANCIAL CORPORATION**


(Exact
      Name of Registrant as Specified in its Charter)


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





(717)
      492-2222


(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)




Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act. Yes o No x





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act. Yes oNo x





Note
      -
      Checking the box above will not relieve any registrant required to file reports
      pursuant to Section 13 or Section 15(d) of the Exchange Act from their
      obligations under those sections.





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 xNo o





Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K (§229.405 of this chapter) 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 a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      the definitions of “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act. (Check One)


Large
                  accelerated filero
              Accelerated
                  fileroNon-accelerated
                  filerx
              Smaller
                  reporting companyo





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


Yes
o
      No x





The
      aggregate market value of the shares of Common Stock of the Registrant held
      by
      nonaffiliates of the Registrant was $35,775,830 as of June 30, 2007. As of
      March
      27, 2008 the Registrant had approximately 2,547,987 shares of Common Stock
      outstanding.





DOCUMENTS
      INCORPORATED BY REFERENCE:





Certain
      portions of Union National Financial Corporation’s Annual Report to Shareholders
      for the year ended December 31, 2007, are incorporated by reference into Parts
      I, II and IV of this Annual Report on Form 10-K. Certain portions of Union
      National Financial Corporation's Proxy Statement to be filed in connection
      with
      its 2008 Annual Meeting are incorporated by reference in response to Parts
      II
      and III of this Annual Report on Form 10-K. However, any information in Union
      National Financial Corporation’s Annual Report to Shareholders and Proxy
      Statement that is not required to be included in this Annual Report on Form
      10-K
      shall not be deemed to be incorporated herein or filed with the Securities
      and
      Exchange Commission.








UNION
      NATIONAL FINANCIAL CORPORATION


FORM
      10-K


INDEX


PAGE
                    NO.PART
                    IItem
                    1 -
                
                Business
                
                4Item
                    1A -
                
                Risk
                    Factors
                
                11Item
                    1B -
                
                Unresolved
                    Staff Comments
                
                18Item
                    2 -
                
                Properties
                
                18Item
                    3 -
                
                Legal
                    Proceedings
                
                21Item
                    4 -
                
                Submission
                    of Matters to a Vote of Security Holders
                
                21PART
                    IIItem
                    5 -
                
                Market
                    for Registrant's Common Equity, Related Stockholder Matters and
                    Issuer
                    Purchases of Equity Securities
                
                22Item
                    6 -
                
                Selected
                    Financial Data
                
                25Item
                    7 -
                
                Management's
                    Discussion and Analysis ofFinancial
                    Condition and Results of Operations
                
                25Item
                    7A-
                
                Quantitative
                    and Qualitative Disclosure About Market Risk
                
                25Item
                    8 -
                
                Financial
                    Statements and Supplementary Data
                
                25Item
                    9 -
                
                Changes
                    In and Disagreements With Accountants on Accounting and Financial
                    Disclosure
                
                25Item
                    9A(T) -
                
                Controls
                    and Procedures
                
                25Item
                    9B -
                
                Other
                    Information
                
                26PART
                    IIIItem
                    10 -
                
                Directors,
                    Executive Officers, and Corporate Governance
                
                27Item
                    11 -
                
                Executive
                    Compensation
                
                27Item
                    12 -
                
                Security
                    Ownership of Certain Beneficial Owners and Management and Related
                    Stockholder Matters
                
                27Item
                    13 -
                
                Certain
                    Relationships and Related Transactions, and Director
                    Independence
                
                27Item
                    14 -
                
                Principal
                    Accountant Fees and Services
                
                28PART
                    IVItem
                    15 -
                
                Exhibits,
                    Financial Statement Schedules
                
                29Signatures
                
                
                
                34Exhibit
                    Index
                
                
                
                36
  2


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




We
      have
      made forward-looking statements in this Annual Report on Form 10-K, and in
      documents that we incorporate by reference, that are subject to risks and
      uncertainties. Forward-looking statements include information concerning
      possible or assumed future results of operations of Union National, its Bank
      subsidiary, 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
      Annual Report on Form 10-K, and in the 2007 Forms 10-Q and Forms 8-K that were
      previously filed, and in the documents that are incorporated by reference,
      could
      affect the future financial results of Union National, its Bank subsidiary,
      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 but are not limited to 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.




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 this Annual Report on Form 10-K and other documents that we
      periodically file with the Securities and Exchange Commission.




3


ITEM
      1 .  BUSINESS .





Union
      National Financial Corporation (“UNFC”), 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. UNFC was incorporated on June 26, 1986, under the Business Corporation
      Law of the Commonwealth of Pennsylvania. UNFC 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. UNFC's business consists primarily of
      managing and supervising Union National Community Bank (“the Bank”), and its
      principal source of income is dividends paid by the Bank. UNFC has three
      wholly-owned subsidiaries: the Bank; Union National Capital Trust I; and, Union
      National Capital Trust II. UNFC’s two trust subsidiaries were formed on December
      19, 2003, and October 23, 2004, respectively, for the purpose of issuing trust
      capital securities. Home
      Team
      Financial, LLC, a subsidiary of the Bank, and its subsidiary, TA of Lancaster,
      LLC (together, “Home Team”) began operations in July 2005, and ceased operations
      in October 2007. Home Team operated a mortgage banking and brokerage business
      and also offered title insurance and settlement services. In accordance with
      agreements between the Bank and the minority interest owners, the Bank’s
      ownership interest in Home Team was 98%, and the Bank’s interest in Home Team’s
      net profits and losses was 30% up until June 30, 2007, and 62.31% thereafter
      until Home Team ceased operating on October 31, 2007. The Bank also has a wholly
      owned subsidiary, Union National Insurance Agency, Inc. formed on May 21, 2001.





Union
      National Community Bank was organized in 1865 under a national bank charter.
      The
      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 the Bank are insured by the Federal Deposit Insurance Corporation to the
      maximum extent permitted by law. 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. The Bank accepts time, demand,
      and
      savings deposits and makes secured and unsecured commercial, real estate and
      consumer loans. The Bank also has a full-service trust department located at
      its
      corporate office center. Through a third party provider affiliation, the Bank
      offers certain non-depository products to its customers to include annuities
      and
      brokerage services.





The
      Bank
      has ten branch locations within Lancaster County, Pennsylvania, including eight
      traditional branch locations and two innovative retail offices featuring our
      Gold Café brand and concept.




UNFC’s
      executive offices are located in its corporate office center at 570 Lausch
      Lane,
      Suite 300, Lancaster, Pennsylvania 17601. Its telephone number is (717)
      492-2222.





The
      Bank
      experiences substantial competition in attracting and retaining deposits and
      in
      lending funds. Financial institutions compete for deposits by offering
      attractive rates and 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.




4




For
      additional information concerning UNFC’s business activities, see Management’s
      Discussion and Analysis in Part II, Item 7  of
      this
      Annual Report on Form 10-K.





Supervision
      and Regulation - UNFC





UNFC
      operates in a heavily regulated environment. Changes in laws and regulations
      affecting UNFC and its Bank subsidiary may have an impact on operations. See
      “Supervision and Regulation—Union National Financial Corporation” and
“Supervision and Regulation—Union National Community Bank” below and pages 25
      and 51 of the Annual Report to Shareholders for the year ended December 31,
      2007.





Without
      the prior approval of the Federal Reserve, the Bank Holding Company Act
      prohibits UNFC 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 UNFC from
      engaging in activities 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 UNFC 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, UNFC does not at this time engage in any other permissible
      activities, nor does UNFC have any current plans to engage in any other
      permissible activities in the foreseeable future.





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.




5





There
      are
      various legal restrictions on the extent to which UNFC and its non-bank
      subsidiaries can borrow or otherwise obtain credit from the Bank. In general,
      these restrictions require that any such extensions of credit must be secured
      by
      designated amounts of specified


collateral
      and are limited, as to UNFC or any one of such non-bank subsidiaries, to 10
      percent of the Bank’s capital stock and surplus, and as to UNFC and all such
      non-bank subsidiaries in the aggregate, to 20 percent of the Bank’s capital
      stock and surplus. Further, UNFC and the Bank are prohibited from engaging
      in
      certain tie-in arrangements in connection with any extension of credit, lease
      or
      sale of property or furnishing of services.





Under
      the
      Community Reinvestment Act, the Bank has a continuing and affirmative
      obligation, consistent with its safe and sound operation, to help meet the
      credit needs of its entire community, including low and moderate income
      neighborhoods. However, the Community


Reinvestment
      Act does not establish specific lending requirements or programs for financial
      institutions nor does it limit an institution’s discretion to develop the types
      of products and services that it believes are best suited to its particular
      community. The Community


Reinvestment
      Act also requires:





·
            the
                applicable regulatory agency to assess an institution’s record of meeting
                the credit needs of its community;




·
            public
                disclosure of an institution’s CRA rating;
                and




·
            that
                the applicable regulatory agency provides a written evaluation of
                an
                institution’s CRA performance utilizing a four-tiered descriptive rating
                system.





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 UNFC and its subsidiary. The
      following paragraphs discuss legislative or regulatory changes of potential
      significance to UNFC 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 UNFC's consolidated
      assets, management does not believe that the risk-based capital rules have
      a
      material effect on UNFC's business and capital plans. The Bank has capital
      ratios exceeding the regulatory requirements and meets the Bank regulatory
      criteria to be considered “well capitalized”. For information concerning UNFC’s
      and the Bank’s capital ratios, see Note 15 on page 25 of UNFC's Annual Report to
      Shareholders for the year ended December 31, 2007, which is included in Exhibit
      13 and incorporated herein by reference.




6





Pending
      Legislation .
      Management cannot anticipate what changes Congress may enact or, if enacted,
      their impact on UNFC’s financial position and reported results of operations. As
      a consequence of the extensive regulation of commercial banking activities
      in
      the United States, UNFC’s and the Bank’s businesses may be adversely affected by
      federal and state legislation and regulations that may increase the costs of
      doing business. See also pages 25 and 51 of UNFC's Annual Report to Shareholders
      for the year ended December 31, 2007, which is included in Exhibit 13 and
      incorporated herein by reference.





Effects
      of Inflation .
      Inflation has some impact on UNFC’s and the Bank’s operating costs. Unlike many
      industrial companies, however, substantially all of the Bank’s assets and
      liabilities are monetary in nature. As a result, interest rates have a more
      significant impact on UNFC’s and the 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 UNFC and the 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 the
      Bank’s deposits, loans and investment growth, as well as the rate of interest
      earned and paid, and are expected to affect the Bank's operations in the future.
      The effect of Federal Reserve Board policies and regulations upon the future
      business and earnings of UNFC and the Bank cannot be predicted.





Environmental
      Laws .
      Neither
      UNFC nor the Bank anticipates 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, the 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 the Bank. UNFC
      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 the
      Bank.




7





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 the Bank. Further, the liability has the potential to far exceed the
      original amount of the loan issued by the Bank. Currently, neither UNFC nor
      the
      Bank is a party to any pending legal proceeding pursuant to any environmental
      statute, nor is UNFC or the Bank aware of any circumstances that may give rise
      to liability under any such statute.





Gramm-Leach-Bliley
      Act .
      Gramm-Leach-Bliley permits commercial banks to affiliate with investment banks.
      It also permits bank holding companies which elect financial holding company
      status to


engage
      in
      any type of financial activity, including securities, insurance, merchant
      banking/equity investment and other activities that are financial in nature.
      The
      merchant banking provisions allow a bank holding company to make a controlling
      investment in any kind of company,


financial
      or commercial. These powers allow a bank to engage in virtually every type
      of
      activity currently recognized as financial or incidental or complementary to
      a
      financial activity. A commercial bank that wishes to engage in these activities
      is required to be well capitalized, well managed and have a satisfactory or
      better Community Reinvestment Act rating. Gramm-Leach-Bliley also allows
      subsidiaries of banks to engage in a broad range of financial activities that
      are not permitted for banks themselves. UNFC has not elected financial holding
      company status at this time, however, Gramm-Leach-Bliley enables UNFC and the
      Bank to evaluate new financial activities that would complement the products
      already offered to enhance non-interest income.





Sarbanes-Oxley
      Act of 2002 .
      The
      Sarbanes-Oxley Act of 2002 implemented a broad range of corporate governance,
      accounting and reporting measures for companies that have securities registered
      under the Exchange Act, including publicly-held bank holding companies. The
      more
      significant reforms of the Sarbanes-Oxley Act of 2002 include: (1) new
      requirements for audit committees, including independence, expertise, and
      responsibilities; (2) certification of financial statements by the Chief
      Executive Officer and Chief Financial Officer of the reporting company; (3)
      new
      standards for auditors and regulation of audits, including independence
      provisions that restrict non-audit services that accountants may provide to
      their audit clients; (4) increased disclosure and reporting obligations for
      the
      reporting company and their directors and executive officers, including
      accelerated reporting of stock transactions and a prohibition on trading during
      pension blackout periods; and (5) a range of new and increased civil and
      criminal penalties for fraud and other violations of the securities laws.
      Section 404 of the Sarbanes-Oxley Act required UNFC to include in its Annual
      Report of Form 10-K a report on management’s assessment of the effectiveness of
      internal control over financial reporting as of December 31, 2007. To support
      our report on the internal control over financial reporting, we used contracted,
      independent internal audit services to identify, document and test key controls
      over the financial reporting process. The external and internal costs associated
      with complying with the provisions of Section 404 were approximately $125,000
      pre-tax for the year ended December 31, 2007.




8





USA
      Patriot Act .
      The
      Uniting and Strengthening America by Providing Appropriate Tools Required to
      Intercept and Obstruct Terrorism Act of 2001 (USA Patriot Act) imposes
      additional obligations on financial institutions, including banks and
      broker-dealer subsidiaries, to implement policies, procedures and controls
      which
      are reasonably designed to detect and report instances of money laundering
      and
      the financing of terrorism. In addition, provisions of the USA Patriot Act
      require the federal financial institution regulatory agencies to consider the
      effectiveness of a financial institution’s anti-money laundering activities when
      reviewing bank mergers and bank holding company acquisitions.





As
      a
      public company, UNFC is subject to the Securities and Exchange Commission’s
      rules and regulations relating to periodic reporting, proxy solicitation and
      insider trading.





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 the Bank is the Office of the Comptroller
      of
      the Currency, which regulates and examines the 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.




9





As
      a
      subsidiary of a bank holding company, the 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 Bank’s
      business. It cannot be predicted whether any such legislation will be adopted
      or, if adopted, how such legislation would affect the Bank’s business. As a
      consequence of the extensive regulation of commercial banking activities in
      the
      United States, the 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 33
      through 52 of UNFC’s Annual Report to Shareholders for the year ended December
      31, 2007.





Employees .
      As of
      March 27, 2008, the Bank had 132 full-time employees and 21 part-time employees.
      None of these employees is represented by a collective bargaining agent, and
      UNFC 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 Michael D. Peduzzi, Treasurer/Chief
      Financial Officer at P.O. Box 567, 101 E. Main Street, Mount Joy, PA 17552-0567.
      (The information found on the corporation’s website does not constitute a part
      of this or any other report.)





10




ITEM
      1A .  RISK
      FACTORS.





An
      investment in UNFC’s common stock is subject to risks inherent to our business.
      The material risks and uncertainties that management believes affect us are
      described below. Before making an investment decision, you should carefully
      consider the risks and uncertainties described below together with all of the
      other information included or incorporated by reference in this report. The
      risks and uncertainties described below are not the only ones facing us.
      Additional risks and uncertainties that we not aware of or focused on or that
      we
      currently deem immaterial may also impair our business operations. This report
      is qualified in its entirety by these risk factors.





If
      any of
      the following risks actually occur, our financial condition and results of
      operations could be materially and adversely affected. If this were to happen,
      the value of our common stock could decline significantly, and you could lose
      all or part of your investment.





*We
      are Subject to Interest Rate Risk, and Variations in Interest Rates May
      Negatively Affect our Financial Performance.*





Changes
      in the interest rate environment may reduce profits. Our primary source of
      income is the differential or "spread" between the interest earned on loans,
      securities and other interest-earning assets, and interest paid on deposits,
      borrowings and other interest-bearing liabilities. As prevailing interest rates
      change, net interest spreads are affected by the difference between the
      maturities and repricing characteristics of interest-earning assets and
      interest-bearing liabilities. In addition, loan volume and yields are affected
      by market interest rates on loans, and rising interest rates generally are
      associated with a lower volume of loan originations. Substantial decreases
      in
      the general level of interest rates may reduce our net interest spread and
      margin as a substantial portion of our wholesale borrowings are at fixed
      interest rates. An increase in the general level of interest rates may also
      adversely affect the ability of certain borrowers to pay the interest on and
      principal of their obligations. Although we believe we have implemented
      effective asset and liability management strategies to reduce the potential
      effects of changes in interest rates on the results of operations, any
      substantial, unexpected, prolonged change in market interest rates could have
      a
      material adverse effect on our net interest spread, asset quality, loan
      origination volume and overall profitability.





*We
      are Subject to Lending Risk*





There
      are
      inherent risks associated with our lending activities. These risks include,
      among other things, the impact of changes in interest rates and changes in
      the
      economic conditions in the markets where we operate as well as those across
      the
      Commonwealth of Pennsylvania and the United States. As noted above, increases
      in
      interest rates and/or weakening economic conditions could adversely impact
      the
      ability of borrowers to repay outstanding loans or the value of the collateral
      securing these loans. We are also subject to various laws and regulations that
      affect our lending activities. Failure to comply with applicable laws and
      regulations could subject us to regulatory enforcement action that could result
      in the assessment of significant civil money penalties.





As
      of
      December 31, 2007, approximately 58% of our loan portfolio consisted of
      commercial, industrial, agricultural, construction, and commercial and
      agricultural real estate loans. Because our loan portfolio contains a
      significant number of commercial, industrial, agricultural, construction, and
      commercial and agricultural real estate loans with relatively large balances,
      the deterioration of one or a few of these loans could cause a significant
      increase in non-performing loans. An increase in non-performing loans could
      result in a net loss of earnings from these loans, an increase in the provision
      for loan and lease losses and an increase in loan charge-offs, all of which
      could have a material adverse effect on our financial condition and results
      of
      operations.




11





*Our
      Allowance for Loan and Lease Losses May Be Insufficient*





Our
      loan
      customers may not repay their loans according to their terms, and the collateral
      securing the payment of their loans may be insufficient to assure repayment.
      We
      maintain an allowance for loan and lease losses, which is a reserve established
      through a provision for losses charged to expense that represents our best
      estimate of probable losses that have been incurred within the existing
      portfolio of loans and leases (“loans”). The allowance, in our judgment, is
      necessary to reserve for estimated loan losses and risks inherent in the loan
      portfolio. The level of the allowance reflects our continuing evaluation of
      industry concentrations; specific credit risks; loan loss experience; current
      loan portfolio quality; present economic, political and regulatory conditions;
      and unidentified losses inherent in the current loan portfolio. The
      determination of the appropriate level of the allowance for loan losses
      inherently involves a high degree of subjectivity and requires us to make
      significant estimates of current credit risks and future trends, all of which
      may undergo material changes. Changes in economic conditions affecting
      borrowers, new information regarding existing loans, identification of
      additional problem loans and other factors, both within and outside of our
      control, may require an increase in the allowance for loan losses. In addition,
      bank regulatory agencies periodically review our allowance for loan losses
      and
      may require an increase in the provision for loan losses or the recognition
      of
      further loan charge-offs, based on judgments different than ours. Also, if
      charge-offs in future periods exceed the allowance for loan losses, we will
      need
      additional provisions to increase the allowance for loan losses. Any increases
      in the allowance for loan losses will result in a decrease in net income and,
      possibly, capital, and may have a material adverse effect on our financial
      condition and results of operations.





*We
      are Subject to Extensive Government Regulation and Supervision*





We
      are subject to extensive federal and state regulation and supervision. Banking
      regulations are primarily intended to protect depositors’ funds, federal deposit
      insurance funds and the banking system as a whole, not shareholders. These
      regulations affect our lending practices, capital structure, investment
      practices, dividend policy and growth, among other things. Congress and federal
      regulatory agencies continually review banking laws, regulations and policies
      for possible changes. Changes to statutes, regulations or regulatory policies,
      including changes in interpretation or implementation of statutes, regulations
      or policies, could affect us in substantial and unpredictable ways. Such changes
      could subject us to additional costs, limit the types of financial services
      and
      products we may offer, and/or increase the ability of non-banks to offer
      competing financial services and products, among other things. Failure to comply
      with laws, regulations or policies could result in sanctions by regulatory
      agencies, civil money penalties, and/or reputation damage, which could have
      a
      material adverse effect on our business, financial condition, and results of
      operations. While we have policies and procedures designed to prevent any such
      violations, there can be no assurance that such violations will not occur.
      In
      addition, we are subject to changes in federal and state tax laws, accounting
      principles, and governmental economic and monetary policies. We cannot predict
      whether any of these changes may adversely and materially affect us. Compliance
      with the various statutes and other regulations increases our expense, requires
      management's attention, and can be a disadvantage from a competitive standpoint
      with respect to non-regulated competitors.




12




*We
      May Not be Able to Successfully Manage Growth*





During
      the last five years, we have experienced significant growth. Continued quality
      growth is a key aspect of our business strategy. Our ability to continue to
      grow
      depends, in part, upon our ability to:





·
            Identify
                attractive loan and investment opportunities;
                and




·
            Expand
                our core deposit base; and




·
            Obtain
                capital necessary for growth on terms that are
                favorable.





We
      may
      need to expand our market service areas by opening new branch offices and
      attracting deposits to the new locations. We may not be able to successfully
      implement an expansion strategy if attractive locations and opportunities to
      expand in the future cannot be identified. The ability to manage growth
      successfully will also depend upon whether it is possible to maintain capital
      levels adequate to support growth, maintain cost controls and asset quality,
      and
      introduce new products and services. We anticipate that some growth will be
      supported through the generation of additional deposits at existing branch
      locations; however, it may be necessary to raise additional capital through
      other means. Our ability to raise capital through the sale of securities will
      depend primarily upon our financial condition and the condition of financial
      markets at the time, and it may not be possible to obtain additional capital
      in
      the amounts or on terms satisfactory to us. Future growth may be constrained
      if
      we are unable to raise additional capital as needed.





When
      we
      continue to expand by opening new branches, we expect to incur increased
      personnel, occupancy, and other operating expenses. These higher expenses must
      be absorbed while new deposits are beginning to be generated, and there also
      will be a time lag in deploying the new deposits into attractively priced loans
      and other higher yielding earning assets. Thus, our plans to grow aggressively
      could depress earnings in the short run, even if the growth strategy is well
      executed.





*We
      are Subject to Environmental Liability Risk Associated With Lending
      Activities*





A
      significant portion of our loan portfolio is secured by real property. During
      the ordinary course of business, we may foreclose on and take title to
      properties securing certain loans. In doing so, there is a risk that hazardous
      or toxic substances could be found on these properties. If hazardous or toxic
      substances are found, we may be liable for remediation costs, as well as for
      personal injury and property damage. Environmental laws may require us to incur
      substantial expenses and may materially reduce the affected property’s value or
      limit our ability to use or sell the affected property. In addition, future
      laws
      or more stringent interpretations or enforcement policies with respect to
      existing laws may increase our exposure to environmental liability. The
      remediation costs and any other financial liabilities associated with an
      environmental hazard could have a material adverse effect on our financial
      condition and results of operations.




13





*Our
      Profitability Depends Significantly on Economic Conditions in the Commonwealth
      of Pennsylvania*





Our
      success depends primarily on the general economic conditions of the Commonwealth
      of Pennsylvania and the specific local markets in which we operate. Unlike
      larger national or other regional banks that are more geographically
      diversified, we provide banking and financial services to customers primarily
      in
      Lancaster County, PA. The local economic conditions in this area have a
      significant impact on the demand for our products and services as well as the
      ability of our customers to repay loans, the value of the collateral securing
      loans, and the stability of our deposit funding sources. A significant decline
      in general economic conditions, caused by inflation, recession, acts of
      terrorism, outbreak of hostilities or other international or domestic
      occurrences, unemployment, changes in securities markets, or other factors
      could
      impact these local economic conditions and, in turn, have a material adverse
      effect on our financial condition and results of operations.





*We
      Operate In a Highly Competitive Industry and Market Area*





We
      compete for loans, deposits and investment dollars with numerous regional and
      national banks and other community banking institutions, as well as other kinds
      of financial institutions and enterprises, such as securities firms, insurance
      companies, savings associations, credit unions, mortgage brokers, and private
      lenders. Many competitors have substantially greater resources than we do,
      and
      operate under less stringent regulatory environments. The differences in
      resources and regulations may make it harder for us to compete profitably,
      reduce the rates that we can earn on loans and investments, increase the rates
      we must offer on deposits and other funds, and adversely affect our overall
      financial condition and earnings.





Our
      ability to compete successfully depends on a number of factors, including,
      among
      other things:





·
            The
                ability to develop, maintain and build upon long-term customer
                relationships based on top quality service, high ethical standards
                and
                safe, sound assets;




·
            The
                ability to expand our market position;




·
            The
                scope, relevance and pricing of products and services offered to
                meet
                customer needs and demands;




·
            The
                rate at which we introduce new products and services relative to
                our
                competitors;




·
            Customer
                satisfaction with our level of service;
                and




·
            Industry
                and general economic trends.





Failure
      to perform in any of these areas could significantly weaken our competitive
      position, which could adversely affect our growth and profitability. This could,
      in turn, have a material adverse effect on our financial condition and results
      of operations.




14




*Our
      Controls and Procedures May Fail or Be Circumvented*





We
      regularly review and update our internal controls, disclosure controls and
      procedures, and corporate governance policies and procedures. Any internal
      control process and structure, however well designed and operated, can provide
      only reasonable, not absolute, assurances that the internal control objectives
      are met. Any failure or circumvention of our internal controls and procedures,
      or failure to comply with regulations related to controls and procedures, could
      have a material adverse effect on our business, results of operations, and
      financial condition.





*New
      Lines of Business or New Products and Services May Subject Us to Additional
      Risk*





From
      time
      to time, we may implement new lines of business or offer new products and
      services within existing lines of business. There are substantial risks and
      uncertainties associated with these efforts, particularly in instances where
      the
      markets are not fully developed. In developing and marketing new lines of
      business and/or new products and services, we may invest significant time and
      resources. Initial timetables for the introduction and development of new lines
      of business and/or new products or services may not be achieved and price and
      profitability targets may not prove feasible. External factors, such as
      compliance with regulations, competitive alternatives, and shifting market
      preferences, may also impact the successful implementation of a new line of
      business or a new product or service. Furthermore, any new line of business
      and/or new product or service could have a significant impact on the
      effectiveness of our system of internal controls. Failure to successfully manage
      these risks in the development and implementation of new lines of business
      or
      new products or services could have a material adverse effect on our business,
      results of operations, and financial condition.





*We
      Rely On Dividends from Our Subsidiaries for Most of Our
      Revenue*





Union
      National Financial Corporation is a separate and distinct legal entity from
      its
      subsidiaries. It receives substantially all of its revenue from dividends from
      its subsidiary, Union National Community Bank. These dividends are the principal
      source of funds to pay dividends on our common stock and interest and principal
      on our debt. Various federal and/or state laws and regulations limit the amount
      of dividends that the Bank may pay. Also, our right to participate in a
      distribution of assets upon a subsidiary’s liquidation or reorganization is
      subject to the prior claims of the subsidiary’s creditors. In the event the Bank
      is unable to pay dividends to us, we may not be able to service debt, pay
      obligations, or pay dividends on our common stock. The inability to receive
      dividends from the Bank could have a material adverse effect on our business,
      financial condition, and results of operations.





15




*We
      May Not be Able to Attract and Retain Skilled People*





We
      are a
      customer-focused and relationship-driven organization. Our success depends,
      in
      large part, on our ability to attract and retain key people. We currently have
      employment agreements with certain key executive officers; however, the
      existence of such agreements does not necessarily assure that we will be able
      to
      continue to retain their services. We also maintain bank-owned life insurance
      that would help cover some of the economic impact of a loss of key personnel
      caused by death. The unexpected loss of services of one or more of our key
      personnel could have a material adverse impact on our business because of their
      skills, knowledge of our market, years of industry experience, and the
      difficulty of promptly finding qualified replacement personnel. Competition
      for
      the best people in most activities we engage in can be intense, and we may
      not
      be able to hire people or to retain them.





*Our
      Information Systems May Experience an Interruption or Breach in
      Security*





We
      rely
      heavily on communications and information systems to conduct our business.
      Any
      failure, interruption, or breach in security of these systems could result
      in
      failures or disruptions in our customer relationship management, general ledger,
      deposit, loan, and other systems. While we have policies and procedures designed
      to prevent or limit the effect of the failure, interruption, or security breach
      of our information systems, there can be no assurance that any such failures,
      interruptions, or security breaches will not occur or, if they do occur, that
      they will be adequately addressed. The occurrence of any failures,
      interruptions, or security breaches of our information systems could damage
      our
      reputation, result in a loss of customer business, subject us to additional
      regulatory scrutiny, or expose us to civil litigation and possible financial
      liability, any of which could have a material adverse effect on our financial
      condition and results of operations.





*We
      Continually Encounter Technological Change*





The
      financial services industry is continually undergoing rapid technological change
      with frequent introductions of new technology-driven products and services.
      The
      effective use of technology increases efficiency and enables financial
      institutions to better serve customers and to reduce costs. Our future success
      depends, in part, upon our ability to address the needs of our customers by
      using technology to provide products and services that will satisfy customer
      demands, as well as to create additional efficiencies in our operations. Many
      of
      our competitors have substantially greater resources to invest in technological
      improvements. We may not be able to effectively implement new technology-driven
      products and services or be successful in marketing these products and services
      to our customers. Failure to successfully keep pace with technological change
      affecting the financial services industry could have a material adverse impact
      on our business and, in turn, our financial condition and results of operations.





Technology
      and other changes are allowing parties to complete financial transactions that
      historically have involved banks through alternative methods. For example,
      consumers can now maintain funds that would have historically been held as
      bank
      deposits in brokerage accounts or mutual funds. Consumers can also complete
      transactions such as paying bills and/or transferring funds directly, without
      the assistance of banks. The process of eliminating banks as intermediaries,
      known as “disintermediation,” could result in the loss of fee income, as well as
      the loss of customer deposits and the related income on earning assets that
      could be generated from those deposits. The loss of these revenue streams and
      the possible reduction of deposits as a source of funds could have a material
      adverse effect on our financial condition and results of operations.




16





*We
      are Subject to Claims and Litigation Pertaining to Fiduciary
      Responsibility*





From
      time
      to time, customers may make claims and take legal action pertaining to our
      performance of our fiduciary responsibilities. Whether customer claims and
      legal
      action related to our performance of fiduciary responsibilities are founded
      or
      unfounded, if such claims and legal actions are not resolved in a manner
      favorable to us they may result in significant financial liability and/or
      adversely affect the market perception of us and our products and services
      as
      well as impact customer demand for those products and services. Any financial
      liability or reputation damage could have a material adverse effect on our
      business, which, in turn, could have a material adverse effect on our financial
      condition and results of operations.





*Severe
      Weather, Natural Disasters, Acts of War or Terrorism, and Other External Events
      Could Significantly Impact Our Business*





Severe
      weather, natural disasters, acts of war or terrorism, and other adverse external
      events could have a significant impact on our ability to conduct business.
      Such
      events could affect the stability of our deposit base, impair the ability of
      borrowers to repay outstanding loans, impair the value of collateral securing
      loans, cause significant property damage, result in loss of revenue, and/or
      cause us to incur additional expenses. Severe weather or natural disasters,
      acts
      of war or terrorism, or other adverse external events may occur in the future.
      Although we have established disaster recovery policies and procedures, the
      occurrence of any such event could have a material adverse effect on our
      business, which, in turn, could have a material adverse effect on our financial
      condition and results of operations.





*Our
      Stock Price Can Be Volatile*





Stock
      price volatility may make it more difficult for stockholders to resell common
      stock at times and at prices suitable to their requirements. Our stock price
      can
      fluctuate significantly in response to a variety of factors including, among
      other things:




·
            Actual
                or anticipated variations in our results of operations and financial
                condition;·
            Recommendations
                by securities analysts;·
            Operating
                and stock price performance of other companies that investors deem
                comparable to us;·
            News
                reports relating to trends, concerns, and other issues in the financial
                services industry;·
            Perceptions
                in the marketplace regarding us and/or our competitors;·
            New
                technology used, or services offered, by competitors;




17




·
            Changes
                in government regulations; or·
            Geopolitical
                conditions such as acts or threats of terrorism or military conflicts.





General
      market fluctuations, industry factors, and general economic and political
      conditions and events, such as economic slowdowns or recessions, interest rate
      changes, or credit loss trends, could also cause our stock price to decrease
      regardless of operating results.





*The
      Trading Volume in Our Common Stock is Less Than That of Some Other Financial
      Services Companies*





Our
      common stock is traded on the OTC Bulletin Board and the trading volume is
      less
      than that of some other financial services companies. A public trading market
      having the desired characteristics of depth, liquidity, and orderliness depends
      on the presence in the marketplace of willing buyers and sellers of our common
      stock at any given time. This presence depends on the individual decisions
      of
      investors and general economic and market conditions over which we have no
      control. Given the lower trading volume of our common stock, significant sales
      of the common stock or the expectation of these sales could cause our stock
      price to fall.





*Our
      Articles of Incorporation, By-Laws and Certain Banking Laws May Have an
      Anti-Takeover Effect*





Provisions
      of our articles of incorporation and by-laws, and federal banking laws,
      including regulatory approval requirements, could make it more difficult for
      a
      third party to acquire Union National, even if doing so would be perceived
      to be
      beneficial to our shareholders. The combination of these provisions effectively
      inhibits a non-negotiated merger or other business combination, which, in turn,
      could adversely affect the market price of our common stock.





ITEM
      1B .  UNRESOLVED
      STAFF COMMENTS .





None.





ITEM
      2 .  PROPERTIES .





The
      Bank
      owns five 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. Below is a table containing the location and date of acquisition
      of
      the Bank’s properties. In addition, the Bank leases office space for five branch
      offices and a professional office center (executive offices). The Bank's
      executive offices are located at 570 Lausch Lane, Suite 300, Lancaster,
      Pennsylvania 17601.





18




**PROPERTIES
      OWNED BY UNION NATIONAL COMMUNITY BANK**


Office
                  and Address
              
              Description
                  of Property
              
              Date
                  AcquiredMount
                  Joy Branch Office
              
              Branch
                  Bank, cut limestone and
              
              1911101
                  East Main Street
              
              brick.1995
                  addition is concreteMount
                  Joy, PA17552
              
              over
                  steel construction.Containing
                  approximately22,251
                  sq. ft. of space.MotorBank
                  Branch Office
              
              Drive-up
                  Bank Branch
              
              November
                  197221
                  North Barbara Street
              
              Brick
                  on frame. ContainingMount
                  Joy, PA17552
              
              approximately
                  445 sq. ft. of space.Maytown
                  Branch Office
              
              Branch
                  Bank, brick veneer,
              
              April
                  1972100
                  West High Street
              
              shingled
                  roof with wood trusses.Maytown,
                  PA17550
              
              Containing
                  approximately 4,960 sq. ft.of
                  space.Hempfield
                  Branch Office
              
              Branch
                  Bank
              
              June
                  1979190
                  Stony Battery Road
              
              Brick
                  with wood shingle roof.Salunga,
                  PA17538
              
              Containing
                  approximately4,619
                  sq. ft. of space.Administration
                  Services Center
              
              Brick
                  on concrete block with
              
              December
                  1984Bank
                  Administration Building
              
              wood
                  and steel frame.25
                  North Barbara Street
              
              Containing
                  approximatelyMount
                  Joy, PA17552
              
              12,798
                  sq. ft. of space.Elizabethtown
                  Branch Office
              
              Branch
                  Bank
              
              January
                  19881275
                  South Market Street
              
              Brick
                  veneer, shingled roofElizabethtown,
                  PA17022
              
              with
                  wood trusses.Containing
                  approximately6,808
                  sq. ft. of space.Elizabethtown
                  MotorBank Office
              
              Drive-up
                  Bank
              
              September
                  2001Brick
                  on FrameContaining
                  approximately574
                  sq. ft. of space.Columbia
                  Branch Office
              
              Branch
                  Bank
              
              October
                  1992921
                  Lancaster Avenue
              
              One
                  story brick buildingColumbia,
                  PA17512
              
              containing
                  approximately2,257
                  sq. ft. of space.
  19
  **PROPERTY
        LEASED BY THE BANK**
  Office
                  and Address
              
              Description
                  of Property
              
              Date
                  LeasedManheim
                  Branch Office
              
              Concrete
                  block building
              
              January
                  1995701
                  Lancaster Road
              
              containing
                  4,266 sq. ft.Manheim,
                  PA 17545
              
              of
                  space of which approximately2,600
                  sq. ft. of space iscurrently
                  used for bankingpurposes.Manheim
                  Township Branch Office
              
              Branch
                  Bank
              
              April
                  200338
                  E. Roseville Road
              
              One
                  story brick and metal sidingLancaster,
                  PA 17601
              
              building
                  containing approximately2,000
                  sq. ft. of space.HACC
                  Gold Café
              
              Branch
                  Bank
              
              February
                  20051625
                  Old Philadelphia Pike
              
              One
                  story masonry and brickLancaster,
                  PA 17602
              
              building
                  with metal trusses,containing
                  approximately3,486
                  sq. ft. of space.Union
                  National Professional
              
              Three
                  story masonry, stone and brick
              
              February
                  2006Center
              
              over
                  steel building with concrete floors,570
                  Lausch Lane
              
              containing
                  approximately 27,000 sq. ftLancaster,
                  PA17601
              
              of
                  office space, of which approximately18,000
                  sq. ft. is currently used for bankadministrative
                  purposes and the remainderis
                  sub-leased or available for sub-lease.Centerville
                  Gold Café
              
              Branch
                  Bank
              
              November
                  2006301
                  Centerville Rd.
              
              One
                  story masonry andLancaster,
                  PA 17602
              
              brick
                  building with metal trusses,containing
                  approximately 3,575 sq.ft.
                  of space.Ephrata
                  Branch Office
              
              Branch
                  Bank
              
              April
                  2007108
                  North Reading Road
              
              One
                  story masonry and brickEphrata,
                  PA 17522
              
              building
                  with metal trusses,containing
                  approximately 1,300sq.
                  ft. of 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.




20





ITEM
      3 .  LEGAL
      PROCEEDINGS .





Management,
      after consulting with legal counsel, is not aware of any litigation that would
      have a material adverse effect on the consolidated financial position of UNFC.
      There are no proceedings pending other than ordinary routine litigation incident
      to the business of UNFC and its subsidiary, 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 2007.


21




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 herein by
      reference from the inside front cover of Union National Financial Corporation's
      Annual Report to Shareholders for the year ended December 31, 2007, 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 Annual Report to Shareholders for
      the
      year ended December 31, 2007, and is also available on financial market internet
      websites. This information represents a limited amount of share transfer
      activity.





Union
      National Financial Corporation and, prior to organizing as a bank holding
      company, Union National Community Bank, have paid regular cash dividends on
      their common stock for more than forty years. Given the level of earnings
      realized in 2007, the Board of Directors of Union National Financial Corporation
      believed it prudent to temporarily suspend the payment of dividends to ensure
      that a strong capital position is maintained. Union National Financial
      Corporation expects to restore payment of 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 the holding company by Union National Community Bank.





**Securities
      Authorized for Issuance under Equity Compensation Plans**





The
      following table discloses the number of outstanding options, warrants and rights
      granted by the Corporation to participants in equity compensation plans, as
      well
      as the number of securities remaining available for future issuance under these
      plans, as of December 31, 2007. The table provides this information separately
      for equity compensation plans that have and have not been approved by security
      holders.




(A)(#)
            
            (B)($)
            
            (C)(#)Number
                of SecuritiesNumber
                of Securities
              to
                be Issued Upon Exercise of Outstanding Options, Warrants,and
                Rights
            
            Weighted
                Average Exercise Price of Outstanding Options,
              Warrants,
                and Rights
            
            Remaining
                Available for Future Issuance Under Equity Compensation Plans Excluding
                SecuritiesReflected
                in Column (A)Equity
                Compensation Plans Approved by Shareholders(1)
            
            
            124,439
            
            $
            18.32
            
            
            0Equity
                Compensation Plans Not Approved by Shareholders
            
            
            0
            
            
            0
            
            
            0Totals
            
            
            124,439
            
            $
            18.32
            
            
            0




(1) Includes
      shares issued under Union National Financial Corporation’s 1988 and 1997 Stock
      Incentive Plans, 1997 Stock Purchase Plan (which expired in 2003) and 1997
      Independent Director Plan (expired).




22





Additional
      information required by this item regarding dividend restrictions is
      incorporated herein by reference from Note 15 on page 25 and from page 52 of
      Union National Financial Corporation's Annual Report to Shareholders for the
      year ended December 31, 2007, which is included in Exhibit 13 to this Annual
      Report on Form 10-K.





As
      of
      March 17, 2008, there were approximately 1,372 holders of record of UNFC's
      common stock.





**Issuer
      Purchases of Equity Securities:**





Period
            
            (a)
              Total
                Number of Shares Purchased
            
            (b)
              Average
                Price Paid per Share
            
            (c)
              Total
                Number of Shares Purchased as Part of Publicly Announced Plans or
                Programs*
            
            (d)
              Maximum
                Number of Shares that May Yet Be Purchased Under the Plans or
                Programs*October
                1, 2007 to October 31, 2007
            
            
            0
            
            $
            0.00
            
            
            0
            
            
            49,700November
                1, 2007 to November 30, 2007
            
            
            0
            
            $
            0.00
            
            
            0
            
            
            49,700December
                1, 2007 to December 31, 2007
            
            
            0
            
            $
            0.00
            
            
            0
            
            
            49,700Total
            
            
            0
            
            $
            0.00
            
            
            0




* On
      April
      21, 2005, the Board of Directors of Union National authorized and approved
      a
      plan to purchase up to 100,000 shares of its outstanding common stock in open
      market or privately negotiated transactions.




23




**Union
      National Financial Corporation**










***Period
                Ending******Index***
            
            **12/31/02**
            
            **12/31/03**
            
            **12/31/04**
            
            **12/31/05**
            
            **12/31/06**
            
            **12/31/07**Union
                National Financial Corporation
            
            
            100.00
            
            
            136.60
            
            
            173.96
            
            
            149.85
            
            
            127.38
            
            
            79.37NASDAQ
                Composite
            
            
            100.00
            
            
            150.01
            
            
            162.89
            
            
            165.13
            
            
            180.85
            
            
            198.60Mid-Atlantic
                Custom Peer Group*
            
            
            100.00
            
            
            153.01
            
            
            167.55
            
            
            165.85
            
            
            173.43
            
            
            159.74Custom
                Peer Group**
            
            
            100.00
            
            
            135.22
            
            
            154.80
            
            
            144.22
            
            
            151.74
            
            
            138.01




**Mid-Atlantic
                Custom Peer Group consists of Mid-Atlantic commercial banks with
                assets
                less than $1B.*




***Custom
                Peer Group index consists of ACNB, First Chester County Corporation,
                Leesport Financial Corp.,**Franklin
                Financial Services Corporation, Ephrata National Bank, Orrstown Financial
                Services, Inc.,**DNB
                Financial Corporation, Juniata Valley Financial Corporation, Mid
                Penn
                Bancorp, Inc.,**Codorus
                Valley Bancorp, Inc., and Tower Bancorp
                Incorporated.*





**Source
      : SNL Financial LC, Charlottesville, VA**   **(434)
      977-1600**


**©
      2008**       **** **www.snl.com** ****




24




ITEM
              6.
            SELECTED
                FINANCIAL DATA.





The
      information required by this Item is incorporated herein by reference from
      page
      33 of Union National Financial Corporation's Annual Report to Shareholders
      for
      the year ended December 31, 2007, which is included in Exhibit 13 to this Annual
      Report on Form 10-K.




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 34
      through 52 of Union National Financial Corporation's Annual Report to
      Shareholders for the year ended December 31, 2007, which pages 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 herein by reference from
      pages
      49 and 50 of Union National Financial Corporation's Annual Report to
      Shareholders for the year ended December 31, 2007, 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 herein by reference from
      pages
      4 through 32 of Union National Financial Corporation's Annual Report to
      Shareholders for the year ended December 31, 2007, which pages 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(T).
            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-15(f) under the Exchange Act) was evaluated as of December
      31, 2007. 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.




25





(b)  The Report
      on
      Management’s Assessment of Internal Control over Financial Reporting on page 31
      of the Union National Financial Corporation Annual Report to Shareholders for
      the year ended December 31, 2007 is herein incorporated by
      reference.





(c)  Changes
      in internal controls.





There
      were no changes made in the corporation's internal controls during the period
      covered by this report or, to their knowledge, in other factors that have
      materially affected or are reasonably likely to materially affect these controls
      subsequent to the date of their evaluation.





ITEM
              9B.
            OTHER
                INFORMATION





None.




26


PART
      III





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





The
      information required by this Item is incorporated herein by reference from
      the
      information under the captions “Election of Directors - Information about
      Nominees and Continuing Directors”, “Share Ownership - Executive Officers”,
“Section 16(a) Beneficial Ownership Reporting Compliance”, “Governance of the
      Company - Nomination of Directors” and “Governance of the Company - Meetings and
      Committees of the Board of Directors” of Union National Financial Corporation's
      Proxy Statement for its 2008 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. The code of ethics is incorporated herein
      by
      reference from Exhibit 14 to Union National Financial Corporation’s Annual
      Report on Form 10-K for the year ended December 31, 2003, filed with the
      Commission on March 30, 2004.





ITEM
              11.
            EXECUTIVE
                COMPENSATION.





The
      information required by this Item is incorporated herein by reference from
      the
      information under the captions “Compensation and Plan Information”, “Potential
      Payments Upon Termination or Change-In-Control”, “Compensation Committee Report”
and “Compensation Committee Interlocks and Insider Participation” of Union
      National Financial Corporation's Proxy Statement for its 2008 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 herein by reference from
      the
      information under the caption “Share Ownership” of Union National Financial
      Corporation's Proxy Statement for its 2008 Annual Meeting of Shareholders.
      The
      information related to Equity Compensation Plans as required is incorporated
      herein by reference to Part II, Item 5 of this Annual Report on Form
      10-K.





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





The
      information required by this Item is incorporated herein by reference from
      the
      information under the captions “Transactions with Directors and Executive
      Officers” and “Governance of the Company - Director Independence” of Union
      National Financial Corporation's Proxy Statement for its 2008 Annual Meeting
      of
      Shareholders.




27




ITEM
              14.
            PRINCIPAL
                ACCOUNTING FEES AND SERVICES.





The
      information required by this Item is incorporated herein by reference from
      the
      information under the caption “Report of the Audit Committee” of Union National
      Financial Corporation’s Proxy Statement for its 2008 Annual Meeting of
      Shareholders.




28





PART
      IV





ITEM
              15.
            EXHIBITS,
                FINANCIAL STATEMENT SCHEDULES





(a)
            1.
            Financial
                Statements.




The
      following financial statements are included by reference in Part II, Item 8
      hereof.




Consolidated
      Balance Sheets


Consolidated
      Statements of Income


Consolidated
      Statements of Changes in Stockholders' Equity


Consolidated
      Statements of Cash Flows


Notes
      to
      Consolidated Financial Statements


Report
      of
      Independent Registered Public Accounting Firm




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.)





4
            Rights
                Agreement, dated August 27, 2007, between Registrar and Transfer
                Company
                and Union National Financial Corporation. (Incorporated by reference
                to
                Exhibit 4 to Union National Financial Corporation’s current report on Form
                8-K, filed August 30, 2007.)




10.1
            Union
                National Financial Corporation 1988 Stock Incentive Plan. (Incorporated
                by
                reference to Exhibit 4.3 to Union National Financial Corporation’s
                Registration Statement No. 333-27837 on Form S-8, filed with the
                Commission on May 27, 1997.)




29




10.2
            Union
                National Financial Corporation 1997 Stock Incentive Plan. (Incorporated
                by
                reference to Exhibit 4.5 to Union National Financial Corporation’s
                Registration Statement No. 333-27837 on Form S-8, filed with the
                Commission on May 27, 1997 and incorporated by reference to Amendment
                1 to
                Union National Financial Corporation’s Registration Statement No.
                333-107326 on Form S-8 filed with the commission on July 25,
                2003.)





10.3
            Union
                National Financial Corporation’s Employee Stock Purchase Plan
                (Incorporated by Reference to Exhibit 4.4 to Union National Financial
                Corporation’s Registration Statement No. 333-27837 on Form S-8, filed with
                the Commission on May 27, 1997).





10.4
            Group
                Term Replacement Plan for Certain Officers, CEO, dated January 1,
                2004
                between Mark D. Gainer and Union National Community Bank. (Incorporated
                by
                reference to Exhibit 10.12 to Union National Financial Corporation’s
                Annual Report on Form 10-K, filed with the Commission on March 30,
                2004.)





10.5
            Union
                National Financial Corporation, 1999 Independent DirectorsStock
                Option Plan. (Incorporated by Reference to Exhibit 4.3 toUnion
                National Financial Corporation’s Registration StatementNo.
                333-80739 on Form S-8, filed with the Commission on June15,
                1999.)





10.6
              Board
                  of Director Fees





10.7
            Office
                Lease between Lausch Lane Associates LP as Landlord andUnion
                National Community Bank as Tenant for 570 Lausch Lane,Lancaster,
                PA 17601. (Incorporated by reference to Exhibit 99.1 to Union National
                Financial Corporation’s Current Report of Form 8-K, filed with the
                Commission on May 17, 2005.)





10.8
                Employment
                    agreement between Michael A. Frey, Executive VicePresident
                    and Chief Operating Officer and Union NationalFinancial
                    Corporation and its subsidiary, Union NationalCommunity
                    Bank. (Incorporated by reference to Exhibit 99.1 toUnion
                    National Financial Corporation’s Current Report of Form 8-K,
                    filed with the Commission on June 23,
                    2005.)


10.9
              
              (a)
                  Members Agreement dated as of July 15, 2005 by and among Union
                  National
                  Community Bank, John Neihart, and Kevin Glackin, regarding the
                  formation
                  of Home Team Financial, LLC. (Incorporated by reference to Exhibit
                  10.16
                  (a) to Union National Financial Corporation’s Annual Report on Form 10-K,
                  filed with the Commission on March 31,
                  2006.)
  30
  10.9
              (b)
                  Operating Agreement of Home Team Financial, LLC dated asof
                  July 15, 2005 (Incorporated by reference to Exhibit 10.16 (b) toUnion
                  National Financial Corporation’s Annual Report on Form10-K,
                  filed with the Commission on March 31,
                  2006.)




10.10
            Amended
                and Restated Employment Agreement and Amended and Restated Executive
                Salary Continuation Agreement dated as of December 29, 2006, with
                Mark D.
                Gainer, Chairman, President and Chief Executive Officer. (Incorporated
                by
                reference to Exhibit 10.15 to Union National Financial Corporation’s
                Annual Report on Form 10-K, filed with the Commission on March 28,
                2007.)





10.11
            Office
                Lease dated as of October 30, 2006 between 301 Centerville Road
                Associates, LP as Landlord and Union National Community Bank as Tenant
                for
                301 Centerville Road, Lancaster, PA 17601 (Incorporated by reference
                to
                Exhibit 99.1 to Union National Financial Corporation’s current report on
                Form 8-K, filed with the Commission on November 3,
                2006.)





10.12
            Amended
                and Restated Declaration of Trust of Union National Capital Trust
                II,
                dated as of October 14, 2004, among Union National Financial Corporation,
                as sponsor, the Delaware and institutional trustee named therein,
                and the
                administrators named therein. (Incorporated by reference to Exhibit
                10.15
                to Union National Financial Corporation’s Annual Report on Form 10-K,
                filed with the Commission on March 28,
                2007.)





10.13
            Indenture,
                dated as of October 14, 2004, between Union National Financial
                Corporation, as issuer, and the trustee named therein, relating to
                the
                Junior Subordinated Debt Securities due 2034. (Incorporated by reference
                to Exhibit 10.15 to Union National Financial Corporation’s Annual Report
                on Form 10-K, filed with the Commission on March 28,
                2007.)





10.14
            Guarantee
                Agreement, dated as of October 14, 2004, between Union National Financial
                Corporation and the guarantee trustee named therein. (Incorporated
                by
                reference to Exhibit 10.15 to Union National Financial Corporation’s
                Annual Report on Form 10-K, filed with the Commission on March 28,
                2007.)




31




10.15
            Indenture,
                dated as of July 27, 2006, between Union National Community Bank,
                as
                issuer, and the trustee named therein, relating to the Junior Subordinated
                Debt Securities due 2036. (Incorporated by reference to Exhibit 4
                to Union
                National Financial Corporation’s quarterly  report on Form 10-Q,
                filed with the Commission on August 14,
                2006.)





10.16
            Employment
                Agreement, dated March 8, 2007, between Stephen D. Staman, Executive
                Vice
                President and Chief Revenue Officer and Union National Financial
                Corporation and its subsidiary, Union National Community
                Bank.





10.17
            Complete
                Settlement Agreement and General Release, dated May 4, 2007, between
                Clement M. Hoober and Union National Financial Corporation and its
                subsidiary, Union National Community Banks. (Incorporated by reference
                to
                Exhibit 99.1 to Union National Financial Corporation’s current report on
                Form 8-K, filed with the Commission on May 16,
                2007.)





10.18
            Change
                of Control Agreement, dated September 4, 2007, between Michael D.
                Peduzzi,
                Senior Vice President, Chief Financial Officer and Union National
                Financial Corporation and its subsidiary, Union National Community
                Bank.
                (Incorporated by reference to Exhibit 99.1 to Union National Financial
                Corporation’s current report on Form 8-K, filed with the Commission on
                September 6, 2007.)




13
            Excerpts
                from Union National Financial Corporation’s Annual Report to Shareholders
                for the year ended December 31,
                2007.





14
            Union
                National Financial Corporation Directors and Senior Management Code
                of
                Ethics. (Incorporated by reference to Exhibit 14 to Union National
                Financial Corporation’s Annual Report on Form 10-K, filed with the
                Commission on March 30, 2004.)





21
            Subsidiaries
                of the Union National Financial
                Corporation.





23.1
            Consent
                of Beard Miller Company LLP, Independent Registered Public Accounting
                Firm.





31.1
            Certification
                of Principal Executive Officer Pursuant to Exchange Act Rules
                13a-14(a)/15d-14(a) as added by Section 302 of the Sarbanes-Oxley
                Act of
                2002.




32




31.2
            Certification
                of Principal Financial Officer Pursuant to Exchange Act Rules
                13a-14(a)/15d-14(a) as added by Section 302 of the Sarbanes-Oxley
                Act of
                2002.





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





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





(c)
            NOT
                APPLICABLE.




33


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)Date: March
              31, 2008
            By
            /s/
              Mark
              D. GainerMark
              D. Gainer,Chairman
                of the Board of Directors,
              Chief
                Executive Officer and President




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.




DATEBy  
/s/
              Mark D. Gainer
            
            
            March 31, 2008Mark
                D. Gainer,Chairman
                of the Board of Directors,
              Chief
                Executive Officer, President
              and
                Director (principal executive officer)


By  
              /s/ Michael D. Peduzzi, CPA
            
            
            March 31, 2008Michael
                  D. Peduzzi, CPA,
                Chief
                  Financial Officer (principal
                financial
                  officer and principal
                accounting
                  officer)


By  
              /s/ Stephen D. Staman
            
            
            March 31, 2008Stephen
                D. Staman, Vice President


By   /s/ Donald Cargas,
                Jr.
              
              
              March 31, 2008Donald
                  Cargas, Jr., Director




34


By  /s/
              Nancy M. Shaub
            
            
            March 31, 2008Nancy
                M. Shaub, DirectorBy
            
            
            March 31, 2008/s/
                Kevin Dolan, Director
              Kevin
                Dolan, DirectorBy /s/
              James R. Godfrey
            
            
            March 31, 2008James
                R. Godfrey, DirectorBy  /s/
              Barry C. Huber, CPA
            
            
            March 31, 2008Barry
                  C. Huber, CPA, DirectorBy  /s/
              Thomas J. McGrath, DVM
            
            
            March 31, 2008Thomas
                  J. McGrath, DVM,
                DirectorBy  /s/
              William M. Nies
            
            
            March 31, 2008William
                M. Nies, DirectorBy  /s/
              Darwin A. Nissley
            
            
            March 31, 2008Darwin
                A. Nissley, DirectorBy  /s/
              Lloyd C. Pickell
            
            
            March 31, 2008Lloyd
                C. Pickell, Director


35


**EXHIBIT
      INDEX**


Exhibit
      Number





10.6
            Board
                of Director Fees.





10.16
            Employment
                Agreement, dated March 8, 2007, between Stephen D. Staman,Executive
                Vice President and Chief Revenue Officer and Union NationalFinancial
                Corporation and its subsidiary, Union National Community
                Bank.





13
            Excerpts
                from Union National Financial Corporation’s 2007 AnnualReport
                to Shareholders.





21
            Subsidiaries
                of Union National Financial
                Corporation.





23.1
            Consent
                of Beard Miller Company LLP, Independent Registered Public Accounting
                Firm.




31.1
            Certification
                of Principal Executive Officer Pursuant to Exchange Act Rules
                13a-14(a)/15d-14(a) as
                added by Section 302 of the Sarbanes-Oxley Act of2002.




31.2
            Certification
                of Principal Financial Officer Pursuant to Exchange Act Rules 13a-14(a)/15d-14(a)
                as added by Section 302 of the Sarbanes-Oxley Act of
                2002.





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




36