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Neffs Bancorp, Inc. 10-K

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| DIRECTORS of the CORPORATION and BANK |
|---------------------------------------|
|                                  |   |   |
| Robert B. Heintzelman                 |   | John J. Remaley |
|                                  | Duane A. Schleicher |   |
| Kevin A. Schmidt                      |   | John F. Sharkey, Jr. |
|                                  | John F. Simock |   |
| Dean H. Snyder                        |   | Mary Ann Wagner |

| OFFICERS of the CORPORATION |
|-----------------------------|
|                        |   |   |
| John J. Remaley             |   | Kevin A. Schmidt |
| President                   |   | Vice President |
|                        |   |   |
|                        |   |   |
| David C. Matulevich         |   | Michael J. Bailey |
| Secretary/Treasurer         |   | Assistant Secretary |

| OFFICERS of the BANK                                         |
|--------------------------------------------------------------|
|                                                         |   |   |
| John J. Remaley                                              |   | Kevin A. Schmidt |
| Chairman of the Board                                        |   | President andChief Executive Officer |
|                                                         |   |   |
|                                                         |   |   |
| Michael J. Bailey                                            |   | Carol L. Jones |
| Executive Vice President,Cashier andChief Operations Officer |   | Assistant Cashier andOperations Officer |

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|                                                                                        | PAGE NO. |
|---------------------------------------------------------------------------------------------|----------|
|                                                                                        |     |
| CONSOLIDATED FINANCIAL STATEMENTS:                                                          |     |
|                                                                                        |     |
| Report of Independent Registered Public Accounting Firm                                     | 1        |
|                                                                                        |     |
| Consolidated Statements of Financial Condition                                              | 2        |
|                                                                                        |     |
| Consolidated Statements of Income                                                           | 3        |
|                                                                                        |     |
| Consolidated Statements of Stockholders’ Equity                                       | 4        |
|                                                                                        |     |
| Consolidated Statements of Cash Flows                                                       | 5        |
|                                                                                        |     |
| Notes to Consolidated Financial Statements                                                  | 6        |
|                                                                                        |     |
| Selected Financial Data                                                                     | 30       |
|                                                                                        |     |
| Quarterly Summary of Financial Data                                                         | 31       |
|                                                                                        |     |
| Common Stock Information                                                                    | 32       |
|                                                                                        |     |
| Management’s Discussion and Analysis of Financial Condition and Results of Operations | 33       |

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Report

|   |   | /s/ParenteBeard LLC |
|--------|--------|---------------------|

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|                                                                                                                          |   | December 31,                      |    |
|-------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|---------|
|                                                                                                                          |   | 2009                              |    |   | 2008 |   |
|                                                                                                                          |   | (In Thousands, Except Share Data) |    |
| Assets                                                                                                                        |   |                              |    |   |   |   |
| Cash and cash equivalents                                                                                                     |   | $                                 | 2,187   |   |   | $ | 2,489 |   |
| Interest bearing deposits with banks                                                                                          |   |                              | 101     |   |   |   | 109 |   |
| Federal funds sold                                                                                                            |   |                              | 2,933   |   |   |   | 1,379 |   |
| Securities available for sale                                                                                                 |   |                              | 34,991  |   |   |   | 37,950 |   |
| Securities held to maturity, fair value 2009 $97,538; 2008 $89,111                                                            |   |                              | 100,976 |   |   |   | 91,557 |   |
| Loans receivable, net of allowance for loan losses 2009 $829; 2008 $761                                                       |   |                              | 111,159 |   |   |   | 100,192 |   |
| Premises and equipment, net                                                                                                   |   |                              | 2,446   |   |   |   | 2,326 |   |
| Restricted investments in bank stock                                                                                          |   |                              | 848     |   |   |   | 803 |   |
| Other assets                                                                                                                  |   |                              | 2,536   |   |   |   | 1,977 |   |
|                                                                                                                          |   |                              |    |   |   |   |   |   |
| Total Assets                                                                                                                  |   | $                                 | 258,177 |   |   | $ | 238,782 |   |
|                                                                                                                          |   |                              |    |   |   |   |   |   |
| Liabilities and Stockholders’ Equity                                                                                    |   |                              |    |   |   |   |   |   |
|                                                                                                                          |   |                              |    |   |   |   |   |   |
| Liabilities:                                                                                                                  |   |                              |    |   |   |   |   |   |
| Deposits:                                                                                                                     |   |                              |    |   |   |   |   |   |
| Non-interest bearing                                                                                                          |   | $                                 | 18,177  |   |   | $ | 16,740 |   |
| Interest bearing                                                                                                              |   |                              | 193,214 |   |   |   | 176,198 |   |
|                                                                                                                          |   |                              |    |   |   |   |   |   |
| Total Deposits                                                                                                                |   |                              | 211,391 |   |   |   | 192,938 |   |
|                                                                                                                          |   |                              |    |   |   |   |   |   |
| Other liabilities                                                                                                             |   |                              | 1,158   |   |   |   | 1,315 |   |
|                                                                                                                          |   |                              |    |   |   |   |   |   |
| Total Liabilities                                                                                                             |   |                              | 212,549 |   |   |   | 194,253 |   |
|                                                                                                                          |   |                              |    |   |   |   |   |   |
| Stockholders’ equity:                                                                                                   |   |                              |    |   |   |   |   |   |
| Common stock, $1 par value; authorized 2,500,000 shares; issued 200,000 shares; outstanding shares 2009 183,608; 2008 189,250 |   |                              | 200     |   |   |   | 200 |   |
| Paid-in capital                                                                                                               |   |                              | 753     |   |   |   | 753 |   |
| Retained earnings                                                                                                             |   |                              | 48,255  |   |   |   | 45,836 |   |
| Accumulated other comprehensive income                                                                                        |   |                              | 556     |   |   |   | 442 |   |
| Treasury stock, at cost 2009 16,392 shares; 2008 10,750 shares                                                                |   |                              | (4,136  | ) |   |   | (2,702 | ) |
|                                                                                                                          |   |                              |    |   |   |   |   |   |
| Total Stockholders’ Equity                                                                                              |   |                              | 45,628  |   |   |   | 44,529 |   |
|                                                                                                                          |   |                              |    |   |   |   |   |   |
| Total Liabilities and Stockholders’ Equity                                                                              |   | $                                 | 258,177 |   |   | $ | 238,782 |   |

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|                                                                    |   | Years Ended December 31,                      |    |
|-------------------------------------------------------------------------|--------|-----------------------------------------------|---------|
|                                                                    |   | 2009                                          |    |   | 2008 |   |   | 2007 |   |
|                                                                    |   | (Dollars in Thousands, Except per Share Data) |    |
| Interest Income                                                         |   |                                          |    |   |   |   |   |   |   |
| Interest and fees on loans                                              |   | $                                             | 6,777   |   |   | $ | 6,456 |   |   | $ | 5,988 |   |
| Interest and dividends on investments:                                  |   |                                          |    |   |   |   |   |   |   |   |   |   |
| Taxable                                                                 |   |                                          | 5,304   |   |   |   | 4,876 |   |   |   | 4,086 |   |
| Exempt from federal income taxes                                        |   |                                          | 1,386   |   |   |   | 1,528 |   |   |   | 1,783 |   |
| Interest on federal funds sold and other                                |   |                                          | 4       |   |   |   | 12 |   |   |   | 78 |   |
|                                                                    |   |                                          |    |   |   |   |   |   |   |   |   |   |
| Total Interest Income                                                   |   |                                          | 13,471  |   |   |   | 12,872 |   |   |   | 11,935 |   |
|                                                                    |   |                                          |    |   |   |   |   |   |   |   |   |   |
| Interest Expense                                                        |   |                                          |    |   |   |   |   |   |   |   |   |   |
| Deposits                                                                |   |                                          | 5,472   |   |   |   | 6,099 |   |   |   | 6,085 |   |
| Federal funds purchased                                                 |   |                                          | 2       |   |   |   | 23 |   |   |   | 4 |   |
|                                                                    |   |                                          |    |   |   |   |   |   |   |   |   |   |
| Total Interest Expense                                                  |   |                                          | 5,474   |   |   |   | 6,122 |   |   |   | 6,089 |   |
|                                                                    |   |                                          |    |   |   |   |   |   |   |   |   |   |
| Net Interest Income                                                     |   |                                          | 7,997   |   |   |   | 6,750 |   |   |   | 5,846 |   |
|                                                                    |   |                                          |    |   |   |   |   |   |   |   |   |   |
| Provision for Loan Losses                                               |   |                                          | 84      |   |   |   | 145 |   |   |   | - |   |
|                                                                    |   |                                          |    |   |   |   |   |   |   |   |   |   |
| Net Interest Income after Provision for Loan Losses                     |   |                                          | 7,913   |   |   |   | 6,605 |   |   |   | 5,846 |   |
|                                                                    |   |                                          |    |   |   |   |   |   |   |   |   |   |
| Other Income  (Loss)                                          |   |                                          |    |   |   |   |   |   |   |   |   |   |
| Impairment charge on securities                                         |   |                                          | (948    | ) |   |   | - |   |   |   | - |   |
| Portion of losses recognized in other comprehensive income (before tax) |   |                                          | 289     |   |   |   | - |   |   |   | - |   |
| Net impairment losses                                                   |   |                                          | (659    | ) |   |   | - |   |   |   | - |   |
| Service charges on deposit accounts                                     |   |                                          | 120     |   |   |   | 130 |   |   |   | 136 |   |
| Other service charges and fees                                          |   |                                          | 95      |   |   |   | 98 |   |   |   | 91 |   |
| Security gain on called security                                        |   |                                          | 10      |   |   |   | - |   |   |   | - |   |
| Other income                                                            |   |                                          | 44      |   |   |   | 49 |   |   |   | 44 |   |
|                                                                    |   |                                          |    |   |   |   |   |   |   |   |   |   |
| Total Other Income                                                      |   |                                          | (390    | ) |   |   | 277 |   |   |   | 271 |   |
|                                                                    |   |                                          |    |   |   |   |   |   |   |   |   |   |
| Other Expenses                                                          |   |                                          |    |   |   |   |   |   |   |   |   |   |
| Salaries and employee benefits                                          |   |                                          | 1,446   |   |   |   | 1,427 |   |   |   | 1,367 |   |
| Occupancy                                                               |   |                                          | 214     |   |   |   | 190 |   |   |   | 175 |   |
| Furniture and equipment                                                 |   |                                          | 259     |   |   |   | 233 |   |   |   | 256 |   |
| Pennsylvania shares tax                                                 |   |                                          | 445     |   |   |   | 423 |   |   |   | 403 |   |
| FDIC expense                                                            |   |                                          | 338     |   |   |   | 52 |   |   |   | 21 |   |
| Other expenses                                                          |   |                                          | 719     |   |   |   | 691 |   |   |   | 657 |   |
|                                                                    |   |                                          |    |   |   |   |   |   |   |   |   |   |
| Total Other Expenses                                                    |   |                                          | 3,421   |   |   |   | 3,016 |   |   |   | 2,879 |   |
|                                                                    |   |                                          |    |   |   |   |   |   |   |   |   |   |
| Income before Income Taxes                                              |   |                                          | 4,102   |   |   |   | 3,866 |   |   |   | 3,238 |   |
|                                                                    |   |                                          |    |   |   |   |   |   |   |   |   |   |
| Income Tax Expense (Benefit)                                            |   |                                          |    |   |   |   |   |   |   |   |   |   |
| Current                                                                 |   |                                          | 851     |   |   |   | 724 |   |   |   | 560 |   |
| Deferred                                                                |   |                                          | 90      |   |   |   | 105 |   |   |   | (23 | ) |
|                                                                    |   |                                          |    |   |   |   |   |   |   |   |   |   |
| Total Income Tax Expense                                                |   |                                          | 941     |   |   |   | 829 |   |   |   | 537 |   |
|                                                                    |   |                                          |    |   |   |   |   |   |   |   |   |   |
| Net Income                                                              |   | $                                             | 3,161   |   |   | $ | 3,037 |   |   | $ | 2,701 |   |
| Earnings per Share, Basic                                               |   | $                                             | 16.96   |   |   | $ | 16.00 |   |   | $ | 13.79 |   |
| Weighted Average Common Shares Outstanding                              |   |                                          | 186,417 |   |   |   | 189,861 |   |   |   | 195,893 |   |

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|                                                                                   |   | CommonStock                                   |   |   | Paid-inCapital |   |   | RetainedEarnings |   | AccumulatedOtherComprehensiveIncome (Loss) |   | TreasuryStock |   |   | TotalStockholders’Equity |   |
|----------------------------------------------------------------------------------------|--------|-----------------------------------------------|--------|--------|----------------|--------|--------|------------------|--------|--------------------------------------------|--------|---------------|--------|--------|--------------------------------|--------|
|                                                                                   |   | (Dollars in Thousands, Except per Share Data) |   |
|                                                                                   |   |                                          |   |   |           |   |   |             |   |                                       |   |          |   |   |                           |   |   |   |   |   |   |   |   |   |
| Balance - December 31, 2006                                                            |   |                                          | 200    |   |           |   | 753    |             |   |                                       | 41,634 |          |   |   | (947                           | )      |   |   | (418 | ) |   |   | 41,222 |   |
|                                                                                   |   |                                          |   |   |           |   |   |             |   |                                       |   |          |   |   |                           |   |   |   |   |   |   |   |   |   |
| Comprehensive income:                                                                  |   |                                          |   |   |           |   |   |             |   |                                       |   |          |   |   |                           |   |   |   |   |   |   |   |   |   |
| Net income                                                                             |   |                                          | -      |   |           |   | -      |             |   |                                       | 2,701  |          |   |   | -                              |   |   |   | - |   |   |   | 2,701 |   |
| Change in unrealized net gains (losses) on securities available for sale, net of taxes |   |                                          | -      |   |           |   | -      |             |   |                                       | -      |          |   |   | 574                            |   |   |   | - |   |   |   | 574 |   |
|                                                                                   |   |                                          |   |   |           |   |   |             |   |                                       |   |          |   |   |                           |   |   |   |   |   |   |   |   |   |
| Total Comprehensive Income                                                             |   |                                          |   |   |           |   |   |             |   |                                       |   |          |   |   |                           |   |   |   |   |   |   |   | 3,275 |   |
|                                                                                   |   |                                          |   |   |           |   |   |             |   |                                       |   |          |   |   |                           |   |   |   |   |   |   |   |   |   |
| Cash dividends declared on common stock, $4.00 per share                               |   |                                          |   |   |           |   |   |             |   |                                       | (777   | )             |   |   |                           |   |   |   |   |   |   |   | (777 | ) |
| Purchase of treasury stock (7,186 shares)                                              |   |                                          | -      |   |           |   | -      |             |   |                                       | -      |          |   |   | -                              |   |   |   | (1,890 | ) |   |   | (1,890 | ) |
|                                                                                   |   |                                          |   |   |           |   |   |             |   |                                       |   |          |   |   |                           |   |   |   |   |   |   |   |   |   |
| Balance - December 31, 2007                                                            |   |                                          | 200    |   |           |   | 753    |             |   |                                       | 43,558 |          |   |   | (373                           | )      |   |   | (2,308 | ) |   |   | 41,830 |   |
|                                                                                   |   |                                          |   |   |           |   |   |             |   |                                       |   |          |   |   |                           |   |   |   |   |   |   |   |   |   |
| Comprehensive income:                                                                  |   |                                          |   |   |           |   |   |             |   |                                       |   |          |   |   |                           |   |   |   |   |   |   |   |   |   |
| Net income                                                                             |   |                                          | -      |   |           |   | -      |             |   |                                       | 3,037  |          |   |   | -                              |   |   |   | - |   |   |   | 3,037 |   |
| Change in unrealized net gains (losses) on securities available for sale, net of taxes |   |                                          | -      |   |           |   | -      |             |   |                                       | -      |          |   |   | 815                            |   |   |   | - |   |   |   | 815 |   |
|                                                                                   |   |                                          |   |   |           |   |   |             |   |                                       |   |          |   |   |                           |   |   |   |   |   |   |   |   |   |
| Total Comprehensive Income                                                             |   |                                          |   |   |           |   |   |             |   |                                       |   |          |   |   |                           |   |   |   |   |   |   |   | 3,852 |   |
|                                                                                   |   |                                          |   |   |           |   |   |             |   |                                       |   |          |   |   |                           |   |   |   |   |   |   |   |   |   |
| Cash dividends declared on common stock, $4.00 per share                               |   |                                          | -      |   |           |   | -      |             |   |                                       | (759   | )             |   |   | -                              |   |   |   | - |   |   |   | (759 | ) |
| Purchase of treasury stock (1,505 shares)                                              |   |                                          | -      |   |           |   | -      |             |   |                                       | -      |          |   |   | -                              |   |   |   | (394 | ) |   |   | (394 | ) |
|                                                                                   |   |                                          |   |   |           |   |   |             |   |                                       |   |          |   |   |                           |   |   |   |   |   |   |   |   |   |
| Balance - December 31, 2008                                                            |   |                                          | 200    |   |           |   | 753    |             |   |                                       | 45,836 |          |   |   | 442                            |   |   |   | (2,702 | ) |   |   | 44,529 |   |
|                                                                                   |   |                                          |   |   |           |   |   |             |   |                                       |   |          |   |   |                           |   |   |   |   |   |   |   |   |   |
| Comprehensive income:                                                                  |   |                                          |   |   |           |   |   |             |   |                                       |   |          |   |   |                           |   |   |   |   |   |   |   |   |   |
| Net income                                                                             |   |                                          | -      |   |           |   | -      |             |   |                                       | 3,161  |          |   |   | -                              |   |   |   | - |   |   |   | 3,161 |   |
| Change in unrealized net gains (losses) on securities available for sale, net of taxes |   |                                          | -      |   |           |   | -      |             |   |                                       | -      |          |   |   | 306                            |   |   |   | - |   |   |   | 306 |   |
| Unrealized losses on OTTI securities held to maturity, net of taxes                    |   |                                          | -      |   |           |   | -      |             |   |                                       | -      |          |   |   | (192                           | )      |   |   | - |   |   |   | (192 | ) |
|                                                                                   |   |                                          |   |   |           |   |   |             |   |                                       |   |          |   |   |                           |   |   |   |   |   |   |   |   |   |
| Total Comprehensive Income                                                             |   |                                          |   |   |           |   |   |             |   |                                       |   |          |   |   |                           |   |   |   |   |   |   |   | 3,275 |   |
|                                                                                   |   |                                          |   |   |           |   |   |             |   |                                       |   |          |   |   |                           |   |   |   |   |   |   |   |   |   |
| Cash dividends declared on common stock, $4.00 per share                               |   |                                          | -      |   |           |   | -      |             |   |                                       | (742   | )             |   |   | -                              |   |   |   | - |   |   |   | (742 | ) |
| Purchase of treasury stock (5,642 shares)                                              |   |                                          | -      |   |           |   | -      |             |   |                                       | -      |          |   |   | -                              |   |   |   | (1,434 | ) |   |   | (1,434 | ) |
|                                                                                   |   |                                          |   |   |           |   |   |             |   |                                       |   |          |   |   |                           |   |   |   |   |   |   |   |   |   |
| Balance - December 31, 2009                                                            |   | $                                             | 200    |   |           | $      | 753    |             |   | $                                          | 48,255 |          |   | $      | 556                            |   |   | $ | (4,136 | ) |   | $ | 45,628 |   |

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|                                                                                     |   | Years Ended December 31, |    |
|------------------------------------------------------------------------------------------|--------|--------------------------|---------|
|                                                                                     |   | 2009                     |    |   | 2008 |   |   | 2007 |   |
|                                                                                     |   | (In Thousands)           |    |
| Cash Flows from Operating Activities                                                     |   |                     |    |   |   |   |   |   |   |
| Net income                                                                               |   | $                        | 3,161   |   |   | $ | 3,037 |   |   | $ | 2,701 |   |
| Adjustments to reconcile net income to net cash provided by operating activities:        |   |                     |    |   |   |   |   |   |   |   |   |   |
| Depreciation                                                                             |   |                     | 232     |   |   |   | 193 |   |   |   | 205 |   |
| Provision for loan loss                                                                  |   |                     | 84      |   |   |   | 145 |   |   |   | - |   |
| Net accretion of securities                                                              |   |                     | (626    | ) |   |   | (512 | ) |   |   | (92 | ) |
| Impairment charges on securities                                                         |   |                     | 659     |   |   |   | - |   |   |   | - |   |
| Security gain on called security                                                         |   |                     | (10     | ) |   |   | - |   |   |   | - |   |
| Deferred income tax expense (benefit)                                                    |   |                     | 90      |   |   |   | 105 |   |   |   | (23 | ) |
| (Increase) decrease in assets:                                                           |   |                     |    |   |   |   |   |   |   |   |   |   |
| Accrued interest receivable                                                              |   |                     | (115    | ) |   |   | (86 | ) |   |   | 7 |   |
| Prepaid FDIC assessments                                                                 |   |                     | (705    | ) |   |   | - |   |   |   | - |   |
| Other assets                                                                             |   |                     | 111     |   |   |   | (167 | ) |   |   | 67 |   |
| Increase (decrease) in liabilities:                                                      |   |                     |    |   |   |   |   |   |   |   |   |   |
| Accrued interest payable                                                                 |   |                     | (172    | ) |   |   | (23 | ) |   |   | 139 |   |
| Other liabilities                                                                        |   |                     | 15      |   |   |   | 11 |   |   |   | (8 | ) |
| Net Cash Provided by Operating Activities                                                |   |                     | 2,724   |   |   |   | 2,703 |   |   |   | 2,996 |   |
|                                                                                     |   |                     |    |   |   |   |   |   |   |   |   |   |
| Cash Flows from Investing Activities                                                     |   |                     |    |   |   |   |   |   |   |   |   |   |
| Net decrease in interest bearing deposits with banks                                     |   |                     | 8       |   |   |   | 9 |   |   |   | 26 |   |
| Net increase in federal funds sold                                                       |   |                     | (1,554  | ) |   |   | (1,379 | ) |   |   | - |   |
| Purchases of securities available for sale                                               |   |                     | (6,376  | ) |   |   | (7,961 | ) |   |   | (5,183 | ) |
| Purchases of securities held to maturity                                                 |   |                     | (53,633 | ) |   |   | (39,150 | ) |   |   | (12,935 | ) |
| Proceeds from maturities/calls and principal repayments of securities available for sale |   |                     | 9,724   |   |   |   | 6,851 |   |   |   | 6,335 |   |
| Proceeds from maturities/calls of securities held to maturity                            |   |                     | 43,976  |   |   |   | 34,991 |   |   |   | 10,615 |   |
| Net increase in restricted investment in bank stock                                      |   |                     | (45     | ) |   |   | (89 | ) |   |   | (63 | ) |
| Net increase in loans                                                                    |   |                     | (11,051 | ) |   |   | (6,347 | ) |   |   | (6,572 | ) |
| Purchases of premises and equipment                                                      |   |                     | (352    | ) |   |   | (172 | ) |   |   | (47 | ) |
| Net Cash Used in Investing Activities                                                    |   |                     | (19,303 | ) |   |   | (13,247 | ) |   |   | (7,824 | ) |
|                                                                                     |   |                     |    |   |   |   |   |   |   |   |   |   |
| Cash Flows from Financing Activities                                                     |   |                     |    |   |   |   |   |   |   |   |   |   |
| Net increase in deposits                                                                 |   |                     | 18,453  |   |   |   | 12,547 |   |   |   | 7,290 |   |
| Net increase (decrease) in federal funds purchased                                       |   |                     | -       |   |   |   | (2,249 | ) |   |   | 1,892 |   |
| Dividends paid                                                                           |   |                     | (742    | ) |   |   | (759 | ) |   |   | (777 | ) |
| Purchase of treasury stock                                                               |   |                     | (1,434  | ) |   |   | (394 | ) |   |   | (1,890 | ) |
| Net Cash Provided by Financing Activities                                                |   |                     | 16,277  |   |   |   | 9,145 |   |   |   | 6,515 |   |
| Net  Increase (Decrease) in Cash and Cash Equivalents                          |   |                     | (302    | ) |   |   | (1,399 | ) |   |   | 1,687 |   |
|                                                                                     |   |                     |    |   |   |   |   |   |   |   |   |   |
| Cash and Cash Equivalents - Beginning                                                    |   |                     | 2,489   |   |   |   | 3,888 |   |   |   | 2,201 |   |
| Cash and Cash Equivalents - Ending                                                       |   | $                        | 2,187   |   |   | $ | 2,489 |   |   | $ | 3,888 |   |
|                                                                                     |   |                     |    |   |   |   |   |   |   |   |   |   |
| Supplementary Cash Flows Information                                                     |   |                     |    |   |   |   |   |   |   |   |   |   |
| Interest paid                                                                            |   | $                        | 5,646   |   |   | $ | 6,145 |   |   | $ | 5,950 |   |
|                                                                                     |   |                     |    |   |   |   |   |   |   |   |   |   |
| Income taxes paid                                                                        |   | $                        | 650     |   |   | $ | 901 |   |   | $ | 614 |   |

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|                                             |   | December 31, 2009 |    |
|--------------------------------------------------|--------|-------------------|---------|
|                                             |   | AmortizedCost     |    |   | GrossUnrealizedGains |   |   | GrossUnrealizedLosses |   |   | FairValue |   |
|                                             |   | (In Thousands)    |    |
| Securities Available for Sale:                   |   |              |    |   |   |   |   |   |   |   |   |   |
| U.S. Treasury note                               |   | $                 | 100     |   |   | $ | 4 |   |   | $ | - |   |   | $ | 104 |   |
| Mortgage-backed securities                       |   |              | 33,758  |   |   |   | 1,144 |   |   |   | (15 | ) |   |   | 34,887 |   |
|                                             |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                             |   | $                 | 33,858  |   |   | $ | 1,148 |   |   | $ | (15 | ) |   | $ | 34,991 |   |
| Securities Held to Maturity:                     |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Obligations of U.S. Government agencies          |   | $                 | 59,576  |   |   | $ | 231 |   |   | $ | (2,832 | ) |   | $ | 56,975 |   |
| Obligations of states and political subdivisions |   |              | 36,257  |   |   |   | 1,340 |   |   |   | (139 | ) |   |   | 37,458 |   |
| Corporate securities                             |   |              | 4,305   |   |   |   | 44 |   |   |   | (2,127 | ) |   |   | 2,222 |   |
| Mortgage-backed securities                       |   |              | 838     |   |   |   | 45 |   |   |   | - |   |   |   | 883 |   |
|                                             |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                             |   | $                 | 100,976 |   |   | $ | 1,660 |   |   | $ | (5,098 | ) |   | $ | 97,538 |   |

|                                             |   | December 31, 2008 |   |
|--------------------------------------------------|--------|-------------------|--------|
|                                             |   | AmortizedCost     |   |   | GrossUnrealizedGains |   |   | GrossUnrealizedLosses |   |   | FairValue |   |
|                                             |   | (In Thousands)    |   |
| Securities Available for Sale:                   |   |              |   |   |   |   |   |   |   |   |   |   |
| U.S. Treasury note                               |   | $                 | 100    |   |   | $ | 7 |   |   | $ | - |   |   | $ | 107 |   |
| Mortgage-backed securities                       |   |              | 37,181 |   |   |   | 702 |   |   |   | (40 | ) |   |   | 37,843 |   |
|                                             |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                             |   | $                 | 37,281 |   |   | $ | 709 |   |   | $ | (40 | ) |   | $ | 37,950 |   |
| Securities Held to Maturity:                     |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Obligations of U.S. Government agencies          |   | $                 | 52,871 |   |   | $ | 568 |   |   | $ | (1,393 | ) |   | $ | 52,046 |   |
| Obligations of states and political subdivisions |   |              | 32,300 |   |   |   | 833 |   |   |   | (66 | ) |   |   | 33,067 |   |
| Corporate securities                             |   |              | 5,341  |   |   |   | - |   |   |   | (2,413 | ) |   |   | 2,928 |   |
| Mortgage-backed securities                       |   |              | 1,045  |   |   |   | 25 |   |   |   | - |   |   |   | 1,070 |   |
|                                             |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                             |   | $                 | 91,557 |   |   | $ | 1,426 |   |   | $ | (3,872 | ) |   | $ | 89,111 |   |

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|                                   |   | Available for Sale |   |   | Held to Maturity |   |
|----------------------------------------|--------|--------------------|--------|--------|------------------|--------|
|                                   |   | AmortizedCost      |   |   | FairValue        |   |   | AmortizedCost |   |   | FairValue |   |
|                                   |   | (In Thousands)     |   |
|                                   |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Due in one year or less                |   | $                  | -      |   |             | $      | - |   |   | $ | 185 |   |   | $ | 188 |   |
| Due after one year through five years  |   |               | 100    |   |             |   | 104 |   |   |   | 7,630 |   |   |   | 7,940 |   |
| Due after five years through ten years |   |               | -      |   |             |   | - |   |   |   | 16,865 |   |   |   | 17,562 |   |
| Due after ten years                    |   |               | -      |   |             |   | - |   |   |   | 75,458 |   |   |   | 70,965 |   |
|                                   |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
|                                   |   |               | 100    |   |             |   | 104 |   |   |   | 100,138 |   |   |   | 96,655 |   |
| Mortgage-backed securities             |   |               | 33,758 |   |             |   | 34,887 |   |   |   | 838 |   |   |   | 883 |   |
|                                   |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
|                                   |   | $                  | 33,858 |   |             | $      | 34,991 |   |   | $ | 100,976 |   |   | $ | 97,538 |   |

|                                                                                            |   | 2009           |   |   | 2008   |   |   | 2007   |   |
|-------------------------------------------------------------------------------------------------|--------|----------------|--------|--------|--------|--------|--------|--------|--------|
|                                                                                            |   | (In Thousands) |   |
| Gross change in unrealized gains on securities available for sale                               |   | $              | 463    |   |   | $      | 1,235  |   |   | $ | 870 |   |
| Non-credit related impairment loss on other-than-temporarily impaired held to maturity security |   |           | (289   | )      |   |   | -      |   |   |   | - |   |
|                                                                                            |   |           |   |   |   |   |   |   |   |   |   |   |
| Net Unrealized Gains                                                                            |   |           | 174    |   |   |   | 1,235  |   |   |   | 870 |   |
|                                                                                            |   |           |   |   |   |   |   |   |   |   |   |   |
| Tax effect                                                                                      |   |           | (60    | )      |   |   | (420   | )      |   |   | (296 | ) |
|                                                                                            |   |           |   |   |   |   |   |   |   |   |   |   |
| Net of Tax Amount                                                                               |   | $              | 114    |   |   | $      | 815    |   |   | $ | 574 |   |

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|                                             |   | Less than 12 Months |   |   | 12 Months or More |   |   | Total     |   |
|--------------------------------------------------|--------|---------------------|--------|--------|-------------------|--------|--------|-----------|--------|
|                                             |   | FairValue           |   |   | Unrealized Losses |   |   | FairValue |   |   | Unrealized Losses |   |   | FairValue |   |   | Unrealized Losses |   |
|                                             |   | (In Thousands)      |   |
| DECEMBER 31, 2009:                               |   |                |   |   |              |   |   |      |   |   |   |   |   |   |   |   |   |   |
| Securities Available for Sale:                   |   |                |   |   |              |   |   |      |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities                       |   | $                   | 981    |   |              | $      | 15     |      |   | $ | - |   |   | $ | - |   |   | $ | 981 |   |   | $ | 15 |   |
|                                             |   |                |   |   |              |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Securities Held to Maturity:                     |   |                |   |   |              |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Obligations of U.S. Government agencies          |   |                | 39,065 |   |              |   | 2,379  |      |   |   | 9,672 |   |   |   | 453 |   |   |   | 48,737 |   |   |   | 2,832 |   |
| Obligations of states and political subdivisions |   |                | 5,422  |   |              |   | 137    |      |   |   | 297 |   |   |   | 2 |   |   |   | 5,719 |   |   |   | 139 |   |
| Corporate securities                             |   |                | -      |   |              |   | -      |      |   |   | 1,027 |   |   |   | 2,127 |   |   |   | 1,027 |   |   |   | 2,127 |   |
|                                             |   |                |   |   |              |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Temporarily Impaired Securities            |   | $                   | 45,468 |   |              | $      | 2,531  |      |   | $ | 10,996 |   |   | $ | 2,582 |   |   | $ | 56,464 |   |   | $ | 5,113 |   |

|                                             |   | Less than 12 Months |   |   | 12 Months or More |   |   | Total     |   |
|--------------------------------------------------|--------|---------------------|--------|--------|-------------------|--------|--------|-----------|--------|
|                                             |   | FairValue           |   |   | Unrealized Losses |   |   | FairValue |   |   | Unrealized Losses |   |   | FairValue |   |   | Unrealized Losses |   |
|                                             |   | (In Thousands)      |   |
| DECEMBER 31, 2008:                               |   |                |   |   |              |   |   |      |   |   |   |   |   |   |   |   |   |   |
| Securities Available for Sale:                   |   |                |   |   |              |   |   |      |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities                       |   | $                   | 38     |   |              | $      | 1      |      |   | $ | 5,866 |   |   | $ | 39 |   |   | $ | 5,904 |   |   | $ | 40 |   |
|                                             |   |                |   |   |              |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Securities Held to Maturity:                     |   |                |   |   |              |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Obligations of U.S. Government agencies          |   |                | 26,576 |   |              |   | 1,206  |      |   |   | 2,572 |   |   |   | 187 |   |   |   | 29,148 |   |   |   | 1,393 |   |
| Obligations of states and political subdivisions |   |                | 3,818  |   |              |   | 44     |      |   |   | 627 |   |   |   | 22 |   |   |   | 4,445 |   |   |   | 66 |   |
| Corporate securities                             |   |                | 1,613  |   |              |   | 448    |      |   |   | 1,165 |   |   |   | 1,965 |   |   |   | 2,778 |   |   |   | 2,413 |   |
|                                             |   |                |   |   |              |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Temporarily Impaired Securities            |   | $                   | 32,045 |   |              | $      | 1,699  |      |   | $ | 10,230 |   |   | $ | 2,213 |   |   | $ | 42,275 |   |   | $ | 3,912 |   |

----

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|                      |   | 2009           |    |   | 2008   |   |
|---------------------------|--------|----------------|---------|--------|--------|--------|
|                      |   | (In Thousands) |    |
|                      |   |           |    |   |   |   |   |   |
| Commercial                |   | $              | 4,810   |   |   | $      | 3,627 |   |
| Commercial real estate    |   |           | 29,177  |   |   |   | 26,142 |   |
| Residential real estate   |   |           | 52,433  |   |   |   | 43,799 |   |
| Real estate construction  |   |           | 270     |   |   |   | 873 |   |
| Home equity               |   |           | 18,260  |   |   |   | 19,688 |   |
| Other consumer            |   |           | 7,038   |   |   |   | 6,824 |   |
|                      |   |           |    |   |   |   |   |   |
|                      |   |           | 111,988 |   |   |   | 100,953 |   |
| Allowance for loan losses |   |           | (829    | )      |   |   | (761 | ) |
|                      |   |           |    |   |   |   |   |   |
|                      |   | $              | 111,159 |   |   | $      | 100,192 |   |

|                                       |   | 2009           |   |   | 2008   |   |   | 2007   |   |
|--------------------------------------------|--------|----------------|--------|--------|--------|--------|--------|--------|--------|
|                                       |   | (In Thousands) |   |
|                                       |   |           |   |   |   |   |   |   |   |   |   |   |
| Balance, beginning                         |   | $              | 761    |   |   | $      | 620    |   |   | $ | 653 |   |
| Provision for loan losses                  |   |           | 84     |   |   |   | 145    |   |   |   | - |   |
| Recoveries on loans previously charged off |   |           | -      |   |   |   | 1      |   |   |   | 5 |   |
| Loans charged off                          |   |           | (16    | )      |   |   | (5     | )      |   |   | (38 | ) |
|                                       |   |           |   |   |   |   |   |   |   |   |   |   |
| Balance, ending                            |   | $              | 829    |   |   | $      | 761    |   |   | $ | 620 |   |

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|                              | EstimatedUseful Lives |   | 2009           |   |   | 2008   |   |
|-----------------------------------|-----------------------|--------|----------------|--------|--------|--------|--------|
|                              |                  |   | (In Thousands) |   |
|                              |                  |   |           |   |   |   |   |
| Premises                          | 5-39 years            |   | $              | 2,857  |   |   | $      | 2,845 |   |
| Furniture, fixtures and equipment | 5-10 years            |   |           | 2,476  |   |   |   | 2,136 |   |
|                              |                  |   |           |   |   |   |   |   |   |
|                              |                  |   |           | 5,333  |   |   |   | 4,981 |   |
| Accumulated depreciation          |                  |   |           | (3,125 | )      |   |   | (2,893 | ) |
|                              |                  |   |           |   |   |   |   |   |   |
|                              |                  |   |           | 2,208  |   |   |   | 2,088 |   |
| Land                              |                  |   |           | 238    |   |   |   | 238 |   |
|                              |                  |   |           |   |   |   |   |   |   |
|                              |                  |   | $              | 2,446  |   |   | $      | 2,326 |   |

|                                 |   | 2009           |    |   | 2008   |
|--------------------------------------|--------|----------------|---------|--------|--------|
|                                 |   | (In Thousands) |
|                                 |   |           |    |   |   |   |   |   |
| Savings accounts                     |   | $              | 60,780  |   |   | $ | 48,338 |   |
| NOW accounts                         |   |           | 7,144   |   |   |   | 6,038 |   |
| Certificates and other time deposits |   |           | 125,290 |   |   |   | 121,822 |   |
|                                 |   |           |    |   |   |   |   |   |
|                                 |   | $              | 193,214 |   |   | $ | 176,198 |   |

| 2010   |   | $      | 55,449  |   |
|--------|--------|--------|---------|--------|
| 2011   |   |   | 29,806  |   |
| 2012   |   |   | 13,342  |   |
| 2013   |   |   | 17,124  |   |
| 2014   |   |   | 9,569   |   |
|   |   |   |    |   |
|   |   | $      | 125,290 |   |

----

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|                           |   | 2009           |   |   | 2008   |   |
|--------------------------------|--------|----------------|--------|--------|--------|--------|
|                           |   | (In Thousands) |   |
|                           |   |           |   |   |   |   |   |   |
| AMT credit carryforward        |   | $              | 22     |   |   | $      | 276 |   |
| Losses on impaired security    |   |           | 321    |   |   |   | - |   |
| Allowance for loan losses      |   |           | 231    |   |   |   | 208 |   |
| Accrued benefits               |   |           | 27     |   |   |   | 23 |   |
|                           |   |           |   |   |   |   |   |   |
| Total Deferred Tax Assets      |   |           | 601    |   |   |   | 507 |   |
|                           |   |           |   |   |   |   |   |   |
| Securities accretion           |   |           | 49     |   |   |   | 37 |   |
| Unrealized gains on securities |   |           | 385    |   |   |   | 228 |   |
| Depreciation                   |   |           | 94     |   |   |   | 20 |   |
|                           |   |           |   |   |   |   |   |   |
| Total Deferred Tax Liabilities |   |           | 528    |   |   |   | 285 |   |
|                           |   |           |   |   |   |   |   |   |
| Net Deferred Tax Asset         |   | $              | 73     |   |   | $      | 222 |   |

----

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|                                |   | 2009                   |   |   | 2008             |   |   | 2007   |   |
|-------------------------------------|--------|------------------------|--------|--------|------------------|--------|--------|--------|--------|
|                                |   | Amount                 |   |   | % ofPretaxIncome |   |   | Amount |   |   | % ofPretaxIncome |   |   | Amount |   |   | % ofPretaxIncome |   |
|                                |   | (Dollars in Thousands) |   |
| Tax at statutory rate               |   | $                      | 1,395  |   |             |   | 34     | %      |   | $ | 1,315 |   |   |   | 34 | % |   | $ | 1,101 |   |   |   | 34 | % |
| Increase (decrease) resulting from: |   |                   |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tax-exempt interest income          |   |                   | (507   | )      |             |   | (12    | )      |   |   | (550 | ) |   |   | (14 | ) |   |   | (643 | ) |   |   | (20 | ) |
| TEFRA interest expense disallowance |   |                   | 53     |   |             |   | 1      |   |   |   | 64 |   |   |   | 2 |   |   |   | 79 |   |   |   | 3 |   |
|                                |   |                   |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                |   | $                      | 941    |   |             |   | 23     | %      |   | $ | 829 |   |   |   | 22 | % |   | $ | 537 |   |   |   | 17 | % |

| Balances, January 1, 2009   |   | $      | 5,381  |   |
|----------------------------------|--------|--------|--------|--------|
| Advances                         |   |   | 1,375  |   |
| Repayments                       |   |   | (1,785 | )      |
|                             |   |   |   |   |
| Balances, December 31, 2009 |   | $      | 4,971  |   |

----

----

----

|                                       |   | 2009           |   |   | 2008   |   |
|--------------------------------------------|--------|----------------|--------|--------|--------|--------|
|                                       |   | (In Thousands) |   |
|                                       |   |           |   |   |   |   |   |   |
| Commitments to grant loans                 |   | $              | 956    |   |   | $      | 806 |   |
| Unfunded commitments under lines of credit |   |           | 5,128  |   |   |   | 4,771 |   |
| Letters of credit                          |   |           | 798    |   |   |   | 594 |   |
|                                       |   |           |   |   |   |   |   |   |
|                                       |   | $              | 6,882  |   |   | $      | 6,171 |   |

----

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|                                      |   |  Actual           |   |   | For Capital AdequacyPurposes |   |   | To Be Well CapitalizedUnder PromptCorrective ActionProvisions |   |
|-------------------------------------------|--------|------------------------|--------|--------|------------------------------|--------|--------|---------------------------------------------------------------|--------|
|                                      |   | Amount                 |   |   | Ratio                        |   |   | Amount                                                        |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
|                                      |   | (Dollars in Thousands) |   |
| As of December 31, 2009:             |   |                   |   |   |                         |   |   |                                                          |   |   |   |   |   |   |   |   |   |   |
| Total capital (to risk-weighted assets):  |   | $                      | 45,606 |   |                         |   | 32.7   |                                                          |   |   | 311,174 |   |   |   | 38.0 |   |   | $ | 313,968 |   |   |   | 10.0 | % |
| Tier 1 capital (to risk-weighted assets): |   |                   | 44,777 |   |                         |   | 32.1   |                                                          |   |   | 3 5,587 |   |   |   | 34.0 |   |   |   | 3 8,381 |   |   |   | 3 6.0 |   |
| Tier 1 capital (to average assets):       |   |                   | 44,777 |   |                         |   | 17.5   |                                                          |   |   | 310,263 |   |   |   | 34.0 |   |   |   | 312,829 |   |   |   | 3 5.0 |   |
|                                      |   |                   |   |   |                         |   |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| As of December 31, 2008:             |   |                   |   |   |                         |   |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total capital (to risk-weighted assets):  |   | $                      | 44,587 |   |                         |   | 38.5   |                                                          |   |   | 39,267 |   |   |   | 38.0 |   |   | $ | 311,584 |   |   |   |  10.0 | % |
| Tier 1 capital (to risk-weighted assets): |   |                   | 43,826 |   |                         |   | 37.8   |                                                          |   |   | 34,633 |   |   |   | 34.0 |   |   |   | 3 6,950 |   |   |   | 3 6.0 |   |
| Tier 1 capital (to average assets):       |   |                   | 43,826 |   |                         |   | 18.6   |                                                          |   |   | 39,413 |   |   |   | 34.0 |   |   |   | 311,767 |   |   |   | 3 5.0 |   |

----

----

----

----

----

----

| Description                                   |   | Total  |   |   | (Level 1)Quoted Prices in ActiveMarkets for IdenticalAssets |   |   | (Level 2)Significant OtherObservable Inputs |   |   | (Level 3)SignificantUnobservableInputs |   |
|-----------------------------------------------|--------|--------|--------|--------|-------------------------------------------------------------|--------|--------|---------------------------------------------|--------|--------|----------------------------------------|--------|
|                                          |   |   |   |   | (In Thousands)                                              |   |   |                                        |   |   |                                   |   |
| December 31, 2009                             |   |   |   |   |                                                        |   |   |                                        |   |   |                                   |   |
| U. S. Treasury note available for sale        |   | $      | 104    |   |                                                        | $      | 104    |                                        |   |   | -                                      |   |   |   | - |   |
| Mortgage-backed securities available for sale |   | $      | 34,887 |   |                                                        |   | -      |                                        |   | $      | 34,887                                 |   |   |   | - |   |
| December 31, 2008                             |   |   |   |   |                                                        |   |   |                                        |   |   |                                   |   |   |   |   |   |
| U. S. Treasury note available for sale        |   | $      | 107    |   |                                                        | $      | 107    |                                        |   |   | -                                      |   |   |   | - |   |
| Mortgage-backed securities available for sale |   | $      | 37,843 |   |                                                        |   | -      |                                        |   | $      | 37,843                                 |   |   |   | - |   |

| Description                                        |   | Total  |   |   | (Level 1)Quoted Prices in ActiveMarkets for IdenticalAssets |   |   | (Level 2)Significant OtherObservable Inputs |   |   | (Level 3)SignificantUnobservableInputs |   |
|----------------------------------------------------|--------|--------|--------|--------|-------------------------------------------------------------|--------|--------|---------------------------------------------|--------|--------|----------------------------------------|--------|
|                                               |   |   |   |   | (In Thousands)                                              |   |   |                                        |   |   |                                   |   |
| December 31, 2009                                  |   |   |   |   |                                                        |   |   |                                        |   |   |                                   |   |
| Impaired trust preferred security held to maturity |   | $      | 65     |   |                                                        |   | -      |                                        |   |   | -                                      |   |   | $ | 65 |   |
| December 31, 2008                                  |   |   |   |   |                                                        |   |   |                                        |   |   |                                   |   |   |   |   |   |
| Impaired trust preferred security held to maturity |   | $      | -      |   |                                                        |   | -      |                                        |   |   | -                                      |   |   | $ | - |   |

|                                                                  |   | Impaired trustpreferredsecurity held tomaturity(In Thousands) |   |
|-----------------------------------------------------------------------|--------|---------------------------------------------------------------|--------|
| Book value of impaired held to maturity security at December 31, 2008 |   | $                                                             | 997    |   |
| Payment in kind (interest added to principal)                         |   |                                                          | 16     |   |
| Credit related impairment                                             |   |                                                          | (659   | ) |
| Non-credit related impairment                                         |   |                                                          | (289   | ) |
| Book/fair value of impaired security at December 31, 2009             |   | $                                                             | 65     |   |

----

----

----

----

----

----

|                                               |   | 2009           |    |   | 2008               |   |
|----------------------------------------------------|--------|----------------|---------|--------|--------------------|--------|
|                                               |   | CarryingAmount |    |   | EstimatedFairValue |   |   | CarryingAmount |   |   | EstimatedFairValue |   |
|                                               |   | (In Thousands) |    |
| Financial assets:                                  |   |           |    |   |               |   |   |   |   |   |   |   |
| Cash and short-term investments                    |   | $              | 2,288   |   |               | $      | 2,288 |   |   | $ | 2,598 |   |   | $ | 2,598 |   |
| Federal funds sold                                 |   |           | 2,933   |   |               |   | 2,933 |   |   |   | 1,379 |   |   |   | 1,379 |   |
| Securities available for sale                      |   |           | 34,991  |   |               |   | 34,991 |   |   |   | 37,950 |   |   |   | 37,950 |   |
| Securities held to maturity                        |   |           | 100,976 |   |               |   | 97,538 |   |   |   | 91,557 |   |   |   | 89,111 |   |
| Loans, net                                         |   |           | 111,159 |   |               |   | 114,291 |   |   |   | 100,192 |   |   |   | 104,130 |   |
| Accrued interest receivable                        |   |           | 1,611   |   |               |   | 1,611 |   |   |   | 1,496 |   |   |   | 1,496 |   |
|                                               |   |           |    |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities:                             |   |           |    |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                           |   |           | 211,391 |   |               |   | 214,651 |   |   |   | 192,938 |   |   |   | 194,495 |   |
| Accrued interest payable                           |   |           | 1,047   |   |               |   | 1,047 |   |   |   | 1,219 |   |   |   | 1,219 |   |
|                                               |   |           |    |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Off-balance sheet financial instruments:           |   |           |    |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Commitments to extend credit and letters of credit |   |           | -       |   |               |   | - |   |   |   | - |   |   |   | - |   |

----

----

----

|                                                                                             |   | Other-Than-TemporaryImpairmentCredit LossesRecorded inEarnings(In Thousands) |   |
|--------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|--------|
| Beginning Balance January 1, 2009                                                                |   | $                                                                            | -      |   |
| Additions for OTTI not previously recognized                                                     |   |                                                                         | 659    |   |
| Total other-than-temporary losses recognized during the period, ending balance December 31, 2009 |   | $                                                                            | 659    |   |

----

----

----

|   | § | the few observable transactions and market quotations that are available are not reliable for purposes of determining fair value at December 31, 2009, |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | § | an income valuation approach technique (present value technique) that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs will be equally or more representative of fair value than the market approach valuation technique used at prior measurement dates and |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | § | our TRUP CDOs are classified within Level 3 of the fair value hierarchy because we determined that significant adjustments are required to determine fair value at the measurement date. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 1. | There were a number of assumptions used and the results of the modeling were highly dependent upon the assumptions. |
|--------|----|---------------------------------------------------------------------------------------------------------------------|

|   | 2. | Credit and prepayment assumptions were used for each quarter. |
|--------|----|---------------------------------------------------------------|

|   | 3. | Forward interest rates were used to project future principal and interest payments.  This allowed the analysts to model the impact of over- or under-collateralization for each transaction.  (Higher interest rates generally increase the credit stress on under-collateralized transactions by reducing excess interest, which is the difference between the interest received from the underlying collateraland the interest paid on the rated bonds.) |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4. | Original face purchased, current book value (as of December 31, 2009), purchase date, and purchase price were used to produce the calculations. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 5. | The basic methodology of ASC 325 was to compare the present value of the cash flows from quarter to quarter.  A decline in the present value versus that for the previous quarter was considered to be an “adverse change.” |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 6. | ASC 325 prescribes using a discount rate “equal to the current yield used to accrete the beneficial interest.”  Original discount margin calculated as of the purchase date passed on purchase price was used to calculate the discount rate.  The original discount margin is then added to the appropriate forward 3-month LIBOR rate to determine the discount rate.  For fixed/floatingsecurities, the original coupon is used as the discount rate for the remaining fixed-rate portion of the security’s estimated life. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 7. | The discount rate was then used to calculate the present value for the current quarter’s projected cash flows. |
|--------|----|----------------------------------------------------------------------------------------------------------------------|

|   | 8. | The result calculated for the current quarter was then compared to the previous quarter’s book value to determine if the change is “adverse.” |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 9. | The credit component of any impairment should be the difference between book value and the projected present value for the current quarter. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

----

----

|                                           |   | December 31,   |   |
|------------------------------------------------|--------|----------------|--------|
|                                           |   | 2009           |   |   | 2008 |   |
|                                           |   | (In Thousands) |   |
|                                           |   |           |   |   |   |   |
| Assets                                         |   |           |   |   |   |   |
|                                           |   |           |   |   |   |   |   |   |
| Cash                                           |   | $              | 40     |   |   | $ | 8 |   |
| Investment in subsidiary                       |   |           | 45,333 |   |   |   | 44,268 |   |
| Premises and equipment                         |   |           | 229    |   |   |   | 241 |   |
| Other assets                                   |   |           | 46     |   |   |   | 33 |   |
|                                           |   |           |   |   |   |   |   |   |
| Total Assets                                   |   | $              | 45,648 |   |   | $ | 44,550 |   |
|                                           |   |           |   |   |   |   |   |   |
| Liability and Stockholders’ Equity       |   |           |   |   |   |   |   |   |
|                                           |   |           |   |   |   |   |   |   |
| Liability, accounts payable                    |   | $              | 20     |   |   | $ | 21 |   |
| Stockholders’ equity                     |   |           | 45,628 |   |   |   | 44,529 |   |
|                                           |   |           |   |   |   |   |   |   |
| Total Liability and Stockholders’ Equity |   | $              | 45,648 |   |   | $ | 44,550 |   |

|                                                                          |   | Years Ended December 31, |   |
|-------------------------------------------------------------------------------|--------|--------------------------|--------|
|                                                                          |   | 2009                     |   |   | 2008 |   |   | 2007 |   |
|                                                                          |   | (In Thousands)           |   |
|                                                                          |   |                     |   |   |   |   |   |   |   |   |   |   |
| Dividends from subsidiary                                                     |   | $                        | 2,300  |   |   | $ | 1,107 |   |   | $ | 2,667 |   |
| Rental income                                                                 |   |                     | 17     |   |   |   | 11 |   |   |   | 13 |   |
| Expenses                                                                      |   |                     | (152   | ) |   |   | (107 | ) |   |   | (127 | ) |
|                                                                          |   |                     |   |   |   |   |   |   |   |   |   |   |
| Income before Income Taxes and Equity in Undistributed Earnings of Subsidiary |   |                     | 2,165  |   |   |   | 1,011 |   |   |   | 2,553 |   |
|                                                                          |   |                     |   |   |   |   |   |   |   |   |   |   |
| Income tax benefit                                                            |   |                     | 45     |   |   |   | 33 |   |   |   | 39 |   |
|                                                                          |   |                     |   |   |   |   |   |   |   |   |   |   |
|                                                                          |   |                     | 2,210  |   |   |   | 1,044 |   |   |   | 2,592 |   |
| Equity in undistributed earnings of subsidiary                                |   |                     | 951    |   |   |   | 1,993 |   |   |   | 109 |   |
|                                                                          |   |                     |   |   |   |   |   |   |   |   |   |   |
| Net Income                                                                    |   | $                        | 3,161  |   |   | $ | 3,037 |   |   | $ | 2,701 |   |

----

----

----

|                                                                              |   | Years Ended December 31, |   |
|-----------------------------------------------------------------------------------|--------|--------------------------|--------|
|                                                                              |   | 2009                     |   |   | 2008 |   |   | 2007 |   |
|                                                                              |   | (In Thousands)           |   |
|                                                                              |   |                     |   |   |   |   |   |   |   |
| Cash Flows from Operating Activities                                              |   |                     |   |   |   |   |   |   |   |
|                                                                              |   |                     |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                        |   | $                        | 3,161  |   |   | $ | 3,037 |   |   | $ | 2,701 |   |
| Adjustments to reconcile net income to net cash provided by operating activities: |   |                     |   |   |   |   |   |   |   |   |   |   |
| Depreciation                                                                      |   |                     | 12     |   |   |   | 11 |   |   |   | 9 |   |
| Equity in undistributed earnings of subsidiary                                    |   |                     | (951   | ) |   |   | (1,993 | ) |   |   | (109 | ) |
| (Increase) decrease in other assets                                               |   |                     | (13    | ) |   |   | 61 |   |   |   | (32 | ) |
| Decrease in accounts payable                                                      |   |                     | (1     | ) |   |   | - |   |   |   | - |   |
|                                                                              |   |                     |   |   |   |   |   |   |   |   |   |   |
| Net Cash Provided by Operating Activities                                         |   |                     | 2,208  |   |   |   | 1,116 |   |   |   | 2,569 |   |
|                                                                              |   |                     |   |   |   |   |   |   |   |   |   |   |
| Cash Flows Used in Investing Activities                                           |   |                     |   |   |   |   |   |   |   |   |   |   |
| Purchases of premises and equipment                                               |   |                     | -      |   |   |   | (8 | ) |   |   | (4 | ) |
|                                                                              |   |                     |   |   |   |   |   |   |   |   |   |   |
| Cash Flows Used in Financing Activities                                           |   |                     |   |   |   |   |   |   |   |   |   |   |
| Dividends paid                                                                    |   |                     | (742   | ) |   |   | (759 | ) |   |   | (777 | ) |
| Purchase of treasury stock                                                        |   |                     | (1,434 | ) |   |   | (394 | ) |   |   | (1,890 | ) |
|                                                                              |   |                     |   |   |   |   |   |   |   |   |   |   |
| Net Cash Used in Financing Activities                                             |   |                     | (2,176 | ) |   |   | (1,153 | ) |   |   | (2,667 | ) |
|                                                                              |   |                     |   |   |   |   |   |   |   |   |   |   |
| Net Increase (Decrease) in Cash                                                   |   |                     | 32     |   |   |   | (45 | ) |   |   | (102 | ) |
|                                                                              |   |                     |   |   |   |   |   |   |   |   |   |   |
| Cash - Beginning                                                                  |   |                     | 8      |   |   |   | 53 |   |   |   | 155 |   |
|                                                                              |   |                     |   |   |   |   |   |   |   |   |   |   |
| Cash - Ending                                                                     |   | $                        | 40     |   |   | $ | 8 |   |   | $ | 53 |   |

----

----

----

Selected

|                                                                   |   | At or For the Year Ended December 31,         |    |
|------------------------------------------------------------------------|--------|-----------------------------------------------|---------|
|                                                                   |   | 2009                                          |    |   | 2008 |   |   | 2007 |   |   | 2006 |   |   | 2005 |   |
| Interest Income                                                        |   | (Dollars in Thousands, Except Per Share Data) |    |
| Interest and fees on loans                                             |   | $                                             | 6,777   |   |   | $ | 6,456 |   |   | $ | 5,988 |   |   | $ | 5,419 |   |   | $ | 5,001 |   |
| Interest and dividends on securities                                   |   |                                          | 6,690   |   |   |   | 6,404 |   |   |   | 5,869 |   |   |   | 5,521 |   |   |   | 5,371 |   |
| Interest on federal funds sold                                         |   |                                          | 4       |   |   |   | 12 |   |   |   | 78 |   |   |   | 51 |   |   |   | 82 |   |
| Total interest income                                                  |   |                                          | 13,471  |   |   |   | 12,872 |   |   |   | 11,935 |   |   |   | 10,991 |   |   |   | 10,454 |   |
| Interest Expense                                                       |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                               |   |                                          | 5,472   |   |   |   | 6,099 |   |   |   | 6,085 |   |   |   | 5,115 |   |   |   | 4,469 |   |
| Short-term borrowings                                                  |   |                                          | 2       |   |   |   | 23 |   |   |   | 4 |   |   |   | 14 |   |   |   | - |   |
| Total interest expense                                                 |   |                                          | 5,474   |   |   |   | 6,122 |   |   |   | 6,089 |   |   |   | 5,129 |   |   |   | 4,469 |   |
| Net interest income                                                    |   |                                          | 7,997   |   |   |   | 6,750 |   |   |   | 5,846 |   |   |   | 5,862 |   |   |   | 5,985 |   |
| Provision for loan losses                                              |   |                                          | 84      |   |   |   | 145 |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                   |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income after provision for loan losses                    |   |                                          | 7,913   |   |   |   | 6,605 |   |   |   | 5,846 |   |   |   | 5,862 |   |   |   | 5,985 |   |
| Other operating income                                                 |   |                                          | (390    | ) |   |   | 277 |   |   |   | 271 |   |   |   | 258 |   |   |   | 276 |   |
| Other operating expense                                                |   |                                          | 3,421   |   |   |   | 3,016 |   |   |   | 2,879 |   |   |   | 2,809 |   |   |   | 2,612 |   |
| Income before taxes                                                    |   |                                          | 4,102   |   |   |   | 3,866 |   |   |   | 3,238 |   |   |   | 3,311 |   |   |   | 3,649 |   |
| Applicable income taxes                                                |   |                                          | 941     |   |   |   | 829 |   |   |   | 537 |   |   |   | 488 |   |   |   | 577 |   |
| Net income                                                             |   | $                                             | 3,161   |   |   | $ | 3,037 |   |   | $ | 2,701 |   |   | $ | 2,823 |   |   | $ | 3,072 |   |
| Per Share Data                                                         |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic earnings                                                         |   | $                                             | 16.96   |   |   | $ | 16.00 |   |   | $ | 13.79 |   |   | $ | 14.26 |   |   | $ | 15.58 |   |
| Book value                                                             |   | $                                             | 248.51  |   |   | $ | 235.29 |   |   | $ | 219.29 |   |   | $ | 208.25 |   |   | $ | 198.51 |   |
| Dividends declared                                                     |   | $                                             | 4.00    |   |   | $ | 4.00 |   |   | $ | 4.00 |   |   | $ | 4.00 |   |   | $ | 4.00 |   |
| Average shares outstanding                                             |   |                                          | 186,417 |   |   |   | 189,861 |   |   |   | 195,893 |   |   |   | 197,941 |   |   |   | 197,117 |   |
| Actual shares outstanding                                              |   |                                          | 183,608 |   |   |   | 189,250 |   |   |   | 190,755 |   |   |   | 197,941 |   |   |   | 197,941 |   |
| At End of Period                                                       |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                                           |   | $                                             | 258,177 |   |   | $ | 238,782 |   |   | $ | 225,797 |   |   | $ | 215,876 |   |   | $ | 213,547 |   |
| Securities                                                             |   |                                          | 135,967 |   |   |   | 129,507 |   |   |   | 122,491 |   |   |   | 120,362 |   |   |   | 120,375 |   |
| Total loans, gross                                                     |   |                                          | 111,988 |   |   |   | 100,953 |   |   |   | 94,610 |   |   |   | 88,071 |   |   |   | 83,042 |   |
| Allowance for loan losses                                              |   |                                          | 829     |   |   |   | 761 |   |   |   | 620 |   |   |   | 653 |   |   |   | 657 |   |
| Deposits                                                               |   |                                          | 211,391 |   |   |   | 192,938 |   |   |   | 180,391 |   |   |   | 173,101 |   |   |   | 173,276 |   |
| Stockholders’ equity                                             |   |                                          | 45,628  |   |   |   | 44,529 |   |   |   | 41,830 |   |   |   | 41,222 |   |   |   | 39,294 |   |
| Key Ratios                                                             |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Return on average assets                                               |   |                                          | 1.24    | % |   |   | 1.30 | % |   |   | 1.21 | % |   |   | 1.32 | % |   |   | 1.46 | % |
| Return on average equity                                               |   |                                          | 7.02    | % |   |   | 7.09 | % |   |   | 6.56 | % |   |   | 7.11 | % |   |   | 8.08 | % |
| Net loans to deposit ratio                                             |   |                                          | 52.58   | % |   |   | 51.93 | % |   |   | 52.10 | % |   |   | 50.50 | % |   |   | 47.55 | % |
| Dividend payout ratio (dividends declared divided by net income)       |   |                                          | 23.59   | % |   |   | 25.01 | % |   |   | 29.01 | % |   |   | 28.05 | % |   |   | 25.66 | % |
| Equity to asset ratio (average equity divided by average total assets) |   |                                          | 17.71   | % |   |   | 18.32 | % |   |   | 18.41 | % |   |   | 18.61 | % |   |   | 17.95 | % |

----

----

----

Quarterly

|                                |   | 2009                                          |   |
|-------------------------------------|--------|-----------------------------------------------|--------|
|                                |   | Three Months Ended                            |   |
|                                |   | March 31                                      |   |   | June 30 |   |   | September 30 |   |   | December 31 |   |
|                                |   | (Dollars in Thousands, Except Per Share Data) |   |
| Interest income                     |   | $                                             | 3,275  |   |   | $ | 3,383 |   |   | $ | 3,395 |   |   | $ | 3,418 |   |
| Interest expense                    |   |                                          | 1,404  |   |   |   | 1,397 |   |   |   | 1,375 |   |   |   | 1,298 |   |
| Net interest income                 |   |                                          | 1,871  |   |   |   | 1,986 |   |   |   | 2,020 |   |   |   | 2,120 |   |
|                                |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision for loan losses           |   |                                          | -      |   |   |   | 1 |   |   |   | 60 |   |   |   | 23 |   |
| Other expenses, net of other income |   |                                          | 759    |   |   |   | 843 |   |   |   | 1,295 |   |   |   | 914 |   |
| Income before income taxes          |   |                                          | 1,112  |   |   |   | 1,142 |   |   |   | 665 |   |   |   | 1,183 |   |
|                                |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income tax expense                  |   |                                          | 265    |   |   |   | 272 |   |   |   | 111 |   |   |   | 293 |   |
| Net income                          |   | $                                             | 847    |   |   | $ | 870 |   |   | $ | 554 |   |   | $ | 890 |   |
|                                |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings per share-Basic            |   | $                                             | 4.49   |   |   | $ | 4.64 |   |   | $ | 2.98 |   |   | $ | 4.85 |   |

|                                         |   | 2008                                          |   |
|----------------------------------------------|--------|-----------------------------------------------|--------|
|                                         |   | Three Months Ended                            |   |
|                                         |   | March 31                                      |   |   | June 30 |   |   | September 30 |   |   | December 31 |   |
|                                         |   | (Dollars in Thousands, Except Per Share Data) |   |
| Interest income                              |   | $                                             | 3,144  |   |   | $ | 3,201 |   |   | $ | 3,251 |   |   | $ | 3,276 |   |
| Interest expense                             |   |                                          | 1,597  |   |   |   | 1,537 |   |   |   | 1,503 |   |   |   | 1,485 |   |
| Net interest income                          |   |                                          | 1,547  |   |   |   | 1,664 |   |   |   | 1,748 |   |   |   | 1,791 |   |
|                                         |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision for loan losses                    |   |                                          | 15     |   |   |   | 15 |   |   |   | 38 |   |   |   | 77 |   |
| Other expenses, net of other income          |   |                                          | 653    |   |   |   | 706 |   |   |   | 708 |   |   |   | 672 |   |
|    Income before income taxes |   |                                          | 879    |   |   |   | 943 |   |   |   | 1,002 |   |   |   | 1,042 |   |
|                                         |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income tax expense                           |   |                                          | 174    |   |   |   | 196 |   |   |   | 232 |   |   |   | 227 |   |
| Net income                                   |   | $                                             | 705    |   |   | $ | 747 |   |   | $ | 770 |   |   | $ | 815 |   |
|                                         |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings per share-Basic                     |   | $                                             | 3.70   |   |   | $ | 3.93 |   |   | $ | 4.06 |   |   | $ | 4.31 |   |

----

----

----

Common

|           |   |   |   |   |   |   |   | Cash Dividends |   |
|----------------|--------|--------|--------|--------|--------|--------|--------|----------------|--------|
| 2009           |   | HIGH   |   |   | LOW    |   |   | Per Share      |   |
| First Quarter  |   | $      | 265.00 |   |   | $      | 190.00 |           |   |   | - |   |
|           |   |   |   |   |   |   |   |           |   |   |   |   |
| Second Quarter |   | $      | 265.00 |   |   | $      | 228.00 |           |   | $ | 2.00 |   |
|           |   |   |   |   |   |   |   |           |   |   |   |   |
| Third Quarter  |   | $      | 324.00 |   |   | $      | 255.00 |           |   |   | - |   |
|           |   |   |   |   |   |   |   |           |   |   |   |   |
| Fourth Quarter |   | $      | 265.00 |   |   | $      | 249.00 |           |   | $ | 2.00 |   |
|           |   |   |   |   |   |   |   |           |   |   |   |   |
|           |   |   |   |   |   |   |   |           |   |   |   |   |
|           |   |   |   |   |   |   |   |           |   | Cash Dividends |   |
| 2008           |   | HIGH   |   |   | LOW    |   |   | Per Share      |   |
| First Quarter  |   | $      | 270.00 |   |   | $      | 270.00 |           |   |   | - |   |
|           |   |   |   |   |   |   |   |           |   |   |   |   |
| Second Quarter |   | $      | 270.00 |   |   | $      | 250.00 |           |   | $ | 2.00 |   |
|           |   |   |   |   |   |   |   |           |   |   |   |   |
| Third Quarter  |   | $      | 260.00 |   |   | $      | 260.00 |           |   |   | - |   |
|           |   |   |   |   |   |   |   |           |   |   |   |   |
| Fourth Quarter |   | $      | 260.00 |   |   | $      | 235.00 |           |   | $ | 2.00 |   |

----

----

----

Management’s

|   | § | operating, legal and regulatory risks, |
|--------|--------|----------------------------------------|

|   | § | economic, political and competitive forces affecting our Banking business, and |
|--------|--------|--------------------------------------------------------------------------------|

|   | § | the risk that our analysis of these risks and forces could be incorrect and/or that the strategies developed to address them could be unsuccessful. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

----

----

|                                             |   | Year Ended December 31, |    |
|--------------------------------------------------|--------|-------------------------|---------|
|                                             |   | 2009                    |    |   | 2008 |   |   | 2007 |   |
|                                             |   | Average                 |    |   |   |   |   | Yield/ |   |   | Average |   |   |   |   |   | Yield/ |   |   | Average |   |   |   |   |   | Yield/ |   |
|                                             |   | Balance1                |    |   | Interest |   |   | Rate |   |   | Balance1 |   |   | Interest |   |   | Rate |   |   | Balance1 |   |   | Interest |   |   | Rate |   |
| Interest earning assets:                         |   | (Dollars in Thousands)  |    |
| Loans receivable2                                |   | $                       | 106,346 |   |   | $ | 6,777 |   |   |   | 6.37 | % |   | $ | 97,774 |   |   | $ | 6,456 |   |   |   | 6.60 | % |   | $ | 92,006 |   |   | $ | 5,988 |   |   |   | 6.51 | % |
| Investment securities:                           |   |                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                          |   |                    | 102,981 |   |   |   | 5,304 |   |   |   | 5.15 | % |   |   | 92,674 |   |   |   | 4,876 |   |   |   | 5.26 | % |   |   | 81,916 |   |   |   | 4,086 |   |   |   | 4.99 | % |
| Non-taxable3                                     |   |                    | 33,280  |   |   |   | 1,386 |   |   |   | 4.16 | % |   |   | 33,871 |   |   |   | 1,528 |   |   |   | 4.51 | % |   |   | 39,387 |   |   |   | 1,783 |   |   |   | 4.53 | % |
| Other interest earning assets4                   |   |                    | 3,627   |   |   |   | 4 |   |   |   | 0.11 | % |   |   | 990 |   |   |   | 12 |   |   |   | 1.21 | % |   |   | 1,747 |   |   |   | 78 |   |   |   | 4.46 | % |
| Total interest earning assets                    |   |                    | 246,234 |   |   |   | 13,471 |   |   |   | 5.47 | % |   |   | 225,309 |   |   |   | 12,872 |   |   |   | 5.71 | % |   |   | 215,056 |   |   |   | 11,935 |   |   |   | 5.55 | % |
| Noninterest earning assets                       |   |                    | 7,268   |   |   |   |   |   |   |   |   |   |   |   | 8,588 |   |   |   |   |   |   |   |   |   |   |   | 8,554 |   |   |   |   |   |   |   |   |   |
| Total assets                                     |   | $                       | 253,502 |   |   |   |   |   |   |   |   |   |   | $ | 233,897 |   |   |   |   |   |   |   |   |   |   | $ | 223,610 |   |   |   |   |   |   |   |   |   |
| Interest bearing liabilities:                    |   |                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW                                              |   | $                       | 7,046   |   |   |   | 28 |   |   |   | 0.40 | % |   | $ | 5,932 |   |   |   | 49 |   |   |   | 0.83 | % |   | $ | 6,517 |   |   |   | 105 |   |   |   | 1.61 | % |
| Savings                                          |   |                    | 55,691  |   |   |   | 723 |   |   |   | 1.30 | % |   |   | 47,649 |   |   |   | 830 |   |   |   | 1.74 | % |   |   | 48,147 |   |   |   | 926 |   |   |   | 1.92 | % |
| Certificates of deposit                          |   |                    | 125,748 |   |   |   | 4,721 |   |   |   | 3.75 | % |   |   | 118,746 |   |   |   | 5,220 |   |   |   | 4.40 | % |   |   | 108,275 |   |   |   | 5,054 |   |   |   | 4.67 | % |
| Federal funds purchased5                         |   |                    | -       |   |   |   | 2 |   |   |   | 1.25 | % |   |   | 861 |   |   |   | 23 |   |   |   | 2.67 | % |   |   | 562 |   |   |   | 4 |   |   |   | 0.71 | % |
| Total interest bearing liabilities               |   |                    | 188,485 |   |   |   | 5,474 |   |   |   | 2.90 | % |   |   | 173,188 |   |   |   | 6,122 |   |   |   | 3.53 | % |   |   | 163,501 |   |   |   | 6,089 |   |   |   | 3.72 | % |
| Noninterest bearing liabilities:                 |   |                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand deposits                                  |   |                    | 18,147  |   |   |   |   |   |   |   |   |   |   |   | 16,393 |   |   |   |   |   |   |   |   |   |   |   | 17,455 |   |   |   |   |   |   |   |   |   |
| Other liabilities                                |   |                    | 1,831   |   |   |   |   |   |   |   |   |   |   |   | 1,466 |   |   |   |   |   |   |   |   |   |   |   | 1,494 |   |   |   |   |   |   |   |   |   |
| Stockholders’ equity                       |   |                    | 45,039  |   |   |   |   |   |   |   |   |   |   |   | 42,850 |   |   |   |   |   |   |   |   |   |   |   | 41,160 |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders’ equity |   | $                       | 253,502 |   |   |   |   |   |   |   |   |   |   | $ | 233,897 |   |   |   |   |   |   |   |   |   |   | $ | 223,610 |   |   |   |   |   |   |   |   |   |
| Net interest income/spread6                      |   |                    |    |   |   | $ | 7,997 |   |   |   | 2.57 | % |   |   |   |   |   | $ | 6,750 |   |   |   | 2.18 | % |   |   |   |   |   | $ | 5,846 |   |   |   | 1.83 | % |
| Net interest margin7                             |   |                    |    |   |   |   |   |   |   |   | 3.25 | % |   |   |   |   |   |   |   |   |   |   | 3.00 | % |   |   |   |   |   |   |   |   |   |   | 2.72 | % |

----

----

----

----

|                               |   | For Year Ended December 31,   |   |
|------------------------------------|--------|-------------------------------|--------|
|                               |   | 2009/2008 Increase/(Decrease) |   |   | 2008/2007 Increase/(Decrease) |   |
|                               |   | Due to Change in              |   |   | Due to Change in |   |
|                               |   | Volume                        |   |   | Rate |   |   | Net |   |   | Volume |   |   | Rate |   |   | Net |   |
| Interest Income:                   |   | (In Thousands)                |   |
| Loans receivable                   |   | $                             | 546    |   |   | $ | (225 | ) |   | $ | 321 |   |   | $ | 381 |   |   | $ | 87 |   |   | $ | 468 |   |
| Securities                         |   |                          | 477    |   |   |   | (191 | ) |   |   | 286 |   |   |   | 265 |   |   |   | 270 |   |   |   | 535 |   |
| Other interest earning assets      |   |                          | 3      |   |   |   | (11 | ) |   |   | (8 | ) |   |   | (9 | ) |   |   | (57 | ) |   |   | (66 | ) |
| Total interest earning assets      |   |                          | 1,026  |   |   |   | (427 | ) |   |   | 599 |   |   |   | 637 |   |   |   | 300 |   |   |   | 937 |   |
| Interest Expense:                  |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW                                |   |                          | 4      |   |   |   | (25 | ) |   |   | (21 | ) |   |   | (5 | ) |   |   | (51 | ) |   |   | (56 | ) |
| Savings                            |   |                          | 104    |   |   |   | (211 | ) |   |   | (107 | ) |   |   | (9 | ) |   |   | (87 | ) |   |   | (96 | ) |
| Certificates of Deposit            |   |                          | 263    |   |   |   | (762 | ) |   |   | (499 | ) |   |   | 460 |   |   |   | (293 | ) |   |   | 167 |   |
| Federal funds purchased            |   |                          | (24    | ) |   |   | 3 |   |   |   | (21 | ) |   |   | 8 |   |   |   | 11 |   |   |   | 19 |   |
| Total interest bearing liabilities |   |                          | 347    |   |   |   | (995 | ) |   |   | (648 | ) |   |   | 454 |   |   |   | (420 | ) |   |   | 34 |   |
|                               |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net change in net interest income  |   | $                             | 679    |   |   | $ | 568 |   |   | $ | 1,247 |   |   | $ | 183 |   |   | $ | 720 |   |   | $ | 903 |   |

|   | § | a continuing review of delinquent, classified and non-accrual loans, large loans and overall portfolio quality, |
|--------|--------|-----------------------------------------------------------------------------------------------------------------|

|   | § | analytical review of loan charge-off experience, delinquency rates and other relevant historical and peer statistical ratios, |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------|

|   | § | management’s judgment with respect to the nature of the portfolio, concentrations of credit and current and projected economic and business conditions and their impact on the existing portfolio, and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | § | regular examinations and review of the portfolio by regulatory authorities. |
|--------|--------|-----------------------------------------------------------------------------|

----

----

----

|                                                  |   | Year Ended December 31 |    |
|-------------------------------------------------------|--------|------------------------|---------|
|                                                  |   | 2009                   |    |   | 2008 |   |   | 2007 |   |   | 2006 |   |   | 2005 |   |
|                                                  |   | (Dollars in Thousands) |    |
| Average loans outstanding                             |   | $                      | 106,346 |   |   | $ | 97,774 |   |   | $ | 92,006 |   |   | $ | 85,565 |   |   | $ | 79,294 |   |
|                                                  |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total gross loans at year end                         |   | $                      | 111,988 |   |   | $ | 100,953 |   |   | $ | 94,610 |   |   | $ | 88,071 |   |   | $ | 83,042 |   |
|                                                  |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses at January 1                |   | $                      | 761     |   |   | $ | 620 |   |   | $ | 653 |   |   | $ | 657 |   |   | $ | 663 |   |
| Losses charged to allowance                           |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                            |   |                   | -       |   |   |   | - |   |   |   | 20 |   |   |   | - |   |   |   | - |   |
| Real estate                                           |   |                   | -       |   |   |   | - |   |   |   | 3 |   |   |   | - |   |   |   | - |   |
| Consumer                                              |   |                   | 16      |   |   |   | 5 |   |   |   | 15 |   |   |   | 6 |   |   |   | 13 |   |
| Total losses charged to allowance                     |   |                   | 16      |   |   |   | 5 |   |   |   | 38 |   |   |   | 6 |   |   |   | 13 |   |
|                                                  |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Recoveries credited to allowance                      |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                            |   |                   | -       |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Real estate                                           |   |                   | -       |   |   |   | - |   |   |   | 3 |   |   |   | - |   |   |   | - |   |
| Consumer                                              |   |                   | -       |   |   |   | 1 |   |   |   | 2 |   |   |   | 2 |   |   |   | 7 |   |
| Total recoveries credited to allowance                |   |                   | -       |   |   |   | 1 |   |   |   | 5 |   |   |   | 2 |   |   |   | 7 |   |
| Net charge-offs                                       |   |                   | 16      |   |   |   | 4 |   |   |   | 33 |   |   |   | 4 |   |   |   | 6 |   |
| Provision for loan losses                             |   |                   | 84      |   |   |   | 145 |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                  |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses at December 31              |   | $                      | 829     |   |   | $ | 761 |   |   | $ | 620 |   |   | $ | 653 |   |   | $ | 657 |   |
|                                                  |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratio of net charge offs to average loans outstanding |   |                   | 0.02    | % |   |   | 0.00 | % |   |   | 0.04 | % |   |   | 0.00 | % |   |   | 0.01 | % |
| Allowance as a percentage of total gross loans        |   |                   | 0.74    | % |   |   | 0.75 | % |   |   | 0.66 | % |   |   | 0.74 | % |   |   | 0.79 | % |

----

----

----

|        |   | 2009                   |   |   | 2008   |   |   | 2007   |   |   | 2006   |   |   | 2005   |   |
|-------------|--------|------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|        |   |                   |   |   | % of   |   |   |   |   |   | % of   |   |   |   |   |   | % of |   |   |   |   |   | % of |   |   |   |   |   | % of |   |
|        |   | Amount                 |   |   | Loan   |   |   | Amount |   |   | Loan   |   |   | Amount |   |   | Loan |   |   | Amount |   |   | Loan |   |   | Amount |   |   | Loan |   |
|        |   | (Dollars in Thousands) |   |
| Commercial  |   | $                      | 303    |   |   |   | 30.3   | %      |   | $      | 231    |   |   |   | 29.5   | % |   | $ | 179 |   |   |   | 29.0 | % |   | $ | 161 |   |   |   | 26.7 | % |   | $ | 122 |   |   |   | 25.6 | % |
| Real estate |   |                   | 432    |   |   |   | 47.1   | %      |   |   | 404    |   |   |   | 44.2   | % |   |   | 287 |   |   |   | 42.4 | % |   |   | 281 |   |   |   | 43.3 | % |   |   | 271 |   |   |   | 45.1 | % |
| Consumer    |   |                   | 94     |   |   |   | 22.6   | %      |   |   | 91     |   |   |   | 26.3   | % |   |   | 131 |   |   |   | 28.6 | % |   |   | 121 |   |   |   | 30.0 | % |   |   | 125 |   |   |   | 29.3 | % |
| Unallocated |   |                   | -      |   |   |   |   |   |   |   | 35     |   |   |   |   |   |   |   | 23 |   |   |   |   |   |   |   | 90 |   |   |   |   |   |   |   | 139 |   |   |   |   |   |
| Total       |   | $                      | 829    |   |   |   | 100    | %      |   | $      | 761    |   |   |   | 100    | % |   | $ | 620 |   |   |   | 100 | % |   | $ | 653 |   |   |   | 100 | % |   | $ | 657 |   |   |   | 100 | % |
|        |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|   | § | occupancy and equipment expenses, |
|--------|--------|-----------------------------------|

|   | § | stationery, printing and Bank supplies, |
|--------|--------|-----------------------------------------|

|   | § | advertising, |
|--------|--------|--------------|

|   | § | outside service providers, relating to data processing and ATM services, |
|--------|--------|--------------------------------------------------------------------------|

|   | § | professional fees for legal, accounting, and consulting services, |
|--------|--------|-------------------------------------------------------------------|

|   | § | costs associated with the due diligence process of extending and maintaining loans and the collection process, |
|--------|--------|----------------------------------------------------------------------------------------------------------------|

|   | § | Pennsylvania shares tax and FDIC assessment, and |
|--------|--------|--------------------------------------------------|

|   | § | other types of expenses incurred as part of the normal course of operation of the Bank. |
|--------|--------|-----------------------------------------------------------------------------------------|

----

----

----

----

----

----

----

----

----

|                                      |   | December 31            |    |
|-------------------------------------------|--------|------------------------|---------|
|                                      |   | 2009                   |    |   | 2008 |   |   | 2007 |   |
| Held to maturity securities:              |   | (Dollars in Thousands) |    |
| U.S. Government agencies and corporations |   | $                      | 59,576  |   |   | $ | 52,871 |   |   | $ | 43,627 |   |
| State and political subdivisions          |   |                   | 36,257  |   |   |   | 32,300 |   |   |   | 37,507 |   |
| Mortgage-backed securities                |   |                   | 838     |   |   |   | 1,045 |   |   |   | 1,240 |   |
| Corporate securities                      |   |                   | 4,305   |   |   |   | 5,341 |   |   |   | 4,437 |   |
|                                      |   |                   |    |   |   |   |   |   |   |   |   |   |
| Available for sale securities:            |   |                   |    |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities                |   |                   | 34,887  |   |   |   | 37,843 |   |   |   | 35,579 |   |
| U.S. Treasury Note                        |   |                   | 104     |   |   |   | 107 |   |   |   | 101 |   |
| Total securities                          |   | $                      | 135,967 |   |   | $ | 129,507 |   |   | $ | 122,491 |   |

|                              |   |                   |   |   |              |   |   | After one but    |   |   | After five but  |   |   |   |   |   |   |   |
|-----------------------------------|--------|------------------------|--------|--------|-------------------|--------|--------|------------------|--------|--------|-----------------|--------|--------|--------|--------|--------|--------|--------|
|                              |   | Within one year        |   |   | within five years |   |   | within ten years |   |   | After ten years |   |
|                              |   | Amount                 |   |   | Yield             |   |   | Amount           |   |   | Yield           |   |   | Amount |   |   | Yield  |   |   | Amount |   |   | Yield |   |
| Available for sale:               |   | (Dollars in Thousands) |   |
| Mortgage-backed securities        |   | $                      | 806    |   |              |   | 3.39   | %                |   | $      | 3,464           |   |   |   | 4.20   | %      |   | $      | 8,589 |   |   |   | 4.64 | % |   | $ | 22,028 |   |   |   | 5.18 | % |
| U.S. Treasury                     |   |                   | -      |   |              |   | -      |             |   |   | 104             |   |   |   | 3.12   | %      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                              |   |                   | 806    |   |              |   |   |             |   |   | 3,568           |   |   |   |   |   |   |   | 8,589 |   |   |   |   |   |   |   | 22,028 |   |   |   |   |   |
| Held to maturity:                 |   |                   |   |   |              |   |   |             |   |   |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Government agencies          |   |                   | -      |   |              |   | -      |             |   |   | -               |   |   |   | -      |   |   |   | 3,997 |   |   |   | 4.78 | % |   |   | 55,579 |   |   |   | 5.12 | % |
| State and political subdivisions8 |   |                   | 185    |   |              |   | 6.77   | %                |   |   | 6,780           |   |   |   | 6.69   | %      |   |   | 12,368 |   |   |   | 7.14 | % |   |   | 16,924 |   |   |   | 6.71 | % |
| Mortgage-backed securities        |   |                   | -      |   |              |   | -      |             |   |   | -               |   |   |   | -      |   |   |   | - |   |   |   | - |   |   |   | 838 |   |   |   | 6.28 | % |
| Other securities                  |   |                   | -      |   |              |   | -      |             |   |   | 850             |   |   |   | 6.41   | %      |   |   | 500 |   |   |   | 5.10 | % |   |   | 2,955 |   |   |   | 2.41 | % |
|                              |   |                   | 185    |   |              |   |   |             |   |   | 7,630           |   |   |   |   |   |   |   | 16,865 |   |   |   |   |   |   |   | 76,296 |   |   |   |   |   |
|                              |   |                   |   |   |              |   |   |             |   |   |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                             |   | $                      | 991    |   |              |   |   |             |   | $      | 11,198          |   |   |   |   |   |   | $      | 25,454 |   |   |   |   |   |   | $ | 98,324 |   |   |   |   |   |

----

----

----

----

|                     |   | December 31,           |    |
|--------------------------|--------|------------------------|---------|
|                     |   | (Dollars in Thousands) |    |
|                     |   | 2009                   |    |   | 2008 |   |   | 2007 |   |   | 2006 |   |   | 2005 |   |
|                     |   |                   |    |   | % of |   |   |   |   |   | % of |   |   |   |   |   | % of |   |   |   |   |   | % of |   |   |   |   |   | % of |   |
|                     |   | Amount                 |    |   | Total |   |   | Amount |   |   | Total |   |   | Amount |   |   | Total |   |   | Amount |   |   | Total |   |   | Amount |   |   | Total |   |
| Commercial               |   | $                      | 4,810   |   |   |   | 4.3 | % |   | $ | 3,627 |   |   |   | 3.6 | % |   | $ | 4,635 |   |   |   | 4.9 | % |   | $ | 4,664 |   |   |   | 5.3 | % |   | $ | 4,832 |   |   |   | 5.8 | % |
| Commercial real estate   |   |                   | 29,177  |   |   |   | 26.1 | % |   |   | 26,142 |   |   |   | 25.9 | % |   |   | 22,779 |   |   |   | 24.1 | % |   |   | 18,820 |   |   |   | 21.4 | % |   |   | 16,440 |   |   |   | 19.8 | % |
| Residential real estate  |   |                   | 52,433  |   |   |   | 46.8 | % |   |   | 43,799 |   |   |   | 43.4 | % |   |   | 39,221 |   |   |   | 41.5 | % |   |   | 37,088 |   |   |   | 42.1 | % |   |   | 37,057 |   |   |   | 44.6 | % |
| Real estate construction |   |                   | 270     |   |   |   | 0.2 | % |   |   | 873 |   |   |   | 0.9 | % |   |   | 879 |   |   |   | 0.9 | % |   |   | 1,053 |   |   |   | 1.2 | % |   |   | 384 |   |   |   | 0.5 | % |
| Home equity              |   |                   | 18,260  |   |   |   | 16.3 | % |   |   | 19,688 |   |   |   | 19.5 | % |   |   | 20,043 |   |   |   | 21.2 | % |   |   | 19,176 |   |   |   | 21.8 | % |   |   | 17,072 |   |   |   | 20.6 | % |
| Other consumer           |   |                   | 7,038   |   |   |   | 6.3 | % |   |   | 6,824 |   |   |   | 6.7 | % |   |   | 7,053 |   |   |   | 7.4 | % |   |   | 7,270 |   |   |   | 8.2 | % |   |   | 7,257 |   |   |   | 8.7 | % |
| Total loans outstanding  |   | $                      | 111,988 |   |   |   | 100.0 | % |   | $ | 100,953 |   |   |   | 100.0 | % |   | $ | 94,610 |   |   |   | 100.0 | % |   | $ | 88,071 |   |   |   | 100.0 | % |   | $ | 83,042 |   |   |   | 100.0 | % |

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|                                  |   | As of December 31, 2009 |   |
|---------------------------------------|--------|-------------------------|--------|
|                                  |   | Due Under               |   |   | Due 1- 5 |   |   | Due Over |   |   |   |   |
|                                  |   | One Year                |   |   | Years |   |   | Five Years |   |   | Total |   |
| Maturity of loans receivable:         |   | (In Thousands)          |   |
| Commercial and commercial real estate |   | $                       | 5,554  |   |   | $ | 13,736 |   |   | $ | 14,696 |   |   | $ | 33,986 |   |
| Real estate construction              |   |                    | -      |   |   |   | - |   |   |   | 270 |   |   |   | 270 |   |
| Total                                 |   | $                       | 5,554  |   |   | $ | 13,736 |   |   | $ | 14,966 |   |   | $ | 34,256 |   |
|                                  |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                  |   |                    |   |   |   | Due 1-5 |   |   | Due Over |   |   |   |   |   |
|                                  |   |                    |   |   |   | Years |   |   | Five Years |   |   |   |   |   |
| Fixed interest rates                  |   |                    |   |   |   | $ | 1,931 |   |   | $ | 4,890 |   |   |   |   |   |
| Floating or adjustable interest rates |   |                    |   |   |   |   | 11,805 |   |   |   | 10,076 |   |   |   |   |   |
| Total                                 |   |                    |   |   |   | $ | 13,736 |   |   | $ | 14,966 |   |   |   |   |   |

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|                                                                  |   | December 31,           |   |
|-----------------------------------------------------------------------|--------|------------------------|--------|
|                                                                  |   | 2009                   |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |   | 2005 |   |
|                                                                  |   | (Dollars in Thousands) |   |
| Non-accruing loans                                                    |   | $                      | -      |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| Accruing loans past due 90 days or more                               |   |                   | 202    |   |   |   | 173 |   |   |   | 36 |   |   |   | 52 |   |   |   | 67 |   |
| Total nonperforming loans                                             |   |                   | 202    |   |   |   | 173 |   |   |   | 36 |   |   |   | 52 |   |   |   | 67 |   |
| Foreclosed real estate/repossessed assets                             |   |                   | -      |   |   |   | - |   |   |   | - |   |   |   | 71 |   |   |   | - |   |
| Total nonperforming assets                                            |   | $                      | 202    |   |   | $ | 173 |   |   | $ | 36 |   |   | $ | 123 |   |   | $ | 67 |   |
| Non-accrual loans:                                                    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest income that would have been recorded on non-accrual loans    |   | $                      | -      |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| Interest income for above loans included in net income for the period |   | $                      | -      |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
|                                                                  |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratios:                                                               |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nonperforming loans to total loans                                    |   |                   | 0.18   | % |   |   | 0.17 | % |   |   | 0.04 | % |   |   | 0.06 | % |   |   | 0.08 | % |
| Allowance for loan losses to nonperforming loans                      |   |                   | 410.40 | % |   |   | 439.88 | % |   |   | 1,722.22 | % |   |   | 1,255.77 | % |   |   | 980.60 | % |
| Nonperforming assets to total assets                                  |   |                   | 0.08   | % |   |   | 0.07 | % |   |   | 0.02 | % |   |   | 0.06 | % |   |   | 0.03 | % |
| Commitments to lend additional funds to Nonperforming loan customers  |   | $                      | -      |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |

| Non-interest bearing demand deposits |   |   | 8.6  | % |
|--------------------------------------|--------|--------|------|---|
| Interest-bearing demand deposits     |   |   | 18.3 | % |
| Savings deposits                     |   |   | 25.7 | % |
| Time deposits                        |   |   | 2.8  | % |

| (In Thousands)                           |   | TimeCertificates |   |
|------------------------------------------|--------|------------------|--------|
|                                     |   |             |   |
| Three months or less                     |   | $                | 2,385  |   |
| Over three months but within six months  |   |             | 4,064  |   |
| Over six months but within twelve months |   |             | 6,703  |   |
| Over twelve months                       |   |             | 31,897 |   |
| Total                                    |   | $                | 45,049 |   |

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|                                                    |   | December 31,           |   |   | December 31, |   |
|---------------------------------------------------------|--------|------------------------|--------|--------|--------------|--------|
|                                                    |   | 2009                   |   |   | 2008         |   |
|                                                    |   | (Dollars in Thousands) |   |
| Tier I, common stockholders’ equity               |   | $                      | 44,777 |   |         | $      | 43,826 |   |
| Tier II, allowable portion of allowance for loan losses |   |                   | 829    |   |         |   | 761 |   |
| Total capital                                           |   | $                      | 45,606 |   |         | $      | 44,587 |   |
|                                                    |   |                   |   |   |         |   |   |   |
| Tier I risk-based capital ratio                         |   |                   | 32.06  | %      |         |   | 37.83 | % |
| Tier II risk-based capital ratio                        |   |                   | 32.65  | %      |         |   | 38.49 | % |
| Tier I leverage ratio                                   |   |                   | 17.45  | %      |         |   | 18.62 | % |

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|                                 |   | Maturity/Repricing Intervals |   |
|--------------------------------------|--------|------------------------------|--------|
|                                 |   | 1-3Months                    |   |   | 3-12Months |   |   | 1-3Years |   |   | 3-5Years |   |   | Over 5Years |   |   | Total |   |
|                                 |   | (In Thousands)               |   |
|                                 |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal funds sold                   |   | $                            | 2,933  |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 2,933 |   |
| Interest bearing deposits with banks |   |                         | -      |   |   |   | 101 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 101 |   |
|                                 |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other securities                     |   |                         | 29,788 |   |   |   | 130 |   |   |   | 2,072 |   |   |   | 3,362 |   |   |   | 64,890 |   |   |   | 100,242 |   |
| Mortgage-backed securities           |   |                         | 3,877  |   |   |   | 10,885 |   |   |   | 3,238 |   |   |   | 2,709 |   |   |   | 15,016 |   |   |   | 35,725 |   |
| Total securities                     |   |                         | 33,665 |   |   |   | 11,015 |   |   |   | 5,310 |   |   |   | 6,071 |   |   |   | 79,906 |   |   |   | 135,967 |   |
|                                 |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total loans                          |   |                         | 36,315 |   |   |   | 33,310 |   |   |   | 16,145 |   |   |   | 8,148 |   |   |   | 18,070 |   |   |   | 111,988 |   |
| Total interest earning assets        |   |                         | 72,913 |   |   |   | 44,426 |   |   |   | 21,455 |   |   |   | 14,219 |   |   |   | 97,976 |   |   |   | 250,989 |   |
|                                 |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW Accounts                         |   |                         | 1,572  |   |   |   | - |   |   |   | 5,572 |   |   |   | - |   |   |   | - |   |   |   | 7,144 |   |
| Savings                              |   |                         | 10,940 |   |   |   | - |   |   |   | 49,840 |   |   |   | - |   |   |   | - |   |   |   | 60,780 |   |
| Total savings deposits               |   |                         | 12,512 |   |   |   | - |   |   |   | 55,412 |   |   |   | - |   |   |   | - |   |   |   | 67,924 |   |
|                                 |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| CDs<$100,000                      |   |                         | 11,452 |   |   |   | 33,550 |   |   |   | 25,579 |   |   |   | 9,560 |   |   |   | - |   |   |   | 80,141 |   |
| CDs>$100,000                      |   |                         | 2,386  |   |   |   | 10,866 |   |   |   | 14,764 |   |   |   | 17,133 |   |   |   | - |   |   |   | 45,149 |   |
| Total time deposits                  |   |                         | 13,838 |   |   |   | 44,416 |   |   |   | 40,343 |   |   |   | 26,693 |   |   |   | - |   |   |   | 125,290 |   |
|                                 |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total interest bearing liabilities   |   |                         | 26,350 |   |   |   | 44,416 |   |   |   | 95,755 |   |   |   | 26,693 |   |   |   | - |   |   |   | 193,214 |   |
|                                 |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Rate sensitive gap                   |   | $                            | 46,563 |   |   | $ | 10 |   |   | $ | (74,300 | ) |   | $ | (12,474 | ) |   | $ | 97,976 |   |   | $ | 57,775 |   |
|                                 |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cumulative gap                       |   | $                            | 46,563 |   |   | $ | 46,573 |   |   | $ | (27,727 | ) |   | $ | (40,201 | ) |   | $ | 57,775 |   |   |   | - |   |

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|   | Neffs Bancorp, Inc.              |
|--------|----------------------------------|
|   | P.O. Box 10                 |
|   | Neffs, PA  18065  |

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