##### 



EXHIBIT 13
 
 
  Presidents Letter
    
    
    1Comparative Summary of Selected Financial Data
    
    
    2Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    3Report of Independent Registered Public Accounting Firm
    
    
    20Consolidated Financial Statements
    
    
    21Notes to Consolidated Financial Statements
    
    
    26Shareholder Information
    
    
    42Officers
    
    
    43Board of Directors
    
    
    44




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##### 


























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##### 



2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001YEAR END BALANCESTotal assets
    
    $
    303,447
    
    
    $
    296,650
    
    
    $
    272,840
    
    
    $
    256,801
    
    
    $
    246,070Total securities
    
    
    56,931
    
    
    
    59,883
    
    
    
    48,491
    
    
    
    39,668
    
    
    
    29,788Loans, net
    
    
    224,926
    
    
    
    211,690
    
    
    
    203,771
    
    
    
    199,974
    
    
    
    197,194Total deposits
    
    
    248,506
    
    
    
    249,174
    
    
    
    238,751
    
    
    
    222,808
    
    
    
    205,221Total borrowed funds
    
    
    32,970
    
    
    
    24,600
    
    
    
    11,500
    
    
    
    11,850
    
    
    
    20,240Total shareholders equity
    
    
    21,525
    
    
    
    21,786
    
    
    
    21,155
    
    
    
    20,778
    
    
    
    19,219Book value per outstanding share(1)
    
    
    18.55
    
    
    
    18.58
    
    
    
    18.21
    
    
    
    17.85
    
    
    
    16.64Shares outstanding(1)
    
    
    1,160,338
    
    
    
    1,172,782
    
    
    
    1,161,952
    
    
    
    1,163,704
    
    
    
    1,155,294RESULTS OF OPERATIONSInterest income
    
    $
    18,045
    
    
    $
    16,600
    
    
    $
    16,128
    
    
    $
    16,612
    
    
    $
    19,232Interest expense
    
    
    6,303
    
    
    
    5,207
    
    
    
    5,581
    
    
    
    6,343
    
    
    
    9,959Net interest income
    
    
    11,742
    
    
    
    11,393
    
    
    
    10,547
    
    
    
    10,269
    
    
    
    9,273Provision for loan loss
    
    
    (1,355
    )
    
    
    (1,486
    )
    
    
    (1,972
    )
    
    
    (1,155
    )
    
    
    (1,090
    )Other income
    
    
    2,487
    
    
    
    2,473
    
    
    
    2,685
    
    
    
    3,071
    
    
    
    2,937Salaries and employee benefits
    
    
    (5,339
    )
    
    
    (5,180
    )
    
    
    (4,951
    )
    
    
    (4,505
    )
    
    
    (4,211
    )Other expenses
    
    
    (5,424
    )
    
    
    (5,237
    )
    
    
    (4,914
    )
    
    
    (5,080
    )
    
    
    (5,107
    )Income before income taxes
    
    
    2,111
    
    
    
    1,963
    
    
    
    1,395
    
    
    
    2,600
    
    
    
    1,802Applicable income taxes
    
    
    (444
    )
    
    
    (439
    )
    
    
    (122
    )
    
    
    (640
    )
    
    
    (408
    )Net income
    
    $
    1,667
    
    
    $
    1,524
    
    
    $
    1,273
    
    
    $
    1,960
    
    
    $
    1,394PER SHARE DATA(2)Net incomeBasic
    
    $
    1.43
    
    
    $
    1.30
    
    
    $
    1.10
    
    
    $
    1.69
    
    
    $
    1.21Diluted
    
    $
    1.43
    
    
    $
    1.29
    
    
    $
    1.09
    
    
    $
    1.69
    
    
    $
    1.20Cash dividend paid
    
    $
    0.76
    
    
    $
    0.76
    
    
    $
    0.76
    
    
    $
    0.76
    
    
    $
    0.71FINANCIAL RATIOSReturn on average total assets
    
    
    0.57
    %
    
    
    0.55
    %
    
    
    0.48
    %
    
    
    0.79
    %
    
    
    0.55
    %Return on average shareholders equity
    
    
    7.63
    %
    
    
    7.04
    %
    
    
    5.93
    %
    
    
    9.79
    %
    
    
    7.20
    %Average shareholders equity to
average total assets
    
    
    7.43
    %
    
    
    7.75
    %
    
    
    8.10
    %
    
    
    8.11
    %
    
    
    7.65
    %Dividend payout
    
    
    53.14
    %
    
    
    58.71
    %
    
    
    69.10
    %
    
    
    44.99
    %
    
    
    59.68
    %
 
 (1)
    
    Book value per outstanding share has been restated to reflect stock dividends and stock
splits declared through the date of issuing the report.(2)
    
    Net income and cash dividend per share data is based on the weighted average number of shares
outstanding during the year, restated to include the effects of stock dividends and stock
splits declared through the date of issuing the report. 2.




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##### 



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 INTRODUCTION
     FORWARD-LOOKING STATEMENTS
  CRITICAL ACCOUNTING POLICIES
  3.




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##### 



Allowance
for loan losses
 RESULTS OF OPERATIONS
  Net Interest Income
   4.




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##### 



CONSOLIDATED STATEMENTS OF INCOME FOR THE PERIODS SHOWNThree Months Ended December 31
    
    
    Twelve Months Ended December 312005
    
    
    2004
    
    
    $ Chg
    
    
    % Chg
    
    
    2005
    
    
    2004
    
    
    $ Chg
    
    
    % ChgInterest and fees on loans
    
    
    4,218
    
    
    
    3,770
    
    
    
    448
    
    
    
    11.88
    
    
    
    15,497
    
    
    
    14,349
    
    
    
    1,148
    
    
    
    8.00Taxable interest on securities
    
    
    438
    
    
    
    393
    
    
    
    45
    
    
    
    11.45
    
    
    
    1,792
    
    
    
    1,259
    
    
    
    533
    
    
    
    42.34Tax-free interest on securities
    
    
    188
    
    
    
    225
    
    
    
    (37
    )
    
    
    (16.44
    )
    
    
    723
    
    
    
    954
    
    
    
    (231
    )
    
    
    (24.21
    )Other interest income
    
    
    15
    
    
    
    12
    
    
    
    3
    
    
    
    25.00
    
    
    
    33
    
    
    
    38
    
    
    
    (5
    )
    
    
    (13.16
    )Total interest income
    
    
    4,859
    
    
    
    4,400
    
    
    
    459
    
    
    
    10.43
    
    
    
    18,045
    
    
    
    16,600
    
    
    
    1,445
    
    
    
    8.70Interest on deposits
    
    
    1,515
    
    
    
    1,198
    
    
    
    317
    
    
    
    26.46
    
    
    
    5,343
    
    
    
    4,577
    
    
    
    766
    
    
    
    16.74Interest on borrowings
    
    
    284
    
    
    
    193
    
    
    
    91
    
    
    
    47.15
    
    
    
    960
    
    
    
    630
    
    
    
    330
    
    
    
    52.38Total interest expense
    
    
    1,799
    
    
    
    1,391
    
    
    
    408
    
    
    
    29.33
    
    
    
    6,303
    
    
    
    5,207
    
    
    
    1,096
    
    
    
    21.05Net interest income
    
    
    3,060
    
    
    
    3,009
    
    
    
    51
    
    
    
    1.69
    
    
    
    11,742
    
    
    
    11,393
    
    
    
    349
    
    
    
    3.06Provision for loan losses
    
    
    405
    
    
    
    355
    
    
    
    50
    
    
    
    14.08
    
    
    
    1,355
    
    
    
    1,486
    
    
    
    (131
    )
    
    
    (8.82
    )Net interest after PLL
    
    
    2,655
    
    
    
    2,654
    
    
    
    1
    
    
    
    0.04
    
    
    
    10,387
    
    
    
    9,907
    
    
    
    480
    
    
    
    4.85Service and overdraft fees
    
    
    468
    
    
    
    472
    
    
    
    (4
    )
    
    
    (0.85
    )
    
    
    1,859
    
    
    
    1,940
    
    
    
    (81
    )
    
    
    (4.18
    )Gains/(losses) on asset sales
    
    
    (15
    )
    
    
    164
    
    
    
    (179
    )
    
    
    (109.15
    )
    
    
    (22
    )
    
    
    181
    
    
    
    (203
    )
    
    
    (112.15
    )Other income
    
    
    130
    
    
    
    121
    
    
    
    9
    
    
    
    7.44
    
    
    
    650
    
    
    
    352
    
    
    
    298
    
    
    
    84.66Total other income
    
    
    583
    
    
    
    757
    
    
    
    (174
    )
    
    
    (22.99
    )
    
    
    2,487
    
    
    
    2,473
    
    
    
    14
    
    
    
    0.57Salaries and employee benefits
    
    
    1,439
    
    
    
    1,437
    
    
    
    2
    
    
    
    .14
    
    
    
    5,339
    
    
    
    5,180
    
    
    
    159
    
    
    
    3.07Occupancy, furniture & equip
    
    
    319
    
    
    
    257
    
    
    
    62
    
    
    
    24.12
    
    
    
    1,191
    
    
    
    1,064
    
    
    
    127
    
    
    
    11.94State taxes
    
    
    100
    
    
    
    104
    
    
    
    (4
    )
    
    
    (3.85
    )
    
    
    427
    
    
    
    413
    
    
    
    14
    
    
    
    3.39Data processing
    
    
    222
    
    
    
    197
    
    
    
    25
    
    
    
    12.69
    
    
    
    814
    
    
    
    805
    
    
    
    9
    
    
    
    1.12FDIC deposit insurance
    
    
    17
    
    
    
    17
    
    
    
    0
    
    
    
    0.00
    
    
    
    70
    
    
    
    68
    
    
    
    2
    
    
    
    2.94Professional fees
    
    
    162
    
    
    
    83
    
    
    
    79
    
    
    
    95.18
    
    
    
    396
    
    
    
    329
    
    
    
    67
    
    
    
    20.36Amortization of intangibles
    
    
    4
    
    
    
    64
    
    
    
    (60
    )
    
    
    (93.75
    )
    
    
    137
    
    
    
    257
    
    
    
    (120
    )
    
    
    (46.69
    )Other operating expense
    
    
    722
    
    
    
    590
    
    
    
    132
    
    
    
    22.37
    
    
    
    2,389
    
    
    
    2,301
    
    
    
    88
    
    
    
    3.82Total other expense
    
    
    2,985
    
    
    
    2,749
    
    
    
    236
    
    
    
    8.58
    
    
    
    10,763
    
    
    
    10,417
    
    
    
    346
    
    
    
    3.32Income before taxes
    
    
    253
    
    
    
    662
    
    
    
    (409
    )
    
    
    (61.78
    )
    
    
    2,111
    
    
    
    1,963
    
    
    
    148
    
    
    
    7.54Income taxes
    
    
    25
    
    
    
    233
    
    
    
    (208
    )
    
    
    (89.27
    )
    
    
    444
    
    
    
    439
    
    
    
    5
    
    
    
    1.14Net income
    
    
    228
    
    
    
    429
    
    
    
    (201
    )
    
    
    (46.85
    )
    
    
    1,667
    
    
    
    1,524
    
    
    
    143
    
    
    
    9.38
 5.




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##### 



The following tables provide an analysis of the average balances, yields and rates on
interest-earning assets and interest-bearing liabilities and the change in net interest income,
identifying the portion of the change in net interest income due to changes in volume versus the
portion due to changes in interest rates.
 VOLUME / RATE ANALYSIS
 (Dollars in thousands)2005 Compared to 2004
    
    
    2004 Compared to 2003Increase/(Decrease)
    
    
    Increase/(Decrease)Change
    
    
    Change
    
    
    
    
    
    
    Change
    
    
    ChangeTotal
    
    
    due to
    
    
    due to
    
    
    Total
    
    
    due to
    
    
    due toChange
    
    
    Volume
    
    
    Rate
    
    
    Change
    
    
    Volume
    
    
    RateShort-term investments
    
    $
    (6
    )
    
    $
    (27
    )
    
    $
    21
    
    
    $
    18
    
    
    $
    12
    
    
    $
    6SecuritiesTaxable
    
    
    533
    
    
    
    447
    
    
    
    86
    
    
    
    607
    
    
    
    442
    
    
    
    165Tax exempt (1)
    
    
    (345
    )
    
    
    (341
    )
    
    
    (4
    )
    
    
    (240
    )
    
    
    (241
    )
    
    
    1Loans (2)
    
    
    1,148
    
    
    
    191
    
    
    
    957
    
    
    
    15
    
    
    
    703
    
    
    
    (688
    )Total interest income
    
    
    1,330
    
    
    
    270
    
    
    
    1,060
    
    
    
    400
    
    
    
    916
    
    
    
    (516
    )DepositsInterest-bearing demand
    
    
    196
    
    
    
    (14
    )
    
    
    210
    
    
    
    (128
    )
    
    
    93
    
    
    
    (221
    )Savings deposits
    
    
    5
    
    
    
    (3
    )
    
    
    8
    
    
    
    (20
    )
    
    
    1
    
    
    
    (21
    )Time deposits
    
    
    565
    
    
    
    272
    
    
    
    293
    
    
    
    (316
    )
    
    
    68
    
    
    
    (384
    )Borrowed funds
    
    
    330
    
    
    
    323
    
    
    
    7
    
    
    
    89
    
    
    
    170
    
    
    
    (81
    )Total interest expense
    
    
    1,096
    
    
    
    578
    
    
    
    518
    
    
    
    (375
    )
    
    
    332
    
    
    
    (707
    )Net interest income
    
    $
    234
    
    
    $
    (308
    )
    
    $
    542
    
    
    $
    775
    
    
    $
    584
    
    
    $
    191
  
 (1)
    
    Tax exempt income is adjusted to a fully taxable equivalent basis using a 34% tax rate
and a 20% disallowance of interest expense deductibility under TEFRA rules.(2)
    
    Nonaccrual loans are included for purposes of computing rate and volume effects
although interest on these balances has been excluded. Provision for Loan Losses
  6.




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##### 



DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS EQUITY
 2005
    
    
    2004
    
    
    2003Average
    
    
    Income/
    
    
    Average
    
    
    Average
    
    
    Income/
    
    
    Average
    
    
    Average
    
    
    Income/
    
    
    AverageBalance (4)
    
    
    Expense
    
    
    Yield
    
    
    Balance (4)
    
    
    Expense
    
    
    Yield
    
    
    Balance (4)
    
    
    Expense
    
    
    YieldShort-term investments
    
    $
    903
    
    
    $
    33
    
    
    
    3.65
    %
    
    $
    3,217
    
    
    $
    38
    
    
    
    1.18
    %
    
    $
    2,016
    
    
    $
    20
    
    
    
    1.00
    %SecuritiesTaxable(1)
    
    
    42,212
    
    
    
    1,792
    
    
    
    4.25
    
    
    
    31,157
    
    
    
    1,259
    
    
    
    4.04
    
    
    
    18,571
    
    
    
    652
    
    
    
    3.51Tax exempt (1 and 2)
    
    
    17,429
    
    
    
    1,057
    
    
    
    6.06
    
    
    
    23,039
    
    
    
    1,402
    
    
    
    6.09
    
    
    
    26,994
    
    
    
    1,642
    
    
    
    6.08Loans (3)(5)
    
    
    213,118
    
    
    
    15,497
    
    
    
    7.27
    
    
    
    203,951
    
    
    
    14,349
    
    
    
    7.04
    
    
    
    199,651
    
    
    
    14,334
    
    
    
    7.18Total earning assets
    
    
    273,662
    
    
    
    18,379
    
    
    
    6.72
    %
    
    
    261,364
    
    
    
    17,048
    
    
    
    6.52
    %
    
    
    247,232
    
    
    
    16,648
    
    
    
    6.75
    %Other assets
    
    
    20,602
    
    
    
    
    
    
    
    
    
    
    
    17,530
    
    
    
    
    
    
    
    
    
    
    
    17,672Total assets
    
    $
    294,264
    
    
    
    
    
    
    
    
    
    
    $
    278,894
    
    
    
    
    
    
    
    
    
    
    $
    264,904DepositsInterest-bearing
demand deposits
    
    $
    71,383
    
    
    
    997
    
    
    
    1.40
    %
    
    $
    72,619
    
    
    
    801
    
    
    
    1.10
    %
    
    $
    66,037
    
    
    
    930
    
    
    
    1.41
    %Savings deposits
    
    
    19,633
    
    
    
    65
    
    
    
    0.33
    
    
    
    20,568
    
    
    
    59
    
    
    
    0.29
    
    
    
    20,387
    
    
    
    80
    
    
    
    0.39Time deposits
    
    
    133,807
    
    
    
    4,281
    
    
    
    3.20
    
    
    
    124,694
    
    
    
    3,717
    
    
    
    2.98
    
    
    
    122,604
    
    
    
    4,031
    
    
    
    3.29Borrowed funds
    
    
    24,566
    
    
    
    960
    
    
    
    3.91
    
    
    
    16,236
    
    
    
    630
    
    
    
    3.88
    
    
    
    12,349
    
    
    
    541
    
    
    
    4.38Total interest-
bearing liabilities
    
    
    249,389
    
    
    
    6,303
    
    
    
    2.53
    %
    
    
    234,117
    
    
    
    5,207
    
    
    
    2.22
    %
    
    
    221,377
    
    
    
    5,582
    
    
    
    2.52
    %Noninterest-bearing
demand deposits
    
    
    21,943
    
    
    
    
    
    
    
    
    
    
    
    21,474
    
    
    
    
    
    
    
    
    
    
    
    19,977Other liabilities
    
    
    1,066
    
    
    
    
    
    
    
    
    
    
    
    1,676
    
    
    
    
    
    
    
    
    
    
    
    2,089Shareholders equity
    
    
    21,866
    
    
    
    
    
    
    
    
    
    
    
    21,627
    
    
    
    
    
    
    
    
    
    
    
    21,461Total liabilities and
shareholders equity
    
    $
    294,264
    
    
    
    
    
    
    
    
    
    
    $
    278,894
    
    
    
    
    
    
    
    
    
    
    $
    264,904Net interest income
    
    
    
    
    
    $
    12,076
    
    
    
    
    
    
    
    
    
    
    $
    11,841
    
    
    
    
    
    
    
    
    
    
    $
    11,066As a percentage of earning assets:Net interest income
    
    
    
    
    
    
    
    
    
    
    4.41
    %
    
    
    
    
    
    
    
    
    
    
    4.53
    %
    
    
    
    
    
    
    
    
    
    
    4.48
    %
 
 (1)
    
    Average balance is computed using the market value of securities. The average yield has
been computed using the historical amortized balance for securities.(2)
    
    Income is computed on a fully-taxable equivalent basis using a 34% tax rate and a 20%
disallowance of interest expense deductibility under TEFRA rules. The amount of such
adjustment was $334,000, $447,000 and $520,000 for 2005, 2004 and 2003, respectively.(3)
    
    Nonaccrual loans are included in the average balances presented.(4)
    
    Average is a daily average balance.(5)
    
    Balances are net of deferred income fees of $103,000, $110,000, and $83,000 for 2005, 2004,
and 2003, as well as $5,252,000, $3,858,000, and $2,997,000 of unearned income for the same
years. Non-Interest Income
  7.




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##### 



Non-interest expense
  Salaries & Employee Benefits
 Occupancy,
Furniture & Equipment
 Professional Fees
 Marketing
& Business Development
 8.




---



##### 



ENDING BALANCES AS OF THE DATE SHOWN12/31/05
    
    
    12/31/04
    
    
    $ Chg
    
    
    % Chg
    
    
    12/31/03
    
    
    $ Chg
    
    
    % ChgCash & fed funds
    
    
    6,605
    
    
    
    10,254
    
    
    
    (3,649
    )
    
    
    (35.59
    )
    
    
    10,624
    
    
    
    (370
    )
    
    
    (3.48
    )Securities AFS
    
    
    56,931
    
    
    
    59,883
    
    
    
    (2,952
    )
    
    
    (4.93
    )
    
    
    48,491
    
    
    
    11,392
    
    
    
    23.49Gross loans
    
    
    227,681
    
    
    
    214,193
    
    
    
    13,488
    
    
    
    6.30
    
    
    
    206,274
    
    
    
    7,919
    
    
    
    3.84Allowance for loan losses
    
    
    (2,755
    )
    
    
    (2,503
    )
    
    
    (252
    )
    
    
    10.07
    
    
    
    (2,503
    )
    
    
    0
    
    
    
    0.00Loans, net
    
    
    224,926
    
    
    
    211,690
    
    
    
    13,236
    
    
    
    6.25
    
    
    
    203,771
    
    
    
    7,919
    
    
    
    3.89Premises & equipment
    
    
    6,385
    
    
    
    6,321
    
    
    
    64
    
    
    
    1.01
    
    
    
    6,380
    
    
    
    (59
    )
    
    
    (0.92
    )Accrued interest receivable
    
    
    1,440
    
    
    
    1,036
    
    
    
    404
    
    
    
    39.00
    
    
    
    1,143
    
    
    
    (107
    )
    
    
    (9.36
    )Other assets
    
    
    7,160
    
    
    
    7,466
    
    
    
    (306
    )
    
    
    (4.10
    )
    
    
    2,431
    
    
    
    5,035
    
    
    
    207.12Total assets
    
    
    303,447
    
    
    
    296,650
    
    
    
    6,797
    
    
    
    2.29
    
    
    
    272,840
    
    
    
    23,810
    
    
    
    8.73Noninterest-bearing demand
    
    
    27,659
    
    
    
    26,882
    
    
    
    777
    
    
    
    2.89
    
    
    
    26,123
    
    
    
    759
    
    
    
    2.91Interest-bearing demand
    
    
    72,695
    
    
    
    72,599
    
    
    
    96
    
    
    
    0.13
    
    
    
    68,656
    
    
    
    3,943
    
    
    
    5.74Savings and time deposits
    
    
    104,466
    
    
    
    107,416
    
    
    
    (2,950
    )
    
    
    (2.75
    )
    
    
    103,413
    
    
    
    4,003
    
    
    
    3.87Time deposits of $100k
    
    
    43,686
    
    
    
    42,277
    
    
    
    1,409
    
    
    
    3.33
    
    
    
    40,559
    
    
    
    1,718
    
    
    
    4.24Total deposits
    
    
    248,506
    
    
    
    249,174
    
    
    
    (668
    )
    
    
    (0.27
    )
    
    
    238,751
    
    
    
    10,423
    
    
    
    4.37FHLB advances
    
    
    31,100
    
    
    
    24,600
    
    
    
    6,500
    
    
    
    26.42
    
    
    
    11,500
    
    
    
    13,100
    
    
    
    113.91Other borrowed funds
    
    
    1,870
    
    
    
    0
    
    
    
    1,870
    
    
    
    0.00
    
    
    
    0
    
    
    
    0
    
    
    
    0.00Accrued interest payable
    
    
    330
    
    
    
    303
    
    
    
    27
    
    
    
    8.91
    
    
    
    415
    
    
    
    (112
    )
    
    
    (26.99
    )Other liabilities
    
    
    116
    
    
    
    787
    
    
    
    (671
    )
    
    
    (85.26
    )
    
    
    1,019
    
    
    
    (232
    )
    
    
    (22.77
    )Total liabilities
    
    
    281,922
    
    
    
    274,864
    
    
    
    7,058
    
    
    
    2.57
    
    
    
    251,685
    
    
    
    23,179
    
    
    
    9.21Shareholders equity
    
    
    21,525
    
    
    
    21,786
    
    
    
    (261
    )
    
    
    (1.20
    )
    
    
    21,155
    
    
    
    631
    
    
    
    2.98Total liabilities & equity
    
    
    303,447
    
    
    
    296,650
    
    
    
    6,797
    
    
    
    2.29
    
    
    
    272,840
    
    
    
    23,810
    
    
    
    8.73
 Income Taxes
 9.




---



##### 



AVERAGE DAILY BALANCES FOR THE PERIODS SHOWNThree Months Ended December 31
    
    
    Twelve Months Ended December 312005
    
    
    2004
    
    
    $ Chg
    
    
    % Chg
    
    
    2005
    
    
    2004
    
    
    $ Chg
    
    
    % ChgCash & fed funds
    
    
    7,069
    
    
    
    8,975
    
    
    
    (1,906
    )
    
    
    (21.24
    )
    
    
    7,062
    
    
    
    10,099
    
    
    
    (3,037
    )
    
    
    (30.07
    )Securities AFS
    
    
    57,872
    
    
    
    60,422
    
    
    
    (2,550
    )
    
    
    (4.22
    )
    
    
    59,641
    
    
    
    54,196
    
    
    
    5,445
    
    
    
    10.05Gross loans
    
    
    220,931
    
    
    
    211,071
    
    
    
    9,860
    
    
    
    4.67
    
    
    
    215,694
    
    
    
    206,420
    
    
    
    9,274
    
    
    
    4.49Allowance for loan losses
    
    
    (2,718
    )
    
    
    (2,491
    )
    
    
    (227
    )
    
    
    9.11
    
    
    
    (2,576
    )
    
    
    (2,469
    )
    
    
    (107
    )
    
    
    4.33Loans, net
    
    
    218,213
    
    
    
    208,580
    
    
    
    9,633
    
    
    
    4.62
    
    
    
    213,118
    
    
    
    203,951
    
    
    
    9,167
    
    
    
    4.49Premises & equipment
    
    
    6,242
    
    
    
    6,312
    
    
    
    (70
    )
    
    
    (1.11
    )
    
    
    6,213
    
    
    
    6,328
    
    
    
    (115
    )
    
    
    (1.82
    )Accrued interest receivable
    
    
    1,563
    
    
    
    1,455
    
    
    
    108
    
    
    
    7.42
    
    
    
    1,469
    
    
    
    1,358
    
    
    
    111
    
    
    
    8.17Other assets
    
    
    6,724
    
    
    
    3,799
    
    
    
    2,925
    
    
    
    76.99
    
    
    
    6,761
    
    
    
    2,962
    
    
    
    3,799
    
    
    
    128.26Total assets
    
    
    297,683
    
    
    
    289,543
    
    
    
    8,140
    
    
    
    2.81
    
    
    
    294,264
    
    
    
    278,894
    
    
    
    15,370
    
    
    
    5.51Noninterest-bearing demand
    
    
    22,607
    
    
    
    21,599
    
    
    
    1,008
    
    
    
    4.67
    
    
    
    21,943
    
    
    
    21,473
    
    
    
    470
    
    
    
    2.19Interest-bearing demand
    
    
    73,636
    
    
    
    73,970
    
    
    
    (334
    )
    
    
    (0.45
    )
    
    
    71,383
    
    
    
    72,619
    
    
    
    (1,236
    )
    
    
    (1.70
    )Savings and time deposits
    
    
    107,267
    
    
    
    106,256
    
    
    
    1,011
    
    
    
    0.95
    
    
    
    116,492
    
    
    
    104,690
    
    
    
    11,802
    
    
    
    11.27Time deposits of $100k
    
    
    43,633
    
    
    
    42,161
    
    
    
    1,472
    
    
    
    3.49
    
    
    
    36,948
    
    
    
    40,572
    
    
    
    (3,624
    )
    
    
    (8.93
    )Total deposits
    
    
    247,143
    
    
    
    243,986
    
    
    
    3,157
    
    
    
    1.29
    
    
    
    246,766
    
    
    
    239,354
    
    
    
    7,412
    
    
    
    3.10FHLB advances
    
    
    27,477
    
    
    
    21,156
    
    
    
    6,321
    
    
    
    29.88
    
    
    
    23,921
    
    
    
    16,084
    
    
    
    7,837
    
    
    
    48.73Other borrowed funds
    
    
    332
    
    
    
    154
    
    
    
    178
    
    
    
    115.58
    
    
    
    645
    
    
    
    151
    
    
    
    494
    
    
    
    327.15Accrued interest payable
    
    
    389
    
    
    
    342
    
    
    
    47
    
    
    
    13.74
    
    
    
    358
    
    
    
    350
    
    
    
    8
    
    
    
    2.29Other liabilities
    
    
    545
    
    
    
    1,857
    
    
    
    (1,312
    )
    
    
    (70.65
    )
    
    
    708
    
    
    
    1,328
    
    
    
    (620
    )
    
    
    (46.69
    )Total liabilities
    
    
    275,886
    
    
    
    267,495
    
    
    
    8,391
    
    
    
    3.14
    
    
    
    272,398
    
    
    
    257,267
    
    
    
    15,131
    
    
    
    5.88Shareholders equity
    
    
    21,797
    
    
    
    22,048
    
    
    
    (251
    )
    
    
    (1.14
    )
    
    
    21,866
    
    
    
    21,627
    
    
    
    239
    
    
    
    1.11Total liabilities & equity
    
    
    297,683
    
    
    
    289,543
    
    
    
    8,140
    
    
    
    2.81
    
    
    
    294,264
    
    
    
    278,894
    
    
    
    15,370
    
    
    
    5.51
 FINANCIAL CONDITION
  Loans
 Year-end loans (in thousands) were as follows:
 2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Commercial loans
    
    $
    154,267
    
    
    $
    140,348
    
    
    $
    129,171
    
    
    $
    115,813
    
    
    $
    89,471Real estate loans  residential
    
    
    10,907
    
    
    
    10,959
    
    
    
    12,323
    
    
    
    20,177
    
    
    
    40,117
 10.




---



##### 



2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Consumer and credit card loans
    
    
    15,255
    
    
    
    21,449
    
    
    
    32,810
    
    
    
    45,468
    
    
    
    58,341Home equity loans
    
    
    18,982
    
    
    
    18,331
    
    
    
    13,445
    
    
    
    9,631
    
    
    
    8,354Consumer finance loans
    
    
    28,270
    
    
    
    23,106
    
    
    
    18,525
    
    
    
    10,976
    
    
    
    2,654Total loans
    
    $
    227,681
    
    
    $
    214,193
    
    
    $
    206,274
    
    
    $
    202,065
    
    
    $
    198,937
    The following is a schedule of maturities of commercial loans (in thousands) based on contract
terms as of December 31, 2005.
 One Year
    
    One Through
    
    Overor Less
    
    Five Years
    
    Five Years$25,492
    
    $
    20,666
    
    
    $
    108,109
   Allowance for Loan Losses
  11.




---



##### 



The following schedule presents an analysis (in thousands) of the allowance for loan losses,
average loan data, and related ratios for each of the five years in the period ended December 31,
 2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Balance at beginning of period
    
    $
    2,503
    
    
    $
    2,503
    
    
    $
    2,091
    
    
    $
    1,743
    
    
    $
    2,089Loans charged off:Commercial
    
    
    (354
    )
    
    
    (642
    )
    
    
    (693
    )
    
    
    (319
    )
    
    
    (1,244
    )Real estate
    
    
    
    
    
    
    (71
    )
    
    
    (3
    )
    
    
    
    
    
    
    Consumer
    
    
    (1,086
    )
    
    
    (1,072
    )
    
    
    (971
    )
    
    
    (619
    )
    
    
    (565
    )Total loans charged off
    
    
    (1,440
    )
    
    
    (1,785
    )
    
    
    (1,667
    )
    
    
    (938
    )
    
    
    (1,809
    )Recoveries of loans previously charged off:Commercial
    
    
    75
    
    
    
    164
    
    
    
    15
    
    
    
    37
    
    
    
    253Real estate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    Consumer
    
    
    262
    
    
    
    135
    
    
    
    92
    
    
    
    92
    
    
    
    120Total loan recoveries
    
    
    337
    
    
    
    299
    
    
    
    107
    
    
    
    131
    
    
    
    373Net loans charged off
    
    
    (1,103
    )
    
    
    (1,486
    )
    
    
    (1,560
    )
    
    
    (807
    )
    
    
    (1,436
    )Provision charged to operating expense
    
    
    1,355
    
    
    
    1,486
    
    
    
    1,972
    
    
    
    1,155
    
    
    
    1,090Balance at end of period
    
    $
    2,755
    
    
    $
    2,503
    
    
    $
    2,503
    
    
    $
    2,091
    
    
    $
    1,743Ratio of net charge-offs to average
loans outstanding for period
    
    
    0.51
    %
    
    
    0.72
    %
    
    
    0.77
    %
    
    
    0.41
    %
    
    
    0.70
    %
    12.




---



##### 



The following schedule is a breakdown of the allowance for loan losses (in thousands) allocated by
type of loan and related ratios.
 Percentage of
    
    
    Percentage of
    
    
    Percentage of
    
    
    Percentage of
    
    
    Percentage ofLoans in Each
    
    
    Loans in Each
    
    
    Loans in Each
    
    
    Loans in Each
    
    
    Loans in EachCategory to
    
    
    Category to
    
    
    Category to
    
    
    Category to
    
    
    Category toAllowance
    
    
    Total
    
    
    Allowance
    
    
    Total
    
    
    Allowance
    
    
    Total
    
    
    Allowance
    
    
    Total
    
    
    Allowance
    
    
    TotalAmount
    
    
    Loans
    
    
    Amount
    
    
    Loans
    
    
    Amount
    
    
    Loans
    
    
    Amount
    
    
    Loans
    
    
    Amount
    
    
    LoansDecember 31, 2005
    
    
    December 31, 2004
    
    
    December 31, 2003
    
    
    December 31, 2002
    
    
    December 31,2001Commercial
    
    $
    1,269
    
    
    
    68
    %
    
    $
    1,268
    
    
    
    65
    %
    
    $
    1,391
    
    
    
    63
    %
    
    $
    885
    
    
    
    57
    %
    
    $
    538
    
    
    
    45
    %Real estate
    
    
    195
    
    
    
    13
    
    
    
    148
    
    
    
    14
    
    
    
    121
    
    
    
    12
    
    
    
    116
    
    
    
    15
    
    
    
    199
    
    
    
    24Consumer
    
    
    1,291
    
    
    
    19
    
    
    
    1,087
    
    
    
    21
    
    
    
    991
    
    
    
    25
    
    
    
    1,090
    
    
    
    28
    
    
    
    1,006
    
    
    
    31Unallocated
    
    
    
    
    
    
    n/a
    
    
    
    
    
    
    
    n/a
    
    
    
    
    
    
    
    n/a
    
    
    
    
    
    
    
    n/a
    
    
    
    
    
    
    
    n/aTotal
    
    $
    2,755
    
    
    
    100
    %
    
    $
    2,503
    
    
    
    100
    %
    
    $
    2,503
    
    
    
    100
    %
    
    $
    2,091
    
    
    
    100
    %
    
    $
    1,743
    
    
    
    100
    %
  The following schedule summarizes impaired and nonperforming loans (in thousands) as of December 31,
 2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Impaired loans
    
    $
    1,912
    
    
    $
    1,283
    
    
    $
    2,462
    
    
    $
    3,352
    
    
    $
    1,002Loans accounted for on a nonaccrual basis
(includes substantially all impaired loans)
    
    $
    1,912
    
    
    $
    1,283
    
    
    $
    2,377
    
    
    $
    3,865
    
    
    $
    1,247Accruing loans which are contractually past
due 90 days or more as to interest or
principal payments
    
    
    124
    
    
    
    80
    
    
    
    83
    
    
    
    46
    
    
    
    977Loans that are troubled debt restructurings
as defined in Statement of Financial
Accounting Standard No. 15
(exclusive of loans listed above)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total nonperforming loans
    
    $
    2,036
    
    
    $
    1,363
    
    
    $
    2,460
    
    
    $
    3,911
    
    
    $
    2,224Nonperforming loans to Allowance for loss
    
    
    0.74
    
    
    
    0.54
    
    
    
    0.98
    
    
    
    1.87
    
    
    
    1.28
   13.




---



##### 



Securities
  Summarized below is the carrying value of securities available for sale (in thousands) as of
December 31,
 2005
    
    
    2004
    
    
    2003U.S. Treasury and U.S. Government
Agency securities
    
    $
    9,287
    
    
    $
    8,472
    
    
    $
    6,037Obligations of states and political subdivisions
    
    
    18,072
    
    
    
    18,098
    
    
    
    27,287Corporate bonds
    
    
    
    
    
    
    
    
    
    
    Mortgage-backed securities
    
    
    27,522
    
    
    
    31,359
    
    
    
    13,293Equity investments
    
    
    2,050
    
    
    
    1,954
    
    
    
    1,874$
    56,931
    
    
    $
    59,883
    
    
    $
    48,491
 The following is a schedule, by carrying value, of maturities (or, if applicable, earliest call
dates) by category of debt securities (in thousands) and the related weighted average yield of such
securities as of December 31, 2005:
 Maturing
    
    
    MaturingMaturing in
    
    
    After One
    
    
    After Five
    
    
    MaturingOne Year
    
    
    Year Through
    
    
    Years Through
    
    
    Afteror Less
    
    
    Five Years
    
    
    Ten Years
    
    
    Ten YearsAmount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    YieldU.S. Treasury and U.S. Government
Agency securities
    
    $
    4,951
    
    
    
    4.35
    %
    
    $
    973
    
    
    
    3.00
    %
    
    $
    2,391
    
    
    
    4.91
    %
    
    $
    972
    
    
    
    5.00
    %Obligations of states and political
subdivisions
    
    
    534
    
    
    
    4.51
    %
    
    
    2,832
    
    
    
    4.22
    %
    
    
    11,578
    
    
    
    4.28
    %
    
    
    3,128
    
    
    
    4.31
    %Mortgage-backed securities
    
    
    71
    
    
    
    2.69
    %
    
    
    
    
    
    
    0.00
    %
    
    
    2,248
    
    
    
    3.65
    %
    
    
    25,203
    
    
    
    4.27
    %Total
    
    $
    5,556
    
    
    
    4.34
    %
    
    $
    3,805
    
    
    
    3.89
    %
    
    $
    16,217
    
    
    
    4.28
    %
    
    $
    29,303
    
    
    
    4.30
    %
  Deposits
  14.




---



##### 



The following is a schedule of maturities of time certificates of deposit (in thousands) in amounts
of more than $100,000 as of December 31, 2005:
 Three months or less
    
    $
    5,726Over three months through six months
    
    
    5,591Over six months through twelve months
    
    
    7,237Over twelve months
    
    
    25,132Total
    
    $
    43,686
 The average amount of deposits (in thousands) and average rates paid are summarized as follows for
the years ended December 31,
 2005
    
    
    2004
    
    
    2003Average
    
    
    Average
    
    
    Average
    
    
    Average
    
    
    Average
    
    
    AverageAmount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    RateInterest-bearing demand deposits
    
    $
    71,383
    
    
    
    1.40
    %
    
    $
    72,619
    
    
    
    1.10
    %
    
    $
    66,037
    
    
    
    1.41
    %Savings deposits
    
    
    19,633
    
    
    
    0.33
    
    
    
    20,568
    
    
    
    0.29
    
    
    
    20,387
    
    
    
    0.39Time deposits
    
    
    133,807
    
    
    
    3.20
    
    
    
    124,694
    
    
    
    2.98
    
    
    
    122,604
    
    
    
    3.29Demand deposits (noninterest-bearing)
    
    
    21,943
    
    
    
    
    
    
    
    21,474
    
    
    
    
    
    
    
    19,977Total
    
    $
    246,766
    
    
    
    
    
    
    $
    239,355
    
    
    
    
    
    
    $
    229,005
 Other Assets
  CAPITAL RESOURCES
   15.




---



##### 



CONTRACTUAL OBLIGATIONS AND COMMITMENTS
  Contractual obligations
    
    

Payments Due by PeriodLess Than
    
    
    1-3
    
    
    3-5
    
    
    After(in thousands)
    
    Total
    
    
    One Year
    
    
    Years
    
    
    Years
    
    
    5 YearsTime deposits and certificates of deposit
    
    $
    130,258
    
    
    $
    64,926
    
    
    $
    57,987
    
    
    $
    6,159
    
    
    $
    1,186Borrowed funds
    
    
    32,970
    
    
    
    21,470
    
    
    
    11,500
    
    
    
    
    
    
    
    Total
    
    $
    163,228
    
    
    $
    86,396
    
    
    $
    69,487
    
    
    $
    6,159
    
    
    $
    1,186
 Other commitments
    

Amount of Commitment  Expiration by PeriodLess Than
    
    
    1-3
    
    
    3-5
    
    
    After(in thousands)
    
    Total
    
    
    One Year
    
    
    Years
    
    
    Years
    
    
    5 YearsCommitments to extend commercial credit
    
    $
    17,860
    
    
    $
    8,933
    
    
    $
    4,846
    
    
    $
    5
    
    
    $
    4,076Commitments to extend consumer credit
    
    
    11,374
    
    
    
    322
    
    
    
    1,264
    
    
    
    643
    
    
    
    9,145Standby letters of credit
    
    
    2,173
    
    
    
    173
    
    
    
    2,000
    
    
    
    
    
    
    
    Total
    
    $
    31,407
    
    
    $
    9,428
    
    
    $
    8,110
    
    
    $
    648
    
    
    $
    13,221
 caveats
 LIQUIDITY
  16.




---



##### 



QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   The Wall Street
Journal
 17.




---



##### 



Principal/Notional Amount with expected Maturities in:
 For the Year Ended December 31, 2005:
 Fair2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    Thereafter
    
    
    Total
    
    
    ValueRate-sensitive assets:Fixed interest rate loans
    
    $
    5,201
    
    
    $
    5,743
    
    
    $
    10,379
    
    
    $
    14,019
    
    
    $
    10,871
    
    
    $
    14,309
    
    
    $
    60,522
    
    
    $
    59,783Average interest rate
    
    
    8.40
    %
    
    
    10.04
    %
    
    
    9.86
    %
    
    
    10.21
    %
    
    
    9.94
    %
    
    
    8.51
    %
    
    
    9.53
    %Variable interest rate loans
    
    $
    23,468
    
    
    $
    2,663
    
    
    $
    2,581
    
    
    $
    5,750
    
    
    $
    2,625
    
    
    $
    130,072
    
    
    $
    167,159
    
    
    $
    165,118Average interest rate
    
    
    7.56
    %
    
    
    7.05
    %
    
    
    6.93
    %
    
    
    6.98
    %
    
    
    7.15
    %
    
    
    6.65
    %
    
    
    6.81
    %Fixed interest rate securities
    
    $
    72
    
    
    
    
    
    
    $
    16
    
    
    $
    966
    
    
    $
    990
    
    
    $
    39,237
    
    
    $
    41,281
    
    
    $
    41,281Average interest rate
    
    
    4.68
    %
    
    
    
    
    
    
    3.40
    %
    
    
    3.19
    %
    
    
    3.01
    %
    
    
    4.32
    %
    
    
    4.26
    %Variable interest rate securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    15,650
    
    
    $
    15,650
    
    
    $
    15,650Average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.68
    %
    
    
    4.68
    %Rate-sensitive liabilities:Non-interest-bearing deposits
    
    $
    6,914
    
    
    $
    5,531
    
    
    $
    4,149
    
    
    $
    3,458
    
    
    $
    3,458
    
    
    $
    4,149
    
    
    $
    27,659
    
    
    $
    27,659Int-bearing demand deposits
    
    $
    16,466
    
    
    $
    16,466
    
    
    $
    16,466
    
    
    $
    16,466
    
    
    $
    16,466
    
    
    $
    8,258
    
    
    $
    90,588
    
    
    $
    90,588Average interest rate
    
    
    1.19
    %
    
    
    1.19
    %
    
    
    1.19
    %
    
    
    1.19
    %
    
    
    1.19
    %
    
    
    1.19
    %
    
    
    1.19
    %Interest-bearing time deposits
    
    $
    64,926
    
    
    $
    38,301
    
    
    $
    19,686
    
    
    $
    3,864
    
    
    $
    2,295
    
    
    $
    1,186
    
    
    $
    130,259
    
    
    $
    129,766Average interest rate
    
    
    3.10
    %
    
    
    3.78
    %
    
    
    4.04
    %
    
    
    3.85
    %
    
    
    4.23
    %
    
    
    4.26
    %
    
    
    3.48
    %Fixed interest rate borrowings
    
    $
    3,000
    
    
    
    
    
    
    $
    11,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    14,500
    
    
    $
    14,468Average interest rate
    
    
    3.01
    %
    
    
    
    
    
    
    4.60
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.27
    %Variable interest rate borrowings
    
    $
    18,470
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    18,470
    
    
    $
    18,434Average interest rate
    
    
    4.36
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.36
    %
 For the Year Ended December 31, 2004:
 Fair2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    Thereafter
    
    
    Total
    
    
    ValueRate-sensitive assets:Fixed interest rate loans
    
    $
    3,786
    
    
    $
    6,386
    
    
    $
    9,881
    
    
    $
    13,107
    
    
    $
    9,684
    
    
    $
    18,601
    
    
    $
    61,445
    
    
    $
    62,298Average interest rate
    
    
    7.95
    %
    
    
    9.95
    %
    
    
    10.17
    %
    
    
    10.48
    %
    
    
    9.71
    %
    
    
    8.70
    %
    
    
    9.38
    %Variable interest rate loans
    
    $
    19,595
    
    
    $
    2,692
    
    
    $
    1,639
    
    
    $
    3,332
    
    
    $
    3,135
    
    
    $
    122,355
    
    
    $
    152,748
    
    
    $
    152,537Average interest rate
    
    
    6.28
    %
    
    
    5.69
    %
    
    
    5.79
    %
    
    
    6.04
    %
    
    
    5.84
    %
    
    
    5.81
    %
    
    
    5.87
    %Fixed interest rate securities
    
    $
    7,643
    
    
    $
    1,533
    
    
    $
    1,072
    
    
    $
    517
    
    
    $
    833
    
    
    $
    33,816
    
    
    $
    45,414
    
    
    $
    45,531Average interest rate
    
    
    4.51
    %
    
    
    4.39
    %
    
    
    6.07
    %
    
    
    5.98
    %
    
    
    5.40
    %
    
    
    5.03
    %
    
    
    4.96
    %Variable interest rate securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    14,456
    
    
    $
    14,456
    
    
    $
    14,352Average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.15
    %
    
    
    4.15
    %Rate-sensitive liabilities:Non-interest-bearing deposits
    
    $
    6,720
    
    
    $
    5,376
    
    
    $
    4,032
    
    
    $
    3,361
    
    
    $
    3,361
    
    
    $
    4,032
    
    
    $
    26,882
    
    
    $
    26,882Int-bearing demand deposits
    
    $
    16,149
    
    
    $
    16,149
    
    
    $
    16,149
    
    
    $
    16,149
    
    
    $
    16,149
    
    
    $
    8,098
    
    
    $
    88,843
    
    
    $
    88,843Average interest rate
    
    
    0.92
    %
    
    
    0.92
    %
    
    
    0.92
    %
    
    
    0.92
    %
    
    
    0.92
    %
    
    
    0.92
    %
    
    
    0.92
    %Interest-bearing time deposits
    
    $
    71,207
    
    
    $
    32,869
    
    
    $
    16,270
    
    
    $
    4,564
    
    
    $
    3,522
    
    
    $
    1,316
    
    
    $
    129,748
    
    
    $
    130,427Average interest rate
    
    
    2.94
    %
    
    
    2.87
    %
    
    
    3.57
    %
    
    
    3.68
    %
    
    
    3.78
    %
    
    
    4.13
    %
    
    
    3.06
    %Fixed interest rate borrowings
    
    
    
    
    
    $
    3,000
    
    
    
    
    
    
    $
    11,500
    
    
    
    
    
    
    
    
    
    
    $
    14,500
    
    
    $
    14,872Average interest rate
    
    
    
    
    
    
    3.01
    %
    
    
    
    
    
    
    4.60
    %
    
    
    
    
    
    
    
    
    
    
    4.27
    %Variable interest rate borrowings
    
    $
    8,100
    
    
    $
    2,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    10,100
    
    
    $
    10,100Average interest rate
    
    
    2.38
    %
    
    
    2.42
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.39
    %
  18.




---



##### 



FAIR VALUE OF FINANCIAL INSTRUMENTS
  IMPACT OF INFLATION
   ACCOUNTING STANDARDS
  19.




---



##### 



20.




---



##### 



2005
    
    
    2004ASSETSCash and cash equivalents
    
    $
    6,605
    
    
    $
    8,984Federal funds sold
    
    
    
    
    
    
    1,270Cash equivalents and federal funds sold
    
    
    6,605
    
    
    
    10,254Securities available for sale
    
    
    56,931
    
    
    
    59,883Total loans
    
    
    227,681
    
    
    
    214,193Allowance for loan loss
    
    
    (2,755
    )
    
    
    (2,503
    )Loans, net
    
    
    224,926
    
    
    
    211,690Premises and equipment, net
    
    
    6,385
    
    
    
    6,321Accrued interest receivable
    
    
    1,440
    
    
    
    1,036Other assets
    
    
    7,160
    
    
    
    7,466Total assets
    
    $
    303,447
    
    
    $
    296,650LIABILITIESDepositsNoninterest-bearing demand
    
    $
    27,659
    
    
    $
    26,882Interest-bearing demand
    
    
    72,695
    
    
    
    72,599Savings and time deposits
    
    
    104,466
    
    
    
    107,416Time deposits $100,000 and greater
    
    
    43,686
    
    
    
    42,277Total deposits
    
    
    248,506
    
    
    
    249,174FHLB advances
    
    
    31,100
    
    
    
    24,600Federal funds purchased
    
    
    1,870
    
    
    
    Accrued interest payable
    
    
    330
    
    
    
    303Other liabilities
    
    
    116
    
    
    
    787Total liabilities
    
    
    281,922
    
    
    
    274,864SHAREHOLDERS EQUITYCommon stock, no par value, 4,000,000 shares authorized,
1,178,938 shares issued in 2005 and 2004
    
    
    11,159
    
    
    
    11,095Retained earnings
    
    
    11,985
    
    
    
    11,206Deferred compensation plan shares,
17,086 shares in 2005, 14,671 shares in 2004
    
    
    (424
    )
    
    
    (360
    )Treasury stock, 18,600 shares in 2005, 6,156 shares in 2004
    
    
    (497
    )
    
    
    (163
    )Accumulated other comprehensive income (loss)
    
    
    (698
    )
    
    
    8Total shareholders equity
    
    
    21,525
    
    
    
    21,786Total liabilities and shareholders equity
    
    $
    303,447
    
    
    $
    296,650
 21.




---



##### 



2005
    
    
    2004
    
    
    2003Interest and dividend incomeInterest and fees on loans
    
    $
    15,497
    
    
    $
    14,349
    
    
    $
    14,334Interest on securities:Taxable
    
    
    1,792
    
    
    
    1,259
    
    
    
    652Nontaxable
    
    
    723
    
    
    
    954
    
    
    
    1,122Other
    
    
    33
    
    
    
    38
    
    
    
    20Total interest income
    
    
    18,045
    
    
    
    16,600
    
    
    
    16,128Interest expenseInterest on deposits
    
    
    5,343
    
    
    
    4,577
    
    
    
    5,040Interest on borrowings
    
    
    960
    
    
    
    630
    
    
    
    541Total interest expense
    
    
    6,303
    
    
    
    5,207
    
    
    
    5,581Net interest income
    
    
    11,742
    
    
    
    11,393
    
    
    
    10,547Provision for loan loss
    
    
    1,355
    
    
    
    1,486
    
    
    
    1,972Net interest income after provision for loan loss
    
    
    10,387
    
    
    
    9,907
    
    
    
    8,575Noninterest incomeService fees and overdraft charges
    
    
    1,859
    
    
    
    1,940
    
    
    
    2,115Gains on sale of securities, net
    
    
    31
    
    
    
    198
    
    
    
    129Gains on sale of loans, net
    
    
    
    
    
    
    
    
    
    
    7Gains/(loss) on sale of other assets, net
    
    
    (53
    )
    
    
    (17
    )
    
    
    Other income
    
    
    650
    
    
    
    352
    
    
    
    434Total noninterest income
    
    
    2,487
    
    
    
    2,473
    
    
    
    2,685Noninterest expensesSalaries and employee benefits
    
    
    5,339
    
    
    
    5,180
    
    
    
    4,951Occupancy, furniture and equipment
    
    
    1,191
    
    
    
    1,064
    
    
    
    934Data processing
    
    
    814
    
    
    
    805
    
    
    
    715State taxes
    
    
    427
    
    
    
    413
    
    
    
    369FDIC deposit insurance
    
    
    70
    
    
    
    68
    
    
    
    68Professional fees
    
    
    396
    
    
    
    329
    
    
    
    291Amortization of intangibles
    
    
    137
    
    
    
    257
    
    
    
    321Other operating expense
    
    
    2,389
    
    
    
    2,301
    
    
    
    2,216Total noninterest expense
    
    
    10,763
    
    
    
    10,417
    
    
    
    9,865Income before income taxes
    
    
    2,111
    
    
    
    1,963
    
    
    
    1,395Income tax expense
    
    
    444
    
    
    
    439
    
    
    
    122Net income
    
    $
    1,667
    
    
    $
    1,524
    
    
    $
    1,273Basic earnings per common share
    
    $
    1.43
    
    
    $
    1.30
    
    
    $
    1.10Diluted earnings per common share
    
    $
    1.43
    
    
    $
    1.29
    
    
    $
    1.09
 22.




---



##### 



AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    Stock
    
    
    
    
    
    
    TotalOutstanding
    
    
    Common
    
    
    Paid-In
    
    
    Retained
    
    
    Comprehensive
    
    
    Ownership
    
    
    Treasury
    
    
    ShareholdersShares
    
    
    Stock
    
    
    Capital
    
    
    Earnings
    
    
    Income
    
    
    Plan Shares
    
    
    Stock
    
    
    EquityBalance at January 1, 2003
    
    
    1,163,704
    
    
    $
    10,402
    
    
    $
    272
    
    
    $
    10,256
    
    
    $
    132
    
    
    $
    (272
    )
    
    $
    (12
    )
    
    $
    20,778Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,273
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,273Change in net unrealized gain (loss) on
securities available for sale, net of
reclassification and tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72
    
    
    
    
    
    
    
    
    
    
    
    72Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,345Cash dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (884
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (884
    )Shares acquired for deferred compensation 330 shares
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    Shares divested for deferred compensation 410 shares
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    (6,960
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (174
    )
    
    
    (174
    )Issue of treasury stock under stock options plans
    
    
    4,719
    
    
    
    
    
    
    
    
    
    
    
    (38
    )
    
    
    
    
    
    
    
    
    
    
    116
    
    
    
    78Issuance of shares common stock
    
    
    489
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12Balance at December 31, 2003
    
    
    1,161,952
    
    
    $
    10,414
    
    
    $
    270
    
    
    $
    10,607
    
    
    $
    204
    
    
    $
    (270
    )
    
    $
    (70
    )
    
    $
    21,155Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,524
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,524Change in net unrealized gain (loss) on
securities available for sale, net of
reclassification and tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (196
    )
    
    
    
    
    
    
    
    
    
    
    (196
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,328Cash dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (895
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (895
    )Shares acquired for deferred compensation 954 shares
    
    
    
    
    
    
    
    
    
    
    108
    
    
    
    
    
    
    
    
    
    
    
    (108
    )
    
    
    
    
    
    
    Shares divested for deferred compensation 755 shares
    
    
    
    
    
    
    
    
    
    
    (18
    )
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    (8,465
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (224
    )
    
    
    (224
    )Issue of treasury stock under stock option plans
    
    
    5,079
    
    
    
    
    
    
    
    
    
    
    
    (30
    )
    
    
    
    
    
    
    
    
    
    
    131
    
    
    
    101Issue of stock for deferred compensation plan
    
    
    3,439
    
    
    
    83
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    83Issue of stock under stock option plans
    
    
    10,777
    
    
    
    238
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    238Balance at December 31, 2004
    
    
    1,172,782
    
    
    $
    10,735
    
    
    $
    360
    
    
    $
    11,206
    
    
    $
    8
    
    
    $
    (360
    )
    
    $
    (163
    )
    
    $
    21,786
 23.




---



##### 



AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    Stock
    
    
    
    
    
    
    TotalOutstanding
    
    
    Common
    
    
    Paid-In
    
    
    Retained
    
    
    Comprehensive
    
    
    Ownership
    
    
    Treasury
    
    
    ShareholdersShares
    
    
    Stock
    
    
    Capital
    
    
    Earnings
    
    
    Income
    
    
    Plan Shares
    
    
    Stock
    
    
    EquityBalance at January 1, 2005
    
    
    1,172,782
    
    
    $
    10,735
    
    
    $
    360
    
    
    $
    11,206
    
    
    $
    8
    
    
    $
    (360
    )
    
    $
    (163
    )
    
    $
    21,786Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,667
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,667Change in net unrealized gain (loss) on
securities available for sale, net of
reclassification and tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (706
    )
    
    
    
    
    
    
    
    
    
    
    (706
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    961Cash dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (886
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (886
    )Shares acquired for deferred compensation 1,584 shares
    
    
    
    
    
    
    
    
    
    
    42
    
    
    
    
    
    
    
    
    
    
    
    (42
    )
    
    
    
    
    
    
    Shares divested for deferred compensation - 0 - shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    (13,468
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (361
    )
    
    
    (361
    )Issue of treasury stock under stock option plans
    
    
    193
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    3Issue of stock for deferred compensation plan
    
    
    831
    
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    (22
    )
    
    
    22
    
    
    
    22Balance at December 31, 2005
    
    
    1,160,338
    
    
    $
    10,735
    
    
    $
    424
    
    
    $
    11,985
    
    
    $
    (698
    )
    
    $
    (424
    )
    
    $
    (497
    )
    
    $
    21,525
 24.




---



##### 



2005
    
    
    2004
    
    
    2003Cash flows from operating activitiesNet income
    
    $
    1,667
    
    
    $
    1,524
    
    
    $
    1,273Adjustments to reconcile net income to net cash from
operating activitiesDepreciation
    
    
    680
    
    
    
    598
    
    
    
    508Provisions for loan loss
    
    
    1,355
    
    
    
    1,486
    
    
    
    1,972Deferred income taxes
    
    
    (195
    )
    
    
    (1
    )
    
    
    (311
    )Gain on sale of securities
    
    
    (31
    )
    
    
    (198
    )
    
    
    (129
    )Gain on sale of loans
    
    
    
    
    
    
    
    
    
    
    (7
    )Gain on other real estate owned
    
    
    53
    
    
    
    17
    
    
    
    Stock dividends on FHLB stock
    
    
    (96
    )
    
    
    (78
    )
    
    
    (72
    )Net amortization on securities
    
    
    302
    
    
    
    224
    
    
    
    187Amortization of intangible assets
    
    
    137
    
    
    
    257
    
    
    
    321Increased cash value of Bank-owned life insurance
    
    
    (227
    )
    
    
    (58
    )
    
    
    (48
    )Changes in:Loans held for sale
    
    
    
    
    
    
    
    
    
    
    226Interest receivable
    
    
    (404
    )
    
    
    107
    
    
    
    54Interest payable
    
    
    27
    
    
    
    (111
    )
    
    
    86Other assets and liabilities
    
    
    573
    
    
    
    (739
    )
    
    
    196Net cash from operating activities
    
    
    3,841
    
    
    
    3,028
    
    
    
    4,256Cash flows from investing activitiesSecurities available for sale
Purchases
    
    
    (10,506
    )
    
    
    (32,348
    )
    
    
    (35,699
    )Maturities and repayments
    
    
    8,069
    
    
    
    5,978
    
    
    
    5,275Sales
    
    
    4,144
    
    
    
    14,733
    
    
    
    21,723Net change in loans
    
    
    (15,108
    )
    
    
    (10,079
    )
    
    
    (6,547
    )Purchase of Bank-owned life insurance
    
    
    (470
    )
    
    
    (4,500
    )
    
    
    Proceeds from sale of OREO and repossessed assets
    
    
    647
    
    
    
    557
    
    
    
    655Proceeds from sale of PP&E
    
    
    19
    
    
    
    
    
    
    
    Bank premises and equipment expenditures, net
    
    
    (764
    )
    
    
    (539
    )
    
    
    (721
    )Net cash from investing activities
    
    
    (13,969
    )
    
    
    (26,198
    )
    
    
    (15,314
    )Cash flows from financing activitiesNet change in deposits
    
    
    (669
    )
    
    
    10,397
    
    
    
    15,943Proceeds from additional FHLB advances
    
    
    15,000
    
    
    
    13,100
    
    
    
    Repayments of FHLB advances and federal funds
    
    
    (6,630
    )
    
    
    
    
    
    
    (350
    )Cash dividends paid
    
    
    (886
    )
    
    
    (895
    )
    
    
    (884
    )Issuance of common stock
    
    
    22
    
    
    
    321
    
    
    
    12Purchase of treasury stock
    
    
    (361
    )
    
    
    (224
    )
    
    
    (174
    )Options exercised
    
    
    3
    
    
    
    101
    
    
    
    78Net cash from financing activities
    
    
    6,479
    
    
    
    22,800
    
    
    
    14,625Net change in cash and cash equivalents
    
    
    (3,649
    )
    
    
    (370
    )
    
    
    3,567Cash and cash equivalents at beginning of year
    
    
    10,254
    
    
    
    10,624
    
    
    
    7,057Cash and cash equivalents at end of year
    
    $
    6,605
    
    
    $
    10,254
    
    
    $
    10,624Supplemental disclosures:Cash paid for interest
    
    $
    6,276
    
    
    $
    5,318
    
    
    $
    5,496Cash paid for income taxes
    
    
    855
    
    
    
    515
    
    
    
    403Non-cash transfer of loans to foreclosed/repossessed assets
    
    
    532
    
    
    
    674
    
    
    
    560
 25.




---



##### 



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
 Nature of Operations:
 Use of Estimates
 Cash and Cash Equivalents
 Securities
  26.




---



##### 



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Loans Receivable
 Allowance for Loan Losses
   Premises and Equipment
 Other Real Estate
 Income Taxes
 27.




---



##### 



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Long-Term Assets
 Benefit Plans
  Stock Compensation Accounting for
Stock-Based Compensation .
 2005
    
    
    2004
    
    
    2003Income as reported
    
    $
    1,667
    
    
    $
    1,524
    
    
    $
    1,273Deduct: Stock-based compensation expenseDetermined under fair value based method
    
    
    6
    
    
    
    19
    
    
    
    43Pro forma net income
    
    
    1,661
    
    
    
    1,505
    
    
    
    1,230Pro forma earnings per shareBasic
    
    $
    1.43
    
    
    $
    1.28
    
    
    $
    1.06Diluted
    
    
    1.42
    
    
    
    1.28
    
    
    
    1.05Earnings per share as reportedBasic
    
    $
    1.43
    
    
    $
    1.30
    
    
    $
    1.10Diluted
    
    
    1.43
    
    
    
    1.29
    
    
    
    1.09
 Newly Issued But Not Yet Effective Accounting Standards
 28.




---



##### 



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Financial Instruments
 Fair Values of Financial Instruments
 Comprehensive Income
 Loss Contingencies
 Earnings Per Share
 Industry Segments
 29.




---



##### 



NOTE 2  SECURITIES
  Gross
    
    
    GrossFair
    
    
    Unrealized
    
    
    UnrealizedValue
    
    
    Gains
    
    
    Losses2005Obligations of U.S. Government
and federal agencies
    
    $
    9,287
    
    
    $
    
    
    
    $
    (342
    )Obligations of state and political
subdivisions
    
    
    18,072
    
    
    
    279
    
    
    
    (95
    )Mortgage-backed securities
    
    
    27,522
    
    
    
    
    
    
    
    (900
    )Total debt securities available for sale
    
    
    54,881
    
    
    
    279
    
    
    
    (1,337
    )Equity investments
    
    
    2,050
    
    
    
    
    
    
    
    Total securities available for sale
    
    $
    56,931
    
    
    $
    279
    
    
    $
    (1,337
    )2004Obligations of U.S. Government
and federal agencies
    
    $
    8,472
    
    
    $
    
    
    
    $
    (153
    )Obligations of state and political
subdivisions
    
    
    18,098
    
    
    
    432
    
    
    
    (34
    )Mortgage-backed securities
    
    
    31,359
    
    
    
    35
    
    
    
    (267
    )Total debt securities available for sale
    
    
    57,929
    
    
    
    467
    
    
    
    (454
    )Equity investments
    
    
    1,954
    
    
    
    
    
    
    
    Total securities available for sale
    
    $
    59,883
    
    
    $
    467
    
    
    $
    (454
    )
  FairValueDue less than one year
    
    $
    Due after one year through five years
    
    
    2,667Due after five years through ten years
    
    
    9,706Due after ten years
    
    
    14,986Mortgage-backed securities
    
    
    27,522Equity securities
    
    
    2,050$
    56,931
  2005
    
    
    2004
    
    
    2003Proceeds
    
    $
    4,144
    
    
    $
    14,733
    
    
    $
    21,723Gross gains
    
    
    42
    
    
    
    249
    
    
    
    166Gross losses
    
    
    11
    
    
    
    51
    
    
    
    37
 30.




---



##### 



(in thousands)
    
    Less Than Twelve Months
    
    
    Over Twelve MonthsGross
    
    
    
    
    
    
    GrossUnrealized
    
    
    
    
    
    
    UnrealizedLosses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair ValueAvailable for Sale Securities:U.S. Government and Agency
    
    $
    (39
    )
    
    $
    1,562
    
    
    $
    (303
    )
    
    $
    7,725State and political subdivisions
    
    
    (67
    )
    
    
    6,000
    
    
    
    (28
    )
    
    
    1,594Mortgage-backed securities
    
    
    (258
    )
    
    
    10,019
    
    
    
    (642
    )
    
    
    17,405Total Available for Sale
    
    $
    (364
    )
    
    $
    17,581
    
    
    $
    (973
    )
    
    $
    26,724
  (in thousands)
    
    Less Than Twelve Months
    
    
    Over Twelve MonthsGross
    
    
    
    
    
    
    GrossUnrealized
    
    
    
    
    
    
    UnrealizedLosses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair ValueAvailable for Sale Securities:U.S. Government and Agency
    
    $
    (87
    )
    
    $
    6,493
    
    
    $
    (66
    )
    
    $
    1,980State and political subdivisions
    
    
    (8
    )
    
    
    2,404
    
    
    
    (26
    )
    
    
    2,398Mortgage-backed securities
    
    
    (154
    )
    
    
    22,352
    
    
    
    (113
    )
    
    
    5,833Total Available for Sale
    
    $
    (249
    )
    
    $
    31,249
    
    
    $
    (205
    )
    
    $
    10,211
  NOTE 3  LOANS
  2005
    
    
    2004Commercial loans
    
    $
    154,267
    
    
    $
    140,348Real estate loans  residential
    
    
    10,291
    
    
    
    10,572Construction loans
    
    
    616
    
    
    
    387Consumer and credit card loans
    
    
    15,255
    
    
    
    21,449Home equity loans
    
    
    18,982
    
    
    
    18,331Consumer finance loans
    
    
    28,270
    
    
    
    23,106Total loans
    
    $
    227,681
    
    
    $
    214,193
 31.




---



##### 



2005
    
    
    2004Year-end loans with no allocated allowance for loan losses
    
    $
    1,627
    
    
    $
    603Year-end loans with allocated allowance for loan losses
    
    
    285
    
    
    
    680Total
    
    $
    1,912
    
    
    $
    1,283Amount of the allowance for loan losses allocated
    
    $
    9
    
    
    $
    85
 2005
    
    
    2004
    
    
    2003Average of impaired loans during the year
    
    $
    1,452
    
    
    $
    1,421
    
    
    $
    2,202Income recognized on impaired loans
    
    
    2
    
    
    
    13
    
    
    
    88Cash-basis interest recognized on impaired loans
    
    
    2
    
    
    
    13
    
    
    
    21
  2005
    
    
    2004Loans past due over 90 days still on accrual
    
    $
    124
    
    
    $
    80Nonaccrual loans
    
    
    1,912
    
    
    
    1,283
  NOTE 4  ALLOWANCE FOR LOAN LOSS
  2005
    
    
    2004
    
    
    2003Beginning balance
    
    $
    2,503
    
    
    $
    2,503
    
    
    $
    2,091Provision for loan loss
    
    
    1,355
    
    
    
    1,486
    
    
    
    1,972Loans charged off
    
    
    (1,440
    )
    
    
    (1,785
    )
    
    
    (1,667
    )Recoveries of loans previously charged off
    
    
    337
    
    
    
    299
    
    
    
    107Ending balance
    
    $
    2,755
    
    
    $
    2,503
    
    
    $
    2,503
 32.




---



##### 



NOTE 5  PREMISES AND EQUIPMENT
  2005
    
    
    2004Land
    
    $
    1,220
    
    
    $
    1,024Buildings
    
    
    6,720
    
    
    
    6,617Furniture and equipment
    
    
    3,456
    
    
    
    3,172Construction in process
    
    
    254
    
    
    
    142Total
    
    
    11,650
    
    
    
    10,955Accumulated depreciation
    
    
    5,265
    
    
    
    4,634Premises and equipment, net
    
    $
    6,385
    
    
    $
    6,321
 NOTE 6  DEPOSITS
  2006
    
    $
    64,9262007
    
    
    38,3012008
    
    
    19,6862009
    
    
    3,8642010
    
    
    2,2952011 and thereafter
    
    
    1,186$
    130,258
 NOTE 7
 FHLB ADVANCES AND OTHER BORROWED FUNDS
  CurrentInterestRate
    
    
    2005
    
    
    2004FHLB daily variable rate advance, with monthly interest payments; renewable
    
    
    2.38
    %
    
    $
    
    
    
    $
    8,100FHLB quarterly variable advance, with monthly interest payments; due August 2006
    
    
    4.47
    %
    
    
    2,000
    
    
    
    2,000FHLB fixed rate advance, with monthly interest payments; due August 2006
    
    
    3.01
    %
    
    
    3,000
    
    
    
    3,000FHLB fixed rate advance, with monthly interest payments; due October 2008
    
    
    4.59
    %
    
    
    6,500
    
    
    
    6,500FHLB fixed rate advance, with monthly interest payments; due October 2008
    
    
    4.62
    %
    
    
    5,000
    
    
    
    5,000FHLB daily variable rate advance, with monthly interest payments; renewable March 2006
    
    
    4.33
    %
    
    
    14,600
    
    
    
    Total FHLB advances
    
    
    
    
    
    $
    31,100
    
    
    $
    24,600
 33.




---



##### 



NOTE 8  INCOME TAXES
  2005
    
    
    2004
    
    
    2003Current provision
    
    $
    639
    
    
    $
    440
    
    
    $
    433Deferred benefit
    
    
    (195
    )
    
    
    (1
    )
    
    
    (311
    )Total income tax expense
    
    $
    444
    
    
    $
    439
    
    
    $
    122
  2005
    
    
    2004Items giving rise to deferred tax assetsAllowance for loan losses in excess of tax reserve
    
    $
    604
    
    
    $
    518Deferred compensation
    
    
    197
    
    
    
    166Unrealized loss on securities available for sale
    
    
    360
    
    
    
    Other
    
    
    2
    
    
    
    14Total
    
    
    1,163
    
    
    
    698Items giving rise to deferred tax liabilitiesDepreciation
    
    
    (207
    )
    
    
    (275
    )Mortgage servicing rights
    
    
    
    
    
    
    (41
    )Deferred loan fees and costs
    
    
    (62
    )
    
    
    (112
    )FHLB stock dividend
    
    
    (239
    )
    
    
    (205
    )Unrealized gain on securities available for sale
    
    
    
    
    
    
    (4
    )Prepaid expenses and other
    
    
    (65
    )
    
    
    (30
    )Total
    
    
    (573
    )
    
    
    (667
    )Net deferred tax benefit/(liability)
    
    $
    590
    
    
    $
    31
  2005
    
    
    2004
    
    
    2003Tax at statutory rates
    
    $
    717
    
    
    $
    667
    
    
    $
    475Increase (decrease) in tax resulting from:Tax-exempt interest
    
    
    (233
    )
    
    
    (277
    )
    
    
    (344
    )Other
    
    
    (40
    )
    
    
    49
    
    
    
    (9
    )Total income tax expense
    
    $
    444
    
    
    $
    439
    
    
    $
    122
 34.




---



##### 



NOTE 9
 STOCK OPTION PLAN
   2005
    
    
    2004
    
    
    2003Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding at
beginning
of year
    
    
    35,567
    
    
    $
    25.13
    
    
    
    66,961
    
    
    $
    24.67
    
    
    
    67,803
    
    
    $
    24.25Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,366
    
    
    
    22.75Exercised
    
    
    (193
    )
    
    
    17.57
    
    
    
    (15,856
    )
    
    
    21.36
    
    
    
    (5,208
    )
    
    
    17.57Forfeited or expired
    
    
    (525
    )
    
    
    22.75
    
    
    
    (15,538
    )
    
    
    
    
    
    
    
    
    
    
    Outstanding at
end of year
    
    
    34,849
    
    
    $
    25.21
    
    
    
    35,567
    
    
    $
    25.13
    
    
    
    66,961
    
    
    $
    24.67Options exercisable
at year-end
    
    
    32,283
    
    
    
    
    
    
    
    25,768
    
    
    
    
    
    
    
    28,424Weighted average
fair value of
options granted
during year
    
    
    n/a
    
    
    
    
    
    
    
    n/a
    
    
    
    
    
    
    
    2.55
   Outstanding
    
    
    ExercisableWeighted Average
    
    
    
    
    
    
    WeightedRange of
    
    
    
    
    
    Remaining
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    Contractual
    
    
    
    
    
    
    ExercisePrices
    
    Number
    
    
    Life
    
    
    Number
    
    
    Price$17-$20
    
    
    2,475
    
    
    1.00 years
    
    
    2,475
    
    
    $
    17.57$22-$25
    
    
    19,174
    
    
    3.37 years
    
    
    16,608
    
    
    
    24.01
 35.




---



##### 



Outstanding
    
    
    ExercisableWeighted Average
    
    
    
    
    
    
    WeightedRange of
    
    
    
    
    
    Remaining
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    Contractual
    
    
    
    
    
    
    ExercisePrices
    
    Number
    
    
    Life
    
    
    Number
    
    
    Price$28-$30
    
    
    13,200
    
    
    3.00 years
    
    
    13,200
    
    
    
    28.64Outstanding at year end
    
    
    34,849
    
    
    
    
    
    
    
    32,283
 NOTE 10  SALARY DEFERRAL  401(k) PLAN
  NOTE 11  COMMITMENTS, OFF-BALANCE-SHEET RISK AND CONTINGENCIES
      2005
    
    
    2004Commitments to extend commercial credit
    
    $
    17,860
    
    
    $
    23,028Commitments to extend consumer credit
    
    
    11,374
    
    
    
    13,202Standby letters of credit
    
    
    2,173
    
    
    
    3,100$
    31,407
    
    
    $
    39,3302005
    
    
    
    2004Fixed rate
    
    $
    366
    
    
    $
    3,972Variable rate
    
    
    31,041
    
    
    
    35,358$
    31,407
    
    
    $
    39,330
 36.




---



##### 



NOTE 12  REGULATORY MATTERS
   Capital to risk-weighted assets
    
    Tier 1 capitalTotal
    
    Tier 1
    
    to average assetsWell capitalized
    
    10%
    
    6%
    
    5%Adequately capitalized
    
    8%
    
    4%
    
    4%Undercapitalized
    
    6%
    
    3%
    
    3%
  Minimum Required
    
    
    Minimum RequiredFor Capital
    
    
    To Be WellActual


    
    
    Adequacy Purposes
    
    
    CapitalizedAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioTotal capital (to risk weighted assets)Corporation
    
    $
    24,958
    
    
    
    10.3
    %
    
    $
    19,429
    
    
    
    8.0
    %
    
    $
    24,286
    
    
    
    10.0
    %Bank
    
    $
    24,524
    
    
    
    10.1
    %
    
    $
    19,429
    
    
    
    8.0
    %
    
    $
    24,286
    
    
    
    10.0
    %Tier 1 capital (to risk weighted assets)Corporation
    
    $
    22,202
    
    
    
    9.1
    %
    
    $
    9,715
    
    
    
    4.0
    %
    
    $
    14,572
    
    
    
    6.0
    %Bank
    
    $
    21,768
    
    
    
    9.0
    %
    
    $
    9,715
    
    
    
    4.0
    %
    
    $
    14,572
    
    
    
    6.0
    %Tier 1 capital (to average assets)Corporation
    
    $
    22,202
    
    
    
    7.5
    %
    
    $
    11,891
    
    
    
    4.0
    %
    
    $
    14,863
    
    
    
    5.0
    %Bank
    
    $
    21,768
    
    
    
    7.3
    %
    
    $
    11,891
    
    
    
    4.0
    %
    
    $
    14,863
    
    
    
    5.0
    %
  37.




---



##### 



Minimum Required
    
    
    Minimum RequiredFor Capital
    
    
    To Be WellActual


    
    
    Adequacy Purposes
    
    
    CapitalizedAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioTotal capital (to risk weighted assets)Corporation
    
    $
    24,232
    
    
    
    10.5
    %
    
    $
    18,503
    
    
    
    8.0
    %
    
    $
    23,129
    
    
    
    10.0
    %Bank
    
    $
    23,999
    
    
    
    10.4
    %
    
    $
    18,503
    
    
    
    8.0
    %
    
    $
    23,129
    
    
    
    10.0
    %Tier 1 capital (to risk weighted assets)Corporation
    
    $
    21,728
    
    
    
    9.4
    %
    
    $
    9,251
    
    
    
    4.0
    %
    
    $
    13,877
    
    
    
    6.0
    %Bank
    
    $
    21,495
    
    
    
    9.3
    %
    
    $
    9,251
    
    
    
    4.0
    %
    
    $
    13,877
    
    
    
    6.0
    %Tier 1 capital (to average assets)Corporation
    
    $
    21,728
    
    
    
    7.5
    %
    
    $
    11,580
    
    
    
    4.0
    %
    
    $
    14,475
    
    
    
    5.0
    %Bank
    
    $
    21,495
    
    
    
    7.4
    %
    
    $
    11,580
    
    
    
    4.0
    %
    
    $
    14,475
    
    
    
    5.0
    %
   NOTE 13  RELATED PARTY TRANSACTIONS
  2005Beginning balance
    
    $
    3,192New loans and advances
    
    
    302Change in status
    
    
    (74
    )Payments
    
    
    (396
    )Ending balance
    
    $
    3,024
  NOTE 14  FAIR VALUES OF FINANCIAL INSTRUMENTS
  2005
    
    
    2004Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    EstimatedAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueFinancial assetsCash and equivalents
    
    $
    6,605
    
    
    $
    6,605
    
    
    $
    10,254
    
    
    $
    10,254Securities available for sale
    
    
    56,931
    
    
    
    56,931
    
    
    
    59,883
    
    
    
    59,883Loans, net of allowance for loan loss
    
    
    224,926
    
    
    
    222,146
    
    
    
    211,690
    
    
    
    212,332Accrued interest receivable
    
    
    1,440
    
    
    
    1,440
    
    
    
    1,036
    
    
    
    1,036Financial liabilitiesDemand and savings deposits
    
    
    (118,247
    )
    
    
    (118,247
    )
    
    
    (119,426
    )
    
    
    (119,426
    )
 38.




---



##### 



2005
    
    
    2004Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    EstimatedAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueTime deposits
    
    
    (130,258
    )
    
    
    (129,766
    )
    
    
    (129,748
    )
    
    
    (130,427
    )Borrowed funds
    
    
    (32,970
    )
    
    
    (32,902
    )
    
    
    (24,600
    )
    
    
    (24,972
    )Accrued interest payable
    
    
    (330
    )
    
    
    (330
    )
    
    
    (303
    )
    
    
    (303
    )
  NOTE
15  OTHER COMPREHENSIVE INCOME
  2005
    
    
    2004
    
    
    2003Unrealized holding gains and losses
on available-for-sale securities
    
    $
    (1,039
    )
    
    $
    (98
    )
    
    $
    238Less reclassification adjustments for gains
and losses later recognized in income
    
    
    31
    
    
    
    198
    
    
    
    130Net unrealized gains and losses
    
    
    (1,070
    )
    
    
    (296
    )
    
    
    108Tax effect
    
    
    (364
    )
    
    
    (100
    )
    
    
    36Other comprehensive income
    
    $
    (706
    )
    
    $
    (196
    )
    
    $
    72
 NOTE
16  EARNINGS PER SHARE
  2005
    
    
    2004
    
    
    2003Weighted average shares outstanding during the year
    
    
    1,165,853
    
    
    
    1,175,669
    
    
    
    1,163,453Dilutive effect of stock options
    
    
    2,716
    
    
    
    2,818
    
    
    
    3,703Weighted average shares considering dilutive effect
    
    
    1,168,569
    
    
    
    1,178,487
    
    
    
    1,167,156
  NOTE
17  PARENT CORPORATION STATEMENTS
  
 2005
    
    
    2004ASSETSCash on deposit with subsidiary
    
    $
    130
    
    
    $
    193
 39.




---



##### 



2005
    
    
    2004Investment in common stock of subsidiaries
    
    
    21,100
    
    
    
    21,556Other assets
    
    
    295
    
    
    
    37Total assets
    
    $
    21,525
    
    
    $
    21,786LIABILITIES AND SHAREHOLDERS EQUITYLiabilities & shareholders equity
    
    $
    21,525
    
    
    $
    21,786
 40.




---



##### 



NOTE
17  PARENT CORPORATION STATEMENTS (continued)
 
 2005
    
    
    2004
    
    
    2003INCOMEDividends from bank subsidiary
    
    $
    886
    
    
    $
    894
    
    
    $
    955Other income
    
    
    
    
    
    
    
    
    
    
    Total income
    
    
    886
    
    
    
    894
    
    
    
    955EXPENSESProfessional fees
    
    
    32
    
    
    
    70
    
    
    
    78Other
    
    
    32
    
    
    
    38
    
    
    
    36Total expenses
    
    
    64
    
    
    
    108
    
    
    
    114Tax (benefit)
    
    
    (22
    )
    
    
    (37
    )
    
    
    (39
    )Income before equity in undistributed earnings of subsidiaries
    
    
    844
    
    
    
    823
    
    
    
    880Equity in undistributed earnings of subsidiaries
    
    
    823
    
    
    
    701
    
    
    
    393NET INCOME
    
    $
    1,667
    
    
    $
    1,524
    
    
    $
    1,273
 
 2005
    
    
    2004
    
    
    2003CASH FLOWS FROM OPERATING ACTIVITIESNet income
    
    $
    1,667
    
    
    $
    1,524
    
    
    $
    1,273Adjustments to reconcile net income to net cash
from operating activitiesEquity in undistributed earnings of subsidiaries
    
    
    (823
    )
    
    
    (701
    )
    
    
    (393
    )Amortization and other
    
    
    42
    
    
    
    42
    
    
    
    (34
    )Net cash from operating activities
    
    
    886
    
    
    
    865
    
    
    
    846CASH FLOWS FROM INVESTING ACTIVITIESCapital infusion from/(to) subsidiary
    
    
    273
    
    
    
    (90
    )
    
    
    90Net cash from investing activities
    
    
    273
    
    
    
    (90
    )
    
    
    90CASH FLOWS FROM FINANCING ACTIVITIESIssuance of common stock / options exercised
    
    
    25
    
    
    
    422
    
    
    
    91Treasury repurchase of common stock
    
    
    (361
    )
    
    
    (224
    )
    
    
    (174
    )Cash dividends paid
    
    
    (886
    )
    
    
    (895
    )
    
    
    (884
    )Net cash from financing activities
    
    
    (1,222
    )
    
    
    (697
    )
    
    
    (967
    )Net change in cash
    
    
    (63
    )
    
    
    78
    
    
    
    (31
    )Cash at beginning of period
    
    
    193
    
    
    
    115
    
    
    
    146Cash at end of period
    
    $
    130
    
    
    $
    193
    
    
    $
    115
 41.




---



##### 



NOTE
18  QUARTERLY INFORMATION (Unaudited)
  2005
    
    March 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,Total interest income
    
    $
    4,184
    
    
    $
    4,441
    
    
    $
    4,560
    
    
    $
    4,860Total interest expense
    
    
    1,420
    
    
    
    1,485
    
    
    
    1,599
    
    
    
    1,799Net interest income
    
    $
    2,764
    
    
    $
    2,956
    
    
    $
    2,961
    
    
    $
    3,061Provision for loan losses
    
    
    220
    
    
    
    365
    
    
    
    365
    
    
    
    405Net income (loss)
    
    $
    431
    
    
    $
    492
    
    
    $
    516
    
    
    $
    228Basic earnings (loss) per common share
    
    
    0.37
    
    
    
    0.42
    
    
    
    0.44
    
    
    
    0.20Diluted earnings (loss) per common share
    
    
    0.37
    
    
    
    0.42
    
    
    
    0.44
    
    
    
    0.20
 2004
    
    March 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,Total interest income
    
    $
    3,970
    
    
    $
    4,022
    
    
    $
    4,208
    
    
    $
    4,400Total interest expense
    
    
    1,255
    
    
    
    1,241
    
    
    
    1,320
    
    
    
    1,391Net interest income
    
    $
    2,715
    
    
    $
    2,781
    
    
    $
    2,888
    
    
    $
    3,009Provision for loan losses
    
    
    300
    
    
    
    402
    
    
    
    430
    
    
    
    355Net income (loss)
    
    $
    423
    
    
    $
    305
    
    
    $
    367
    
    
    $
    429Basic earnings (loss) per common share
    
    
    0.36
    
    
    
    0.26
    
    
    
    0.31
    
    
    
    0.37Diluted earnings (loss) per common share
    
    
    0.36
    
    
    
    0.26
    
    
    
    0.31
    
    
    
    0.36
 SHAREHOLDER INFORMATION
  Dividends2005
    
    Declared
    
    
    Low Bid
    
    
    High BidThree months ended March 31
    
    $
    0.19
    
    
    $
    26.10
    
    
    $
    27.00Three months ended June 30
    
    
    0.19
    
    
    
    25.30
    
    
    
    27.25Three months ended September 30
    
    
    0.19
    
    
    
    26.25
    
    
    
    27.25Three months ended December 31
    
    
    0.19
    
    
    
    26.00
    
    
    
    27.25
 Dividends2004
    
    Declared
    
    
    Low Bid
    
    
    High BidThree months ended March 31
    
    $
    0.19
    
    
    $
    25.50
    
    
    $
    35.00Three months ended June 30
    
    
    0.19
    
    
    
    26.00
    
    
    
    27.25Three months ended September 30
    
    
    0.19
    
    
    
    26.00
    
    
    
    26.25Three months ended December 31
    
    
    0.19
    
    
    
    26.10
    
    
    
    26.40
   42.




---



##### 



David.Browne@csbanking.com
   43.




---



##### 



BOARD OF DIRECTORS
 Richard Sheaffer  Chairman (1)
    
    President, R. A. Sheaffer, Inc.
Morral, OhioPhilip W. Kinley (2)
    
    President and CEO, Commercial
Bancshares, Inc. and the Commercial Savings

Bank, Secretary & Treasurer, Beck Title

Upper Sandusky, OhioDaniel E. Berg (1) (2)
    
    Director of Operations, Tower AutomotiveJ. William Bremyer (1)
    
    Doctor of Podiatry, Tiffin, OhioLynn R. Child (1) (2)
    
    CEO, Aardvark, Inc. and
CentraComm

Communications, LLC, Findlay, OhioMark Dillon (1)
    
    President and CEO, Fairborn U.S.A.,
Inc.

Upper Sandusky, OhioEdwin G. Emerson (1)
    
    Partner, Shumaker, Loop & Kendrick, LLP
Toledo, OhioHazel Franks (1) (2)
    
    Retired, Trucking Firm Owner
Upper Sandusky, OhioDeborah J. Grafmiller (1) (2)
    
    President, Bill Gillen Realty,
Inc.

Co-owner, Certified Appraisal Service

Co-owner/Operating Manager,

Gillen-Grafmiller Realty, LLC

Upper Sandusky, OhioMichael A. Mastro (1)
    
    President, TLM Management, Inc.

Owner/Operator, Buffalo Wild Wings

Marion, Ohio and Findlay, OhioTracy L. Morgan (2)
    
    President and CEO, Advantage
Finance, Inc.

Marion, OhioKurt D. Kimmel (1) (2)
    
    President/Co-owner, Kimmel Cleaners
Upper Sandusky, OhioMichael A. Shope (1)
    
    Retired CFO, Walbro Corporation
Norwalk, OhioDouglas C. Smith (1)
    
    Retired Senior Executive,
Baja Marine Corporation
Bucyrus, Ohio
 
 (1)
    
    Directors of Commercial Bancshares, Inc. and The Commercial Savings Bank(2)
    
    Directors of Advantage Finance, Inc. 44.