UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





ý QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d)  OF


THE
SECURITIES EXCHANGE ACT OF 1934





For
the Quarterly Period Ended March 31, 2009





OR





o TRANSITION PERIOD
PURSUANT TO SECTION 13 OR 15(d) OF


THE
SECURITIES EXCHANGE ACT OF 1934





For the
Transition Period from ___________ to ___________








Commission
File Number:  001-31896








THE
WILBER
CORPORATION


(Exact
Name of the Registrant as Specified in its Charter)





New
      York
            15-6018501(State
      or Other Jurisdiction of Incorporation or Organization)
            (I.R.S.
      Employer Identification Number)


245 Main Street, Oneonta, NY
13820


(Address
of Principal Executive Offices) (Zip Code)





607
432-1700


(Registrant’s
Telephone Number Including Area Code)





no
changes


(Former
name, former address and former fiscal year, if changed since last
report)





Indicate
by check mark whether registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.


Yes ý No o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.  (Check one).




Large
      accelerated filer o
            Accelerated
      filer ýNon-accelerated
      filer o (Do
      not check if a smaller reporting company)
            Smaller
      reporting company ý





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o  No ý





As of May
3, 2009 there were issued and outstanding 10,503,704 shares of the Registrant’s
Common Stock.











THE
WILBER CORPORATION


FORM
10-Q


INDEX








PART
I – FINANCIAL INFORMATION





FORWARD-LOOKING
      STATEMENTSRECENT
      DEVELOPMENTSITEM
      1:
                    Interim
      Financial Statements (Unaudited)Consolidated
      Statements of ConditionConsolidated
      Statements of IncomeConsolidated
      Statements of Changes in Shareholders’ Equity and Comprehensive
      IncomeConsolidated
      Statements of Cash FlowsNotes
      to Unaudited Consolidated Interim Financial StatementsITEM
      2:
                    Management’s
      Discussion and Analysis of Financial Condition and Results of
      OperationsA.
                    GeneralB.
                    Financial
      Condition and Performance OverviewC.
                    Comparison
      of Financial Condition at March 31, 2009 and December 31,
    2008D.
                    Comparison
      of Results of Operations for the Three Months Ended March 31, 2009 and
      2008E.
                    LiquidityF.
                    Capital
      Resources and DividendsITEM
      3:
                    Quantitative
      and Qualitative Disclosures about Market RiskITEM
      4:
                    Controls
      and ProceduresITEM
      4T:
                    Controls
      and ProceduresPART
      II – OTHER INFORMATIONITEM
      1:
                    Legal
      ProceedingsITEM
      1A:
                    Risk
      FactorsITEM
      2:
                    Unregistered
      Sales of Equity Securities and Use of ProceedsITEM
      3:
                    Defaults
      Upon Senior SecuritiesITEM
      4:
                    Submission
      of Matters to a Vote of Security HoldersITEM
      5:
                    Other
      InformationITEM
      6:
                    ExhibitsSignature
      PageIndex
      to
Exhibits


1
 Index


PART
I – FINANCIAL INFORMATION














FORWARD-LOOKING
STATEMENTS








When we
use words or phrases like "will probably result," "we expect," "will continue,"
"we anticipate," "estimate," "project," "should cause," or similar expressions
in this report or in any press releases, public announcements, filings with the
Securities and Exchange Commission (the "SEC"), or other disclosures, we are
making "forward-looking statements" as described in the Private Securities
Litigation Reform Act of 1995.  In addition, certain information we
provide, such as analysis of the adequacy of our allowance for loan losses or an
analysis of the interest rate sensitivity of our assets and liabilities, is
always based on predictions of the future.  From time to time, we may
also publish other forward-looking statements about anticipated financial
performance, business prospects, and similar matters.





The
Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements.  We want you to know that a variety of
future events and uncertainties could cause our actual results and experience to
differ materially from what we anticipate when we make our forward-looking
statements.  Factors that could cause future results to vary from
current management expectations include, but are not limited to, general
economic conditions, including volatility and disruption in national and
international financial markets, legislative and regulatory changes, government
intervention in the U.S. financial system, monetary and fiscal policies of the
federal government, changes in tax policies, tax rates and regulations of
federal, state and local tax authorities, changes in consumer preferences,
changes in interest rates, deposit flows, cost of funds, demand for loan
products, demand for financial services, competition, changes in the quality or
composition of the Company’s loan and investment portfolios, changes in
accounting principles, policies or guidelines, and other economic, competitive,
governmental, and technological factors affecting the Company’s operations,
markets, products, services and fees.





Please do
not rely unduly on any forward-looking statements, which are valid only as of
the date made.  Many factors, including those described above, could
affect our financial performance and could cause our actual results or
circumstances for future periods to differ materially from what we anticipate or
project.  We have no obligation to update any forward-looking
statements to reflect future events that occur after the statements are made and
we specifically disclaim such obligation.











2
 Index


RECENT
DEVELOPMENTS








Emergency Economic Stabilization Act
of 2008.In response to the current financial crisis, on
October 3, 2008, Congress enacted the Emergency Economic Stabilization Act of
2008 (“EESA”), which includes the Troubled Asset Relief Program (“TARP”). On
October 14, 2008, the U.S. Department of the Treasury (the “Treasury”) announced
that, using the authority granted to it under TARP, it would make equity
investments in healthy banks and bank holding companies pursuant to its Capital
Purchase Program (“CPP”). The purpose of the CPP is to increase the flow of
financing to businesses and consumers, support the national economy, strengthen
market stability and improve the strength of financial institutions. Under the
CPP, the Treasury purchases preferred stock in companies that choose to
participate, in amounts ranging from a minimum of 1% to a maximum of 3% of each
participating institution’s risk-weighted assets. Qualifying institutions that
sell preferred stock to the Treasury are expected to use the cash proceeds they
receive primarily to fund additional lending activities, though proceeds also
may be used by companies for other corporate purposes.





The
Company applied to participate in the CPP on November 7, 2008. Participation in
the CPP required the Company to authorize and issue preferred stock to the
Treasury. On December 11, 2008, the Treasury notified the Company that its
application to participate in the CPP had been preliminarily approved for $12
million, or approximately 2% of the Company’s risk-weighted assets. At a special
meeting held on February 27, 2009, the Company’s shareholders approved an
amendment to the Company’s certificate of incorporation authorizing the issuance
of up to 100,000 shares of preferred stock.





Although
the amendment to the certificate of incorporation allowed for the issuance of
preferred stock to the Treasury under CPP, on March 27, 2009 our Board of
Directors determined it was not in the best interest of the Company’s
shareholders.





Federal Deposit Insurance
Corporation (“FDIC”) Deposit Insurance Fund Assessments.  The
FDIC approved an interim rule in February 2009 that will institute a one-time
special assessment of 20 cents per $100 of domestic deposits on the banking
industry in order to quickly restore its Deposit Insurance Fund.  The
FDIC’s Deposit Insurance Fund reserve ratio is required to be maintained at
1.15%.  Due to the high number of bank failures during 2008, the
Deposit Insurance Fund’s reserve ratio stood at 0.40% at December 31,
2008.  The Company estimates that this one-time special assessment
would result in the recording of approximately $1.500 million in additional
non-interest expense during 2009.  Immediately following the FDIC’s
special assessment announcement several comments were provided by member
institutions and banking industry advocates, including the American Bankers
Association, recommending that the FDIC consider alternative Deposit Insurance
Fund funding options including an increase in the FDIC’s line of credit with the
U.S. Department of Treasury.  The FDIC’s Chairperson followed with a
public statement indicating the special assessment could be reduced to 10 basis
points if an increase in the line of credit with the U.S. Treasury Department
were granted.  In the event the special assessment were reduced from
20 basis points to 10 basis points, we estimate that the Company would record
approximately $750 thousand in additional non-interest expense during
2009.





In
addition, the FDIC increased the annual assessment rate to between 12 and 16
basis points for well capitalized banks, which we anticipate will increase our
annual FDIC premiums by $650 thousand to $800 thousand during 2009, as compared
to 2008.  The interim rule also reserves the right of the FDIC to
charge up to 10 cents per $100 of domestic deposits in the form of a special
premium if the reserve ratio continues to fall.





3
 Index


ITEM
1:  Interim Financial Statements (Unaudited)





The
      Wilber CorporationConsolidated
      Statements of Condition (Unaudited)March
      31,
                        
                        
                        December
      31,in
      thousands except share and per share data
                        
                        2009
                        
                        
                        2008AssetsCash
      and Due from Banks
                        
                        $
                        7,980
                        
                        
                        $
                        8,467Interest
      Bearing Balances with Banks
                        
                        
                        38,829
                        
                        
                        
                        35,475Federal
      Funds Sold
                        
                        
                        124
                        
                        
                        
                        479Total
      Cash and Cash Equivalents
                        
                        
                        46,933
                        
                        
                        
                        44,421SecuritiesTrading,
      at Fair Value
                        
                        
                        967
                        
                        
                        
                        1,155Available-for-Sale,
      at Fair Value
                        
                        
                        219,843
                        
                        
                        
                        216,744Held-to-Maturity,
      Fair Value of $49,659 at March 31, 2009and
      $45,009 at December 31, 2008
                        
                        
                        48,712
                        
                        
                        
                        44,454Other
      Investments
                        
                        
                        5,666
                        
                        
                        
                        5,693Loans
      Held for Sale
                        
                        
                        547
                        
                        
                        
                        118Loans
                        
                        
                        600,275
                        
                        
                        
                        583,861Allowance
      for Loan Losses
                        
                        
                        (8,491
                        )
                        
                        
                        (7,564
                        )Loans,
      Net
                        
                        
                        591,784
                        
                        
                        
                        576,297Premises
      and Equipment, Net
                        
                        
                        6,520
                        
                        
                        
                        6,482Bank
      Owned Life Insurance
                        
                        
                        16,549
                        
                        
                        
                        16,402Goodwill
                        
                        
                        4,619
                        
                        
                        
                        4,619Intangible
      Assets, Net
                        
                        
                        82
                        
                        
                        
                        107Other
      Assets
                        
                        
                        8,108
                        
                        
                        
                        8,382Total
      Assets
                        
                        $
                        950,330
                        
                        
                        $
                        924,874Liabilities
      and Shareholders’ EquityDeposits:Demand
                        
                        $
                        68,281
                        
                        
                        $
                        72,168Savings,
      NOW and Money Market Deposit Accounts
                        
                        
                        390,118
                        
                        
                        
                        330,158Certificates
      of Deposit (Over $100M)
                        
                        
                        132,392
                        
                        
                        
                        149,332Certificates
      of Deposit (Under $100M)
                        
                        
                        187,091
                        
                        
                        
                        192,119Other
      Deposits
                        
                        
                        23,060
                        
                        
                        
                        22,096Total
      Deposits
                        
                        
                        800,942
                        
                        
                        
                        765,873Short-Term
      Borrowings
                        
                        
                        15,088
                        
                        
                        
                        21,428Long-Term
      Borrowings
                        
                        
                        58,859
                        
                        
                        
                        59,970Pension
      Liability
                        
                        
                        868
                        
                        
                        
                        869Other
      Liabilities
                        
                        
                        6,512
                        
                        
                        
                        9,275Total
      Liabilities
                        
                        
                        882,269
                        
                        
                        
                        857,415Shareholders’
      Equity:Common
      Stock, $.01 Par Value, 16,000,000 Shares Authorized,and
      13,961,664 Shares Issued at March 31, 2009and
      December 31, 2008
                        
                        
                        140
                        
                        
                        
                        140Additional
      Paid in Capital
                        
                        
                        4,224
                        
                        
                        
                        4,224Retained
      Earnings
                        
                        
                        94,041
                        
                        
                        
                        93,966Accumulated
      Other Comprehensive Loss
                        
                        
                        (2,033
                        )
                        
                        
                        (2,560
                        )Treasury
      Stock at Cost, 3,457,960 Shares at March 31, 2009and
      December 31, 2008
                        
                        
                        (28,311
                        )
                        
                        
                        (28,311
                        )Total
      Shareholders’ Equity
                        
                        
                        68,061
                        
                        
                        
                        67,459Total
      Liabilities and Shareholders’ Equity
                        
                        $
                        950,330
                        
                        
                        $
                        924,874See
      accompanying notes to interim unaudited consolidated financial
      statements.


4
 Index


The
      Wilber CorporationConsolidated
      Statements of Income (Unaudited)
                                    
                                    Three
      Months EndedMarch
      31,in
      thousands except share and per share data
                                    
                                    2009
                                    
                                    
                                    2008Interest
      and Dividend IncomeInterest
      and Fees on Loans
                                    
                                    $
                                    8,896
                                    
                                    
                                    $
                                    7,914Interest
      and Dividends on Securities:U.S.
      Government and Agency Obligations
                                    
                                    
                                    2,360
                                    
                                    
                                    
                                    2,501State
      and Municipal Obligations
                                    
                                    
                                    440
                                    
                                    
                                    
                                    608Other
                                    
                                    
                                    57
                                    
                                    
                                    
                                    101Interest
      on Federal Funds Sold and Interest Bearing Balances at Other
      Banks
                                    
                                    
                                    14
                                    
                                    
                                    
                                    276Total
      Interest and Dividend Income
                                    
                                    
                                    11,767
                                    
                                    
                                    
                                    11,400Interest
      ExpenseInterest
      on Deposits:Savings,
      NOW and Money Market Deposit Accounts
                                    
                                    
                                    956
                                    
                                    
                                    
                                    1,094Certificates
      of Deposit (Over $100M)
                                    
                                    
                                    1,024
                                    
                                    
                                    
                                    1,255Certificates
      of Deposit (Under $100M)
                                    
                                    
                                    1,667
                                    
                                    
                                    
                                    2,138Other
      Deposits
                                    
                                    
                                    126
                                    
                                    
                                    
                                    169Interest
      on Short-Term Borrowings
                                    
                                    
                                    38
                                    
                                    
                                    
                                    89Interest
      on Long-Term Borrowings
                                    
                                    
                                    664
                                    
                                    
                                    
                                    510Total
      Interest Expense
                                    
                                    
                                    4,475
                                    
                                    
                                    
                                    5,255Net
      Interest Income
                                    
                                    
                                    7,292
                                    
                                    
                                    
                                    6,145Provision
      for Loan Losses
                                    
                                    
                                    1,200
                                    
                                    
                                    
                                    225Net
      Interest Income After Provision for Loan Losses
                                    
                                    
                                    6,092
                                    
                                    
                                    
                                    5,920Non-Interest
      IncomeTrust
      Fees
                                    
                                    
                                    324
                                    
                                    
                                    
                                    395Service
      Charges on Deposit Accounts
                                    
                                    
                                    518
                                    
                                    
                                    
                                    461Commission
      Income
                                    
                                    
                                    -
                                    
                                    
                                    
                                    93Investment
      Security Gains, Net
                                    
                                    
                                    441
                                    
                                    
                                    
                                    183Net
      Gain on Sale of Loans
                                    
                                    
                                    55
                                    
                                    
                                    
                                    83Increase
      in Cash Surrender Value of Bank Owned Life Insurance
                                    
                                    
                                    147
                                    
                                    
                                    
                                    151Other
      Service Fees
                                    
                                    
                                    65
                                    
                                    
                                    
                                    64Other
      Income
                                    
                                    
                                    81
                                    
                                    
                                    
                                    100Total
      Non Interest Income
                                    
                                    
                                    1,631
                                    
                                    
                                    
                                    1,530Non-Interest
      ExpenseSalaries
                                    
                                    
                                    2,731
                                    
                                    
                                    
                                    2,710Employee
      Benefits
                                    
                                    
                                    855
                                    
                                    
                                    
                                    650Occupancy
      Expense of Company Premises
                                    
                                    
                                    587
                                    
                                    
                                    
                                    505Furniture
      and Equipment Expense
                                    
                                    
                                    251
                                    
                                    
                                    
                                    241Computer
      Service Fees
                                    
                                    
                                    412
                                    
                                    
                                    
                                    213Advertising
      and Marketing
                                    
                                    
                                    156
                                    
                                    
                                    
                                    192Professional
      Fees
                                    
                                    
                                    281
                                    
                                    
                                    
                                    251Write-Down
      of Other Real Estate
                                    
                                    
                                    134
                                    
                                    
                                    
                                    -Other
      Miscellaneous Expenses
                                    
                                    
                                    974
                                    
                                    
                                    
                                    861Total
      Non-Interest Expense
                                    
                                    
                                    6,381
                                    
                                    
                                    
                                    5,623Income
      Before Taxes
                                    
                                    
                                    1,342
                                    
                                    
                                    
                                    1,827Income
      Taxes
                                    
                                    
                                    (269
                                    )
                                    
                                    
                                    (389
                                    )Net
      Income
                                    
                                    $
                                    1,073
                                    
                                    
                                    $
                                    1,438Weighted
      Average Shares Outstanding
                                    
                                    
                                    10,503,704
                                    
                                    
                                    
                                    10,503,704Basic
      Earnings Per Share
                                    
                                    $
                                    0.10
                                    
                                    
                                    $
                                    0.14See
      accompanying notes to interim unaudited consolidated financial
      statements.


5
 Index


The
      Wilber CorporationConsolidated
      Statements of Changes in Shareholders' Equity and Comprehensive Income
      (Unaudited)AccumulatedAdditional
                                      
                                      
                                      
                                      
                                      
                                      OtherCommon
                                      
                                      
                                      Paid
      in
                                      
                                      
                                      Retained
                                      
                                      
                                      Comprehensive
                                      
                                      
                                      Treasuryin
      thousands except share and per share data
                                      
                                      Stock
                                      
                                      
                                      Capital
                                      
                                      
                                      Earnings
                                      
                                      
                                      Income
      (Loss)
                                      
                                      
                                      Stock
                                      
                                      
                                      TotalBalance
      December 31, 2007
                                      
                                      $
                                      140
                                      
                                      
                                      $
                                      4,224
                                      
                                      
                                      $
                                      93,618
                                      
                                      
                                      $
                                      (272
                                      )
                                      
                                      $
                                      (28,311
                                      )
                                      
                                      $
                                      69,399Comprehensive
      Income:Net
      Income
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      1,438
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      1,438Change
      in Net Unrealized Gain (Loss) on Securities, Net of Taxes
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      1,802
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      1,802Effect
      of Change in Measurement Date of Pension Plan
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      98
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      98Adoption
      of EITF Issue No. 06-4, "Accounting for Deferred
                                        Compensation
      and Postretirement Benefit Aspects of Endorsement
                                        Split-Dollar
      Life Insurance Agreements"
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (676
                                      )
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (676
                                      )Total
      Comprehensive Income
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      2,662Cash
      Dividends ($.095 per share)
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (997
                                      )
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (997
                                      )Balance
      March 31, 2008
                                      
                                      $
                                      140
                                      
                                      
                                      $
                                      4,224
                                      
                                      
                                      $
                                      93,481
                                      
                                      
                                      $
                                      1,530
                                      
                                      
                                      $
                                      (28,311
                                      )
                                      
                                      $
                                      71,064Balance
      December 31, 2008
                                      
                                      $
                                      140
                                      
                                      
                                      $
                                      4,224
                                      
                                      
                                      $
                                      93,966
                                      
                                      
                                      $
                                      (2,560
                                      )
                                      
                                      $
                                      (28,311
                                      )
                                      
                                      $
                                      67,459Comprehensive
      Income:Net
      Income
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      1,073
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      1,073Change
      in Net Unrealized Gain (Loss) on Securities, Net of
                                        Taxes
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      454
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      454Change
      in the Net Actuarial Loss of Defined Benefit Plan, Net
                                        of
      Taxes
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      73
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      73Total
      Comprehensive Income
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      1,600Cash
      Dividends ($.095 per share)
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (998
                                      )
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (998
                                      )Balance
      March 31, 2009
                                      
                                      $
                                      140
                                      
                                      
                                      $
                                      4,224
                                      
                                      
                                      $
                                      94,041
                                      
                                      
                                      $
                                      (2,033
                                      )
                                      
                                      $
                                      (28,311
                                      )
                                      
                                      $
                                      68,061See
      accompanying notes to interim unaudited consolidated financial
      statements.








6
 Index


The
      Wilber CorporationConsolidated
      Statements of Cash Flows (Unaudited)Three
      Months EndedMarch
      31,in
      thousands
                                
                                2009
                                
                                
                                2008Cash
      Flows from Operating Activities:Net
      Income
                                
                                $
                                1,073
                                
                                
                                $
                                1,438Adjustments
      to Reconcile Net Income to Net CashUsed
      by Operating Activities:Provision
      for Loan Losses
                                
                                
                                1,200
                                
                                
                                
                                225Depreciation
      and Amortization
                                
                                
                                430
                                
                                
                                
                                344Net
      Amortization of Premiums and Accretion of Discounts on
      Investments
                                
                                
                                96
                                
                                
                                
                                112Gain
      on Disposal of Fixed Assets
                                
                                
                                -
                                
                                
                                
                                (1
                                )Available-for
      Sale Investment Security Gains, Net
                                
                                
                                (520
                                )
                                
                                
                                (260
                                )Other
      Real Estate Losses/(Gains)
                                
                                
                                134
                                
                                
                                
                                (8
                                )Increase
      in Cash Surrender Value of Bank Owned Life Insurance
                                
                                
                                (147
                                )
                                
                                
                                (151
                                )Net
      Decrease (Increase) in Trading Securities
                                
                                
                                109
                                
                                
                                
                                (88
                                )Net
      Losses on Trading Securities
                                
                                
                                79
                                
                                
                                
                                77Net
      Gain on Sale of Mortgage Loans
                                
                                
                                (55
                                )
                                
                                
                                (83
                                )Originations
      of Mortgage Loans Held for Sale
                                
                                
                                (2,797
                                )
                                
                                
                                (2,047
                                )Proceeds
      from Sale of Mortgage Loans Held for Sale
                                
                                
                                2,423
                                
                                
                                
                                2,272Increase
      in Other Assets
                                
                                
                                (904
                                )
                                
                                
                                (792
                                )Decrease
      in Other Liabilities
                                
                                
                                (1,970
                                )
                                
                                
                                (1,208
                                )Net
      Cash Used by Operating Activities
                                
                                
                                (849
                                )
                                
                                
                                (170
                                )Cash
      Flows from Investing Activities:Proceeds
      from Maturities of Held-to-Maturity Investment Securities
                                
                                
                                1,373
                                
                                
                                
                                1,670Proceeds
      from Maturities of Available-for-Sale Investment
Securities
                                
                                
                                12,405
                                
                                
                                
                                14,038Proceeds
      from Sales and Calls of Available-for-Sale Investment
      Securities
                                
                                
                                16,559
                                
                                
                                
                                10,482Purchases
      of Held-to Maturity Investment Securities
                                
                                
                                (5,657
                                )
                                
                                
                                -Purchases
      of Available-for-Sale Investment Securities
                                
                                
                                (30,873
                                )
                                
                                
                                (23,709
                                )Net
      Decrease (Increase) in Other Investments
                                
                                
                                27
                                
                                
                                
                                (150
                                )Net
      Increase in Loans
                                
                                
                                (16,819
                                )
                                
                                
                                (9,615
                                )Purchase
      of Premises and Equipment, Net of Disposals
                                
                                
                                (274
                                )
                                
                                
                                (532
                                )Proceeds
      from Sale of Other Real Estate
                                
                                
                                -
                                
                                
                                
                                46Net
      Cash Used by Investing Activities
                                
                                
                                (23,259
                                )
                                
                                
                                (7,770
                                )Cash
      Flows from Financing Activities:Net
      Increase in Demand Deposits, Savings, NOW,Money
      Market and Other Deposits
                                
                                
                                57,037
                                
                                
                                
                                29,802Net
      (Decrease) Increase in Certificates of Deposit
                                
                                
                                (21,968
                                )
                                
                                
                                26,175Net
      Decrease in Short-Term Borrowings
                                
                                
                                (6,340
                                )
                                
                                
                                (281
                                )Increase
      in Long-Term Borrowings
                                
                                
                                -
                                
                                
                                
                                4,000Repayment
      of Long-Term Borrowings
                                
                                
                                (1,111
                                )
                                
                                
                                (668
                                )Cash
      Dividends Paid
                                
                                
                                (998
                                )
                                
                                
                                (997
                                )Net
      Cash Provided by Financing Activities
                                
                                
                                26,620
                                
                                
                                
                                58,031Net
      Increase in Cash and Cash Equivalents
                                
                                
                                2,512
                                
                                
                                
                                50,091Cash
      and Cash Equivalents at Beginning of Period
                                
                                
                                44,421
                                
                                
                                
                                18,942Cash
      and Cash Equivalents at End of Period
                                
                                $
                                46,933
                                
                                
                                $
                                69,033Supplemental
      Disclosures of Cash Flow Information:Cash
      Paid during Period for:Interest
                                
                                $
                                4,679
                                
                                
                                $
                                5,044Income
      Taxes
                                
                                
                                657
                                
                                
                                
                                2,010Non
      Cash Investing Activities:Change
      in Unrealized Loss on Securities, Net of Tax
                                
                                
                                454
                                
                                
                                
                                1,802Transfer
      of Loans to Other Real Estate
                                
                                
                                22
                                
                                
                                
                                --See
      accompanying notes to interim unaudited consolidated financial
      statements.


7
 Index


The
Wilber Corporation


Notes to
Unaudited Consolidated Interim Financial Statements





Note
1.  Basis of Presentation





The
accompanying unaudited consolidated interim financial statements include the
accounts of the Company, its wholly owned subsidiary Wilber National Bank (the
"Bank"), and the Bank's wholly owned subsidiaries.  All significant
intercompany accounts and transactions have been eliminated in
consolidation.  The accompanying unaudited consolidated interim
financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America ("GAAP") for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X.  Accordingly, they do not include all of the
information and footnotes required by GAAP for complete financial
statements.





The
preparation of financial statements in conformity with GAAP required management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period.  Actual results could differ from those
estimates.  In the opinion of management, the unaudited consolidated
interim financial statements include all necessary adjustments, consisting of
normal recurring accruals, necessary for a fair presentation for the periods
presented.  The results for the periods presented are not necessarily
indicative of results to be expected for the entire fiscal year or any other
interim period.





The data
in the consolidated balance sheet for December 31, 2008 was derived from the
Company's 2008 Annual Report on Form 10-K.  The Annual Report on Form
10-K includes the Company's audited consolidated statements of
condition,  consolidated statements of income, consolidated statements
of cash flows, and consolidated statements of shareholders’ equity and
comprehensive income as of December 31, 2008 and 2007.  That data,
along with the unaudited interim financial information presented in the
consolidated statements of condition as of March 31, 2009, and the statements of
income, the statements of changes in shareholders' equity and comprehensive
income, and statements of cash flows for the three months ended March 31, 2009
and 2008, should be read in conjunction with the 2008 consolidated financial
statements, including the notes thereto.





Amounts
in prior periods' consolidated financial statements are reclassified when
necessary to conform to the current period's presentation.








Note
2.  Earnings Per Share





Basic
earnings per share ("EPS") are calculated by dividing net income available to
common shareholders by the weighted average number of common shares outstanding
during the period.  Entities with complex capital structures must also
present diluted EPS, which reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common shares.  The Company does not have a complex capital
structure and, accordingly, has presented only basic EPS.








Note
3.  Guarantees





Stand-by
letters of credit written are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements, including
bond financing and similar transactions. The credit risk involved in issuing
letters of credit is essentially the same as that involved in extending loan
facilities to customers.  Since some of the letters of credit are
expected to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements.





The
estimated fair value of the Company’s stand-by letters of credit was $26
thousand and $12 thousand at March 31, 2009 and December 31, 2008,
respectively.  The estimated fair value of stand-by letters of credit
at their inception is equal to the fee that is charged to the customer by the
Company.  Generally, the Company’s stand-by letters of credit have a
term of one year.  In determining the fair values disclosed above, the
fees were reduced on a straight-line basis from the inception of each stand-by
letter of credit to the respective dates above.


8
 Index


Note
4.  Employee Benefit Plans





The
Company's defined benefit pension plan has been frozen since February
2006.  Under the frozen plan, no future benefits will be accrued for
plan participants, nor will any new participants be enrolled in the
plan.  This plan is sponsored by the Company's bank
subsidiary.  Prior to being frozen, the plan covered employees who had
attained the age of 21 and completed one year of service. Although the plan was
frozen, the Company maintains the responsibility for funding the
plan.  The Company's funding practice is to contribute at least the
minimum amount annually to meet minimum funding requirements. The funded status
of the Company’s defined benefit pension plan has and will continue to be
affected by market conditions.  We expect to continue to fund this
plan on an as needed basis and do not foresee any issues or conditions that
could negatively impact the payment of benefit obligations to plan
participants.  Plan assets consist primarily of marketable fixed
income securities and common stocks. Plan benefits are based on years of service
and the employee’s average compensation during the five highest consecutive
years of the last ten years of employment.





The
Components of Net Periodic Benefit Expense (Benefit) are:





Three
      Months EndedMarch
      31,in thousands
                                        
                                        2009
                                        
                                        
                                        2008Service
      Cost
                                        
                                        $
                                        38
                                        
                                        
                                        $
                                        39Interest
      Cost
                                        
                                        
                                        240
                                        
                                        
                                        
                                        227Expected Return on Plan Assets
                                        
                                        
                                        (279
                                        )
                                        
                                        
                                        (364
                                        )Net
      Amortization
                                        
                                        
                                        118
                                        
                                        
                                        
                                        0$
                                        117
                                        
                                        
                                        $
                                        (98
                                        )





For the
three months ended March 31, 2009, the Company recorded $73 thousand, net of
tax, as amortization of amounts previously recognized in accumulated other
comprehensive income.





Split-Dollar
Life Insurance Plan





The
Company offers split-dollar life insurance benefits to fifteen members of senior
management.  The Company recorded a net benefit cost of $21 thousand
for the three months ending March 31, 2009, and $7 thousand for the three months
ending March 31, 2008.








Note
5. Other Comprehensive Income





The
following is a summary of changes in other comprehensive income for the periods
presented:





Three
      Months EndedMarch
      31,in
      thousands
                  
                  2009
                  
                  
                  2008Unrealized
      Holding Gains Arising During the Period, Net of Tax(Pre-tax
      Amount of $1,261 and $3,198)
                  
                  $
                  773
                  
                  
                  $
                  1,961Reclassification
      Adjustment for Gains Realized in Net IncomeDuring
      the Period, Net of Tax (Pre-tax Amount of ($520) and
    ($260))
                  
                  
                  (319
                  )
                  
                  
                  (159
                  )Change
      in Pension Asset (Pre-tax Amount of $118 and $0)
                  
                  
                  73
                  
                  
                  
                  0Other
      Comprehensive Income
                  
                  $
                  527
                  
                  
                  $
                  1,802





9
 Index


Note
6.  Disclosures about Fair Value of Financial Instruments





The
following are the major categories of assets measured at fair value on a
recurring basis at March 31, 2009, using quoted prices in active markets for
identical assets (Level 1), significant other observable inputs (Level 2), and
significant unobservable inputs (Level 3).





Level
      1Quoted
                  
                  
                  Level
      2Prices
      in
                  
                  
                  Significant
                  
                  
                  Level
      3Active
      Markets
                  
                  
                  Other
                  
                  
                  Significant
                  
                  
                  Total
      atfor
      Identical
                  
                  
                  Observable
                  
                  
                  Unobservable
                  
                  
                  March
      31,in
      thousands
                  
                  Assets
                  
                  
                  Inputs
                  
                  
                  Inputs
                  
                  
                  2009Trading
      Securities
                  
                  $
                  967
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  967Available-for-Sale
      Securities
                  
                  
                  -
                  
                  
                  
                  219,843
                  
                  
                  
                  -
                  
                  
                  
                  219,843Total
                  
                  $
                  967
                  
                  
                  $
                  219,843
                  
                  
                  $
                  -
                  
                  
                  $
                  220,810





Price
evaluations for our level 1 trading securities portfolio, consisting of mutual
funds and individual equity and debt securities held by the Company’s executive
deferred compensation plan, are obtained from national exchanges and active
secondary markets.





The price
evaluations for our level 2 available-for-sale securities are good faith
opinions as to what a buyer in the marketplace would pay for a security
(typically in an institutional round lot position) in a current
sale.  The evaluation considers interest rate movements, new issue
information, and other pertinent data.  Fair values for investments
were based on quoted market prices, where available, as provided by third party
vendors.  If quoted market prices were not available, fair values
provided by the vendors were based on quoted market prices of comparable
instruments in active markets and/or based on a matrix pricing methodology that
employs the Securities Industry and Financial Markets Association standard
calculations for cash flow and price/yield analysis, or live benchmark bond
pricing, or terms/conditions data available from major pricing
sources.





SFAS No.
157 requires disclosure of assets and liabilities measured and recorded at fair
value on a non-recurring basis.  For the Company, these include loans
held for sale, collateral dependent impaired loans, other real estate owned,
goodwill and other intangible assets.  In accordance with the
provisions of SFAS No. 114, “Accounting by Creditors for Impairment of a Loan -
an amendment of FASB Statements No. 5 and 15” (“SFAS No. 114”), the Company had
collateral-dependent impaired loans with a carrying value of approximately
$11.517 million, which had specific reserves included in the allowance for loan
and lease losses of $1.258 million at March 31, 2009.  The Company
uses the fair value of underlying collateral to estimate the specific reserves
for collateral-dependent impaired loans.  Based on the valuation
techniques used, the fair value measurements for collateral-dependent impaired
loans are classified as Level 3.




The
Company currently has four properties recorded as other real estate
owned.  Three of these properties were the result of debts previously
contracted and are carried at cost, as it is lower than market
value.  The fourth property was the result of land previously
purchased with the intent of development for branch operations but development
was later halted with the Company deciding to sell the
property.  Through a third party appraisal performed in the first
quarter of 2009, the Company recorded a $134 thousand charge to earnings related
to this property.  The following table reports the fair value of this
property as of March 31, 2009:





Level
      1Quoted
                  
                  
                  Level
      2Prices
      in
                  
                  
                  Significant
                  
                  
                  Level
      3Active
      Markets
                  
                  
                  Other
                  
                  
                  Significant
                  
                  
                  Total
      atfor
      Identical
                  
                  
                  Observable
                  
                  
                  Unobservable
                  
                  
                  March
      31,in
      thousands
                  
                  Assets
                  
                  
                  Inputs
                  
                  
                  Inputs
                  
                  
                  2009Other
      Real Estate Owned
                  
                  $
                  -
                  
                  
                  $
                  277
                  
                  
                  $
                  -
                  
                  
                  $
                  277


10
 Index


ITEM
2:      Management’s Discussion and Analysis of
Financial Condition and Results of Operations





A.
General





The
primary objective of this quarterly report is to provide: (i) an overview of the
material changes in our financial condition, including liquidity and capital
resources, at March 31, 2009 as compared to December 31, 2008 and (ii) a
comparison of our results of operations for the three-month period ended March
31, 2009, as compared to the three-month period ended March 31,
2008.





Our
financial performance is heavily dependent upon net interest income, which is
the difference between the interest and dividend income earned on our loans and
investment securities less the interest paid on our deposits and
borrowings.  Results of operations are also affected by the provision
for loan losses, non-interest income, non-interest expense and
taxes.  Non-interest income includes trust fees, service charges on
deposit accounts, commission income, net investment securities gains, the net
gain on sale of loans, increase in the cash surrender value on bank owned life
insurance, other service fees, and other income.  Non-interest expense
consists of salaries, employee benefits, occupancy expense, furniture and
equipment expense, computer service fees, advertising and marketing expense,
professional fees, losses on other real estate and other miscellaneous
expenses.  Results of operations are also influenced by general
economic conditions (particularly changes in interest rates and regional credit
conditions), competitive conditions, government policies, changes in federal or
state tax law, and the actions of our regulatory authorities.





Critical Accounting Policies.
Management of the Company considers the accounting policy relating to the
allowance for loan losses to be a critical accounting policy given the
uncertainty in evaluating the level of the allowance required to cover credit
losses inherent in the loan portfolio and the material effect that such
judgments can have on the results of operations.  While management’s
current evaluation of the allowance for loan losses indicates that the allowance
is adequate, under adversely different conditions or assumptions, the allowance
would need to be increased.  For example, if historical loan loss
experience significantly worsened or if current economic conditions deteriorated
further, additional provisions for loan losses would be required to increase the
allowance for loan losses.  In addition, the assumptions and estimates
used in the internal reviews of the Company’s non-performing loans, impaired
loans and potential problem loans have a significant impact on the overall
analysis of the adequacy of the allowance for loan losses.  While
management has concluded that the evaluation of collateral values was reasonable
under the circumstances for each of the reported periods, if collateral
valuations were significantly lowered, the Company’s allowance for loan losses
would also require an additional provision for loan losses.





Recent Accounting
Pronouncements.  In April 2009, the Financial Accounting
Standards Board (“FASB”) issued final FASB Staff Positions (“FSP”) on three
mark-to-market accounting standards, in particular FAS 115-2 “Recognition and
Presentation of Other-Than-Temporary-Impairment” (“FSP 115-2”);  FAS
157-4 “Determining Fair Value When the Volume and Level of Activity for the
Asset or Liability has Significantly Decreased and Identifying Transactions that
are not Orderly” (“FSP 157-4”); and FAS 107-1 “Interim Disclosures About Fair
Value of Financial Instruments” (“FSP 107-1”).  All of these FSPs
shall be effective for interim and annual reporting periods ending after June
15, 2009, with early adoption permitted for periods ending after March 15,
2009.





FSP 115-2
changes how entities recognize other-than-temporary-impairment (“OTTI”) on debt
securities.  Under FSP 115-2 the estimated amount of OTTI attributed
to the credit loss on a debt security is recorded through the income statement,
while the remaining mark-to-market loss is recognized through other
comprehensive income.  More specifically, the OTTI is separated into
(a) the amount of the total impairment related to the credit loss and (b) the
amount of the total impairment related to all other factors. The amount of the
total OTTI related to the credit loss is recognized in earnings. The amount of
the total impairment related to all other factors is recognized in other
comprehensive income. The total OTTI is presented in the statement of earnings
with an offset for the amount of the total OTTI that is recognized in other
comprehensive income. This new presentation also provides additional information
about the amounts that an entity does not expect to collect related to a debt
security.





FSP 115-2
requires that the annual disclosures in FASB Statement No.115, “Accounting for Certain Investments
in Debt and Equity Securities” and FSP 115-1 and 124-1, “The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments,” be made for
interim periods (including the aging of securities with unrealized losses). It
does not require, however, disclosures for earlier periods presented for
comparative purposes at initial adoption. In periods after initial adoption, FSP
115-2


11
 Index


requires
comparative disclosures only for periods ending after initial
adoption.  FSP 115-2 also requires new disclosures to help users of
financial statements understand the significant inputs used in determining a
credit loss, as well as a roll-forward of that amount each period. These
collective disclosure enhancements are intended to significantly improve the
information provided to users about impaired securities.





FSP 157-4
provides guidance in determining when and how to use modeled values, as opposed
to broker price quotes when determining the fair value of an investment
security.  It is intended to provide a more consistent approach to modeling
the fair value of a debt security including a more detailed process to evaluate
specific quotes received and a more detailed methodology to determine fair value
through modeling techniques.  It provides additional guidance for
estimating fair value in accordance with FASB Statement No. 157, “Fair Value Measurements,”
when the volume and level of activity for the asset or liability have
significantly decreased. FSP 157-4 also includes guidance on identifying
circumstances that indicate a transaction is not orderly.  It also
emphasizes that even if there has been a significant decrease in the volume and
level of activity for the asset or liability and regardless of the valuation
technique(s) used, the objective of a fair value measurement remains the same.
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction (that is, not a forced
liquidation or distressed sale) between market participants at the measurement
date under current market conditions.





FSP 107-1
amends FASB Statement No. 107, “Disclosures about Fair Value of
Financial Instruments”,to require disclosures about fair value of
financial instruments for interim reporting periods of publicly traded
companies, as well as in annual financial statements.





At March
31, 2009 we did not hold any debt securities with OTTI.  Although we
will evaluate FSP 115-2, FSP 157-4 and FSP 107-1 for adoption during the interim
period ending June 30, 2009, they are not expected to have a material impact on
our financial condition or results of operation.





In
December 2008, the FASB issued FASB Staff Position FAS 132(R)1 which amends
Statement of Financial Accounting Standards (“SFAS”) No 132(R), “Employers’
Disclosures about Pensions and Other Postretirement Benefits” (“FSP
132(R)1”).  Beginning with financial statements issued for December
31, 2009, FSP 132(R)1 will require additional disclosures about our defined
benefit pension plan.  Under FSP 132(R)1, the Company must comply with
the following requirements:





·
            Objectives
      of the Disclosures about Postretirement Benefit Plan
  Assets


i)
            The
      objectives of the disclosures about plan assets in an employer’s defined
      benefit pension or other postretirement plan are to provide users of
      financial statements with an understanding
of:


a)
            How
      investment allocation decisions are made, including the factors that are
      pertinent to an understanding of investment policies and
      strategies;


b)
            The
      major categories of plan assets;


c)
            The
      inputs and valuation techniques used to measure the fair value of plan
      assets;


d)
            The
      effect of fair value measurements using significant unobservable inputs
      (Level 3) on changes in plan assets for the
  period;


e)
            Significant
      concentrations of risk within plan
assets.


·
            An
      employer shall disclose information about how investment allocation
      decisions are made, including factors that are pertinent to an
      understanding of investment policies and
  strategies.


·
            An
      employer shall disclose separately for pension plans and other
      postretirement benefit plans the fair value of each major category of plan
      assets as of each annual reporting date for which a statement of financial
      position is presented. Asset categories shall be based on the nature and
      risks of assets in an employer’s
plan.


·
            An
      employer shall disclose information that enables users of financial
      statements to assess the inputs and valuation techniques used to develop
      fair value measurements of plan assets at the annual reporting
      date.  For fair value measurements using significant
      unobservable inputs (Level 3), an employer shall disclose the effect of
      the measurements on changes in plan assets for the
  period.


·
            An
      employer shall provide users of financial statements with an understanding
      of significant concentrations of risk in plan
  assets.


12
 Index





The
requirements of FSP 132(R)1 are disclosure requirements and will not have an
impact on our financial condition or results of operations.





In May
2008, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No.
162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS No.
162”).  The new standard is intended to improve financial reporting by
identifying a consistent framework, or hierarchy, for selecting accounting
principles to be used in preparing financial statements that are presented in
conformity with U.S. generally accepted accounting principles for
nongovernmental entities.  The hierarchy under SFAS No. 162 is as
follows:  A) FASB Statements of Financial Accounting Standards and
Interpretations, FASB Statement 133 Implementation Issues, FASB Staff Positions,
and American Institute of Certified Public Accountants (“AICPA”) Accounting
Research Bulletins and Accounting Principles Board Opinions that are not
superseded by actions of the FASB; B) FASB Technical Bulletins and, if cleared
by the FASB, AICPA Industry Audit and Accounting Guides and Statements of
Position; C) AICPA Accounting Standards Executive Committee Practice Bulletins
that have been cleared by the FASB, consensus positions of the FASB EITF, and
the Topics discussed in Appendix D of “EITF Abstracts”(“EITF D-Topics”); and
D) Implementation guides (“Q&As”) published by the FASB staff, AICPA
Accounting Interpretations, AICPA Industry Audit and Accounting Guides and
Statements of Position not cleared by the FASB, and practices that are widely
recognized and prevalent either generally or in the industry.  SFAS
No. 162 will be effective 60 days following the SEC’s approval of the Public
Company Accounting Oversight Board (“PCAOB”) amendments to AU Section 411, “The
Meaning of Present Fairly in Conformity With Generally Accepted Accounting
Principles.”  SFAS No. 162 is not expected to have a material impact
on our financial condition or results of operations.








B.
Financial Condition and Performance Overview





At March
31, 2009, we maintained a strong equity capital position.  We have not
recorded any losses in the current period or any prior periods due to the
origination or purchase of sub-prime assets, nor due we expect to record losses
in future periods from these activities.  In the normal course of our
business, we do not originate or hold sub-prime or Alt-A residential mortgage
loans or investment securities backed by sub-prime or Alt-A mortgage
loans.  In addition, we also continued to maintain adequate levels of
liquidity.  The substantial majority of our funding is provided by
customer deposits, which have not been adversely affected by the global
financial crisis.





During
the first quarter of 2009, however, we began to experience a noticeable decline
in some of our loan quality measures.  The amount of delinquent loans,
potential problem loans and impaired loans increased during the
quarter.  These factors, coupled with a weaker economic climate,
required us to increase the allowance for loan losses during the first quarter
of 2009.  The allowance for loan losses was $8.491 million or 1.41% of
total loans at March 31, 2009, as compared to $7.564 million or 1.30% of total
loans at December 31, 2008.  Annualized net charge-offs totaled 0.19%
of average loans outstanding during the first quarter of 2009, as compared to
0.21% in the first quarter of 2008.





Total
assets increased from $924.874 million at December 31, 2008 to $950.330 million
at March 31, 2009, a $25.456 million or 2.8% increase between the
periods.  The increase in total assets was funded principally by an
increase in customer deposits, in particular, money market deposit accounts held
by our municipal customers.  Due to the weakened state of the national
economy, the Company’s current equity capital and liquidity position, we intend
to significantly moderate the rate of asset growth during 2009.  Over
the fifteen month period preceding March 31, 2009, the Company’s total assets
increased $156.650 million or 19.7%.





We
recorded net income and earnings per share of $1.073 million and $0.10,
respectively, for the three-month period ended March 31, 2009.  This
compares to net income and earnings per share of $1.438 million and $0.14,
respectively, for the quarterly period ended March 31, 2008. The $365 thousand
decrease in net income and $0.04 decrease in earnings per share between
comparable quarterly periods were attributable to two primary factors, namely a
significant increase in the provision for loan losses and a significant increase
in total non-interest expense.  To maintain the allowance for loan
losses at a level adequate to absorb probable and estimable losses, we recorded
$1.200 million in the provision for loan losses during the first quarter of
2009.  This compares to $225 thousand in the same quarter of 2008 and
$630 thousand in the fourth quarter of 2008.  The increase in
non-interest expense between comparable quarterly periods was due in large part
to a $205 thousand increase in employee benefits, a $199 thousand increase in
computer service fees, a $134 thousand write-down of other real estate and a
$113


13
 Index


thousand
increase in other miscellaneous expenses.  Increases in the provision
for loan losses and non-interest expense were offset, in part, by a significant
increase in net interest income due to the growth and expansion of our core
business, namely loans and deposits, a modest increase in non-interest income
due principally to an increase in investment securities gains, and a decrease in
income taxes between periods.  Our return on average assets and return
on average equity were 0.46% and 6.44% during the first quarter of 2009, as
compared to, 0.71% and 8.30% during the first quarter of 2008,
respectively.





Our first
quarter 2009 dividend payout ratio was 95%.  We declared and paid a
$0.095 dividend per share during the quarter, while recording earnings per share
of $0.10.  Due to the decrease in quarterly earnings and the need to
preserve the Company’s capital resources, particularly in these uncertain
economic times, the Company’s Board of Directors declared a $0.06 dividend per
share for the second quarter of 2009.





The
following tables set forth in this quarterly financial report provide readers
with supplementary information that is not directly obtainable from the interim
unaudited financial statements provided in PART I, Item 1 of this quarterly
report.  These tables are to be read in conjunction with our
management discussion and analysis narrative regarding the financial condition,
results of operations, liquidity, and capital resources contained within this
report.









14
 Index


Asset and
Yield Summary Table:





The
following tables set forth the total dollar amount and resultant yields of
interest income from average earning assets, as well as the interest expense on
average interest bearing liabilities for the periods stated.  Average
balances are daily averages.


For
      the Three Months Ended March 31,2009
                                                                          
                                                                          
                                                                          2008Average
                                                                            Outstanding
                                                                            Balance
                                                                          
                                                                          
                                                                          Interest
                                                                            Earned
                                                                            /Paid
                                                                          
                                                                          
                                                                          Yield
      /
                                                                            Rate
                                                                          
                                                                          
                                                                          Average
                                                                            Outstanding
                                                                            Balance
                                                                          
                                                                          
                                                                          Interest
                                                                            Earned
                                                                            /Paid
                                                                          
                                                                          
                                                                          Yield
      /
                                                                            Rate(Dollars
      in thousands)Earning
      Assets:Federal
      funds sold
                                                                          
                                                                          $
                                                                          441
                                                                          
                                                                          
                                                                          $
                                                                          0
                                                                          
                                                                          
                                                                          
                                                                          0.11
                                                                          %
                                                                          
                                                                          $
                                                                          27,002
                                                                          
                                                                          
                                                                          $
                                                                          199
                                                                          
                                                                          
                                                                          
                                                                          2.96
                                                                          %Interest
      bearing deposits
                                                                          
                                                                          
                                                                          34,621
                                                                          
                                                                          
                                                                          
                                                                          14
                                                                          
                                                                          
                                                                          
                                                                          0.16
                                                                          %
                                                                          
                                                                          
                                                                          16,085
                                                                          
                                                                          
                                                                          
                                                                          77
                                                                          
                                                                          
                                                                          
                                                                          1.93
                                                                          %Securities
      (1)
                                                                          
                                                                          
                                                                          269,342
                                                                          
                                                                          
                                                                          
                                                                          2,857
                                                                          
                                                                          
                                                                          
                                                                          4.30
                                                                          %
                                                                          
                                                                          
                                                                          289,435
                                                                          
                                                                          
                                                                          
                                                                          3,210
                                                                          
                                                                          
                                                                          
                                                                          4.46
                                                                          %Loans
      (2)
                                                                          
                                                                          
                                                                          594,135
                                                                          
                                                                          
                                                                          8,896
                                                                          
                                                                          
                                                                          
                                                                          6.07
                                                                          %
                                                                          
                                                                          
                                                                          447,721
                                                                          
                                                                          
                                                                          7,914
                                                                          
                                                                          
                                                                          
                                                                          7.11
                                                                          %Total
      earning assets
                                                                          
                                                                          
                                                                          898,539
                                                                          
                                                                          
                                                                          
                                                                          11,767
                                                                          
                                                                          
                                                                          
                                                                          5.31
                                                                          %
                                                                          
                                                                          
                                                                          780,243
                                                                          
                                                                          
                                                                          
                                                                          11,400
                                                                          
                                                                          
                                                                          
                                                                          5.88
                                                                          %Non-earning
      assets
                                                                          
                                                                          
                                                                          37,585
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          38,265Total
      assets
                                                                          
                                                                          $
                                                                          936,124
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          $
                                                                          818,508Liabilities:Savings
      accounts
                                                                          
                                                                          $
                                                                          67,899
                                                                          
                                                                          
                                                                          $
                                                                          64
                                                                          
                                                                          
                                                                          
                                                                          0.38
                                                                          %
                                                                          
                                                                          $
                                                                          68,571
                                                                          
                                                                          
                                                                          $
                                                                          81
                                                                          
                                                                          
                                                                          
                                                                          0.48
                                                                          %Money
      market accounts
                                                                          
                                                                          
                                                                          181,824
                                                                          
                                                                          
                                                                          
                                                                          665
                                                                          
                                                                          
                                                                          
                                                                          1.48
                                                                          %
                                                                          
                                                                          
                                                                          115,923
                                                                          
                                                                          
                                                                          
                                                                          748
                                                                          
                                                                          
                                                                          
                                                                          2.60
                                                                          %NOW
      accounts
                                                                          
                                                                          
                                                                          102,502
                                                                          
                                                                          
                                                                          
                                                                          227
                                                                          
                                                                          
                                                                          
                                                                          0.90
                                                                          %
                                                                          
                                                                          
                                                                          82,094
                                                                          
                                                                          
                                                                          
                                                                          265
                                                                          
                                                                          
                                                                          
                                                                          1.30
                                                                          %Time
      & other deposit accounts
                                                                          
                                                                          
                                                                          359,308
                                                                          
                                                                          
                                                                          
                                                                          2,817
                                                                          
                                                                          
                                                                          
                                                                          3.18
                                                                          %
                                                                          
                                                                          
                                                                          342,453
                                                                          
                                                                          
                                                                          
                                                                          3,562
                                                                          
                                                                          
                                                                          
                                                                          4.18
                                                                          %Borrowings
                                                                          
                                                                          
                                                                          79,142
                                                                          
                                                                          
                                                                          702
                                                                          
                                                                          
                                                                          
                                                                          3.60
                                                                          %
                                                                          
                                                                          
                                                                          61,853
                                                                          
                                                                          
                                                                          599
                                                                          
                                                                          
                                                                          
                                                                          3.89
                                                                          %Total
      interest bearing liabilities
                                                                          
                                                                          
                                                                          790,675
                                                                          
                                                                          
                                                                          
                                                                          4,475
                                                                          
                                                                          
                                                                          
                                                                          2.30
                                                                          %
                                                                          
                                                                          
                                                                          670,894
                                                                          
                                                                          
                                                                          
                                                                          5,255
                                                                          
                                                                          
                                                                          
                                                                          3.15
                                                                          %Non-interest
      bearing deposits
                                                                          
                                                                          
                                                                          68,285
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          69,980Other
      non-interest bearing liabilities
                                                                          
                                                                          
                                                                          9,574
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          7,911Total
      liabilities
                                                                          
                                                                          
                                                                          868,534
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          748,785Shareholders'
      equity
                                                                          
                                                                          
                                                                          67,590
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          69,723Total
      liabilities and shareholders' equity
                                                                          
                                                                          $
                                                                          936,124
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          $
                                                                          818,508Net
      interest income
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          $
                                                                          7,292
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          $
                                                                          6,145Net
      interest rate spread (3)
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          3.01
                                                                          %
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          2.73
                                                                          %Net
      earning assets
                                                                          
                                                                          $
                                                                          107,864
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          $
                                                                          109,349Net
      interest margin (4)
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          3.29
                                                                          %
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          3.17
                                                                          %Net
      interest margin (tax-equivalent) (5)
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          3.46
                                                                          %
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          3.42
                                                                          %Ratio
      of earning assets to interest bearing liabilities
                                                                          
                                                                          
                                                                          113.64
                                                                          %
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          116.30
                                                                          %
  (1)
      Securities include trading, available-for-sale, held-to-maturity and other
      investments. They shown at average amortized cost with net unrealized
      gains or losses on securities available-for-sale included as a component
      of non-earning assets.(2)
      Average loans include loans held for sale, net deferred loan fees and
      costs, non-accrual loans and excludes the allowance for loan
      losses.(3)
      Net interest rate spread represents the difference between the weighted
      average yield on interest-earning assets and the weighted average cost of
      interest-bearing liabilities.(4)
      The net interest margin, also known as the net yield on average
      interest-earning assets, represents net interest income as a percentage of
      average interest-earning assets.(5)
      Net interest margin (tax-equivalent) was derived by adding the taxable
      equivalent interest income on our tax-exempt earning assets to net
      interest income for the period and dividing this total by the average
      interest-earning assets during the period. The taxable equivalent
      interest income on our tax-exempt earning assets was calculated by
      applying a 34% federal corporate tax
rate.


15
 Index





Table of
Non-Performing Assets:





The
following table sets forth information regarding non-performing loans and assets
as of the periods indicated:








At
      March 31,
                        2009
                      
                      
                      At
      December 31,2008(Dollars
      in thousands)Loans
      in non-accrual status:Residential
      real estate (1)
                      
                      $
                      412
                      
                      
                      $
                      439Commercial
      real estate
                      
                      
                      4,450
                      
                      
                      
                      4,516Commercial
      (2)
                      
                      
                      1,499
                      
                      
                      
                      843Consumer
                      
                      
                      35
                      
                      
                      
                      47Total
      non-accruing loans
                      
                      
                      6,396
                      
                      
                      
                      5,845Loans
      contractually past due 90 days or more and still accruing
      interest
                      
                      
                      770
                      
                      
                      
                      1,366Troubled
      debt restructured loans
                      
                      
                      0
                      
                      
                      
                      0Total
      non-performing loans
                      
                      
                      7,166
                      
                      
                      
                      7,211Other
      real estate owned (3)
                      
                      
                      158
                      
                      
                      
                      158Total
      non-performing assets
                      
                      $
                      7,324
                      
                      
                      $
                      7,369Total
      non-performing assets as a percentage of total assets
                      
                      
                      0.77
                      %
                      
                      
                      0.80
                      %Total
      non-performing loans as a percentage of total loans
                      
                      
                      1.19
                      %
                      
                      
                      1.24
                      %


(1)
      Includes loans secured by 1-4 family dwellings, 5+ family residential
      dwellings, home equity loans and residential construction
      loans.
                            
                            (2)
      Includes commercial and industrial loans, agricultural loans and
      obligations (other than securities and leases) of states and political
      subdivisions in the United States.
                            
                            (3)
      Includes properties acquired through foreclosure or similar
      proceedings.


16
 Index





Analysis
of the Allowance for Loan Losses Table:





The
following table sets forth changes in the allowance for loan losses for the
periods indicated:




Three
      months ended March 31,2009
                          
                          
                          2008(Dollars
      in thousands)Balance
      at beginning of period
                          
                          $
                          7,564
                          
                          
                          $
                          6,977Charge
      offs:Residential
      real estate (1)
                          
                          
                          0
                          
                          
                          
                          7Commercial
      real estate
                          
                          
                          0
                          
                          
                          
                          79Commercial
      (2)
                          
                          
                          32
                          
                          
                          
                          29Consumer
                          
                          
                          400
                          
                          
                          
                          186Total
      charge offs
                          
                          
                          432
                          
                          
                          
                          301Recoveries:Residential
      real estate (1)
                          
                          
                          0
                          
                          
                          
                          1Commercial
      real estate
                          
                          
                          0
                          
                          
                          
                          0Commercial
      (2)
                          
                          
                          6
                          
                          
                          
                          16Consumer
                          
                          
                          153
                          
                          
                          
                          47Total
      recoveries
                          
                          
                          159
                          
                          
                          
                          64Net
      charge-offs
                          
                          
                          273
                          
                          
                          
                          237Provision
      for loan losses
                          
                          
                          1,200
                          
                          
                          225Balance
      at end of period
                          
                          $
                          8,491
                          
                          
                          $
                          6,965Ratio
      of net charge-offs during the period to average loans outstanding during
      the period (annualized)
                          
                          
                          0.19
                          %
                          
                          
                          0.21
                          %Allowance
      for loan losses to total loans
                          
                          
                          1.41
                          %
                          
                          
                          1.53
                          %Allowance
      for loan losses to non-performing loans
                          
                          
                          118
                          %
                          
                          
                          96
                          %
  (1)
      Includes loans secured by 1-4 family dwellings, 5+ family residential
      dwellings, home equity loans and residential construction
      loans.
                    
                    (2)
      Includes commercial and industrial loans, agricultural loans and
      obligations (other than securities and leases) of states and political
      subdivisions in the United
States.





17
 Index





C.
Comparison of Financial Condition at March 31, 2009 and December 31,
2008





Overview.  At March
31, 2009, we maintained a strong shareholders’ equity
position.  Shareholders’ equity totaled $68.061 million or 7.16% of
total assets.  This compares to $67.459 million or 7.29% of total
assets at December 31, 2008.  The Company’s total capital to
risk-weighted assets ratio, an important regulatory capital ratio, was 11.06% at
March 31, 2009.  Per current regulatory standards, a bank holding
company is considered to be adequately capitalized if this ratio is maintained
at 8.0% or above.  Similarly, Wilber National Bank, the Company’s sole
bank subsidiary, maintained an 11.01% total capital to risk-weighted assets
ratio at March 31, 2009.  Banks are considered to be
“well-capitalized” if they maintain a total capital to risk-weighted assets
ratio at or above 10.0% and “adequately-capitalized” if they maintain a total
capital to risk-weighted assets ratio of 8.0%.  We have not recorded
any losses in the current period or any prior periods due to the origination or
purchase of sub-prime or Alt-A residential mortgage assets, nor due we expect to
record losses in future periods from these types of assets.  We expect
to maintain adequate levels of shareholders’ equity for the foreseeable
future.  Similarly, we expect Wilber National Bank to maintain its
well-capitalized status for the foreseeable future.





Although
we significantly increased total loans outstanding over the last several
quarters, including the first quarter of 2009, we continue to maintain adequate
levels of liquidity.  We continue to have access to various wholesale
funding sources, including, lines of credit with other banks and brokered
certificates of deposit, however, we have not unduly relied on these sources to
fund our loan and investment activities.  The substantial majority of
our funding is provided by customer deposits, a more stable funding source than
the wholesale credit markets.





A
weakening national economy coupled with increases in the amount of potential
problem loans, impaired loans, delinquent loans and increased consumer loan
charge-offs required us to provide more for the allowance for loan losses during
the quarter.  The allowance for loan losses was $8.491 million or
1.41% of total loans at March 31, 2009, as compared to $7.564 million or 1.30%
of total loans at December 31, 2008.





Total
assets increased from $924.874 million at December 31, 2008 to $950.330 million
at March 31, 2009, a $25.456 million or 2.8% increase between the
periods.  The growth in total assets included a $16.414 million or
2.8% increase in total loans outstanding.  Total loans outstanding
increased from $583.861 million at December 31, 2008 to $600.275 million at
March 31, 2009.  Over the last several quarters we concentrated our
staffing, marketing and sales resources on growing our core business, in
particular total loans and total deposits outstanding, and expanding our
geographic territory to the Greater Syracuse and Capital District markets of New
York State.  The increase in our total assets during the first quarter
of 2009 was reflective of these strategies.





During
the first quarter of 2009, the outstanding balances in our interest-bearing,
non-maturity deposit account liabilities increased rapidly due principally to
municipal deposit growth.  Savings, NOW and money market deposit
accounts (on a combined basis) increased $59.960 million or 18.2% during the
period, from $330.158 million at December 31, 2008 to $390.118 million at March
31, 2009.  Increases in these categories of deposits were offset, in
part, by decreases in demand deposits and certificates of deposit during the
quarter.




Asset Quality.  We
use several measures to determine the overall credit quality of our loan
portfolio.  These include the level of delinquent loans (those 30 or
more days delinquent, excluding non-performing loans), the level of
non-performing loans, the level of impaired loans, the level of potential
problem loans, and the dollar amount and type of loan charge-offs we
experience.  The amount of net charge-offs increased over a comparable
quarterly basis from $237 thousand in the first quarter of 2008, as compared to
$273 thousand in the first quarter of 2009.  As a percent of average
loans outstanding, however, net charge-offs decreased from 0.21% in the first
quarter of 2008, to 0.19% in the first quarter of 2009.  By
comparison, during the fourth quarter of 2008, we recorded $292 thousand in net
charge-offs or 0.21% of average loans outstanding.





Total
non-performing loans, which include non-accruing loans, loans 90 days or more
past due and still accruing interest, and troubled debt restructured loans,
decreased $45 thousand or 0.6% during the first quarter of 2009, from $7.211
million at December 31, 2008 to $7.166 million at March 31, 2009.  At
March 31, 2009, the total non-performing loans as a percentage of total loans
outstanding were 1.19%.  This compares to 1.24% at December 31,
2008.  The five basis point decrease in non-performing loans was due
to both a decrease in the amount of non-performing loans, as well as an increase
in loans


18
 Index


outstanding
between the periods.  Between December 31, 2008 and March 31, 2009,
the level of non-accrual commercial and industrial loans increased $656
thousand, while the level of loans 90-days past due and still accruing decreased
$596 thousand.  The level of non-performing loans at March 31, 2009
was low relative to the levels of our national peer banks, as the central New
York State economy has not been affected by the national recession as severely
as other regions of the country.





Potential
problem loans are loans that are currently performing, but where information
about possible credit problems exists, which caused management to have doubts as
to the ability of such borrowers to comply with present loan repayment terms and
which may result in the loans eventually moving to non-performing
status.  The amount of potential problem loans may vary significantly
from quarter to quarter due to the significant volume of commercial loans with
balances in excess of $1.000 million.  During the first quarter of
2009, the amount of potential problem loans increased from $16.099 million at
December 31, 2008 to $26.118 million at March 31, 2009.  Potential
problem loans as a percent of total loans outstanding equaled 4.35% at March 31,
2009, versus 2.76% at December 31, 2008.  Between December 31, 2008
and March 31, 2009, several loans to large commercial borrowers were downgraded
to potential problem loan status on our internal loan grading
system.  We attribute the increase in potential problem loans during
the quarter to a slowing regional economy.





We
recorded net loan charge-offs of $273 thousand during the three-month period
ended March 31, 2009.  This compares to $237 thousand for the same
period last year.  Annualized net loan charge-offs as a percent of
average total loans outstanding was 0.19% for the three-month period ended March
31, 2009, versus 0.21% for the same period last year.  The increase in
the amount of net charge-offs between comparable three-month periods were
principally due to an increase in losses on consumer installment loans secured
by automobiles.





Delinquent
loans, which are loans that are currently performing but where the borrower is
30 or more days late in making a scheduled payment, totaled $8.750 million or
1.46% of total loans outstanding at March 31, 2009.  By comparison, at
December 31, 2008 delinquent loans totaled $6.095 million or 1.04% of total
loans outstanding.  This represents a $2.655 million or 43.6% increase
between the periods.  We attribute the increase in delinquent loans
during the quarter to a slowing regional economy.  Although there was
an increase in the level of delinquent loans, we consider these levels of
delinquency to be manageable and within management’s target range of less than
2.0% of total loans.





Impaired
loans are commercial loans where management has determined that it is probable a
borrower will be unable to pay all amounts due in accordance with contractual
terms of his loan agreement.  The level of impaired loans increased
from $8.620 million at December 31, 2008 to $11.004 million at March 31, 2009, a
$2.384 million or 27.7% increase between the periods.  Although the
level of impaired loans increased significantly during the quarter, the specific
reserve allocated to the impaired loans only increased slightly.  More
specifically, at March 31, 2009 the specific reserve allocated to the impaired
loan pool totaled $1.193 million versus $1.160 million at December 31,
2008.  We attribute the modest change in specific reserve allocations
to management’s general practice of obtaining strong collateral positions in the
loans it originates.





Based on
the above factors, the allowance for loan losses increased between December 31,
2008 and March 31, 2009.  At March 31, 2009 the allowance for loan
losses was $8.491 million or 1.41% of loans outstanding.  This
compares to $7.564 million or 1.30% of loans outstanding at December 31, 2008, a
$927 thousand or 12.3% increase between the periods.





The
credit quality of our debt securities portfolio is strong.  At March
31, 2009, 99.8% of the securities held in our available-for-sale and
held-to-maturity investment securities portfolios (excluding notes issued
directly by the Bank to local municipalities) were rated “A” or better by
Moody’s credit rating services; 88.7% were rated “AAA.”  This compares
to 99.8% and 85.8%, respectively, at December 31, 2008.





Similarly,
the credit quality of the insurance carriers that issued our bank-owned life
insurance policies remained strong.  At March 31, 2009, we held
fifty-six life insurance policies on fifteen current and former executives of
the Company.  The cash surrender value of these policies at March 31,
2009 totaled $16.549 million.





19
 Index





D.
Comparison of Results of Operations for the Three Months Ended March 31, 2009
and 2008





Overview.There
was a significant decrease in our net income and earnings per share between
comparable three-month periods ended March 31, 2009 and March 31,
2008.  During the first quarter of 2009, we recorded net income and
earnings per share of $1.073 million and $0.10, respectively.  This
compares to net income of $1.438 million and earnings per share of $0.14 during
the first quarter of 2008.  The $365 thousand decrease in net income
and the $0.04 decrease in earnings per share between comparable quarters were
due principally to increases in the provision for loan losses and non-interest
expense, offset, in part by a significant increase in net interest income and a
modest increase in non-interest income.





During
the first quarter of 2009, we recorded $1.200 million in the provision for loan
losses during the quarter to increase the allowance for loan losses to an amount
we deemed adequate to absorb probable and estimable losses.  This
increase in the provision for loan losses was almost completely offset by a
$1.147 million increase in net interest income between the first quarter of 2008
and the first quarter of 2009.  Throughout 2008 and the first quarter
of 2009, we rapidly expanded our core business, namely loans and
deposits.  The growth in these portfolios along with rapidly declining
funding costs due to lower interest rates drove improvement in net interest
income.  We recorded $7.292 million in net interest income in the
first quarter of 2009, as compared to $6.145 million in the first quarter of
2008.  This represents an 18.7% increase between the
periods.





Due to
lower interest rates, the market value of our available-for-sale investment
securities portfolio increased significantly over the last several
quarters.  Due to the improvement in these valuations and the rapid
growth of the loan portfolio we sold $16.559 million of available-for-sale
investment securities during the first quarter of 2009 and recorded net
investment securities gains totaling $441 thousand.  This compares to
net investment securities gains totaling $183 thousand during the first quarter
of 2008, a $258 thousand increase.  The increase in net investment
securities gains was offset, in part, by decreases in trust fees, commission
income and other income resulting in a $101 thousand net increase in total
non-interest income between the quarters.





Total
non-interest expenses increased $758 thousand or 13.5% between comparable
quarters.  The net increase was due to several factors, namely
increases in employee benefits, computer service fees, a write-down of other
real estate and other miscellaneous expenses.  Employee benefits
increased significantly due principally to a significant increase in pension
related expense.  The increase in computer service fees was due
principally to the outsourcing of our core operating system late in the first
quarter of 2008.  The write-down in other real estate was due to our
decision to list for sale a parcel of land which we originally intended to
develop for Company use and the related reduction in the appraised value of the
property.  The increase in other miscellaneous expense was due to
several factors including a significant increase in our FDIC
assessment.





The
decrease in net income resulted in a decrease in both the return on average
assets and the return on average shareholders’ equity.  The return on
average assets was 0.47% in the first quarter of 2009, as compared to 0.71% in
the first quarter of 2008.  Similarly, the return on average
shareholders’ equity decreased from 8.30% in the first quarter of 2008 to 6.44%
in the first quarter of 2009.





Net Interest
Income.  Net interest income is our most significant source of
revenue.  During the first quarter of 2009, net interest income
comprised 82% of our net revenue (net interest income plus non-interest
income).  This compares to 80% in the first quarter of
2008.  For the three-month period ended March 31, 2009, our net
interest income was $7.292 million.  By comparison, for the
three-month period ended March 31, 2008, our net interest income was $6.145
million.  The $1.147 million or 18.7% increase in net interest income
between comparable periods was due to a significant increase in our earning
asset balances, particularly loans, and a significant drop in funding
costs.  During the first quarter of 2009, average earning assets
totaled $898.539 million.  This compares to average earning assets of
$780.243 million in the first quarter of 2008, a $118.296 million or 15.2%
increase between comparable quarters.  The first quarter of 2009 marks
the fourth consecutive quarter in which net interest income
increased.  It also marks a new Company record for quarterly net
interest income.





The yield
on our earning assets decreased 57 basis points between comparable three-month
periods, from 5.88% in the first quarter of 2008 to 5.31% in the first quarter
of 2009.  Between September 2007 and December 2008, the Federal Open
Market Committee lowered the target federal funds interest rate by 500 basis
points, from 5.25% to 0.25%, due to a rapidly slowing national
economy.  This, in turn,


20
 Index


caused a
decrease in the national prime lending rate, an interest rate to which a
significant portion of our loan portfolio is indexed.  These actions,
along with decreases in other short-term interest rates, reduced the yield on
all categories of earning assets between comparable quarters, which negatively
affected interest income.  Between these periods, however, we embarked
on an aggressive strategy to increase earning assets, particularly
loans.  The increase in the average outstanding volume of our earning
assets due to these efforts offset a substantial portion of the decrease in
interest income caused by lower earning asset yields.  We recorded
$11.767 million of interest income during the first quarter of 2009 as compared
to $11.400 million in the first quarter of 2008, a $367 thousand or 3.2%
increase.  The interest income recorded on loans, our highest yielding
and largest earning asset portfolio, increased $982 thousand, from $7.914
million in the first quarter of 2008 to $8.896 million in the first quarter of
2009, despite a 104 basis point decrease in yield between the
periods.  The average outstanding balance of our loan portfolio was
$594.135 million in the first quarter of 2009, as compared to $447.721 million
in the first quarter of 2008, a $146.414 million or 32.7% increase.





Between
the first quarter of 2008 and the first quarter of 2009, the rate on all
categories of interest bearing liabilities decreased.  The weighted
average rate on all interest bearing liabilities totaled 3.15% in the first
quarter of 2008, as compared to 2.30% in the first quarter of
2009.  Similarly, total interest expense decreased $780 thousand
between comparable periods in spite of a $119.781 million or 17.9% increase in
average outstanding interest bearing liabilities.  We recorded $4.475
million in total interest expense during the first quarter of 2009, as compared
to $5.255 million in the first quarter of 2008.  The significant
decrease in market interest rates between comparable periods allowed us to
reduce the average rate paid on all categories of our interest-bearing
liabilities, including money market deposit accounts and time and other deposit
accounts, our two largest and highest cost interest-bearing deposit
liabilities.  During the first quarter of 2009 we recorded $665
thousand of interest expense on our money market deposit accounts at an average
rate of 1.48%.  By comparison, during the first quarter of 2008 we
recorded $748 thousand of interest expense at an average rate of
2.60%.  The 112 basis point decrease in the average rate on these
deposit liabilities was principally due to a significant reduction in the
interest rate offered on our “Wealth Management” money market deposit
account.  Similarly, the interest expense recorded on time and other
deposit accounts decreased $745 thousand between comparable quarters in spite of
an increase in the average volume of time and other deposit accounts
outstanding.  During the first quarter of 2009 the average rate paid
on time and other deposit accounts was 3.18%, versus 4.18% in the first quarter
of 2008, a 100 basis point decrease.





Due to
the combination of changes in interest rates and the volume and composition of
our earning assets and liabilities, our net interest margin increased between
comparable quarters.   Net interest margin was 3.29% (3.46% tax
equivalent) in the first quarter of 2009.  By comparison, net interest
margin was 3.17% (3.42% tax equivalent) in the first quarter of
2008.





Rate and Volume
Analysis.The purpose of a rate volume analysis is to identify
the dollar amount of change in net interest income due to changes in interest
rates, versus changes in the volume of earning assets and interest-bearing
liabilities.


21
 Index





Rate and
Volume Table:





The
following table presents changes in interest income and interest expense
attributable to changes in volume (change in average balance multiplied by prior
year rate), changes in rate (change in rate multiplied by prior year volume),
and the net change in net interest income.  The net change
attributable to the combined impact of volume and rate has been allocated to
each in proportion to the absolute dollar amount of change.  The table
has not been adjusted for tax-exempt interest.





For
      the Three Months Ended
                    March
      31,2009
      vs. 2008Rate
                  
                  
                  Volume
                  
                  
                  Total(Dollars
      in thousands)Earning
      assets:Federal
      Funds Sold
                  
                  $
                  (98
                  )
                  
                  $
                  (101
                  )
                  
                  $
                  (199
                  )Interest
      Bearing Deposits
                  
                  
                  (119
                  )
                  
                  
                  56
                  
                  
                  
                  (63
                  )Securities
                  
                  
                  (120
                  )
                  
                  
                  (233
                  )
                  
                  
                  (353
                  )Loans
                  
                  
                  (1,277
                  )
                  
                  
                  2,259
                  
                  
                  
                  982Total
      earning assets
                  
                  
                  (1,614
                  )
                  
                  
                  1,981
                  
                  
                  
                  367Interest
      bearing liabilities:Savings
      accounts
                  
                  
                  (17
                  )
                  
                  
                  0
                  
                  
                  
                  (17
                  )Money
      market accounts
                  
                  
                  (400
                  )
                  
                  
                  317
                  
                  
                  
                  (83
                  )NOW
      accounts
                  
                  
                  (93
                  )
                  
                  
                  55
                  
                  
                  
                  (38
                  )Time
      & other deposit accounts
                  
                  
                  (859
                  )
                  
                  
                  114
                  
                  
                  
                  (745
                  )Borrowings
                  
                  
                  (49
                  )
                  
                  
                  152
                  
                  
                  
                  103Total
      interest bearing liabilities
                  
                  
                  (1,418
                  )
                  
                  
                  638
                  
                  
                  
                  (780
                  )Change
      in net interest income
                  
                  $
                  (196
                  )
                  
                  $
                  1,343
                  
                  
                  $
                  1,147





Net
interest income increased $1.147 million between the first quarter of 2008 and
the first quarter of 2009.  Between the periods we recorded a $367
thousand increase in interest income and a $780 thousand decrease in interest
expense.  The increase in interest income between comparable quarters
was driven by a significant increase in the average loan balances
outstanding.  The decrease in interest expense was driven by a
reduction in the average interest paid on all categories of interest-bearing
liabilities, offset, in part, by an increase in the average volume in all
categories of interest-bearing liabilities except savings accounts.





Between
September 2007 and December 2008, the Federal Open Market Committee lowered the
federal funds target rate by 500 basis points due to a weakening national
economy.  The precipitous drop in the federal funds rate and other
market interest rates caused a significant reduction in both our
interest-earning asset yields and interest-bearing liability
costs.  Conversely, our strategy to increase the Company’s earning
assets contributed to increases in both interest income and interest expense due
to volume factors.  More specifically, net interest income increased
$1.981 million between the first quarter of 2008 and the first quarter of 2009
due to volume factors, but was offset, in part, by a $1.614 million decrease in
net interest income due to rate factors.  Between the first quarter of
2008 and the first quarter of 2009, the volume of earning assets (on a net
basis) increased $118.296 million, including a $146.414 million increase in
average loans outstanding between the periods.





Throughout
2007, 2008 and the first quarter of 2009, we focused our personnel and marketing
resources on increasing the outstanding balances in our loan portfolio with the
goal of increasing interest income.  Due to these efforts, we steadily
increased the average outstanding balances in our loan portfolio over the last
several quarters.  The growth in the loan portfolio between comparable
quarters contributed $2.259 million of additional interest income between
comparable quarters.  This improvement, however, was offset by a
$1.277 million decrease in interest income due to a decrease in the average
yield on loans between comparable quarters as market interest rates
dropped.  Due to these two factors, the interest income recorded on
loans increased $982 thousand between comparable quarters.


22
 Index


We
recorded only $14 thousand in interest income on federal funds sold and interest
bearing deposits (at other banks) during the first quarter of
2009.  During the fourth quarter of 2008, the Federal Reserve Bank of
New York changed its long standing policy of not paying interest on required and
excess reserves held by member institutions to paying interest on required and
excess reserves.  Given the comparable Federal Reserve deposit
interest rate and the open market rates for federal funds sold during the first
quarter of 2009, we invested the large majority of our overnight excess reserve
balances at the Federal Reserve Bank of New York during the first quarter of
2009.  Due to these factors, the combined interest income on federal
funds sold and interest bearing deposits decreased $262 thousand.  Due
to the low interest rate being paid on these funds, we targeted a lower average
balance in these assets.  The interest income due to rate on these
combined balances decreased $217 thousand between comparable periods, while the
interest income due to volume on these combined earning asset categories
decreased $45 thousand between comparable periods.





The
interest income recorded on the investment securities portfolio decreased $353
thousand between the first quarter of 2008 and the first quarter of 2009 due to
both rate and volume factors.  During the last three quarters of 2008
and the first quarter of 2009, we significantly increased the average volume of
loans outstanding.  To help fund this growth in loans outstanding, we
reduced our average investment securities balances outstanding by $20.093
million between comparable periods.  Similarly, due to a declining
interest rate environment, the yield on our investment securities portfolio
decreased from 4.46% in the first quarter of 2008 to 4.30% during the first
quarter of 2009.  Between comparable periods, the interest income
earned on investment securities decreased $233 thousand due to volume, and $120
thousand due to rate factors.





We
recorded $3.562 million in interest expense on time and other accounts during
the first quarter of 2008, as compared to $2.817 million in the first quarter of
2009, a $745 thousand or 20.9% decrease in interest expense between the
periods.  Due primarily to an increase in municipal customer
certificates of deposit, the average outstanding balances in time and other
deposit accounts increased $16.855 million between the first quarter of 2008 and
the first quarter of 2009.  This increase in the volume of time and
other deposit accounts increased interest expense $114 thousand between
comparable quarters.  As short-term interest rates dropped in late
2007 and 2008, however, we lowered the interest rates offered on new and renewed
certificates of deposit.  These rate factors caused interest expense
on time and other deposit accounts to decrease by $859 thousand between
comparable quarters.





Interest
expense on money market deposit accounts decreased $83 thousand between the
first quarter of 2008 and the first quarter of 2009.  As short-term
interest rates decreased between comparable quarters, we lowered the interest
rate paid on money market deposit accounts causing a $400 thousand decrease in
interest expense due to rate factors.  Between comparable quarters,
however, we increased the average volume of money market accounts outstanding
due to the successful promotion of our Wealth Management product and increased
interest expense on this portfolio $317 thousand due to volume
factors.





In 2008
we decreased the interest rates paid on statement savings and passbook savings
accounts.  The low interest rates offered on these accounts caused a
slight decrease in the average outstanding balances on these
accounts.  These factors resulted in a $17 thousand decrease in
interest expense between the first quarter of 2008 and the first quarter of
2009, all of which was due to rate.





The
average rate paid on NOW accounts decreased from 1.30% in first quarter of 2008
to 0.90% in the first quarter of 2009.  Despite the decrease in the
average rate paid on these accounts, the average outstanding balance in the NOW
account portfolio increased from $82.094 million in the first quarter of 2008 to
$102.502 million in the first quarter of 2009 due principally to an increase in
municipal deposit accounts.  Between comparable periods, interest
expense on NOW accounts decreased $38 thousand.  The increase in the
volume of NOW accounts increased interest expense $55 thousand between
comparable periods, but was offset by a $93 thousand decrease in interest
expense due to a decrease in rate.





Between
the first quarter of 2008 and the first quarter of 2009, we secured long-term
borrowings to fund our long-term fixed-rate residential mortgage and commercial
real estate loans.  The interest rates on these new long-term
borrowings were generally less than the interest rates on maturing long-term
borrowings, which dropped our average cost of borrowings from 3.89% in the first
quarter of 2008 to 3.60% in the first quarter of 2009.  An increase in
the average volume of borrowings increased interest expense by $152 thousand,
while the decrease in the average rate paid on borrowings decreased interest
expense by $49 thousand, resulting in a $103 thousand net increase in interest
expense on borrowings.


23
 Index





Provision for Loan
Losses.We recorded $1.200 million in the provision for loan
losses in the first quarter of 2009.  This compares to $225 thousand
for the first quarter of 2008, a $975 thousand increase.  The
provision for loan losses increased due to an increase in potential problem
loans, delinquent loans, impaired loans, as well as deteriorating economic
conditions.  In addition net charge-offs increased from $237 thousand
in the first quarter of 2008 to $273 thousand in the first quarter of
2009.





Non-Interest
Income.  Non-interest income is comprised of trust fees,
service charges on deposit accounts, commission income, net investment
securities gains, net gain on sale of loans, income on bank-owned life
insurance, other service fees and other income.  Non-interest income
increased in the first quarter of 2009, as compared to first quarter of 2008 due
principally to a significant increase in net investment securities
gains.  Specifically, total non-interest income increased from $1.530
million in the first quarter of 2008 to $1.631 million in the first quarter of
2009, a $101 thousand or 6.6% increase.





During
the first quarter of 2009, we recorded $520 thousand of net gains on the sale of
$16.559 million of available-for-sale investment securities.  This
compares to $260 thousand in net gains from the sale of $10.482 million of
available-for-sale investment securities during the first quarter of
2008.  As interest rates plummeted during the fourth quarter of 2008
and first quarter of 2009, the value of our investment securities portfolio
increased.  Due to these market conditions we sold available-for-sale
investment securities and recorded substantial gains.  In addition, we
recorded $79 thousand and $77 thousand of net investment securities losses on
our trading portfolio in the quarterly periods, ended March 31, 2009 and March
31, 2008, respectively.  Our trading portfolio consists of equity and
debt securities held by the Company’s executive deferred compensation
plan.





During
the first quarter of 2009 we recorded $518 thousand in service charges on
deposit accounts.  This compares to $461 thousand during the first
quarter of 2008, a $57 thousand or 12.4% increase.  The net increase
in service charges on deposit accounts was primarily due to three factors: an
increase in penalty charges on consumer checking accounts, an increase in
deposit service charges on business checking accounts (due to fee increases
implemented in the latter part of the first quarter of 2008) and an increase in
ATM fees.





Significant
increases in net investment securities gains and service charges on deposit
accounts were offset, in part by decreases in trust fees, commission income and
net gain on the sale of loans.  Trust fees decreased $71 thousand or
18.0% between the first quarter of 2008 and the first quarter of
2009.  Between comparable quarters the value of the securities held in
our trust and investment division decreased substantially due to a significant
decline in the Unites States and global equity markets.  Since our
trust and investment management fees are based, in part, on the value of the
assets held by the various accounts, we experienced a substantial decline in
these fees between comparable quarters.





During
the first quarter of 2008, we recorded $93 thousand of commission income, versus
no commission income in the first quarter of 2009.  During the second
quarter of 2008, we sold our ownership interest in Mang–Wilber LLC, our former
insurance agency subsidiary, therefore terminating this source of
revenue.





The net
gain recorded on the sale of loans totaled $55 thousand in the first quarter of
2009.  This compares to $83 thousand in the first quarter of 2008, a
$28 thousand or 33.7% decrease between the comparable
quarters.  Between comparable quarters, the premiums we earn on
residential mortgage loans originated by our Provantage Home Loan Division and
sold into the secondary residential mortgage market decreased.





Non-Interest
Expense.  Non-interest expense is comprised of salaries,
employee benefits, occupancy expense, furniture and equipment expense, computer
service fees, advertising and marketing expense, professional fees, write-down
of other real estate and other miscellaneous expenses.  Total
non-interest expense increased $758 thousand or 13.5% on a comparable quarter
basis, from $5.623 million in the first quarter of 2008 to $6.381 million in the
first quarter of 2009.  The substantial increase in total non-interest
expense between comparable quarters was principally due to an increase in
pension expense, computer service fees, a write-down on other real estate, and
other miscellaneous expense.





We
recorded $855 thousand in employee benefits expense during the first quarter of
2009, versus $650 thousand in the first quarter of 2008, a $205 thousand or
31.5% increase between the periods.  The increase in employee benefits
expense between the periods was largely due a significant increase in pension
expense.  During the first quarter of 2009, we recorded a $117
thousand pension expense, as compared to a $98 thousand net pension benefit in
the first quarter of 2008.  The Company’s defined


24
 Index


benefit
plan pension assets performed well for several years preceding
2008.  Due to significant declines in the equity markets, however, the
pension assets lost substantial value by the end of 2008 causing us to record a
net expense in the first quarter of 2009 despite freezing plan benefits in
2006.





On a
combined basis, occupancy expense of company premises and furniture and fixture
expense increased $92 thousand or 12.3%, from $746 thousand in the first quarter
of 2008 to $838 thousand in the first quarter of 2009.  During 2008,
we began incurring a lease expense on two new facilities, namely our
representative loan office in Cicero, New York (Onondaga County) and our
full-service branch office facility in Halfmoon, New York (Saratoga
County).  These market expansion initiatives increased rents,
utilities, building repairs, depreciation expense and property taxes between
comparable periods.





Computer
service fees increased $199 thousand or 93.4% between comparable quarters, from
$213 thousand in the first quarter of 2008 to $412 thousand in the first quarter
of 2009.  Late in the first quarter of 2008, we transferred our core
computer system from our main office location in Oneonta, New York to a service
bureau environment in Albany, New York to enhance our business continuity plan
and minimize disruption of customer service.  We also converted our
payroll system from proprietary software to a third party software
provider.  On a combined basis, these two computer system changes were
responsible for a $220 thousand increase in computer service fees period over
period, $206 thousand due to the core system migration and $14 thousand due to
the payroll system.





During
the first quarter of 2009, we elected to list for sale a parcel of land which we
originally intended to develop for Company use.  We recorded a $134
thousand write-down of other real estate based on an updated appraisal on this
property obtained during the first quarter of 2009.  By comparison, we
did not record any write-downs on other real estate during the first quarter of
2008.





Other
miscellaneous expenses include directors’ fees, fidelity insurance, the Bank’s
OCC assessment, FDIC premiums and assessments, bad debt collection expenses,
correspondent bank services, service expenses related to the Bank’s accounts
receivable financing services, charitable donations and customer relations,
other losses, dues and memberships, office supplies, postage and shipping,
subscriptions, telephone expense, employee travel and entertainment, software
amortization, intangible asset amortization expense, OREO expenses (expenses
related to real estate properties formerly pledged as collateral on loans that
we have acquired through foreclosure proceedings or acceptance of a deed in lieu
of foreclosure), minority interest expense, stock exchange listing fees, and
several other miscellaneous expenses.  During the first quarter of
2009 other miscellaneous expenses increased $113 thousand or 13.1%, from $861
thousand in the first quarter of 2008 to $974 thousand in the first quarter of
2009.  The following table itemizes the individual components of other
miscellaneous expenses that increased (or decreased) significantly between
comparable periods:





For
      the Three
                        Months
      Ended
                        March
      31,Description
      of Other Miscellaneous Expense
                      2009
                      2008
                      Increase
      /
                        (Decrease)(Dollars
      in thousands)FDIC
      assessment
                      $91
                      $19
                      $72Collection
      and non-filing expense
                      73
                      21
                      52Dues
      and memberships
                      20
                      50
                      (30)Office
      supplies
                      100
                      81
                      19Postage
      and shipping
                      82
                      62
                      20Telephone
      and data communications
                      114
                      94
                      20Other
      losses
                      10
                      57
                      (47)All
      other miscellaneous expense items, net
                      484
                      477
                      7Total
      Other Miscellaneous Expense
                      $974
                      $861
                      $113





Due to
the recent global financial crisis and the related losses incurred by the FDIC
Deposit Insurance Fund, we were recently advised that during 2009 there will be
a substantial increase in the FDIC insurance premium rates charged to insured
banks.  Based on preliminary estimates, our FDIC related expense could
increase between $200 thousand and $250 thousand per quarter, or $800thousand to $1.000 million
annually.  The FDIC also approved an interim rule inFebruary 2009
that will institute a one-time special assessment of 20 cents per $100 of
domestic deposits on the banking industry in order


25
 Index


to
quickly restore its Deposit Insurance Fund.  The FDIC’s Deposit
Insurance Fund reserve ratio is required to be maintained at
1.15%.  Due to the high number of bank failures during 2008, the
Deposit Insurance Fund’s reserve ratio stood at 0.40% at December 31,
2008.  The Company estimates that this one-time special assessment
that was announced would result in approximately $1.500 million in additional
non-interest expense during 2009.  Immediately following the FDIC’s
special assessment announcement several comments were provided by member
institutions and banking industry advocates, including the American Bankers
Association, recommending that the FDIC consider alternative Deposit Insurance
Fund funding options including an increase in the FDIC’s line of credit with the
U.S. Department of Treasury.  The FDIC’s Chairperson followed with a
public statement indicating the special assessment could be reduced to 10 basis
points if an increase in the line of credit with the U.S. Treasury Department
were granted.  In the event, the special assessment were reduced from
20 basis points to 10 basis points, we estimate that the Company would record
approximately $750 thousand in additional non-interest expense during
2009.





Income
Taxes.  Income tax expense decreased from $389 thousand during
the first quarter of 2008 to $269 thousand during the first quarter of
2009.  The decrease in income tax expense was primarily due to a
decrease in income before tax.  The effective tax rate decreased
between periods, from 21.3% in the first quarter of 2008 to 20.0% in the first
quarter of 2009.  In the first quarter of 2009 a larger proportion of
our income was derived from tax-exempt sources such as municipal bonds and notes
and bank-owned life insurance.








E.
Liquidity





Liquidity
describes our ability to meet financial obligations in the normal course of
business.  Liquidity is primarily needed to meet the borrowing and
deposit withdrawal requirements of our customers and to fund our current and
planned expenditures.  We are committed to maintaining a strong
liquidity position.  Accordingly, we monitor our liquidity position on
a daily basis through our daily funds management process.  This
includes:





●
            maintaining
      the appropriate levels of currency throughout our branch system to meet
      the daily cash needs of our
customers,


●
            balancing
      our mandated deposit or “reserve” requirements at the Federal Reserve Bank
      of New York,


●
            maintaining
      adequate cash balances at our correspondent banks,
  and


●
            assuring
      that adequate levels of federal funds sold, liquid assets, and borrowing
      resources are available to meet obligations, including reasonably
      anticipated daily fluctuations.





The
following list represents the sources of funds available to meet our liquidity
requirements. Our primary sources of funds are denoted by an asterisk
(*).





Sources
      of Funding•
      Currency*•
      Federal Reserve and Correspondent Bank Balances*•
      Federal Funds Sold*•
      Loan and Investment Principal and Interest Payments*•
      Investment Security Maturities and Calls*•
      Demand Deposits and NOW Accounts*•
      Savings and Money Market Deposits*•
      Certificates of Deposit and Other Time Deposits*•
      Repurchase Agreements*•
      FHLBNY Advances / Lines of Credit*•
      Sale of Available-for-Sale Investment Securities•
      Brokered Deposits•
      Correspondent Lines of Credit•
      Federal Reserve Discount Window Borrowings•
      Sale of Loans•
      Proceeds from Issuance of Equity Securities•
      Branch Acquisition







26
 Index


In
addition to the daily funds management process, we also monitor certain
liquidity ratios and complete a liquidity assessment on a monthly
basis.  The monthly evaluation report, known as the Liquidity
Contingency Scorecard, is reviewed by the Asset and Liability Committee (“ALCO”)
and the Bank’s Board of Directors.  The report provides management
with various ratios and financial market data that are compared to limits
established within the Bank’s Asset and Liability Management
Policy.  It was designed to provide an early warning signal for a
potential liquidity crisis.  Based on the limits established in our
Asset and Liability Management Policy, we determined that at March 31, 2009 the
Bank was in a “1B” liquidity position.  Based on management’s internal
rating system, a “1B” liquidity position means management can continue operating
the Company in the normal course of business, but liquidity risk merits
heightened attention.





The
following table summarizes several of our key liquidity measures for the periods
stated:





Table of
Liquidity Measures:





Liquidity
      Measure
                                              
                                              March
      31,
                                                2009
                                              
                                              
                                              December
      31,
                                                2008(Dollars
      in thousands)Cash
      and cash equivalents
                                              
                                              $
                                              46,933
                                              
                                              
                                              $
                                              44,421Available-for-Sale
      and Held-to-Maturity investment securities at estimated fair value less
      securities pledged for state and municipal deposits and
      borrowings
                                              
                                              $
                                              30,385
                                              
                                              
                                              $
                                              29,404Total
      loan to total asset ratio
                                              
                                              
                                              63.2
                                              %
                                              
                                              
                                              63.1
                                              %FHLBNY
      remaining borrowing capacity
                                              
                                              $
                                              10,641
                                              
                                              
                                              $
                                              7,032Available
      correspondent bank lines of credit
                                              
                                              $
                                              15,000
                                              
                                              
                                              $
                                              15,000Brokered
      certificate of deposit line of credit
                                              
                                              $
                                              92,000
                                              
                                              
                                              $
                                              0Federal
      reserve bank discount window
                                              
                                              $
                                              7,526
                                              
                                              
                                              $
                                              8,435





Our
overall liquidity position increased significantly between December 31, 2008 and
March 31, 2009 due primarily to the approval to participate in a nationally
recognized FDIC-approved brokered certificate of deposit program.  The
$92.000 million facility allows us to bid weekly for FDIC-insured certificate of
deposits as long as we continue to meet program conditions including maintaining
our well-capitalized status.  The certificate of deposit terms range
from 4-weeks to 3-years with higher levels of availability in the shorter term
pools.  We did not utilize the brokered certificate of deposit
facility during the first quarter of 2009.





At March
31, 2009 we maintained $46.933 million in cash and cash equivalents, $30.385
million in unpledged available-for-sale (at estimated fair value) and
held-to-maturity investment securities, and $33.167 million of readily available
lines of credit at other banks (excluding the brokered certificate of deposit
line of credit) to fund any anticipated or unanticipated growth in earning
assets.  This compares to $44.421 million in cash and cash
equivalents, $29.404 million in unpledged available-for-sale (at estimated fair
value) and held-to-maturity investment securities, and $30.467 million of
readily available lines of credit at other banks on December 31,
2008.  In aggregate, these potential funding sources provided $202.485
million of short- and long-term liquidity at March 31, 2009, as compared to
$104.292 million at December 31, 2008, a $98.193 million increase between
periods.  Despite our significant loan growth during the first quarter
of 2009, we improved our overall liquidity position.  Our total loan
to total asset ratios of 63.2% at March 31, 2009 and 63.1% at December 31, 2008
were low relative to those of our comparative peer group of financial
institutions.





Our
commitments to extend credit and stand-by letters of credit increased modestly
between December 31, 2008 and March 31, 2009.  Commitments to extend
credit and stand-by letters of credit totaled $144.430 million at March 31,
2009, versus $139.496 million at December 31, 2008, a $4.934 million or 3.5%
increase.  The increase between periods was principally due to
increases in commitments to fund commercial construction loans.  Our
experience indicates that draws on the commitments to extend credit and stand-by
letters of credit do not fluctuate significantly from quarter to
quarter.  We, however, will closely monitor our liquidity position
over the next several quarters to assure adequate levels of short-term funding
are available to fund our off balance commitments.







27
 Index


On a
quarterly basis we prepare a forward-looking 90-day sources and uses report to
determine future liquidity needs.  Based on this report, our deposit
retention experience, anticipated loan and investment funding and prepayment
activity, the product offerings of our competitors, the level of interest rates,
the level of regional economic activity, and our current pricing strategies, we
anticipate that we will have sufficient levels of liquidity to meet our funding
commitments over the next several quarters prospectively.





Finally,
during the first quarter of 2009, we received preliminary approval to
participate in the Federal Reserve Bank of New York’s borrower in custody of
collateral (“BICC”) program.  The BICC program is intended to provide
member institutions with short-term borrowings secured by acceptable forms of
collateral.  It is our intention to pledge eligible consumer loans
under the BICC program providing for approximately $40 million of short-term
credit availability.  It is our intention to use the BICC line of
credit, infrequently and for borrowing periods less than 28 days, once final
approval is obtained.  We anticipate obtaining final approval from the
Federal Reserve Bank of New York before June 30, 2009.








F.  Capital
Resources and Dividends





The
maintenance of appropriate capital levels is a management
priority.  Overall capital adequacy is monitored on an ongoing basis
by our management and reviewed regularly by the Board of
Directors.  Our principal capital planning goal is to provide an
adequate return to shareholders, while maintaining a sufficient capital base to
provide for future expansion and complying with all regulatory
standards.





Due to
the moderate growth in total assets during the first quarter of 2009, total
shareholders’ equity to total assets decreased from 7.29% at December 31, 2008
to 7.16% at March 31, 2009.  Between December 31, 2008 and March 31,
2009, total shareholders’ equity increased $602 thousand or
0.9%.  Total shareholders’ equity was $68.061 million at March 31,
2009, as compared to $67.459 million at December 31, 2008.  The net
increase in shareholders’ equity between periods was due to a few factors, some
positive and some negative.  During the first quarter of 2009 we
recorded net income of $1.073 million.  We also recorded a $454
thousand positive change in net unrealized loss on investment securities, net of
tax, due to a general decrease in the level of interest rates, and a $73
thousand positive adjustment to accumulated other comprehensive income to record
the change in the net actuarial loss of defined benefit plan, net of
tax.  This amount was offset by an equal amount of pension expense
(net of tax) recorded through the Company’s income statement during the first
quarter of 2009.  The increase to shareholders’ equity was offset, in
part, by cash dividend payments totaling $998 thousand in the first quarter of
2009.





The
Company and the Bank are both subject to regulatory capital guidelines as
established by federal bank regulators.  Under these guidelines, in
order to be “adequately capitalized” the Company and the Bank must both maintain
a minimum ratio of tier 1 capital to average assets and tier 1 capital to
risk-weighted assets of 4.0% and a minimum ratio of total capital to
risk-weighted assets of 8.0%.  Tier 1 capital is comprised of
shareholders’ equity less intangible assets and accumulated other comprehensive
income.  Total capital for this risk-based capital standard includes
tier 1 capital plus allowable portions of the Company’s allowance for loan
losses.  Similarly, for the Bank to be considered “well capitalized,”
it must maintain a tier 1 capital to average assets ratio of 5.0%, a tier 1
capital to risk-weighted assets ratio of 6.0% and a total capital to
risk-weighted assets ratio of 10.0%.  The Company exceeded all capital
adequacy guidelines, and the Bank exceeded all “well capitalized” guidelines at
March 31, 2009 and December 31, 2008.  In addition, the Bank’s Board
of Directors has established a minimum capital policy that exceeds “well
capitalized” regulatory standards to ensure the safety and soundness of the
Company’s banking subsidiary.  The Company’s tier 1 capital to average
assets ratio, tier 1 capital to risk-weighted assets ratio and total capital to
risk-weighted assets ratio at March 31, 2009 were 7.02%, 9.81% and 11.06%,
respectively.  This compares to 7.33%, 10.26% and 11.46%,
respectively, at December 31, 2008.  The decrease in these capital
ratios between the periods was primarily due to growth in the Company’s total
assets between December 31, 2008 and March 31, 2009.





The
principal source of funds for the payment of shareholder dividends by the
Company has been dividends declared and paid to the Company by its subsidiary
bank.  There are various legal and regulatory limitations applicable
to the payment of dividends to the Company by its subsidiaries, as well as the
payment of dividends by the Company to its shareholders.  At March 31,
2009, under these statutory limitations, the maximum amount that could have been
paid by the Bank subsidiary to the Company without special regulatory approval
was approximately $5.465 million.  The ability of the Company and the
Bank to pay dividends in the future is and will continue to be influenced by
regulatory policies, capital guidelines, and applicable laws.







28
 Index





ITEM
3:  Quantitative and
Qualitative Disclosures about Market Risk





This item
is not applicable due to the Company’s Smaller Reporting Company
status.








ITEM 4: Controls and Procedures





We have
established disclosure control procedures to ensure that material information
related to the Company, its financial condition, or results of operation is made
known to the officers that certify the Company’s financial reports and to other
members of senior management and the Board of Directors.  These
procedures have been formalized through the formation of a Management Disclosure
Committee and the adoption of a Management Disclosure Committee Charter and
related disclosure certification process.  The management disclosure
committee is comprised of our senior management and meets at least quarterly to
review periodic filings for full and proper disclosure of material
information.





Our
management, including the Chief Executive Officer and Chief Financial Officer,
evaluated the design and operational effectiveness of the Company’s disclosure
controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)–15(e) under
the Securities Exchange Act of 1934, as amended) as of March 31,
2009.  Based upon that evaluation, the Chief Executive Officer and
Chief Financial Officer concluded that the Company’s disclosure controls and
procedures were effective in ensuring that information required to be disclosed
by the Company in reports that it files or submits under the Securities Exchange
Act of 1934 are recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms.





It should
be noted that any system of internal controls, regardless of design, can provide
only reasonable, and not absolute, assurance that the objectives of the control
system are met.  In addition, the design of any control system is
based in part upon certain assumptions about the likelihood of future
events.  Because of these and other inherent limitations of control
systems, there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions, regardless of how
remote.





There
were no changes made in the Company’s internal controls over financial reporting
that occurred during the Company’s most recent fiscal quarter that have
materially affected, or are reasonably likely to materially affect, the
Company’s internal controls over financial reporting.








ITEM
4T:  Controls and Procedures





This item
is not applicable as the Company is an accelerated filer.








PART II – OTHER INFORMATION





ITEM
1: Legal Proceedings





From time
to time, the Company becomes subject to various legal claims that arise in the
normal course of business.  At March 31, 2009 the Company was not the
subject of any material pending legal proceedings other than ordinary routine
litigation occurring in the normal course of its business.  The
various pending legal claims against the Company will not, in the opinion of
management, result in any material liability to the Company and will not
materially affect our financial position, results of operation, or cash
flow.





Neither
the Company, the Bank, nor any of the Bank’s subsidiaries have been subject to
review by the Internal Revenue Service of any transactions that have been
identified as abusive or that have a significant tax avoidance
purpose.








ITEM
1A:  Risk Factors





During
the first quarter of 2009 there were no material changes to the Company’s risk
factors as disclosed in the Annual Report on Form 10-K, Item 1A, filed with the
SEC on March 13, 2009.


29
 Index


ITEM
2: Unregistered Sales of Equity Securities and Use of
Proceeds


A. Not
applicable.





B.  Not
applicable.





C.  Purchases
of Equity Securities by Issuer and Affiliated Purchasers





None








ITEM
3: Defaults Upon Senior Securities





The
Company did not default on any senior securities during the three-month period
ended March 31, 2009.








ITEM
4: Submission of Matters to a Vote of Security Holders





On
February 27, 2009, the Company held a Special Meeting of Shareholders to approve
an amendment to the Company’s Restated Certificate of Incorporation to authorize
the issuance of up to 100,000 shares of preferred stock, no par value per
share.





On the
record date for the Special Meeting of Shareholders, January 9, 2009, 10,503,704
shares of the Company’s common stock, par value $.01 per share, were issued and
outstanding and eligible to be voted.  At the meeting the proposal was
approved by the shareholders.  A total of 8,018,700 shares were voted
at the meeting, 6,960,636 for, 903,233 against and 154,831 abstain.





The
authorization of preferred shares was required per the terms of the
CPP.  Although the Board of Directors of the Company thereafter
elected not to participate in the CPP, the Restated Certificate of Incorporation
was filed with the New York Secretary of State on March 26, 2009.  The
Restated Certificate of Incorporation, as filed, allows the Board of Directors
to issue preferred shares in the future if deemed
appropriate.  Currently, there are no plans to issue preferred
securities.








ITEM
5: Other Information





None.








ITEM 6: Exhibits





See
Exhibit Index to this Form 10-Q.


30
 Index


SIGNATURES











Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.








THE
      WILBER CORPORATIONBy:
              /s/
      Douglas C. Gulotty
              
              Date:
              May
      7, 2009Douglas
      C. GulottyPresident
      and Chief Executive OfficerBy:
              /s/
      Joseph E. Sutaris
              
              Date:
              May
      7, 2009Joseph
      E. SutarisExecutive
      Vice President, Chief Financial Officer, Treasurer, and
      Secretary


31
 Index


EXHIBIT
INDEX








No.
            Document31.1
            Certification
      of Chief Executive Officer Pursuant to 302 of the Sarbanes-Oxley Act of
      200231.2
            Certification
      of Chief Financial Officer Pursuant to 302 of the Sarbanes-Oxley Act of
      200232.1
            Certification
      of Chief Executive Officer Pursuant to 18 U.S.C. 135032.2
            Certification
      of Chief Financial Officer Pursuant to 18 U.S.C.
  1350










32