EXHIBIT 13
 
 
  Presidents Letter
    
    
    1Comparative Summary of Selected Financial Data
    
    
    2Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    3Report of Independent Registered Public Accounting Firm
    
    
    21Consolidated Financial Statements
    
    
    22Notes to Consolidated Financial Statements
    
    
    27Shareholder Information
    
    
    43Officers
    
    
    44Board of Directors
    
    
    45




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th




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COMPARATIVE SUMMARY OF SELECTED FINANCIAL DATA  (Dollars in thousands, except per share data)
 2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004YEAR-END BALANCESTotal assets
    
    $
    259,795
    
    
    $
    266,225
    
    
    $
    273,692
    
    
    $
    303,447
    
    
    $
    296,650Total securities
    
    
    38,323
    
    
    
    49,489
    
    
    
    51,773
    
    
    
    56,931
    
    
    
    59,883Loans, net
    
    
    195,465
    
    
    
    192,128
    
    
    
    192,407
    
    
    
    224,926
    
    
    
    211,690Total deposits
    
    
    231,668
    
    
    
    238,511
    
    
    
    249,665
    
    
    
    248,506
    
    
    
    249,174Total borrowed funds
    
    
    5,000
    
    
    
    5,000
    
    
    
    
    
    
    
    32,970
    
    
    
    24,600Total shareholders equity
    
    
    21,305
    
    
    
    21,266
    
    
    
    22,447
    
    
    
    21,525
    
    
    
    21,786Book value per outstanding share
    
    
    18.75
    
    
    
    18.71
    
    
    
    19.50
    
    
    
    18.55
    
    
    
    18.58Shares outstanding
    
    
    1,136,397
    
    
    
    1,136,397
    
    
    
    1,151,335
    
    
    
    1,160,338
    
    
    
    1,172,782RESULTS OF OPERATIONSInterest income
    
    $
    16,294
    
    
    $
    17,882
    
    
    $
    19,150
    
    
    $
    18,045
    
    
    $
    16,600Interest expense
    
    
    (6,277
    )
    
    
    (8,371
    )
    
    
    (8,488
    )
    
    
    (6,303
    )
    
    
    (5,207
    )Net interest income
    
    
    10,017
    
    
    
    9,511
    
    
    
    10,662
    
    
    
    11,742
    
    
    
    11,393Provision for loan loss
    
    
    (1,127
    )
    
    
    (1,332
    )
    
    
    (435
    )
    
    
    (1,355
    )
    
    
    (1,486
    )Other income
    
    
    2,659
    
    
    
    2,244
    
    
    
    2,443
    
    
    
    2,487
    
    
    
    2,473Salaries and employee benefits
    
    
    (5,298
    )
    
    
    (5,776
    )
    
    
    (5,308
    )
    
    
    (5,339
    )
    
    
    (5,180
    )Other expenses
    
    
    (4,762
    )
    
    
    (5,543
    )
    
    
    (5,092
    )
    
    
    (5,424
    )
    
    
    (5,237
    )Income (loss) before income taxes
    
    
    1,489
    
    
    
    (896
    )
    
    
    2,270
    
    
    
    2,111
    
    
    
    1,963Applicable income (taxes) benefit
    
    
    (188
    )
    
    
    597
    
    
    
    (490
    )
    
    
    (444
    )
    
    
    (439
    )Net income (loss)
    
    $
    1,301$
    
    
    
    (299
    )
    
    $
    1,780
    
    
    $
    1,667
    
    
    $
    1,524PER SHARE DATANet income (loss)Basic
    
    $
    1.14
    
    
    $
    (0.26
    )
    
    $
    1.54
    
    
    $
    1.43
    
    
    $
    1.30Diluted
    
    $
    1.14
    
    
    $
    (0.26
    )
    
    $
    1.54
    
    
    $
    1.43
    
    
    $
    1.29Cash dividend paid
    
    $
    0.76
    
    
    $
    0.76
    
    
    $
    0.76
    
    
    $
    0.76
    
    
    $
    0.76FINANCIAL RATIOSReturn on average total assets
    
    
    0.50
    %
    
    
    -0.11
    %
    
    
    0.61
    %
    
    
    0.57
    %
    
    
    0.55
    %Return on average shareholders equity
    
    
    6.09
    %
    
    
    -1.37
    %
    
    
    8.09
    %
    
    
    7.63
    %
    
    
    7.04
    %Average shareholders equity to
average total assets
    
    
    8.15
    %
    
    
    8.11
    %
    
    
    7.56
    %
    
    
    7.43
    %
    
    
    7.75
    %Dividend payout
    
    
    66.38
    %
    
    
    n/a
    
    
    
    49.40
    %
    
    
    53.14
    %
    
    
    58.71
    %
  2




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




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CRITICAL ACCOUNTING POLICIES
  Allowance for loan losses
     Fair Values of Financial Instruments 
  4




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OVERVIEW
      5




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RESULTS OF OPERATIONS
 Net Interest Income
      6




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Provision for Loan Losses
  Noninterest Income
   7




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The following tables provide an analysis of the average balances, yields and rates on interest
earning assets and interest-bearing liabilities and the change in net interest income, identifying
the portion of the change in net interest income due to changes in volume versus the portion due to
changes in interest rates.
 VOLUME / RATE ANALYSIS
 2008 Compared to 2007
    
    
    2007 Compared to 2006Increase / (Decrease)
    
    
    Increase / (Decrease)Change
    
    
    Change
    
    
    
    
    
    
    Change
    
    
    ChangeTotal
    
    
    due to
    
    
    due to
    
    
    Total
    
    
    due to
    
    
    due to(Dollars in thousands)
    
    Change
    
    
    Volume
    
    
    Rate
    
    
    Change
    
    
    Volume
    
    
    RateFederal funds invested
    
    $
    (190
    )
    
    $
    (176
    )
    
    $
    (14
    )
    
    $
    12
    
    
    $
    2
    
    
    $
    10SecuritiesTaxable
    
    
    (385
    )
    
    
    (356
    )
    
    
    (29
    )
    
    
    (186
    )
    
    
    (238
    )
    
    
    52Tax exempt (1)
    
    
    (13
    )
    
    
    13
    
    
    
    (26
    )
    
    
    107
    
    
    
    101
    
    
    
    6Loans (2)
    
    
    (1,021
    )
    
    
    309
    
    
    
    (1,330
    )
    
    
    (1,143
    )
    
    
    (1,672
    )
    
    
    529Total interest income
    
    
    (1,609
    )
    
    
    (210
    )
    
    
    (1,399
    )
    
    
    (1,210
    )
    
    
    (1,807
    )
    
    
    597DepositsInterest-bearing demand
    
    
    (1,455
    )
    
    
    (276
    )
    
    
    (1,179
    )
    
    
    562
    
    
    
    222
    
    
    
    340Savings deposits
    
    
    (4
    )
    
    
    (1
    )
    
    
    (3
    )
    
    
    
    
    
    
    (4
    )
    
    
    4Time deposits
    
    
    (783
    )
    
    
    (271
    )
    
    
    (512
    )
    
    
    313
    
    
    
    (329
    )
    
    
    642Borrowed funds
    
    
    148
    
    
    
    266
    
    
    
    (118
    )
    
    
    (992
    )
    
    
    (997
    )
    
    
    5Total interest expense
    
    
    (2,094
    )
    
    
    (282
    )
    
    
    (1,812
    )
    
    
    (117
    )
    
    
    (1,108
    )
    
    
    991Net interest income
    
    $
    485
    
    
    $
    72
    
    
    $
    413
    
    
    $
    (1,093
    )
    
    $
    (699
    )
    
    $
    (394
    )
  (1)
    
    Tax-exempt income is adjusted to a fully taxable equivalent basis using a 34% tax rate and a
20% disallowance of interest expense deductibility under TEFRA rules.(2)
    
    Non-accrual loans are included for purposes of computing rate and volume effects although
interest on these balances has been excluded. Noninterest expense
   8




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DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS EQUITY
 2008
    
    
    2007
    
    
    2006Average
    
    
    Income/
    
    
    Average
    
    
    Average
    
    
    Income/
    
    
    Average
    
    
    Average
    
    
    Income/
    
    
    Average(Dollars in thousands)
    
    Balance (4)
    
    
    Expense
    
    
    Yield
    
    
    Balance (4)
    
    
    Expense
    
    
    Yield
    
    
    Balance (4)
    
    
    Expense
    
    
    YieldFederal funds invested
    
    $
    605
    
    
    $
    18
    
    
    
    2.98
    %
    
    $
    3,883
    
    
    $
    208
    
    
    
    5.36
    %
    
    $
    3,852
    
    
    $
    196
    
    
    
    5.09
    %SecuritiesTaxable(1)
    
    
    23,681
    
    
    
    1,087
    
    
    
    4.59
    
    
    
    31,249
    
    
    
    1,472
    
    
    
    4.71
    
    
    
    36,492
    
    
    
    1,658
    
    
    
    4.54Tax exempt (1)
    
    
    19,774
    
    
    
    1,188
    
    
    
    6.01
    
    
    
    19,569
    
    
    
    1,201
    
    
    
    6.14
    
    
    
    17,917
    
    
    
    1,094
    
    
    
    6.11Loans (2) (3)
    
    
    192,594
    
    
    
    14,374
    
    
    
    7.46
    
    
    
    188,525
    
    
    
    15,395
    
    
    
    8.17
    
    
    
    208,074
    
    
    
    16,538
    
    
    
    7.95Total earning assets
    
    
    236,654
    
    
    
    16,667
    
    
    
    7.04
    %
    
    
    243,226
    
    
    
    18,276
    
    
    
    7.51
    %
    
    
    266,335
    
    
    
    19,486
    
    
    
    7.32
    %Other assets
    
    
    25,412
    
    
    
    
    
    
    
    
    
    
    
    26,020
    
    
    
    
    
    
    
    
    
    
    
    24,725Total assets
    
    $
    262,066
    
    
    
    
    
    
    
    
    
    
    $
    269,246
    
    
    
    
    
    
    
    
    
    
    $
    291,060DepositsInterest-bearing
demand deposits
    
    $
    80,471
    
    
    
    1,452
    
    
    
    1.80
    %
    
    $
    86,759
    
    
    
    2,907
    
    
    
    3.35
    %
    
    $
    78,335
    
    
    
    2,346
    
    
    
    2.99
    %Savings deposits
    
    
    15,464
    
    
    
    48
    
    
    
    0.31
    
    
    
    15,765
    
    
    
    52
    
    
    
    0.33
    
    
    
    17,060
    
    
    
    51
    
    
    
    0.30Time deposits
    
    
    114,548
    
    
    
    4,581
    
    
    
    4.00
    
    
    
    120,603
    
    
    
    5,364
    
    
    
    4.45
    
    
    
    128,973
    
    
    
    5,051
    
    
    
    3.92Borrowed funds
    
    
    6,150
    
    
    
    196
    
    
    
    3.19
    
    
    
    865
    
    
    
    48
    
    
    
    5.55
    
    
    
    21,158
    
    
    
    1,040
    
    
    
    4.92Total interest-
bearing liabilities
    
    
    216,633
    
    
    
    6,277
    
    
    
    2.90
    %
    
    
    223,992
    
    
    
    8,371
    
    
    
    3.74
    %
    
    
    245,526
    
    
    
    8,488
    
    
    
    3.46
    %Noninterest-bearing
demand deposits
    
    
    22,167
    
    
    
    
    
    
    
    
    
    
    
    21,758
    
    
    
    
    
    
    
    
    
    
    
    21,948Other liabilities
    
    
    1,911
    
    
    
    
    
    
    
    
    
    
    
    1,667
    
    
    
    
    
    
    
    
    
    
    
    1,575Shareholders equity
    
    
    21,355
    
    
    
    
    
    
    
    
    
    
    
    21,829
    
    
    
    
    
    
    
    
    
    
    
    22,011Total liabilities and
shareholders equity
    
    $
    262,066
    
    
    
    
    
    
    
    
    
    
    $
    269,246
    
    
    
    
    
    
    
    
    
    
    $
    291,060Net interest income
    
    
    
    
    
    $
    10,390
    
    
    
    
    
    
    
    
    
    
    $
    9,905
    
    
    
    
    
    
    
    
    
    
    $
    10,998As a percentage of earning assets:Net interest income
    
    
    
    
    
    
    
    
    
    
    4.39
    %
    
    
    
    
    
    
    
    
    
    
    4.07
    %
    
    
    
    
    
    
    
    
    
    
    4.13
    %
 (1)
    
    Securities include federal funds sold for purposes of this yield table. Average yields on
all securities have been computed based on amortized cost. Income on tax-exempt securities
has been computed on a fully taxable equivalent basis using a 34% tax rate and a 20%
disallowance of interest expense deductibility under TEFRA rules. The amount of such
adjustment was $373,000, $394,000 and $336,000 for 2008, 2007 and 2006 respectively.(2)
    
    Average balance is net of deferred loan fees of $94,000, $76,000, and $94,000 for 2008, 2007
and 2006 respectively, as well as $1,163,000, $2,554,000, and $4,693,000 of unearned income
for the same years.(3)
    
    Average loan balances include non-accruing loans.(4)
    
    Average balances are computed on an average daily basis.    9




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FINANCIAL CONDITION
    10




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Loans
 Year-end loans (in thousands) were as follows:
 2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Commercial loans
    
    $
    141,266
    
    
    $
    138,957
    
    
    $
    136,230
    
    
    $
    154,267
    
    
    $
    140,348Real estate loans  residential
    
    
    8,921
    
    
    
    8,580
    
    
    
    9,117
    
    
    
    10,907
    
    
    
    10,959Consumer and credit card loans
    
    
    21,596
    
    
    
    18,499
    
    
    
    12,440
    
    
    
    15,255
    
    
    
    21,449Home equity loans
    
    
    22,244
    
    
    
    19,160
    
    
    
    17,551
    
    
    
    18,982
    
    
    
    18,331Indirect finance loans
    
    
    3,921
    
    
    
    9,343
    
    
    
    19,084
    
    
    
    28,270
    
    
    
    23,106Total loans
    
    $
    197,948
    
    
    $
    194,539
    
    
    $
    194,422
    
    
    $
    227,681
    
    
    $
    214,193
  The following is a schedule of maturities of commercial loans (in thousands) based on contract
terms as of December 31, 2008.
 One Through
    
    
    OverOne Year or Less
    
    Five Years
    
    
    Five Years$19,059
    
    $
    22,742
    
    
    $
    99,465
   Allowance for loan losses
   11




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The following schedule presents an analysis (in thousands) of the allowance for loan losses,
average loan data, and related ratios for each of the five years in the period ended December 31,
 2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Balance at beginning of period
    
    $
    2,411
    
    
    $
    2,015
    
    
    $
    2,755
    
    
    $
    2,503
    
    
    $
    2,503Loans charged off:Commercial
    
    
    (690
    )
    
    
    (501
    )
    
    
    (302
    )
    
    
    (354
    )
    
    
    (642
    )Real estate
    
    
    (35
    )
    
    
    (22
    )
    
    
    (101
    )
    
    
    
    
    
    
    (71
    )Consumer
    
    
    (554
    )
    
    
    (764
    )
    
    
    (1,071
    )
    
    
    (1,086
    )
    
    
    (1,072
    )Total loans charged off
    
    
    (1,279
    )
    
    
    (1,287
    )
    
    
    (1,474
    )
    
    
    (1,440
    )
    
    
    (1,785
    )Recoveries of loans previously charged off:Commercial
    
    
    94
    
    
    
    228
    
    
    
    69
    
    
    
    75
    
    
    
    164Real estate
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    Consumer
    
    
    130
    
    
    
    123
    
    
    
    217
    
    
    
    262
    
    
    
    135Total loan recoveries
    
    
    224
    
    
    
    351
    
    
    
    299
    
    
    
    337
    
    
    
    299Net loans charged off
    
    
    (1,055
    )
    
    
    (936
    )
    
    
    (1,175
    )
    
    
    (1,103
    )
    
    
    (1,486
    )Provision charged to operating expense
    
    
    1,127
    
    
    
    1,332
    
    
    
    435
    
    
    
    1,355
    
    
    
    1,486Balance at end of period
    
    $
    2,483
    
    
    $
    2,411
    
    
    $
    2,015
    
    
    $
    2,755
    
    
    $
    2,503Ratio of net charge-offs to average
loans outstanding for period
    
    
    0.54
    %
    
    
    0.49
    %
    
    
    0.56
    %
    
    
    0.51
    %
    
    
    0.72
    %
   12




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The following schedule is a breakdown of the allowance for loan losses (in thousands) allocated by
type of loan and related ratios.
 Percentage of Loans in Each Category to Total Loans
 December 31, 2008
    
    
    December 31, 2007
    
    
    December 31, 2006
    
    
    December 31, 2005
    
    
    December 31, 2004Allowance
    
    
    Total
    
    
    Allowance
    
    
    Total
    
    
    Allowance
    
    
    Total
    
    
    Allowance
    
    
    Total
    
    
    Allowance
    
    
    TotalLoan Type
    
    Amount
    
    
    Loans
    
    
    Amount
    
    
    Loans
    
    
    Amount
    
    
    Loans
    
    
    Amount
    
    
    Loans
    
    
    Amount
    
    
    LoansCommercial
    
    $
    1,772
    
    
    
    71
    %
    
    $
    1,679
    
    
    
    71
    %
    
    $
    1,112
    
    
    
    69
    %
    
    $
    1,269
    
    
    
    68
    %
    
    $
    1,268
    
    
    
    65
    %Real estate
    
    
    67
    
    
    
    05
    
    
    
    64
    
    
    
    04
    
    
    
    177
    
    
    
    14
    
    
    
    195
    
    
    
    13
    
    
    
    148
    
    
    
    14Consumer
    
    
    644
    
    
    
    24
    
    
    
    668
    
    
    
    25
    
    
    
    726
    
    
    
    17
    
    
    
    1,291
    
    
    
    19
    
    
    
    1,087
    
    
    
    21Unallocated
    
    
    
    
    
    
    n/a
    
    
    
    
    
    
    
    n/a
    
    
    
    
    
    
    
    n/a
    
    
    
    
    
    
    
    n/a
    
    
    
    
    
    
    
    n/aTotal
    
    $
    2,483
    
    
    
    100
    %
    
    $
    2,411
    
    
    
    100
    %
    
    $
    2,015
    
    
    
    100
    %
    
    $
    2,755
    
    
    
    100
    %
    
    $
    2,503
    
    
    
    100
    %
   The following schedule summarizes impaired and non-performing loans (in thousands) as of December
31,
 2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Impaired loans
    
    $
    5,355
    
    
    $
    3,445
    
    
    $
    2,267
    
    
    $
    1,912
    
    
    $
    1,283Loans accounted for on a non-accrual basis
(includes substantially all impaired loans)
    
    $
    5,355
    
    
    $
    3,445
    
    
    $
    1,984
    
    
    $
    1,912
    
    
    $
    1,283Accruing loans, which are contractually past
due 90 days or more as to interest or
principal payments
    
    
    0
    
    
    
    5
    
    
    
    283
    
    
    
    124
    
    
    
    80Total non-performing loans
    
    $
    5,355
    
    
    $
    3,450
    
    
    $
    2,267
    
    
    $
    2,036
    
    
    $
    1,363Non-performing loans to
Allowance for losses
    
    
    2.16
    
    
    
    1.43
    
    
    
    1.13
    
    
    
    0.74
    
    
    
    0.54
   13




---



##### 



Securities
  Summarized below is the carrying value of securities available for sale (in thousands) as of
December 31,
 2008
    
    
    2007
    
    
    2006U.S. Treasury and U.S. Government
Agency securities
    
    $
    1,007
    
    
    $
    8,530
    
    
    $
    8,383Obligations of states and political subdivisions
    
    
    19,299
    
    
    
    19,767
    
    
    
    18,469Mortgage-backed securities
    
    
    15,759
    
    
    
    19,021
    
    
    
    22,750Equity investments
    
    
    2,258
    
    
    
    2,171
    
    
    
    2,171$
    38,323
    
    
    $
    49,489
    
    
    $
    51,773
 The following is a schedule, by carrying value, of maturities (or, if applicable, earliest call
dates) by category of debt securities (in thousands) and the related weighted average yield of such
securities as of December 31, 2008:
 Maturing
    
    
    MaturingMaturing in
    
    
    After One
    
    
    After Five
    
    
    MaturingOne Year
    
    
    Year Through
    
    
    Years Through
    
    
    Afteror Less
    
    
    Five Years
    
    
    Ten Years
    
    
    Ten YearsAmount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    YieldU.S. Treasury and U.S. Government
Agency securities
    
    $
    1,007
    
    
    
    3.18
    %
    
    $
    
    
    
    
    n/a
    
    
    $
    
    
    
    
    n/a
    
    
    $
    
    
    
    
    n/aObligations of states and political
subdivisions
    
    
    2,244
    
    
    
    6.85
    %
    
    
    8,750
    
    
    
    5.73
    %
    
    
    6,427
    
    
    
    5.89
    %
    
    
    1,878
    
    
    
    6.01
    %Mortgage-backed securities
    
    
    15
    
    
    
    4.88
    %
    
    
    1,008
    
    
    
    3.67
    %
    
    
    2,893
    
    
    
    4.27
    %
    
    
    11,843
    
    
    
    4.71
    %Total
    
    $
    3,266
    
    
    
    5.71
    %
    
    $
    9,758
    
    
    
    5.52
    %
    
    $
    9,320
    
    
    
    5.38
    %
    
    $
    13,721
    
    
    
    4.88
    %
   14




---



##### 



Premises and equipment
  Other assets
   Deposits and borrowings
  The following is a schedule of maturities of time certificates of deposit (in thousands) in amounts
of more than $100,000 as of December 31, 2008:
 Three months or less
    
    $
    3,709Over three months through six months
    
    
    7,828Over six months through twelve months
    
    
    15,122Over twelve months
    
    
    14,587Total
    
    $
    41,246
 The average amount of deposits (in thousands) and average rates paid are summarized as follows for
the years ended December 31,
 2008
    
    
    2007
    
    
    2006Average
    
    
    Average
    
    
    Average
    
    
    Average
    
    
    Average
    
    
    AverageAmount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    RateInterest-bearing demand deposits
    
    $
    80,471
    
    
    
    1.80
    %
    
    $
    86,759
    
    
    
    3.35
    %
    
    $
    78,335
    
    
    
    2.99
    %Savings deposits
    
    
    15,464
    
    
    
    0.31
    
    
    
    15,765
    
    
    
    0.33
    
    
    
    17,060
    
    
    
    0.30Time deposits
    
    
    114,548
    
    
    
    4.00
    
    
    
    120,603
    
    
    
    4.45
    
    
    
    128,973
    
    
    
    3.92Demand deposits (noninterest-bearing)
    
    
    22,167
    
    
    
    
    
    
    
    21,758
    
    
    
    
    
    
    
    21,948Total
    
    $
    232,650
    
    
    
    
    
    
    $
    244,885
    
    
    
    
    
    
    $
    246,316
  15




---



##### 



CAPITAL RESOURCES
    16




---



##### 



CONTRACTUAL OBLIGATIONS AND COMMITMENTS
 
 Payments Due by PeriodContractual obligations
    
    
    
    
    
    Less Than
    
    
    
    
    
    
    
    
    
    
    After(In thousands)
    
    Total
    
    
    One Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsTime deposits and certificates of deposit
    
    $
    126,999
    
    
    $
    77,626
    
    
    $
    37,399
    
    
    $
    11,806
    
    
    $
    168Borrowed funds
    
    
    5,000
    
    
    
    
    
    
    
    5,000
    
    
    
    
    
    
    
    Total
    
    $
    131,999
    
    
    $
    77,626
    
    
    $
    42,399
    
    
    $
    11,806
    
    
    $
    168
 Amount of Commitment  Expiration by PeriodOther commitments
    
    
    
    
    
    Less Than
    
    
    
    
    
    
    
    
    
    
    After(In thousands)
    
    Total
    
    
    One Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsCommitments to extend commercial credit
    
    $
    11,172
    
    
    $
    5,819
    
    
    $
    1,719
    
    
    $
    138
    
    
    $
    3,496Commitments to extend consumer credit
    
    
    11,363
    
    
    
    383
    
    
    
    1,033
    
    
    
    4,339
    
    
    
    5,608Standby letters of credit
    
    
    150
    
    
    
    150
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    22,685
    
    
    $
    6,352
    
    
    $
    2,752
    
    
    $
    4,477
    
    
    $
    9,104
    17




---



##### 



LIQUIDITY
  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  The Wall Street Journal.
  18




---



##### 



Principal/Notional Amount with expected Maturities in:  (Dollars in thousands)
 For the Year Ended December 31, 2008:
 Fair2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    Thereafter
    
    
    Total
    
    
    ValueRate-sensitive assets:Fixed interest rate loans
    
    $
    5,421
    
    
    $
    6,041
    
    
    $
    6,814
    
    
    $
    8,240
    
    
    $
    8,772
    
    
    $
    19,752
    
    
    $
    55,040
    
    
    $
    53,826Average interest rate
    
    
    8.28
    %
    
    
    8.85
    %
    
    
    8.43
    %
    
    
    7.14
    %
    
    
    7.13
    %
    
    
    8.49
    %
    
    
    8.08
    %Variable interest rate loans
    
    $
    10,342
    
    
    $
    2,453
    
    
    $
    435
    
    
    $
    2,010
    
    
    $
    6,222
    
    
    $
    121,446
    
    
    $
    142,908
    
    
    $
    139,813Average interest rate
    
    
    5.55
    %
    
    
    5.79
    %
    
    
    6.74
    %
    
    
    6.11
    %
    
    
    5.74
    %
    
    
    6.55
    %
    
    
    6.42
    %Fixed interest rate securities
    
    $
    1,039
    
    
    $
    570
    
    
    $
    667
    
    
    $
    142
    
    
    $
    1,236
    
    
    $
    27,761
    
    
    $
    31,415
    
    
    $
    31,415Average interest rate
    
    
    3.16
    %
    
    
    6.65
    %
    
    
    4.25
    %
    
    
    4.89
    %
    
    
    2.87
    %
    
    
    4.95
    %
    
    
    4.83
    %Variable interest rate securities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    6,908
    
    
    $
    6,908
    
    
    $
    6,908Average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.74
    %
    
    
    4.74
    %Rate-sensitive liabilities:Noninterest-bearing deposits
    
    $
    4,849
    
    
    $
    3,879
    
    
    $
    2,909
    
    
    $
    2,425
    
    
    $
    2,425
    
    
    $
    2,909
    
    
    $
    19,396
    
    
    $
    19,396Int-bearing demand deposits
    
    $
    15,500
    
    
    $
    15,500
    
    
    $
    15,500
    
    
    $
    15,500
    
    
    $
    15,500
    
    
    $
    7,773
    
    
    $
    85,273
    
    
    $
    85,273Average interest rate
    
    
    1.75
    %
    
    
    1.75
    %
    
    
    1.75
    %
    
    
    1.75
    %
    
    
    1.75
    %
    
    
    1.75
    %
    
    
    1.75
    %Interest-bearing time deposits
    
    $
    77,628
    
    
    $
    23,724
    
    
    $
    13,675
    
    
    $
    1,619
    
    
    $
    10,187
    
    
    $
    166
    
    
    $
    126,999
    
    
    $
    130,025Average interest rate
    
    
    3.51
    %
    
    
    3.80
    %
    
    
    4.34
    %
    
    
    4.71
    %
    
    
    4.41
    %
    
    
    2.34
    %
    
    
    3.74
    %Fixed interest rate borrowings
    
    $
    
    
    
    $
    5,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    5,000
    
    
    $
    5,142Average interest rate
    
    
    
    
    
    
    3.36
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.36
    %Variable interest rate borrowings
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Average interest rate
 For the Year Ended December 31, 2007:
 Fair2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    Thereafter
    
    
    Total
    
    
    ValueRate sensitive assets:Fixed interest rate loans
    
    $
    6,339
    
    
    $
    5,558
    
    
    $
    7,973
    
    
    $
    8,627
    
    
    $
    4,852
    
    
    $
    17,971
    
    
    $
    51,320
    
    
    $
    51,751Average interest rate
    
    
    10.27
    %
    
    
    10.22
    %
    
    
    10.21
    %
    
    
    8.83
    %
    
    
    8.06
    %
    
    
    8.43
    %
    
    
    9.16
    %Variable interest rate loans
    
    $
    11,676
    
    
    $
    1,618
    
    
    $
    2,539
    
    
    $
    524
    
    
    $
    3,170
    
    
    $
    123,692
    
    
    $
    143,219
    
    
    $
    144,425Average interest rate
    
    
    7.84
    %
    
    
    7.52
    %
    
    
    7.26
    %
    
    
    9.31
    %
    
    
    8.12
    %
    
    
    7.43
    %
    
    
    7.49
    %Fixed interest rate securities
    
    $
    45
    
    
    $
    1,006
    
    
    $
    632
    
    
    $
    534
    
    
    $
    1,141
    
    
    $
    35,292
    
    
    $
    38,650
    
    
    $
    38,650Average interest rate
    
    
    3.94
    %
    
    
    3.19
    %
    
    
    7.39
    %
    
    
    4.49
    %
    
    
    4.94
    %
    
    
    4.35
    %
    
    
    4.39
    %Variable interest rate securities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    10,839
    
    
    $
    10,839
    
    
    $
    10,839Average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.80
    %
    
    
    4.80
    %Rate sensitive liabilities:Noninterest-bearing deposits
    
    $
    5,636
    
    
    $
    4,509
    
    
    $
    3,381
    
    
    $
    2,819
    
    
    $
    2,819
    
    
    $
    3,381
    
    
    $
    22,545
    
    
    $
    22,545Int-bearing demand deposits
    
    $
    18,112
    
    
    $
    18,112
    
    
    $
    18,112
    
    
    $
    18,112
    
    
    $
    18,112
    
    
    $
    9,081
    
    
    $
    99,641
    
    
    $
    99,641Average interest rate
    
    
    2.62
    %
    
    
    2.62
    %
    
    
    2.62
    %
    
    
    2.62
    %
    
    
    2.62
    %
    
    
    2.62
    %
    
    
    2.62
    %Interest-bearing time deposits
    
    $
    88,881
    
    
    $
    18,882
    
    
    $
    5,444
    
    
    $
    946
    
    
    $
    1,522
    
    
    $
    649
    
    
    $
    116,324
    
    
    $
    116,509Average interest rate
    
    
    4.51
    %
    
    
    4.63
    %
    
    
    4.49
    %
    
    
    4.59
    %
    
    
    4.81
    %
    
    
    3.56
    %
    
    
    4.53
    %Fixed interest rate borrowings
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Average interest rateVariable interest rate borrowings
    
    $
    5,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    5,000
    
    
    $
    5,013Average interest rate
    
    
    4.64
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.64
    %
   19




---



##### 



FAIR VALUE OF FINANCIAL INSTTRUMENTS
   IMPACT OF INFLATION
    20




---



##### 



21




---



##### 



CONSOLIDATED BALANCE SHEETS
 (Dollars in thousands)
    
    2008
    
    
    2007ASSETSCash and cash equivalents
    
    $
    5,357
    
    
    $
    4,956Federal funds sold
    
    
    3,577
    
    
    
    1,588Cash equivalents and federal funds sold
    
    
    8,934
    
    
    
    6,544Securities available for sale
    
    
    38,323
    
    
    
    49,489Total loans
    
    
    197,948
    
    
    
    194,539Allowance for loan losses
    
    
    (2,483
    )
    
    
    (2,411
    )Loans, net
    
    
    195,465
    
    
    
    192,128Premises and equipment, net
    
    
    7,922
    
    
    
    8,688Accrued interest receivable
    
    
    1,035
    
    
    
    1,250Other assets
    
    
    8,116
    
    
    
    8,126Total assets
    
    $
    259,795
    
    
    $
    266,225LIABILITIESDepositsNoninterest-bearing demand
    
    $
    19,396
    
    
    $
    22,545Interest-bearing demand
    
    
    70,926
    
    
    
    84,233Savings and time deposits
    
    
    100,100
    
    
    
    93,529Time deposits $100,000 and greater
    
    
    41,246
    
    
    
    38,204Total deposits
    
    
    231,668
    
    
    
    238,511FHLB advances
    
    
    5,000
    
    
    
    5,000Accrued interest payable
    
    
    337
    
    
    
    386Other liabilities
    
    
    1,485
    
    
    
    1,062Total liabilities
    
    
    238,490
    
    
    
    244,959SHAREHOLDERS EQUITYCommon stock, no par value; 4,000,000 shares authorized,
1,178,938 shares issued in 2008 and 2007
    
    
    11,282
    
    
    
    11,233Retained earnings
    
    
    11,836
    
    
    
    11,722Deferred compensation plan shares; at cost,
22,126 shares in 2008 and 19,947 shares in 2007
    
    
    (542
    )
    
    
    (492
    )Treasury stock; 42,541 shares in 2008 and 2007
    
    
    (1,163
    )
    
    
    (1,163
    )Accumulated other comprehensive income (loss)
    
    
    (108
    )
    
    
    (34
    )Total shareholders equity
    
    
    21,305
    
    
    
    21,266Total liabilities and shareholders equity
    
    $
    259,795
    
    
    $
    266,225
   22




---



##### 



CONSOLIDATED STATEMENTS OF INCOME (LOSS)
 (Dollars in thousands, except per share data)
    
    2008
    
    
    2007
    
    
    2006Interest incomeInterest and fees on loans
    
    $
    14,374
    
    
    $
    15,395
    
    
    $
    16,538Interest on securities:Taxable
    
    
    1,087
    
    
    
    1,472
    
    
    
    1,658Nontaxable
    
    
    815
    
    
    
    807
    
    
    
    758Federal funds sold
    
    
    18
    
    
    
    208
    
    
    
    196Total interest income
    
    
    16,294
    
    
    
    17,882
    
    
    
    19,150Interest expenseInterest on deposits
    
    
    6,081
    
    
    
    8,323
    
    
    
    7,448Interest on borrowings
    
    
    196
    
    
    
    48
    
    
    
    1,040Total interest expense
    
    
    6,277
    
    
    
    8,371
    
    
    
    8,488Net interest income
    
    
    10,017
    
    
    
    9,511
    
    
    
    10,662Provision for loan losses
    
    
    1,127
    
    
    
    1,332
    
    
    
    435Net interest income after provision for loan loss
    
    
    8,890
    
    
    
    8,179
    
    
    
    10,227Noninterest incomeService fees and overdraft charges
    
    
    1,896
    
    
    
    1,754
    
    
    
    1,541Losses on repossessed asset sales, net
    
    
    (21
    )
    
    
    (51
    )
    
    
    (61
    )Other income
    
    
    784
    
    
    
    541
    
    
    
    963Total noninterest income
    
    
    2,659
    
    
    
    2,244
    
    
    
    2,443Noninterest expensesSalaries and employee benefits
    
    
    5,298
    
    
    
    5,776
    
    
    
    5,308Premises and equipment
    
    
    1,563
    
    
    
    1,711
    
    
    
    1,417State and local taxes
    
    
    374
    
    
    
    397
    
    
    
    404Data processing
    
    
    267
    
    
    
    566
    
    
    
    594Professional fees
    
    
    495
    
    
    
    629
    
    
    
    436Software Maintenance
    
    
    266
    
    
    
    274
    
    
    
    154Other operating expense
    
    
    1,797
    
    
    
    1,966
    
    
    
    2,087Total noninterest expense
    
    
    10,060
    
    
    
    11,319
    
    
    
    10,400Income (loss) before income taxes
    
    
    1,489
    
    
    
    (896
    )
    
    
    2,270Income tax expense (credit)
    
    
    188
    
    
    
    (597
    )
    
    
    490Net income (loss)
    
    $
    1,301
    
    
    $
    (299
    )
    
    $
    1,780Basic earnings (loss) per common share
    
    $
    1.14
    
    
    $
    (0.26
    )
    
    $
    1.54Diluted earnings (loss) per common share
    
    $
    1.14
    
    
    $
    (0.26
    )
    
    $
    1.54
   23




---



##### 



CONSOLIDATED STATEMENTS OF C HANGES IN SHAREHOLDERS EQUITY
 AccumulatedOther
    
    
    Stock
    
    
    
    
    
    
    TotalOutstanding
    
    
    Common
    
    
    Retained
    
    
    Comprehensive
    
    
    Ownership
    
    
    Treasury
    
    
    Shareholders(Dollars in thousands)
    
    Shares
    
    
    Stock
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Plan Shares
    
    
    Stock
    
    
    EquityBalance at January 1, 2006
    
    
    1,160,338
    
    
    $
    11,159
    
    
    $
    11,985
    
    
    $
    (698
    )
    
    $
    (424
    )
    
    $
    (497
    )
    
    $
    21,525Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    1,780
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,780Change in net unrealized gain (loss) on securities
available for sale, net of reclassification & tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    277
    
    
    
    
    
    
    
    
    
    
    
    277Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,057Cash dividends declared
    
    
    
    
    
    
    
    
    
    
    (879
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (879
    )Shares acquired for deferred compensation: 1,628 shares
    
    
    
    
    
    
    44
    
    
    
    
    
    
    
    
    
    
    
    (44
    )
    
    
    
    
    
    
    Stock-based compensation
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Purchase of treasury stock
    
    
    (11,448
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (318
    )
    
    
    (318
    )Issuance of treasury stock under stock option plans
    
    
    2,195
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52
    
    
    
    52Issuance of treasury stock for deferred compensation plan
    
    
    250
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    7
    
    
    
    7Balance at December 31, 2006
    
    
    1,151,335
    
    
    $
    11,213
    
    
    $
    12,886
    
    
    $
    (421
    )
    
    $
    (475
    )
    
    $
    (756
    )
    
    $
    22,447Comprehensive income:Net loss
    
    
    
    
    
    
    
    
    
    
    (299
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (299
    )Change in net unrealized gain (loss) on securities
available for sale, net of reclassification & tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    387
    
    
    
    
    
    
    
    
    
    
    
    387Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88Cash dividends declared
    
    
    
    
    
    
    
    
    
    
    (865
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (865
    )Shares acquired for deferred compensation: 1,588 shares
    
    
    
    
    
    
    32
    
    
    
    
    
    
    
    
    
    
    
    (32
    )
    
    
    
    
    
    
    Shares divested for deferred compensation: 956 shares
    
    
    
    
    
    
    (25
    )
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    3Stock-based compensation
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Purchase of treasury stock
    
    
    (15,320
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (417
    )
    
    
    (417
    )Issuance of treasury stock for deferred compensation plan
    
    
    382
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    10
    
    
    
    10Balance at December 31, 2007
    
    
    1,136,397
    
    
    $
    11,233
    
    
    $
    11,722
    
    
    $
    (34
    )
    
    $
    (492
    )
    
    $
    (1,163
    )
    
    $
    21,266
   24




---



##### 



CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
 AccumulatedOther
    
    
    Stock
    
    
    
    
    
    
    TotalOutstanding
    
    
    Common
    
    
    Retained
    
    
    Comprehensive
    
    
    Ownership
    
    
    Treasury
    
    
    Shareholders(Dollars in thousands)
    
    Shares
    
    
    Stock
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Plan Shares
    
    
    Stock
    
    
    EquityBalance at January 1, 2008
    
    
    1,136,397
    
    
    $
    11,233
    
    
    $
    11,722
    
    
    $
    (34
    )
    
    $
    (492
    )
    
    $
    (1,163
    )
    
    $
    21,266Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    1,301
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,301Change in net unrealized gain (loss) on securities
  available for sale, net of reclassification & tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (74
    )
    
    
    
    
    
    
    
    
    
    
    (74
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,227Cumulative effect of change in accounting for
postretirement obligations
    
    
    
    
    
    
    
    
    
    
    (323
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (323
    )Cash dividends declared
    
    
    
    
    
    
    
    
    
    
    (864
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (864
    )Shares acquired for deferred compensation: 2,510 shares
    
    
    
    
    
    
    58
    
    
    
    
    
    
    
    
    
    
    
    (58
    )
    
    
    
    
    
    
    Shares divested for deferred compensation: (331) shares
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    Stock-based compensation
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )Balance at December 31, 2008
    
    
    1,136,397
    
    
    $
    11,282
    
    
    $
    11,836
    
    
    $
    (108
    )
    
    $
    (542
    )
    
    $
    (1,163
    )
    
    $
    21,305
   25




---



##### 



CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollars in thousands)
    
    2008
    
    
    2007
    
    
    2006Cash flows from operating activitiesNet income (loss)
    
    $
    1,301
    
    
    $
    (299
    )
    
    $
    1,780Adjustments to reconcile net income (loss) to net cash from
  operating activitiesDepreciation
    
    
    1,031
    
    
    
    1,125
    
    
    
    910Provisions for loan loss
    
    
    1,127
    
    
    
    1,332
    
    
    
    435Deferred income taxes
    
    
    (66
    )
    
    
    (169
    )
    
    
    294Loss on sale of repossessed assets
    
    
    21
    
    
    
    51
    
    
    
    61Stock dividends on FHLB stock
    
    
    (87
    )
    
    
    
    
    
    
    (121
    )Net amortization on securities
    
    
    107
    
    
    
    308
    
    
    
    204Amortization of intangible assets
    
    
    
    
    
    
    4
    
    
    
    17Increased cash value of Bank-owned life insurance
    
    
    (268
    )
    
    
    (258
    )
    
    
    (261
    )Stock-based compensation
    
    
    (1
    )
    
    
    3
    
    
    
    3Changes in:Interest receivable
    
    
    214
    
    
    
    79
    
    
    
    111Interest payable
    
    
    (49
    )
    
    
    (12
    )
    
    
    68Other assets and liabilities
    
    
    496
    
    
    
    (303
    )
    
    
    (13
    )Net cash from operating activities
    
    
    3,826
    
    
    
    1,861
    
    
    
    3,488Cash flows from investing activitiesSecurities available for salePurchases
    
    
    
    
    
    
    (1,537
    )
    
    
    (412
    )Maturities and repayments
    
    
    11,034
    
    
    
    4,101
    
    
    
    5,906Net change in loans
    
    
    (4,788
    )
    
    
    (1,449
    )
    
    
    31,637Proceeds from sale of OREO and repossessed assets
    
    
    291
    
    
    
    487
    
    
    
    599Proceeds from sale of premises and equipment
    
    
    583
    
    
    
    137
    
    
    
    136Bank premises and equipment expenditures
    
    
    (848
    )
    
    
    (448
    )
    
    
    (4,192
    )Net cash from investing activities
    
    
    6,272
    
    
    
    1,291
    
    
    
    33,674Cash flows from financing activitiesNet change in deposits
    
    
    (6,844
    )
    
    
    (11,154
    )
    
    
    1,159Proceeds from additional FHLB advances
    
    
    20,440
    
    
    
    5,000
    
    
    
    8,000Repayments of FHLB advances
    
    
    (20,440
    )
    
    
    
    
    
    
    (40,970
    )Cash dividends paid
    
    
    (864
    )
    
    
    (865
    )
    
    
    (879
    )Issuance of common stock
    
    
    
    
    
    
    10
    
    
    
    7Purchase of treasury stock
    
    
    
    
    
    
    (417
    )
    
    
    (318
    )Options exercised
    
    
    
    
    
    
    
    
    
    
    52Net cash from financing activities
    
    
    (7,708
    )
    
    
    (7,426
    )
    
    
    (32,949
    )Net change in cash equivalents and federal funds sold
    
    
    2,390
    
    
    
    (4,274
    )
    
    
    4,213Cash equivalents and federal funds sold at beginning of year
    
    
    6,544
    
    
    
    10,818
    
    
    
    6,605Cash equivalents and federal funds sold at end of year
    
    $
    8,934
    
    
    $
    6,544
    
    
    $
    10,818Supplemental disclosures:Cash paid for interest
    
    $
    6,326
    
    
    $
    8,382
    
    
    $
    8,421Cash paid for income taxes
    
    
    
    
    
    
    
    
    
    
    223Non-cash transfer of loans to foreclosed/repossessed assets
    
    
    405
    
    
    
    413
    
    
    
    503
   26




---



##### 



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation :
 Nature of Operations :
 Use of Estimates :
 Cash and Cash Equivalents :
 Securities :
 Loans Receivable :
 Allowance for Loan Losses :
  27




---



##### 



Premises and Equipment :
 Other Real Estate :
 Income Taxes :
 Long-Term Assets :
 Benefit Plans :
  Split Dollar Life Insurance Arrangements : Accounting for Deferred Compensation and
Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements
  28




---



##### 



Stock Compensation:
 Financial Instruments :
 Fair Values of Financial Instruments :
 Comprehensive Income :
 Loss Contingencies :
 Earnings Per Share :
 Industry Segments :
  29




---



##### 



NOTE 2  SECURITIES
  Gross
    
    
    GrossFair
    
    
    Unrealized
    
    
    UnrealizedValue
    
    
    Gains
    
    
    Losses2008Obligations of U.S. Government and
federal agencies
    
    $
    1,007
    
    
    $
    7
    
    
    $
    Obligations of state and political subdivisions
    
    
    19,299
    
    
    
    310
    
    
    
    (415
    )Mortgage-backed securities
    
    
    15,759
    
    
    
    59
    
    
    
    (124
    )Total debt securities available for sale
    
    
    36,065
    
    
    
    376
    
    
    
    (539
    )Equity investments
    
    
    2,258
    
    
    
    
    
    
    
    Total securities available for sale
    
    $
    38,323
    
    
    $
    376
    
    
    $
    (539
    )2007Obligations of U.S. Government and
federal agencies
    
    $
    8,530
    
    
    $
    
    
    
    $
    (106
    )Obligations of state and political subdivisions
    
    
    19,767
    
    
    
    358
    
    
    
    (34
    )Mortgage-backed securities
    
    
    19,021
    
    
    
    2
    
    
    
    (270
    )Total debt securities available for sale
    
    
    47,318
    
    
    
    360
    
    
    
    (410
    )Equity investments
    
    
    2,171
    
    
    
    
    
    
    
    Total securities available for sale
    
    $
    49,489
    
    
    $
    360
    
    
    $
    (410
    )
  Fair ValueDue less than one year
    
    $
    1,726Due after one year through five years
    
    
    1,264Due after five years through ten years
    
    
    9,077Due after ten years
    
    
    8,239Mortgage-backed securities
    
    
    15,759Equity investments
    
    
    2,258$
    38,323
   30




---



##### 



Less Than Twelve Months
    
    
    Over Twelve MonthsGross
    
    
    
    
    
    
    GrossUnrealized
    
    
    
    
    
    
    Unrealized(in thousands)
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair ValueAvailable for Sale Securities:U.S. Government and Agency
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0State and political subdivisions
    
    
    (415
    )
    
    
    7,143
    
    
    
    0
    
    
    
    0Mortgage-backed securities
    
    
    (96
    )
    
    
    7,585
    
    
    
    (28
    )
    
    
    1,071Total Available for Sale
    
    $
    (511
    )
    
    $
    14,728
    
    
    $
    (28
    )
    
    $
    1,071
  Less Than Twelve Months
    
    
    Over Twelve MonthsGross
    
    
    
    
    
    
    GrossUnrealized
    
    
    
    
    
    
    Unrealized(in thousands)
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair ValueAvailable for Sale Securities:U.S. Government and Agency
    
    $
    0
    
    
    $
    0
    
    
    $
    (106
    )
    
    $
    8,530State and political subdivisions
    
    
    (20
    )
    
    
    2,718
    
    
    
    (14
    )
    
    
    1,063Mortgage-backed securities
    
    
    (14
    )
    
    
    1,484
    
    
    
    (256
    )
    
    
    17,310Total Available for Sale
    
    $
    (34
    )
    
    $
    4,202
    
    
    $
    (376
    )
    
    $
    26,903
  NOTE 3  LOANS
  2008
    
    
    2007Commercial loans
    
    $
    141,266
    
    
    $
    138,957Real estate loans  residential
    
    
    7,000
    
    
    
    7,356Construction loans
    
    
    1,921
    
    
    
    1,224Consumer and credit card loans
    
    
    21,596
    
    
    
    18,499Home equity loans
    
    
    22,244
    
    
    
    19,160Indirect finance loans
    
    
    3,921
    
    
    
    9,343Total loans
    
    $
    197,948
    
    
    $
    194,539
   31




---



##### 



2008
    
    
    2007Year-end loans with no allocated allowance for loan losses
    
    $
    3,767
    
    
    $
    1,715Year-end loans with allocated allowance for loan losses
    
    
    1,588
    
    
    
    1,730Total
    
    $
    5,355
    
    
    $
    3,445Amount of the allowance for loan losses allocated
    
    $
    375
    
    
    $
    436
 2008
    
    
    2007
    
    
    2006Average of impaired loans during the year
    
    $
    5,103
    
    
    $
    2,560
    
    
    $
    2,370Income recognized on impaired loans
    
    
    51
    
    
    
    137
    
    
    
    14Cash-basis interest recognized on impaired loans
    
    
    51
    
    
    
    137
    
    
    
    14
  2008
    
    
    2007Loans past due over 90 days still on accrual
    
    $
    
    
    
    $
    5Nonaccrual loans
    
    
    5,355
    
    
    
    3,445
 NOTE 4  ALLOWANCE FOR LOAN LOSS
  2008
    
    
    2007
    
    
    2006Beginning balance
    
    $
    2,411
    
    
    $
    2,015
    
    
    $
    2,755Provision for loan loss
    
    
    1,127
    
    
    
    1,332
    
    
    
    435Loans charged off
    
    
    (1,279
    )
    
    
    (1,287
    )
    
    
    (1,474
    )Recoveries of loans previously charged off
    
    
    224
    
    
    
    351
    
    
    
    299Ending balance
    
    $
    2,483
    
    
    $
    2,411
    
    
    $
    2,015
 NOTE 5  PREMISES AND EQUIPMENT
  2008
    
    
    2007Land
    
    $
    1,070
    
    
    $
    1,191Buildings
    
    
    8,249
    
    
    
    8,390Furniture and equipment
    
    
    4,639
    
    
    
    4,748Construction in process
    
    
    371
    
    
    
    118Total
    
    
    14,329
    
    
    
    14,447Accumulated depreciation
    
    
    6,407
    
    
    
    5,759Premises and equipment, net
    
    $
    7,922
    
    
    $
    8,688
  32




---



##### 



NOTE 6  DEPOSITS
  2009
    
    $
    77,6262010
    
    
    23,7242011
    
    
    13,6752012
    
    
    1,6192013
    
    
    10,1872014 and thereafter
    
    
    168$
    126,999
 NOTE 7  FHLB ADVANCES
  CurrentInterestRate
    
    
    2008
    
    
    2007FHLB fixed rate advance, with monthly
Interest payments; due June 2010
    
    
    3.36
    %
    
    $
    5,000
    
    
    $
    FHLB daily variable advance, with monthly
interest payments: matured March 2008
    
    
    4.26
    %
    
    $
    
    
    
    
    5,000Total FHLB advances
    
    
    
    
    
    $
    5,000
    
    
    $
    5,000
  NOTE 8  INCOME TAXES
  2008
    
    
    2007
    
    
    2006Current provision
    
    $
    254
    
    
    $
    (428
    )
    
    $
    196Deferred provision (benefit)
    
    
    (66
    )
    
    
    (169
    )
    
    
    294Total income tax expense (credit)
    
    $
    188
    
    
    $
    (597
    )
    
    $
    490
  33




---



##### 



2008
    
    
    2007Items giving rise to deferred tax assetsAllowance for loan losses in excess of tax reserve
    
    $
    511
    
    
    $
    487Deferred compensation
    
    
    272
    
    
    
    183Unrealized loss on securities available for sale
    
    
    56
    
    
    
    17Nonaccrual loan interest
    
    
    18
    
    
    
    79Other
    
    
    25
    
    
    
    48Total
    
    
    882
    
    
    
    814Items giving rise to deferred tax liabilitiesDepreciation
    
    
    (95
    )
    
    
    (170
    )Deferred loan fees and costs
    
    
    (160
    )
    
    
    (162
    )FHLB stock dividend
    
    
    (309
    )
    
    
    (280
    )Prepaid expenses and other
    
    
    (91
    )
    
    
    (80
    )Total
    
    
    (655
    )
    
    
    (692
    )Net deferred tax benefit/(liability)
    
    $
    227
    
    
    $
    122
  2008
    
    
    2007
    
    
    2006Tax at statutory rates
    
    $
    506
    
    
    $
    (305
    )
    
    $
    772Increase (decrease) in tax resulting from:Tax-exempt income
    
    
    (310
    )
    
    
    (311
    )
    
    
    (249
    )Other
    
    
    (8
    )
    
    
    19
    
    
    
    (33
    )Total income tax expense (credit)
    
    $
    188
    
    
    $
    (597
    )
    
    $
    490
  NOTE 9  STOCK OPTION PLAN
   34




---



##### 



2008
    
    
    2007
    
    
    2006Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding at
beginning
of year
    
    
    16,328
    
    
    $
    26.71
    
    
    
    31,819
    
    
    $
    26.04
    
    
    
    34,849
    
    
    $
    25.21Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    26.75Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,195
    )
    
    
    23.64Expired
    
    
    (8,250
    )
    
    
    28.64
    
    
    
    (2,755
    )
    
    
    25.70
    
    
    
    (2,475
    )
    
    
    17.57Forfeited
    
    
    (1,476
    )
    
    
    25.46
    
    
    
    (12,736
    )
    
    
    23.64
    
    
    
    (360
    )
    
    
    22.75Outstanding at
end of year
    
    
    6,602
    
    
    $
    24.59
    
    
    
    16,328
    
    
    $
    26.71
    
    
    
    31,819
    
    
    $
    26.04Options exercisable
at year-end
    
    
    5,602
    
    
    
    
    
    
    
    14,328
    
    
    
    
    
    
    
    27,613Weighted average
fair value of
options granted
during the year
    
    
    n/a
    
    
    
    
    
    
    
    n/a
    
    
    
    4.16
  Outstanding
    
    
    ExercisableWeighted Average
    
    
    
    
    
    
    WeightedRemaining
    
    
    
    
    
    
    AverageRange of Exercise Prices
    
    Number
    
    
    Contractual Life
    
    
    Number
    
    
    Exercise Price$22  $25
    
    
    5,602
    
    
    1.61 years
    
    
    5,602
    
    
    
    24.19$26  $30
    
    
    1,000
    
    
    7.00 years
    
    
    0
    
    
    
    0.00Outstanding at year-end
    
    
    6,602
    
    
    
    
    
    
    
    5,602
 NOTE 10  BENEFIT PLANS
   35




---



##### 



NOTE 11  COMMITMENTS, OFF-BALANCE-SHEET RISK AND CONTINGENCIES
      2008
    
    
    2007Commitments to extend commercial credit
    
    $
    11,172
    
    
    $
    14,478Commitments to extend consumer credit
    
    
    11,363
    
    
    
    11,653Standby letters of credit
    
    
    150
    
    
    
    282$
    22,685
    
    
    $
    26,413
 2008
    
    
    2007Fixed rate
    
    $
    3,486
    
    
    $
    5,435Variable rate
    
    
    19,199
    
    
    
    20,978$
    22,685
    
    
    $
    26,413
   36




---



##### 



NOTE 12  REGULATORY MATTERS
   Capital to risk-weighted assets
    
    
    Tier 1 capitalTotal
    
    
    Tier 1
    
    
    to average assetsWell capitalized
    
    
    10
    %
    
    
    6
    %
    
    
    5
    %Adequately capitalized
    
    
    8
    %
    
    
    4
    %
    
    
    4
    %Undercapitalized
    
    
    6
    %
    
    
    3
    %
    
    
    3
    %
  Minimum Required
    
    
    Minimum RequiredFor Capital
    
    
    To Be WellActual
    
    
    Adequacy Purposes
    
    
    Capitalized(In thousands)
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioTotal capital (to risk weighted assets)
Bank
    
    $
    23,650
    
    
    
    11.3
    %
    
    $
    16,817
    
    
    
    8.0
    %
    
    $
    21,021
    
    
    
    10.0
    %Tier 1 capital (to risk weighted assets)
Bank
    
    $
    21,167
    
    
    
    10.1
    %
    
    $
    8,409
    
    
    
    4.0
    %
    
    $
    12,613
    
    
    
    6.0
    %Tier 1 capital (to average assets)
Bank
    
    $
    21,167
    
    
    
    8.1
    %
    
    $
    10,512
    
    
    
    4.0
    %
    
    $
    13,140
    
    
    
    5.0
    %
  Minimum Required
    
    
    Minimum RequiredFor Capital
    
    
    To Be WellActual
    
    
    Adequacy Purposes
    
    
    Capitalized(In thousands)
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioTotal capital (to risk weighted assets)
Bank
    
    $
    23,538
    
    
    
    11.1
    %
    
    $
    16,927
    
    
    
    8.0
    %
    
    $
    21,158
    
    
    
    10.0
    %Tier 1 capital (to risk weighted assets)
Bank
    
    $
    21,127
    
    
    
    10.0
    %
    
    $
    8,463
    
    
    
    4.0
    %
    
    $
    12,695
    
    
    
    6.0
    %Tier 1 capital (to average assets)
Bank
    
    $
    21,127
    
    
    
    7.9
    %
    
    $
    10,710
    
    
    
    4.0
    %
    
    $
    13,387
    
    
    
    5.0
    %
  37




---



##### 



NOTE 13  RELATED PARTY TRANSACTIONS
  2008Beginning balance
    
    $
    1,882New loans and advances
    
    
    185Change in status
    
    
    (1,465
    )Payments
    
    
    (289
    )Ending balance
    
    $
    313
  NOTE 14  FAIR VALUES AND MEASUREMENTS OF FINANCIAL INSTRUMENTS
  2008
    
    
    2007Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    EstimatedAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueFinancial assetsCash equivalents and federal funds sold
    
    $
    8,934
    
    
    $
    8,934
    
    
    $
    6,544
    
    
    $
    6,544Securities available for sale
    
    
    38,323
    
    
    
    38,323
    
    
    
    49,489
    
    
    
    49,489Loans, net of allowance for loan loss
    
    
    195,465
    
    
    
    191,156
    
    
    
    192,128
    
    
    
    193,765Accrued interest receivable
    
    
    1,035
    
    
    
    1,035
    
    
    
    1,250
    
    
    
    1,250Financial liabilitiesDemand and savings deposits
    
    $
    (104,669
    )
    
    $
    (104,669
    )
    
    $
    (122,186
    )
    
    $
    (122,186
    )Time deposits
    
    
    (126,999
    )
    
    
    (130,025
    )
    
    
    (116,324
    )
    
    
    (116,509
    )Borrowed funds
    
    
    (5,000
    )
    
    
    (5,142
    )
    
    
    (5,000
    )
    
    
    (5,013
    )Accrued interest payable
    
    
    (337
    )
    
    
    (337
    )
    
    
    (386
    )
    
    
    (386
    )
  38




---



##### 



Quoted Prices in
    
    
    
    
    
    
    SignificantActive Markets
    
    
    Significant
    
    
    UnobservableFor Identical
    
    
    Observable Inputs
    
    
    Inputs
    
    
    Balance at($In thousands)
    
    Assets (Level 1)
    
    
    Level (2)
    
    
    (Level 3)
    
    
    December 31, 2008Assets-Securities available for sale
    
    $
    19,024
    
    
    $
    19,299
    
    
    $
    
    
    
    $
    38,323Liabilities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
     39




---



##### 



NOTE 15  OTHER COMPREHENSIVE INCOME
  2008
    
    
    2007
    
    
    2006Unrealized holding gains and losses
on available-for-sale securities
    
    $
    (112
    )
    
    $
    587
    
    
    $
    420Less reclassification adjustments for gains
and losses later recognized in income
    
    
    
    
    
    
    
    
    
    
    Net unrealized gains and losses
    
    
    (112
    )
    
    
    587
    
    
    
    420Tax effect
    
    
    (38
    )
    
    
    200
    
    
    
    143Other comprehensive income (loss)
    
    $
    (74
    )
    
    $
    387
    
    
    $
    277
 NOTE 16  EARNINGS PER SHARE
  2008
    
    
    2007
    
    
    2006Weighted average shares outstanding during the year
    
    
    1,136,397
    
    
    
    1,140,370
    
    
    
    1,157,192Dilutive effect of stock options
    
    
    
    
    
    
    
    
    
    
    1,983Weighted average shares considering dilutive effect
    
    
    1,136,397
    
    
    
    1,140,370
    
    
    
    1,159,175Anti-dilutive stock options not considered in
computing diluted earnings per share
    
    
    6,602
    
    
    
    16,328
    
    
    
    13,200
 NOTE 17  PARENT CORPORATION STATEMENTS
  CONDENSED BALANCE SHEETS   (Dollars in thousands)
 2008
    
    
    2007ASSETSCash on deposit with subsidiary
    
    $
    48
    
    
    $
    38Investment in common stock of subsidiaries
    
    
    21,098
    
    
    
    21,120Other assets
    
    
    172
    
    
    
    108Total assets
    
    $
    21,318
    
    
    $
    21,266LIABILITIES AND SHAREHOLDERS EQUITYLiabilities & shareholders equity
    
    $
    21,318
    
    
    $
    21,266
  40




---



##### 



CONDENSED STATEMENTS OF INCOME   (Dollars in thousands)
 2008
    
    
    2007
    
    
    2006INCOMEDividends from Bank subsidiary
    
    $
    1,050
    
    
    $
    1,440
    
    
    $
    2,280Other income
    
    
    
    
    
    
    49
    
    
    
    30Total income
    
    
    1,050
    
    
    
    1,489
    
    
    
    2,310EXPENSESProfessional fees
    
    
    123
    
    
    
    89
    
    
    
    79Other
    
    
    65
    
    
    
    75
    
    
    
    63Total expenses
    
    
    188
    
    
    
    164
    
    
    
    142Tax (benefit)
    
    
    (64
    )
    
    
    (48
    )
    
    
    (38
    )Income (loss) before equity in undistributed
earnings of subsidiaries
    
    
    926
    
    
    
    1,373
    
    
    
    2,206Equity in undistributed earnings of subsidiaries
(distribution from subsidiaries in excess of net income)
    
    
    375
    
    
    
    (1,672
    )
    
    
    (426
    )NET INCOME (LOSS)
    
    $
    1,301
    
    
    $
    (299
    )
    
    $
    1,780
 CONDENSED STATEMENTS OF CASH FLOW   (Dollars in thousands)
 2008
    
    
    2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIESNet income (loss)
    
    $
    1,301
    
    
    $
    (299
    )
    
    $
    1,780Adjustments to reconcile net income (loss) to
net cash from operating activities
Equity in undistributed earnings of subsidiaries
    
    
    (375
    )
    
    
    1,672
    
    
    
    426Other
    
    
    (52
    )
    
    
    (94
    )
    
    
    (1,167
    )Net cash from operating activities
    
    
    874
    
    
    
    1,279
    
    
    
    1,039CASH FLOWS FROM INVESTING ACTIVITIESProceeds from sale of BOLI
    
    
    
    
    
    
    1,454
    
    
    
    Capital infusion from/(to) subsidiary
    
    
    
    
    
    
    (1,454
    )
    
    
    Net cash from investing activities
    
    
    
    
    
    
    
    
    
    
    CASH FLOWS FROM FINANCING ACTIVITIESIssuance of common stock / options exercised
    
    
    
    
    
    
    10
    
    
    
    59Treasury repurchase of common stock
    
    
    
    
    
    
    (417
    )
    
    
    (318
    )Cash dividends paid
    
    
    (864
    )
    
    
    (865
    )
    
    
    (879
    )Net cash from financing activities
    
    
    (864
    )
    
    
    (1,272
    )
    
    
    (1,138
    )Net change in cash
    
    
    10
    
    
    
    7
    
    
    
    (99
    )Cash at beginning of period
    
    
    38
    
    
    
    31
    
    
    
    130Cash at end of period
    
    $
    48
    
    
    $
    38
    
    
    $
    31
  41




---



##### 



NOTE 18  QUARTERLY INFORMATION
  2008
    
    March 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,Total interest income
    
    $
    4,227
    
    
    $
    4,086
    
    
    $
    4,068
    
    
    $
    3,913Total interest expense
    
    
    1,848
    
    
    
    1,486
    
    
    
    1,426
    
    
    
    1,517Net interest income
    
    $
    2,379
    
    
    $
    2,600
    
    
    $
    2,642
    
    
    $
    2,396Provision for loan losses
    
    
    135
    
    
    
    220
    
    
    
    270
    
    
    
    502Net income
    
    $
    240
    
    
    $
    379
    
    
    $
    471
    
    
    $
    211Basic earnings per common share
    
    
    0.21
    
    
    
    0.33
    
    
    
    0.41
    
    
    
    0.19Diluted earnings per common share
    
    
    0.21
    
    
    
    0.33
    
    
    
    0.41
    
    
    
    0.19
 2007
    
    March 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,Total interest income
    
    $
    4,447
    
    
    $
    4,481
    
    
    $
    4,496
    
    
    $
    4,458Total interest expense
    
    
    2,050
    
    
    
    2,080
    
    
    
    2,155
    
    
    
    2,086Net interest income
    
    $
    2,397
    
    
    $
    2,401
    
    
    $
    2,341
    
    
    $
    2,372Provision for loan losses
    
    
    276
    
    
    
    435
    
    
    
    240
    
    
    
    381Net income (loss)
    
    $
    61
    
    
    $
    (169
    )
    
    $
    60
    
    
    $
    (251
    )Basic earnings (loss) per common share
    
    
    0.06
    
    
    
    (0.15
    )
    
    
    0.05
    
    
    
    (0.22
    )Diluted earnings (loss) per common share
    
    
    0.06
    
    
    
    (0.15
    )
    
    
    0.05
    
    
    
    (0.22
    )
  42




---



##### 



SHAREHOLDER INFORMATION
  Dividends2008
    
    Declared
    
    
    Low Bid
    
    
    High BidThree months ended March 31
    
    $
    0.19
    
    
    $
    22.65
    
    
    $
    26.50Three months ended June 30
    
    
    0.19
    
    
    
    21.25
    
    
    
    24.83Three months ended September 30
    
    
    0.19
    
    
    
    16.70
    
    
    
    23.78Three months ended December 31
    
    
    0.19
    
    
    
    12.30
    
    
    
    17.35
 Dividends2007
    
    Declared
    
    
    Low Bid
    
    
    High BidThree months ended March 31
    
    $
    0.19
    
    
    $
    26.00
    
    
    $
    27.55Three months ended June 30
    
    
    0.19
    
    
    
    25.75
    
    
    
    27.00Three months ended September 30
    
    
    0.19
    
    
    
    25.00
    
    
    
    27.20Three months ended December 31
    
    
    0.19
    
    
    
    25.00
    
    
    
    32.00
     43




---



##### 



COMMERCIAL BANCSHARES, INC.
  
   
   
  info@rtco.com  www.rtco.com
 ANNUAL MEETING
   44




---



##### 



COMMERCIAL BANCSHARES, INC.
 Michael A. Shope  Chairman
    
    Retired CFO, Walbro CorporationNorwalk, OhioStanley K. Kinnett  Vice Chairman
    
    President and CEO, Dixie-SouthernDuette, FloridaRobert E. Beach
    
    President and CEO of CommercialBancshares, Inc. and the Commercial
Savings Bank, Upper Sandusky, OhioDaniel E. Berg
    
    Director of Operations, Tower AutomotiveJ. William Bremyer
    
    Foot and Ankle SurgeryMercy Health Systems, Tiffin, OhioLynn R. Child
    
    CEO, Aardvark, Inc. and Chairman, CentraCommCommunications, LLC, Findlay, OhioMark Dillon
    
    President and CEO, Fairborn U.S.A., Inc.Upper Sandusky, OhioDeborah J. Grafmiller
    
    State Certified General AppraiserProfessional Appraisal Service
Findlay, OhioKurt D. Kimmel
    
    President/Co-owner, Kimmel CleanersUpper Sandusky, OhioLee M. Sisler
    
    President, Sisler and AssociatesMarion, OhioRichard Sheaffer
    
    President, R.A. Sheaffer, Inc.Morral, Ohio
  45