Exhibit 13

Table of Contents



|                                                          |  |            
|--------------------------------------------------------- |  | -----------
|                                                          |  | Page Number
|Community is Our Middle Name                            |  | 2          
|                                                          | 
|Financial Summary of 2005                                 |  | 3          
|                                                          | 
|A Message from Management                                 |  | 4-8        
|                                                          | 
|Selected Financial Data                                   |  | 9          
|                                                          | 
|Common Stock and Market Price Information                 |  | 10         
|                                                          | 
|Independent Registered Public Accounting Firm Report      |  | 11         
|                                                          | 
|Consolidated Balance Sheet                                |  | 12         
|                                                          | 
|Consolidated Statement of Income                          |  | 13         
|                                                          | 
|Consolidated Statement of Changes in Stockholders Equity |  | 14         
|                                                          | 
|Consolidated Statement of Cash Flows                      |  | 15         
|                                                          | 
|Notes to Consolidated Financial Statements                |  | 16-37      
|                                                          | 
|Keith R. Clutter Retirement                               |  | 38         
|                                                          | 
|Managements Discussion and Analysis                      |  | 39-44      
|                                                          | 
|Board of Directors                                        |  | 45         
|                                                          | 
|Community Branch Locations                                |  | 46-47      
|                                                          | 
|Officers                                                  |  | 48         



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Average Balances and Average Yields

The following table sets forth certain information relating to the Companys consolidated average balance sheets and statements of income for the years ended December 31, 2005 and 2004, and reflects the
average yield on assets and average cost of liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense by the average daily balance of assets or liabilities, respectively, for the periods shown.



|                                                                  |  |                    |            |          |      |                   |  |      |                |  |          |            |                   |   |           |  |      |  
|----------------------------------------------------------------- |  | ------------------ | ---------- | -------- | ---- | ----------------- |  | ---- | -------------- |  | -------- | ---------- | ----------------- | - | --------- |  | ---- | -
|                                                                  |  | For the Year Ended |           
|                                                                  |  | 2005               |            |          | 2004 |                  
|                                                                  |  | AverageBalance     |            | Interest |      | AverageYield/Rate |  |      | AverageBalance |  | Interest |            | AverageYield/Rate |  
|Interest-earning assets:                                          |  |                    |            |          |      |                   |  |      |                |  |          |            |                   |   |           |  |      |  
|Interest-bearing deposits with other banks and federal funds sold |  | $                  | 3,544,937  |          | $    | 100,617           |  | 2.84 | %              |  | $        | 3,096,496  |                   | $ | 37,634    |  | 1.22 | %
|Taxable investment securities                                     |  |                    | 33,324,954 |          |      | 1,313,045         |  | 3.94 | %              |  |          | 24,465,196 |                   |   | 903,517   |  | 3.69 | %
|Non taxable investment securities (2)                             |  |                    | 4,690,448  |          |      | 324,250           |  | 6.91 | %              |  |          | 6,440,850  |                   |   | 445,312   |  | 6.91 | %
|Loans (1)(2)                                                      |  |                    | 43,080,026 |          |      | 3,283,528         |  | 7.62 | %              |  |          | 44,965,329 |                   |   | 3,337,608 |  | 7.42 | %
|                                                                  |  |                    |            |          |      |                   |  |      |                |  |          |            |                   |   |           |  |      |  
|Total interest-earning assets                                     |  |                    | 84,640,365 |          |      | 5,021,440         |  | 5.93 | %              |  |          | 78,967,871 |                   |   | 4,724,071 |  | 5.98 | %
|                                                                  |  |                    |            |          |      |                   |  |      |                |  |          |            |                   |   |           |  |      |  
|Noninterest-earning assets                                        |  |                    | 11,617,027 |          |      |                   |  |      |                |  |          | 11,765,716 |                   |   |           |  |      |  
|                                                                  |  |                    |            |          |      |                   |  |      |                |  |          |            |                   |   |           |  |      |  
|Total assets                                                      |  | $                  | 96,257,392 |          |      |                   |  |      |                |  | $        | 90,733,587 |                   |   |           |  |      |  
|                                                                  |  |                    |            |          |      |                   |  |      |                |  |          |            |                   |   |           |  |      |  
|Interest-bearing liabilities:                                     |  |                    |            |          |      |                   |  |      |                |  |          |            |                   |   |           |  |      |  
|Interest bearing demand                                           |  | $                  | 10,924,706 |          |      | 80,201            |  | 0.73 | %              |  | $        | 15,168,547 |                   |   | 106,661   |  | 0.70 | %
|Money market accounts                                             |  |                    | 8,039,124  |          |      | 98,342            |  | 1.22 | %              |  |          | 6,838,628  |                   |   | 84,343    |  | 1.23 | %
|Savings deposits                                                  |  |                    | 12,920,725 |          |      | 113,249           |  | 0.88 | %              |  |          | 13,756,216 |                   |   | 122,419   |  | 0.89 | %
|Time deposits                                                     |  |                    | 30,092,501 |          |      | 849,169           |  | 2.82 | %              |  |          | 23,378,607 |                   |   | 535,338   |  | 2.29 | %
|Total borrowings                                                  |  |                    | 10,207,957 |          |      | 204,452           |  | 2.00 | %              |  |          | 8,574,844  |                   |   | 116,419   |  | 1.36 | %
|                                                                  |  |                    |            |          |      |                   |  |      |                |  |          |            |                   |   |           |  |      |  
|Total interest-bearing liabilities                                |  |                    | 72,185,013 |          |      | 1,345,413         |  | 1.86 | %              |  |          | 67,716,842 |                   |   | 965,180   |  | 1.43 | %
|                                                                  |  |                    |            |          |      |                   |  |      |                |  |          |            |                   |   |           |  |      |  
|Noninterest-bearing liabilities                                   |  |                    | 15,009,559 |          |      |                   |  |      |                |  |          | 13,747,565 |                   |   |           |  |      |  
|Stockholders equity                                              |  |                    | 9,062,820  |          |      |                   |  |      |                |  |          | 9,269,180  |                   |   |           |  |      |  
|                                                                  |  |                    |            |          |      |                   |  |      |                |  |          |            |                   |   |           |  |      |  
|Total liabilities and stockholders equity                        |  | $                  | 96,257,392 |          |      |                   |  |      |                |  | $        | 90,733,587 |                   |   |           |  |      |  
|                                                                  |  |                    |            |          |      |                   |  |      |                |  |          |            |                   |   |           |  |      |  
|Net earning assets                                                |  | $                  | 12,455,352 |          |      |                   |  |      |                |  | $        | 11,251,029 |                   |   |           |  |      |  
|                                                                  |  |                    |            |          |      |                   |  |      |                |  |          |            |                   |   |           |  |      |  
|Net interest income                                               |  |                    |            |          | $    | 3,676,027         |  |      |                |  |          |            |                   | $ | 3,758,891 |  |      |  
|                                                                  |  |                    |            |          |      |                   |  |      |                |  |          |            |                   |   |           |  |      |  
|Net interest spread (3)                                           |  |                    |            |          |      |                   |  | 4.07 | %              |  |          |            |                   |   |           |  | 4.57 | %
|                                                                  |  |                    |            |          |      |                   |  |      |                |  |          |            |                   |   |           |  |      |  
|Net interest margin (4)                                           |  |                    |            |          |      |                   |  | 4.34 | %              |  |          |            |                   |   |           |  | 4.76 | %
|                                                                  |  |                    |            |          |      |                   |  |      |                |  |          |            |                   |   |           |  |      |  

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|(1) | For the purpose of these computations, non-accrual loans (if any) are included in the daily average loan amounts outstanding and interest on loans includes fee income.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Yields are computed on a tax equivalent basis using a 34% federal income tax rate.
|--- | ----------------------------------------------------------------------------------

|(3) | Net interest rate spread represents the difference between the average yield on interest-earning assets, and the average cost of interest-bearing liabilities.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Net interest margin is calculated by dividing the difference between total interest earned and total paid by total interest earning assets.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------



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A Report from Management

The company made major strides in 2005 to restructure and re-energize the Bank and its other subsidiaries in preparation for future growth and success. The banking industry has faced and will continue to face many regulatory, technological
and competitive market challenges. 1st Bank has undergone a gradual metamorphosis to a younger leadership team. The new team is demonstrating good skills for navigating change. Additions and changes among our staff in 2005 should move the Bank
toward more efficient, effective and profitable operations for the future.

Staff Changes

Mission Statement #3  Provide a working environment that values our employees and their contributions.



|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|LOGO |  | Edward L. Baumgardner, President and CEO of 1st National Community Bank first joined the Bank in March of 2005 as Assistant to the Chairman. In September 2005, Ed was named as Bank
CEO. The Board of Directors later named him President and CEO in January 2006. Ed previously served as President of American Community Bank in Lima, Ohio. Before joining 1stBank, he has served as President and CEO of two area financial institutions. Ed and his wife Sally reside in the Calcutta area and have a son and two
daughters. Eds involvement with community activities includes the Rotary Club, United Way, Kent State East Liverpool Advisory Board, Chamber of Commerce, and St. John Lutheran Church.

Upon the retirement of Keith Clutter and the transition of Charles Lang to senior administrator of the new Trust
Department, Edward L. Baumgardner* has transitioned into the positions of President and CEO of 1stBank. He has been
appointed to complete the term of Mr. Clutter on the Boards of Directors of the Bank and the holding company. Stephen Beadnell was promoted from Vice President and IT Officer to Vice President and Chief Financial Officer. He will continue to
oversee the Information Technology function. Steve was featured as a new employee in the Annual Report of 2003. Robin Wycoff Moadus* just joined the Bank as Vice President and Chief Operating Officer assuming many of the functions of
Mr. Clutter. Allen Dingey* was named to the position of Branch Sales Manager of the Lisbon office. Michael Palmer moved from the Calcutta office to the New Cumberland Office where he now serves as Branch Sales Manager.

Wanda Laughlin joined our staff in the fourth quarter as a Mortgage Loan Specialist in the Calcutta office. Cheryl Melnick was added to the loan operations department to
help increase our presence in the home mortgage market. Shannon Horner was promoted to Assistant Manager of the New Cumberland Office. Sharon Higgins was named Manager of the Main Office on St. Clair Avenue and Kim Rice was elevated to Assistant
Manager. Lisa Travis was transferred to the Midland office where she serves as Assistant Manager. Ed Stansbury joined the Bank in the first quarter of 2005 and has since been promoted to the position of Accounting/IT Administrator.

John P. Scotford, Jr., President of McBarscot Company of Poland, Ohio, was appointed to fill a vacancy on the Board of Directors of the Bank created when his father,
John P. Scotford, Sr. was elected to Emeritus status. Mr. Scotford, Sr. will continue to serve as a Director of the holding company. Keith Clutter will continue to act as Secretary of the various Boards of Directors.



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|* | Officers featured in the 2005 Annual Report
|- | -------------------------------------------



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Services Added

The Bank introduced on-line banking this past year. The convenience and portability of on-line banking is winning converts each week as usage by satisfied customers grows. On-line banking allows 1stBank to also offer an electronic bill pay service and a cash management service for commercial customers. Cash Management
saves office staff a considerable amount of time in managing corporate funds for customers.

The Bank has been designated as a SBA Express Lender. This
will ease the process of obtaining government assisted loans for smaller commercial borrowers. A fifth off-site bank ATM location went in service at the Penn Sparkle Market in the East End of East Liverpool. This affords customers surcharge-free
access to their funds conveniently in that neighborhood. The Trust Department of 1stBank opened in March bringing a
variety of estate planning and deferred compensation programs within reach of our customers. There has not been a trust department in East Liverpool for a number of years. This is now the only trust department situated in Columbiana County.

Planned Services

Mission Statement #1  Partner with our customers to help them achieve their financial goals.

The
year 2005 was a good year for the Bank. Over $500,000 in profits were generated from operations. However, there is concern that there may be some missed opportunities. Management constantly seeks ways to provide better service to our customers while
providing a better return on investment for our shareholders.

Sometimes we learn by experience that a product or service can be provided to our customers
better by outsourcing to another company. The decision has been made to sell the credit card service in 2006 to eliminate the credit risk to the Bank in exchange for giving up some earnings opportunity. Credit cards will still be offered to our
customers.

Over the past several years we have expanded our product offerings to our customers considerably. We feel that in many areas 1stBank matches or exceeds our much larger competitors. However sometimes we fail to communicate to our customers the products
and services adequately. This means we also fail in our mission to help our customers. A major goal for the new year will be to build upon the strengths of our staff by developing a stronger sales and service culture. This will help make our
customers more aware of the entire array of banking services available to them from their community bank.



|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|LOGO |  | Robin Wycoff Moadus, Vice President & Chief Operating Officer of 1st National Community Bank joined the staff in 2006. Her responsibilities include supervision of all retail
operations, sales/service training, and staff training and development. Robins banking career spans 27 years, all at area financial institutions. Her most recent assignment was Assistant Vice President & Sales Administrator of 36 branches.
Robin attended Kent State and has taken various advanced banking courses. She graduated from Leadership Columbiana County and has been active in the Calcutta Chamber of Commerce, City Hospital Ladies Auxiliary, East Liverpool Business Association
and United Way. Robin and husband Dave have a son residing in the area, and a daughter and granddaughter living in Youngstown.



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An important by-product of the on-line banking service is that it becomes the gateway for the customer to access his or
her account information. 1stBank is rebuilding its web site to provide better information on all banking services.
You are invited to view the new consumer-friendly and eye-appealing web site of 1stBank at www.1stncb.com.
In addition to helpful information about Bank products and services, 1stBanks site offers the opportunity to
directly link to other sites that offer unique bank-related programs available exclusively through 1stBank.

1stBank has
historically offered shorter term fixed and adjustable rate home mortgages, home equity loans, home improvement and second mortgages, an FHLB Welcome Home product and down payment assistance through the Community Action Agency. However,
our primary focus has been commercial and consumer lending.

Recently the Bank began offering a first time home buyer program and 30 year fixed rate home
mortgages with up to 100% financing through the secondary market. These programs enable the Bank to offer more competitive mortgage loan rates to our customers. The addition of these programs, and new experienced home mortgage loan experts, should
enable the bank to increase its presence in residential lending, resulting in a better balance and diversification of our loan portfolio. Additionally, we are pursuing participation opportunities in government assisted home loans and
commercial real estate loans.



|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|LOGO |  | Allan G. Dingey, Branch Sales Manager of the Lisbon Office of 1st National Community Bank, joined the staff in September 2005. Allan has over 24 years of banking experience that
includes positions of Bank Officer, Branch Manager and Loan officer at three area financial institutions. He holds an Associate Degree in Accounting from Kent State and a Bachelor of Science degree in Human Resources from Geneva College. Allan is a
basketball coach in the Wellsville School system and is active in the East Liverpool Area Church Youth Basketball league and the reading intervention program at Lisbon McKinley Elementary School. Allan and his wife, Rowene, reside in East Liverpool
and have a son, Greg, who attends Kent State University.

MDH INVESTMENT MANAGEMENT INC.

MDH joined Tri-State 1stBanc, Inc. in late December of 2005. Marc Hoffrichter,
founder of the company, continues to serve as President of MDH. The company continues to operate from its beautifully redecorated office on Forsyth Place in East Liverpool.

Our first year together has been one of learning about one another and discovering ways in which our respective staffs can assist each other in providing better service to respective customers/clients. MDH manages
approximately $65 million in assets for clients located in fourteen states. MDH saw growth in the number of local clients this year and this can be attributed in some measure to the association of MDH with 1stBank.

The stock market was rather flat for much of
2005 but made a resurgence toward year end. Marcs investment strategies cushion against downturns and take advantage of upswings in the market. His investment strategies have met with much success over twenty years. An uncertain stock market
in 2006 should assure that the need for MDHs services will continue to grow.



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The acquisition of MDH was very timely for Tri-State 1stBanc. Net income of Tri-State received a big boost from MDH in 2005. One purpose in acquiring MDH was to diversity our revenue streams. The wisdom in doing so
has proven itself.

GATEMINDER CORPORATION

Gateminder
in 1998 grew out of the entertainment industry and small merchants who wished to accommodate their customers and stimulate sales by offering the convenience of ATM service on premises. By the end of 2004, customers were primarily small merchants,
with a single customer in the entertainment field that accounted for over 40% of revenues. In March of 2005 Gateminder lost that 40% customer.

Gateminder
however had anticipated the loss of that market and had conceived a new direction, or market niche. The company spent this past year cultivating this new niche that involves providing ATM service to financial institutions. Gateminder already
provided its service to 1stBank at five off-site merchant locations in grocery and convenience stores. Gateminder
is now saving four other financial institutions tens of thousands of dollars a year in fees by assuming administration of their ATM operations.

Highlights of 2005

Mission Statement #4  Exceed the expectations of our Shareholders

1stBank
reached a milestone in banking when the Bank reached the $100 million level of assets. This is even more impressive when one considers that the deposit growth of the Bank has been organic, or internally generated and not because of acquiring other
institutions. With greater size comes the opportunity to operate more efficiently in order to favorably impact the bottom line. Although total assets were below $100 million at the end of 2005 due to seasonal fluctuation of deposits, the Bank
experienced an 8.88% growth of assets and a 6.69% growth of deposits from 2004.

After a strong year in 2004, the past year proved to be difficult for many
community banks. 1stBank was no exception. Net Income was down 23.18% as the company experienced flat interest
income in a rising interest rate environment, an increase in the Provision for Loan Losses reflecting credit weaknesses with some Bank customers, and operating expenses rising more rapidly than operating income. Nonetheless, dividends on shares of
Tri-State 1stBanc were increased $.02 or 5.27% in 2005 over the prior year.

Mission Statement #2  Be a vital influence in the communities we serve

1stBank received the BKD Award for Excellence & Innovation for the state
of Ohio in 2005. The award was the result of the Banks marketing slogan 1stNational Community Bank
 Where Community is our Middle Name together with the pioneering of new bank services. The award is presented annually by the Community Bankers Association of Ohio in cooperation with the BKD bank consulting company. BKD partner Craig
Lynam said of 1stBank: The creative marketing of 1stNational Community Bank demonstrates a community spirit that can help member banks excel and thrive in our competitive times.



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TRUST SERVICE is our featured service in the 2005 Annual Report. After receiving the necessary regulatory
approvals, our Trust Department began offering trust services to its customers in March of 2005. 1stBank now has
the only Trust Department operating in Columbiana County. It also offers trust and estate services in Beaver County, PA and Hancock County, WV. Charles B. Lang, JD, is the senior Trust Officer. His past trust experience includes heading a trust
department in East Liverpool, one in Chester, WV and an eight-county regional department for a major regional bank. The department is structured to reduce earnings risk to 1stBank and offer more options to the customer in terms of expertise for investment management. Custodial and record keeping are out-sourced to a third party.
However, personal administration of trusts and estates remains with the local trust staff with oversight from local businessmen on the Trust Committee.

After eighteen- and-a-half years of devoted service to 1stBank, the talents and labors of retiring
President Keith R. Clutter will be sorely missed by our entire staff and the many customers who were beneficiaries of his banking wisdom and common sense approach. Please join us in wishing him well in his retirement.

Just a reminder, if you are interested in buying or selling shares of Tri-State 1stBanc, Inc., traded under the symbol TSEO, Mr. Greig McDonald at Community Banc Investments makes a market in our stock. His phone number at New Concord, Ohio is (800) 224-1013.
The Registrar & Transfer Company, 10 Commerce St., Cranford, NJ, 07016 at (800) 368-5948 serves as the transfer agent for shares.



|                         |  |                            
|------------------------ |  | ---------------------------
|Respectfully,           
|                         | 
|Charles B. Lang          |  | Edward L. Baumgardner      
|President & CEO          |  | President & CEO            
|Tri-State 1st Banc, Inc. |  | 1st National Community Bank



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Selected Financial Data

The following tables set forth certain information concerning the consolidated position and certain performance ratios of the Company at the dates indicated:



|                                                    |  |                                                      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        
|--------------------------------------------------- |  | ---------------------------------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | -------
|                                                    |  | At or for the Year Ended December 31,               
|                                                    |  | 2005                                                 |         |   | 2004 |   |         | 2003 |  |   | 2002    |   |  | 2001
|                                                    |  | (Dollars in Thousands, Except Per Share Information)
|Balance Sheet Data                                  |  |                                                      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        
|Assets                                              |  | $                                                    | 93,658  |   |      | $ | 90,969  |      |  | $ | 89,372  |   |  | $    | 77,358  |   |  | $ | 74,533 
|Investment securities                               |  |                                                      | 34,486  |   |      |   | 32,721  |      |  |   | 31,843  |   |  |      | 23,287  |   |  |   | 22,235 
|Loans                                               |  |                                                      | 42,856  |   |      |   | 44,484  |      |  |   | 45,241  |   |  |      | 45,396  |   |  |   | 42,767 
|Allowance for loan losses                           |  |                                                      | 532     |   |      |   | 501     |      |  |   | 514     |   |  |      | 514     |   |  |   | 443    
|Deposits                                            |  |                                                      | 75,613  |   |      |   | 72,306  |      |  |   | 71,379  |   |  |      | 62,135  |   |  |   | 59,585 
|Borrowings                                          |  |                                                      | 8,582   |   |      |   | 8,434   |      |  |   | 8,533   |   |  |      | 5,206   |   |  |   | 5,805  
|Stockholders equity                                |  |                                                      | 8,812   |   |      |   | 9,338   |      |  |   | 9,263   |   |  |      | 9,611   |   |  |   | 8,757  
|                                                    |  |                                                      |         |   |     
|Summary of Operations                               |  |                                                      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        
|Interest income                                     |  | $                                                    | 4,911   |   |      | $ | 4,556   |      |  | $ | 4,634   |   |  | $    | 4,714   |   |  | $ | 5,024  
|Interest expense                                    |  |                                                      | 1,345   |   |      |   | 965     |      |  |   | 1,137   |   |  |      | 1,372   |   |  |   | 1,958  
|                                                    |  |                                                      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        
|Net interest income                                 |  |                                                      | 3,566   |   |      |   | 3,591   |      |  |   | 3,497   |   |  |      | 3,342   |   |  |   | 3,066  
|Provision for loan losses                           |  |                                                      | 230     |   |      |   | 133     |      |  |   | 76      |   |  |      | 108     |   |  |   | 111    
|                                                    |  |                                                      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        
|Net interest income after provision for loan losses |  |                                                      | 3,336   |   |      |   | 3,458   |      |  |   | 3,421   |   |  |      | 3,234   |   |  |   | 2,955  
|Other operating income                              |  |                                                      | 2,045   |   |      |   | 1,388   |      |  |   | 1,140   |   |  |      | 974     |   |  |   | 822    
|Other operating expense                             |  |                                                      | 4,661   |   |      |   | 3,871   |      |  |   | 3,732   |   |  |      | 3,387   |   |  |   | 3,107  
|                                                    |  |                                                      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        
|Income before income taxes                          |  |                                                      | 720     |   |      |   | 975     |      |  |   | 829     |   |  |      | 821     |   |  |   | 670    
|Income taxes                                        |  |                                                      | 131     |   |      |   | 209     |      |  |   | 128     |   |  |      | 165     |   |  |   | 111    
|                                                    |  |                                                      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        
|Net income                                          |  | $                                                    | 589     |   |      | $ | 766     |      |  | $ | 701     |   |  | $    | 656     |   |  | $ | 559    
|                                                    |  |                                                      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        
|Per Share Data (1)                                  |  |                                                      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        
|Basic earnings                                      |  | $                                                    | 0.68    |   |      | $ | 0.86    |      |  | $ | 0.78    |   |  | $    | 0.73    |   |  | $ | 0.62   
|Diluted earnings                                    |  |                                                      | 0.68    |   |      |   | 0.86    |      |  |   | 0.78    |   |  |      | 0.73    |   |  |   | 0.61   
|Cash dividends declared                             |  |                                                      | 0.40    |   |      |   | 0.38    |      |  |   | 0.28    |   |  |      | 0.23    |   |  |   | 0.20   
|Book value                                          |  |                                                      | 10.11   |   |      |   | 10.59   |      |  |   | 10.36   |   |  |      | 10.52   |   |  |   | 9.73   
|Basic average shares outstanding                    |  |                                                      | 871,243 |   |      |   | 888,656 |      |  |   | 901,715 |   |  |      | 901,176 |   |  |   | 908,839
|Diluted average shares outstanding                  |  |                                                      | 871,243 |   |      |   | 888,756 |      |  |   | 902,095 |   |  |      | 903,927 |   |  |   | 919,268
|                                                    |  |                                                      |         |   |     
|Market Information                                  |  |                                                      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        
|High                                                |  | $                                                    | 18.91   |   |      | $ | 19.25   |      |  | $ | 20.25   |   |  | $    | 19.20   |   |  | $ | 21.80  
|Low                                                 |  |                                                      | 17.41   |   |      |   | 18.25   |      |  |   | 16.50   |   |  |      | 16.84   |   |  |   | 17.20  
|At December 31                                      |  |                                                      | 18.25   |   |      |   | 18.90   |      |  |   | 18.50   |   |  |      | 18.40   |   |  |   | 19.20  
|                                                    |  |                                                      |         |   |     
|Selected Financial Ratios                           |  |                                                      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        
|Return on average assets                            |  |                                                      | 0.62    | % |      |   | 0.85    | %    |  |   | 0.80    | % |  |      | 0.84    | % |  |   | 0.74   
|Return on average equity                            |  |                                                      | 6.50    |   |      |   | 8.26    |      |  |   | 7.46    |   |  |      | 7.19    |   |  |   | 6.43   
|Average equity to average assets                    |  |                                                      | 9.46    |   |      |   | 10.23   |      |  |   | 10.76   |   |  |      | 11.70   |   |  |   | 11.56  
|Equity to assets at end of period                   |  |                                                      | 9.41    |   |      |   | 10.27   |      |  |   | 10.36   |   |  |      | 12.42   |   |  |   | 11.75  
|Non-performing assets to total assets               |  |                                                      | 1.70    |   |      |   | 1.23    |      |  |   | 1.57    |   |  |      | 0.30    |   |  |   | 0.39   
|Non-performing loans to total loans                 |  |                                                      | 3.54    |   |      |   | 2.52    |      |  |   | 3.01    |   |  |      | 0.51    |   |  |   | 0.67   

---

|(1) | Adjusted for a five-for-four stock split effective January 24, 2003 and a 10% stock dividend effective January 11, 2002.
|--- | ------------------------------------------------------------------------------------------------------------------------



---

Common Stock Market Price and Dividend Information

Tri-State 1st Banc, Inc.s common stock is traded on the NASDAQ OTC Bulletin Board under the trade symbol TSEO. The following table presents the quarterly high and low prices in the Companys common stock
for the two-year period ended December 31, 2005. Also included in the table are dividends declared per share on the outstanding common stock.



|                   |  |                                  |       |     |   |       |  |   |     
|------------------ |  | -------------------------------- | ----- | --- | - | ----- |  | - | ----
|Common Stock
Price |  | Cash DividendsDeclared Per Share
|2005               |  | High                             |       | Low |  
|First Quarter      |  | $                                | 18.91 |     | $ | 18.16 |  | $ | 0.10
|Second Quarter     |  |                                  | 18.66 |     |   | 17.75 |  |   | 0.10
|Third Quarter      |  |                                  | 18.30 |     |   | 17.74 |  |   | 0.10
|Fourth Quarter     |  |                                  | 18.25 |     |   | 17.75 |  |   | 0.10
|                   |  |                                  |       |     |   |       |  |   |     
|                   |  |                                  |       |     |   |       |  | $ | 0.40
|                   |  |                                  |       |     |   |       |  |   |     
|2004               |  |                                  |       |     |   |      
|First Quarter      |  | $                                | 18.90 |     | $ | 18.25 |  | $ | 0.09
|Second Quarter     |  |                                  | 18.80 |     |   | 18.25 |  |   | 0.09
|Third Quarter      |  |                                  | 19.00 |     |   | 18.25 |  |   | 0.10
|Fourth Quarter     |  |                                  | 19.25 |     |   | 18.25 |  |   | 0.10
|                   |  |                                  |       |     |   |       |  |   |     
|                   |  |                                  |       |     |   |       |  | $ | 0.38
|                   |  |                                  |       |     |   |       |  |   |     

All market prices and cash dividend amounts have been restated to reflect a five-for-four stock
split effective January 24, 2003.

At December 31, 2005, there were 863,234 of common shares outstanding, which were held by approximately
483 shareholders of record.

The Companys ability to pay dividends to shareholders may be dependent upon the receipt of dividends from the Bank. The
Bank may not declare or pay dividends on its common stock if such payment will cause its regulatory capital to be reduced below minimum requirements imposed by OCC regulations. The Company is also subject to certain regulatory restrictions imposed
by the Federal Reserve Board on the payment of dividends to its shareholders.



---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Tri-State 1st Banc, Inc.

We have audited the consolidated balance sheet of Tri-State 1st Banc, Inc. and subsidiaries as of December 31, 2005
and 2004, and the related consolidated statements of income, changes in stockholders equity, and cash flows for the years then ended. These financial statements are the responsibility of the Companys management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of Tri-State 1st Banc, Inc. and subsidiaries as of December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the years then ended in
conformity with U.S. generally accepted accounting principles.



|                         
|-------------------------
|                         
|/s/ S.R. Snodgrass, A. C.
|Wexford, Pennsylvania    
|January 27, 2006         



---

TRI-STATE 1ST BANC, INC.

CONSOLIDATED BALANCE SHEET



|                                                                                   |  |              |            |   |      |   |            |  
|---------------------------------------------------------------------------------- |  | ------------ | ---------- | - | ---- | - | ---------- | -
|                                                                                   |  | December 31, |           
|                                                                                   |  | 2005         |            |   | 2004 |  
|ASSETS                                                                             |  |              |            |   |      |   |            |  
|Cash and due from banks                                                            |  | $            | 6,059,509  |   |      | $ | 5,821,350  |  
|Interest-bearing deposits with other banks                                         |  |              | 40,588     |   |      |   | 169,820    |  
|Federal funds sold                                                                 |  |              | 1,550,000  |   |      |   |           |  
|                                                                                   |  |              |            |   |      |   |            |  
|Cash and cash equivalents                                                          |  |              | 7,650,097  |   |      |   | 5,991,170  |  
|Investment securities available for sale                                           |  |              | 25,455,135 |   |      |   | 31,738,674 |  
|Investment securities held to maturity (market value of $8,937,160 and $1,021,161) |  |              | 9,030,439  |   |      |   | 982,470    |  
|Loans                                                                              |  |              | 42,856,155 |   |      |   | 44,484,168 |  
|Less allowance for loan losses                                                     |  |              | 531,873    |   |      |   | 501,301    |  
|                                                                                   |  |              |            |   |      |   |            |  
|Net loans                                                                          |  |              | 42,324,282 |   |      |   | 43,982,867 |  
|Premises and equipment                                                             |  |              | 3,798,252  |   |      |   | 3,944,265  |  
|Bank-owned life insurance                                                          |  |              | 2,340,555  |   |      |   | 2,258,592  |  
|Goodwill                                                                           |  |              | 886,784    |   |      |   | 882,475    |  
|Accrued interest and other assets                                                  |  |              | 2,172,671  |   |      |   | 1,188,197  |  
|                                                                                   |  |              |            |   |      |   |            |  
|TOTAL ASSETS                                                                       |  | $            | 93,658,215 |   |      | $ | 90,968,710 |  
|                                                                                   |  |              |            |   |      |   |            |  
|LIABILITIES                                                                        |  |              |            |   |      |   |            |  
|Deposits:                                                                          |  |              |            |   |      |   |            |  
|Non-interest-bearing demand                                                        |  | $            | 16,029,665 |   |      | $ | 14,884,630 |  
|Interest-bearing demand                                                            |  |              | 11,161,177 |   |      |   | 10,827,774 |  
|Money market                                                                       |  |              | 5,642,694  |   |      |   | 8,117,013  |  
|Savings                                                                            |  |              | 12,126,622 |   |      |   | 13,524,377 |  
|Time                                                                               |  |              | 30,652,370 |   |      |   | 24,951,811 |  
|                                                                                   |  |              |            |   |      |   |            |  
|Total deposits                                                                     |  |              | 75,612,528 |   |      |   | 72,305,605 |  
|Short-term borrowings                                                              |  |              | 5,982,201  |   |      |   | 5,133,865  |  
|Other borrowings                                                                   |  |              | 2,600,000  |   |      |   | 3,300,000  |  
|Accrued interest and other liabilities                                             |  |              | 651,669    |   |      |   | 891,152    |  
|                                                                                   |  |              |            |   |      |   |            |  
|TOTAL LIABILITIES                                                                  |  |              | 84,846,398 |   |      |   | 81,630,622 |  
|                                                                                   |  |              |            |   |      |   |            |  
|STOCKHOLDERS EQUITY                                                               |  |              |            |   |      |   |            |  
|Common stock, no par value; 3,000,000 shares authorized, 915,764 shares issued     |  |              | 8,195,467  |   |      |   | 8,195,467  |  
|Retained earnings                                                                  |  |              | 1,988,595  |   |      |   | 1,748,559  |  
|Treasury stock, at cost (52,530 and 21,843 shares)                                 |  |              | (963,218   | ) |      |   | (630,685   | )
|Accumulated other comprehensive income (loss)                                      |  |              | (409,027   | ) |      |   | 24,747     |  
|                                                                                   |  |              |            |   |      |   |            |  
|TOTAL STOCKHOLDERS EQUITY                                                         |  |              | 8,811,817  |   |      |   | 9,338,088  |  
|                                                                                   |  |              |            |   |      |   |            |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                         |  | $            | 93,658,215 |   |      | $ | 90,968,710 |  
|                                                                                   |  |              |            |   |      |   |            |  

See accompanying notes to the consolidated financial statements.



---

TRI-STATE 1ST BANC, INC.

CONSOLIDATED STATEMENT OF INCOME



|                                                    |  |                         |           |      |   |          
|--------------------------------------------------- |  | ----------------------- | --------- | ---- | - | ---------
|                                                    |  | Year Ended December 31,
|                                                    |  | 2005                    |           | 2004
|INTEREST INCOME                                     |  |                         |           |      |   |          
|Loans, including fees                               |  | $                       | 3,283,528 |      | $ | 3,320,653
|Interest-bearing deposits with other banks          |  |                         | 2,585     |      |   | 4,245    
|Federal funds sold                                  |  |                         | 98,032    |      |   | 33,389   
|Investment securities:                              |  |                         |           |      |   |          
|Taxable                                             |  |                         | 1,313,045 |      |   | 903,517  
|Exempt from federal income tax                      |  |                         | 214,005   |      |   | 293,906  
|                                                    |  |                         |           |      |   |          
|Total interest income                               |  |                         | 4,911,195 |      |   | 4,555,710
|                                                    |  |                         |           |      |   |          
|INTEREST EXPENSE                                    |  |                         |           |      |   |          
|Deposits                                            |  |                         | 1,140,960 |      |   | 848,761  
|Short-term borrowings                               |  |                         | 84,455    |      |   | 100,368  
|Other borrowings                                    |  |                         | 119,998   |      |   | 16,051   
|                                                    |  |                         |           |      |   |          
|Total interest expense                              |  |                         | 1,345,413 |      |   | 965,180  
|                                                    |  |                         |           |      |   |          
|NET INTEREST INCOME                                 |  |                         | 3,565,782 |      |   | 3,590,530
|Provision for loan losses                           |  |                         | 229,686   |      |   | 133,000  
|                                                    |  |                         |           |      |   |          
|NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES |  |                         | 3,336,096 |      |   | 3,457,530
|                                                    |  |                         |           |      |   |          
|OTHER OPERATING INCOME                              |  |                         |           |      |   |          
|Service fees on deposit accounts                    |  |                         | 1,083,582 |      |   | 941,513  
|Investment securities gains, net                    |  |                         | 16,696    |      |   | 9,959    
|Earnings on bank-owned life insurance               |  |                         | 81,963    |      |   | 87,910   
|Other                                               |  |                         | 862,656   |      |   | 348,154  
|                                                    |  |                         |           |      |   |          
|Total other operating income                        |  |                         | 2,044,897 |      |   | 1,387,536
|                                                    |  |                         |           |      |   |          
|OTHER OPERATING EXPENSE                             |  |                         |           |      |   |          
|Salaries and employee benefits                      |  |                         | 2,391,098 |      |   | 1,949,124
|Occupancy                                           |  |                         | 447,058   |      |   | 399,900  
|Furniture and equipment                             |  |                         | 366,959   |      |   | 344,513  
|Other                                               |  |                         | 1,455,934 |      |   | 1,176,342
|                                                    |  |                         |           |      |   |          
|Total other operating expense                       |  |                         | 4,661,049 |      |   | 3,869,879
|                                                    |  |                         |           |      |   |          
|Income before income taxes                          |  |                         | 719,944   |      |   | 975,187  
|Income taxes                                        |  |                         | 131,312   |      |   | 208,955  
|                                                    |  |                         |           |      |   |          
|NET INCOME                                          |  | $                       | 588,632   |      | $ | 766,232  
|                                                    |  |                         |           |      |   |          
|EARNINGS PER SHARE                                  |  |                         |           |      |   |          
|Basic                                               |  | $                       | 0.68      |      | $ | 0.86     
|Diluted                                             |  |                         | 0.68      |      |   | 0.86     

See accompanying notes to the consolidated financial statements.



---

TRI-STATE 1ST BANC, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY



|                                                                                                      |  |             |           |                  |   |           |               |  |   |                                            |   |  |       |          |   |  |   |           |  
|----------------------------------------------------------------------------------------------------- |  | ----------- | --------- | ---------------- | - | --------- | ------------- |  | - | ------------------------------------------ | - |  | ----- | -------- | - |  | - | --------- | -
|                                                                                                      |  | CommonStock |           | RetainedEarnings |   |           | TreasuryStock |  |   | AccumulatedOtherComprehensiveIncome (Loss) |   |  | Total |         
|Balance, December 31, 2003                                                                            |  | $           | 8,195,467 |                  | $ | 1,319,285 |               |  | $ | (402,637                                   | ) |  | $     | 150,697  |   |  | $ | 9,262,812 |  
|Comprehensive income:                                                                                 |  |             |           |                  |   |           |               |  |   |                                            |   |  |       |          |   |  |   |           |  
|Net income                                                                                            |  |             |           |                  |   | 766,232   |               |  |   |                                            |   |  |       |          |   |  |   | 766,232   |  
|Net unrealized loss on securities, net of reclassification adjustment, net of tax benefit of $64,883  |  |             |           |                  |   |           |               |  |   |                                            |   |  |       | (125,950 | ) |  |   | (125,950  | )
|                                                                                                      |  |             |           |                  |   |           |               |  |   |                                            |   |  |       |          |   |  |   |           |  
|Total comprehensive income                                                                            |  |             |           |                  |   |           |               |  |   |                                            |   |  |       |          |   |  |   | 640,282   |  
|Purchase of treasury stock                                                                            |  |             |           |                  |   |           |               |  |   | (228,048                                   | ) |  |       |          |   |  |   | (228,048  | )
|Dividends declared ($0.38 per share)                                                                  |  |             |           |                  |   | (336,958  | )             |  |   |                                            |   |  |       |          |   |  |   | (336,958  | )
|                                                                                                      |  |             |           |                  |   |           |               |  |   |                                            |   |  |       |          |   |  |   |           |  
|Balance, December 31, 2004                                                                            |  |             | 8,195,467 |                  |   | 1,748,559 |               |  |   | (630,685                                   | ) |  |       | 24,747   |   |  |   | 9,338,088 |  
|Comprehensive income:                                                                                 |  |             |           |                  |   |           |               |  |   |                                            |   |  |       |          |   |  |   |           |  
|Net income                                                                                            |  |             |           |                  |   | 588,632   |               |  |   |                                            |   |  |       |          |   |  |   | 588,632   |  
|Net unrealized loss on securities, net of reclassification adjustment, net of tax benefit of $223,459 |  |             |           |                  |   |           |               |  |   |                                            |   |  |       | (433,774 | ) |  |   | (433,774  | )
|                                                                                                      |  |             |           |                  |   |           |               |  |   |                                            |   |  |       |          |   |  |   |           |  
|Total comprehensive income                                                                            |  |             |           |                  |   |           |               |  |   |                                            |   |  |       |          |   |  |   | 154,858   |  
|Purchase of treasury stock                                                                            |  |             |           |                  |   |           |               |  |   | (499,200                                   | ) |  |       |          |   |  |   | (499,200  | )
|Reissuance of treasury stock                                                                          |  |             |           |                  |   |           |               |  |   | 166,667                                    |   |  |       |          |   |  |   | 166,667   |  
|Dividends declared ($0.40 per share)                                                                  |  |             |           |                  |   | (348,596  | )             |  |   |                                            |   |  |       |          |   |  |   | (348,596  | )
|                                                                                                      |  |             |           |                  |   |           |               |  |   |                                            |   |  |       |          |   |  |   |           |  
|Balance, December 31, 2005                                                                            |  | $           | 8,195,467 |                  | $ | 1,988,595 |               |  | $ | (963,218                                   | ) |  | $     | (409,027 | ) |  | $ | 8,811,817 |  
|                                                                                                      |  |             |           |                  |   |           |               |  |   |                                            |   |  |       |          |   |  |   |           |  



|                                                                          |  |      |          |   |      |   |          |  
|------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|                                                                          |  | 2005 |          |   | 2004 |  
|Components of other comprehensive loss:                                   |  |      |          |   |      |   |          |  
|Change in net unrealized loss on investment securities available for sale |  | $    | (422,755 | ) |      | $ | (119,377 | )
|Realized gains included in net income, net of taxes of $5,677 and $3,386  |  |      | (11,019  | ) |      |   | (6,573   | )
|                                                                          |  |      |          |   |      |   |          |  
|Total                                                                     |  | $    | (433,774 | ) |      | $ | (125,950 | )
|                                                                          |  |      |          |   |      |   |          |  

See accompanying notes to the consolidated financial statements.



---

TRI-STATE 1ST BANC, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS



|                                                                                  |  |                         |             |   |      |   |             |  
|--------------------------------------------------------------------------------- |  | ----------------------- | ----------- | - | ---- | - | ----------- | -
|                                                                                  |  | Year Ended December 31, |            
|                                                                                  |  | 2005                    |             |   | 2004 |  
|OPERATING ACTIVITIES                                                              |  |                         |             |   |      |   |             |  
|Net income                                                                        |  | $                       | 588,632     |   |      | $ | 766,232     |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                         |             |   |      |   |             |  
|Provision for loan losses                                                         |  |                         | 229,686     |   |      |   | 133,000     |  
|Depreciation and amortization, net                                                |  |                         | 429,463     |   |      |   | 424,823     |  
|Investment securities gains, net                                                  |  |                         | (16,696     | ) |      |   | (9,959      | )
|Deferred income taxes                                                             |  |                         | (68,497     | ) |      |   | 17,625      |  
|Earnings on bank-owned life insurance                                             |  |                         | (81,963     | ) |      |   | (87,910     | )
|Decrease (increase) in accrued interest receivable                                |  |                         | (44,148     | ) |      |   | 47,890      |  
|Increase (decrease) in accrued interest payable                                   |  |                         | (490        | ) |      |   | 1,453       |  
|Other, net                                                                        |  |                         | (51,269     | ) |      |   | (4,981      | )
|                                                                                  |  |                         |             |   |      |   |             |  
|Net cash provided by operating activities                                         |  |                         | 984,718     |   |      |   | 1,288,173   |  
|                                                                                  |  |                         |             |   |      |   |             |  
|INVESTING ACTIVITIES                                                              |  |                         |             |   |      |   |             |  
|Investment securities available for sale:                                         |  |                         |             |   |      |   |             |  
|Proceeds from sales                                                               |  |                         | 4,682,674   |   |      |   | 582,021     |  
|Proceeds from principal repayments and maturities                                 |  |                         | 4,887,033   |   |      |   | 10,553,332  |  
|Purchases of securities                                                           |  |                         | (4,002,489  | ) |      |   | (12,453,145 | )
|Investment securities held to maturity:                                           |  |                         |             |   |      |   |             |  
|Proceeds from principal repayments and maturities                                 |  |                         | 2,636,502   |   |      |   | 143,486     |  
|Purchases of securities                                                           |  |                         | (10,689,865 | ) |      |   |            |  
|Net decrease in loans                                                             |  |                         | 958,805     |   |      |   | 657,594     |  
|Purchase of premises and equipment                                                |  |                         | (239,247    | ) |      |   | (789,885    | )
|Proceeds from sale of real estate                                                 |  |                         |            |   |      |   | 32,000      |  
|Acquisition of MDH subsidiary                                                     |  |                         | (166,667    | ) |      |   | (366,027    | )
|                                                                                  |  |                         |             |   |      |   |             |  
|Net cash used for investing activities                                            |  |                         | (1,933,254  | ) |      |   | (1,640,624  | )
|                                                                                  |  |                         |             |   |      |   |             |  
|FINANCING ACTIVITIES                                                              |  |                         |             |   |      |   |             |  
|Net increase in deposits                                                          |  |                         | 3,306,923   |   |      |   | 926,619     |  
|Net increase (decrease) in short-term borrowings                                  |  |                         | 848,336     |   |      |   | (3,398,784  | )
|Proceeds from other borrowings                                                    |  |                         |            |   |      |   | 3,300,000   |  
|Repayment of other borrowings                                                     |  |                         | (700,000    | ) |      |   |            |  
|Purchase of treasury stock                                                        |  |                         | (499,200    | ) |      |   | (228,048    | )
|Cash dividends paid                                                               |  |                         | (348,596    | ) |      |   | (336,958    | )
|                                                                                  |  |                         |             |   |      |   |             |  
|Net cash provided by financing activities                                         |  |                         | 2,607,463   |   |      |   | 262,829     |  
|                                                                                  |  |                         |             |   |      |   |             |  
|Increase (decrease) in cash and cash equivalents                                  |  |                         | 1,658,927   |   |      |   | (89,622     | )
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                    |  |                         | 5,991,170   |   |      |   | 6,080,792   |  
|                                                                                  |  |                         |             |   |      |   |             |  
|CASH AND CASH EQUIVALENTS AT END OF YEAR                                          |  | $                       | 7,650,097   |   |      | $ | 5,991,170   |  
|                                                                                  |  |                         |             |   |      |   |             |  

See accompanying notes to the consolidated financial statements.



---

TRI-STATE 1ST BANC, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-- | ------------------------------------------

Nature of Operations and Basis of Presentation

A summary of significant accounting and reporting policies applied in
the presentation of the accompanying financial statements follows:

Tri-State 1st Banc, Inc. (the Company) is an Ohio
corporation organized as the holding company of 1st National Community Bank (the Bank), Gateminder Corporation (Gateminder), and MDH Investment Management, Inc. (MDH). The Bank is a national banking association
headquartered in East Liverpool, Ohio. The Banks principal sources of revenue emanate from its commercial, commercial mortgage, residential real estate, and consumer loan financing, its investment securities portfolio, as well as a variety of
deposit services offered to its customers through seven branch offices which are located in the tristate area of East Liverpool, Ohio. Gateminder was established by the Company to provide non-banking services to businesses with automated teller
machines (ATMs). Gateminder sells ATM machines and provides the means for processing transactions for businesses. MDH is an investment advisory firm established by the Company to provide investment management and financial planning
services.

The Companys principal assets are represented by its ownership of the Bank, Gateminder, and MDH. The Company, Gateminder,
and MDH are supervised by the Board of Governors of the Federal Reserve System, while the Bank is subject to regulation and supervision by the Office of the Comptroller of the Currency.

The consolidated financial statements of the Company include its wholly owned subsidiaries. All intercompany transactions have been eliminated in
consolidation. The investment in subsidiaries on the parent company financial statements is carried at the Companys equity position in the underlying net assets of each entity. The financial statements have been prepared in conformity with
U.S. generally accepted accounting principles. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the balance sheet date and revenues and
expenses for the period. Actual results could differ significantly from those estimates.

Investment Securities

Investment securities are classified at the time of purchase, based on managements abilities and intention, as securities held to maturity or
available for sale. Debt securities acquired with the ability and intent to hold to maturity are stated at cost adjusted for amortization of premium and accretion of discount, which are computed using the interest method and recognized as
adjustments of interest income. All other debt securities have been classified as available for sale to serve principally for liquidity purposes. Unrealized holding gains and losses for available-for-sale securities are reported as a separate
component of stockholders equity, net of tax, until realized. Realized securities gains and losses are computed using the specific identification method. Interest and dividends on investment securities are recognized as income when earned.

Common stock of the Federal Home Loan Bank of Cincinnati (FHLB) and the Federal Reserve Bank represents ownership in
institutions that are wholly owned by other financial institutions. These equity securities are accounted for at cost and are classified as other assets.



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|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|-- | ------------------------------------------------------



Loans

Loans are reported at their principal amount, net of the allowance for loan losses. Interest on all loans is recognized as income when earned on the accrual method. The Companys general policy is to stop
accruing interest on loans when it is determined that reasonable doubt exists as to the collectibility of additional interest. Payments received on nonaccrual loans are recorded as income or applied against principal according to managements
judgment as to the collectibility of principal.

Loan origination fees and certain direct loan origination costs are being deferred and the
net amount amortized as an adjustment of the related loans yield. The Company is amortizing these amounts over the contractual life of the related loans.

Allowance for Loan Losses

The allowance for loan losses represents the amount which
management estimates is adequate to provide for probable losses inherent in its loan portfolio. The allowance method is used in providing for loan losses. Accordingly, all loan losses are charged to the allowance, and all recoveries are credited to
it. The allowance for loan losses is established through a provision for loan losses charged to operations. The provision for loan losses is based on managements periodic evaluation of individual loans, economic factors, past loan loss
experience, changes in the composition and volume of the portfolio, and other relevant factors. The estimates used in determining the adequacy of the allowance for loan losses, including the amounts and timing of future cash flows expected on
impaired loans, are particularly susceptible to changes in the near term.

Impaired loans are commercial and commercial real estate loans
for which it is probable the Company will not be able to collect all amounts due according to the contractual terms of the loan agreement. The Company individually evaluates such loans for impairment and does not aggregate loans by major risk
classifications. The definition of impaired loans is not the same as the definition of nonaccrual loans, although the two categories overlap. The Company may choose to place a loan on nonaccrual status due to payment
delinquency or uncertain collectibility, while not classifying the loan as impaired, provided the loan is not of a commercial or commercial real estate classification. Factors considered by management in determining impairment include payment status
and collateral value. The amount of impairment for these types of loans is determined by the difference between the present value of the expected cash flows related to the loan, using the original interest rate, and its recorded value, or as a
practical expedient in the case of collateralized loans, the difference between the fair value of the collateral and the recorded amount of the loans. When foreclosure is probable, impairment is measured based on the fair value of the collateral.

Mortgage loans secured by one-to-four family properties and all consumer loans are large groups of smaller balance homogeneous loans and
are measured for impairment collectively. Loans that experience insignificant payment delays, which are defined as 90 days or less, generally are not classified as impaired. Management determines the significance of payment delays on a case-by-case
basis taking into consideration all circumstances concerning the loan, the creditworthiness and payment history of the borrower, the length of the payment delay, and the amount of shortfall in relation to the principal and interest owed.

Premises and Equipment

Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed on the straight-line method over the estimated useful lives of the assets, which range from 3 to 20 years for furniture, fixtures, and
equipment and 3 to 40 years for buildings and leasehold improvements. Expenditures for maintenance and repairs are charged against income as incurred. Costs of major additions and improvements are capitalized.



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|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|-- | ------------------------------------------------------



Bank-Owned Life Insurance

Bank-owned life insurance (BOLI) is carried by the Bank at the current cash surrender values of the underlying policies. The policies are single premium
policies that do not carry loads or surrender charges. Income earned on the policies is based on the crediting rate on the individual insurance contracts.

Intangible Asset

The intangible asset consists of a premium for the value of the
sellers customer listing. This customer list premium, which was developed based upon a specific study, is amortized using the straight-line method over seven years. Annual assessments of carrying value and remaining amortization periods are
made to determine possible carrying value impairment and appropriate adjustments as deemed necessary. This asset is a component of other assets on the Consolidated Balance Sheet.

Goodwill

The Company accounts
for goodwill in accordance with Statement of Financial Accounting Standards (FAS) No. 142, Goodwill and Other Intangible Assets. This statement, among other things, requires a two-step process for testing the impairment of
goodwill on at least an annual basis. This approach could cause more volatility in the Companys reported net income because impairment losses, if any, could occur irregularly and in varying amounts. The Company performs an annual impairment
analysis of goodwill. Based on the fair value of the reporting unit, estimated using the expected present value of future cash flows, no impairment of goodwill was recognized in 2005.

Real Estate Owned

Real estate
owned acquired in the settlement of foreclosed loans is carried as a component of other assets at the lower of cost or fair value minus estimated cost to sell. Valuation allowances for estimated losses are provided when the carrying value of the
real estate acquired exceeds the fair value. Direct costs incurred in the foreclosure process and subsequent holding costs incurred on such properties are recorded as expenses of current operations.

Treasury Stock

The
acquisition of treasury stock is recorded under the cost method. At the date of subsequent issue, the treasury stock is redeemed by the cost of such stock on the average cost basis.

Advertising Costs

Advertising
costs are expensed as the costs are incurred. Advertising expenses amounted to $55,913 and $47,329 for 2005 and 2004, respectively.

Earnings Per Share

The Company provides dual presentation of basic and diluted earnings per share. Basic earnings
per share are calculated utilizing net income as reported in the numerator and average shares outstanding in the denominator. The computation of diluted earnings per share differs in that the dilutive effects of any stock options, warrants, and
convertible securities are adjusted in the denominator.

Employee Benefits

Employee benefits include contributions to a defined contribution Section 401(k) plan covering eligible employees. Limited matching contributions are
made for participating employees subject to plan criteria. In addition, an elective contribution is made annually at the discretion of the Board of Directors. The Company also maintains an Employee Stock Ownership Plan (ESOP) covering
substantially all employees and officers. The amount of the contribution to the ESOP is at the discretion of the Board of Directors.



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|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|-- | ------------------------------------------------------



Stock Options

The Company maintains stock option plans for the directors, officers, and key employees. The Company accounts for its stock option plans under the
provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. Under this opinion, no compensation expense has been recognized with respect to the plans because the exercise price of the
Companys employee stock options equals the market price of the underlying stock on the grant date.

Had the compensation expense for
the stock option plans been recognized in accordance with the fair value accounting provisions of FAS No. 123, Accounting for Stock-Based Compensation,net income applicable to common stock and basic and diluted net income per common
share for the year ended December 31 would have been as follows:



|                                         |  |      |         |      |   |        
|---------------------------------------- |  | ---- | ------- | ---- | - | -------
|                                         |  | 2005 |         | 2004
|Net income applicable to common stock    |  | $    | 588,632 |      | $ | 766,232
|Less pro forma expense related to option |  |      |        |      |   | 31,574 
|                                         |  |      |         |      |   |        
|Pro forma net income                     |  | $    | 588,632 |      | $ | 734,658
|                                         |  |      |         |      |   |        
|Basic net income per common share:       |  |      |         |      |   |        
|As reported                              |  | $    | 0.68    |      | $ | 0.86   
|Pro forma                                |  |      | 0.68    |      |   | 0.83   
|Diluted net income per common share:     |  |      |         |      |   |        
|As reported                              |  | $    | 0.68    |      | $ | 0.86   
|Pro forma                                |  |      | 0.68    |      |   | 0.83   

For purposes of computing pro forma results, the Company estimated the fair values of stock options
using the Black-Scholes option pricing model. The model requires the use of subjective assumptions which can materially affect fair value estimates. Therefore, the pro forma results are estimates of results of operations as if compensation expense
had been recognized for the stock option plans. The fair value of each stock option granted was estimated using the following weighted-average assumptions:



|           |  |                       |   |  |                        |   |  |                    |   |  |                        
|---------- |  | --------------------- | - |  | ---------------------- | - |  | ------------------ | - |  | -----------------------
|Grant Year |  | ExpectedDividendYield |   |  | Risk-FreeInterest Rate |   |  | ExpectedVolatility |   |  | ExpectedLife (in years)
|2004       |  | 2.13                  | % |  | 3.77                   | % |  | 18.36              | % |  | 6.17                   

Income Taxes

The Company, the Bank, Gateminder and MDH file a consolidated federal income tax return. Deferred tax assets and liabilities are reflected at currently
enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, these assets and liabilities are adjusted through the provision
for income taxes.

Comprehensive Income

The Company is required to present comprehensive income and its components in a full set of general-purpose financial statements for all periods presented. The Companys other comprehensive income comprises the
net unrealized gains and losses attributable to its investment securities available for sale. The Company has elected to report the effects of comprehensive income as a part of the Consolidated Statement of Changes in Stockholders Equity.



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|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|-- | ------------------------------------------------------



Cash Flow Information

The Company has defined cash and cash equivalents as those amounts included in the balance sheet captions Cash and due from banks and
Interest-bearing deposits with other banks that have original maturities of less than 90 days. Cash payments for interest expense in 2005 and 2004 were $1,345,903 and $963,727, respectively. Cash payments for income taxes in 2005 and
2004 were $253,440 and $99,811, respectively.

Recent Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 123 (revised
2004), Share-Based Payment(FAS No. 123R). FAS No. 123R revised FAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its
related implementation guidance. FAS No. 123R will require compensation costs related to share-based payment transactions to be recognized in the financial statement (with limited exceptions). The amount of compensation cost will be measured
based on the grant-date fair value of the equity or liability instruments issued. Compensation cost will be recognized over the period during which an employee provides service in exchange for the award.

In April 2005, the Securities and Exchange Commission adopted a new rule that amends the compliance dates for FAS No. 123R. The statement requires
that compensation cost relating to share-based payment transactions be recognized in financial statements and that this cost be measured based on the fair value of the equity or liability instruments issued. FAS No. 123R covers a wide range of
share-based compensation arrangements, including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. The Company will adopt FAS No. 123R on January 1, 2006. Unless
additional options are granted management does not anticipate any compensation expense as a result of the adoption of this statement.

In
March 2005, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 107 (SAB No. 107), Share-Based Payment, providing guidance on option valuation methods, the accounting for
income tax effects of share-based payment arrangements upon adoption of FAS No. 123R, and the disclosures in MD&A subsequent to the adoption. The Company will provide SAB No. 107 required disclosures upon adoption of
FAS No. 123R on January 1, 2006.

In December 2004, FASB issued FAS No. 153, Exchanges of Nonmonetary Assets 
An Amendment of APB Opinion No. 29. The guidance in APB Opinion No. 29, Accounting for Nonmonetary Transactions, is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the
assets exchanged. The guidance in that opinion, however, included certain exceptions to that principle. FAS No. 153 amends Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it
with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the
exchange. The provisions of FAS No. 153 are effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Early application is permitted and companies must apply the standard prospectively. The
adoption of this standard is not expected to have a material effect on the Companys results of operations or financial position.

In
June 2005, the FASB issued FAS No. 154, Accounting Changes and Errors Corrections, a replacement of APB Opinion No. 20 and FAS No. 3. The statement applies to all voluntary changes in accounting principle and changes the
requirements for accounting for and reporting of a change in accounting principle. FAS No. 154 requires retrospective application to prior periods financial statements of a voluntary change in accounting principle unless



---

|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|-- | ------------------------------------------------------

Recent Accounting Pronouncements (Continued)



it is impractical. APB Opinion No. 20 previously required that most voluntary changes in accounting principle be recognized by including in net income
of the period of the change the cumulative effect of changing to the new accounting principle. FAS No. 154 improves the financial reporting because its requirements enhance the consistency of financial reporting between periods. The provisions
of FAS No. 154 are effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The adoption of this standard is not expected to have a material effect on the Companys results of
operations or financial position.

Certain items previously reported have been reclassified to conform to the current years reporting
format. Such reclassifications did not affect net income or stockholders equity.



|2. | EARNINGS PER SHARE
|-- | ------------------

There are no convertible
securities which would affect the numerator in calculating basic and diluted earnings per share; therefore, net income as presented on the Consolidated Statement of Income will be used as the numerator. The following table sets forth the composition
of the weighted-average common shares (denominator) used in the basic and diluted earnings per share computation.



|                                                                                                         |  |         |   |  |         |  
|-------------------------------------------------------------------------------------------------------- |  | ------- | - |  | ------- | -
|                                                                                                         |  | 2005    |   |  | 2004    |  
|Weighted-average common shares                                                                           |  | 915,764 |   |  | 915,764 |  
|Average treasury stock shares                                                                            |  | (44,521 | ) |  | (27,108 | )
|                                                                                                         |  |         |   |  |         |  
|Weighted-average common shares outstanding used to calculate basic earnings per share                    |  | 871,243 |   |  | 888,656 |  
|Additional common stock equivalents (stock options) used to calculate diluted earnings per share         |  |        |   |  | 100     |  
|                                                                                                         |  |         |   |  |         |  
|Weighted-average common shares and common stock equivalents used to calculate diluted earnings per share |  | 871,243 |   |  | 888,756 |  
|                                                                                                         |  |         |   |  |         |  

Options to purchase 60,137 shares of common stock at prices from $18.40 to $20.36 were outstanding
during 2005 and options to purchase 57,100 shares of common stock at prices from $18.75 to $20.36 were outstanding during 2004, respectively, but were not included in the computation of diluted earnings per share because to do so would have been
antidilutive.



|3. | BUSINESS ACQUISITION
|-- | --------------------

Effective December 22,
2004, the Company, through a newly formed subsidiary, acquired the assets of MDH Investment Management, Inc. for $1,000,000. Under the terms of the acquisition agreement, 50 percent of the acquisition price is to be paid in cash and 50 percent is to
be paid from issuance of the Companys common stock. The acquisition price will be paid over a three-year period.

The primary business
of MDH was and remains an investment advisory firm providing investment management and financial planning services with total assets under management of approximately $65 million. MDH is a registered investment advisory firm with the Securities and
Exchange Commission and serves in excess of 100 clients in 14 states.



---

|4. | INVESTMENT SECURITIES
|-- | ---------------------

The amortized cost and
estimated market value of investment securities available for sale are as follows:



|                                                 |  |               |            |                      |   |                       |  |   |                       |   |  |   |           
|------------------------------------------------ |  | ------------- | ---------- | -------------------- | - | --------------------- |  | - | --------------------- | - |  | - | ----------
|                                                 |  | 2005         
|                                                 |  | AmortizedCost |            | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | EstimatedMarket Value
|U.S. government agency securities                |  | $             | 13,726,058 |                      | $ |                      |  | $ | (396,704              | ) |  | $ | 13,329,354
|Obligations of states and political subdivisions |  |               | 2,245,107  |                      |   | 55,838                |  |   |                      |   |  |   | 2,300,945 
|Mortgage-backed securities                       |  |               | 9,103,708  |                      |   | 20                    |  |   | (252,761              | ) |  |   | 8,850,967 
|                                                 |  |               |            |                      |   |                       |  |   |                       |   |  |   |           
|Total debt securities                            |  |               | 25,074,873 |                      |   | 55,858                |  |   | (649,465              | ) |  |   | 24,481,266
|Mutual funds                                     |  |               | 1,000,000  |                      |   |                      |  |   | (26,131               | ) |  |   | 973,869   
|                                                 |  |               |            |                      |   |                       |  |   |                       |   |  |   |           
|Total                                            |  | $             | 26,074,873 |                      | $ | 55,858                |  | $ | (675,596              | ) |  | $ | 25,455,135
|                                                 |  |               |            |                      |   |                       |  |   |                       |   |  |   |           
|                                                 | 
|                                                 |  | 2004         
|                                                 |  | AmortizedCost |            | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | EstimatedMarket Value
|U.S. government agency securities                |  | $             | 13,974,353 |                      | $ | 3,023                 |  | $ | (190,041              | ) |  | $ | 13,787,335
|Obligations of states and political subdivisions |  |               | 5,699,319  |                      |   | 278,128               |  |   | (5,562                | ) |  |   | 5,971,885 
|Mortgage-backed securities                       |  |               | 11,027,505 |                      |   | 29,546                |  |   | (63,520               | ) |  |   | 10,993,531
|                                                 |  |               |            |                      |   |                       |  |   |                       |   |  |   |           
|Total debt securities                            |  |               | 30,701,177 |                      |   | 310,697               |  |   | (259,123              | ) |  |   | 30,752,751
|Mutual funds                                     |  |               | 1,000,000  |                      |   |                      |  |   | (14,077               | ) |  |   | 985,923   
|                                                 |  |               |            |                      |   |                       |  |   |                       |   |  |   |           
|Total                                            |  | $             | 31,701,177 |                      | $ | 310,697               |  | $ | (273,200              | ) |  | $ | 31,738,674
|                                                 |  |               |            |                      |   |                       |  |   |                       |   |  |   |           

The amortized cost and estimated market value of investment securities held to maturity are as
follows:



|                                                 |  |               |           |                      |   |                       |  |   |                      |   |  |   |          
|------------------------------------------------ |  | ------------- | --------- | -------------------- | - | --------------------- |  | - | -------------------- | - |  | - | ---------
|                                                 |  | 2005         
|                                                 |  | AmortizedCost |           | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | EstimatedMarketValue
|U.S. treasury securities                         |  | $             | 98,267    |                      | $ |                      |  | $ | (1,549               | ) |  | $ | 96,718   
|U.S. government agency securities                |  |               | 5,507,105 |                      |   |                      |  |   | (59,654              | ) |  |   | 5,447,451
|Obligations of states and political subdivisions |  |               | 841,118   |                      |   | 10,658                |  |   |                     |   |  |   | 851,776  
|Mortgage-backed securities                       |  |               | 2,583,949 |                      |   |                      |  |   | (42,734              | ) |  |   | 2,541,215
|                                                 |  |               |           |                      |   |                       |  |   |                      |   |  |   |          
|Total                                            |  | $             | 9,030,439 |                      | $ | 10,658                |  | $ | (103,937             | ) |  | $ | 8,937,160
|                                                 |  |               |           |                      |   |                       |  |   |                      |   |  |   |          
|                                                 | 
|                                                 |  | 2004         
|                                                 |  | AmortizedCost |           | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | EstimatedMarketValue
|Obligations of states and political subdivisions |  | $             | 982,470   |                      | $ | 38,691                |  | $ |                     |   |  | $ | 1,021,161
|                                                 |  |               |           |                      |   |                       |  |   |                      |   |  |   |          
|Total                                            |  | $             | 982,470   |                      | $ | 38,691                |  | $ |                     |   |  | $ | 1,021,161
|                                                 |  |               |           |                      |   |                       |  |   |                      |   |  |   |          



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|4. | INVESTMENT SECURITIES (Continued)
|-- | ---------------------------------



The following table shows the Companys gross unrealized losses and fair value, aggregated by
investment category and length of time that the individual securities have been in a continuous unrealized loss position, at December 31, 2005 and 2004.



|                                                 |  |                         |            |                          |   |                      |  |                       |            |                      |   |                       |  |   |            |  |   |        
|------------------------------------------------ |  | ----------------------- | ---------- | ------------------------ | - | -------------------- |  | --------------------- | ---------- | -------------------- | - | --------------------- |  | - | ---------- |  | - | -------
|                                                 |  | 2005                   
|                                                 |  | Less than Twelve Months |            | Twelve Months or Greater |   | Total               
|                                                 |  | EstimatedMarketValue    |            | GrossUnrealizedLosses    |   | EstimatedMarketValue |  | GrossUnrealizedLosses |            | EstimatedMarketValue |   | GrossUnrealizedLosses
|U.S. treasury securities                         |  | $                       | 96,719     |                          | $ | 1,549                |  | $                     |           |                      | $ |                      |  | $ | 96,719     |  | $ | 1,549  
|U.S. government agency securities                |  |                         | 9,997,738  |                          |   | 151,058              |  |                       | 8,779,068  |                      |   | 305,300               |  |   | 18,776,806 |  |   | 456,358
|Mortgage-backed securities                       |  |                         | 7,340,363  |                          |   | 158,065              |  |                       | 4,023,692  |                      |   | 137,430               |  |   | 11,364,055 |  |   | 295,495
|                                                 |  |                         |            |                          |   |                      |  |                       |            |                      |   |                       |  |   |            |  |   |        
|Total debt securities                            |  |                         | 17,434,820 |                          |   | 310,672              |  |                       | 12,802,760 |                      |   | 442,730               |  |   | 30,237,580 |  |   | 753,402
|Mutual funds                                     |  |                         |           |                          |   |                     |  |                       | 973,869    |                      |   | 26,131                |  |   | 973,869    |  |   | 26,131 
|                                                 |  |                         |            |                          |   |                      |  |                       |            |                      |   |                       |  |   |            |  |   |        
|Total                                            |  | $                       | 17,434,820 |                          | $ | 310,672              |  | $                     | 13,776,629 |                      | $ | 468,861               |  | $ | 31,211,449 |  | $ | 779,533
|                                                 |  |                         |            |                          |   |                      |  |                       |            |                      |   |                       |  |   |            |  |   |        
|                                                 | 
|                                                 |  | 2004                   
|                                                 |  | Less than Twelve Months |            | Twelve Months or Greater |   | Total               
|                                                 |  | EstimatedMarketValue    |            | GrossUnrealizedLosses    |   | EstimatedMarketValue |  | GrossUnrealizedLosses |            | EstimatedMarketValue |   | GrossUnrealizedLosses
|U.S. government agency securities                |  | $                       | 6,185,322  |                          | $ | 52,867               |  | $                     | 6,460,363  |                      | $ | 137,174               |  | $ | 12,645,685 |  | $ | 190,041
|Obligations of states and political subdivisions |  |                         | 431,245    |                          |   | 2,778                |  |                       | 109,995    |                      |   | 2,784                 |  |   | 541,240    |  |   | 5,562  
|Mortgage-backed securities                       |  |                         | 3,821,805  |                          |   | 18,573               |  |                       | 2,564,472  |                      |   | 44,947                |  |   | 6,386,277  |  |   | 63,520 
|                                                 |  |                         |            |                          |   |                      |  |                       |            |                      |   |                       |  |   |            |  |   |        
|Total debt securities                            |  |                         | 10,438,372 |                          |   | 74,218               |  |                       | 9,134,830  |                      |   | 184,905               |  |   | 19,573,202 |  |   | 259,123
|Mutual funds                                     |  |                         |           |                          |   |                     |  |                       | 985,923    |                      |   | 14,077                |  |   | 985,923    |  |   | 14,077 
|                                                 |  |                         |            |                          |   |                      |  |                       |            |                      |   |                       |  |   |            |  |   |        
|Total                                            |  | $                       | 10,438,372 |                          | $ | 74,218               |  | $                     | 10,120,753 |                      | $ | 198,982               |  | $ | 20,559,125 |  | $ | 273,200
|                                                 |  |                         |            |                          |   |                      |  |                       |            |                      |   |                       |  |   |            |  |   |        

The policy of the Company is to evaluate for other-than-temporary impairment when the fair value
has been significantly below cost for three consecutive quarters. For fixed maturity investments with unrealized losses due to interest rates where the Company has the positive intent and ability to held the investment for a period of time
sufficient to allow a market recovery, declines in value below cost are not assumed to be other than temporary. There are 58 positions that are temporarily impaired at December 31, 2005. The Company reviews its position quarterly and has
asserted that at December 31, 2005, the declines outlined in the above table represent temporary declines and the Company does have the intent and ability either to hold those securities to maturity or to allow a market recovery.

The Company has concluded that any impairment of its investment securities portfolio is not other than temporary but is the result of interest rate
changes, sector credit changes, or Company-specific rating changes that are not expected to result in the noncollection of principal and interest during the period.



---

|4. | INVESTMENT SECURITIES (Continued)
|-- | ---------------------------------



The amortized cost and estimated market value of debt securities by contractual maturity at
December 31, 2005, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.



|                                       |  |                    |            |                      |   |               |  |                      |           |  |   |          
|-------------------------------------- |  | ------------------ | ---------- | -------------------- | - | ------------- |  | -------------------- | --------- |  | - | ---------
|                                       |  | Available for Sale |            | Held to Maturity    
|                                       |  | AmortizedCost      |            | EstimatedMarketValue |   | AmortizedCost |  | EstimatedMarketValue
|Due in one year or less                |  | $                  | 700,047    |                      | $ | 694,569       |  | $                    | 280,109   |  | $ | 282,160  
|Due after one year through five years  |  |                    | 13,120,600 |                      |   | 12,822,832    |  |                      | 6,481,662 |  |   | 6,411,811
|Due after five years through ten years |  |                    | 3,932,906  |                      |   | 3,837,861     |  |                      | 2,268,668 |  |   | 2,243,189
|Due after ten years                    |  |                    | 7,321,320  |                      |   | 7,126,004     |  |                      |          |  |   |         
|                                       |  |                    |            |                      |   |               |  |                      |           |  |   |          
|Total                                  |  | $                  | 25,074,873 |                      | $ | 24,481,266    |  | $                    | 9,030,439 |  | $ | 8,937,160
|                                       |  |                    |            |                      |   |               |  |                      |           |  |   |          

Proceeds from the sales of securities available for sale and the gross realized gains and losses
for the years ended December 31 are as follows:



|                      |  |      |           |      |   |        
|--------------------- |  | ---- | --------- | ---- | - | -------
|                      |  | 2005 |           | 2004
|Proceeds from sales   |  | $    | 4,682,674 |      | $ | 582,021
|Gross realized gains  |  |      | 90,894    |      |   | 9,959  
|Gross realized losses |  |      | 74,198    |      |   |       

Investment securities with an amortized cost of $18,073,887 and $11,876,644 and an estimated market
value of $17,659,693 and $11,746,241, respectively, were pledged to secure public deposits, securities sold under agreements to repurchase, and other purposes as required by law at December 31, 2005 and 2004.



|5. | LOANS
|-- | -----

Major classifications of loans are
summarized as follows:



|                               |  |      |            |      |   |           
|------------------------------ |  | ---- | ---------- | ---- | - | ----------
|                               |  | 2005 |            | 2004
|Commercial and agricultural    |  | $    | 11,454,356 |      | $ | 11,416,620
|Real estate mortgages:         |  |      |            |      |   |           
|Residential                    |  |      | 20,448,708 |      |   | 20,647,891
|Construction                   |  |      | 244,978    |      |   | 205,617   
|Commercial                     |  |      | 5,354,511  |      |   | 6,317,945 
|Consumer                       |  |      | 5,353,602  |      |   | 5,896,095 
|                               |  |      |            |      |   |           
|                               |  |      | 42,856,155 |      |   | 44,484,168
|Less allowance for loan losses |  |      | 531,873    |      |   | 501,301   
|                               |  |      |            |      |   |           
|Net loans                      |  | $    | 42,324,282 |      | $ | 43,982,867
|                               |  |      |            |      |   |           

The Company grants consumer, commercial, and mortgage loans to customers throughout its trade area
that encompasses the immediate tristate area of East Liverpool, Ohio. Although the Company has a diversified loan portfolio at December 31, 2005 and 2004, a substantial portion of its debtors ability to honor their loan agreements is
dependent upon the economic stability of the tristate area.

Loans on which the accrual of interest has been discontinued or reduced,
inclusive of impaired loans, amounted to $410,798 and $197,844 as of December 31, 2005 and 2004, respectively. Interest income on loans would have been increased by $23,428 and $6,382 during 2005 and 2004, respectively, if these loans had
performed in accordance with their original terms.



---

|5. | LOANS (Continued)
|-- | -----------------



Information with respect to impaired loans and the related allowance for loan losses for the years
ended December 31, 2005 and 2004, are as follows:



|                                              |  |      |         |      |   |        
|--------------------------------------------- |  | ---- | ------- | ---- | - | -------
|                                              |  | 2005 |         | 2004
|Impaired loans:                               |  |      |         |      |   |        
|With a related allowance for loan losses      |  | $    | 640,390 |      | $ | 733,378
|Without a related allowance for loan losses   |  |      |        |      |   |       
|                                              |  |      |         |      |   |        
|Total                                         |  | $    | 640,390 |      | $ | 733,378
|                                              |  |      |         |      |   |        
|Allowance for loan losses                     |  | $    | 2,689   |      | $ | 32,345 
|Average recorded investment in impaired loans |  |      | 809,758 |      |   | 763,719
|Interest income recognized                    |  |      | 72,130  |      |   | 50,384 

As of December 31, 2005, aggregate loans of $60,000 or more extended to officers, directors,
and related affiliates or associates were $1,282,636. A summary of activity during the year is as follows:



|     |           |           |   |                 |  |      |         |  |   |          
|---- | --------- | --------- | - | --------------- |  | ---- | ------- |  | - | ---------
|2004 |           | Additions |   | AmountCollected |  | 2005
|$    | 1,827,075 |           | $ | 245,548         |  | $    | 789,986 |  | $ | 1,282,636



|6. | ALLOWANCE FOR LOAN LOSSES
|-- | -------------------------

Changes in the allowance
for loan losses for the years ended December 31 are as follows:



|                                |  |      |         |      |   |        
|------------------------------- |  | ---- | ------- | ---- | - | -------
|                                |  | 2005 |         | 2004
|Balance, January 1              |  | $    | 501,301 |      | $ | 514,260
|Add:                            |  |      |         |      |   |        
|Provision charged to operations |  |      | 229,686 |      |   | 133,000
|Recoveries                      |  |      | 69,584  |      |   | 23,752 
|Less loans charged off          |  |      | 268,698 |      |   | 169,711
|                                |  |      |         |      |   |        
|Balance, December 31            |  | $    | 531,873 |      | $ | 501,301
|                                |  |      |         |      |   |        



---

|7. | PREMISES AND EQUIPMENT
|-- | ----------------------

Major classifications of
premises and equipment are summarized as follows at December 31:



|                                   |  |      |           |      |   |          
|---------------------------------- |  | ---- | --------- | ---- | - | ---------
|                                   |  | 2005 |           | 2004
|Land and improvements              |  | $    | 440,918   |      | $ | 435,550  
|Buildings and improvements         |  |      | 3,001,371 |      |   | 3,061,623
|Leasehold improvements             |  |      | 608,619   |      |   | 608,619  
|Furniture, fixtures, and equipment |  |      | 2,404,295 |      |   | 2,266,013
|Construction in progress           |  |      | 28,949    |      |   |         
|                                   |  |      |           |      |   |          
|                                   |  |      | 6,484,152 |      |   | 6,371,805
|Less accumulated depreciation      |  |      | 2,685,900 |      |   | 2,427,540
|                                   |  |      |           |      |   |          
|Total                              |  | $    | 3,798,252 |      | $ | 3,944,265
|                                   |  |      |           |      |   |          

Depreciation and amortization charged to operations was $385,260 in 2005 and $339,624 in 2004.



|8. | INTANGIBLE ASSETS
|-- | -----------------

As part of the acquisition of
MDH, $140,219 of intangible assets was recorded. During 2005, $20,032 of amortization expense was recorded and, due to the timing of the acquisition, no amortization expense was recognized during 2004. The estimated amortization of the intangible
assets is $20,032 for each of the years ending 2006, 2007, 2008, 2009, and 2010.



|9. | GOODWILL
|-- | --------

As of December 31, 2005 and 2004,
goodwill had a net carrying amount of $886,784 and $882,475, resulting from the MDH acquisition on December 22, 2004. There was no impairment of goodwill during 2005 and 2004.



|10. | DEPOSITS
|--- | --------

Time deposits at December 31, 2005,
mature $26,086,280, $4,034,023, $455,706, and $76,361, during 2006, 2007, 2008, and 2009, respectively.

Time deposits include certificates
of deposit in denominations of $100,000 or more. Such deposits aggregated $13,968,060 and $7,586,838 at December 31, 2005 and 2004, respectively.

Maturities on time deposits of $100,000 or more are as follows at December 31, 2005:



|                                    |  |   |           
|----------------------------------- |  | - | ----------
|Within three months                 |  | $ | 10,770,184
|Beyond three but within six months  |  |   | 598,283   
|Beyond six but within twelve months |  |   | 2,045,735 
|Beyond one year                     |  |   | 553,858   
|                                    |  |   |           
|Total                               |  | $ | 13,968,060
|                                    |  |   |           



---

|11. | SHORT-TERM BORROWINGS
|--- | ---------------------

Short-term borrowings can
consist of federal funds purchased, securities sold under agreement to repurchase, and FHLB adjustable rate borrowings with terms of 30 days or less.

The outstanding balances and related information for short-term borrowings are summarized as follows:



|                                            |  |        |           |      |      |   |        |   |            |  |      |  
|------------------------------------------- |  | ------ | --------- | ---- | ---- | - | ------ | - | ---------- |  | ---- | -
|                                            |  | 2005   |           |      | 2004 |  
|                                            |  | Amount |           | Rate |      |   | Amount |   | Rate       | 
|Balance at year-end                         |  | $      | 5,982,201 |      | 1.25 | % |        | $ | 5,133,865  |  | 1.25 | %
|Average balance outstanding during the year |  |        | 6,545,637 |      | 1.29 |   |        |   | 8,574,844  |  | 1.17 |  
|Maximum amount outstanding at any month-end |  |        | 9,038,260 |      |      |   |        |   | 10,379,073 |  |      |  

The average balance outstanding during the year represents daily averages. Average interest rates
represent interest expense divided by the related average balance.



|12. | OTHER BORROWINGS
|--- | ----------------

Other borrowings consist of
advances from the FHLB.

The following table presents contractual maturities of FHLB advances as of December 31:



|            |  |              |  |              |   |  |      |           |      |   |          
|----------- |  | ------------ |  | ------------ | - |  | ---- | --------- | ---- | - | ---------
|Description |  | MaturityDate |  | InterestRate |   |  | 2005 |           | 2004
|Fixed       |  | 12/1/2006    |  | 3.47         | % |  | $    | 1,900,000 |      | $ | 1,900,000
|Variable    |  | 12/1/2006    |  | 4.58         | % |  |      | 700,000   |      |   | 700,000  
|Fixed       |  | 12/1/2005    |  | 3.11         | % |  |      |          |      |   | 700,000  
|            |  |              |  |              |   |  |      |           |      |   |          
|            |  |              |  |              |   |  | $    | 2,600,000 |      | $ | 3,300,000
|            |  |              |  |              |   |  |      |           |      |   |          

The Bank maintains a credit arrangement which includes a revolving line of credit with the FHLB.
Under this credit arrangement, the Bank has a remaining borrowing capacity of approximately $38.2 million at December 31, 2005, which is subject to annual renewal and typically incurs no service charges. Under terms of a blanket agreement,
collateral for the FHLB borrowings must be secured by certain qualifying assets of the Bank that consist principally of first mortgage loans.



|13. | OTHER EXPENSES
|--- | --------------

The following is an analysis of
other expenses:



|                                           |  |      |           |      |   |          
|------------------------------------------ |  | ---- | --------- | ---- | - | ---------
|                                           |  | 2005 |           | 2004
|Stationery, printing, and supplies         |  | $    | 115,756   |      | $ | 109,125  
|State franchise tax                        |  |      | 95,800    |      |   | 104,140  
|Postage                                    |  |      | 64,818    |      |   | 58,098   
|ATM and debit card processing and supplies |  |      | 91,232    |      |   | 94,205   
|Advertising and public relations           |  |      | 70,903    |      |   | 71,469   
|Other                                      |  |      | 1,017,425 |      |   | 739,305  
|                                           |  |      |           |      |   |          
|Total                                      |  | $    | 1,455,934 |      | $ | 1,176,342
|                                           |  |      |           |      |   |          



---

|14. | INCOME TAXES
|--- | ------------

The provision for income taxes
consists of:



|         |  |      |         |   |      |   |        
|-------- |  | ---- | ------- | - | ---- | - | -------
|         |  | 2005 |         |   | 2004
|Current  |  | $    | 199,809 |   |      | $ | 191,330
|Deferred |  |      | (68,497 | ) |      |   | 17,625 
|         |  |      |         |   |      |   |        
|Total    |  | $    | 131,312 |   |      | $ | 208,955
|         |  |      |         |   |      |   |        

The components of the net deferred tax assets (liabilities) are as follows at December 31:



|                                      |  |      |         |      |   |         |  
|------------------------------------- |  | ---- | ------- | ---- | - | ------- | -
|                                      |  | 2005 |         | 2004 |  
|Deferred tax assets:                  |  |      |         |      |   |         |  
|Allowance for loan losses             |  | $    | 157,143 |      | $ | 142,082 |  
|Net unrealized loss on securities     |  |      | 210,711 |      |   |        |  
|Other                                 |  |      | 24,034  |      |   | 20,239  |  
|                                      |  |      |         |      |   |         |  
|Gross deferred tax assets             |  |      | 391,888 |      |   | 162,321 |  
|                                      |  |      |         |      |   |         |  
|Deferred tax liabilities:             |  |      |         |      |   |         |  
|Net unrealized gain on securities     |  |      |        |      |   | 12,749  |  
|Premises and equipment                |  |      | 104,220 |      |   | 116,205 |  
|Accrual to cash conversion            |  |      |        |      |   | 27,178  |  
|Deferred loan fees                    |  |      | 39,828  |      |   | 39,465  |  
|FHLB stock dividend                   |  |      | 41,376  |      |   | 37,058  |  
|Other                                 |  |      | 21,899  |      |   |        |  
|                                      |  |      |         |      |   |         |  
|Gross deferred tax liabilities        |  |      | 207,323 |      |   | 232,655 |  
|                                      |  |      |         |      |   |         |  
|Net deferred tax assets (liabilities) |  | $    | 184,565 |      | $ | (70,334 | )
|                                      |  |      |         |      |   |         |  

No valuation allowance was established at December 31, 2005 and 2004, in view of the
Companys ability to carryback to taxes paid in previous years and certain tax strategies, coupled with the anticipated future taxable income as evidenced by the Companys earnings potential.

The reconciliation of the federal statutory rate and the Companys effective income tax rate is as follows:



|                                      |  |        |         |   |                   |       |   |        |   |          |                   |  |       |  
|------------------------------------- |  | ------ | ------- | - | ----------------- | ----- | - | ------ | - | -------- | ----------------- |  | ----- | -
|                                      |  | 2005   |         |   | 2004              |      
|                                      |  | Amount |         |   | % of PretaxIncome |       |   | Amount |   |          | % of PretaxIncome | 
|Provision at statutory rate           |  | $      | 244,781 |   |                   | 34.0  | % |        | $ | 331,564  |                   |  | 34.0  | %
|Effect of tax-free income             |  |        | (85,244 | ) |                   | (11.9 | ) |        |   | (113,263 | )                 |  | (11.6 | )
|Other                                 |  |        | (28,225 | ) |                   | (3.9  | ) |        |   | (9,346   | )                 |  | (1.0  | )
|                                      |  |        |         |   |                   |       |   |        |   |          |                   |  |       |  
|Actual tax expense and effective rate |  | $      | 131,312 |   |                   | 18.2  | % |        | $ | 208,955  |                   |  | 21.4  | %
|                                      |  |        |         |   |                   |       |   |        |   |          |                   |  |       |  



|15. | EMPLOYEE BENEFITS
|--- | -----------------

Savings Plan

The Bank maintains a trusteed Section 401(k) plan for all eligible employees. The Bank makes matching contributions for eligible
employees of 25 percent of the employee contributions annually, to a maximum of 12 percent of base salary. The Bank also makes discretionary contributions as determined annually by the Board of Directors. The Banks total contribution to this
plan was $31,472 in 2005 and $32,756 in 2004.



---

|15. | EMPLOYEE BENEFITS (Continued)
|--- | -----------------------------



ESOP

The Company also maintains an ESOP covering substantially all employees and officers. The Trustee has discretionary authority to purchase shares of common stock of the Company in the open market. The amount of the
contribution to the ESOP is at the discretion of the Board of Directors with benefits vesting over a seven-year period. Contributions of $12,000 and $10,000 were recorded during 2005 and 2004, respectively. The Trustee held 9,220 and 8,413 shares of
the Companys common stock at December 31, 2005 and 2004, respectively.

Stock Option Plan

The Company maintains stock option plans for the directors, officers, and key employees. The stock options typically have expiration terms of five or ten
years, are subject to certain extensions and early terminations, and are fully vested on the grant date. The per share exercise price of a stock option granted shall, at a minimum, equal the fair market value of a share of common stock on the date
the option is granted.

The following table presents share data related to the outstanding options:



|                                  |  |        |   |  |                               |       |      |        |                               |   |      
|--------------------------------- |  | ------ | - |  | ----------------------------- | ----- | ---- | ------ | ----------------------------- | - | -----
|                                  |  | 2005   |   |  | Weighted-AverageExercisePrice |       | 2004 |        | Weighted-AverageExercisePrice
|Outstanding, at beginning of year |  | 66,725 |   |  | $                             | 19.21 |      | 53,725 |                               | $ | 19.33
|Granted                           |  |       |   |  |                               |      |      | 13,000 |                               |   | 18.75
|Exercised                         |  |       |   |  |                               |      |      |       |                               |   |     
|Forfeited                         |  | (6,588 | ) |  |                               | 19.06 |      |       |                               |   |     
|                                  |  |        |   |  |                               |       |      |        |                               |   |      
|Outstanding, at end of year       |  | 60,137 |   |  |                               | 19.23 |      | 66,725 |                               |   | 19.21
|                                  |  |        |   |  |                               |       |      |        |                               |   |      
|Exercisable, at end of year       |  | 60,137 |   |  |                               | 19.23 |      | 66,725 |                               |   | 19.21
|                                  |  |        |   |  |                               |       |      |        |                               |   |      

The following table summarizes the characteristics of stock options outstanding at
December 31, 2005:



|                  |  |               |       |                                 |        |                        |      |                      |   |      
|----------------- |  | ------------- | ----- | ------------------------------- | ------ | ---------------------- | ---- | -------------------- | - | -----
|Grant Date        |  | ExercisePrice |       | OutstandingandExercisableShares |        | ContractualAverageLife |      | AverageExercisePrice
|August 25, 1999   |  | $             | 19.20 |                                 | 15,194 |                        | 3.73 |                      | $ | 19.20
|August 24, 2000   |  |               | 20.36 |                                 | 15,193 |                        | 4.65 |                      |   | 20.36
|January 23, 2003  |  |               | 18.40 |                                 | 8,375  |                        | 7.07 |                      |   | 18.40
|December 12, 2003 |  |               | 18.80 |                                 | 9,875  |                        | 7.95 |                      |   | 18.80
|November 19, 2004 |  |               | 18.75 |                                 | 11,500 |                        | 8.89 |                      |   | 18.75
|                  |  |               |       |                                 |        |                        |      |                      |   |      
|                  |  |               |       |                                 | 60,137 |                        |      |                      |   |      
|                  |  |               |       |                                 |        |                        |      |                      |   |      



---

|16. | COMMITMENTS
|--- | -----------

In the normal course of business, the
Company makes various commitments not reflected in the accompanying consolidated financial statements. The Company offers such products to enable its customers to meet their financing objectives. The instruments involve, to varying degrees, elements
of credit and interest rate risk in excess of the amount recognized in the balance sheet. The Companys exposure to credit loss is represented by the contractual amounts as disclosed below. Losses, if any, are charged to the reserve for
off-balance sheet risk.

The off-balance sheet commitments comprise the following at December 31:



|                             |  |      |           |      |   |          
|---------------------------- |  | ---- | --------- | ---- | - | ---------
|                             |  | 2005 |           | 2004
|Commitments to extend credit |  | $    | 8,361,891 |      | $ | 5,135,803
|Standby letters of credit    |  |      | 1,134,471 |      |   | 1,306,504

These instruments involve, to varying degrees, elements of credit and interest rate risk in excess
of the amount recognized in the Consolidated Balance Sheet. The Companys exposure to credit loss, in the event of nonperformance by the other parties to the financial instruments, is represented by the contractual amounts as disclosed. The
Company minimizes its exposure to credit loss under these commitments by subjecting them to credit approval and review procedures and collateral requirements as deemed necessary. Commitments generally have fixed expiration dates within one year of
their origination.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer
to a third party. Performance letters of credit represent conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. These instruments are issued primarily to support bid or performance-related contracts.
The coverage period for these instruments is typically a one-year period with an annual renewal option subject to prior approval by management. Fees earned from the issuance of these letters are recognized over the coverage period. For secured
letters of credit, the collateral is typically Bank deposit instruments or customer business assets.

The Company presently leases three
branch bank buildings and one office building under separate operating leases that expire in various years through 2016. Rent expense for 2005 and 2004 was $111,308 and $96,854.

Minimum future rental payments under noncancelable operating leases having remaining terms in excess of one year as of December 31, 2005, for each of
the next five years and in the aggregate, thereafter, are $108,617, $103,871, $41,233, $20,400, $6,000 and $500 for the years ended December 31, 2006, 2007, 2008, 2009, 2010, and thereafter, respectively.



---

|17. | FAIR VALUE OF FINANCIAL INSTRUMENTS
|--- | -----------------------------------

The estimated
fair values of the Companys financial instruments are as follows:



|                            |  |               |            |            |   |               |  |            |            |  |   |           
|--------------------------- |  | ------------- | ---------- | ---------- | - | ------------- |  | ---------- | ---------- |  | - | ----------
|                            |  | 2005          |            | 2004      
|                            |  | CarryingValue |            | Fair Value |   | CarryingValue |  | Fair Value
|Financial assets:           |  |               |            |            |   |               |  |            |            |  |   |           
|Cash and cash equivalents   |  | $             | 7,650,097  |            | $ | 7,650,097     |  | $          | 5,991,170  |  | $ | 5,991,170 
|Investment securities       |  |               | 34,485,574 |            |   | 34,392,295    |  |            | 32,721,144 |  |   | 32,759,835
|Net loans                   |  |               | 42,324,282 |            |   | 42,783,656    |  |            | 43,982,867 |  |   | 44,656,851
|Bank-owned life insurance   |  |               | 2,340,555  |            |   | 2,340,555     |  |            | 2,258,592  |  |   | 2,258,592 
|Regulatory stock            |  |               | 383,250    |            |   | 383,250       |  |            | 363,450    |  |   | 363,450   
|Accrued interest receivable |  |               | 510,101    |            |   | 510,101       |  |            | 465,953    |  |   | 465,953   
|                            |  |               |            |           
|Financial liabilities:      |  |               |            |            |   |               |  |            |            |  |   |           
|Deposits                    |  | $             | 75,612,528 |            | $ | 75,067,956    |  | $          | 72,305,605 |  | $ | 72,464,295
|Short-term borrowings       |  |               | 5,982,201  |            |   | 5,982,201     |  |            | 5,133,865  |  |   | 5,133,865 
|Other borrowings            |  |               | 2,600,000  |            |   | 2,600,000     |  |            | 3,300,000  |  |   | 3,300,000 
|Accrued interest payable    |  |               | 43,267     |            |   | 43,267        |  |            | 43,757     |  |   | 43,757    

Financial instruments are defined as cash, evidence of an ownership interest in an entity, or a
contract which creates an obligation or right to receive or deliver cash or another financial instrument from/to a second entity on potentially favorable or unfavorable terms.

Fair value is defined as the amount at which a financial instrument could be exchanged in a current transaction between willing parties other than in a
forced or liquidation sale. If a quoted market price is available for a financial instrument, the estimated fair value would be calculated based upon the market price per trading unit of the instrument.

If no readily available market exists, the fair value estimates for financial instruments are based upon managements judgment regarding current
economic conditions, interest rate risk, expected cash flows, future estimated losses, and other factors as determined through various option pricing formulas or simulation modeling. Since many of these assumptions result from judgments made by
management based upon estimates which are inherently uncertain, the resulting estimated fair values may not be indicative of the amount realizable in the sale of a particular financial instrument. In addition, changes in the assumptions on which the
estimated fair values are based may have a significant impact on the resulting estimated fair values.



---

|17. | FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
|--- | -----------------------------------------------



Since certain assets such as deferred tax assets and premises and equipment are not considered
financial instruments, the estimated fair value of financial instruments would not represent the full value of the Company.

The Company
performed simulation modeling in determining the estimated fair value of financial instruments for which quoted market prices were not available based upon the following assumptions:

Cash and Cash Equivalents, Regulatory Stock, Accrued Interest Receivable, Short-Term Borrowings, and Accrued Interest Payable

The fair value is equal to the current carrying value.

Bank-Owned Life Insurance

The fair value is equal to the cash surrender value of the life
insurance policies.

Investment Securities

The fair value of investment securities is equal to the available quoted market price. If no quoted market price is available, fair value is estimated using the quoted market price for similar securities.

Loans, Deposits, and Other Borrowings

The fair value of loans is estimated by discounting the future cash flows using a simulation model which estimates future cash flows and constructs discount rates that consider reinvestment opportunities, operating
expenses, non-interest income, credit quality, and prepayment risk. Demand, savings, and money market deposit accounts which are due within 30 days are valued at the amount payable as of year-end. Fair values for time are estimated using a
discounted cash flow calculation that applies contractual costs currently being offered in the existing portfolio to current market rates being offered for deposits of similar remaining maturities.

Commitments to Extend Credit and Commercial Letters of Credit

These financial instruments are generally not subject to sale, and estimated fair values are not readily available. The carrying value, represented by the net deferred fee arising from the unrecognized commitment or
letter of credit, and the fair value, determined by discounting the remaining contractual fee over the term of the commitment using fees currently charged to enter into similar agreements with similar credit risk, are not considered material for
disclosure. The contractual amounts of unfunded commitments and letters of credit are presented in Note 16.



|18. | REGULATORY MATTERS
|--- | ------------------

Cash and Due From
Banks

The district Federal Reserve Bank requires the Bank to maintain certain reserve balances. As of December 31, 2005 and
2004, the Bank had required reserves of $405,000 and $568,000, respectively, consisting of vault cash and a depository amount held with the Federal Reserve Bank.

Loans

Federal law prevents the Company from borrowing from the Bank unless the loans are
secured by specific obligations. Further, such secured loans are limited in amount to 10 percent of the Banks capital.



---

|18. | REGULATORY MATTERS (Continued)
|--- | ------------------------------



Dividends

The Bank is subject to a dividend restriction that generally limits the amount of dividends that can be paid by a national bank. Prior approval of the Comptroller of the Currency is required if the total of all
dividends declared by a national bank in any calendar year exceeds net profits, as defined for the year, combined with its retained net profits for the two preceding calendar years less any required transfers to surplus. However, the Company is
currently required to obtain approval form the Comptroller of the Currency prior to declaring dividends.

Capital Requirements

Federal regulations require the Company to maintain minimum amounts of capital. Specifically, the Company and the Bank are required to
maintain minimum amounts and ratios of Total and Tier 1 capital to risk-weighted assets and of Tier 1 capital to average total assets. Management believes, as of December 31, 2005, that the Company and the Bank meet all capital adequacy
requirements to which they are subject.

In addition to capital requirements, the Federal Deposit Insurance Corporation Improvement Act
(FDICIA) established five capital categories ranging from well capitalized to critically undercapitalized. Should any institution fail to meet the requirements to be considered adequately capitalized,
it would become subject to a series of increasingly restrictive regulatory actions.

As of December 31, 2005 and 2004, the FDIC
categorized the Company and the Bank as well capitalized under the regulatory framework for prompt corrective action. To be classified as a well capitalized financial institution, Total risk-based, Tier 1 risk-based, and Tier 1 Leverage capital
ratios must be at least 10 percent, 6 percent, and 5 percent, respectively.

The capital position of the Bank does not materially differ
from the Companys; therefore, the following table sets forth the Companys capital position and minimum requirements as of December 31:



|                                         |  |        |           |       |       |   |        |   |           |  |       |  
|---------------------------------------- |  | ------ | --------- | ----- | ----- | - | ------ | - | --------- |  | ----- | -
|                                         |  | 2005   |           |       | 2004  |  
|                                         |  | Amount |           | Ratio |       |   | Amount |   | Ratio     | 
|Total Capital (to Risk-Weighted Assets)  |  |        |           |       |       |   |        |   |           |  |       |  
|Actual                                   |  | $      | 8,762,485 |       | 17.44 | % |        | $ | 8,789,953 |  | 17.52 | %
|For Capital Adequacy Purposes            |  |        | 4,020,560 |       | 8.00  |   |        |   | 4,013,040 |  | 8.00  |  
|To Be Well Capitalized                   |  |        | 5,025,700 |       | 10.00 |   |        |   | 5,016,300 |  | 10.00 |  
|                                         |  |        |           |      
|Tier I Capital (to Risk-Weighted Assets) |  |        |           |       |       |   |        |   |           |  |       |  
|Actual                                   |  | $      | 8,196,627 |       | 16.31 | % |        | $ | 8,279,271 |  | 16.50 | %
|For Capital Adequacy Purposes            |  |        | 2,010,280 |       | 4.00  |   |        |   | 2,006,520 |  | 4.00  |  
|To Be Well Capitalized                   |  |        | 3,015,420 |       | 6.00  |   |        |   | 3,009,780 |  | 6.00  |  
|                                         |  |        |           |      
|Tier I Capital (to Average Assets)       |  |        |           |       |       |   |        |   |           |  |       |  
|Actual                                   |  | $      | 8,196,627 |       | 8.88  | % |        | $ | 8,279,271 |  | 9.24  | %
|For Capital Adequacy Purposes            |  |        | 3,693,561 |       | 4.00  |   |        |   | 3,582,437 |  | 4.00  |  
|To Be Well Capitalized                   |  |        | 4,616,951 |       | 5.00  |   |        |   | 4,478,047 |  | 5.00  |  



---

|19. | SEGMENT REPORTING
|--- | -----------------

The Company operates two major
businesses engaged in providing banking and investment advisory services. Banking services include community banking through seven branch offices which are located in the tristate area of East Liverpool, Ohio. Investment advisory services include
investment management and financial planning to over 100 clients in fourteen states.

Total business segment financial results differ from
total consolidated results. The impact of these differences is reflected in the Intercompany Eliminations and Other categories. Intercompany Eliminations reflects activities conducted among our businesses that are
eliminated in the consolidated results. Other includes residual activities that do not meet the criteria for disclosure as a separate reportable business, such as Gateminder.

Business Segment Products and Services

Community Banking Products and Services

The Bank operates as a full-service community Bank, offering a variety of
financial services to meet the needs of its customers. Services include: accepting demand and time deposits from the general public and, together with borrowings and other funds, using the proceeds to originate secured and unsecured commercial and
consumer loans and provide construction and mortgage loans, as well as home equity and personal lines of credit. In addition, funds are also used to purchase investment securities. The Banks deposits are insured to the legal maximum amount by
the Federal Deposit Insurance Corporation.

MDH Investment Management, Inc.

MDH Investment Management, Inc. was incorporated December 22, 2004, under the laws of the state of Ohio as a wholly owned non-bank subsidiary of the
Company. MDH is headquartered in East Liverpool, Ohio, and provides investment management advisory services to both individuals and trusts in 14 states.

Other

The Other segment includes the parent company and other non-bank
subsidiaries and is necessary for purposes of reconciling to the consolidated amounts.

The following tables provide financial information
for these segments of the Company.



|                          |  |                  |            |     |   |           |  |   |                          |   |  |              |            |   |  |   |           
|------------------------- |  | ---------------- | ---------- | --- | - | --------- |  | - | ------------------------ | - |  | ------------ | ---------- | - |  | - | ----------
|                          |  | CommunityBanking |            | MDH |   | Other     |  |   | IntercompanyEliminations |   |  | Consolidated
|Interest income           |  | $                | 4,911,195  |     | $ |          |  | $ | 7,241                    |   |  | $            | (7,241     | ) |  | $ | 4,911,195 
|Interest expense          |  |                  | 1,345,413  |     |   |          |  |   | 7,241                    |   |  |              | (7,241     | ) |  |   | 1,345,413 
|Provision for loan losses |  |                  | 229,686    |     |   |          |  |   |                         |   |  |              |           |   |  |   | 229,686   
|Other operating income    |  |                  | 1,476,579  |     |   | 487,020   |  |   | 99,298                   |   |  |              | (18,000    | ) |  |   | 2,044,897 
|Other operating expense   |  |                  | 3,758,083  |     |   | 319,403   |  |   | 148,505                  |   |  |              | (12,000    | ) |  |   | 4,213,991 
|Occupancy expense         |  |                  | 430,809    |     |   | 16,249    |  |   | 6,000                    |   |  |              | (6,000     | ) |  |   | 447,058   
|Income taxes              |  |                  | 102,000    |     |   | 51,000    |  |   | (21,688                  | ) |  |              |           |   |  |   | 131,312   
|Net income                |  |                  | 521,783    |     |   | 100,368   |  |   | 584,529                  |   |  |              | (618,048   | ) |  |   | 588,632   
|Total assets              |  |                  | 92,625,002 |     |   | 1,131,548 |  |   | 9,190,708                |   |  |              | (9,289,043 | ) |  |   | 93,658,215



---

|20. | PARENT COMPANY
|--- | --------------

Following are condensed financial
statements for the parent company:

CONDENSED BALANCE SHEET



|                                           |  |              |           |      |   |           
|------------------------------------------ |  | ------------ | --------- | ---- | - | ----------
|                                           |  | December 31,
|                                           |  | 2005         |           | 2004
|ASSETS                                     |  |              |           |      |   |           
|Cash                                       |  | $            | 15,607    |      | $ | 80,070    
|Investment in subsidiaries                 |  |              | 9,076,984 |      |   | 9,415,510 
|Loans                                      |  |              | 20,000    |      |   | 485,000   
|Other assets                               |  |              | 32,559    |      |   | 24,175    
|                                           |  |              |           |      |   |           
|TOTAL ASSETS                               |  | $            | 9,145,150 |      | $ | 10,004,755
|                                           |  |              |           |      |   |           
|OTHER LIABILITIES                          |  | $            | 333,333   |      | $ | 666,667   
|STOCKHOLDERS EQUITY                       |  |              | 8,811,817 |      |   | 9,338,088 
|                                           |  |              |           |      |   |           
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |  | $            | 9,145,150 |      | $ | 10,004,755
|                                           |  |              |           |      |   |           

CONDENSED STATEMENT OF INCOME



|                                                                 |  |                         |         |      |   |          |  
|---------------------------------------------------------------- |  | ----------------------- | ------- | ---- | - | -------- | -
|                                                                 |  | Year Ended December 31, |        
|                                                                 |  | 2005                    |         | 2004 |  
|INCOME                                                           |  | $                       | 534,619 |      | $ | 932,578  |  
|EXPENSES                                                         |  |                         | 53,927  |      |   | 40,428   |  
|                                                                 |  |                         |         |      |   |          |  
|Earnings before income taxes                                     |  |                         | 480,692 |      |   | 892,150  |  
|Income tax expense                                               |  |                         | 17,000  |      |   | 6,119    |  
|                                                                 |  |                         |         |      |   |          |  
|Earnings before equity in undistributed earnings of subsidiaries |  |                         | 497,692 |      |   | 898,269  |  
|Equity in undistributed earnings of subsidiaries                 |  |                         | 90,940  |      |   | (132,037 | )
|                                                                 |  |                         |         |      |   |          |  
|NET INCOME                                                       |  | $                       | 588,632 |      | $ | 766,232  |  
|                                                                 |  |                         |         |      |   |          |  



---

|20. | PARENT COMPANY (Continued)
|--- | --------------------------



CONDENSED STATEMENT OF CASH FLOWS



|                                                                                 |  |                         |          |   |      |   |          |  
|-------------------------------------------------------------------------------- |  | ----------------------- | -------- | - | ---- | - | -------- | -
|                                                                                 |  | Year ended December 31, |         
|                                                                                 |  | 2005                    |          |   | 2004 |  
|OPERATING ACTIVITIES                                                             |  |                         |          |   |      |   |          |  
|Net income                                                                       |  | $                       | 588,632  |   |      | $ | 766,232  |  
|Adjustment to reconcile net income to net cash provided by operating activities: |  |                         |          |   |      |   |          |  
|Equity in undistributed earnings of subsidiaries                                 |  |                         | (90,940  | ) |      |   | 132,037  |  
|Other, net                                                                       |  |                         | (12,692  | ) |      |   | (3,672   | )
|                                                                                 |  |                         |          |   |      |   |          |  
|Net cash provided by operating activities                                        |  |                         | 485,000  |   |      |   | 894,597  |  
|                                                                                 |  |                         |          |   |      |   |          |  
|INVESTING ACTIVITIES                                                             |  |                         |          |   |      |   |          |  
|Acquisition of MDH subsidiary                                                    |  |                         | (166,667 | ) |      |   | (366,027 | )
|Decrease in loans                                                                |  |                         | 465,000  |   |      |   | 10,000   |  
|                                                                                 |  |                         |          |   |      |   |          |  
|Net cash provided by (used for) investing activities                             |  |                         | 298,333  |   |      |   | (356,027 | )
|                                                                                 |  |                         |          |   |      |   |          |  
|FINANCING ACTIVITIES                                                             |  |                         |          |   |      |   |          |  
|Cash dividends paid                                                              |  |                         | (348,596 | ) |      |   | (336,958 | )
|Purchase of treasury stock                                                       |  |                         | (499,200 | ) |      |   | (228,048 | )
|                                                                                 |  |                         |          |   |      |   |          |  
|Net cash used for financing activities                                           |  |                         | (847,796 | ) |      |   | (565,006 | )
|                                                                                 |  |                         |          |   |      |   |          |  
|Net decrease in cash                                                             |  |                         | (64,463  | ) |      |   | (26,436  | )
|CASH AT BEGINNING OF YEAR                                                        |  |                         | 80,070   |   |      |   | 106,506  |  
|                                                                                 |  |                         |          |   |      |   |          |  
|CASH AT END OF YEAR                                                              |  | $                       | 15,607   |   |      | $ | 80,070   |  
|                                                                                 |  |                         |          |   |      |   |          |  



---

|21. | QUARTERLY DATA (Unaudited)
|--- | --------------------------

The following is a
summary of the unaudited quarterly results of operations:



|                                                    |  |                    |           |          |   |               |  |              |           |  |   |          
|--------------------------------------------------- |  | ------------------ | --------- | -------- | - | ------------- |  | ------------ | --------- |  | - | ---------
|                                                    |  | Three Months Ended
|                                                    |  | March2005          |           | June2005 |   | September2005 |  | December2005
|Total interest income                               |  | $                  | 1,168,292 |          | $ | 1,250,499     |  | $            | 1,264,714 |  | $ | 1,227,414
|Total interest expense                              |  |                    | 295,577   |          |   | 341,527       |  |              | 353,492   |  |   | 354,816  
|                                                    |  |                    |           |          |   |               |  |              |           |  |   |          
|Net interest income                                 |  |                    | 872,715   |          |   | 908,972       |  |              | 911,222   |  |   | 872,598  
|Provision for loan losses                           |  |                    | 30,000    |          |   | 57,000        |  |              | 72,500    |  |   | 50,500   
|                                                    |  |                    |           |          |   |               |  |              |           |  |   |          
|Net interest income after provision for loan losses |  |                    | 842,715   |          |   | 851,972       |  |              | 838,722   |  |   | 822,098  
|Total noninterest income                            |  |                    | 484,248   |          |   | 474,832       |  |              | 535,483   |  |   | 550,328  
|Total noninterest expense                           |  |                    | 1,129,169 |          |   | 1,149,691     |  |              | 1,139,314 |  |   | 1,242,281
|                                                    |  |                    |           |          |   |               |  |              |           |  |   |          
|Income before income taxes                          |  |                    | 177,794   |          |   | 177,113       |  |              | 234,891   |  |   | 130,145  
|Income taxes                                        |  |                    | 22,700    |          |   | 32,700        |  |              | 58,100    |  |   | 17,812   
|                                                    |  |                    |           |          |   |               |  |              |           |  |   |          
|Net income                                          |  | $                  | 155,094   |          | $ | 144,413       |  | $            | 176,791   |  | $ | 112,333  
|                                                    |  |                    |           |          |   |               |  |              |           |  |   |          
|Per share data:                                     |  |                    |           |          |   |               |  |              |           |  |   |          
|Net income                                          |  |                    |           |          |   |               |  |              |           |  |   |          
|Basic                                               |  | $                  | 0.18      |          | $ | 0.17          |  | $            | 0.20      |  | $ | 0.13     
|Diluted                                             |  |                    | 0.18      |          |   | 0.17          |  |              | 0.20      |  |   | 0.13     
|Weighted-average shares outstanding                 |  |                    |           |          |   |               |  |              |           |  |   |          
|Basic                                               |  |                    | 880,045   |          |   | 876,457       |  |              | 870,437   |  |   | 858,283  
|Diluted                                             |  |                    | 880,045   |          |   | 876,457       |  |              | 870,437   |  |   | 858,283  
|                                                    | 
|                                                    |  | Three Months Ended
|                                                    |  | March2004          |           | June2004 |   | September2004 |  | December2004
|Total interest income                               |  | $                  | 1,157,947 |          | $ | 1,141,668     |  | $            | 1,131,371 |  | $ | 1,124,723
|Total interest expense                              |  |                    | 271,730   |          |   | 255,677       |  |              | 218,994   |  |   | 218,780  
|                                                    |  |                    |           |          |   |               |  |              |           |  |   |          
|Net interest income                                 |  |                    | 886,217   |          |   | 885,991       |  |              | 912,377   |  |   | 905,943  
|Provision for loan losses                           |  |                    | 45,000    |          |   | 34,000        |  |              | 24,000    |  |   | 30,000   
|                                                    |  |                    |           |          |   |               |  |              |           |  |   |          
|Net interest income after provision for loan losses |  |                    | 841,217   |          |   | 851,991       |  |              | 888,377   |  |   | 875,943  
|Total noninterest income                            |  |                    | 276,652   |          |   | 328,561       |  |              | 397,504   |  |   | 384,820  
|Total noninterest expense                           |  |                    | 927,585   |          |   | 920,148       |  |              | 985,878   |  |   | 1,036,267
|                                                    |  |                    |           |          |   |               |  |              |           |  |   |          
|Income before income taxes                          |  |                    | 190,284   |          |   | 260,404       |  |              | 300,003   |  |   | 224,496  
|Income taxes                                        |  |                    | 36,000    |          |   | 51,300        |  |              | 75,643    |  |   | 46,012   
|                                                    |  |                    |           |          |   |               |  |              |           |  |   |          
|Net income                                          |  | $                  | 154,284   |          | $ | 209,104       |  | $            | 224,360   |  | $ | 178,484  
|                                                    |  |                    |           |          |   |               |  |              |           |  |   |          
|Per share data:                                     |  |                    |           |          |   |               |  |              |           |  |   |          
|Net income                                          |  |                    |           |          |   |               |  |              |           |  |   |          
|Basic                                               |  | $                  | 0.17      |          | $ | 0.23          |  | $            | 0.25      |  | $ | 0.2      
|Diluted                                             |  |                    | 0.17      |          |   | 0.23          |  |              | 0.25      |  |   | 0.2      
|Weighted-average shares outstanding                 |  |                    |           |          |   |               |  |              |           |  |   |          
|Basic                                               |  |                    | 892,464   |          |   | 892,397       |  |              | 888,086   |  |   | 881,627  
|Diluted                                             |  |                    | 892,578   |          |   | 892,516       |  |              | 888,086   |  |   | 881,786  



---

Keith R. Clutter

1stNational Community Bank

President (1993-2005)

Founding
Director (since 6/1/1987)

Keith Clutter retired from the Bank and Tri-State 1stBanc effective January 1, 2006 after nearly 19 years serving on various Boards of Directors, executive offices and too many different capacities to ever
enumerate. Keiths first office space at 1stBank was a storage room beside the rear exit of the building
during the building renovations from a Perkins Pancake House restaurant. He will continue to serve the Bank and the holding company in the capacity of Secretary after retirement.

Keith began his banking career with The First National Bank of East Liverpool in 1965 in the Consumer Credit Department. He was serving as Vice President and Cashier of the bank when it was merged into Bank One in
1984. Keith then served as Vice President in the Operations Department of Bank One of Eastern Ohio until joining the 1stBank staff as its second in command.

Through his forty years in banking, Keith Clutter has been recognized as an outstanding leader in
the banking profession and in his community. He was graduated from the prestigious Stonier Graduate School of Banking and the Mellon School of Banking. He served as President and in other offices of the Columbiana County Bankers Association. Keith
also taught banking courses at the AIB School in Steubenville, Ohio, the Jefferson County Technical Institute and the East Liverpool Campus of Kent State University.

Some of his past activities in the community included: Past President of the East Liverpool Jaycees, of the Calcutta Rotary Club, of the East Liverpool Lions Club and of the Calcutta Chamber of Commerce. He chaired
the Southern Columbiana County United Way Campaign, also serving as its Treasurer. At the time of his retirement, Keith served on the Advisory Board of the Community Action Agency and the Board of the East Liverpool Area Salvation Army.

Keith is a lifetime resident of the East Liverpool area. He received a bachelors degree from Youngstown State University in 1965. Keith is married to the former
Vicky Cranston and they have three children and eight grandchildren. All live in the tri-state area and Keith plans to spend much of his newly found time enjoying grandchildren.

Charles B. Lang, Chairman of the Bank Board and longtime associate, stated: It is hard to imagine the Bank without Keith seated in his usual spot next to the front door greeting our customers. He has been a
vital part of the success of the Bank over the years. Keith has a great following among many customers who he assisted with every imaginable banking and business need. He also has earned the respect and appreciation of our employees through his
genuine caring for them and his gift as a teacher and coach. The influence he has had on the bank will continue to contribute to our success for many years into the future.



---

Managements Discussion and Analysis of Financial Condition and Results of Operations

The following is Managements discussion and analysis of the financial condition and results of operations of Tri-State 1stBanc, Inc. for the years ended December 31, 2005 and 2004. The discussion should be read in conjunction with the consolidated financial statements and
notes thereto and the summary financial information included elsewhere in this annual report.

Business

Tri-State 1stBanc, Inc. (the
Company) is an Ohio Corporation organized as the parent Company of 1st National Community Bank, a national banking association (the Bank), Gateminder Corporation (Gateminder) and MDH Investment Management, Inc.
(MDH), both Ohio corporations. The Company controls all of the capital stock of the Bank, Gateminder and MDH. The Company is a bank holding company regulated by the Board of Governors of the Federal Reserve System.

The Bank, chartered as a national banking association and headquartered in East Liverpool, Ohio, conducts business through seven banking offices. Branch offices are
located throughout the tri-state area of Columbiana County, Ohio; Hancock County, West Virginia; and Beaver County, Pennsylvania. The Banks deposits are insured to the legal maximum amount provided by the Federal Deposit Insurance Corporation.

Gateminder Corporation was incorporated under the laws of the state of Ohio as a wholly owned non-bank subsidiary of the Company. Headquartered in East
Liverpool, Ohio, Gateminder provides services for Automated Teller Machines (ATM). The non-bank subsidiary sells ATM machines to businesses, financial institutions and merchants that operate ATMs at their place of business and provides
the means for processing the ATM transactions that are generated at the merchants ATM.

MDH Investment Management, Inc. was incorporated in 2005 under the
laws of the state of Ohio as a wholly owned non-bank subsidiary of the Company. MDH is headquartered in East Liverpool, Ohio and provides investment management advisory services to over 100 clients in fourteen states.

Forward-Looking Statements

Certain
statements made by the Company and contained in this report that are not supported by historical facts but are forward looking statements, are subject to certain risks and uncertainties. These forward-looking statements are made in good faith
pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Such forward-looking statements include
statements about the Companys beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, that are subject to significant risk and uncertainties, and are subject to change based on various factors (some of which
are beyond the Companys control). The words may, could, should, would, believe, anticipate, estimate, expect, intend, plan
and similar expressions are intended to identify forward-looking statements.

Management Strategy

The Companys philosophy is to provide a wide array of community-oriented financial service products designed to meet the needs of its customers. Banking services
are delivered through conveniently located branch banking offices which offer customer friendly hours and a variety of loan and deposit products. In addition to full service banking, the Company offers other financial-related services through its
non-bank subsidiaries by providing ATM support and operations for businesses and wealth management services through an investment advisory firm.

The
lending strategy of the Bank has historically focused on the origination of real estate commercial mortgages, one-to-four family mortgage loans, working capital commercial loans in the form of credit lines and term notes, personal loans, automobile
loans and home equity loans.



---

The Bank attempts to manage the interest rates it pays on deposits, while maintaining a stable to growing deposit base by
providing convenient and quality service at competitive rates to its customers. Historically, the Bank has relied upon its customer deposit base as its primary source of funds but has from time to time borrowed funds through credit arrangements with
the Federal Home Loan Bank of Cincinnati (FHLB), the use of repurchase agreements with its business customers and federal funds purchased.

Management of Interest Rate and Market Risk

The objective of the Companys interest rate risk management
function is to evaluate interest rate sensitivity and determine the level of risk appropriate and consistent with approved guidelines. The Company maintains an Asset/Liability Management Committee (ALCO), which is responsible for
reviewing its asset/liability policies, securities portfolio, interest rate risk position and liquidity. The ALCO meets at least quarterly to review trends in interest rates, changes in the market value of the investment securities portfolio, the
financial position of the Company, actual performance results to budgeted performance, the Companys interest rate position as measured by changes in its net interest income, net income and economic value of equity under certain interest rate
scenarios, and the projected impact of such interest rate scenarios on earnings and capital.

Market risk is the risk of losses resulting from adverse
changes in market pricing and rates. The Companys market risk is primarily its interest rate risk associated with its investing, lending, deposit, and borrowing activities. Interest rate risk arises when interest rates on assets change in a
different time period or in a different proportion from that of liabilities. Management actively monitors its interest rate sensitivity position with the primary objective to prudently structure the balance sheet so that movements of interest rates
on assets and liabilities are highly correlated and produce a reasonable net interest margin even in periods of volatile interest rates.

Summary of Financial Condition

Total consolidated assets of the Company at December 31, 2005 were $93,658,000,
an increase of 3.0% or $2,698,000 from year-end 2004. This increase was above the 1.8% or $1,597,000 increase experienced in the 2004 period. Total deposits in 2005 grew at a faster rate than the previous year, but not as fast as they have
historically. Deposits increased by 4.6% increasing by $3,307,000 compared to $927,000 in 2004. As a result of this growth pattern at points during the year the Company made use of excess borrowing capacities with the FHLB to supplement deposits. At
the end of the year the borrowings represented amounts borrowed to implement a leveraged strategy.

Federal Funds Sold
and Investment Securities

At year-end 2005 the company had $1,550,000 in federal funds sold compared to 2004 when the Company had no federal funds
sold. On an average daily basis, federal funds sold were $3.2 million in 2005 and $2.9 million in 2004. The Company generally attempts to average between $2 and $4 million in federal funds sold, however, this range may shift as cash flows fluctuate
or liquidity needs change.

Investment Securities

Investment securities available for sale were $25,455,000 at December 31, 2005. This compares to $31,739,000 at December 31, 2004, a decrease of $6,284,000 or 19.8%. Investment securities held to maturity
increased by $8,048,000 or 819.2% in 2005 when compared to the prior year. This change in the portfolio composition occurred because management felt that at the end of 2004 the portfolio mix between held to maturity and available for sale needed to
be more balanced. The majority of purchases in 2005 were put into held to maturity to provide longer term income without the market value fluctuation that would occur in the available for sale classification. Total purchases for 2005 were
$14,692,000 and were funded by deposits. Investment securities that were either called or matured totaled $7,524,000 compared to previous year calls and maturities of $10,697,000 and purchases of $12,453,000. For 2005, a total of $4,683,000 in
securities was sold at a pre-tax gain of $17,000 compared to $582,000 in 2004 for a pre-tax gain of $10,000.



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The year-end 2005 market value of the available for sale investment portfolio decreased $657,000 when compared to
year-end 2004. This decrease was primarily due to interest rates rising during the year. In general, as interest rates rise, and increase above the rate on a fixed-rate investment security, the market value of that security declines. As a result,
the Company has taken measures to help position the investment portfolio for a rising rate environment. One such measure has been to keep-short the maturity or life of the portfolio in an attempt to minimize possible market value
declines.

Loans

Total loans for the year decreased $1,659,000 or 3.7% to $42,324,000. Average loans outstanding were $43,080,000, down $1,885,000 or 4.2% for the year. Overall loan demand has continued to be at a much slower pace than anticipated. In
September, the Company expanded the mortgage lending staff by adding an experienced residential mortgage Loan Officer. This originator has significant secondary market experience and will help the company as they begin to offer loans that will be
sold in the secondary market. This will allow the company to offer lower rates and longer terms for residential mortgage loans to better compete in the marketplace. The Company can then sell the loans at a profit on the sale and divest itself of the
interest rate risk on long term fixed rate loans. The Company divested itself of its credit card portfolio on December 31, 2005. The portfolio was $431,000 at year end and a premium was paid for the portfolio of $52,000, but after an accrual
for conversion costs and possible loan repurchases on delinquent loans sold the gain was negligible.

Bank Owned Life
Insurance

In early 2004, the Bank purchased $2,100,000 of Bank-owned life insurance (BOLI) from two separate insurance carriers. The
insurance is carried by the Bank at the current cash surrender values of the underlying policies. The earnings received from the cash value life insurance plans, which are tax exempt, are used to offset employee benefit costs. For 2005 the cash
value of these policies increased by $82,000 or 3.6%.

Deposits

Deposits are generally the Banks primary source for funding its earning assets. The Bank offers a wide variety of products designed to attract new customers and
retain existing customers while at the same time attempting to maintain a cost-effective funding source. Deposits in total were up $3,307,000 or 4.57% when compared to total deposits at December 31, 2004. Interest-bearing demand accounts were
up by $333,000 or 3.1%. Money market accounts were down by $2,474,000 or 30.5% and savings accounts decreased by $1,398,000 or 10.3%. In 2005 many consumers moved money from money market accounts and savings accounts to time deposits to take
advantage of rising interest rates and the higher rates on time deposits. This accounted for a portion of the loss in money market accounts and savings accounts. Total time deposits were up $5,701,000 for the year while noninterest-bearing demand
accounts increased by $1,145,000. In 2005, the Company introduced On-line Banking and a Billpay service to help retain and attract new customers. This service was introduced to the customers during the second quarter of 2005 and by the end of the
year approximately 10% of customers were utilizing the service.

Borrowings

The Company may from time to time use various funding sources other than deposits to provide the funds necessary for the loan and investment securities portfolios.
Alternative funding sources may include securities sold under repurchase agreements and advances with the FHLB. Securities that are sold under repurchase agreements are funding agreements with customers of the Bank that are collateralized by various
Bank owned investment securities.

At December 31, 2005 total borrowings from the FHLB equaled $2,600,000 compared to $3,300,000 at year-end 2004. The
2005 borrowings consisted of both fixed and variable rate advances with a term of twelve months. The borrowings are a result of a managed leverage strategy executed in 2004. The decrease in the FHLB advances for the year was a maturity of a $700,000
advance was timed to coincide with a decrease in the asset side of the leverage strategy.



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Securities sold under repurchase agreements totaled $5,134,000 for year-end 2004 compared to $5,982,000 in 2005 an
increase of $848,000 of 16.5% for the year.

Summary of Earnings

The Companys 2005 net income was $589,000, a decrease of $178,000, or 23.1%, from 2004s net income of $766,000. On a per share basis, net income decreased by
20.9% to $0.68 per basic and diluted share compared to 2004s net income per share of $0.86 for basic and diluted shares, respectively. The decrease in net income for the year was primarily a result of a decrease in net interest income and an
increase in other operating expenses somewhat offset by an increase in other operating income.

Interest Income

Interest income on loans decreased $37,000 or 1.1% during 2005 when compared to 2004. This decrease was a result of a 19 basis point increase on the
yield earned for total loans offset by a decrease of $1,872,000 or 4.2% in the average loan balance outstanding.

Interest income on federal funds sold
increased $65,000 or 193.6% during 2005 when compared to 2004 due to an increase of 39.2% or $830,000 in the average balance outstanding and a 239 basis point increase in the yield earned.

Interest income earned on investment securities increased in 2005 by $330,000 or 27.5% from 2004. This increase was a result of an 8 basis point increase in the yield
earned and by a $7,397,000 or 22.8% increase in the average balance.

Interest Expense

Interest expense on deposits for 2005 increased $292,000 or 34.4% when compared to 2004. This increase was a result of a 56 basis point increase on the rate paid on
deposits for the year and by a $3,827,000 or 6.7% increase in average interest-bearing deposits outstanding.

Interest expense on borrowings increased
$88,000 or 75.6% in 2005 when compared to 2004 and was due to an increase of 61 basis points on the rate paid on these funds and a $907,000 or 11.7% increase in the average balance of borrowed funds outstanding.

Provision and Allowance for Loan Losses

For 2005, the provision for loan losses was $230,000, compared to $133,000 charged in 2004. This represents a $97,000 or 72.7% increase for the year. The amount of the provision for loan losses charged to operations is determined by the
Companys loan committee and approved by the Board of Directors. In determining the amount of the provision, the committee considers such factors as credit risks inherent in the loan portfolio, asset quality, economic conditions, portfolio
trends and the amount of charge-offs. The increase in charge offs of $99,000 is attributable to the Bounce Protection accounts as well as general economic conditions in the area. Recoveries also increased $46,000 and the company
continues to aggressively pursue charged off loans in an effort to mitigate losses. The company continues to monitor the portfolio and the reserve account based on historical factors as well as general economic conditions. Each quarter these factors
are evaluated and the provision is adjusted accordingly.

The Company believes that the allowance for loan losses at December 31, 2005 of $532,000 is
adequate to cover probable losses in the portfolio as of such date. However, there can be no assurance that the Company will not sustain losses in future periods, which could be substantial in relation to the size of the allowance at
December 31, 2005.

Other Operating Income

Total noninterest income increased $657,000 or 47.4% for 2005. Service fees on deposit accounts increased by $142,000 or 15.1% as a result of (1) increased revenues from new deposits accounts as costs of these
services were not increased and (2) fees collected from a new demand deposit product introduced late in the second quarter of 2004. The new product, named Bounce Protection is an overdraft privilege service provided to customers of
the Bank and 2005 was the first year with a full year of those fees.



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Other noninterest income also increased from new revenues from investment advisory fees generated by MDH. The amounts of
the fees for 2005 were $487,000 compared to $3,000 in 2004. MDH is currently meeting expectations and investment fees are consistent with the projections.

Investment securities gains totaled $17,000 for 2005 compared to $10,000 in 2004 from the sale of $4,683,000 and $ 582,000 in investment securities, respectively. The investment sales in 2005 were made to help the company meet liquidity
needs that developed during the middle of 2005.

Other Operating Expense

Total salary and employee benefits increased $442,000 or 22.7% in 2005. Employee salaries and wages increased $333,000 or 22.5% due to the hiring of additional personnel
throughout 2005, including the acquisition of personnel from MDH, as well as normal merit increases relating to existing employees. In addition to the President of MDH and a clerical employee, the bank hired a full time loan originator as well as a
new CEO while the previous CEO is developing the trust department. Total employee benefit costs for the year increased by $118,000 due to increases in health insurance costs and other employee related benefit expenses.

Furniture and equipment costs increased $22,000 or 6.5% in 2005 from 2004 due mostly from an increase in depreciation expense from capitalized costs associated with new
networking equipment and On-line banking equipment purchased in 2005. Other expenses increased $280,000 or 23.8%, in 2005 mainly as a result of (1) increase in telecommunications costs from the wide area network, (2) increase in exam and
auditing fees and (3) systems software costs.

Income Tax Expense

The provision for income tax was $131,000 in 2005 compared to $209,000 in 2004. This represents a decrease of $78,000 or 37.2% and is due mostly to a decrease in taxable
income. The effective tax rate for the company for 2005 is 18.2% that compares to 21.4% for the year 2004.

Capital
Resources

Total consolidated stockholders equity decreased $526,000 or 5.6% when compared to December 31, 2004. For the year, net treasury
shares purchased totaled $333,000, which is a reduction to capital, and accumulated comprehensive income declined by $434,000, all offset by net income of $589,000, less cash dividends declared of $349,000.

Liquidity

The liquidity of a
Banking institution reflects its ability to provide funds to meet loan requests, to accommodate the possible outflows of deposits and to take advantage of interest rate market opportunities. It requires continuous analysis by management in order to
match the maturities of short-term loans and investments with the various types of deposits and borrowings. Liquidity is normally considered in terms of the nature and the mix of the Banks sources and uses of funds.

The Banks primary sources of funds are deposits, borrowings, proceeds from principal and interest payments on loans and interest payments and maturities on
investment securities. While scheduled principal repayments on loans and interest payments on investment securities are a relatively predictable source of funds, deposit and short-term borrowing outflows are greatly influenced by interest rates,
economic conditions, competition and other factors.

Management is not aware of any known trends, events or uncertainties that would have a material effect
on the liquidity, capital resources or operations of the Company. Management is not aware of any current regulatory recommendations, which, if implemented, would have a material effect on the liquidity, capital resources or operations of the
Company.



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Impact of Inflation and Changing Prices

The financial statements and related data have been prepared in accordance with generally accepted accounting principles which require the measurement of financial
position and operating results in terms of historical dollars, without consideration for changes in the relative purchasing power of money over time caused by inflation.

The effects of inflation on the local economy and the Companys operating results have been relatively modest for the past several years. However, unlike industrial companies, nearly all of the assets and
liabilities of a financial institution are monetary in nature. As a result, interest rates have a more significant impact on a financial institutions performance than general levels of inflation. Interest rates do not necessarily move in the
same direction or in the same magnitude as the price of goods or services, since such goods and services are affected by inflation. In the current interest rate environment, liquidity and the maturity structure of the Banks assets and
liabilities are critical to the maintenance of the acceptable performance levels.



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Directors of Tri-State 1stBanc, Inc.

Pictured from left to right: seated are, William E. Blair, Jr., Edward L.
Baumgardner, Charles B. Lang and John C. Thompson.; standing are Marvin H. Feldman, J. Robert Berg, Timothy G. Dickey, Stephen W. Cooper, and John Scotford Jr.

J. Robert Berg(1)(2)

President 

Richardson Monuments, Inc.

Edward L. Baumgardner(1)(2)(3)

CEO 

1stNational Community Bank

William E. Blair, Jr.(1)(2)(3)

President 

Bill Blair, Inc.

Vice President 

Gateminder Corporation

Stephen W. Cooper(1)(2)(4)

Cooper Insurance Agency

Timothy G. Dickey(1)(2)

Chairman-

D. W. Dickey & Son, Inc.

Marvin H. Feldman(1)(2)

Partner

The Feldman Agency

Charles B. Lang(1)/(2)(3)(4)

Chairman of the Board 

1stNational Community Bank

President 

Gateminder Corporation

President 

Tri-State 1stBanc, Inc

Vice President 

MDH Investment Management, Inc

John P. Scotford, Sr.(1)(4)(5)

Chairman 

McBarscot Company

John P. Scotford, Jr.(2)(3)

President 

McBarscot Company

John C. Thompson(1)(2)(3)(4)

Chairman 

The Hall China Company

(1) Director of Tri-State 1stBanc

(2) Director of 1st National Community Bank

(3) Director of Gateminder Corporation

(4)
Director of MDH Investment Management, Inc.

(5) Director Emeritus of 1st National Community Bank



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Officers of Tri-State 1stBanc, Inc. and Subsidiaries

Tri-State 1st Banc, Inc

Charles B. Lang

President

Keith R. Clutter

Secretary

Stephen Beadnell

Chief Financial Officer

1st National Community Bank

Edward L.
Baumgardner

Chief Executive Officer

Stephen A. Beadnell

Vice President, Chief Financial Officer

R. Keith Broadbent

Vice President, Loan Officer

Downtown East Liverpool Office

Steven A. Mabbott

Vice President, Consumer Loans

Robin W. Moadus

Vice President, Chief Operating Officer

Judy A. Mouse

Assistant Cashier

Vickie L. Owens

Vice President, Data
Processing

Michael J. Palmer

Assistant Vice President, Branch Sales Manager

Roger D. Sanford

Vice President, Business Development Officer

Joseph B. Shemasek

Vice President, Commercial Loans

Cynthia A. Vincent

Assistant Vice President, Human Resources

MDH Investment Management, Inc.

Dr. Marc D.
Hoffrichter

President

Charles
B. Lang

Secretary

Stephen
Beadnell

Chief Financial Officer

Gateminder Corporation

Charles B. Lang

President

William E. Blair Jr.

Vice- President

Edward L. Baumgardner

Secretary

Stephen A. Beadnell

Chief Financial Officer

Lance H. Lang

Vice President, Account Executive