EARNINGS SUMMARY

Comparison of the Three Months Ended March 31, 2009 and 2008

Summary Results

Net income for the three months ended March 31, 2009 was $839,000 compared to $2,131,000 for the same period of 2008 as after-tax securities losses increased $1,589,000 (from a gain of $25,000 to a loss of $1,564,000). Included within the change in after-tax securities losses was an other than temporary impairment charge relating to certain equity securities held in the investment portfolio of $2,333,000. Basic and diluted earnings per share for the three months ended March 31, 2009 were $0.22 compared to $0.55 for the three months ended March 31, 2008. Return on average assets and return on average equity were 0.52% and 5.64% for the three months ended March 31, 2009 compared to 1.36% and 12.01% for the corresponding period of 2008. Net income from core operations ("operating earnings") increased 14.1% to $2,403,000 for the three months ended March 31, 2009 compared to $2,106,000 for the same period of 2008. Operating earnings per share for the three months ended March 31, 2009 increased 16.7% to $0.63 basic and dilutive compared to $0.54 basic and dilutive for the three months ended March 31, 2008.

(Management uses the non-GAAP measure of net income from core operations in its analysis of the Company's performance. This measure, as used by the Company, adjusts net income by excluding significant gains or losses that are unusual in nature. Because certain of these items and their impact on the Company's performance are difficult to predict, management believes the presentation of financial measures excluding the impact of such items provides useful supplemental information in evaluating the operating results of the Company's core businesses. For purposes of this Quarterly Report on Form 10-Q, net income from core operations means net income adjusted to exclude after-tax net securities gains or losses. These disclosures should not be viewed as a substitute for net income determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.)

Interest And Dividend Income

Interest and dividend income for the three months ended March 31, 2009 decreased $131,000 to $8,917,000 compared to $9,048,000 for the same period of 2008. The decrease in interest income was the result of a decline in loan interest of $161,000 offset by an increase in investment securities income of $30,000. The decline in loan interest is the result of the low interest rate environment that has existed over the past year. This has caused the interest rate of new loans to be at a lower rate, resulting in a 56 basis point ("bp") decline in loan portfolio yield. Dividend income decreased as a direct result of the current status of the economy that has caused many of the equity holdings in our portfolio to decrease their dividend. In addition, the Federal

Home Loan Bank of Pittsburgh ("FHLB") has suspended payment of dividends on shares of its common stock, which has resulted in a decrease of approximately $75,000 in dividend income. Offsetting the decreased dividend income was an increase in taxable investment securities income of $173,000. On a taxable equivalent basis, the decline in total interest income was limited to $73,000. Average loan portfolio growth of $27,202,000 limited the impact of the decline in loan portfolio yield. In addition, the investment portfolio yield increased 43 bp resulting in increased taxable equivalent income of $41,000.

Interest and dividend income composition for the three months ended March 31, 2009 and 2008 was as follows:

                                                   For The Three Months Ended
                                      March 31, 2009      March 31, 2008         Change
(In Thousands)                       Amount    % Total   Amount    % Total   Amount      %
Loans including fees                 $ 6,219      69.7 % $ 6,380      70.5 % $  (161 )  (2.5 )%
Investment securities:
Taxable                                1,363      15.3     1,190      13.2       173    14.5
Tax-exempt                             1,246      14.0     1,226      13.5        20     1.6
Dividend and other interest income        89       1.0       252       2.8      (163 ) (64.7 )
Total interest and dividend income   $ 8,917     100.0 % $ 9,048     100.0 % $  (131 )  (1.4 )%

Interest Expense

Interest expense for the three months ended March 31, 2009 decreased $1,087,000 to $3,080,000 compared to $4,167,000 for the same period of 2008. The decreased expense of $536,000 associated with deposits is primarily the result of a reduction of 138 bp in rate paid on time deposits. Factors that led to the rate decreases include, but are not limited to, Federal Open Market Committee ("FOMC") interest rate actions and campaigns conducted by the Company during the past two years to attract 12 month or shorter maturity CDs resulting in an increased repricing frequency. Short-term borrowings interest expense decreased $271,000 as the increase in average balance of $10,374,000 was countered by a decrease in the rate paid of 231 bp due to the FOMC rate actions and overall decline in the treasury security market. Long-term borrowing interest expense decreased $280,000 as the average balance of such borrowings decreased $18,756,000, while the average rate decreased 26 bp to 4.23%. The change in average balance and rate is reflective of $29,600,000 in long-term borrowing maturities during the first half of 2008 at an average rate of 4.77% offset by the acquisition of $10,000,000 in long-term borrowings at a rate of 3.18% during the third quarter of 2008.

Interest expense composition for the three months ended March 31, 2009 and 2008 was as follows:

                                            For The Three Months Ended
                              March 31, 2009      March 31, 2008          Change
(In Thousands)               Amount    % Total   Amount    % Total    Amount      %
Deposits                     $ 2,005      65.1 % $ 2,541      61.0 % $   (536 ) (21.1 )%
Short-term borrowings            158       5.1       429      10.3       (271 ) (63.2 )
Long-term borrowings, FHLB       917      29.8     1,197      28.7       (280 ) (23.4 )
Total interest expense       $ 3,080     100.0 % $ 4,167     100.0 % $ (1,087 ) (26.1 )%

Net Interest Margin

The net interest margin ("NIM") for the three months ended March 31, 2009 was 4.47% compared to 3.87% for the corresponding period of 2008. The increase in the NIM was driven by a 105 bp decline in the rate paid on interest bearing liabilities that more than compensated for a 19 bp decline in the yield on earning assets. The decrease in earning asset yield is due to the impact on the loan portfolio of the current low rate environment offset in part by an increase in yield for the investment portfolio. The increase in the investment portfolio yield was driven by a strategic initiative to increase tax equivalent net interest income by purchasing tax-exempt and taxable municipal bonds in anticipation of the decreasing rate environment that has continued to date. The decrease in the cost of interest bearing liabilities to 2.45% from 3.50% was driven primarily by a reduction in the rate paid on time deposits of 138 bp and total borrowings of 121 bp. The reduction in the rate paid on time deposits was the result of a shortening of the time deposit portfolio that has resulted in an increasing repricing frequency during this period of decreasing rates.

The following is a schedule of average balances and associated yields for the three months ended March 31, 2009 and 2008:

                                                         AVERAGE BALANCES AND INTEREST RATES
                                         Three Months Ended                              Three Months Ended
                                           March 31, 2009                                  March 31, 2008
(In Thousands)               Average Balance     Interest    Average Rate    Average Balance     Interest    Average Rate
Assets:
Tax-exempt loans            $          16,052   $      265           6.70 % $           8,013   $      126           6.32 %
All other loans                       373,878        6,044           6.56 %           354,715        6,297           7.14 %
Total loans                           389,930        6,309           6.56 %           362,728        6,423           7.12 %

Taxable investment
securities                            101,890        1,452           5.70 %           100,730        1,442           5.73 %
Tax-exempt investment
securities                            101,654        1,888           7.43 %           114,590        1,857           6.48 %
Total securities                      203,544        3,340           6.56 %           215,320        3,299           6.13 %

Interest bearing deposits                  23            -           0.00 %                38            -           0.00 %

Total interest-earning
assets                                593,497        9,649           6.56 %           578,086        9,722           6.75 %

Other assets                           55,256                                          48,692

Total assets                $         648,753                               $         626,778

Liabilities:
Savings                     $          59,642           78           0.53 % $          58,561          109           0.75 %
Super Now deposits                     53,890          129           0.97 %            46,367          155           1.34 %
Money market deposits                  41,276          212           2.08 %            23,324          127           2.18 %
Time deposits                         205,110        1,586           3.14 %           190,927        2,150           4.52 %
Total deposits                        359,918        2,005           2.26 %           319,179        2,541           3.20 %

Short-term borrowings                  61,487          158           1.03 %            51,113          429           3.34 %
Long-term borrowings,
FHLB                                   86,778          917           4.23 %           105,534        1,197           4.49 %
Total borrowings                      148,265        1,075           2.90 %           156,647        1,626           4.11 %

Total interest-bearing
liabilities                           508,183        3,080           2.45 %           475,826        4,167           3.50 %

Demand deposits                        71,321                                          70,243
Other liabilities                       9,760                                           9,726
Shareholders' equity                   59,489                                          70,983
Total liabilities and
shareholders' equity        $         648,753                               $         626,778

Interest rate spread                                                 4.12 %                                          3.25 %

Net interest
income/margin                                   $    6,569           4.47 %                     $    5,555           3.87 %

1. Information on this table has been calculated using average daily balance sheets to obtain average balances.

2. Nonaccrual loans have been included with loans for the purpose of analyzing net interest earnings.

3. Income and rates on a fully taxable equivalent basis include an adjustment for the difference between annual income from tax-exempt obligations and the taxable equivalent of such income at the standard 34% tax rate.

The following table presents the adjustment to convert net interest income to net interest income on a fully taxable equivalent basis for the three months ended March 31, 2009 and 2008.

                                                   For the Three Months Ended
                                                           March 31,
(In Thousands)                                       2009             2008

Total interest income                            $       8,917    $       9,048
Total interest expense                                   3,080            4,167

Net interest income                                      5,837            4,881
Tax equivalent adjustment                                  732              674

Net interest income (fully taxable equivalent)   $       6,569    $       5,555

The following table sets forth the respective impact that both volume and rate changes have had on net interest income on a fully taxable equivalent basis for the three month periods ended March 31, 2009 and 2008:

                                          Three Months Ended March 31,
                                                  2009 vs 2008
                                              Increase (Decrease)
                                                     Due to
(In Thousands)                        Volume        Rate           Net
Interest income:
Loans, tax-exempt                    $     131    $       8    $        139
Loans                                      453         (706 )          (253 )
Taxable investment securities               17           (7 )            10
Tax-exempt investment securities          (223 )        254              31
Interest bearing deposits                    -            -               -
Total interest-earning assets              378         (451 )           (73 )

Interest expense:
Savings deposits                             2          (33 )           (31 )
Super Now deposits                          33          (59 )           (26 )
Money market deposits                       90           (5 )            85
Time deposits                              178         (742 )          (564 )
Short-term borrowings                      106         (377 )          (271 )
Long-term borrowings, FHLB                (211 )        (69 )          (280 )
Total interest-bearing liabilities         198       (1,285 )        (1,087 )
Change in net interest income        $     180    $     834    $      1,014

Provision for Loan Losses

The provision for loan losses is based upon management's quarterly review of the loan portfolio. The purpose of the review is to assess loan quality, identify impaired loans, analyze delinquencies, ascertain loan growth, evaluate potential charge-offs and recoveries, and assess general economic conditions in the markets served. An external independent loan review is also performed annually for the Bank. Management remains committed to an aggressive program of problem loan identification and resolution.

The allowance for loan losses is determined by applying loss factors to outstanding loans by type, excluding loans for which a specific allowance has been determined. Loss factors are based on management's consideration of the nature of the portfolio segments, changes in mix and volume of the loan portfolio, and historical loan loss experience. In addition, management considers industry standards and trends with respect to non-performing loans and its knowledge and experience with specific lending segments.

Although management believes it uses the best information available to make such determinations and that the allowance for loan losses is adequate at March 31, 2009, future adjustments could be necessary if circumstances or economic conditions differ substantially from the assumptions used in making the initial determinations. A downturn in the local economy,

increased unemployment, and delays in receiving financial information from borrowers could result in increased levels of nonperforming assets, charge-offs, loan loss provisions, and reductions in income. Additionally, as an integral part of the examination process, bank regulatory agencies periodically review the Bank's loan loss allowance. The banking agencies could require the recognition of additions to the loan loss allowance based on their judgment of information available to them at the time of their examination.

While determining the appropriate allowance level, management has attributed the allowance for loan losses to various portfolio segments; however, the allowance is available for the entire portfolio as needed.

The allowance for loan losses increased from $4,356,000 at December 31, 2008 to $4,441,000 at March 31, 2009. At March 31, 2009 and December 31, 2008, the allowance for loan losses to total loans was 1.15% and 1.14%, respectively.

The provision for loan losses totaled $126,000 for the three months ended March 31, 2009, compared to $60,000 for the same period in 2008. The amount of the increase in the provision was the result of several factors, including but not limited to, an increase in gross loans of $5,714,000 since December 31, 2008, a ratio of annualized net charge offs to average loans of 0.04% for the three months ended March 31, 2009, a ratio of nonperforming loans to total loans of 0.59%, and a ratio of the allowance for loan losses to nonperforming loans of 195.72% at March 31, 2009.

Non-interest Income

Total non-interest income for the three months ended March 31, 2009 compared to the same period in 2008 decreased $2,690,000 to $(776,000) due to a $2,407,000 decrease in net securities gains and losses realized when comparing the three month periods ended March 31, 2009 and 2008. Excluding net securities gains and losses, non-interest income for the first quarter of 2009 would have decreased $283,000 as compared to the 2008 period. Deposit service charges decreased $45,000 as overdraft fee income declined $33,000 in addition to customers migrating to no service charge checking accounts that were introduced as part of a customer acquisition and retention program. Gain on sale of loans decreased $34,000 due primarily from a change in product mix which has resulted in a greater percentage of the fee collected being categorized as other income. Other income increased due to increased revenue from electronic card (debit/credit) usage and fees from the sale of loans into the secondary market, which countered losses realized from the sale of other real estate owned.

Insurance commissions for the three months ended March 31, 2009 decreased $226,000 compared to the same period in 2008 due to a softening market and shift in product mix. Management of The M Group continues to pursue new and build upon current relationships. The sales call program continues to expand to other financial institutions, which results in additional revenue for The M Group if another sales outlet is added. However, the addition of another sales outlet for The M Group can take up to a year or more to be completed.

Non-interest income composition for the three months ended March 31, 2009 and 2008 was as follows:

                                                     For The Three Months Ended
                                    March 31, 2009         March 31, 2008             Change
(In Thousands)                     Amount     % Total    Amount     % Total     Amount        %
Deposit service charges           $    525      (67.7 )% $   570       29.8 %  $    (45 )      (7.9 )%
Securities (losses) gains, net      (2,369 )    305.3         38        2.0      (2,407 )  (6,334.2 )
Bank owned life insurance              162      (20.9 )      155        8.1           7         4.5
Gain on sale of loans                  118      (15.2 )      152        7.9         (34 )     (22.4 )
Insurance commissions                  354      (45.6 )      580       30.3        (226 )     (39.0 )
Other                                  434      (55.9 )      419       21.9          15         3.6
Total non-interest income         $   (776 )    100.0 %  $ 1,914      100.0 %  $ (2,690 )    (140.5 )%

Non-interest Expense

Total non-interest expense increased $200,000 for the three months ended March 31, 2009 compared to the same period of 2008. The increase in salaries and employee benefits was attributable to several items including standard cost of living wage adjustments for employees, increased pension expense, and other benefit costs. Pennsylvania shares tax increased $66,000 due to the utilization of Pennsylvania Enterprise Zone tax credits from a low income housing partnership during 2008. Other expenses increased primarily due to normal anticipated inflationary adjustments to ongoing business operating costs.

Non-interest expense composition for the three months ended March 31, 2009 and 2008 was as follows: