• changes in the interest rate environment which could reduce anticipated or actual margins;

• changes in political conditions or the legislative or regulatory environment, including new or heightened legal standards and regulatory requirements, practices or expectations, which may impede profitability or affect the Corporation's financial condition;

• persisting volatility and limited credit availability in the financial markets, particularly if limitations on the Corporation's ability to raise funding to the extent required by banking regulators or otherwise; initiatives undertaken by the U.S. government do not have the intended effect on the financial markets;

• limitations on the Corporation's ability to return capital to shareholders and dilution of the Corporation's common shares that may result from the terms of the Capital Purchase Program ("CPP"), pursuant to which the Corporation issued securities to the United States Department of the Treasury (the "U.S. Treasury");

• limitations on the Corporation's ability to pay dividends;

• increases in interest rates or further weakening economic conditions that could constrain borrowers' ability to repay outstanding loans or diminish the value of the collateral securing those loans;

• adverse effects on the Corporation's ability to engage in routine funding transactions as a result of the actions and commercial soundness of other financial institutions;

• asset price deterioration, which has had and may continue to have a negative effect on the valuation of certain asset categories represented on the Corporation's balance sheet;

• general economic conditions, either nationally or regionally (especially in northeastern Ohio), becoming less favorable than expected resulting in, among other things, a deterioration in credit quality of assets;

• increases in deposit insurance premiums or assessments imposed on the Corporation by the FDIC;

• difficulty attracting and/or retaining key executives and/or relationship managers at compensation levels necessary to maintain a competitive market position;

• changes occurring in business conditions and inflation;

• changes in technology;

• changes in trade, monetary, fiscal and tax policies;

• changes in the securities markets, in particular, continued disruption in the fixed income markets and adverse capital market conditions;

• continued disruption in the housing markets and related conditions in the financial markets; and

• changes in general economic conditions and competition in the geographic and business areas in which the Corporation conducts its operations, particularly in light of the recent consolidation of competing financial institutions; as well as the risks and uncertainties described from time to time in the Corporation's reports as filed with the Securities and Exchange Commission.

Critical Accounting Policies and Estimates The Corporation's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The Corporation follows general practices within the banking industry and application of these principles requires Management to make assumptions, estimates and judgments that affect the financial statements and accompanying notes. These assumptions, estimates and judgments are based on information available as of the date of the financial statements.
The most significant accounting policies followed by the Corporation are presented in Note 1 to the Consolidated Financial Statements contained within this Form 10-Q. These policies are fundamental to the understanding of results of operation and financial conditions.
The accounting policies considered by Management to be critical are as follows:
Allowance for Loan Losses
The allowance for loan losses is an amount that Management believes will be adequate to absorb probable credit losses inherent in the loan portfolio taking into consideration such factors as past loss experience, changes in the nature and volume of the portfolio, overall portfolio quality, loan concentrations, specific problem loans, and current economic conditions that affect the borrower's ability to pay. Determination of the allowance is subjective in nature. Loan losses are charged off against the allowance when Management believes that the full collectability of the loan is unlikely. Recoveries of amounts previously charged-off are credited to the allowance.
A loan is considered impaired when it is probable that not all principal and interest amounts will be collected according to the terms of the loan contract. Residential mortgage, installment and other consumer loans are evaluated collectively for impairment. Individual commercial loans exceeding size thresholds established by Management are evaluated for impairment. Impaired loans are written down by the establishment of a specific allowance where necessary. The fair value of all loans currently evaluated for impairment is collateral-dependent and therefore the fair value is determined by the fair value of the underlying collateral.
The Corporation maintains the allowance for loan losses at a level adequate to absorb Management's estimate of probable credit losses inherent in the loan portfolio. The allowance is comprised of a general allowance, a specific allowance for identified problem loans and an unallocated allowance. The general allowance is determined by applying estimated loss factors to the credit exposures from outstanding loans. For commercial and commercial real estate loans, loss factors are applied based on internal risk grades of these loans. Many factors are considered when these grades are assigned to individual loans such as current and past delinquency, financial statements of the borrower, current net realizable value of collateral and the general economic environment and specific economic trends affecting the portfolio. For residential real estate, installment and other loans, loss factors are applied on a portfolio basis. Loss factors are based on the Corporation's historical loss experience and are reviewed for appropriateness on a quarterly basis, along with other factors affecting the collectability of the loan portfolio. Specific allowances are established for all classified loans when Management has determined that, due to identified significant conditions, it is probable that a loss has been incurred that exceeds the general allowance loss factor from these loans. The unallocated allowance recognizes the estimation risk associated with the allocated general and specific allowances and incorporates Management's evaluation of existing conditions that are not included in the allocated allowance determinations. These conditions are reviewed quarterly by Management and include general economic conditions, credit quality trends and internal loan review and regulatory examination findings.
Management believes that it uses the best information available to determine the adequacy of the allowance for loan losses. However, future adjustments to the allowance may be necessary and the results of operations could be significantly and adversely affected if circumstances differ substantially from the assumptions used in making the determinations.

Income Taxes
The Corporation computes income tax expense (benefit) by applying the current statutory tax rates to net taxable income (loss) after consideration of permanent differences. Deferred tax assets and liabilities are recognized for the temporary differences between the tax basis and book basis of an asset or liability and will result in taxable or deductible amounts in future periods. Deferred tax assets are recorded only to the extent that the amount of net deductible temporary differences or carry forward attributes may be offset against taxable temporary differences reversing in future periods or utilized to the extent of management's estimate of future taxable income. A valuation allowance is provided for deferred tax assets to the extent that the value of net deductible temporary differences and carry forward attributes exceeds management's estimates of taxes payable on future taxable income. New Accounting Pronouncements
Management is not aware of any proposed regulations or current recommendations by the Financial Accounting Standards Board or by regulatory authorities, which, if they were implemented, would have a material effect on the liquidity, capital resources, or operations of the Corporation.
Summary of Earnings (Dollars in thousands except per share data) Net loss for the third quarter of 2009 was $4,376, and $2,543 for the nine months ended September 30, 2009. Net loss available to common shareholders for the third quarter of 2009 was $4,695, or $0.64 per diluted common share. Net loss available to common shareholders for the nine months ended September 30, 2009 was $3,480, or $0.48 per diluted common share. This compares to net income of $1,823, or $.25 per diluted share, for the third quarter of 2008 and net income of $2,135, or $.29 per diluted share, for the nine months ended September 30, 2008.
Third quarter earnings were significantly impacted by higher credit cost as the Corporation provided $11,067 for possible loan losses. The higher provision is a result of an increase in problem loans, including non-accrual and classified loans, and the decline in collateral values associated with these loans during the third quarter. The provision for the third quarter on a per share basis equaled $1.52 compared to $.06 for the same period one year ago. Net charge-offs for the quarter were $1,489 led largely by consumer loans given the weakness of the local economy. For the nine month period, the provision for loan losses equaled $15,360 or $2.11 per share in 2009 compared to $5,609 or $.77 per share in 2008. By comparison, the provision expense for the year ended December 31, 2007 was $2,225 or $.32 per share.
Net interest income on the fully tax-equivalent basis ("FTE") for the quarter ended September 30, 2009 was $9,714 compared to $8,342 for the same period one year ago. The net interest margin improved from 3.28% in the third quarter of 2008 to 3.30% in 2009 as the cost of interest bearing liabilities fell from 2.70% in 2008 to 1.92% in 2009, a decline of 78 basis points and the yield on earning assets dropped from 5.71% in 2008 to 4.97% in 2009, or 74 basis points. Total loans averaged $818,877 for the third quarter of 2009 compared to $790,746 in 2008. Installment loans and home equity lines of credit continue to account for a significant portion of the growth, installments increased $12,358 and home equities $14,742, commercial loans for the same period increased $16,232. Mortgage loans decreased by $15,201 as the Corporation continues to sell new loan production to Freddie Mac rather than adding the loans to the loan portfolio. During the third quarter, $7,363 of mortgage loans were sold. Over the past year the Corporation has seen a strong continued growth in deposits, primarily time deposits, in both consumer and public funds, reducing its reliance on non-core funding alternatives.
Noninterest income ended the quarter at $3,124 compared to $3,158 for the third quarter of 2008. Fee income, which excludes the gain on the sale of assets, was up 4.3% year over year. Trust and brokerage fees improved in the third quarter, ending the quarter at $496 compared to $441 in the third quarter of 2008. Service charges on deposit accounts remain flat period over period as customers remain conservative in managing their accounts. Gain on the sale of loans was up $43 or 14.4% for the quarter and $321 or 50.0% for the nine month periods, primarily due to higher mortgage loan originations given the low interest rate environment and the increase in refinancing activity.
Total noninterest expense for the third quarter of 2009 was $8,737 compared to $8,498 for 2008. For the first nine months of 2008 and for the first nine months of 2009, total noninterest expense was $26,577 compared to $25,860 for the same period in 2008. FDIC assessments represent a significant increase year over year. Excluding the FDIC expense, both the quarter and year-to-date periods saw lower non-interest expenses compared to 2008. Salary and employee benefits were down 5.7% or $218 for the third quarter compared to 2008 and 2.9% or $337 year-to-date. The Corporation continues to be extremely diligent in addressing the noninterest expenses within its control. The

Corporation's efficiency ratio for the third quarter of 2009 was 68.06% compared to 73.90% for the same period of 2008 and for the first nine months of 2009, was 71.38% compared to 76.40% for the first half of 2008. Results of Operations
Net Interest Income
Net interest income is the difference between interest income earned on interest-earning assets and the interest expense paid on interest-bearing liabilities. Net interest income is the Corporation's principal source of revenue, accounting for 75.41% of the Corporation's revenues for the three months ended September 30, 2009. The amount of net interest income is affected by changes in the volume and mix of earning assets and interest-bearing liabilities, the level of rates earned or paid on those assets and liabilities and the amount of loan fees earned. The Corporation reviews net interest income on a fully taxable equivalent basis, which presents interest income with an adjustment for tax-exempt interest income on an equivalent pre-tax basis assuming a 34% statutory Federal tax rate. These rates may differ from the Corporation's actual effective tax rate. The net interest margin is net interest income as a percentage of average earning assets.
Three Months Ended September 30, 2009 versus Three Months Ended September 30, 2008
Net interest income, before provision for loan losses, was $9,578 for the third quarter 2009 as compared to $8,229 during the same quarter 2008. Adjusting for tax-exempt income, net interest income, before provision for loan losses, for the third quarter 2009 and 2008 was $9,714 and $8,342, respectively. The net interest margin FTE, determined by dividing tax equivalent net interest income by average earning assets, was 3.30% for the three months ended September 30, 2009 compared to 3.28% for the three months ended September 30, 2008. Average earning assets for the third quarter of 2009 were $1,169,229. This was an increase of $158,841 or 15.72% over the same quarter last year. The yield on average earning assets was 4.97% in the third quarter of 2009 as compared to 5.71% for the same period last year. The yield on average loans during the third quarter of 2009 was 5.60%. This was 44 basis points lower than that of the third quarter of 2008 at 6.04%. Interest income from securities was $3,083 (FTE) for the three months ended September 30, 2009, as compared to $2,447 during the third quarter of 2008. The yield on average securities was 4.21% and 4.80% for these periods, respectively. The cost of interest-bearing liabilities was 1.92% during the third quarter of 2009 as compared to 2.70% during the same period in 2008. The average cost of trust preferred securities was 4.31% for the third quarter of 2009, compared to 5.40% for the third quarter of 2008. One half of the securities were issued at a fixed rate of 6.64% and the other at LIBOR plus 1.48%.
Nine Months Ended September 30, 2009 versus Nine Months Ended September 30, 2008
Net interest income, before provision for loan losses, for the first nine months of 2009 was $27,610 as compared to $23,888 for the same period in 2008. Adjusting for tax-exempt income, net interest income, before provision for loan losses, for the first nine months of 2009 and 2008 was $28,006 and $24,202, respectively. The net interest margin FTE was 3.30% for the nine months ended September 30, 2009 compared to 3.24% for the nine months ended September 30, 2008.
Interest income FTE produced by earning assets during the first nine months of 2009 was $43,798. This compares to interest income from earning assets of $44,256 during the first nine months of 2008. Average earning assets increased $138,002, or 13.85%, to $1,134,258 for the first nine months of 2009 as compared to $996,256 for the first nine months of 2008. The yield on average earning assets was 5.16% for the first nine months of 2009 as compared to 5.93% for the same period last year, or a decrease of 77 basis points.
Interest income FTE from loans was $34,657 for the first nine months of 2009, and $36,583 for the first nine months of 2008. The yield on loans for the first nine months of 2009 and 2008 was 5.69% and 6.32%, respectively. Average loans increased $39,033, or 5.05%, over the same period of 2008. Average installment loans (primarily indirect auto loans) increased $17,497 and average commercial loans increased $13,310 when comparing the first nine months of 2009 to the first nine months of 2008.
Interest expense was $15,792 for the first nine months of 2009 compared to $20,054 for the first nine months of 2008. Average interest-bearing liabilities increased $98,721, or 11.06%, to $991,361 for the first nine months of 2009 as compared to $892,640 for the first nine months of 2008. Interest expense from deposits for the first nine months of the year was $13,829 in 2009 and $17,041 in 2008. Average interest-bearing deposits for the first nine months of 2009 increased $116,638 over the same period in 2008. The cost of deposits for the first nine months of 2009 decreased 87 basis points in comparison to the first nine months of 2008. During the nine month period ending

September 30, 2009, average brokered time deposits decreased $4,162 while average consumer time deposits increased $99,910 in comparison to the same period in 2008.
Table 1 displays the components of net interest income for the three and nine months ended September 30, 2009 and 2008. Rates are computed on a tax equivalent basis and nonaccrual loans are included in the average loan balances.

Table 1: Condensed Consolidated Average Balance Sheets Interest, Rate, and Rate/ Volume differentials are stated on a Fully-Tax Equivalent (FTE) Basis.

                                                         Three Months Ended September 30,
                                              2009                                              2008
                             Average                                           Average
                             Balance          Interest          Rate           Balance          Interest          Rate
                                                              (Dollars in thousands)
Assets:
U.S. Govt agencies
and corporations and
restricted stock           $   265,086        $   2,707          4.05 %      $   183,073        $   2,154          4.68 %
State and political
subdivisions                    25,774              376          5.79             19,822              293          5.88
Federal funds sold
and short-term
investments                     59,492               19          0.13             16,747               54          1.28
Commercial loans               453,829            6,325          5.53            437,597            6,991          6.36
Real estate mortgage
loans                           83,723            1,176          5.57             98,924            1,495          6.01
Home equity lines of
credit                         107,668            1,088          4.01             92,926            1,045          4.47
Installment loans              173,657            2,968          6.78            161,299            2,466          6.08

Total Earning Assets       $ 1,169,229        $  14,659          4.97 %      $ 1,010,388        $  14,498          5.71 %

Allowance for loan
loss                           (13,451 )                                         (11,888 )
Cash and due from
banks                           16,921                                            19,160
Bank owned life
insurance                       16,122                                            15,412
Other assets                    47,234                                            49,797

Total Assets               $ 1,236,055                                       $ 1,082,869

Liabilities and
Shareholders' Equity
Consumer time
deposits                   $   494,926        $   3,615          2.90 %      $   398,462        $   3,609          3.60 %
Public time deposits            88,223              370          1.66             59,732              571          3.80
Brokered time
deposits                         5,707               55          3.84              8,477               98          4.60
Money market accounts          135,694              168          0.49            108,528              459          1.68
Savings deposits                80,054               41          0.20             83,137              133          0.64
Interest-bearing
demand                         119,875               77          0.25            124,928              265          0.84
Short-term borrowings           33,684               43          0.51             32,918               93          1.12
FHLB advances                   43,005              351          3.24             70,813              646          3.63
Trust preferred
securities                      20,732              225          4.31             20,758              282          5.40

Total
Interest-Bearing
Liabilities                $ 1,021,900        $   4,945          1.92 %      $   907,753        $   6,156          2.70 %

Noninterest-bearing
deposits                        94,489                                            87,358
Other liabilities               11,359                                             8,466
Shareholders' Equity           108,307                                            79,292

Total Liabilities and
Shareholders' Equity       $ 1,236,055                                       $ 1,082,869

Net interest Income
(FTE)                                         $   9,714          3.30 %                         $   8,342          3.28 %
Taxable Equivalent
Adjustment                                         (136 )                                            (113 )

Net Interest Income
Per Financial
Statements                                    $   9,578                                         $   8,229

                                                         Nine Months Ended September 30,
                                              2009                                              2008
                             Average                                           Average
                             Balance          Interest          Rate           Balance          Interest          Rate
                                                              (Dollars in thousands)
Assets:
U.S. Govt agencies
and corporations and
restricted stock           $   249,077        $   8,083          4.34 %      $   195,431        $   6,748          4.61 %
State and political
subdivisions                    24,460            1,096          5.99             17,766              795          5.98
Federal funds sold
and short-term
investments                     49,013               52          0.14             10,384              130          1.67
Commercial loans               448,766           19,001          5.66            435,456           21,309          6.54
Real estate mortgage
loans                           89,245            3,921          5.87             99,143            4,470          6.02
Home equity lines of
credit                         105,087            3,151          4.01             86,963            3,222          4.95
Installment loans              168,610            8,494          6.74            151,113            7,582          6.70

Total Earning Assets       $ 1,134,258        $  43,798          5.16 %      $   996,256        $  44,256          5.93 %

Allowance for loan
loss                           (12,252 )                                          (9,240 )
Cash and due from
banks                           17,804                                            20,749
Bank owned life
insurance                       15,964                                            15,559
Other assets                    47,184                                            47,300

Total Assets               $ 1,202,958                                       $ 1,070,624

Liabilities and
Shareholders' Equity
Consumer time
deposits                   $   482,112        $  11,157          3.09 %      $   382,202        $  11,599          4.05 %
Public time deposits            86,188            1,445          2.24             60,047            1,858          4.13
Brokered time
deposits                        10,203              320          4.19             14,365              562          5.23
Money market accounts          115,823              500          0.58            116,624            1,780          2.04
Savings deposits                79,752              137          0.23             83,145              406          0.65
Interest-bearing
demand                         121,783              270          0.30            122,840              836          0.91
Short-term borrowings           28,513              111          0.52             29,286              354          1.61
FHLB advances                   46,246            1,131          3.27             63,347            1,769          3.73
Trust preferred
securities                      20,741              721          4.65             20,784              890          5.72

Total
Interest-Bearing
Liabilities                $   991,361        $  15,792          2.13 %      $   892,640        $  20,054          3.00 %

Noninterest-bearing
deposits                        92,582                                            86,396
Other liabilities               10,924                                             9,576
Shareholders' Equity           108,091                                            82,012
. . .