Edgar Filing: CCFNB BANCORP INC

e10vq

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009.


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from to .

No. 0-19028
(Commission file number)

CCFNB BANCORP, INC.

(Exact name of registrant as specified in its charter)


PENNSYLVANIA		23-2254643
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

232 East Street, Bloomsburg, PA		17815
(Address of principal executive offices)		(Zip Code)


	Registrant’s telephone number, including area code: (570) 784-4400

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirings for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

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


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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)

Yes o No þ

On October 31, 2009, there were 2,254,480 shares of the Registrant’s common stock outstanding, par value $1.25.

CCFNB Bancorp, Inc. and Subsidiary
Index to Quarterly Report on Form 10-Q


	Page
	Number
Part I Financial Information
Item1. Financial Statements

Consolidated Balance Sheets as of September 30, 2009 (unaudited) and December 31, 2008		3

Consolidated Statements of Income (unaudited) for the three and nine months ended September 30, 2009 and 2008		4

Consolidated Statement of Changes in Stockholders’ Equity (unaudited) for the nine months ended September 30, 2009 and 2008		5

Consolidated Statements of Cash Flows (unaudited) for the nine Months ended September 30, 2009 and 2008		6

Notes to Consolidated Financial Statements (unaudited)		7

Report of Independent Registered Public Accounting Firm		17

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 3. Quantitative and Qualitative Disclosures About Market Risk		28
Item 4. Controls and Procedures		28

Part II Other Information		28

Item 1. Legal Proceedings		28
Item 1A. Risk Factors		28
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		29
Item 3. Defaults Upon Senior Securities		29
Item 4. Submission of Matters to a Vote of Security Holders		29
Item 5. Other Information		29
Item 6. Exhibits		29
Signatures		30
Exhibits

PART I Financial Information

Item 1. Financial Statements

CCFNB Bancorp, Inc.
Consolidated Balance Sheets


	(Unaudited)
	September 30,			December 31,
(In Thousands)	2009			2008
ASSETS
Cash and due from banks	$	6,817		$	10,173
Interest-bearing deposits in other banks		92			149
Federal funds sold		742			5,163

Total cash and cash equivalents		7,651			15,485

Investment securities, available for sale, at fair value		218,583			196,580
Loans,net of unearned income		331,099			320,068
Less: Allowance for loan losses		3,934			3,758

Loans, net		327,165			316,310
Premises and equipment, net		12,063			12,609
Accrued interest receivable		2,089			2,388
Cash surrender value of bank-owned life insurance		11,319			10,943
Investment in limited partnerships		727			845
Intangible Assets:
Core deposit		2,919			3,411
Goodwill		7,937			7,937
Other assets		2,445			1,811

TOTAL ASSETS	$	592,898		$	568,319


LIABILITIES
Interest-bearing deposits	$	393,096		$	381,849
Non interest-bearing deposits		49,562			52,460

Total deposits		442,658			434,309

Short-term borrowings		61,995			55,462
Long-term borrowings		15,129			9,133
Junior subordinate debentures		4,640			4,640
Accrued interest payable		907			1,075
Other liabilities		2,771			2,925

TOTAL LIABILITIES		528,100			507,544


STOCKHOLDERS’ EQUITY
Common stock, par value $1.25 per share; authorized 5,000,000 shares; issued 2,266,980 shares in 2009 and 2,253,080 shares in 2008		2,834			2,816
Surplus		27,443			27,173
Retained earnings		32,030			29,164
Accumulated other comprehensive income		2,764			1,622
Treasury stock , at cost; 12,500 shares in 2009 and 0 shares in 2008		(273	)		—

TOTAL STOCKHOLDERS’ EQUITY		64,798			60,775

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	592,898		$	568,319

See accompanying notes to unaudited consolidated financial statements.

CCFNB Bancorp, Inc.
Consolidated Statements of Income
(Unaudited)


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(In Thousands, Except Per Share Data)	2009			2008			2009			2008
INTEREST AND DIVIDEND INCOME
Interest and fees on loans:
Taxable	$	4,682		$	4,535		$	14,086		$	9,614
Tax-exempt		215			197			622			495
Interest and dividends on investment securities:
Taxable		1,968			1,967			6,195			3,220
Tax-exempt		123			80			315			164
Dividend and other interest income		11			39			48			88
Federal funds sold		5			45			11			153
Deposits in other banks		—			3			1			23

TOTAL INTEREST AND DIVIDEND INCOME		7,004			6,866			21,278			13,757


INTEREST EXPENSE
Deposits		1,842			1,979			5,775			4,005
Short-term borrowings		95			222			254			580
Long-term borrowings		175			140			462			432
Junior subordinate debentures		28			44			104			44

TOTAL INTEREST EXPENSE		2,140			2,385			6,595			5,061


NET INTEREST INCOME		4,864			4,481			14,683			8,696

PROVISION FOR LOAN LOSSES		310			—			530			—

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		4,554			4,481			14,153			8,696


NON-INTEREST INCOME
Service charges and fees		427			317			1,251			797
Gain on sale of loans		201			74			547			194
Earnings on bank-owned life insurance		107			111			324			244
Brokerage		83			82			190			174
Trust		150			143			462			217
Investment security losses		(10	)		(283	)		(71	)		(283	)
Other		328			427			1,110			565

TOTAL NON-INTEREST INCOME		1,286			871			3,813			1,908


NON-INTEREST EXPENSE
Salaries		1,632			1,637			4,776			3,056
Employee benefits		398			1,125			1,232			1,595
Occupancy		249			240			810			496
Furniture and equipment		319			361			944			583
State shares tax		128			114			400			277
Professional fees		172			250			447			382
Director’s fees		74			55			215			152
FDIC assessments		105			19			543			29
Other		839			496			2,621			1,111

TOTAL NON-INTEREST EXPENSE		3,916			4,297			11,988			7,681


INCOME BEFORE INCOME TAX PROVISION		1,924			1,055			5,978			2,923
INCOME TAX PROVISION		463			183			1,423			653

NET INCOME	$	1,461		$	872		$	4,555		$	2,270


EARNINGS PER SHARE	$	0.65		$	0.43		$	2.02		$	1.51

CASH DIVIDENDS PER SHARE	$	0.27		$	0.24		$	0.75		$	0.66

WEIGHTED AVERAGE SHARES OUTSTANDING		2,252,039			2,056,686			2,253,872			1,503,955

See accompanying notes to the unaudited consolidated financial statements.

CCFNB Bancorp, Inc.
Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)


													Accumulated
	Common												Other						Total
	Stock									Retained			Comprehensive			Treasury			Stockholders’
(In Thousands Except Per Share Data)	Shares			Amount			Surplus			Earnngs			Income (Loss)			Stock			Equity
Balance, December 31, 2007		1,226,536		$	1,533		$	2,271		$	27,679		$	144		$	—		$	31,627
Comprehensive Income:
Net income											2,270									2,270
Change in net unrealized gain (loss) on investment securities available-for-sale, net of reclassification adjustment and tax effects.														(2	)					(2	)

Total comprehensive income																				2,268

Par value of new shares issued to acquire Columbia Financial		1,030,286			1,288			25,026												26,314
Common stock issuance under dividend reinvestment and stock purchase plans		8,188			10			181												191
Recognition of employee stock purchase plan expense								2												2
Purchase of treasury stock (16,000 shares)		0															(398	)		(398	)
Retirement of treasury stock		(16,000	)		(20	)		(378	)								398			—
Cash dividends, ($0.66 per share)											(1,053	)								(1,053	)

Balance, September 30, 2008		2,249,010		$	2,811		$	27,102		$	28,896		$	142		$	—		$	58,951


Balance, December 31, 2008		2,253,080		$	2,816		$	27,173		$	29,164		$	1,622		$	—		$	60,775
Comprehensive Income:
Net income											4,555									4,555
Change in net unrealized gain on investment securities available-for-sale, net of reclassification adjustment and tax effects.														1,142						1,142

Total comprehensive income																				5,697

Common stock issuance under dividend reinvestment and stock purchase plans		13,900			18			265												283
Recognition of employee stock purchase plan expense								5												5
Purchase of treasury stock (12,500 shares)																	(273	)		(273	)
Cash dividends, ($0.75 per share)											(1,689	)								(1,689	)


Balance, September 30, 2009		2,266,980		$	2,834		$	27,443		$	32,030		$	2,764		$	(273	)	$	64,798

See accompanying notes to the unaudited consolidated financial statements.

CCFNB Bancorp, Inc.
Consolidated Statements of Cash Flows
(Unaudited)


	For The Nine Months Ended September 30,
(In Thousands)	2009			2008
OPERATING ACTIVITIES
Net Income	$	4,555		$	2,270
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		530			—
Depreciation and amortization of premises and equipment		766			422
Impairment loss on securities		71			283
Amortization and accretion on investment securities		404			181
Gain on sale of premises and equipment		(185	)		—
Loss on sale of other real estate owned		81			—
Deferred income taxes benefit (provision)		119			(165	)
Gain on sale of loans		(547	)		(194	)
Proceeds from sale of mortgage loans		87,380			11,194
Originations of mortgage loans held for resale		(87,633	)		(11,775	)
Amortization of intangibles and invesment in limited partnerships		610			140
Decrease in accrued interest receivable		299			(186	)
Increases in cash surrender value of bank-owned life insurance		(376	)		(275	)
Decrease in accrued interest payable		(168	)		(127	)
Other, net		(1,482	)		(339	)

Net cash provided by operating activities		4,424			1,429

INVESTING ACTIVITIES
Investment securities available for sale:
Purchases		(91,271	)		(48,283	)
Proceeds from sales, maturities and redemptions		71,340			34,380
Proceeds from redemption of regulatory stock		—			1,387
Purchase of regulatory stock		(817	)		(1,825	)
Net (increase) decrease in loans		(11,017	)		(412	)
Acquisition of bank cash		—			5,803
Proceeds from sale of premises and equipment		1,294			—
Proceeds from sale of other real estate owned		343			—
Acquisition of premises and equipment		(1,329	)		(515	)

Net cash used for investing activities		(31,457	)		(9,465	)

FINANCING ACTIVITIES
Net increase in deposits		8,349			2,622
Net decrease in short-term borrowings		6,533			7,444
Proceeds from long-term borrowings		6,000			—
Repayment of long-term borrowings		(4	)		(2,003	)
Acquisition of treasury stock		(273	)		(398	)
Proceeds from issuance of common stock		283			191
Cash dividends paid		(1,689	)		(1,053	)

Net cash (used for) provided by financing activities		19,199			6,803

NET DECREASE IN CASH AND CASH EQUIVALENTS		(7,834	)		(1,233	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		15,485			13,401

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	7,651		$	12,168


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Interest paid	$	6,763		$	4,424
Income taxes paid		1,419			735
Loans transferred to other real estate owned		432			242

See accompanying notes to the unaudited consolidated financial statements.

CCFNB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies of CCFNB Bancorp, Inc. (the “Corporation”) are in accordance with the accounting principles generally accepted in the United States of America and conform to common practices within the banking industry. The more significant policies follow:

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of CCFNB Bancorp, Inc. and its wholly-owned subsidiary, First Columbia Bank & Trust Co. ( “Bank”). Columbia Financial Corporation (“CFC”), the former parent company of the Bank was acquired by CCFNB Bancorp, Inc. on July 18, 2008 and Columbia County Farmers National Bank (“CCFNB”) merged with and into the Bank on July 18, 2008. All significant inter-company balances and transactions have been eliminated in consolidation.

NATURE OF OPERATIONS

The Corporation is a financial holding company that provides full-banking services, including trust services, through the Bank, to individuals and corporate customers. The Bank has thirteen offices covering an area of approximately 752 square miles in Northcentral Pennsylvania. The Corporation and Bank are subject to the regulation of the Pennsylvania Department of Banking, the Federal Deposit Insurance Corporation, and the Federal Reserve Bank of Philadelphia.

Procuring deposits and making loans are the major lines of business. The deposits are mainly deposits of individuals and small businesses and include various types of checking accounts, passbook and statement savings, money market accounts, interest checking accounts, individual retirement accounts, and certificates of deposit. The Bank also offers non-insured “Repo sweep” accounts. Lending products include commercial, consumer, and mortgage loans. The trust services, trading under the name of B.B.C.T.,Co. include administration of various estates, pension plans, self-directed IRA’s and other services. A third-party brokerage arrangement is also resident in the Lightstreet branch. This investment center offers a full line of stocks, bonds and other non-insured financial services.

SEGMENT REPORTING

The Bank acts as an independent community financial services provider, and offers traditional banking and related financial services to individual, business and government customers. Through its branch, internet banking, telephone and automated teller machine network, the Bank offers a full array of commercial and retail financial services, including the taking of time, savings and demand deposits; the making of commercial, consumer and mortgage loans; and the providing of other financial services. The Bank also performs personal, corporate, pension and fiduciary services through its B.B.C.T., Co. as well as offering diverse investment products through its investment center.

Management does not separately allocate expenses, including the cost of funding loan demand, between the commercial, retail, trust and investment center operations of the Corporation. As such, discrete financial information is not available and segment reporting would not be meaningful.

USE OF ESTIMATES

The preparation of these consolidated financial statements in conformity with accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of these consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.

INVESTMENT SECURITIES

The Corporation classifies its investment securities as either “held-to-maturity” or “available-for-sale” at the time of purchase. Debt securities are classified as held-to-maturity when the Corporation has the ability and positive intent to hold the securities to maturity. Investment securities held-to-maturity are carried at cost adjusted for amortization of premiums and accretion of discounts to maturity.

Debt securities not classified as held-to-maturity and equity securities included in the available-for-sale category, are carried at fair value, and the amount of any unrealized gain or loss net of the effect of deferred income taxes is reported as other comprehensive income in the Consolidated Statement of Changes in Stockholders’ Equity. Management’s decision to sell available-for-sale securities is based on changes in economic conditions controlling the sources and uses of funds, terms, availability of and yield of alternative investments, interest rate risk, and the need for liquidity.

The cost of debt securities classified as held-to-maturity or available-for-sale is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion, as well as interest and dividends, is included in interest income

from investments. Realized gains and losses are included in net investment securities gains. The cost of investment securities sold, redeemed or matured is based on the specific identification method.

LOANS

Loans are stated at their outstanding principal balances, net of deferred fees or costs, unearned income, and the allowance for loan losses. Interest on loans is accrued on the principal amount outstanding, primarily on an actual day basis. Non-refundable loan fees and certain direct costs are deferred and amortized over the life of the loans using the interest method. The amortization is reflected as an interest yield adjustment, and the deferred portion of the net fees and costs is reflected as a part of the loan balance. Real estate mortgage loans held for resale are carried at the lower of cost or market on an aggregate basis. A portion of these loans are sold with limited recourse by the Corporation.

Past Due Loans — Generally, a loan is considered past due when a payment is in arrears for a period of 10 or 15 days, depending on the type of loan. Delinquent notices are issued at this point and related collection efforts will commence and continue until final resolution. Past due loans are continually evaluated with determination for charge-off being made when no reasonable chance remains that the status of the loan can be improved.

Non-Accrual Loans — Generally, a loan is classified as non-accrual, with the accrual of interest on such a loan discontinued when the contractual payment of principal or interest has become 90-days past due or management has serious doubts about further collectability of principal or interest, even though the loan currently may be performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well-secured. When a loan is placed on non-accrual status, unpaid interest credited to income in the current year is reversed, and unpaid interest accrued in prior years is charged against the allowance for loan losses. Certain non-accrual loans may continue to perform wherein payments are still being received with those payments generally applied to principal. Non-accrual loans remain under constant scrutiny and if performance continues, interest income may be recorded on a cash basis based on management’s judgment as to collectability of principal.

Impaired Loans — A loan is considered impaired when, based on current information and events, it is probable that the Corporation will be unable to collect all amounts due according to the contractual terms of the loan agreement. Under current accounting standards, the allowance for loan losses related to impaired loans is based on discounted cash flows using the loan’s effective interest rate or the fair value of the collateral for certain collateral dependent loans. The recognition of interest income on impaired loans is the same as for non-accrual loans discussed above.

Allowance for Loan Losses — The allowance for loan losses is established through provisions for loan losses charged against income. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is maintained at a level established by management to be adequate to absorb estimated potential loan losses. Management’s periodic evaluation of the adequacy of the allowance for loan losses is based on the Corporation’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay (including the timing of future payments), the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions, and other relevant factors. This evaluation is inherently subjective as it requires material estimates, including the amounts and timing of future cash flows expected to be received on impaired loans that may be susceptible to significant change.

In addition, an allowance is provided for possible credit losses on off-balance sheet credit exposures. The allowance is estimated by management and is classified in other liabilities.

PREMISES AND EQUIPMENT

Premises and equipment are stated at cost less accumulated depreciation computed principally on the straight-line method over the estimated useful lives of the assets. Maintenance and minor repairs are charged to operations as incurred. The cost and accumulated depreciation of the premises and equipment retired or sold are eliminated from the property accounts at the time of retirement or sale, and the resulting gain or loss is reflected in current operations.

MORTGAGE SERVICING RIGHTS

The Bank originates and sells real estate loans to investors in the secondary mortgage market. After the sale, the Bank retains the right to service a portion of these loans. When originated mortgage loans are sold and servicing is retained, a servicing asset is capitalized based on relative fair value at the date of sale. Servicing assets are amortized as an offset to other fees in proportion to, and over the period of, estimated net servicing income. The unamortized cost is included in other assets in the accompanying consolidated balance sheets. The servicing rights are periodically evaluated for impairment based on their relative fair value.

JUNIOR SUBORDINATE DEBENTURES

During 2006, CFC issued $4,640,000 in junior debentures due December 15, 2036 to Columbia Financial Statutory Trust I (Trust). On July 18, 2008, the Corporation became the successor to CFC and to this Trust, respectively. The Corporation owns all of the $140,000 in common equity of the Trust and the debentures are the sole asset of the Trust. The Trust, a wholly-owned unconsolidated subsidiary of the Corporation, issued $4,500,000 of floating-rate trust capital securities in a non-public offering in reliance on Section 4 (2) of the Securities Act of 1933. The floating-rate capital securities provide for quarterly distributions at a variable annual coupon rate, reset quarterly, based on the 3-month LIBOR plus 1.75%. The coupon rate was 2.05% at September 30,

2009 and 3.75% at December 31, 2008. The securities are callable by the Corporation, subject to any required regulatory approval, at par, after five years. The Corporation unconditionally guarantees the trust capital securities. The terms of the junior subordinated debentures and the common equity of the trust mirror the terms of the trust capital securities issued by the Trust.

INTANGIBLE ASSETS — GOODWILL

Goodwill represents the excess for the purchase price over the fair market value of net assets acquired. The Corporation has recorded net goodwill of $7,937,000 at September 30, 2009 and December 31, 2008 related to the 2008 acquisition of Columbia Financial Corporation and it’s subsidiary, First Columbia Bank & Trust Co. In accordance with current accounting standards, goodwill is not amortized, but evaluated at least annually for impairment. Any impairment of goodwill results in a charge to income. The Corporation periodically assesses whether events or changes in circumstances indicate that the carrying amounts of goodwill and other intangible assets may be impaired. Goodwill is tested for impairment at the reporting unit level and an impairment loss is recorded to the extent that the carrying amount of goodwill exceeds its implied fair value. The Company employs general industry practices in evaluating the impairment of its goodwill and other intangible assets. The Company calculates the value of goodwill using a combination of the following valuation methods: dividend discount analysis under the income approach, which calculates the present value of all excess cash flows plus the present value of a terminal value, the price/earnings multiple under the market approach and the change in control premium to market price approach. Management performed its annual review of goodwill at July 31, 2009. Based upon these reviews, management determined there was no impairment of goodwill at July 31, 2009. No assurance can be given that future impairment tests will not result in a charge to earnings.

INTANGIBLE ASSETS — CORE DEPOSIT

The Corporation has an amortizable intangible asset related to the deposit premium paid for the acquisition of Columbia Financial Corporation’s subsidiary, First Columbia Bank & Trust Co. This intangible asset is being amortized on a sum of the years digits method over 10 years and has a carrying value of $2,919,000 and $3,411,000, net of accumulated amortization of $771,000 and $279,000, as of September 30, 2009 and December 31, 2008, respectively. The recoverability of the carrying value is evaluated on an ongoing basis, and permanent declines in value, if any, are charged to expense. Amortization of the core deposit intangible amounted to $492,000 and $112,000 for the nine months ended September 30, 2009 and 2008, respectively.

The estimated amortization expense of the core deposit intangible over its remaining life is as follows:


For the Year Ended:
Remainder of 2009	$	151,000
2010		576,000
2011		509,000
2012		442,000
2013		374,000
Thereafter		867,000

Total	$	2,919,000

OTHER REAL ESTATE OWNED

Real estate properties acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value on the date of foreclosure establishing a new cost basis. After foreclosure, valuations are periodically performed by management and the real estate is carried at the lower of carrying amount or fair value less cost to sell and is included in other assets. Revenues derived from and costs to maintain the assets and subsequent gains and losses on sales are included in other non-interest income and expense. The amount of other real estate owned was $380,000 and $373,000 as of September 30, 2009 and December 31, 2008, respectively and is included in other assets in the accompanying consolidated balance sheets.

BANK OWNED LIFE INSURANCE

The Corporation invests in Bank Owned Life Insurance (BOLI). Purchase of BOLI provides life insurance coverage on certain present and retired employees and directors with the Corporation being owner and primary beneficiary of the policies.

INVESTMENTS IN LIMITED PARTNERSHIPS

The Corporation is a limited partner in three partnerships at September 30, 2009 that provide low income elderly housing in the Corporation’s geographic market area. The investments are accounted for under the effective yield method. Under the effective yield method, the Corporation recognizes tax credits as they are allocated and amortizes the initial cost of the investment to provide a constant effective yield over the period that the tax credits are allocated to the Corporation. Under this method, the tax credits allocated, net of any amortization of the investment in the limited partnerships, are recognized in the consolidated statements of income as a component of income tax expense. The amount of 2009 tax credits allocated to the Corporation were $140,000 and the amortization of the investments in limited partnerships was $119,000 and $28,000 for the nine months ended September 30, 2009 and

2008, respectively. The carrying value of the Corporation’s investments in limited partnerships was $727,000 and $845,000 as of September 30, 2009 and December 31, 2008, respectively.

INVESTMENT IN INSURANCE AGENCY

The Corporation owns a 50 percent interest in a local insurance agency, a corporation organized under the laws of the Commonwealth of Pennsylvania. The income or loss from this investment is accounted for under the equity method of accounting. The carrying value of this investment as of September 30, 2009 and December 31, 2008 was $230,000 and $218,000, respectively, and is included in other assets in the accompanying consolidated balance sheets.

INCOME TAXES

The provision for income taxes is based on the results of operations, adjusted primarily for tax-exempt income. Certain items of income and expense are reported in different periods for financial reporting and tax return purposes. Deferred tax assets and liabilities are determined based on the differences between the consolidated financial statement and income tax basis of assets and liabilities measured by using the enacted tax rates and laws expected to be in effect when the timing differences are expected to reverse. Deferred tax expense or benefit is based on the difference between deferred tax asset or liability from period to period.

PER SHARE DATA

Basic earnings per share is calculated by dividing net income by the weighted average number of shares of common stock outstanding at the end of each period. Diluted earnings per share is calculated by increasing the denominator for the assumed conversion of all potentially dilutive securities. The Corporation does not have any securities which have or will have a dilutive effect, so accordingly, basic and diluted per share data are the same.

CASH FLOW INFORMATION

For purposes of reporting consolidated cash flows, cash and cash equivalents include cash on hand and due from banks, interest-bearing deposits in other banks and federal funds sold. The Corporation considers cash classified as interest-bearing deposits with other banks as a cash equivalent because they are represented by cash accounts essentially on a demand basis. Federal funds are also included as a cash equivalent because they are generally purchased and sold for one-day periods.

TRUST ASSETS AND INCOME

Property held by the Corporation in a fiduciary or agency capacity for its customers is not included in the accompanying consolidated financial statements because such items are not assets of the Corporation and the Bank. Trust Department income is generally recognized on a cash basis and is not materially different than if it was reported on an accrual basis.

ACCUMULATED OTHER COMPREHENSIVE INCOME

The Corporation is required to present accumulated other comprehensive income in a full set of general-purpose financial statements for all periods presented. Accumulated other comprehensive income is comprised of unrealized holding gains on the available for sale investment securities portfolio. The Corporation has elected to report the effects of other comprehensive income as part of the Consolidated Statement of Changes in Stockholders’ Equity.

ADVERTISING COSTS

It is the Corporation’s policy to expense advertising costs in the period in which they are incurred Advertising expense for the nine months ended September 30, 2009 and 2008 was approximately $135,000 and $77,000, respectively.

SUBSEQUENT EVENTS

Management has evaluated subsequent events for reporting and disclosure in these financial statements through November 10, 2009, the date the financial statements were issued.

RECENT ACCOUNTING PRONOUNCEMENTS

FASB ASC 105-10 — In June 2009, the Financial Accounting Standards Board (FASB) issued Statement No. 168 — The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (FASB ASC 105-10, Generally Accepted Accounting Principles). SFAS No. 168 replaces SFAS No. 162 and establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”). Rules and interpretive releases of the Securities and Exchange Commission under federal securities laws are also sources of authoritative GAAP for SEC registrants. The FASB Accounting Standards Codification (“ASC”) will be effective for financial statements that cover interim and annual periods ending after September 15, 2009. Other than resolving certain minor inconsistencies in current GAAP, the FASB Accounting Standards Codification is not intended to change GAAP, but rather to make it easier to review and research GAAP applicable to a particular transaction or accounting issue. Technical references to generally accepted accounting principles included in the Notes to Consolidated Financial Statements are provided under the new FASB ASC structure with the prior terminology included parenthetically.

FASB ASC 805 — In December 2007, the FASB issued new guidance impacting FASB ASC 805, Business Combinations (SFAS No. 141(R) — Business Combinations). The new guidance establishes principles and requirements for how an acquiring corporation (1) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquired, (2) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase, and (3) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination.

The Corporation was required to prospectively apply FASB ASC 805 to all business combinations completed on or after January 1, 2009. Early adoption is not permitted. For business combinations in which the acquisition date was before the effective date, the provisions of FASB ASC 805 will apply to the subsequent accounting for deferred income tax valuation allowances and income tax contingencies and will require any changes in those amounts to be recorded in earnings. The Corporation adopted FASB ASC 805 for any business combinations occurring at or subsequent to January 1, 2009. The adoption of this standard did not have a material impact on the Corporation’s consolidated financial condition, results of operations or liquidity.

FASB ASC 810-10 — In December 2007, the FASB issued FASB ASC 810-10, Consolidation (Statement No. 160 — Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB 51). FASB ASC 810-10 establishes new accounting and reporting standards for noncontrolling interests in a subsidiary and for the deconsolidation of a subsidiary. The new standard will require entities to classify noncontrolling interests as a component of stockholders’ equity and will require subsequent changes in ownership interest in a subsidiary to be accounted for as an equity transaction. Additionally, the new standard will require entities to recognize a gain or loss upon the loss of control of a subsidiary and to remeasure any ownership interest retained at fair value on that date. This statement also requires expanded disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. The new standard is effective on a prospective basis for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008, except for the presentation and disclosure requirements, which are required to be applied retrospectively. Early adoption is not permitted. The adoption of this standard did not have a material impact on the Corporation’s consolidated financial condition, results of operations or liquidity.

FASB ASC 815-10 — In March 2008 the FASB issued FASB ASC 815-10, Derivatives and Hedging (Statement No. 161-Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133). FASB ASC 815-10 requires enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and related items are accounted for and how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. The new standard became effective for the Corporation on January 1, 2009. The adoption of this standard did not have a material impact on the Corporation’s consolidated financial position or results of operations.

FASB ASC 855 — In May 2009, the FASB issued FASB ASC 855, Subsequent Events (Statement No. 164 — Subsequent Events). FASB ASC 855 established the period after the balance sheet date during which management shall evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements and the circumstances under which an entity shall recognize events or transactions that occur after the balance sheet date. FASB ASC 855 also requires disclosure of the date through which subsequent events have been evaluated. The Corporation adopted this standard for the interim reporting period ending June 30, 2009. The adoption of this standard did not have a material impact on the Corporation’s consolidated financial position or results of operations.

FASB ASC 860 — In June 2009, the FASB issued new guidance impacting FASH ASC 860, Transfers and servicing (Statement No. 166 — Accounting for Transfers of Financial Assets — an amendment of FASB Statement No. 140). The new guidance removes the concept of a qualifying special-purpose entity and limits the circumstances in which a financial asset, or portion of a financial asset, should be derecognized when the transferor has not transferred the entire financial asset to an entity that is not consolidated with the transferor in the financial statements being presented and/or when the transferor has continuing involvement with the transferred financial asset. The new standard will become effective for the Corporation on January 1, 2010. The Corporation is currently evaluating the impact of adopting the new standard on the consolidated financial statements.

FASB ASC 810-10 — In June 2009, the FASB issued new guidance impacting FASB ASC 810-10, Consolidation (Statement No. 167 — Amendments to FASB Interpretation No. 46 (R). The new guidance amends tests for variable interest entities to determine whether a variable interest entity must be consolidated. FASB ASC 810-10 requires an entity to perform an analysis to determine whether an entity’s variable interest or interests give it a controlling financial interest in a variable interest entity. This standard requires ongoing reassessments of whether an entity is the primary beneficiary of the variable interest entity and enhanced disclosures that provide more transparent information about an entity’s involvement with a variable interest entity. The new guidance will become effective for the Corporation on January 1, 2010 and the Corporation is currently evaluating the impact of adopting the standard on the consolidated financial statements.

FASB ASC 715-20-50 — In December 2008, the FASB issued new guidance impacting FASB ASC 715-20-50, Compensation Retirement Benefits — Defined Benefit Plans — General (FASB Staff Position No. 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets). This provides guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. The guidance requires disclosure of the fair value of each major category of plan assets

for pension plans and other postretirement benefit plans. This standard becomes effective for the Corporation on January 1, 2010. The Corporation is currently evaluating the impact of adopting the new guidance on the consolidated financial statements, but it is not expected to have a material impact.

FASB ASC 825-10-50 — In April 2009, the FASB issued new guidance impacting FASB ASC 825-10-50, Financial Instruments (FASB Staff Position No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments). This guidance amends existing GAAP to require disclosures about fair values of financial instruments for interim reporting periods as well as in annual financial statements. The guidance also amends existing GAAP to require those disclosures in summarized financial information at interim reporting periods. The Corporation adopted this standard for the interim reporting period ending March 31, 2009.

FASB ASC 320-10 — In April 2009, the FASB issued new guidance impacting FASB ASC 320-10, Investments — Debt and Equity Securities (FASB Staff Position No. FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments). This guidance amends the other-than-temporary impairment guidance in U. S. generally accepted accounting principles for debt securities. If an entity determines that it has an other-than temporary impairment on a security, it must recognize the credit loss on the security in the income statement. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. FASB ASC 320-10 expands disclosures about other-than-temporary impairment and requires that the annual disclosures in existing generally accepted accounting principles be made for interim reporting periods. The Corporation adopted this guidance for the interim reporting period ending March 31, 2009 and it did not have a material impact on the Corporation’s consolidated financial position or results of operations.

FASB ASC 820 — In April 2009, the FASB issued new guidance impacting FASB ASC 820, Fair Value Measurements and Disclosures (FASB Staff Position No. FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly). This provides additional guidance on determining fair value when the volume and level of activity for the asset or liability have significantly decreased when compared with normal market activity of the asset or liability. A significant decrease in the volume or level of activity for the asset or liability is an indication that transactions or quoted prices may not be determinative of fair value because transactions may not be orderly. In that circumstance, further analysis of transactions or quoted prices is needed, and an adjustment to the transactions or quoted prices may be necessary to estimate fair value. The Corporation adopted this guidance for the interim reporting period ending March 31, 2009 and it did not have a material impact on the Corporation’s consolidated financial position or results of operations.

SAB 111 — In April 2009, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 111 (“SAB 111”). SAB 111 amends Topic 5.M. in the Staff Accounting Bulletin series entitled Other Than Temporary Impairment of Certain Investments in Debt and Equity Securities. On April 9, 2009, the FASB issued new guidance impacting FASB ASC 320-10, Investments — Debt and Equity Securities (FASB Staff Position No. FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments). SAB 111 maintains the previous views related to equity securities an amends Topic 5.M. to exclude debt securities from its scope. SAB 111 was effective for the Corporation as of March 31, 2009. There was no material impact to CCFNB Bancorp, Inc.’s consolidated financial position or results of operations upon adoption.

SAB 112 — In June 2009, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 112 (“SAB 112”). SAB 112 revises or rescinds portions of the interpretative guidance included in the Staff Accounting Bulletin series in order to make the interpretive guidance consistent with recent pronouncements by the FASB, specifically FASB ASC 805 and FASB ASC 810-10 (SFAS No. 141 (R) and SAFAS No. 160). SAB 112 was effective for the Corporation as of June 30, 2009. There was no material impact to CCFNB Bancorp, Inc.’s consolidated financial position or results of operations upon adoption.

FASB ASC 323 — In November 2008, the FASB Emerging Issues Task Force reached a consensus on FASB ASC 323, Investments — Equity Method and Joint Ventures (Issue No. 08-6, Equity Method Investment Accounting Considerations). The new guidance clarifies the accounting for certain transactions and impairment considerations involving equity method investments. An equity investor shall not separately test an investee’s underlying assets for impairment but will recognize its share of any impairment charge recorded by an investee in earning and consider the effect of the impairment on its investment. An equity investor shall account for a share issuance by an investee as if the investor had sold a proportionate share of its investment, with any gain or loss recognized in earnings. The new guidance became effective for the Corporation on January 1, 2009 and did not have a material impact on the Corporation’s consolidated financial position or results of operations.

FASB ASC 350 — In November 2008, the FASB Emerging Issues Task Force reached a consensus on FASB ASC 350, Intangibles — Goodwill and Other (Issue No. 08-7, Accounting for Defensive Intangible Assets). The new guidance clarifies how to account for defensive intangible assets subsequent to initial measurement. The guidance applies to acquired intangible assets in situations in which an entity does not intend to actively use an asset but intends to hold the asset to prevent others from obtaining access to the asset. A defensive intangible asset should be accounted for as a separate unit of accounting with an expected life that reflects the consumption of the expected benefits related to that asset. The benefit from holding a defensive intangible asset is the direct and indirect cash flows resulting from the entity preventing others from using the asset. The new guidance was effective for

intangible assets acquired on or after January 1, 2009 and did not have a material impact on the Corporation’s consolidated financial position or results of operations.

FASB ASC 260-10 — In June 2008, the FASB issued new guidance impacting FASB ASC 260-10, Earnings Per Share (FSP No. EITF 03-06-1, Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities). This new guidance concluded that all outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends participate in undistributed earnings with common shareholders and therefore are considered participating securities for purposes of computing earning per share. Entities that have participating securities that are not convertible into common stock are required to use the “two-class” method of computing earnings per share. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. This new guidance was effective for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. This new guidance became effective for the Corporation on January 1, 2009 and did not have a material impact on the Corporation’s consolidated financial position or results of operations.

FASB ASC 820-10 — In August 2009, the FASB issued an update (ASC No. 1009-05, Measuring Liabilities at Fair Value) impacting FASB ASC 820-10, Fair Value Measurements and Disclosures. The update provides clarification about measuring liabilities at fair value in circumstances where a quoted price in an active market for an identical liability is not available and the valuation techniques that should be used. The update also clarifies that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability. This update became effective for the Corporation for the reporting period ending September 30, 2009 and did not have a material impact on the Corporation’s consolidate financial postion or results of operations.

FASB ASC 820-10 — In September 2009, the FASB issued an update (ASC No. 2009-12, Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)) impacting FASB ASC 820-10, Fair Value Measurements and Disclosures. The amendments in this update permit, as a practical expedient, a reporting entity to measure the fair value of an investment (or its equivalent) if the net asset value of the investment is calculated in a manner consistent with the measurement principles of Topic 946, Financial Services-Investment Companies. The amendments in this update also require disclosures by major category of investment about the attributes of investments within the scope of the amendments in this update, such as the nature of an restrictions on the ability to redeem an investment on the measurement date. This update becomes effective for the Corporation for interim an annual reporting periods ending after December 15, 2009. The Corporation is currently evaluating the impact of adopting the new guidance on the consolidate financial statements, but it is not expected to have a material impact.

RECLASSIFICATIONS

Certain amounts in the consolidated financial statements of the prior years have been reclassified to conform with presentations used in the 2009 consolidated financial statements. Such reclassifications had no effect on the Corporation’s consolidated financial condition or net income.

2. ALLOWANCE FOR LOAN LOSSES

Changes in the allowance for loan losses for the nine months ended September 30, 2009 and 2008 were as follows:


(In Thousands)	2009			2008
Balance, beginning of year	$	3,758		$	1,437
Provision charged to operations		530			—
Allowance acquired		—			1,683
Loans charged off		(375	)		(94	)
Recoveries		21			29

Balance, September 30,	$	3,934		$	3,055

As of September 30, 2009, the total recorded investment in loans that are considered to be impaired was $5,903,000. These impaired loans had a related allowance for loan losses of $503,000. No additional charge to operations was required to provide for the impaired loans since the total allowance for loan losses is estimated by management to be adequate to provide for the estimated loan loss as of September 30, 2009.

3. SHORT-TERM BORROWINGS

Securities sold under agreements to repurchase and Federal Home Loan Bank advances generally represented overnight or less than 30-day borrowings. U.S. Treasury tax and loan notes for collections made by the Bank were payable on demand.

4. LONG-TERM BORROWINGS

Long-term borrowings consist of advances due to the FHLB — Pittsburgh.

5. DEFERRED COMPENSATION PLANS

The Bank has entered into certain non-qualified deferred compensation agreements with certain present and retired executive officers and directors. Expenses related to these non-qualified deferred compensation plans amounted to $131,000 and $116,000 for the nine month periods ended September 30, 2009 and 2008, respectively.

On May 26, 2009, the Bank entered into a Supplemental Executive Retirement Benefit Agreement with the Chief Lending Officer. A copy of the agreement is attached to Form 8-K filed by the Corporation on May 28, 2009. There were no other substantial changes in other plans as disclosed in the 2008 Annual Report.

6. ACQUISITION

On July 18, 2008, the Corporation completed its acquisition of Columbia Financial Corporation(“CFC”). Under the terms of the Agreement and Plan of Reorganization dated as of November 29, 2007, CFC merged with and into the Corporation; and the Corporation’s wholly-owned subsidiary, Columbia County Farmers National Bank merged with and into the Bank. The Corporation acquired 100% of the outstanding shares of CFC for a total purchase price of $26,316,000. The transaction was accounted for in accordance with FASB ASC 805, Business Combinations (SFAS No. 141- Business Combinations). In connection therewith, the Corporation issued approximately 1,030,286 shares of its common stock and paid cash of approximately $3,000 in lieu of the issuance of fractional shares in exchange for all of the issued and outstanding shares of CFC common stock. Assets and liabilities of CFC are recorded at estimated fair values as of the acquisition date and the results of the acquired entity operations are included in income from that date. The fair values of acquired assets and liabilities, including identified intangible assets, were finalized as quickly as possible following the acquisition. The CFC purchase price allocation is complete.

The following table shows the excess purchase price of the carrying value of net assets acquired, purchase price allocation and resulting goodwill recorded for this acquisition. Changes to the carrying amount of goodwill, premises and equipment and junior subordinate debentures, since the merger date, reflect additional information obtained about the fair value of the assets acquired and liabilities assumed.


(In Thousands)
Purchase price	$	26,316
Carrying value of net assets acquired		(17,855	)

Excess of purchase price over carrying value of net assets acquired		8,461

Purchase accounting adjustments:
Loans		30
Premises and equipment		853
Deposits		1,235
Severance and related costs		840
Deferred taxes		208

Subtotal		11,627
Core deposit intangibles		(3,690	)

Goodwill	$	7,937

The following table summarized the estimated fair value of net assets acquired:


(In Thousands)
Assets
Cash and cash equivalents	$	5,157
Interest-bearing deposits in other banks		129
Federal funds sold		517
Investment securities		138,257
Loans, net of allowance for loan losses		160,724
Premises and equipment		6,492
Accrued interest receivable		1,534
Bank-owned life insurance		3,462
Investment in limited partnerships		919
Goodwill and other intangibles		11,627
Other assets		564

Total assets	$	329,382


Liabilities
Deposits	$	264,692
Borrowings		31,883
Junior subordinate debentures		4,640
Accrued interest payable		764
Other liabilities		1,087

Total liabilities	$	303,066


Fair value of net assets acquired	$	26,316

7. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF CREDIT RISK

The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit and commercial letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The contract or notional amounts of those instruments reflect the extent of involvement the Corporation has in particular classes of financial instruments. The Corporation does not engage in trading activities with respect to any of its financial instruments with off-balance sheet risk.

The Corporation may require collateral or other security to support financial instruments with off-balance sheet credit risk. The contract or notional amounts at September 30, 2009 and December 31, 2008 were as follows:


(In Thousands)	2009		2008
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit	$	82,474	$	68,412
Standby letters of credit		2,938		3,064
Dealer floor plans		1,389		1,129
Loans held for sale		1,420		72

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Because many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Corporation evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Corporation upon extension of credit, is based on management’s credit evaluation of the counter-party. Collateral held varies but may include accounts receivable, inventory, property, plant, equipment and income-producing commercial properties.

Standby letters of credit and commercial letters of credit are conditional commitments issued by the Corporation to guarantee payment to a third party when a customer either fails to repay an obligation or fails to perform some non-financial obligation. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Corporation holds collateral supporting those commitments for which collateral is deemed necessary.

The Corporation’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and letters of credit is represented by the contractual notional amount of those instruments. The Corporation uses the same credit policies in making commitments and conditional obligations, as it does for on-balance sheet instruments.

The Corporation granted commercial, consumer and residential loans to customers primarily within Pennsylvania. Of the total loan portfolio at September 30, 2009, 82.2% was for real estate loans. It was the opinion of management that this high concentration did not pose an adverse credit risk. Further, it is management’s opinion that the remainder of the loan portfolio was balanced and diversified to the extent necessary to avoid any significant concentration of credit.

8. FAIR VALUE MEASUREMENTS

Effective January 1, 2008, the Corporation adopted FASB ASC 820-10 (SFAS No. 157), which, among other things, requires enhanced disclosures about assets and liabilities carried at fair value. FASB ASC 820-10 establishes a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring assets and liabilities at fair value. The standard describes three levels of inputs that may be used to measure fair values:

Level I:		Quoted prices are available in active markets for identical assets or liabilities as of the reported date.

Level II:		Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observables as of the reported date. The nature of these assets and liabilities include items for which quoted prices are available but traded less frequently, and items that are fair valued using other financial instruments of which can be directly observed.

Level III:		Assets and liabilities that have little or no pricing observability as of the reported date. These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into determination of fair value require significant management judgment or estimation.

The following table presents the assets reported on the consolidated statements of financial condition at their fair value as of September 30, 2009 by level within the fair value hierarchy. As required by FASB ASC 820-10, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.


	September 30, 2009
(In Thousands)	Level I		Level II		Level III		Total
Assets:
Investment Securities, available-for-sale	$	1,903	$	216,680	$	—	$	218,583

At September 30, 2009, investments measured at fair value on a recurring basis and the valuation methods used are as follows:


(In Thousands)	Level I		Level II		Level III		Total
Available for sale securities
Obligation of US Government Agencies
Mortgage-backed	$	—	$	141,578	$	—	$	141,578
Other		—		59,062		—		59,062
Obligations of state and political subdivisions		—		13,056		—		13,056
Equity securities		1,903		—		—		1,903
Restricted equity securities		—		2,984		—		2,984

	$	1,903	$	216,680	$	—	$	218,583

The estimated fair values of equity securities classified as Level I are derived from quoted market prices in active markets; these assets consists mainly of stocks held in other banks. The estimated fair values of all debt securities classified as Level II are obtained from nationally-recognized third-party pricing agencies. The estimated fair values are derived primarily from cash flow models, which include assumptions for interest rates, credit losses, and prepayment speeds. The significant inputs utilized in the cash flow models are based on market data obtained from sources independent of the Corporation (observable inputs), and are therefore classified as Level II within the fair value hierarchy.

NOTE 9 — MANAGEMENT’S ASSERTIONS AND COMMENTS REQUIRED TO BE PROVIDED WITH FORM 10Q FILING

In management’s opinion, the consolidated interim financial statements reflect fair presentation of the consolidated financial position of the Corporation, and the results of their operations and their cash flows for the interim periods presented. Further, the consolidated interim financial statements are unaudited, however they reflect all adjustments, which are in the opinion of management, necessary to present fairly the consolidated financial condition and consolidated results of operations and cash flows for the interim periods presented and that all such adjustments to the consolidated financial statements are of a normal recurring nature.

These consolidated interim financial statements have been prepared in accordance with requirements of Form 10Q and therefore do not include all disclosures normally required by accounting principles generally accepted in the United States of America applicable to financial institutions as included with consolidated financial statements included in the Corporation’s annual Form 10K filing. The reader of these consolidated interim financial statements may wish to refer to the Corporation’s annual report or Form 10K for the period ended December 31, 2008 filed with the Securities and Exchange Commission.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders of CCFNB Bancorp, Inc.:

We have reviewed the accompanying consolidated balance sheet of CCFNB Bancorp, Inc. and Subsidiary as of September 30, 2009, the related consolidated statements of income for the three and nine month periods ended September 30, 2009 and 2008 and changes in stockholders’ equity and cash flows for the nine-month periods ended September 30, 2009 and 2008. These consolidated interim financial statements are the responsibility of the management of CCFNB Bancorp, Inc. and Subsidiary.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of CCFNB Bancorp, Inc. and Subsidiary as of December 31, 2008, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated March 10, 2009, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2008, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.



/s/ J. H. Williams & Co., LLP
J.H. Williams & Co., LLP
Kingston, Pennsylvania
November 10, 2009


Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY STATEMENT

Certain statements in this section and elsewhere in this Quarterly Report on Form 10-Q, other periodic reports filed by us under the Securities Exchange Act of 1934, as amended, and any other written or oral statements made by or on behalf of us may include “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 which reflect our current views with respect to future events and financial performance. Such forward looking statements are based on general assumptions and are subject to various risks, uncertainties, and other factors that may cause actual results to differ materially from the views, beliefs and projections expressed in such statements. These risks, uncertainties and other factors include, but are not limited to:

	•		Our business and financial results are affected by business and economic conditions, both generally and specifically in the Northcentral Pennsylvania market in which we operate. In particular, our business and financial results may be impacted by:

	•		Changes in interest rates and valuations in the debt, equity and other financial markets.

	•		Disruptions in the liquidity and other functioning of financial markets, including such disruptions in the market for real estate and other assets commonly securing financial products.

	•		Actions by the Federal Reserve Board and other government agencies, including those that impact money supply and market interest rates.

	•		Changes in our customers’ and suppliers’ performance in general and their creditworthiness in particular.

	•		Changes in customer preferences and behavior, whether as a result of changing business and economic conditions or other factors.

	•		Changes resulting from the newly enacted Emergency Economic Stabilization Act of 2008.

	•		A continuation of recent turbulence in significant segments of the United States and global financial markets, particularly if it worsens, could impact our performance, both directly by affecting our revenues and the value of our assets and liabilities and indirectly by affecting our customers and suppliers and the economy generally.

	•		Our business and financial performance could be impacted as the financial industry restructures in the current environment by changes in the competitive landscape.

	•		Given current economic and financial market conditions, our forward-looking financial statements are subject to the risk that these conditions will be substantially different than we are currently expecting. These statements are based on our current expectations that interest rates will remain low through 2009 with continued wide market credit spreads and our view that national economic trends currently point to a continuation of severe recessionary conditions through 2009 followed by a subdued recovery.

	•		Legal and regulatory developments could have an impact on our ability to operate our business or our financial condition or results of operations or our competitive position or reputation. Reputational impacts, in turn, could affect matters such as business generation and retention, our ability to attract and retain management, liquidity and funding. These legal and regulatory developments could include: (a) the unfavorable resolution of legal proceedings or regulatory and other governmental inquiries; (b) increased litigation risk from recent regulatory and other governmental developments; (c) the results of the regulatory examination process, and regulators’ future use of supervisory and enforcement tools; (d) legislative and regulatory reforms, including changes to laws and regulations involving tax, pension, education and mortgage lending, the protection of confidential customer information, and other aspects of the financial institution industry; and (e) changes in accounting policies and principles.

	•		Our business and operating results are affected by our ability to identify and effectively manage risks inherent in our businesses, including, where appropriate, through the effective use of third-party insurance and capital management techniques.

	•		Our ability to anticipate and respond to technological changes can have an impact on our ability to respond to customer needs and to meet competitive demands.

	•		Our ability to implement our business initiatives and strategies could affect our financial performance over the next several years.

	•		Competition can have an impact on customer acquisition, growth and retention, as well as on our credit spreads and product pricing, which can affect market share, deposits and revenues.

	•		Our business and operating results can also be affected by widespread natural disasters, terrorist activities or international hostilities, either as a result of the impact on the economy and capital and other financial markets generally or on us or on our customers and suppliers.

The words “believe,” “expect,” “anticipate,” “project” and similar expressions signify forward looking statements. Readers are cautioned not to place undue reliance on any forward looking statements made by or on behalf of us. Any such statement speaks only as of the date the statement was made. We undertake no obligation to update or revise any forward looking statements.

The following discussion and analysis should be read in conjunction with the detailed information and consolidated financial statements, including notes thereto, included elsewhere in this Form 10Q. Our consolidated financial condition and results of operations are essentially those of our subsidiary, the Bank. Therefore, the analysis that follows is directed to the performance of the Bank.

RESULTS OF OPERATIONS

NET INTEREST INCOME

2009 vs. 2008

Tax-equivalent net interest income increased $6.0 million to $15.0 million for the nine months ended September 30, 2009. Reported tax-equivalent interest income increased $7.5 million to $21.6 million for the nine months ended September 30, 2009. The increase primarily resulted from the acquisition of Columbia Financial Corporation (“CFC”) as described in Note 6 of the Notes to the Consolidated Financial Statements included in Item 1 of this Form 10-Q. The acquisition of CFC contributed to an increase in net loans in the amount of $160.7 million, an increase in investment securities in the amount of $138.3 million, an increase in federal funds sold in the amount of $517,000, and an increase in interest-bearing deposits in other banks of $129,000. Reported interest expense increased $1.5 million or 30.3 percent to $6.6 million. The acquisition of CFC contributed an increase in deposits in the amount of $264.7 million, an increase in other borrowings of $31.9 million, and an increase of $4.6 million in junior subordinate debentures.

Net interest margin decreased to 3.77 percent at September 30, 2009 from 3.85 percent at September 30, 2008. The net decrease in margin resulted primarily from the yield on interest-bearing deposits decreasing 46 basis points to 1.95 percent at September 30, 2009 while the yield on total borrowings decreased 130 basis points to 1.75 percent at September 30, 2009. A decrease of 144 basis points on the short-term borrowings for the nine months ended September 30, 2009 was the primary reason for the yield decrease in the total borrowings as the long-term borrowing yield decreased 75 basis points over the same period. The short-term borrowing had an average balance of $46.5 million and $35.7 million as of September 30, 2009 and 2008, respectively. The yield decreases were driven by the rate decreases enacted throughout 2008 by the Federal Open Market Committee (FOMC) as well as local market competition. The yield on interest-earning assets decreased 58 basis points to 5.42 percent for the nine months ended September 30, 2009. The yield on total loans decreased 62 basis points to 6.12 percent for the nine months ended September 30, 2009.

The following Average Balance Sheet and Rate Analysis table presents the average assets, actual income or expense and the average yield on assets, liabilities and stockholders’ equity for the nine months ended September 30, 2009 and 2008.

AVERAGE BALANCE SHEET AND RATE ANALYSIS
NINE MONTHS ENDED SEPTEMBER 30,


	2009							2008
	Average Balance		Interest		Average Rate			Average Balance		Interest		Average Rate
(In Thousands)	(1)							(1)
ASSETS:
Tax-exempt loans	$	19,684	$	834		5.66	%	$	14,994	$	750		6.69	%
All other loans		306,078		14,086		6.15	%		190,492		9,614		6.75	%

Total loans (2)(3)(4)		325,762		14,920		6.12	%		205,486		10,364		6.74	%


Taxable securities		184,914		6,243		4.50	%		93,239		3,309		4.73	%
Tax-exempt securitites (3)		10,745		422		5.24	%		5,205		248		6.35	%

Total securities		195,659		6,665		4.54	%		98,444		3,557		4.82	%


Federal funds sold		9,883		11		0.15	%		—		—		0.00	%
Interest-bearing deposits		551		1		0.24	%		9,870		176		2.38	%


Total interest-earning assets		531,855		21,597		5.42	%		313,800		14,097		6.00	%


Other assets		44,599							25,220


TOTAL ASSETS	$	576,454						$	339,020


LIABILITIES:
Savings	$	56,307		168		0.40	%	$	33,760		101		0.40	%
Now deposits		68,789		75		0.15	%		41,056		86		0.28	%
Money market deposits		44,278		353		1.07	%		16,570		190		1.53	%
Time deposits		226,875		5,179		3.05	%		130,352		3,628		3.72	%

Total deposits		396,249		5,775		1.95	%		221,738		4,005		2.41	%


Short-term borrowings		46,535		254		0.73	%		35,684		580		2.17	%
Long-term borrowings		11,603		462		5.32	%		9,508		432		6.07	%
Junior subordinate debentures		4,640		104		3.00	%		1,087		44		5.41	%

Total borrowings		62,778		820		1.75	%		46,279		1,056		3.05	%


Total interest-bearing liabilities		459,027		6,595		1.92	%		268,017		5,061		2.52	%


Demand deposits		51,004							29,061
Other liabilities		3,656							2,340
Stockholders’ equity		62,767							39,602

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	576,454						$	339,020

Interest rate spread (6)						3.50	%						3.48	%

Net interest income/margin (5)			$	15,002		3.77	%			$	9,036		3.85	%


(1)		Average volume information was compared using daily (or monthly) averages for interest-earning and bearing accounts. Certain balance sheet items utilized quarter-end balances for averages.

(2)		Interest on loans includes fee income.

(3)		Tax exempt interest revenue is shown on a tax-equivalent basis using a statutory federal income tax rate of 34 percent for 2009 and 2008.

(4)		Nonaccrual loans have been included with loans for the purpose of analyzing net interest earnings.

(5)		Net interest margin is computed by dividing annualized net interest income by total interest earning assets.

(6)		Interest rate spread represents the difference between the average rate earned on interest-earning assets and the average rate paid on interest-bearing liabilities.

Reconcilement of Taxable Equivalent Net Interest Income
For the Nine Months Ended September 30,


(In Thousands)	2009		2008
Total interest income	$	21,278	$	13,757
Total interest expense		6,595		5,061


Net interest income		14,683		8,696
Tax equivalent adjustment		319		340


Net interest income (fully taxable equivalent)	$	15,002	$	9,036

Rate/Volume Analysis

To enhance the understanding of the effects of volumes (the average balance of earning assets and costing liabilities) and average interest rate fluctuations on the balance sheet as it pertains to net interest income, the table below reflects these changes for 2009 versus 2008:


	Nine Months Ended September 30,
	2009 vs 2008
	Increase (Decrease)
	Due to
(In Thousands)	Volume			Rate			Net
Interest income:
Loans, tax-exempt	$	199		$	(115	)	$	84
Loans		5,319			(847	)		4,472
Taxable investment securities		3,095			(161	)		2,934
Tax-exempt investment securities		218			(44	)		174
Federal funds sold		11			—			11
Interest bearing deposits		(17	)		(158	)		(175	)

Total interest-earning assets		8,825			(1,325	)		7,500

Interest expense:
Savings		67			—			67
NOW deposits		30			(41	)		(11	)
Money market deposits		221			(58	)		163
Time deposits		2,203			(652	)		1,551
Short-term borrowings		59			(385	)		(326	)
Long-term borrowings, FHLB		83			(53	)		30
Junior subordinate debentures		80			(20	)		60

Total interest-bearing liabilities		2,743			(1,209	)		1,534

Change in net interest income	$	6,082		$	(116	)	$	5,966

PROVISION FOR LOAN LOSSES

2009 vs. 2008

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, evaluate potential charge-offs and recoveries, and assess the general conditions in the markets served. Management remains committed to an aggressive and thorough program of problem loan identification and resolution. Periodically, an independent loan review is performed for the Bank. The allowance for loan losses is evaluated quarterly and is calculated by applying historic loss factors to the various outstanding loans types while excluding loans for which a specific allowance has already been determined. Loss factors are based on management’s consideration of the nature of the portfolio segments, historical loan loss experience, industry standards and trends with respect to nonperforming loans, and its core knowledge and experience with specific loan segments.

Although management believes that it uses the best information available to make such determinations and that the allowance for loan losses is adequate at September 30, 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 or employment and delays in receiving financial information from borrowers could result in increased levels of nonperforming assets and charge-offs, increased loan loss provisions and reductions in interest income. Also, as part of the examination process, bank regulatory agencies periodically review the Bank’s loan loss allowance. The bank regulators could require the recognition of additions or reductions to the loan loss allowance based on their judgment of information available to them at the time of their examination.

The provision for loan losses amounted to $530,000 and $0 for the nine months ended September 30, 2009 and 2008, respectively. Management concluded the increase of the provision was appropriate considering the gross loan growth experience of $11,031,000, increases in nonperforming assets, and the general downturn in the national economy. Utilizing the resources noted above, management concluded that the allowance for loan losses remains at a level adequate to provide for probable losses inherent in the loan portfolio.

NON-INTEREST INCOME

2009 vs. 2008

Total non-interest income increased $1.9 million or 99.8 percent to $3.8 million for the nine months ended September 30, 2009. The increase primarily resulted from the acquisition of CFC as described in Note 6 of the Notes to the Consolidated Financial Statements included in Item 1 of this Form 10-Q. The service charges and fees increased $454,000 or 57.0 percent to $1.3 million for the nine months ended September 30, 2009. Gain on sale of loans increased $353,000 or 182.0 percent from $194,000 in 2008 to $547,000 in 2009. Brokerage income increased $16,000 or 9.2 percent from $174,000 in 2008 to $190,000 in 2009. Trust income increased $245,000 or 112.9 percent from $217,000 in 2008 to $462,000 in 2009. Other income increased $545,000 from $565,000 in 2008 to $1.1 million in 2009 primarily as a result of $183,000 in gains recorded on the sale of property and equipment as well as increased ATM transaction revenue and related surcharges.


	For The Nine Months Ended
	September 30, 2009						September 30, 2008						Change
(In Thousands)	Amount			% Total			Amount			% Total			Amount		%
Service charges and fees	$	1,251			32.8	%	$	797			41.8	%	$	454		57.0	%
Gain on sale of loans		547			14.3			194			10.2			353		182.0
Earnings on bank-owned life insurance		324			8.5			244			12.8			80		32.8
Brokerage and insurance		190			5.0			174			9.1			16		9.2
Trust		462			12.1			217			11.4			245		112.9
Investment security losses		(71	)		(1.9	)		(283	)		(14.8	)		212		(74.9	)
Other		1,110			29.2			565			29.5			545		96.5

Total non-interest income	$	3,813			100.0	%	$	1,908			100.0	%	$	1,905		99.8	%

NON-INTEREST EXPENSE

2009 vs. 2008

Total non-interest expense increased $4.3 million or 56.1 percent from $7.7 million in 2008 to $12.0 million in 2009. The increases primarily resulted from the acquisition of CFC as described in Note 6 of the Notes to the Consolidated Financial Statements included in Item 1 of this Form 10-Q. Salaries and employee benefits increased $1.4 million or 33.5 percent for the nine months ended September 30, 2009. Professional fees increased $65,000 or 17.0 percent from $382,000 in 2008 to $447,000 in 2009. FDIC assessments increased $514,000 due to the imposition of a 5 basis point special assessment and an increase in the regular quarterly

assessment rate. Other expenses, Occupancy, Furniture and Equipment, and Directors fees all experienced net increases as a result of the CFC acquisition.

One standard to measure non-interest expense is to express annualized non-interest expense as a percentage of average total assets. As of September 30, 2009 this percentage was 2.77 percent compared to 3.02 percent in 2008.


	For The Nine Months Ended
	September 30, 2009					September 30, 2008					Change
(In Thousands)	Amount		% Total			Amount		% Total			Amount			%
Salaries	$	4,776		39.8	%	$	3,056		39.8	%	$	1,720			56.3	%
Employee benefits		1,232		10.3			1,595		20.8			(363	)		(22.8	)
Occupancy		810		6.8			496		6.5			314			63.3
Furniture and equipment		944		7.9			583		7.6			361			61.9
State shares tax		400		3.3			277		3.6			123			44.4
Professional fees		447		3.7			382		5.0			65			17.0
Directors fees		215		1.8			152		2.0			63			41.4
FDIC assessments		543		4.5			29		0.4			514			1,772.4
Other		2,621		21.9			1,111		14.3			1,510			135.9

Total non-interest expense	$	11,988		100.0	%	$	7,681		100.0	%	$	4,307			56.1	%

FINANCIAL CONDITION

Our consolidated assets at September 30, 2009 were $592.9 million which represented an increase of $24.6 million from $568.3 million at December 31, 2008.

Gross loans increased 3.4 percent from $320.1 million at December 31, 2008 to $331.1 million at September 30, 2009.

The loan-to-deposit ratio is a key measurement of liquidity. Our loan-to-deposit ratio increased during 2009 to 74.8 percent compared to 73.7 percent at December 31, 2008.

INVESTMENTS

All of our securities are available-for-sale and are carried at estimated fair value. Available-for-sale securities are reported on the consolidated balance sheet at fair value with an offsetting adjustment to deferred taxes. The possibility of material price volatility in a changing interest rate environment is offset by the availability to the bank of restructuring the portfolio for gap positioning at any time through the securities classified as available-for-sale. The impact of the fair value accounting was an unrealized gain, net of tax, on September 30, 2009 of $2,764,000 compared to an unrealized gain, net of tax, on December 31, 2008 of $1,622,000, which represents an unrealized gain, net of tax, of $1,142,000 for the nine months ended September 30, 2009. The following table shows the amortized cost and estimated fair value of the investment securities as of the dates shown:


	September 30, 2009
			Estimated
	Amortized		Fair
(In Thousands)	Cost		Value
Obligation of U.S.Government Corporations and Agencies:
Mortgage-backed	$	137,500	$	141,578
Other		58,521		59,062
Obligations of state and political subdivisions		12,839		13,056

Total debt securities		208,860		213,696
Marketable equity securities		2,551		1,903
Restricted equity securities		2,984		2,984

Total investment securities AFS	$	214,395	$	218,583


	December 31, 2008
			Estimated
	Amortized		Fair
(In Thousands)	Cost		Value
Obligation of U.S.Government Corporations and Agencies:
Mortgage-backed	$	116,357	$	118,046
Other		63,031		64,080
Obligations of state and political subdivisions		9,944		9,994

Total debt securities		189,332		192,120
Marketable equity securities		2,623		2,293
Restricted equity securities		2,167		2,167

Total investment securities AFS	$	194,122	$	196,580

LOANS

The loan portfolio increased 3.4 percent from $320.1 million at December 31, 2008 to $331.1 million at September 30, 2009. The percentage distribution in the loan portfolio was 82.2 percent in real estate loans at $272.3 million; 9.5 percent in commercial loans at $31.3 million; 2.4 percent in consumer loans at $7.9 million; and 5.9 percent in tax exempt loans at $19.6 million.

The following table presents the breakdown of loans by type as of the date indicated:


							Change
(In Thousands)	September 30, 2009			December 31, 2008			Amount			%

Commercial, financial and agricultural	$	31,305		$	27,165		$	4,140			15.2	%
Tax-exempt		19,558			16,762			2,796			16.7
Real estate		267,172			262,539			4,633			1.8
Real estate construction		5,087			5,307			(220	)		(4.1	)
Installment loans to individuals		7,893			8,202			(309	)		(3.8	)
Add (deduct): Unearned discount		(18	)		(24	)		6			(25.0	)
Unamortized loan costs, net of fees		102			117			(15	)		(12.8	)

Gross loans	$	331,099		$	320,068		$	11,031			3.4	%

The following table presents the percentage distribution of loans by category as of the date indicated:


	September 30, 2009			December 31, 2008
Commercial, financial and agricultural		9.5	%		8.5	%
Tax-exempt		5.9			5.2
Real estate		80.7			82.1
Real estate construction		1.5			1.7
Installment loans to individuals		2.4			2.5

Gross loans		100.0	%		100.0	%

ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses was $3.9 million at September 30, 2009, compared to $3.1 million at September 30, 2008. This allowance equaled 1.19 percent and .94 percent of total loans, net of unearned income, as of September 30, 2009 and 2008, respectively. The loan loss reserve is analyzed quarterly and reviewed by the Bank’s Board of Directors. No concentration or apparent deterioration in classes of loans or pledged collateral was evident. Semi-monthly loan meetings with the Bank’s Director Loan Committee reviewed new loans. Delinquent loans, loan exceptions and certain large loans are addressed by the full Board no less than monthly to determine compliance with policies. Allowance for loan losses was considered adequate based on delinquency trends and actual loans written as it relates to the loan portfolio.

The following table presents a summary of the Bank’s loan loss experience as of the dates indicated:


	For the Nine Months Ended September 30,
(In Thousands)	2009			2008
Average Loans Outstanding during the period	$	325,762		$	205,486

Balance, beginning of year	$	3,758		$	1,437
Provision charged to operations		530			—
Allowance acquired		—			1,683

Loans charged off:
Commercial, financial, and agricultural		(114	)		—
Real estate mortgages		(233	)		—
Installment loans to indiviuals		(28	)		(94	)

Recoveries:
Commercial, financial, and agricultural		1			—
Real estate mortgages		9			2
Installment loans to indiviuals		11			27


Balance, end of period	$	3,934		$	3,055


Net charge-offs to Average loans outstanding during the period		-0.11	%		-0.03	%

NON-PERFORMING LOANS

As of September 30, 2009, loans 30-89 days past due totaled $1.8 million compared to $1.6 million at December 31, 2008. Non-accrual loans totaled $5.8 million at September 30, 2009 and $4.5 at December 31, 2008. Overall, past due and non-accrual loans increased $1.7 million to $7.8 million at September 30, 2009 from $6.1 million at December 31, 2008.

The following table presents past due and non-accrual loans by loan type and in summary as of the dates indicated:


(In Thousands)	September 30, 2009		December 31, 2008

Commercial, financial and agricultural
Days 30-89	$	410	$	61
Days 90 plus		126		—
Non-accrual		414		581
Real estate
Days 30-89		1,330		1,528
Days 90 plus		—		—
Non-accrual		5,358		3,780
Installment loans to individuals
Days 30-89		50		9
Days 90 plus		—		—
Non-accrual		63		92

	$	7,751	$	6,051


Days 30-89	$	1,790	$	1,598
Days 90 plus		126		—
Non-accrual		5,835		4,453

	$	7,751	$	6,051


Restructured loans still accruing	$	380	$	58


Other real estate owned	$	380	$	373

DEPOSITS

Total deposits increased by 1.9 percent from $434.3 million at December 31, 2008 to $442.7 million at September 30, 2009. Savings deposits increased 1.3 percent to $55.4 million at September 30, 2009 from $54.7 million at December 31, 2008. Money market deposits increased 12.5 percent to $41.7 million as of September 30, 2009 from $37.1 million as of December 31, 2008. Interest bearing NOW accounts increased 1.7 percent from $63.8 million at December 31, 2008 to $64.8 million at September 30, 2009.

The actual balances and average rate paid on deposits are summarized as follows:


	September 30, 2009					December 31, 2008
			Average					Average			Change
(In Thousands)	Balance		Rate			Balance		Rate			Amount			%
Non-interest bearing	$	49,562		—	%	$	52,460		—	%	$	(2,898	)		(5.5	)%
Savings		55,431		0.40			54,717		0.40			714			1.3
Now deposits		64,846		0.15			63,776		0.27			1,070			1.7
Money market deposits		41,743		1.12			37,120		1.66			4,623			12.5
Time deposits		231,076		3.15			226,236		3.53			4,840			—

Total deposits	$	442,658		1.82	%	$	434,309		2.07	%	$	8,349			1.9	%

BORROWED FUNDS

Short-term borrowings, including securities sold under agreements to repurchase and day-to-day FHLB — Pittsburgh borrowings increased 11.8 percent from $55.5 million at December 31, 2008 to $62.0 million at September 30, 2009. Long-term borrowings increased $6.0 million from $9.1 million at December 31, 2008 to $15.1 million at September 30, 2009.


	September 30, 2009					December 31, 2008					Change
(In Thousands)	Amount		% Total			Amount		% Total			Amount		%
Short-term borrowings:
FHLB repurchase agreements	$	—		—	%	$	—		—	%	$	—		—	%
Short-term borrowings, FHLB		—		—			—		—			—		—
Securities sold under agreement to repurchase		61,995		75.8			55,462		80.1			6,533		11.8

Total short-term borrowings		61,995		75.8	%		55,462		80.1	%		6,533		11.8
Junior subordinate debentures		4,640		5.7			4,640		6.7			—		—
Long-term borrowings, FHLB		15,129		18.5			9,133		13.2			5,996		65.7

Total borrowed funds	$	81,764		100.0	%	$	69,235		100.0	%	$	12,529		18.1	%

LIQUIDITY

Liquidity management is required to ensure that adequate funds will be available to meet anticipated and unanticipated deposit withdrawals, debt service payments, investment commitments, commercial and consumer loan demand, and ongoing operating expenses. Funding sources include principal repayments on loans, sale of assets, growth in core deposits, short and long-term borrowings, investment securities coming due, loan prepayments and repurchase agreements. Regular loan payments are a dependable source of funds, while the sale of investment securities, deposit growth and loan prepayments are significantly influenced by general economic conditions and the level of interest rates.

We manage liquidity on a daily basis. We believe that our liquidity is sufficient to meet present and future financial obligations and commitments on a timely basis.

CAPITAL RESOURCES

Capital continues to be a strength for the Bank. Capital is critical as it must provide growth, payment to shareholders, and absorption of unforeseen losses. The federal regulators provide standards that must be met.

As of September 30, 2009, the Bank was categorized as well-capitalized under the regulatory framework for prompt corrective action. To be categorized as well-capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios.

Our actual consolidated capital amounts and ratios as of September 30, 2009 and December 31, 2008 are in the following table:


	2009					2008
(In Thousands)	Amount		Ratio			Amount		Ratio
Total Capital (to Risk-weighted Assets)

Actual	$	58,896		17.8	%	$	55,851		16.5	%
For Capital Adequacy Purposes		26,404		8.0			27,112		8.0
To Be Well-Capitalized		33,005		10.0			33,890		10.0

Tier I Capital (to Risk-weighted Assets)

Actual	$	54,962		16.7	%	$	52,083		15.4	%
For Capital Adequacy Purposes		13,202		4.0			13,556		4.0
To Be Well-Capitalized		19,803		6.0			20,334		6.0

Tier I Capital (to Average Assets)

Actual	$	54,962		9.7	%	$	52,083		9.3	%
For Capital Adequacy Purposes		22,624		4.0			22,476		4.0
To Be Well-Capitalized		28,280		5.0			28,095		5.0

Our capital ratios are not materially different from those of the Bank.

INTEREST RATE RISK MANAGEMENT

Interest rate risk management involves managing the extent to which interest-sensitive assets and interest-sensitive liabilities are matched. Interest rate sensitivity is the relationship between market interest rates and earnings volatility due to the repricing characteristics of assets and liabilities. The Bank’s net interest income is affected by changes in the level of market interest rates. In order to maintain consistent earnings performance, the Bank seeks to manage, to the extent possible, the repricing characteristics of its assets and liabilities.

One major objective of the Bank when managing the rate sensitivity of its assets and liabilities is to stabilize net interest income. The management of and authority to assume interest rate risk is the responsibility of the Bank’s Asset/Liability Committee (“ALCO”), which is comprised of senior management and Board members. ALCO meets quarterly to monitor the ratio of interest sensitive assets to interest sensitive liabilities. The process to review interest rate risk management is a regular part of management of the Bank. Consistent policies and practices of measuring and reporting interest rate risk exposure, particularly regarding the treatment of noncontractual assets and liabilities, are in effect. In addition, there is an annual process to review the interest rate risk policy with the Board of Directors which includes limits on the impact to earnings from shifts in interest rates.

The ratio between assets and liabilities repricing in specific time intervals is referred to as an interest rate sensitivity gap. Interest rate sensitivity gaps can be managed to take advantage of the slope of the yield curve as well as forecasted changes in the level of interest rate changes.

To manage the interest sensitivity position, an asset/liability model called “gap analysis” is used to monitor the difference in the volume of the Bank’s interest sensitive assets and liabilities that mature or reprice within given periods. A positive gap (asset sensitive) indicates that more assets reprice during a given period compared to liabilities, while a negative gap (liability sensitive) has the opposite effect. The Bank employs computerized net interest income simulation modeling to assist in quantifying interest rate risk exposure. This process measures and quantifies the impact on net interest income through varying interest rate changes and balance sheet compositions. The use of this model assists the ALCO to gauge the effects of the interest rate changes on interest sensitive assets and liabilities in order to determine what impact these rate changes will have upon our net interest spread.

At September 30, 2009, our cumulative gap positions and the potential earnings change resulting from a 200 basis point change in rates were both within the internal risk management guidelines.

In addition to gap analysis, the Bank uses earnings simulation to assist in measuring and controlling interest rate risk. The Bank also simulates the impact on net interest income of plus and minus 100, 200 and 300 basis point rate shocks. The results of these theoretical rate shocks provide an additional tool to help manage the Bank’s interest rate risk.

It is our opinion that the asset/liability mix and the interest rate risk associated with the balance sheet is within manageable parameters. Additionally, the Bank’s Asset/Liability Committee meets quarterly with an investment consultant.


Item 3.		Quantitative and Qualitative Disclosures about Market Risk

In the normal course of conducting business activities, the Corporation is exposed to market risk, principally interest rate risk, through the operations of its banking subsidiary. Interest rate risk arises from market driven fluctuations in interest rates that affect cash flows, income, expense and values of financial instruments and was discussed previously in this Form 10-Q.

No material changes in market risk occurred during the current period. A detailed discussion of market risk is provided in the Annual Report on Form 10-K for the period ended December 31, 2008.


Item 4.		Controls and Procedures

Our Chief Executive Officer (CEO) and Chief Financial Officer (CFO) have concluded that our disclosure controls and procedures (as defined in Rules 13a — 15(e) and 15d — 15(e) under the Securities Exchange Act of 1934, as amended), based on their evaluation of these controls and procedures as of the end of the period covered by this Report, were effective as of such date at the reasonable assurance level as discussed below to ensure that information required to be disclosed by us in the reports we file under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to our management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Our management, including the CEO and CFO, does not expect that our disclosure controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. In addition, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls.

The CEO and CFO have evaluated the changes to our internal controls over financial reporting that occurred during our fiscal Quarter Ended September 30, 2009, as required by paragraph (d) Rules 13a — 15 and 15d — 15 under the Securities Exchange Act of 1934, as amended, and have concluded that there were no changes that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II Other Information


Item 1.		Legal Proceedings

Management and the Corporation’s legal counsel are not aware of any litigation that would have a material adverse effect on the consolidated financial position of the Corporation. There are no proceedings pending other than the ordinary routine litigation incident to the business of the Corporation and its subsidiary, First Columbia Bank & Trust Co.. In addition, no material proceedings are pending or are known to be threatened or contemplated against the Corporation and the Bank by government authorities.


Item 1A.		Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1.A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2008, which could materially affect our business, financial condition or future results. At September 30, 2009 the risk factors of the Corporation have not changed materially from those in our Annual Report on Form 10-K. However, the risks described in our Annual Report on Form 10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.


Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds

Total

Average

Total Number of

Maximum Number (or

Number of

Price Paid

Shares (or Units)

Approximate Dollar Value)

Shares (or

per Share

Purchased as Part of

of Shares (or Units) that

Units)

(or Units)

Publicly Announced

May Yet Be Purchased

Period

Purchased

Plans or Programs (1)

Under the Plans or Programs

Month #1 (July 1 - July 31, 2009)

3,500

21.75

3,500

189,500

Month #2 (August 1 - August 31, 2009)

—

189,500

Month #3 (September 1 - September 30, 2009)

2,000

22.50

2,000

187,500


(1)		This program was announced in 2009 and represents the third buy-back program. The Board of Directors approved the purchase of 200,000 shares. There was no expiration date associated with this program.


Item 3.		Defaults Upon Senior Securities

Not applicable.


Item 4.		Submission of Matters to a Vote of Security Holders

None


Item 5.		Other Information

None


Item 6.		Exhibits


31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

32		Section 1350 Certification of Chief Executive Officer and Chief Financial Officer

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this quarterly report on Form 10-Q for the period ended September 30, 2009, to be signed on its behalf by the undersigned thereunto duly authorized.


	CCFNB BANCORP, INC. (Registrant)
	By	/s/ Lance O. Diehl
		Lance O. Diehl
		President and CEO

	Date: November 10, 2009

	By	/s/ Jeffrey T. Arnold
		Jeffrey T. Arnold, CPA, CIA
		Chief Financial Officer

	Date: November 10, 2009