10-K405 1 w46770e10-k405.txt FORM 10-K FOR CCFNB 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2000 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from _____________to________________ Commission file Number: 0-19028 CCFNB BANCORP, INC. (Name of small business issuer in its charter)

PENNSYLVANIA 23-2254643 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 232 East Street, Bloomsburg, Pennsylvania 17815 (Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (570) 784-4400 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $1.25 per share. 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 past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No______ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting and non-voting equity held by non-affiliates of the Registrant based on the average of the bid and asked prices of $16.88 at February 28, 2001, was $22,681,791. As of February 28, 2001, the Registrant had outstanding 1,343,708 shares of its common stock, par value $1.25 per share. DOCUMENTS INCORPORATED BY REFERENCE In addition, portions of the Annual Report to stockholders of the Registrant for the year ended December 31, 2000, are incorporated by reference in Part II of this Annual Report. Page ii of 70 Exhibit Index on Page 28 2 CCFNB BANCORP, INC. FORM 10-K INDEX

Part I Page Item 1. Business.............................................................................................1 Item 2. Properties..........................................................................................17 Item 3. Legal Proceedings...................................................................................17 Item 4. Submission of Matters to a Vote of Security Holders.................................Not Applicable Part II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters...........................17 Item 6. Selected Financial Data.............................................................................18 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations...............18 Item 7A. Quantitative and Qualitative Disclosures about Market Risk..........................................18 Item 8. Financial Statements and Supplementary Data.........................................................18 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.........................................................................Not Applicable Part III Item 10. Directors and Executive Officers of the Registrant..................................................18 Item 11. Executive Compensation..............................................................................20 Item 12. Security Ownership of Certain Beneficial Owners and Management......................................24 Item 13. Certain Relationships and Related Transactions......................................................24 Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.....................................25 SIGNATURES.......................................................................................................25 INDEX TO EXHIBITS................................................................................................28

i 3 CCFNB BANCORP, INC. FORM 10-K PART I ITEM 1. BUSINESS GENERAL We are a registered bank holding company and Pennsylvania business corporation and are headquartered in Bloomsburg, Pennsylvania. We have one wholly-owned subsidiary which is Columbia County Farmers National Bank or referred to as the Bank. Our business consists of the management and supervision of the Bank. Our principal source of income is dividends paid by the Bank. At December 31, 2000, we had approximately: - $203 million in total assets; - $137 million in loans; - $143 million in deposits; and - $25 million in stockholders' equity. The Bank is a national banking association and member of the Federal Reserve System whose deposits are insured by the Bank Insurance Fund of the FDIC. The Bank is a full-service commercial bank providing a range of services and products, including time and demand deposit accounts, consumer, commercial and mortgage loans to individuals and small to medium-sized business in its Northcentral Pennsylvania market area. The Bank operates also a full-service trust department. At December 31, 2000, the Bank had six branch banking offices which are located in the Pennsylvania county of Columbia. We consider our branch banking offices to be a single operating segment, because these branches have similar: - economic characteristics, - products and services, - operating processes, - delivery system, - customer bases, and - regulatory oversight. We have not operated any other reportable operating segments in the 3-year period ended December 31, 2000. As of December 31, 2000, we had 85 employees on a full-time equivalent basis. The Company and the Bank are not parties to any collective bargaining agreement and employee relations are considered to be good. SUPERVISION AND REGULATION The following discussion sets forth the material elements of the regulatory framework applicable to us and the Bank and provides certain specific information. This regulatory framework is primarily intended for the protection of investors in our common stock, depositors at the Bank and the Bank Insurance Fund that insures bank deposits. To the extent that the following information describes statutory and regulatory provisions, it is qualified by reference to those provisions. A change in the statutes, regulations or regulatory policies applicable to us or the Bank may have a material effect on our business. INTERCOMPANY TRANSACTIONS Various governmental requirements, including Sections 23A and 23B of the Federal Reserve Act, limit borrowings by us from the Bank and also limit various other transactions between us and the Bank. For example, Section 23A l 4 of the Federal Reserve Act limits to no more than ten percent of its total capital the aggregate outstanding amount of the Bank's loans and other "covered transactions" with any particular non-bank affiliate (including a financial subsidiary) and limits to no more than 20 percent of its total capital the aggregate outstanding amount of the Bank's covered transactions with all of its affiliates (including financial subsidiaries). At December 31, 2000, approximately $5.0 million was available for loans to us from the Bank. Section 23A of the Federal Reserve Act also generally requires that the Bank's loans to its non-bank affiliates (including financial subsidiaries) be secured, and Section 23B of the Federal Reserve Act generally requires that the Bank's transactions with its non-bank affiliates (including financial subsidiaries) be on arm's-length terms. Also, we the Bank (and any financial subsidiary) are prohibited from engaging in certain "tie-in" arrangements in connection with extensions of credit or provision of property or services. SUPERVISORY AGENCIES As a national bank and member of the Federal Reserve System, the Bank is subject to primary supervision, regulation, and examination by the Office of the Comptroller of the Currency and secondary regulation by the FDIC. The Bank is subject to extensive statutes and regulations that significantly affect its business and activities. The Bank must file reports with its regulators concerning its activities and financial condition and obtain regulatory approval to enter into certain transactions. The Bank is also subject to periodic examinations by its regulators to ascertain compliance with various regulatory requirements. Other applicable statutes and regulations relate to insurance of deposits, allowable investments, loans, leases, acceptance of deposits, trust activities, mergers, consolidations, payment of dividends, capital requirements, reserves against deposits, establishment of branches and certain other facilities, limitations on loans to one borrower and loans to affiliated persons, activities of subsidiaries and other aspects of the business of banks. Recent federal legislation has instructed federal agencies to adopt standards or guidelines governing banks' internal controls, information systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation and benefits, asset quality, earnings and stock valuation, and other matters. Legislation adopted in 1994 gives the federal banking agencies greater flexibility in implementing standards on asset quality, earnings, and stock valuation. Regulatory authorities have broad flexibility to initiate proceedings designed to prohibit banks from engaging in unsafe and unsound banking practices. We and the Bank are also affected by various other governmental requirements and regulations, general economic conditions, and the fiscal and monetary policies of the federal government and the Federal Reserve Board. The monetary policies of the Federal Reserve Board influence to a significant extent the overall growth of loans, leases, investments, deposits, interest rates charged on loans, and interest rates paid on deposits. The nature and impact of future changes in monetary policies are often not predictable. We are subject to the jurisdiction of the SEC for matters relating to the offering and sale of our securities. We are also subject to the SEC's rules and regulations relating to periodic reporting, insider trader reports and proxy solicitation materials. Our common stock is not listed for quotation of prices on The NASDAQ Stock Market or any other nationally-recognized stock exchange. However, daily bid and asked price quotations are maintained on the interdealer electronic bulletin board system. SUPPORT OF THE BANK Under current Federal Reserve Board policy, we are expected to act as a source of financial and managerial strength to the Bank by standing ready to use available resources to provide adequate capital funds to the Bank during periods of financial adversity and by maintaining the financial flexibility and capital-raising capacity to obtain additional resources for assisting the Bank. The support expected by the Federal Reserve Board may be required at times when we may not have the resources or inclination to provide it. If a default occurred with respect to the Bank, any capital loans to the Bank from us would be subordinate in right of payment to payment of the Bank depositors and certain of its other obligations. 2 5 LIABILITY OF COMMONLY CONTROLLED BANKS The Bank can be held liable for any loss incurred, or reasonably expected to be incurred, by the FDIC in connection with: - the default of a commonly controlled FDIC-insured depository institution or - any assistance provided by the FDIC to a commonly controlled FDIC-insured depository institution in danger of default. "Default" generally is defined as the appointment of a conservator or receiver, and "in danger of default" generally is defined as the existence of certain conditions indicating that a default is likely to occur in the absence of regulatory assistance. DEPOSITOR PREFERENCE STATUTE In the "liquidation or other resolution" of the Bank by any receiver, federal legislation provides that deposits and certain claims for administrative expenses and employee compensation against the Bank are afforded a priority over the general unsecured claims against the Bank, including federal funds and letters of credit. ALLOWANCE FOR LOAN LOSSES There are certain risks inherent in making all loans. These risks include interest rate changes over the time period in which loans may be repaid, risks resulting from changes in our Northcentral Pennsylvania area economy, risks inherent in dealing with individual borrowers, and, in the case of a loan backed by collateral, risks resulting from uncertainties about the future value of the collateral. Commercial loans and commercial real estate loans comprised 33% of our total consolidated loans as of December 31, 2000. Commercial loans are typically larger than residential real estate loans and consumer loans. Because our loan portfolio contains a significant number of commercial loans and commercial real estate loans with relatively large balances, the deterioration of one or a few of these loans may cause a significant increase in nonperforming loans. An increase in nonperforming loans could result in a loss of earnings from these loans, an increase in the provision for loan losses and loan charge-offs. We maintain an allowance for loan losses to absorb any loan losses based on, among other things, our historical experience, an evaluation of economic conditions, and regular reviews of any delinquencies and loan portfolio quality. We cannot assure you that charge-offs in future periods will not exceed the allowance for loan losses or that additional increases in the allowance for loan losses will not be required. Additions to the allowance for loan losses would result in a decrease in our net income and, possibly, our capital. In evaluating our allowance for loan losses, we divide our loans into the following categories: - commercial, - real estate mortgages, - consumer, and - unallocated. We evaluate some loans as a group and some individually. We use the following criteria in choosing loans to be evaluated individually: - by industry group, - by risk profile, and - by past due status. 3 6 After our evaluation of these loans, we allocate portions of our allowance for loan losses to categories of loans based upon the following considerations: - historical trends, - economic conditions, and - any known deterioration. We use a self-correcting mechanism to reduce differences between estimated and actual losses. We will, on a quarterly basis, weight our loss experience among the various categories and reallocate the allowance for loan losses. For a more in-depth presentation of our allowance for loan losses and the components of this allowance, please refer to Item 7 of this report under Management's Discussion and Analysis of Financial Condition and Results of Operations as well as footnote 4 at Exhibit 13 to this report. CAPITAL REQUIREMENTS We are subject to risk-based capital requirements and guidelines imposed by the Federal Reserve Board, which are substantially similar to the capital requirements and guidelines imposed by the Comptroller of the Currency on the Bank. For this purpose, a bank's or bank holding company's assets and certain specified off-balance sheet commitments are assigned to four risk categories, each weighted differently based on the level of credit risk that is ascribed to those assets or commitments. In addition, risk-weighted assets are adjusted for low-level recourse and market-risk equivalent assets. A bank's or bank holding company's capital, in turn, includes the following tiers: - core ("Tier 1") capital, which includes common equity, non-cumulative perpetual preferred stock, a limited amount of cumulative perpetual preferred stock, and minority interests in equity accounts of consolidated subsidiaries, less goodwill, certain identifiable intangible assets, and certain other assets; and - supplementary ("Tier 2") capital, which includes, among other items, perpetual preferred stock not meeting the Tier 1 definition, mandatory convertible securities, subordinated debt and allowances for loan and lease losses, subject to certain limitations, less certain required deductions. We, like other bank holding companies, are required to maintain Tier 1 and "Total Capital" (the sum of Tier 1 and Tier 2 capital, less certain deductions) equal to at least four percent and eight percent of their total risk-weighted assets (including certain off-balance sheet items, such as unused lending commitments and standby letters of credit), respectively. At December 31, 2000, we met both requirements, with Tier 1 and Total Capital equal to 20.94 percent and 21.77 percent of total risk-weighted assets. The Federal Reserve Board has adopted rules to incorporate market and interest rate risk components into their risk-based capital standards. Amendments to the risk-based capital requirements, incorporating market risk, became effective January 1, 1998. Under the new market-risk requirements, capital will be allocated to support the amount of market risk related to a financial institution's ongoing trading activities. The Federal Reserve Board also requires bank holding companies to maintain a minimum "Leverage Ratio" (Tier 1 capital to adjusted total assets) of three percent if the bank holding company has the highest regulatory rating and meets certain other requirements, or of three percent plus an additional cushion of at least one to two percentage points if the bank holding company does not meet these requirements. At December 31, 2000, our leverage ratio was 13.02 percent. The Federal Reserve Board may set capital requirements higher than the minimums noted above for holding companies whose circumstances warrant it. For example, bank holding companies experiencing or anticipating significant growth may be expected to maintain strong capital positions substantially above the minimum supervisory levels without significant reliance on intangible assets. Furthermore, the Federal Reserve Board has indicated that it will consider a "Tangible Tier 1 Leverage Ratio" (deducting all intangibles) and other indicia of 4 7 capital strength in evaluating proposals for expansion or new activities or when a bank holding company faces unusual or abnormal risk. The Federal Reserve Board has not advised us of any specific minimum leverage ratio applicable to it. The Bank is subject to similar risk-based capital and leverage requirements adopted by the Comptroller of the Currency. The Bank was in compliance with the applicable minimum capital requirements as of December 31, 2000. The Comptroller of the Currency has not advised the Bank of any specific minimum leverage ratio applicable to it. Failure to meet capital requirements could subject the Bank to a variety of enforcement remedies, including the termination of deposit insurance by the FDIC, and to certain restrictions on its business. The Federal Deposit Insurance Corporation Improvements Act of 1991 ("FDICIA"), among other things, identifies five capital categories for insured banks - well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized - and requires federal bank regulatory agencies to implement systems for "prompt corrective action" for insured banks that do not meet minimum capital requirements based on these categories. The FDICIA imposed progressively more restrictive constraints on operations, management, and capital distributions, depending on the category in which an institution is classified. Unless a bank is well capitalized, it is subject to restrictions on its ability to offer brokered deposits, on "pass-through" insurance coverage for certain of its accounts, and on certain other aspects of its operations. FDICIA generally prohibits a bank from paying any dividend or making any capital distribution or paying any management fee to its holding company if the bank would thereafter be undercapitalized. An undercapitalized bank is subject to regulatory monitoring and may be required to divest itself of or liquidate subsidiaries. Holding companies of such institutions may be required to divest themselves of such institutions or divest themselves of or liquidate other affiliates. An undercapitalized bank must develop a capital restoration plan, and its parent bank holding company must guarantee the bank's compliance with the plan up to the lesser of five percent of the bank's assets at the time it became undercapitalized or the amount needed to comply with the plan. Critically undercapitalized institutions are prohibited from making payments of principal and interest on subordinated debt and are generally subject to the mandatory appointment of a conservator or receiver. Rules adopted by the Comptroller of the Currency under FDICIA provide that a national bank is deemed to be well capitalized if the bank has a total risk-based capital ratio of ten percent or greater, a Tier 1 risk-based capital ratio of six percent or greater, and a leverage ratio of five percent or greater and the institution is not subject to a written agreement, order, capital directive, or prompt corrective action directive to meet and maintain a specific level of any capital measure. As of December 31, 2000, the Bank was well-capitalized, based on the prompt corrective action ratios and guidelines described above. It should be noted, however, that a bank's capital category is determined solely for the purpose of applying the Comptroller of the Currency's prompt corrective action regulations, and that the capital category may not constitute an accurate representation of the bank's overall financial condition or prospects. BROKERED DEPOSITS Under FDIC regulations, no FDIC-insured bank can accept brokered deposits unless it (1) is well capitalized, or (2) is adequately capitalized and receives a waiver from the FDIC. In addition, these regulations prohibit any bank that is not well capitalized from paying an interest rate on brokered deposits in excess of three-quarters of one percentage point over certain prevailing market rates. As of December 31, 2000, the Bank held no brokered deposits. DIVIDEND RESTRICTIONS We are a legal entity separate and district from the Bank. In general, under Pennsylvania law, we cannot pay a cash dividend if such payment would render us insolvent. Our revenues consist primarily of dividends paid by the Bank. The National Bank Act limits the amount of dividends the Bank can pay to us without regulatory approval. The Bank may declare and pay dividends to us to the lesser of: 5 8 - the level of undivided profits, and - absent regulatory approval, an amount not in excess of net income combined with retained net income for the preceding two years. At December 31, 2000, approximately $2,164,881 million was available for payment of dividends to us. In addition, federal bank regulatory authorities have authority to prohibit the Bank from engaging in an unsafe or unsound practice in conducting its business. Depending upon the financial condition of the bank in question, the payment of dividends could be deemed to constitute an unsafe or unsound practice. The ability of the Bank to pay dividends in the future is currently influenced, and could be further influenced, by bank regulatory policies and capital guidelines. DEPOSIT INSURANCE ASSESSMENTS The deposits of the Bank are insured up to regulatory limits by the FDIC and, accordingly, are subject to deposit insurance assessments to maintain the Bank Insurance Fund ("BIF") administered by the FDIC. The FDIC has adopted regulations establishing a permanent risk-related deposit insurance assessment system. Under this system, the FDIC places each insured bank in one of nine risk categories based on the bank's capitalization and supervisory evaluations provided to the FDIC by the institution's primary federal regulator. An insured bank's insurance assessment rate is then determined by the risk category in which it is classified by the FDIC. In the light of the recent favorable financial situation of the federal deposit insurance funds and the recent low number of depository institution failures, effective January 1, 1997 the annual insurance premiums on bank deposits insured by the BIF vary between $0.00 per $100 of deposits for banks classified in the highest capital and supervisory evaluation categories to $0.27 per $100 of deposits for banks classified in the lowest capital and supervisory evaluation categories. BIF assessment rates are subject to semi-annual adjustment by the FDIC within a range of up to five basis points without public comment. The FDIC also possesses authority to impose special assessments from time to time. The Deposit Insurance Funds Act provides for assessments to be imposed on insured depository institutions with respect to deposits insured by the BIF ( in addition to assessments currently imposed on depository institutions with respect to BIF-insured deposits) to pay for the cost of Financing Corporation ("FICO") funding. The FDIC established the FICO assessment rates effective for the fourth quarter 2000 at approximately $0.0202 per $100 annually for BIF-assessable deposits. The FICO assessments are adjusted quarterly to reflect changes in the assessment bases of the FDIC insurance funds and do not vary depending upon a depository institution's capitalization or supervisory evaluations. In 2000, the Bank paid FICO assessments of $28,149. INTERSTATE BANKING AND BRANCHING Under the Riegle-Neal Interstate Banking and Branching Efficiency Act ("Riegle-Neal"), subject to certain concentration limits and other requirements: - bank holding companies, such as we, are permitted to acquire banks and bank holding companies located in any state; - any bank that is a subsidiary of a bank holding company is permitted to receive deposits, renew time deposits, close loans, service loans, and receive loan payments as an agent for any other depository institution subsidiary of that bank holding company; and - banks are permitted to acquire branch offices outside their home states by merging with out-of-state banks, purchasing branches in other states, and establishing de novo branch offices in other states. The ability of banks to acquire branch offices through purchase or opening of other branches is contingent, however, on the host state having adopted legislation "opting in" to those provisions of Riegle-Neal. In addition, the ability of a bank to merge with a bank located in another state is contingent on the host state not having adopted 6 9 legislation "opting out" of that provision of Riegle-Neal. Pennsylvania has opted in to all of these provisions upon the condition that another host state has similar or reciprocal requirements as in Pennsylvania. As of the date of this report, we are not contemplating any interstate acquisitions of a bank or a branch office. CONTROL ACQUISITIONS The Change in Bank Control Act prohibits a person or group of persons from acquiring "control" of a bank holding company, unless the Federal Reserve Board has been notified and has not objected to the transaction. Under a rebuttable presumption established by the Federal Reserve Board, the acquisition of ten percent or more of a class of voting stock of a bank holding company with a class of securities registered under Section 12 of the Exchange Act, such as we, would, under the circumstances set forth in the presumption, constitute acquisition of control of the bank holding company. In addition, a company is required to obtain the approval of the Federal Reserve Board under the Bank Holding Company Act before acquiring 25 percent (five percent in the case of an acquirer that is a bank holding company) or more of any class of outstanding common stock of a bank holding company, such as we, or otherwise obtaining control or a "controlling influence" over that bank holding company. PERMITTED NON-BANKING ACTIVITIES The Federal Reserve Board permits us or our subsidiaries to engage in nonbanking activities so closely related to banking or managing or controlling banks as to be a proper incident thereto. For a discussion of other activities that are financial in nature in which we can engage, see the caption that follows entitled "Financial Services Modernization." The Federal Reserve Board requires us to serve as a source of financial and managerial strength to the Bank and not to conduct our operations in an unsafe and unsound manner. Whenever the Federal Reserve Board believes an activity that we are doing or our control of a nonbank subsidiary (other than a nonbank subsidiary of the Bank) constitutes a serious risk to the financial safety, soundness, or stability of the Bank and is inconsistent with sound banking principles or the purposes of the federal banking laws, the Federal Reserve Board may require us to terminate that activity or to terminate control of that subsidiary. While the types of permissible activities are subject to change by the Federal Reserve Board, the principal nonbanking activities that presently may be conducted by a bank holding company or its subsidiary without prior approval of the Federal Reserve Board are: - Servicing Activities. Furnishing services for, or establish or acquire a company that engages solely in servicing activities for: - us or the Bank in connection with activities authorized by law, such as commitments entered into by any subsidiary with third parties as long as we or our servicing company comply with published guidelines and do not act as a principal in dealing with third parties; - the internal operations of the Bank, such as: - accounting, auditing and appraising; - advertising and public relations; - data processing and transmission services, data bases or facilities; - personnel services; - courier services; - holding or operating property used by our subsidiaries or for their future use; - liquidating property acquired from the Bank; and - selling, purchasing or underwriting insurance, such as blanket bond insurance, group insurance for employees and property and casualty insurance. 7 10 - Safe deposit business. Conduct a safe deposit business or acquire voting securities of a company that conducts such business. - Securities or property representing five percent or less of any company. Acquiring five percent or less of the outstanding voting securities of any company regardless of that company's activities. - Extending credit and servicing loans. Making, acquiring, brokering, or servicing loans or other extensions of credit (including factoring, issuing letters of credit and accepting drafts) for the company's account or for the account of others. - Activities related to extending credit. Any activity usual in connection with making, acquiring, brokering or servicing loans or other extensions of credit, as determined by the Federal Reserve Board. The Federal Reserve Board has determined that the following activities are usual in connection with making, acquiring, brokering or servicing loans or other extensions of credit: - Real estate and personal property appraising. Performing appraisals of real estate and tangible and intangible personal property, including securities. - Arranging commercial real estate equity financing. Acting as intermediary for the financing of commercial or industrial income-producing real estate by arranging for the transfer of the title, control, and risk of such a real estate project to one or more investors, if the bank holding company and its affiliates do not have an interest in, or participate in managing or developing, a real estate project for which it arranges equity financing, and do not promote or sponsor the development of the property. - Check-guaranty services. Authorizing a subscribing merchant to accept personal checks tendered by the merchant's customers in payment for goods and services, and purchasing from the merchant validly authorized checks that are subsequently dishonored. - Collection agency services. Collecting overdue accounts receivable, either retail or commercial. - Credit bureau services. Maintaining information related to the credit history of consumers and providing the information to a credit grantor who is considering a borrower's application for credit or who has extended credit to the borrower. - Asset management, servicing, and collection activities. Engaging under contract with a third party in asset management, servicing, and collection of assets of a type that an insured depository institution may originate and own, if the company does not engage in real property management or real estate brokerage services as part of these services. - Acquiring debt in default. Acquiring debt that is in default at the time of acquisition under certain conditions. - Real estate settlement servicing. Providing real estate settlement services. - Leasing personal or real property. Leasing personal or real property or acting as agent, broker, or adviser in leasing such property under certain conditions. - Operating nonbank depository institutions: - Industrial banking. Owning, controlling, or operating an industrial bank, Morris Plan bank, or industrial loan company, so long as the institution is not a bank. 8 11 - Operating savings association. Owning, controlling or operating a savings association, if the savings association engages only in deposit-taking activities, lending, and other activities that are permissible for bank holding companies. - Trust company functions. Performing functions or activities that may be performed by a trust company (including activities of a fiduciary, agency, or custodial nature), in the manner authorized by federal or state law, so long as the company is not a bank for purposes of the Bank Holding Company Act. - Financial and investment advisory activities. Acting as investment or financial advisor to any person, including (without, in any way, limiting the foregoing): - Serving as investment adviser (as defined in section 2(a)(20) of the Investment Company Act of 1940, 15 U.S.C. 80a-2(a)(20)), to an investment company registered under that act, including sponsoring, organizing, and managing a closed-end investment company; - Furnishing general economic information and advice, general economic statistical forecasting services, and industry studies; - Providing advice in connection with mergers, acquisitions, divestitures, investments, joint ventures, leveraged buyouts, recapitalizations, capital structurings, financing transactions and similar transactions, and conducting financial feasibility studies; - Providing information, statistical forecasting, and advice with respect to any transaction in foreign exchange, swaps, and similar transactions, commodities, and any forward contract, option, future, option on a future, and similar instruments; - Providing educational courses, and instructional materials to consumers on individual financial management matters; and - Providing tax-planning and tax-preparation services to any person. - Agency transactional services for customer investments: - Securities brokerage. Providing securities brokerage services (including securities clearing and/or securities execution services on an exchange), whether alone or in combination with investment advisory services, and incidental activities (including related securities credit activities and custodial services), if the securities brokerage services are restricted to buying and selling securities solely as agent for the account of customers and do not include securities underwriting or dealing. - Riskless principal transactions. Buying and selling in the secondary market all types of securities on the order of customers as a "riskless principal" to the extent of engaging in a transaction in which the company, after receiving an order to buy (or sell) a security from a customer, purchases (or sells) the security for its own account to offset a contemporaneous sale to (or purchase from) the customer. This does not include: (A) Selling bank-ineligible securities at the order of a customer that is the issuer of the securities, or selling bank-ineligible securities in any transaction where the company has a contractual agreement to place the securities as agent of the issuer; or 9 12 (B) Acting as a riskless principal in any transaction involving a bank-ineligible security for which the company or any of its affiliates acts as underwriter (during the period of the underwriting or for 30 days thereafter) or dealer. - Private placement services. Acting as agent for the private placement of securities in accordance with the requirements of the Securities Act of 1933 ("1933 Act") and the rules of the Securities and Exchange Commission, if the company engaged in the activity does not purchase or repurchase for its own account the securities being placed, or hold in inventory unsold portions of issues of these securities. - Futures commission merchant. Acting as a futures commission merchant ("FCM") for unaffiliated persons in the execution, clearance, or execution and clearance of any futures contract and option on a futures contract traded on an exchange in the United States or abroad under certain conditions. - Other transactional services. Providing to customers as agent transactional services with respect to swaps and similar transactions. - Investment transactions as principal: - Underwriting and dealing in government obligations and money market instruments. Underwriting and dealing in obligations of the United States, general obligations of states and their political subdivisions, and other obligations that state member banks of the Federal Reserve System may be authorized to underwrite and deal in under 12 U.S.C. 24 and 335, including banker's acceptances and certificates of deposit, under the same limitations as would be applicable if the activity were performed by the bank holding company's subsidiary member banks or its subsidiary nonmember banks as if they were member banks. - Investing and trading activities. Engaging as principal in: (A) Foreign exchange; (B) Forward contracts, options, futures, options on futures, swaps, and similar contracts, whether traded on exchanges or not, based on any rate, price, financial asset (including gold, silver, platinum, palladium, copper, or any other metal approved by the Federal Reserve Board), nonfinancial asset, or group of assets, other than a bank-ineligible security under certain conditions. (C) Forward contracts, options, futures, options on futures, swaps, and similar contracts, whether traded on exchanges or not, based on an index of a rate, a price, or the value of any financial asset, nonfinancial asset, or group of assets, if the contract requires such settlement. - Buying and selling bullion, and related activities. Buying, selling and storing bars, rounds, bullion, and coins of gold, silver, platinum, palladium, copper, and any other metal approved by the Federal Reserve Board, for the company's own account and the account of others, and providing incidental services such as arranging for storage, safe custody, assaying, and shipment. - Management consulting and counseling activities: - Management consulting. Providing management consulting advice under certain conditions. - Employee benefits consulting services. Providing consulting services to employee benefit, compensation and insurance plans, including designing plans, assisting in the implementation 10 13 of plans, providing administrative services to plans, and developing employee communication programs for plans. - Career counseling services. Providing career counseling services to: (A) A financial organization and individuals currently employed by, or recently displaced from, a financial organization; (B) Individuals who are seeking employment at a financial organization; and (C) Individuals who are currently employed in or who seek positions in the finance, accounting, and audit departments of any company. - Support services: - Courier services. Providing courier services for: (A) Checks, commercial papers, documents, and written instruments (excluding currency or bearer-type negotiable instruments) that are exchanged among banks and financial institutions; and (B) Audit and accounting media of a banking or financial nature and other business records and documents used in processing such media. (ii) Printing and selling MICR-encoded items. Printing and selling checks and related documents, including corporate image checks, cash tickets, voucher checks, deposit slips, savings withdrawal packages, and other forms that require Magnetic Ink Character Recognition ("MICR") encoding. - Insurance agency and underwriting: - Credit insurance. Acting as principal, agent, or broker for insurance (including home mortgage redemption insurance) that is: (A) Directly related to an extension of credit by the bank holding company or any of its subsidiaries; and (B) Limited to ensuring the repayment of the outstanding balance due on the extension of credit in the event of the death, disability, or involuntary unemployment of the debtor. - Finance company subsidiary. Acting as agent or broker for insurance directly related to an extension of credit by a finance company that is a subsidiary of a bank holding company under certain conditions. - Engaging in any general insurance agency activities. - Community development activities: - Financing and investment activities. Making equity and debt investments in corporations or projects designed primarily to promote community welfare, such as the economic rehabilitation and development of low-income areas by providing housing, services, or jobs for residents. 11 14 - Advisory activities. Providing advisory and related services for programs designed primarily to promote community welfare. - Money orders, savings bonds, and traveler's checks. The issuance and sale at retail of money orders and similar consumer-type payment instruments; the sale of U.S. savings bonds; and the issuance and sale of traveler's checks. - Data processing. Providing data processing and data processing and data transmission services, facilities (including data processing and data transmission hardware, software, documentation, or operating personnel), data bases, advice, and access to such services, facilities, or data bases by any technological means under certain conditions. Community Reinvestment Act The Community Reinvestment Act of 1977, as amended (the "CRA"), and the regulations promulgated to implement the CRA are designed to create a system for bank regulatory agencies to evaluate a depository institution's record in meeting the credit needs of its community. CRA regulations establish tests for evaluating both small and large depository institutions' investment in the community. A "small bank" is defined as a bank which has total assets of less than $250 million and is independent or is an affiliate of a holding company with less than $1 billion in assets. There are streamlined procedures for evaluating small banks and the frequency of CRA examinations will occur less often based upon a bank's CRA rating. A large retail institution is one which does not meet the "small bank" definition. A large retail institution can be evaluated under one of two tests: (1) a three-part test evaluating the institution's lending, service and investment performance; or (2) a "strategic plan" designed by the institution with community involvement and approved by the appropriate federal bank regulator. A large institution must choose one of these options under which, to be examined. In addition, the CRA regulations include separate rules regarding the manner in which "wholesale banks" and "limited purpose banks" will be evaluated for compliance. For the purposes of the CRA regulations, the Bank is deemed to be a "small bank," based upon financial information as of December 31, 2000. The Bank will be examined under the streamlined procedures. The Bank received a "satisfactory" CRA rating in its last CRA examination which was held in 1997. Concentration We are not dependent for deposits nor exposed by loan concentrations to a single customer or to a small group of customers the loss of any one or more of which would have a materially adverse effect on our financial condition. Financial Services Modernization On November 12, 1999, the President signed into law the Gramm-Leach-Bliley Act (the "GLB Act") which will, in general, take effect on March 11, 2000. The GLB Act contains some of the most far-reaching changes governing the operations of companies doing business in the financial services industry. The GLB Act eliminates the restrictions placed on the activities of banks and bank holding companies. By creating two new structures - financial holding companies and financial subsidiaries - we and the Bank will be allowed to provide a wider array of financial services and products that were reserved only for insurance companies and securities firms. In addition, we can now affiliate with an insurance company and a securities firm. On December 19, 2000 we became a financial holding company by filing an election to do so with the Federal Reserve Board. We became a financial holding company in anticipation of a contemplated transaction to acquire an interest in a local insurance agency. This contemplated transaction is expected to close sometime during the first quarter of 2001. A financial holding company has authority to engage in activities referred to as "financial activities" that are not permitted to bank holding companies. A financial holding company may also affiliate with companies that are engaged in financial activities. A "financial activity" is an activity that does not pose a safety and soundness risk and is: 12 15 - financial in nature, - incidental to an activity that is financial in nature, or - complimentary to a financial activity. The GLB Act lists certain activities as financial in nature: - Lending, investing or safeguarding money or securities; - Underwriting insurance or annuities, or acting as an insurance or annuity principal, agent or broker; - Providing financial or investment advice; - Issuing or selling interests in pools of assets that a bank could hold; - Underwriting, dealing in or making markets in securities; - Engaging in any activity that the Federal Reserve Board found before the GLB Act to be related closely to banking (See the section in this report entitled "Permitted Non-banking Activities"); - Engaging within the United States in any activity that a bank holding company could engage in outside of the country, if the Federal Reserve Board determined before the GLB Act that the activity was usual in connection with banking or other financial operations internationally; - Merchant banking - acquiring or controlling ownership interests in an entity engaged in impermissible activities, if: the interests are not held by a depository institution; the interests are held by a securities affiliate or an investment advisory affiliate of an insurance company as part of underwriting, merchant or investment banking activity; the interests are held long enough to enable their sale in a manner consistent with the financial viability of such an activity; and we do not control the entity except to the extent necessary to obtain a reasonable return on the investment; or - Insurance portfolio investing - acquiring or controlling ownership interests in an entity engaged in impermissible activities, if: the interests are not held by a depository institution; the interests are held by an insurance or annuity company; the interests represent investments made in the ordinary course of business in accordance with state law; and we do not control the entity except to the extent necessary to obtain a reasonable return on the investment. The GLB Act instructs the Federal Reserve Board to adopt a regulation or order defining certain additional activities as financial in nature, to the extent they are consistent with the purposes of the GLB Act. These are: - Lending, exchanging, transferring, investing for others or safeguarding financial assets other than money or securities; - Providing any method of transferring financial assets; and - Arranging, effecting or facilitating financial transactions for third parties. Other activities also may be decided by the Federal Reserve Board to be financial in nature or incidental to a financial activity if they meet specified criteria. The Federal Reserve Board is instructed to consider the purposes of the GLB Act and the Bank Holding Company Act; changes in the market in which financial holding companies compete; changes in the technology used to deliver financial services; and whether the proposed activity is necessary or appropriate to allow a financial holding company and its affiliates to compete effectively, deliver services efficiently and offer services through the most advanced technological means available. The GLB Act gives national banks authority to use "financial subsidiaries" to engage in financial activities. This authority has some limitations. A financial subsidiary of the Bank may not, as a principal: - underwrite insurance or annuities; - engage in real estate development or investment; - engage in merchant banking; or - engage in insurance portfolio investment activities. A bank's investment in a financial subsidiary will affect the way it calculates its capital. The bank must deduct from its assets and stockholders' equity the total of its investments in financial subsidiaries. Moreover, a bank 13 16 must present its financial information in two ways: in accordance with generally accepted accounting principles, and, separately, in a manner that reflects the segregation of the bank's investments in financial subsidiaries. Privacy Title V of the GLB Act creates a minimum federal standard of privacy by limiting the instances which we and the Bank may disclose nonpublic personal information about a consumer of our products or services to nonaffiliated third parties. A state, such as Pennsylvania, can impose a greater or more restrictive standard of privacy than the GLB Act. The GLB Act distinguishes "consumers" from "customers" for purposes of the notice requirements imposed by this Act. We are required to give a "consumer" a privacy notice only if we intend to disclose nonpublic personnel information about the consumer to a nonaffiliated third party. However, by contrast, we are required to give a "customer" a notice of our privacy policy at the time of the establishment of a customer relationship and then annually, thereafter during the continuation of the customer relationship. The term consumer is different from the term customer. A consumer means an individual who obtains or has obtained a financial product or service from the Bank that is to be used primarily for personal, family or household purposes or that individual's representative. A customer of the Bank is an individual with a continuous relationship with the Bank. The Office of the Comptroller of the Currency issued regulations (effective November 13, 2000, however, compliance is optional until July 1, 2001) which give several examples of a consumer and customer relationship: - An individual who applies to the Bank for credit for personal, family or household purposes is a consumer of a financial service, regardless of whether the credit is extended. - An individual who provides nonpublic personal information to the Bank in order to obtain a determination about whether he or she may qualify for a loan to be used primarily for personal, family, or household purposes is a consumer of a financial service, regardless of whether the loan is extended by the Bank or another financial institution. - An individual who provides nonpublic personal information to the Bank in connection with obtaining or seeking to obtain financial, investment or economic advisory services is a consumer regardless of whether the Bank establishes an ongoing advisory relationship. - An individual who negotiates a workout with the Bank for a loan that the Bank owns is a consumer regardless of whether the Bank originally extended the loan to the individual. - An individual who has a loan from the Bank is the Bank's consumer even if the Bank: - Hires an agent to collect on the loan; - Sells the rights to service the loan; or - Bought the loan from the financial institution that originated the loan. - An individual is not the Bank's consumer solely because the Bank processes information about the individual on behalf of a financial institution that extended the loan to the individual. On the other hand, several examples of a customer follow: - A customer has a continuing relationship with the Bank if the customer: - Has a deposit, loan, credit, trust or investment account with the Bank; - Purchases an insurance product from the Bank; - Holds an investment product through the Bank; - Enters into an agreement or understanding with the Bank whereby the Bank undertakes to arrange or broker a home mortgage loan for the customer; - Has a loan that the Bank services where the Bank owns the servicing rights; - Enters into a lease of personal property with the Bank; or - Obtains financial, investment, or economic advisory services from the Bank for a fee. - A person does not, however, have a continuing relationship with the Bank and therefore is not a customer, if: - The person only obtains a financial product or service in an isolated transaction, such as withdrawing cash from the Bank's ATM or purchasing a cashier's check or money order; 14 17 - The Bank sells the person's loan and does not retain the rights to service the loan; or - The Bank sells the person airline tickets, travel insurance or traveler's checks in an isolated transaction. In general, the Bank cannot disclose to a nonaffiliated third party any nonpublic personal information of its customers and consumers unless the Bank provides its customer or consumer with a notice that includes: - the policies and practices of the Bank with regard to: - disclosing nonpublic personal information to nonaffiliated third parties; - the categories of persons to whom the information is or may be disclosed; and - the policy for disclosure to former customers; - categories of nonpublic personal information that are collected by the Bank; - the policies that the Bank maintains to protect the confidentiality and security of nonpublic personal information; - the disclosure, if required, under the Fair Credit Reporting Act; and - in addition, the Bank must provide an opt out notice to each of its consumers and customers that explains accurately the right to opt out of any disclosure by the Bank of the customer's or consumer's nonpublic personal information and the means by which the customer or consumer may exercise the opt out right. The GLB Act sets forth a new requirement that this notice to a consumer or customer must be in clear and conspicuous or "plain English" language and presentation. The proposed regulations give several examples of the rules to follow in drafting these notices: - The Bank makes its notice reasonably understandable if, the Bank: - Presents the information contained in the notice in clear, concise sentences, paragraphs and sections; - Uses short explanatory sentences and bullet lists, whenever possible; - Uses definite, concrete, everyday words and active voice, whenever possible; - Avoids multiple negatives; - Avoids legal and highly technical business terminology; and - Avoids boilerplate explanations that are imprecise and readily subject to different interpretations. - The Bank designs its notice to call attention to the nature and significance of the information contained in the notice if, to the extent applicable, the Bank: - Uses a plain-language heading to call attention to the notice; - Uses a typeface and type size that are easy to read; and - Provides wide margins and ample line spacing. - If the Bank provides a notice on the same form as another notice or other documents, the Bank designs its notice to call attention to the nature and significance of the information contained in the notice if the Bank uses: - Larger type size(s), boldface or italics in the text; - Wider margins and line spacing in the notice; or - Shading or sidebars to highlight the notice, whenever possible. The GLB Act creates certain exceptions to the prohibition on disclosure of nonpublic personal information of customers and consumers. Some of these exceptions are: - with the consent of the customer or consumer; - to effect, administer or enforce a transaction requested or authorized by the customer or consumer; - the servicing or processing of a financial product or service requested or authorized by the customer or consumer; 15 18 - the maintaining or servicing of the customer's or consumer's account with the Bank or with another entity as part of a private label credit card program; - disclosure to persons holding a legal or beneficial interest relating to the customer or consumer or to persons acting in a fiduciary or representative capacity on behalf of the customer or consumer; - providing information to insurance rate advisory organizations, guaranty funds or agencies, rating agencies, persons assessing the Bank's compliance with industry standards and the Bank's attorneys, accountants and auditors; and - disclosure permitted under other laws, such as the Right to Financial Privacy Act, to law enforcement agencies or under local and state laws. The Bank cannot disclose an account number or similar form of access code for a credit card account, deposit account or transaction account of a customer or consumer to any non-affiliated third party for use in telemarketing, direct mail marketing or other marketing through electronic mail to the customer or consumer. The Bank The Bank's legal headquarters are located at 232 East Street, Bloomsburg, Columbia County, Pennsylvania 17815. The Bank is a locally-owned and managed community bank that seeks to provide personal attention and professional financial assistance to its customers. The Bank serves the needs of individuals and small - and medium-sized businesses. The Bank's business philosophy includes offering direct access to its President and other officers and providing friendly, informed and courteous service, local and timely decision making, flexible and reasonable operating procedures and consistently-applied credit policies. The Bank solicits small and medium-sized businesses located primarily with in the Bank's market area that typically borrow in the $25,000 to $1.0 million range. In the event that certain loan requests may exceed the Bank's lending limit to any one customer, the Bank seeks to arrange such loans on a participation basis with other financial institutions. Marketing Area The Bank's primary market area is Columbia County, a 484 square mile area located in Northcentral Pennsylvania with a population of approximately 63,200 based on 1990 census data. The Town of Bloomsburg is the County's largest municipality and its center of industry and commerce. Bloomsburg has a population of approximately 12,400 based on 1990 census data, and is the county seat. Berwick, located on the eastern boundary of the County, is the second largest municipality, with a 1990 population of approximately 11,000. The Bank currently serves its market area through six branch offices located in Bloomsburg, Benton, Lightstreet, Millville, Orangeville and South Centre, Columbia County. The Bank competes with eight other depository institutions in Columbia County. The Bank's major competitors are: First National Bank of Berwick; PNC Bank, N.A., the largest commercial bank headquartered in Pennsylvania; and First Columbia Bank and Trust Company of Bloomsburg, Pennsylvania. The Bank's extended market area includes the adjacent Pennsylvania counties of Luzerne, Montour, Northumberland, Schuylkill and Sullivan. Future Legislation Various legislation, including proposals to substantially change the financial institution regulatory system and to expand or contract the powers of banking institutions and bank holding companies, is from time to time introduced in the Congress. This legislation may change banking statutes and our operating environment in substantial and unpredictable ways. If enacted, such legislation could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions, and other financial institutions. We can not accurately predict whether any of this potential legislation will 16 19 ultimately be enacted, and, if enacted, the ultimate effect that it, or implementing regulations, would have upon our financial condition or results of operations. Item 2. Properties Our corporate headquarters are located at 232 East Street, Bloomsburg, Pennsylvania. We own this facility which has approximately 11,686 square feet. The Bank's legal or registered office is also at 232 East Street, Bloomsburg, Pennsylvania. Our remaining banking centers, all of which we own, are described as follows:

Approximate Location Square Footage Use Orangeville, PA 2,259 Banking Services Benton, PA 4,672 Banking Services South Centre, PA 3,868 Banking Services Scott Township, PA 16,500 Banking Services, Corporate, Credit and Operations Millville, PA 2,520 Banking Services

We consider our facilities to be suitable and adequate for our current and immediate future purposes. Item 3. Legal Proceedings We and the Bank are not parties to any legal proceedings that could have any significant effect upon our financial condition or income. In addition, we and the Bank are not parties to any legal proceedings under federal and state environmental laws. PART II. Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters We had 754 stockholders of record including individual participants in security position listings and 1,343,708 shares of common stock, par value of $1.25 per share, the only authorized class of common stock, outstanding as of February 28, 2001. Our common stock trades under the symbol "CCFN." As of February 28, 2001, six firms were identified on the interdealer electronic bulletin board system as market makers in our common stock. The following information is reported by one of our market makers: Tucker Anthony of Lancaster, Pennsylvania. These quotations represent prices between buyers and sellers and do not include retail makeup, markdown or commission. They may not necessarily represent actual transactions. The high and low closing sale prices and dividends per share of our common stock for the four quarters of 2000 and 1999 are summarized in the following table.

Dividends 2000: High Low Declared First quarter 17.00 16.38 .140 Second quarter 16.63 16.38 .140 Third quarter 17.50 16.00 .140 Fourth quarter 19.50 16.00 .140

17 20

Dividends 1999: High Low Declared First quarter 25.00 19.13 .116 Second quarter 20.50 18.00 .130 Third quarter 20.63 20.00 .130 Fourth quarter 20.12 18.75 .130

We have paid cash dividends since 1983. It is our present intention to continue the dividend payment policy, although the payment of future dividends must necessarily depend upon earnings, financial position, appropriate restrictions under applicable law and other factors relevant at the time the Board of Directors considers any declaration of dividends. Item 6. Selected Financial Data The information called for by this item is filed at Exhibit 13 to this report and is incorporated in its entirety by reference under this Item 6. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The information called for by this item is filed at Exhibit 13 to this report and is incorporated in its entirety by reference under this Item 7. Item 7A. Quantitative and Qualitative Disclosures about Market Risk The information called for by this item is filed at Exhibit 13 to this report and is incorporated in its entirety by reference under this Item 7A. Item 8. Financial Statements and Supplementary Data Our consolidated financial statements and notes to these statements are filed at Exhibit 13 to this report and are incorporated in their entirety by reference under this Item 8. Our supplementary data is filed at Exhibit 13 to this report and is incorporated in its entirety by reference under this Item 8. PART III. Item 10. Directors and Executive Officers of the Registrant Directors At February 28, 2001, we had nine directors. Our directors are divided into three classes: three directors are in Class 1; three directors are in Class 2; and three directors are in Class 3. Each director holds office for a three-year term. The terms of the classes are staggered, so that the term of office of one class expires each year. The following information includes the age of each of our current directors and those persons who have been nominated to become a director upon their election at our 2001 annual meeting of stockholders. All of our current directors are also nominees for director. 18 21

Name Age Principal Occupation Director Since Don E. Bangs 69 Secretary of the Corporation and 1985 the bank. Former owner of Bangs Insurance Agency and former agent for The Thrush Insurance Agency. Robert M. Brewington, Jr. 50 Owner of Sutliff Motors (sales and service of cars and trucks; 1996 school bus contractor). Edward L. Campbell 62 President of ELC Enterprises, Inc., doing business as The 1985 Heritage House Family Restaurant, and the sole proprietor of Heritage Acres Christmas tree sales. Edward R. Harding, Jr. 54 Partner of Harding & Associates 1984 (law firm) and President of Inter-County Land Abstract Co., Inc. (title insurance). William F. Hess 67 Chairman and former Vice Chairman 1983 of the Corporation and the bank. Dairy farmer. Rodney B. Keller 50 Community Development Director for PPL Corp. 2000 Willard H. Kile, Jr., D.M.D. 46 Partner of Kile & Robinson LLC 2000 (dentists); Partner of Kile & Kile Real Estate. Charles E. Long 65 Retired. Former President of 1993 Long Supply Co., Inc. (a wholesaler and retailer of hardware and masonry products). Paul E. Reichart 63 President, Chief Executive 1983 Officer and Vice Chairman of the Corporation and the bank.

19 22 Principal Officers Our principal officers are appointed by the Board of Directors and serve at the will of the Board of Directors, subject to certain change in control agreements discussed later in this report. The following information is presented for our principal officers:

Held Since Employee Name & Position Since Age William F. Hess Chairman 1998 * 67 Paul E. Reichart President and CEO 1985 1960 63 Don E. Bangs Secretary 1993 * 69 Virginia D. Kocher Treasurer 1991 1972 53

------------ * Not an employee of the Company and the Bank. Compliance with Section 16(a) of the Securities Exchange Act of 1934 Executive officers and directors and "beneficial owners" of more than ten percent of our common stock must file initial reports of ownership and reports of changes in ownership with the SEC pursuant to Section 16(a). We have reviewed the reports and written representations from the executive officers and directors. Based on this review, we believe that all filing requirements were met during 2000. Item 11. Executive Compensation This section of the report contains charts that show the amount of compensation earned by our executive officers whose salary and bonus exceeded $100,000 for 2000. It also contains the performance graph comparing our performance relative to a peer group and the report of our human resource committee explaining the compensation philosophy for our most highly paid officers. SUMMARY COMPENSATION TABLE(1)

Annual Compensation Name and Principal Fiscal Other Annual All Other Position Year Salary($) Bonus($) Compensation(2)($) Compensation(3)($) Paul E. Reichart 2000 94,439 31,598(4) 9,600 4,284 President and Chief 1999 90,895 23,653(5) 8,400 4,131 Executive Officer 1998 88,247 19,920(6) 8,800 3,542

------------------- (1) From January 1, 1998 through December 31, 2000, the Corporation did not pay any long-term compensation in the form of stock options, stock appreciation rights, restricted stock or any other long-term compensation, nor did it make any long-term incentive plan payments. Accordingly, no such information is presented in the summary compensation table set forth above. No such arrangements are currently in effect. (2) Represents the payment of directors' fees by the bank for the years presented. Mr. Reichart did not receive perquisites and other personal benefits, securities and property that totaled in the aggregate for the years presented either $50,000 or 10% of the total of the amounts reported under the salary and bonus columns. Therefore, the amounts for such perquisites and other personal benefits, securities and property are not reported. (3) These figures represent annual term insurance premium payments on the life of Mr. Reichart. (4) Includes 15,000 as a life insurance premium payment for a deferred compensation plan; $4,212 as a cash bonus representing 4% of base salary; $5,430 as a contribution to the bank's profit sharing plan; $1,300 representing 50% up to 3% matching contribution to Mr. Reichart's 401K plan; $718 representing car expense; and $4,938 representing cafeteria plan benefits. (5) Includes 9,977 as a life insurance premium payment for a deferred compensation plan; $1,851 as a cash bonus representing 2% of base salary; $4,941 as a contribution to the bank's profit sharing plan; $1,350 representing 50% up to 3% matching contribution to Mr. Reichart's 401K plan; $865 representing car expense; and $4,669 representing cafeteria plan benefits. (6) Includes $5,364 as a life insurance premium payment for a deferred compensation plan; $3,459 as a cash bonus representing 4% of base salary; $4,455 as a contribution to the bank's profit sharing plan; $1,300 representing 50% up to 3% matching contribution to Mr. Reichart's 401K plan; $854 representing car expense; and $4,488 representing cafeteria plan benefits 20 23 EXECUTIVE COMPENSATION Human Resource Committee Report Executive compensation for the officers of the Company and the Bank is determined by the Human Resource Committee of the Company's Board of Directors. Salaries and bonuses for the executive officers are reviewed annually. All executive compensation is paid by the Bank to the applicable executive. Compensation Philosophy Our executive compensation philosophy is designed to attract, retain, and motivate the best managerial talent available in line with three central themes: alignment, accountability, and attraction. - Alignment with the long-term interests of our stockholders; - Accountability for results by linking executives to the Company and individual performance; and - Attraction, motivation and retention of critical talent. The Human Resource Committee annually conducts a full review of our executives and their performance in determining compensation levels. For 2000, the Human Resource Committee considered various qualitative and quantitative indicators of the Company and individual performance in determining the level of compensation for President and Chief Executive Officer and other executive officers. The review included an evaluation of the Company's performance both on a short- and long-term basis. This review included an analysis of quantitative measures, such as Return on Equity. The Human Resource Committee considered also qualitative measures such as leadership, experience, strategic direction, community representation and social responsibility. The Human Resource Committee has been sensitive to management's maintaining a balance between actions that foster long-term value creation and short-term performance. In addition, the Human Resource Committee evaluates total executive compensation in light of the operational and financial performance and compensation practices of the commercial banking industry in the Pennsylvania region. Base salaries are reviewed each year and generally adjusted relative to individual performance and competitive salaries with the commercial banking industry in the Pennsylvania region. A base salary increase of 4.19% was made to all executives in 2000. Actual salaries will continue to be set according to the scope of the responsibilities of each executive officer's position. Deferred Compensation Agreements for Executive Officers Paul E. Reichart has served as our and the Bank's President and Chief Executive Officer since 1985. Mr. Reichart was named Vice Chairman in 1998. J. Jan Girton has served as the Executive Vice President, Chief Operating Officer and Assistant Secretary of the Bank since 1987. As a result of Messrs. Reichart's and Girton's active involvement and experience in the affairs of the Bank, the Bank has depended upon, and continues to depend upon, their continued employment. The Bank does not maintain employment agreements or key man insurance, other than the deferred compensation agreements described below, with respect to Messrs. Reichart and Girton. In 1992, the Bank entered into agreements with Paul E. Reichart, President and Chief Executive Officer of the Company and the Bank, and J. Jan Girton, Executive Vice President, Chief Operating Officer and Assistant Secretary of the Bank, to establish a non-qualified deferred compensation plan for these officers. Each officer is deferring compensation in order to participate in his deferred compensation plan. If the officer continues to serve as an officer of the Bank until he attains 65 years of age, the Bank has agreed to pay him 120 guaranteed consecutive monthly payments commencing on the first day of the month following the officer's 65th birthday. Each officer's guaranteed monthly payment is based upon the future value of life insurance purchased with the compensation the officer has deferred. If the officer attains 65 years of age but dies before receiving all of the guaranteed monthly payments, then the Bank will make the remaining payments to the officer's designated 21 24 beneficiary or to the representative of his estate. In the event that the officer dies while serving as an officer, but prior to age 65 years of age, then the Bank will remit the guaranteed monthly payments to the officer's designated beneficiary or to the representative of his estate. The Bank has obtained life insurance (designating the bank as the beneficiary) on the life of each participating officer in an amount which is intended to cover the Bank's obligations under the deferred compensation plan, based upon certain actuarial assumptions. In 2000, the Bank accrued $25,800 as an expense for the deferred compensation plan. FIVE YEAR PERFORMANCE GRAPH The following graph and table compare the cumulative total stockholder return on our common stock during the six-year period ending on December 31, 2000, with (i) the cumulative total return on the SNL Securities Corporation Performance Index (1) for 35 publicly-traded banks with under $250 million in total assets in the Middle Atlantic area (2), and (ii) the cumulative total return for all United States stocks traded on the NASDAQ Stock market. The comparison assumes the value of the investment in our common stock and each index was $100 on December 31, 1995, and assumes further the reinvestment of dividends into the applicable securities. The stockholder return shown on the graph and table below is not necessarily indicative of future performance. 22 25 [LINE GRAPH]

Period Ending -------------------------------------------------------------------------------- Index 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 -------------------------------------------------------------------------------------------------------------------------- CCFNB Bancorp, Incorporated 100.00 105.47 146.88 160.94 125.00 103.13 NASDAQ - Total US* 100.00 123.04 150.69 212.51 394.92 237.62 SNL <$250M Bank Index 100.00 126.34 206.17 195.98 172.09 170.38

------------------ *Source: CRSP, Center for Research in Security Prices, Graduate School of Business, The University of Chicago 2001. Used with permission. All rights reserved. crsp.com. SNL Securities LC (804) 977-1600 (C)2001 ------------------ Notes: A. The lines represent monthly index levels derived from compounded daily returns that include all dividends. B. The indexes are reweighted daily, using the market capitalization on the previous trading day. C. If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding day is used. D. The index level for all series was set to $100 on 12/31/95. ------------------ (1) SNL Securities is a research and publishing firm specializing in the collection and dissemination of data on the banking, thrift and financial services industries. (2) The Middle Atlantic area comprises the states of Delaware, Pennsylvania, Maryland, New Jersey and New York, the District of Columbia and Puerto Rico 23 26 Item 12. Security Ownership of Certain Beneficial Owners and Management This section describes how much stock our directors, executive officers own. It also describes the persons or entities that own more than 5% of our voting stock. Stock Owned By Directors, Nominees for Director And Executive Directors This table indicates the number of shares of common stock owned by the directors, nominees for director and executive officers as of February 28, 2001. The aggregate number of shares owned by all directors and executive officers is 4.41%. Unless otherwise noted, each individual has sole voting and investment power for the shares indicated below.

Name of Individual Amount and Nature of of Identity of Group Beneficial Ownership(1) Percent of Class Don E. Bangs 8,344.626 ---- Robert M. Brewington, Jr. 7,226.163 ---- Edward L. Campbell 6,055.904 ---- Elwood R. Harding, Jr. 15,457.901 1.15% William F. Hess 4,292.981 ---- Rodney B. Keller 577.747 ---- Willard H. Kile, Jr. 2,505.484 ---- Virginia D. Kocher 391.000 ---- Charles E. Long 6,425.882 ---- Paul E. Reichart 8,020.000 ---- All Officers and Directors as a group (9 directors, 3 nominees, 4 officers, 10 persons in total) 59,297.688 4.41%

------------------ (1) Includes shares held (a) directly, (b) jointly with a spouse, (c) individually by spouse, (d) by the transfer agent in the Corporation's dividend reinvestment account, and (e) in various trusts. Voting Stock Owned by "Beneficial Owner" We know of no persons or entities who own beneficially more than five percent of our common stock as of February 28, 2001. Item 13. Certain Relationships and Related Transactions We encourage our directors and executive officers to have banking and financial transactions with the Bank. All of these transactions are made on comparable terms and with similar interest rates as those prevailing for other customers. The total consolidated loans made by the Bank at December 31, 2000, to its directors and officers as a group, members of their immediate families and companies in which they have a 10% or more ownership interest was $6,605,617 or 26.4% of our total consolidated capital accounts. The largest amount for all of these loans in 2000 was $8,205,415 million or 32.8% of our total consolidated capital accounts. These loans did not involve more than the normal risk of collectibility nor did they present other unfavorable features. 24 27 PART IV. Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) 1. Our consolidated financial statements and notes to these statements as well as the applicable reports of the independent certified public accountants are filed at Exhibit 13 to this report and are incorporated in their entirety by reference under this Item 14(a)1. 2. All schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes to these statements. 3. The exhibits required by Item 601 of Regulation S-K are included under Item 14(c) to this report. (b) Reports on Form 8-K We filed no current reports on Form 8-K during the quarter ended December 31, 2000. (c) Exhibits required by Item 601 of Regulation S-K:

Exhibit Number Referred to Item 601 of Regulation SK Description of Exhibit 2 None. 3 None. 4 None. 9 None. 10 None. 11 None. 12 None. 13 Portions of the Annual Report to Stockholders for Fiscal Year Ended December 31, 2000. 16 None. 18 None. 21 List of Subsidiaries of the Company. 22 None. 23 None. 24 None. 99 SEC Guide 3 Financial Information.

By order of the Board of Directors SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CCFNB BANCORP, INC. (Bancorp) By: /s/ Paul E. Reichart Date: March 8, 2001 -------------------- Paul E. Reichart President, Chief Executive Officer and Vice Chairman of the Board 25 28 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By: /s/ Don E. Bangs Date: March 8, 2001 --------------------- Don E. Bangs Director and Secretary By: /s/ Robert M. Brewington, Jr. Date: March 8, 2001 --------------------- Robert M. Brewington, Jr. Director By: /s/ Edward L. Campbell Date: March 8, 2001 --------------------- Edward L. Campbell Director By: /s/ Elwood R. Harding, Jr. Date: March 8, 2001 --------------------- Elwood R. Harding, Jr. Director By: /s/ William F. Hess Date: March 8, 2001 --------------------- William F. Hess Director and Chairman of the Board By: /s/ Rodney B. Keller Date: March 8, 2001 --------------------- Rodney B. Keller Director By: /s/ Willard H. Kile, Jr., DMD Date: March 8, 2001 --------------------- Willard H. Kile, Jr., DMD Director By: /s/ Charles E. Long Date: March 8, 2001 --------------------- Charles E. Long Director 26 29 By: /s/ Paul E. Reichart Date: March 8, 2001 --------------------- Paul E. Reichart Director , President, Chief Executive Officer and Vice Chairman of the Board (Chief Executive Officer) By: /s/ Virginia D. Kocher Date: March 8, 2001 --------------------- Virginia D. Kocher Treasurer (Principal Financial and Accounting Officer) 27 30 INDEX TO EXHIBITS

Item Number Description Page 13 Portions of the Annual Report to Stockholders for the Fiscal Year Ended December 31, 2000............................29 21 List of Subsidiaries of the Company............................66 99 SEC Guide 3 Financial Information..............................67

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