2016 Annual Report. Mifflinburg Bancorp, Inc.

Transcription

1 2016 Annual Report Mifflinburg Bancorp, Inc.

2 TABLE OF CONTENTS Letter from the President... Statistical Information Independent Auditor s Report... 3 Consolidated Balance Sheets... Consolidated Statements of Income... Consolidated Statements of Comprehensive Income... Consolidated Statements of Changes in Stockholders Equity... Consolidated Statements of Cash Flows

3 Letter from the President It is a pleasure to report to you the continued success of Mifflinburg Bancorp, Inc. Our expectations were measured throughout 2016 due to the uncertainty in our government s monetary and fiscal policies. Our slow and steady growth philosophy combined with defensive balance sheet management has led to new milestones reached for the corporation. We finished the year with total assets of $407 million and total deposits of $328 million, compared to $388 million and $290 million respectively in This represents year over year asset growth of 5.0% and deposit growth of 12.6%. Deposit increases helped reduce $10.5 million in Federal Home Loan Bank advances, fund 3.0% growth in loans and 14.7% growth in our securities portfolio. We paid an annual dividend of $2.05 per share, or a 5.1% increase over last year. Dividends have been paid at least annually since the inception of the company in 1872, resulting in 289 consecutive dividend payments, once again showing the strength, stability and longevity of your company. We recognized record net income of $4,183,000 and earnings per share (EPS) of $4.24 in 2016 versus $4,063,000 or $4.11 EPS in 2015, an increase of 3.0% and 3.2% respectively. This was attributable to an increase in net interest income of 2.2%, even though our net interest margin declined to 3.14% in 2016 from 3.21% in 2015 due to the rise in short term interest rates. Additionally, we contributed $355,000 to the Allowance for Loan Losses, maintaining a year over year 1.36% ratio of total loans outstanding. Our asset quality remains strong with a delinquency ratio of 0.91% of total loans. Controlling overhead cost has been the bread and butter of our success which is reflected in our 58.16% efficiency ratio. The lower the efficiency ratio, the better the bank s performance. The Pennsylvania peer average for banks our size was 70.98% in We have a staff of conscientious employees who work together with systems and tools that allow them to efficiently and effectively serve our customers. Finding a balance of adequate computer systems has also been essential as we grow and technologies change. We identify solutions that are suitable for the size and complexity of our organization and the products and services our customers expect from a leading financial institution. We continue to take advantage of opportunities, as we have done in the past. There will be new challenges going forward that require Mifflinburg Bank & Trust, as well as all financial institutions, to adapt to the ever changing business environment. We strive to maintain solid earnings and strong asset quality while growing our balance sheet and market area. We take pride in supporting our communities, helping our neighbors and giving back to our customers, shareholders and employees in every way possible. We are committed to remaining your community s trusted financial resource. Sincerely, Jeffrey J. Kapsar President & CEO 1

4 $ per share $4.50 $4.25 $4.00 $3.75 $3.50 EARNINGS PER SHARE $4.11 $4.00 $3.89 $3.70 $4.24 x 1,000 $4,350 $4,150 $3,950 $3,750 $3,550 $3,350 $3,671 NET NET INCOME INCOME $4,063 $3,960 $3,855 $4,183 $3.25 $3,150 $ $2, DIVIDENDS PAYOUT HISTORY RETURN RETURN ON ON AVERAGE EQUITY $ per share $1.75 $1.81 $1.86 $1.95 $ % 10.50% 10.00% 9.50% 9.00% 8.50% 8.00% 7.50% 7.00% 6.50% 10.06% 10.38% 10.18% 9.90% 9.66% % (Excludes Special dividend of $1.00 in 2013.) RETURN RETURN ON AVERAGE ON ASSETS 1.30% 1.20% 1.12% 1.14% 1.09% 1.10% 1.07% 1.05% 1.00% 0.90% x 1,000 $430,000 $410,000 $390,000 $370,000 $350,000 $330,000 TOTAL ASSETS $387,596 $377,959 $349,026 $340,532 $407, % 0.70% $310,000 $290,000 $270, % $250,

5 Tel: Fax: E. Park Drive, Suite 103 Harrisburg, PA Independent Auditor s Report To the Board of Directors and Stockholders Mifflinburg Bancorp, Inc. Mifflinburg, Pennsylvania We have audited the accompanying consolidated financial statements of Mifflinburg Bancorp, Inc. and its subsidiary, which comprise the consolidated balance sheets as of December 31, 2016 and 2015, and the related consolidated statements of income, comprehensive income, changes in stockholders equity and cash flows for the years then ended, and the related notes to the consolidated financial statements. Management s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. 3

6 Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Mifflinburg Bancorp, Inc. and its subsidiary as of December 31, 2016 and 2015, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Harrisburg, Pennsylvania March 15,

7 Consolidated Balance Sheets (in thousands, except share and per share data) December 31, Assets Cash and due from banks $ 3,581 $ 3,325 Interest-bearing demand deposits Cash and cash equivalents 4,075 4,168 Interest-bearing time deposits 19,738 17,853 Securities available-for-sale, at fair value 75,339 65,712 Investments in restricted stock, at cost 1,395 1,794 Loans 289, ,038 Allowance for loan losses (3,946) (3,826) Net loans 285, ,212 Premises and equipment, net 7,314 7,104 Accrued interest receivable Bank owned life insurance 9,973 10,151 Net deferred tax asset 1,562 1,191 Other assets 1,295 1,471 Total Assets $ 407,144 $ 387,596 Liabilities and Stockholders' Equity Liabilities Deposits: Noninterest-bearing $ 52,380 $ 44,866 Interest-bearing 275, ,001 Total deposits 327, ,867 Repurchase agreements 5,701 7,985 Federal funds purchased - 5,692 Federal Home Loan Bank advances 26,993 37,526 Accrued interest payable Other liabilities 3,746 3,618 Total Liabilities 364, ,140 Stockholders' Equity Common stock, par value $1.00; authorized 5,000,000 shares; issued 1,080,000 shares; outstanding 983,251 and 989,642 shares at December 31, 2016 and 2015, respectively 1,080 1,080 Capital surplus 2,773 2,726 Retained earnings 42,934 40,773 Accumulated other comprehensive income Treasury stock at cost: 2016: 96,749 shares; 2015: 90,358 shares (4,127) (3,688) Total Stockholders' Equity 42,663 41,456 Total Liabilities and Stockholders' Equity $ 407,144 $ 387,596 See accompanying notes to consolidated financial statements. 5

8 Consolidated Statements of Income (in thousands, except per share data) Years Ended December 31, Interest and Dividend Income Interest and fees on loans $ 12,124 $ 11,582 Interest-bearing deposits in banks Federal funds sold 22 2 Securities: Taxable Exempt from federal income tax 948 1,034 Dividends Total Interest and Dividend Income 13,903 13,510 Interest Expense Deposits 1,658 1,511 Federal Home Loan Bank advances Other borrowings 3 16 Total Interest Expense 2,164 2,021 Net interest income 11,739 11,489 Provision for Loan Losses Net Interest Income after Provision for Loan Losses 11,384 10,919 Other Income Service charges on deposit accounts Mortgage banking activities Trust department income Commissions from investment product sales Net gain (loss) on sale of securities 29 (5) Earnings on bank owned life insurance Other Total Other Income 2,114 2,032 Other Expenses Salaries and employee benefits 4,755 4,528 Net occupancy and equipment expense Data processing fees State shares tax FDIC deposit insurance Other 1,558 1,490 Total Other Expenses 8,038 7,746 Income before income taxes 5,460 5,205 Income Taxes 1,277 1,142 Net Income $ 4,183 $ 4,063 Earnings Per Share $ 4.24 $ 4.11 See accompanying notes to consolidated financial statements. 6

9 Consolidated Statements of Comprehensive Income (in thousands) Years Ended December 31, Net Income $ 4,183 $ 4,063 Other Comprehensive Loss Unrealized holding losses on available-for-sale securities, net of income taxes of $(279) and $(73), respectively (543) (141) Reclassification adjustment for (loss) gain on sale of available-for-sale securities realized in net income, net of income taxes $(10) and $2, respectively (a) (b) (19) 3 Other comprehensive loss (562) (138) Total Comprehensive Income $ 3,621 $ 3,925 (a) (b) Amounts are included in net gain (loss) on sale of securities on the consolidated statements of income in other income. Income tax amounts are included in income taxes on the consolidated statements of income. See accompanying notes to consolidated financial statements. 7

10 Consolidated Statements of Changes in Stockholders Equity (in thousands, except per share data) Common Stock Capital Surplus Retained Earnings Accumulated Other Comprehensive Income Treasury Stock Total Balance, January, 2015 $ 1,080 $ 2,711 $ 38,639 $ 703 $ (3,662) $ 39,471 Net income - - 4, ,063 Other comprehensive loss, net of income taxes (138) - (138) Purchase of 1,114 shares of treasury stock (67) (67) Sale of 1,000 shares of treasury stock Cash dividends declared ($1.95 per share) - - (1,929) - - (1,929) Balance, December 31, ,080 2,726 40, (3,688) 41,456 Net income - - 4, ,183 Other comprehensive loss, net of income taxes (562) - (562) Purchase of 9,391 shares of treasury stock (567) (567) Sale of 3,000 shares of treasury stock Cash dividends declared ($2.05 per share) - - (2,022) - - (2,022) Balance, December 31, 2016 $ 1,080 $ 2,773 $ 42,934 $ 3 $ (4,127) $ 42,663 See accompanying notes to consolidated financial statements. 8

11 Consolidated Statements of Cash Flows (in thousands) Years Ended December 31, Cash Flows from Operating Activities Net income $ 4,183 $ 4,063 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation Net amortization of discounts and premiums on securities Deferred income tax benefit (82) (107) Provision for loan losses (Increase) decrease in accrued interest receivable (31) 47 Increase (decrease) in accrued interest payable 15 (8) Net loss on sale of foreclosed real estate 1 - Earnings on cash surrender value of bank owned life insurance (275) (279) Net (gain) loss on sale of securities (29) 5 Loss on disposition of premises and equipment 28 - Gain on life insurance proceeds (5) - Origination of loans held for sale (9,223) (8,177) Proceeds from loans sold 9,512 8,447 Gain on sale of loans (289) (270) Other assets and liabilities, net Net Cash Provided by Operating Activities 5,071 5,053 Cash Flows from Investing Activities Securities available-for-sale: Purchases (26,602) (8,302) Proceeds from paydowns, maturities and calls 13,993 16,600 Proceeds from sales 1,879 3,007 Net increase in loans (8,645) (25,826) Proceeds from sale of foreclosed real estate 19 - (Increase) decrease of interest-bearing time deposits (1,885) 2,342 Proceeds from life insurance Decrease (increase) in restricted stock 399 (424) Proceeds from disposition of premises and equipment 1 - Purchases of premises and equipment (565) (221) Net Cash Used in Investing Activities (20,948) (12,824) Cash Flows from Financing Activities Net increase (decrease) in deposits 36,707 (1,907) Proceeds from Federal Home Loan Bank advances 7,855 16,600 Repayment of Federal Home Loan Bank advances (18,388) (7,181) Net decrease in repurchase agreements (2,284) (3,536) Net (decrease) increase in federal funds purchased (5,692) 3,497 Purchase of treasury stock (567) (67) Sale of treasury stock Dividends paid on common stock (2,022) (1,929) Net Cash Provided by Financing Activities 15,784 5,533 Net decrease in cash and cash equivalents (93) (2,238) Cash and Cash Equivalents, Beginning of Year 4,168 6,406 Cash and Cash Equivalents, End of Year $ 4,075 $ 4,168 Supplementary Cash Flows Information Interest paid $ 2,149 $ 2,029 Income taxes paid $ 1,315 $ 1,368 Transfer of loans to foreclosed real estate $ 20 $ - See accompanying notes to consolidated financial statements. 9

12 1. Description of Business and Summary of Significant Accounting Policies Mifflinburg Bancorp, Inc. (the Company) is a Pennsylvania corporation organized as the holding company of Mifflinburg Bank and Trust Company (the Bank). The Bank is a state chartered commercial bank located in Mifflinburg, Pennsylvania, whose principal sources of revenues are derived from its commercial, mortgage, residential real estate, and consumer loan financing as well as a variety of deposit services provided to customers serviced by its five offices. Milestone Insurance Services, LLC (Milestone) was formed in 2003 and is a wholly-owned subsidiary of the Bank. Milestone is licensed to sell title insurance. The Company is supervised by the Board of Governors of the Federal Reserve System while the Bank is subject to regulation and supervision by the Federal Deposit Insurance Corporation and the Pennsylvania Department of Banking. A summary of significant accounting and reporting policies applied in the presentation of the accompanying consolidated financial statements follows. Basis of Presentation The accounting policies followed by the Company and the Bank and the methods of applying these policies conform with accounting principles generally accepted in the United States of America and with general practices within the banking industry. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and require disclosure of contingent assets and liabilities as of the date of the consolidated balance sheets and revenues and expenses for the period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the evaluation of other-than-temporary impairment of securities available-for-sale and the valuation of deferred income tax assets. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and the Bank (including the accounts of Milestone), its wholly-owned subsidiary. All significant intercompany balances and transactions have been eliminated. The entire business of the Company is managed as one operating segment. Subsequent Events On January 20, 2017, the Company repurchased 50,000 shares of common stock into the Treasury Stock account at a total cost of $3,125,000. The Company has evaluated events and transactions occurring subsequent to the balance sheet date of December 31, 2016 for items that should potentially be recognized or disclosed in these consolidated financial statements. The evaluation was conducted through March 15, 2017, the date these consolidated financial statements were available to be issued. Cash and Cash Equivalents For purposes of the consolidated statements of cash flows, the Company defines cash equivalents as cash and due from banks, interest-bearing demand deposits and federal funds sold. Federal funds are generally sold for one day periods. 10

13 Interest-Bearing Time Deposits Interest-bearing time deposits have original maturities in excess of one year and are carried at cost. Securities Debt securities and equity securities classified as available-for-sale are carried at fair value with unrealized gains and losses net of the related tax effects reflected as a separate component of stockholders' equity. Securities classified as available-for-sale are those debt and equity securities that the Company intends to hold for an indefinite period of time, but not necessarily to maturity in the case of debt securities. Any decision to sell a security classified as available-for-sale would be based on various factors, including significant movements in interest rates, changes in the maturity mix of the Company's assets and liabilities, liquidity needs, regulatory capital considerations, and other similar factors. Premium amortization and discount accretion are recorded using the interest method over each security's expected life. The Company follows current accounting guidance related to recognition and presentation of other-than-temporary impairment. The guidance specifies that if the Company does not have the intent to sell a debt security prior to recovery and it is more likely than not that it will not have to sell the debt security prior to recovery, the security would not be considered other-than-temporarily impaired unless there is a credit loss. When the Company does not intend to sell the security, and it is more likely than not, the Company will not have to sell the security before the recovery of its cost basis, it will recognize the credit component of an other-thantemporary impairment of a debt security in earnings and the remaining portion in other comprehensive income. The Company has not recognized any other-than-temporary impairment losses in the years ended December 31, 2016 or Realized gains and losses on sales of securities represent the differences between net proceeds and cost determined on the average cost method for equity securities and the specific identification method for all other securities. Investments in Restricted Stock Investments in restricted stock represent required investments in the common stock of correspondent banks and consist of common stock of the Federal Home Loan Bank of Pittsburgh (FHLB) of $1,350,000 and $1,749,000 at December 31, 2016 and 2015, respectively, and other correspondent banks of $45,000 as of December 31, 2016 and As a member of the FHLB, the Bank is required to maintain an investment in FHLB restricted stock based on mortgage loans, advances and other criteria. As no active market exists for this stock, it is carried at cost. All FHLB stock is pledged as collateral for FHLB advances. 11

14 Loans Held for Sale Mortgage loans originated and intended for sale in the secondary market at the time of origination are carried at the lower of aggregate cost or estimated fair value, as determined by aggregate outstanding commitments from investors or current investor yield requirements. All sales are made without recourse. Loans are generally sold with the mortgage servicing rights retained by the Company, the mortgage service rights are recognized as assets upon the sale. See further information for accounting for these assets under Mortgage Servicing Rights. Gains or losses on sales of mortgage loans are recognized based on the difference between the selling price and the carrying value of the related mortgage loans sold. Loans Receivable Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at their outstanding unpaid principal balances, net of an allowance for loan losses and any deferred fees or costs. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the yield (interest income) of the related loans. The Company is generally amortizing these amounts over the contractual life of the loan. Premiums and discounts on purchased loans are amortized as adjustments to interest income using the effective yield method. The loans receivable portfolio is segmented into commercial and consumer loans. Commercial loans consist of the following classes: commercial (including commercial, agricultural and state and municipal), and commercial real estate (including commercial, construction and land development and farmland). Consumer loans consist of the following classes: residential mortgage, home equity, consumer automobile and other consumer. For all classes of loans receivable, the accrual of interest is generally 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 is currently 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 nonaccrual 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. Interest received on nonaccrual loans including impaired loans generally is either applied against principal or reported as interest income, according to management's judgment as to the collectability of principal. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time (generally six months) and the ultimate collectability of the total contractual principal and interest is no longer in doubt. The past due status of all classes of loans receivable is determined based on contractual due dates for loan payments. 12

15 Allowance for Loan Losses The allowance for loan losses (allowance) represents management's estimate of losses inherent in the loan portfolio as of the consolidated balance sheet date and is recorded as a reduction to loans. The allowance for loan losses is increased by the provision for loan losses, and decreased by chargeoffs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of loans receivable are charged off to the allowance as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely. Non-residential consumer loans are generally charged off no later than 120 days past due on a contractual basis, earlier in the event of bankruptcy, or if there is an amount deemed uncollectible. Because all identified losses are immediately charged off, no portion of the allowance for loan losses is restricted to any individual loan or groups of loans, and the entire allowance is available to absorb any and all loan losses. The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management performs a quarterly evaluation of the adequacy of the allowance. The allowance is based on the Company's past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay, 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 that may be susceptible to significant revision as more information becomes available. The allowance consists of specific, general and unallocated components. The specific component relates to loans that are classified as impaired. For loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers pools of loans by loan class including commercial loans not considered impaired, as well as smaller balance homogeneous loans, such as residential real estate, home equity and other consumer loans. These pools of loans are evaluated for loss exposure based upon historical loss rates for each of these categories of loans, adjusted for qualitative factors. These qualitative risk factors include: 1. Lending policies and procedures, including underwriting standards and collection, chargeoff, and recovery practices. 2. National, regional, and local economic and business conditions as well as the condition of various market segments. 3. Nature and volume of the portfolio and terms of loans. 4. Experience, ability, and depth of lending management and staff. 5. Volume and severity of past due, classified and nonaccrual loans as well as and other loan modifications. 6. Quality of the Company's loan review system, and the degree of oversight by the Company's Board of Directors. 7. Existence and effect of any concentrations of credit and changes in the level of such concentrations. 8. Effect of external factors, such as competition and legal and regulatory requirements. 13

16 Each factor is assigned a value to reflect improving, stable or declining conditions based on management's best judgment using relevant information available at the time of the evaluation. Adjustments to the factors are supported through documentation of changes in conditions in a narrative accompanying the allowance calculation. Commercial lending, including commercial real estate loans generally present a higher level of risk than residential mortgage loans. This greater risk is due to several factors, including the concentration of principal in a limited number of loans and borrowers, the effect of general economic conditions on income producing properties and the increased difficulty of evaluating and monitoring these types of loans. Furthermore, the repayment of loans secured by commercial and industrial real estate is typically dependent upon the successful operation of the related real estate project or business. If the cash flow from the project is reduced, the borrower's ability to repay the loan may be impaired. Consumer loans may entail greater credit risk than do residential mortgage loans, particularly in the case of consumer loans which are unsecured or are secured by rapidly depreciable assets, such as automobiles. Home equity loans also entail greater risk than residential mortgage loans due to being in a junior lien position. In such cases, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation. In addition, consumer loan collections are dependent on the borrower's continuing financial stability, and thus are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans. An unallocated component is maintained to cover uncertainties that could affect management's estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial loans and commercial real estate loans by either the present value of expected future cash flows discounted at the loan's effective interest rate or the fair value of the collateral if the loan is collateral dependent. An allowance for loan losses is established for an impaired loan if its carrying value exceeds its estimated fair value. The estimated fair values of substantially all of the Company's impaired loans are measured based on the estimated fair value of the loan's collateral. 14

17 For commercial loans secured by real estate, estimated fair values are determined primarily through third-party appraisals. When a real estate secured loan becomes impaired, a decision is made regarding whether an updated certified appraisal of the real estate is necessary. This decision is based on various considerations, including the age of the most recent appraisal, the loan-to-value ratio based on the original appraisal and the condition of the property. Appraised values may be discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include estimated costs to sell the property. For commercial and industrial loans secured by non-real estate collateral, such as accounts receivable, inventory and equipment, estimated fair values are determined based on the borrower's financial statements, inventory reports, accounts receivable agings or equipment appraisals or invoices. Indications of value from these sources are generally discounted based on the age of the financial information or the quality of the assets. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual residential mortgage loans, home equity loans and other consumer loans for impairment disclosures, unless such loans are the subject of a troubled debt restructuring agreement. Loans whose terms are modified are classified as troubled debt restructurings if the Company grants such borrowers concessions for economic or legal reasons and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a troubled debt restructuring generally involve a temporary or permanent reduction in interest rate, a modified rate that is below the market rate given the associated credit risk, an extension of a loan's stated maturity date or payment modifications to better match the timing of cash flows due under the restructured terms with the cash flows from the borrowers operations. Loan modifications are intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. Non-accrual troubled debt restructurings are restored to accrual status if principal and interest payments, under the modified terms, are current for a reasonable period of time, generally six consecutive months after modification. Loans classified as troubled debt restructurings are designated as impaired. The Company identifies loans for potential restructure primarily through direct communication with the borrower and evaluation of the borrower s financial statements, revenue projections, tax returns, and credit reports. Even if the borrower is not presently in default, management will consider the likelihood that cash flow shortages, adverse economic conditions, and negative trends may result in a payment default in the near future. 15

18 The allowance calculation methodology includes further segregation of loan classes into risk rating categories. The borrower's overall financial condition, repayment sources, guarantors and value of collateral, if appropriate, are evaluated annually for commercial and commercial real estate loans or when credit deficiencies arise, such as delinquent loan payments, for commercial and consumer loans. Credit quality risk ratings include regulatory classifications of special mention, substandard, doubtful and loss. Loans classified as special mention have potential weaknesses that deserve management's close attention. If uncorrected, the potential weaknesses may result in deterioration of the repayment prospects. Loans classified substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They include loans that are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified doubtful have all the weaknesses inherent in loans classified substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified as a loss are considered uncollectible and are charged to the allowance for loan losses. Loans not classified are rated pass. In addition, Federal and State regulatory agencies, as an integral part of their examination process, periodically review the Company's allowance for loan losses and may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination, which may not be currently available to management. Based on management's comprehensive analysis of the loan portfolio, management believes the current level of the allowance for loan losses is adequate at December 31, Foreclosed Real Estate Foreclosed real estate consists of real estate acquired in settlement of foreclosed loans and is initially recorded at fair value less estimated costs to sell at the time of transfer from loans to foreclosed real estate, establishing a new cost basis. Subsequent to the transfer, foreclosed real estate is carried at the lower of the adjusted cost or fair value less costs to sell. Valuation allowances are established when the carrying amount exceeds the fair value less estimated costs to sell. Costs related to the acquisition and holding of foreclosed real estate are charged to operations when incurred. The fair value of real estate acquired through foreclosure is generally determined by reference to an outside appraisal. Premises and Equipment Premises and equipment are stated at cost less accumulated depreciation. Repairs and maintenance expenditures are expensed as incurred. The costs of major additions and improvements are capitalized. When premises or equipment are retired or sold, the remaining cost and accumulated depreciation are removed from the accounts and any gain or loss is credited or charged to income. Depreciation is computed using straight-line and accelerated methods over the shorter of lease term or estimated useful lives of the assets. 16

19 Bank Owned Life Insurance The Bank invests in bank owned life insurance (BOLI) as a source of funding for employee and director benefit expenses. BOLI involves the purchasing of life insurance by the Bank on a chosen group of employees. The Bank is the owner and beneficiary of the policies. This life insurance investment is carried at the cash surrender value of the underlying policies and reported in other assets on the balance sheet. Income from the increase in the cash surrender value of the policies is included with other income on the statement of income. The Company accounts for certain benefit plans under ASC Topic related to "Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split Dollar Life Insurance Agreements." This pronouncement requires recognition of a liability for postretirement benefits provided through an endorsed split-dollar life insurance arrangement. The liability for postretirement benefits under these arrangements was $371,000 and $402,000 at December 31, 2016 and 2015, respectively. Income in the years ended December 31, 2016 and 2015 was $(32,000) and $(15,000), respectively. Mortgage Servicing Rights Mortgage servicing rights are recognized as assets upon the sale of a mortgage loan. A portion of the cost of the loan is allocated to the servicing right based upon relative fair value. Servicing rights are reported in intangible assets and are amortized over the estimated period of future servicing income to be received on the underlying mortgage loans. The carrying amount of mortgage servicing rights was $255,000 and $252,000 at December 31, 2016 and 2015, respectively. The Company considers mortgage servicing rights to be immaterial and has determined that fair value approximates carrying value. Any related amortization expense is netted against loan servicing fee income and is reflected in the income statement in other income. Amortization expense was $43,000 and $34,000 for the years ended December 31, 2016 and 2015, respectively. Servicing rights are evaluated for impairment based upon estimated fair value as compared to unamortized book value. The Company retains the servicing rights on certain mortgage loans sold to the FHLB and receives mortgage banking fee income based upon the principal balance outstanding. Total loans serviced for the FHLB and Fannie Mae amounted to $51,633,000 and $51,299,000 at December 31, 2016 and 2015, respectively. These mortgage loans sold and serviced by the Company are not reflected in the Company s consolidated balance sheets. Transfers of Financial Assets Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity. Advertising Expenses Advertising costs are expensed as incurred and totaled $121,000 in 2016 and $125,000 in

20 Income Taxes Current income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred income tax expense results from changes in certain deferred tax assets and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized. The Company accounts for uncertain tax positions if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management's judgment. The Company recognizes interest and penalties on income taxes as a component of income tax expense. The tax years subject to examination by the taxing authorities are the years ended December 31, 2013 through Earnings Per Share The Company does not have any common stock equivalents and, therefore, presents only basic earnings per share, which represents net income divided by the weighted average shares outstanding during the period. The weighted average shares outstanding during 2016 and 2015 were 987,095 and 989,188, respectively. Treasury Stock The acquisition of treasury stock is recorded under the cost method. The subsequent disposition or sale of the treasury stock is recorded using the average cost method. Off-Balance Sheet Financial Instruments In the ordinary course of business, the Bank has entered into off-balance sheet financial instruments consisting of commitments to extend credit and letters of credit. Such financial instruments are recorded on the consolidated balance sheets as they are funded. 18

21 Comprehensive Income Accounting principles generally accepted in the United States of America require that recognized revenue, expenses, gains, and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on securities available-for-sale, are reported as a separate component of the equity section of the balance sheet, such items, along with net income are components of comprehensive income and reflected in the consolidated statements of comprehensive income. The only other comprehensive income (loss) items that the Company presently has are unrealized gains or losses on securities available-for-sale. Trust Assets Assets held by the Bank in a fiduciary or agency capacity for its customers are not included in the consolidated financial statements since such items are not assets of the Company. Trust income is recorded on a cash basis, which is not materially different from the accrual basis. Trust assets under management as of December 31, 2016 and 2015 totaled $31 million and $29 million, respectively. Reclassifications Certain amounts in prior year s consolidated financial statements are reclassified when necessary to conform to the current year s presentation. Such reclassifications, if any, had no impact on stockholders equity or net income. 2. Securities Available-for-Sale The amortized cost and fair value of securities available-for-sale are as follows at December 31 (in thousands): Amortized Cost Gross Unrealized Gains Gross Gross Unrealized Fair Amortized Unrealized Losses Value Cost Gains Gross Unrealized Losses Fair Value U.S. government agencies $ 11,795 $ 13 $ (59) $ 11,749 $ 3,410 $ 13 $ (4) $ 3,419 Taxable state and municipal 1, ,601 2, (1) 2,154 Tax exempt state and municipal 50, (662) 49,783 44, (49) 44,888 U.S. government sponsored enterprise mortgagebacked securities 6, (47) 6,580 9, (70) 9,960 Corporate securities 2, (1) 2,985 3, (3) 3,226 73, (769) 72,698 63, (127) 63,647 Equity securities 2, (30) 2,641 1, (63) 2,065 $ 75,334 $ 804 $ (799) $ 75,339 $ 64,856 $ 1,046 $ (190) $ 65,712 19

22 The amortized cost and estimated fair value of debt securities available-for-sale at December 31, 2016, by expected maturity for mortgage-backed securities and debt securities with call features and by contractual maturity for all other securities, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties (in thousands). Amortized Cost Fair Value Due in one year or less $ 17,313 $ 17,284 Due after one year through three years 23,953 23,928 Due after three years through five years 15,684 15,554 Due after five years through ten years 12,267 12,200 Due after ten years 3,917 3,732 $ 73,134 $ 72,698 The following table shows the Company's securities' gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31 (in thousands): December 31, 2016 Less than 12 Months 12 Months or Longer Total Unrealized Unrealized Fair Value Losses Fair Value Losses Fair Value Unrealized Losses U.S. government agencies $ 10,241 $ 59 $ - $ - $ 10,241 $ 59 Tax-exempt state and municipal 30, , U.S. government sponsored enterprise mortgage-backed securities 4, , Corporate securities , , Equity securities $ 45,708 $ 788 $ 643 $ 11 $ 46,351 $

23 December 31, 2015 Less than 12 Months 12 Months or Longer Total Unrealized Unrealized Fair Value Losses Fair Value Losses Fair Value Unrealized Losses U.S. government agencies $ 2,353 $ 4 $ - $ - $ 2,353 $ 4 Taxable state and municipal Tax-exempt state and municipal 5, , , U.S. government sponsored enterprise mortgage-backed securities 5, , , Corporate securities , , , Equity securities $ 14,780 $ 117 $ 6,062 $ 73 $ 20,842 $ 190 At December 31, 2016, the $788,000 unrealized loss (less than 12 months) was attributed to 130 different securities. The $11,000 unrealized loss (12 months or more) was attributed to 4 different securities. None of the unrealized losses are individually significant. Management believes, based upon an evaluation of the issuers of the debt securities, that the unrealized losses on debt securities were the result of fluctuations in market interest rates subsequent to purchase and not a result of credit risk. Management has the intent and ability to hold investments and does not believe it will have to sell the securities until the earlier of maturity or market price recovery, accordingly, no debt securities are deemed to be other-than-temporarily impaired. The Company's equity securities with unrealized losses are comprised of common stock in varying industries. The Company has established different parameters for evaluating equity securities for other-than-temporary impairment. These parameters include, but are not limited to, the length of time in an unrealized loss position and the amount of the unrealized loss. At December 31, 2016, no equity securities are deemed to be other-than-temporarily impaired. Below is a summary of gross gains and gross losses realized on the sale of securities available-forsale for the years ended December 31 (in thousands): Gross gains $ 110 $ 163 Gross losses $ (81) $ (168) Securities with a carrying value of $56,759,000 and $47,167,000 at December 31, 2016 and 2015, respectively, were pledged to secure public deposits and for other purposes as required by law. 21

24 3. Loans Major categories of loans are summarized as follows as of December 31 (in thousands): Commercial $ 56,603 $ 57,082 Commercial real estate 115, ,857 Residential mortgage 95,741 92,811 Home equity 3,745 4,101 Consumer, automobile 15,172 15,972 Consumer, other 2,560 2, , ,366 Less: net deferred loan fees (325) (328) Total loans net of deferred loan fees 289, ,038 Less: allowance for loan losses (3,946) (3,826) Net Loans $ 285,482 $ 277,212 In the normal course of business, loans are extended to directors, executive officers, and their affiliates. In management's opinion, all of these loans are on substantially the same terms and conditions as loans to other individuals and businesses of comparable creditworthiness. A summary of loan activity for those directors, executive officers, and their affiliates is as follows (in thousands): December 31, 2015 New Loans Repayments December 31, 2016 $ 3,488 $ 400 $ (487) $ 3,401 The Bank grants commercial, residential, and personal loans to customers primarily in Union, Centre, and Snyder Counties, Pennsylvania. Although the Bank has a diversified loan portfolio, a significant portion of its debtors' ability to honor their contracts is dependent on the economic conditions within this region. Additionally, approximately 16% and 14% of the Bank's loans at December 31, 2016 and 2015, respectively, are to individuals and corporations in the agricultural business. The Bank has entered into a best efforts agreement to sell residential mortgages to the Federal Home Loan Bank of Pittsburgh. The maximum to be sold under the agreement is $75 million, and $48 million has been sold under this agreement as of December 31,

25 4. Allowance for Loan Losses The following table presents the classes of loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company's internal risk rating system as of December 31 (in thousands): December 31, 2016 Pass Special Mention Substandard Doubtful Loss Total Commercial $ 56,273 $ 97 $ 233 $ - $ - $ 56,603 Commercial real estate 109,404 3,448 3, ,932 Residential mortgage 94, ,741 Home equity 3, ,745 Consumer, automobile 15, ,172 Consumer, other 2, ,560 $ 282,023 $ 3,926 $ 3,804 $ - $ - $ 289,753 December 31, 2015 Pass Special Mention Substandard Doubtful Loss Total Commercial $ 56,970 $ 99 $ 13 $ - $ - $ 57,082 Commercial real estate 103,887 2,019 2, ,857 Residential mortgage 91, ,811 Home equity 4, ,101 Consumer, automobile 15, ,972 Consumer, other 2, ,543 $ 275,317 $ 2,296 $ 3,753 $ - $ - $ 281,366 The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio summarized by the past due status and nonaccrual as of December 31 (in thousands): December 31, Days Past Due Greater than 90 Days and Accruing Nonaccrual Total Past Due and Nonaccrual Current Total Loans Receivables Commercial $ 164 $ 30 $ - $ 194 $ 56,409 $ 56,603 Commercial real estate , , ,932 Residential mortgage ,352 94,389 95,741 Home equity ,745 3,745 Consumer, automobile ,401 15,172 Consumer, other ,550 2,560 $ 2,139 $ 76 $ 1,333 $ 3,548 $ 286,205 $ 289,753 23

26 December 31, Days Past Due Greater than 90 Days and Accruing Nonaccrual Total Past Due and Nonaccrual Current Total Loans Receivables Commercial $ - $ - $ 1 $ 1 $ 57,081 $ 57,082 Commercial real estate , ,857 Residential mortgage ,050 92,811 Home equity ,101 4,101 Consumer, automobile ,709 15,972 Consumer, other ,536 2,543 $ 702 $ 164 $ 1,162 $ 2,028 $ 279,338 $ 281,366 The following tables summarize the activity in the allowance for loan losses by loan class for the years ended December 31, 2016 and 2015 and information in regards to the allowance for loan losses and the recorded investment in loans receivable by loan class as of December 31, 2016 and 2015 (in thousands): December 31, 2016 Beginning Balance Charge-offs Recoveries Provisions Ending Balance Commercial $ 333 $ (5) $ - $ 236 $ 564 Commercial real estate 1,543 (127) ,937 Residential mortgage 816 (21) Home equity Consumer, automobile 1,083 (78) 38 (797) 246 Consumer, other 19 (47) Unallocated $ 3,826 $ (278) $ 43 $ 355 $ 3,946 December 31, 2015 Beginning Balance Charge-offs Recoveries Provisions Ending Balance Commercial $ 608 $ (15) $ 15 $ (275) $ 333 Commercial real estate 1,868 (121) - (204) 1,543 Residential mortgage Home equity Consumer, automobile 442 (79) ,083 Consumer, other 77 (33) 6 (31) 19 Unallocated $ 3,465 $ (248) $ 39 $ 570 $ 3,826 During 2016, the Company updated the approach used in analyzing the allowance for loan losses. While our methodology of evaluating the adequacy of the allowance for loan losses generally did not change, our revised analysis is more robust in allowing us to take a more measurable approach to our evaluation of qualitative factors and the allocation of the allowance for loan losses to the various loan classes for the year ended December 31,

27 Allowance for Loan Losses Ending Balance December 31, 2016 Impairment Analysis Individual Collectively Evaluated Evaluated Loans Receivable Ending Balance December 31, 2016 Impairment Analysis Individual Collectively Evaluated Evaluated Commercial $ - $ 597 $ - $ 56,603 Commercial real estate , ,159 Residential mortgage ,741 Home equity ,745 Consumer, automobile ,172 Consumer, other ,560 Unallocated $ 847 $ 3,099 $ 4,773 $ 284,980 Allowance for Loan Losses Ending Balance December 31, 2015 Impairment Analysis Individual Collectively Evaluated Evaluated Loans Receivable Ending Balance December 31, 2015 Impairment Analysis Individual Collectively Evaluated Evaluated Commercial $ - $ 333 $ - $ 57,082 Commercial real estate , ,625 Residential mortgage ,811 Home equity ,101 Consumer, automobile - 1,083-15,972 Consumer, other ,543 Unallocated $ 985 $ 2,841 $ 5,232 $ 276,134 The following table summarizes information in regards to impaired loans by loan portfolio class as of December 31, 2016 and 2015 (in thousands). December 31, 2016 Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized With no related allowance recorded: Commercial real estate $ 1,483 $ 1,483 $ - $ 1,558 $ 48 With an allowance recorded: Commercial real estate 3,290 3, , Total: Commercial real estate $ 4,773 $ 4,773 $ 847 $ 4,900 $

28 December 31, 2015 Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized With no related allowance recorded: Commercial real estate $ 1,780 $ 1,780 $ - $ 1,777 $ 60 Residential mortgage With an allowance recorded: Commercial real estate 3,393 3, , Total: Commercial real estate $ 5,173 $ 5,173 $ 985 $ 5,231 $ 270 Residential mortgage The Corporation did not have any restructured loans that were considered troubled debt restructurings during the years ended December 31, 2016 and 2015, respectively. There were no troubled debt restructurings that subsequently defaulted during 2016 or Two commercial real estate loans and two residential real estate loans with a total of $1,062,000 were in the process of foreclosure as of December 31, Premises and Equipment Major classifications of premises and equipment are summarized as follows at December 31 (in thousands): December 31, Land $ 1,678 $ 1,627 Construction in process Buildings 7,988 7,841 Furniture and fixtures 2,927 2,850 Automobiles ,054 12,545 Less accumulated depreciation (5,740) (5,441) $ 7,314 $ 7,104 Total depreciation expense was $326,000 and $302,000 for the years ended December 31, 2016 and 2015, respectively. 26

29 6. Deposits Time deposits include certificates of deposit in denominations of $250,000 or more. Such deposits aggregated $19,599,000 and $20,333,000 at December 31, 2016 and 2015, respectively. A summary of the maturity of time deposits as of December 31, 2016 is as follows (in thousands): Year Ending December 31, 2017 $ 40, , , , ,830 $ 96,699 As of December 31, 2016 and 2015, deposits from related parties total $2,428,000 and $2,561,000, respectively. 7. Securities Sold Under Agreements to Repurchase The Company enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. Under these arrangements, the Company may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Company to repurchase the assets. As a result, these repurchase agreements are accounted for as collateralized financing agreements (i.e., secured borrowings) and not as a sale and subsequent repurchase of securities. The obligation to repurchase the securities is reflected as a liability in the Company s consolidated balance sheets, while the securities underlying the repurchase agreements remain in the respective investment securities asset accounts. In other words, there is no offsetting or netting of the investment securities assets with the repurchase agreement liabilities. The following table presents the liabilities subject to an enforceable master netting arrangement or repurchase agreements as of December 31, 2016 and 2015 (dollars in thousands): December 31, 2016 Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Balance Sheets Net Amounts of Liabilities Presented in the Balance Sheets Gross Amounts Not Offset in the Balance Sheets Financial Instruments Cash Collateral Pledged Net Amount Repurchase agreements: Commercial customers (a) $ 5,701 $ - $ 5,701 $ 5,701 $ - $ - 27

30 December 31, 2015 Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Balance Sheets Net Amounts of Liabilities Presented in the Balance Sheets Gross Amounts Not Offset in the Balance Sheets Financial Instruments Cash Collateral Pledged Net Amount Repurchase agreements: Commercial customers (a) $ 7,985 $ - $ 7,985 $ 7,985 $ - $ - (a) As of December 31, 2016 and 2015, the fair value of securities pledged in connection with repurchase agreements was $5,757 and $9,303, respectively. 8. Federal Funds Purchased Federal funds purchased amounted to $-0- as of December 31, 2016 and $5,692,000 as of December 31, The Bank maintains a federal funds borrowing agreement with Atlantic Community Bankers Bank with an available borrowing capacity of $8 million. This agreement is subject to annual renewal, incurs no service charges, and is unsecured. 9. Federal Home Loan Bank Advances The Bank maintains a borrowing agreement with the FHLB of Pittsburgh with an available funding capacity of approximately $118 million as of December 31, This agreement is subject to annual renewal, incurs no service charges, and is secured by FHLB stock and a blanket security agreement on outstanding residential mortgage loans. Federal Home Loan Bank advances consist of separate loans with the Federal Home Loan Bank of Pittsburgh as of December 31 as follows (dollars in thousands): Amount Weighted Average Rate Amount Weighted Average Rate FHLB fixed-rate advances maturing: 2016 $ - - % $ 18, % , , , , , , , , , , , $ 26,993 $ 37,526 28

31 10. Income Taxes The provision for income taxes consists of the following (in thousands): Year Ended December 31, Current tax expense $ 1,359 $ 1,249 Deferred tax benefit (82) (107) Total Provision $ 1,277 $ 1,142 The tax effects of deductible and taxable temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31 are as follows (in thousands): December 31, Deferred tax assets: Allowance for loan losses $ 1,257 $ 1,216 Deferred compensation ,025 1,976 Deferred tax liabilities: Net unrealized gains on securities Premises and equipment Deferred loan origination fees, net Other Net Deferred Tax Asset $ 1,562 $ 1,191 A reconciliation between the expected statutory income tax rate of 34% and the effective income tax rate on income before income taxes is as follows (dollars in thousands): Amount Percentage Amount Percentage Provision at statutory rate $ 1, % $ 1, % Tax-exempt interest (452) (8.3) (495) (9.5) Nondeductible interest expense Bank owned life insurance (94) (1.7) (95) (1.8) Other, net (55) (1.0) (61) (1.2) Applicable Income Taxes and Effective Rates $ 1, % $ 1, % 29

32 11. Employee Benefits Plans Section 401(k) Plan The Bank sponsors a contributory defined contribution Section 401(k) plan covering substantially all employees who have completed one year of service, have worked 1,000 hours and have attained age twenty-one. The plan permits employees to make pretax contributions which are matched by the Bank up to four percent of the employee's compensation. The Bank's contributions were $114,000 and $109,000 in 2016 and 2015, respectively. Contributions made by the Bank vest immediately. The Bank has a profit sharing employer contribution component to the 401(k) Plan. The profit sharing employer contribution is made at the discretion of management and the Board of Directors based upon current year earnings. The Bank's contributions were $42,000 and $147,000 in 2016 and 2015, respectively. Contributions made by the Bank vest ratably beginning after the second year of service and are fully vested after an employee completes six years of service. Employee Stock Option Plan The Bank sponsors an Employee Stock Option Plan (ESOP) covering substantially all employees who have completed one year of service, have worked 1,000 hours and have attained age twenty-one. Contributions to the plan are permitted based upon management s discretion. The Bank's contributions were $175,000 and $57,000 in 2016 and 2015, respectively. Contributions made by the Bank vest ratably beginning after the second year of service and are fully vested after an employee completes six years of service. Deferred Directors' Compensation The Bank maintains deferred compensation plans with directors through which the payments of the directors' fees are deferred. The future liability of these agreements, which is payable in ten annual installments, was financed through the purchase of life insurance contracts. The present value of the future liability of the plans at December 31, 2016 and 2015 was $1,245,000 and $1,283,000, respectively, and is included in other liabilities in the consolidated balance sheets. The related expenses amounted to $71,000 and $72,000 for the years ended 2016 and 2015, respectively. 30

33 Bank Owned Life Insurance The Bank holds bank-owned life insurance (BOLI) with a cash value of $9,973,000 and $10,151,000 at December 31, 2016 and 2015, respectively. The Plan provides that the Bank and the Executives share in the rights to the death benefits of bank owned split-dollar life insurance policies (the "BOLI Policies") and provides for additional compensation to the executives and directors, equal to any income tax consequences related to the Supplemental Plan until retirement. The amount of the BOLI Policies has been calculated so that the projected increases in their cash surrender value will substantially offset the Bank's expense related to the Supplemental Plans. In addition, the BOLI Policies are intended to provide the directors with $100,000 of supplemental life insurance and the executive officers with supplemental life insurance equal to three times salary. Neither the insurance company nor Mifflinburg Bancorp, Inc. has guaranteed any minimum cash value. The cash surrender value increased by $178,000 and $279,000 in 2016 and 2015, respectively. During 2016 $458,000 of cash surrender value was received due to the death of a former director. Supplemental Retirement Plans The Bank has an unfunded, non-qualified supplemental executive retirement plan (SERP) for certain key Executives. The SERP is designed to provide certain executives, upon attaining age 65, with projected annual distributions. The liability of the SERP at December 31, 2016 and 2015 was $971,000 and $912,000, respectively, and is included in other liabilities in the consolidated balance sheets. The related expense amounted to $113,000 and $106,000 for the years ended December 31, 2016 and 2015, respectively. The Bank offsets the cost of these plans through the purchase of bankowned life insurance as noted above. 12. Regulatory Matters Cash and Due from Banks Included in cash and due from banks are required reserves of $376,000 and $257,000 at December 31, 2016 and 2015, respectively, required by the Federal Reserve Bank. The required reserves are computed by applying prescribed ratios to the various classes of average deposit accounts. The reserves are held in the form of cash. Deposits with correspondent financial institutions are insured up to $250,000 per institution. The Company maintains cash and cash equivalents with certain correspondent financial institutions in excess of the insured amount. Regulatory Capital Requirements The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet capital requirements can initiate certain mandatory, and possibly additional discretionary actions by the regulators that, if undertaken, could have a direct material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain offbalance sheet items as calculated under regulatory accounting practices. The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. 31

34 In July 2013, the Federal Reserve Board approved final rules (the "U.S. Basel III Capital Rules") establishing a new comprehensive capital framework for U.S. banking organizations and implementing the Basel Committee on Banking Supervision's December 2010 framework for strengthening international capital standards. The U.S. Basel III Capital Rules substantially revise the risk-based capital requirements applicable to bank holding companies and depository institutions. The new minimum regulatory capital requirements established by the U.S. Basel III Capital Rules became effective for the Company on January 1, 2015, and will be fully phased in on January 1, The U.S. Basel III Capital Rules require the Company and the Bank to: Meet a new minimum Common Equity Tier 1 capital ratio of 4.50% of risk-weighted assets and a Tier 1 capital ratio of 6.00% of risk-weighted assets; Continue to require the current minimum Total capital ratio of 8.00% of risk-weighted assets and the minimum Tier 1 leverage capital ratio of 4.00% of average assets; and Comply with a revised definition of capital to improve the ability of regulatory capital instruments to absorb losses. Certain non-qualifying capital instruments, including cumulative preferred stock and trust preferred securities, are being phased out as a component of Tier 1 capital for institutions of the Company s and the Bank s size. The capital conservation buffer will be phased in over four years beginning on January 1, 2016, with a maximum buffer of 0.625% of risk weighted assets for 2016, 1.25% for 2017, 1.875% for 2018, and 2.5% for 2019 and thereafter. Failure to maintain the required capital conservation buffer will result in limitations on capital distributions and on discretionary bonuses to executive officers. The U.S. Basel III Capital Rules use a standardized approach for risk weightings that expands the risk-weightings for assets and off balance sheet exposures from the previous 0%, 20%, 50% and 100% categories to a much larger and more risk-sensitive number of categories, depending on the nature of the assets and off-balance sheet exposures and resulting in higher risk weights for a variety of asset categories. As of December 31, 2016, the Company and the Bank met the minimum requirements of the U.S. Basel III Capital Rules, and each of the Bank s capital ratios exceeded the amounts required to be considered "well capitalized" as defined in the regulations. As of December 31, 2016, the Bank's capital levels also met the fully-phased in minimum capital requirements, including the capital conservation buffers, as prescribed in the U.S. Basel III Capital Rules. As of December 31, 2016, the most recent notification from the Federal Deposit Insurance Corporation has categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There have been no conditions or events since that notification that management believes have changed the Bank's category. To be categorized as well capitalized, the Bank must maintain minimum Total risk-based and Tier I leverage ratios as set forth as follows. Management believes, as of December 31, 2016 and 2015, that the Company and the Bank meet all capital adequacy requirements to which it is subject. 32

35 The following table reflects the Bank's capital ratios at December 31 (dollars in thousands): December 31, 2016 To Be Well Capitalized Actual For Capital Adequacy Purposes Minimum Capital Adequacy with Capital Buffer Under Prompt Corrective Action Provisions Amount Ratio Amount Ratio Amount Ratio Amount Ratio Total capital (to risk-weighted assets) $ 43, % $ 23, % $ 24, % $ 28, % Common equity tier 1 capital (to riskweighted assets) $ 40, % $ 12, % 14, % $ 18, % Tier 1 capital (to risk-weighted assets) $ 40, % $ 17, % 19, % $ 23, % Tier 1 capital (to average assets) $ 40, % $ 16, % N/A N/A $ 20, % December 31, 2015 Actual For Capital Adequacy Purposes To be Well Capitalized under Prompt Corrective Action Provisions Amount Ratio Amount Ratio Amount Ratio Total capital (to riskweighted assets) $ 42, % $ 22, % $ 27, % Common equity tier 1 capital (to riskweighted assets) 38, % 12, % 18, % Tier 1 capital (to riskweighted assets) 38, % 16, % 22, % Tier 1 capital (to average assets) 38, % 15, % 19, % Dividends Banking regulations limit the amount of dividends that may be paid by the Bank to the Company without prior regulatory approval and are subject to the minimum capital ratio requirements noted above. 13. Commitments and Standby Letters of Credit In the normal course of business, the Bank makes various commitments which are not reflected in the accompanying consolidated financial statements. The Bank offers such products to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve to varying degrees elements of credit, interest rate, or liquidity risk in excess of the amount recognized in the consolidated balance sheet. The Bank's maximum exposure to credit loss from nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual amount of these instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. The Bank evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Bank on extension of credit is based on management's credit assessment of the counterparty. 33

36 Financial instruments whose contract amounts represent credit risk at December 31 are as follows (in thousands): December 31, Commitments to extend credit $ 67,736 $ 64,118 Standby letters of credit Commitments to extend credit are legally binding agreements to lend to customers as long as there are no violations of the agreements. Commitments generally have fixed expiration dates or other termination clauses and may require payment of fees. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future liquidity requirements. Outstanding letters of credit written are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. The majority of these standby letters of credit expire within the next twelve months. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending other loan commitments. The Bank requires collateral supporting these letters of credit as deemed necessary. The current amount of the liability as of December 31, 2016 and 2015 for guarantees under standby letters of credit is not material. 14. Parent Company Statements The following is condensed financial information for Mifflinburg Bancorp Inc. on a parent company only basis (in thousands): Condensed Balance Sheets December 31, Assets: Cash and cash equivalents $ 224 $ 210 Investment in subsidiaries 39,950 39,262 Equity securities 2,641 2,065 Total Assets $ 42,815 $ 41,537 Liabilities and Stockholders Equity: Other liabilities (assets) $ 2 $ (8) Deferred tax liability Stockholders equity 42,663 41,456 Total Liabilities and Stockholders Equity $ 42,815 $ 41,537 34

37 Condensed Income Statement Years Ended December 31, Income: Equity in undistributed earnings of subsidiaries $ 2,161 $ 2,151 Dividends from subsidiaries 2,022 1,929 Dividend income Net gain (loss) on sale of securities 15 (18) Total Income 4,261 4,126 Expense: Operating expenses (78) (63) Total Expense (78) (63) Net Income $ 4,183 $ 4,063 Condensed Statement of Cash Flows Years Ended December 31, Cash Flows from Operating Activities: Net income $ 4,183 $ 4,063 Equity in undistributed earnings of subsidiaries (2,161) (2,151) Net (gain) loss on sale of securities (15) 18 Equity in distributed earnings of subsidiaries Increase (decrease) in other liabilities 10 (53) Net Cash Provided by Operating Activities 2,811 1,999 Cash Flows from Investing Activities: Security purchases (1,529) (1,550) Proceeds from security sales 1,146 1,624 Net Cash (Used in) Provided by Investing Activities (383) 74 Cash Flows from Financing Activities: Acquisition of treasury stock (567) (67) Sale of treasury stock Dividends paid (2,022) (1,929) Net Cash Used in Financing Activities (2,414) (1,940) Net increase in cash and cash equivalents Cash and Cash Equivalents, Beginning of Year Cash and Cash Equivalents, End of Year $ 224 $

38 15. Fair Value Measurements Management uses its best judgment in estimating the fair value of the Company's financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective year-ends and have not been re-evaluated or updated for purposes of these consolidated financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each year-end. ASC Topic , Fair Value Measurements and Disclosures, defines fair value measurement and disclosure guidance as the price that would be received to sell the asset or transfer the liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. Additional guidance is provided on determining when the volume and level of activity for the asset or liability has significantly decreased. The standard also includes guidance on identifying circumstances when a transaction may not be considered orderly. Fair value measurement and disclosure guidance provides a list of factors that a reporting entity should evaluate to determine whether there has been a significant decrease in the volume and level of activity for the asset or liability in relation to normal market activity for the asset or liability. When the reporting entity concludes there has been a significant decrease in the volume and level of activity for the asset or liability, further analysis of the information from that market is needed and significant adjustments to the related prices may be necessary to estimate fair value in accordance with fair value measurement and disclosure guidance. This guidance further clarifies that when there has been a significant decrease in the volume and level of activity for the asset or liability, some transactions may not be orderly. In those situations, the entity must evaluate the weight of the evidence to determine whether the transaction is orderly. The guidance provides a list of circumstances that may indicate that a transaction is not orderly. A transaction price that is not associated with an orderly transaction is given little, if any, weight when estimating fair value. Fair value measurement and disclosure guidance establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows: Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Level 2 - Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability. Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity). 36

39 An asset's or liability's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at December 31, 2016 and 2015 are as follows (in thousands): December 31, 2016 Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Securities available-for-sale: U.S. government agencies $ 11,749 $ - $ 11,749 $ - Taxable state and municipal 1,601-1,601 - Tax-exempt state and municipal 49,783-49,783 - U.S. government sponsored enterprise mortgagebacked securities 6,580-6,580 - Corporate securities 2,985-2,985 - Equity securities 2,641 2, Total Securities Availablefor-Sale $ 75,339 $ 2,641 $ 72,698 $ - December 31, 2015 Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Securities available-for-sale: U.S. government agencies $ 3,419 $ - $ 3,419 $ - Taxable state and municipal 2,154-2,154 - Tax-exempt state and municipal 44,888-44,888 - U.S. government sponsored enterprise mortgagebacked securities 9,960-9,960 - Corporate securities 3,226-3,226 - Equity securities 2,065 2, Total Securities Availablefor-Sale $ 65,712 $ 2,065 $ 63,647 $ - 37

40 For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at December 31, 2016 and 2015 are as follows (in thousands): December 31, 2016 Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Impaired loans $ 2,443 $ - $ - $ 2,443 December 31, 2015 Impaired loans $ 2,408 $ - $ - $ 2,408 The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which Level 3 inputs were utilized to determine fair value at December 31, 2016 and 2015 (in thousands): December 31, 2016 Fair Value Valuation Technique Unobservable Input Range (Weighted Average) Impaired loans $ 2,443 Appraisal of collateral Appraisal adjustments Liquidation expenses 0-80% (27)% 0-5% (4)% December 31, 2015 Fair Value Valuation Technique Unobservable Input Range (Weighted Average) Impaired loans $ 2,408 Appraisal of collateral Appraisal adjustments Liquidation expenses 0-80% (27)% 0-5% (4)% The Company had no financial liabilities measured at fair value on a nonrecurring basis as of December 31, 2016 or

41 The following information should not be interpreted as an estimate of the fair value of the entire Company since the fair value calculation is only provided for a limited portion of the Company's assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company's disclosures and those of other companies may not be meaningful. The following methods and assumptions were used to estimate the fair values of certain of the Company's financial instruments at December 31, 2016 and Cash and Cash Equivalents (Carried at Cost) The carrying amounts reported in the consolidated balance sheets for cash and short-term instruments approximate those assets' fair values. Interest-Bearing Time Deposits (Carried at Cost) Fair values for fixed-rate time certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates to a schedule of aggregated expected monthly maturities on time deposits. The Bank generally purchases amounts below the insured limit, limiting the amount of credit risk on these time deposits. Securities Available-for-Sale (Carried at Fair Value) The fair value of securities available-for-sale and trading securities are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities' relationship to other benchmark quoted prices. For certain securities which are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments are generally based on available market evidence (Level 3). In the absence of such evidence, management's best estimate is used. Management's best estimate consists of both internal and external support on certain Level 3 investments. Internal cash flow models using a present value formula that includes assumptions market participants would use along with indicative exit pricing obtained from broker/dealers (where available) were used to support fair values of certain Level 3 investments. Investments in Restricted Stock (Carried at Cost) The carrying amount of investments in restricted stock approximates fair value, and considers the limited marketability of such securities. Net Loans (Carried at Cost) The fair values of loans are estimated using discounted cash flow analyses, using market rates at the balance sheet date that reflect the credit and interest rate-risk inherent in the loans. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal. Generally, for variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. 39

42 Impaired Loans (Generally Carried at Fair Value) Loans for which the Company has measured impairment are generally based on the fair value of the loan's collateral. Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements. The fair value consisted of the loan balances of $3,290,000 less specific allowances of $847,000 as of December 31, The fair value consisted of the loan balances of $3,393,000 less specific allowances of $985,000 as of December 31, Accrued Interest Receivable and Payable (Carried at Cost) The carrying amount of accrued interest receivable and accrued interest payable approximates its fair value. Mortgage Servicing Rights (Carried at Lower of Cost or Fair Value) The Company considers mortgage servicing rights to be immaterial and has determined that fair value approximates carrying value. Deposits (Carried at Cost) The fair values disclosed for demand deposits (e.g., interest and noninterest checking, passbook savings and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e. their carrying amounts). Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates to a schedule of aggregated expected monthly maturities on time deposits. Federal Funds Purchased (Carried at Cost) The carrying amount of federal funds purchased approximate their fair value. Repurchase Agreements (Carried at Cost) The carrying amount of repurchase agreements approximates their fair value. FHLB Advances (Carried at Cost) Fair values of FHLB advances are estimated using discounted cash flow analysis, based on quoted prices for new FHLB advances with similar credit risk characteristics, terms and remaining maturity. These prices obtained from this active market represent a market value that is deemed to represent the transfer price if the liability were assumed by a third party. 40

43 Off-Balance Sheet Financial Instruments (Disclosed at Cost) Fair values for the Company's off-balance sheet financial instruments (lending commitments and letters of credit) are based on fees currently charged in the market to enter into similar agreements, taking into account, the remaining terms of the agreements and the counterparties' credit standing. The contractual amounts of unfunded commitments and letters of credit are presented in Note 13. The estimated fair values (in thousands) of the Company's financial instruments were as follows at December 31, 2016 and December 31, 2016 Carrying Value Fair Value Level 1 Level 2 Level 3 Financial assets: Cash and cash equivalents $ 4,075 $ 4,075 $ - $ 4,075 $ - Interest-bearing time deposits 19,738 19,738-19,738 - Securities available-for-sale 75,339 75,339 2,641 72,698 - Investments in restricted stock 1,395 1,395-1,395 - Net loans 285, , ,414 Accrued interest receivable Mortgage servicing rights Financial liabilities: Deposits 327, , ,046 - Repurchase agreements 5,701 5,701-5,701 - FHLB advances 26,993 26,740-26,740 - Accrued interest payable Off-balance sheet financial instruments: Commitments to extend credit and letters of credit December 31, 2015 Carrying Value Fair Value Level 1 Level 2 Level 3 Financial assets: Cash and cash equivalents $ 4,168 $ 4,168 $ - $ 4,168 $ - Interest-bearing time deposits 17,853 17,853-17,853 - Securities available-for-sale 65,712 65,712 2,065 63,647 - Investments in restricted stock 1,794 1,794-1,794 - Net loans 277, , ,438 Accrued interest receivable Mortgage servicing rights Financial liabilities: Deposits 290, , ,068 - Repurchase agreements 7,985 7,985-7,985 - Federal funds purchased 5,692 5,692-5,692 - FHLB advances 37,526 37,434-37,434 - Accrued interest payable Off-balance sheet financial instruments: Commitments to extend credit and letters of credit

44 YEAR AT A GLANCE

45 Directors Mifflinburg Bancorp Inc. and Mifflinburg Bank & Trust Company Thomas E. Boop, Chairman Jeffrey J. Kapsar, Vice Chairman John D. Griffith, Secretary Richard J. Drzewiecki Robert C. Musser Betsy K. Robertson John R. Showers DIRECTORS EMERITUS Robert K. Lynch, Director Emeritus D. Roger Shuck, Director Emeritus Robert E. Valentine, Director Emeritus W. Gale Reish, Director Emeritus Mifflinburg Bank and Trust Company Officers Jeffrey J. Kapsar- President and Chief Executive Officer Thomas L. Eberhart- Sr. Vice President and Chief Operating Officer Garry R. Benfer- Sr. Vice President of Loan Administration Thomas C. Graver, Jr.- CPA, Sr. Vice President and Chief Financial Officer Thomas E. Beck- CPA, Sr. Vice President of Internal Audit and Compliance Andrea L. Long- PHR, Vice President and Director of Human Resources Member FDIC Locations 250 East Chestnut Street, Mifflinburg, PA (570) North Fairground Road, Lewisburg, PA (570) Market Street, Lewisburg, PA (570) Route 45, P.O. Box 438, Millheim, PA (814) State Route 304, New Berlin, PA (570) Routes 11&15, Shamokin Dam, PA (570) Toll Free: (888)