SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

þ		QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2008

o		TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                          to                         

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, PA		17815
(Address of principal executive offices)		(Zip Code)
Issuer’s telephone number, including area code: (570) 784-4400

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

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

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

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No o

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 1,217,783 shares of $1.25 (par) common stock were outstanding as of July 17, 2008.

 

 

CCFNB Bancorp, Inc. and Subsidiary
Table of Contents
June 30, 2008

		Page
FINANCIAL INFORMATION:
Consolidated Balance Sheets		2
Consolidated Statements of Income		3
Consolidated Statements of Cash Flows		4
Notes to Consolidated Financial Statements		5 - 17
Report of Independent Registered Public Accounting Firm		18
Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations		19 - 27
Controls and Procedures		28
OTHER INFORMATION		29
SIGNATURES		30 - 33

CCFNB Bancorp, Inc. and Subsidiary

		Unaudited
		June				December
		30, 2008				31, 2007
ASSETS
Cash and due from banks		$	4,404			$	5,550
Interest-bearing deposits with other banks			518				732
Federal funds sold			6,094				7,119
Investment securities available-for-sale			61,223				57,686
Loans, net of unearned income			161,240				161,460
Allowance for loan losses			1,436				1,437
Net loans			159,804				160,023
Premises and equipment, net			4,917				5,087
Cash surrender value of bank-owned life insurance			7,234				7,077
Accrued interest receivable			1,020				1,082
Other assets			1,965				968
TOTAL ASSETS		$	247,179			$	245,324
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits:
Non-interest bearing		$	20,721			$	19,394
Interest bearing			154,500				151,544
Total Deposits			175,221				170,938
Short-term borrowings			28,973				29,511
Long-term borrowings			9,134				11,137
Accrued interest and other expenses			1,852				2,082
Other liabilities			23				29
TOTAL LIABILITIES			215,203				213,697
STOCKHOLDERS’ EQUITY
Common stock, par value $1.25 per share; authorized 5,000,000 shares; issued and outstanding 1,219,783 shares in 2008 and 1,226,536 shares in 2007			1,525				1,533
Surplus			2,105				2,271
Retained earnings			28,563				27,679
Accumulated other comprehensive income (loss)			(217	)			144
TOTAL STOCKHOLDERS’ EQUITY			31,976				31,627
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	247,179			$	245,324

See accompanying notes to Consolidated Financial Statements.

CCFNB Bancorp, Inc. and Subsidiary

		For the Six								For the Three
		Months Ending								Months Ending
		June 30								June 30
		2008				2007				2008				2007
INTEREST AND DIVIDEND INCOME
Interest and fees on loans:
Taxable		$	5,079			$	5,259			$	2,496			$	2,635
Tax-exempt			298				231				154				115
Interest and dividends on investment securities:
Taxable			1,253				1,100				645				579
Tax-exempt			84				97				39				47
Dividends			49				60				24				30
Federal funds sold			108				274				44				139
Deposits in other banks			20				88				7				53
TOTAL INTEREST AND DIVIDEND INCOME			6,891				7,109				3,409				3,598
INTEREST EXPENSE
Deposits			2,026				1,978				990				1,011
Short-term borrowings			358				702				130				353
Long-term borrowings			292				334				138				167
TOTAL INTEREST EXPENSE			2,676				3,014				1,258				1,531
Net interest income			4,215				4,095				2,151				2,067
Provision for loan losses			—				30				—				7
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES			4,215				4,065				2,151				2,060
NON-INTEREST INCOME
Service charges and fees			480				440				241				235
Gain on sale of loans			106				64				59				43
Bank-owned life insurance income			133				143				68				73
Investment center			92				271				54				89
Trust department			74				82				36				39
Other			152				149				79				81
TOTAL NON-INTEREST INCOME			1,037				1,149				537				560
NON-INTEREST EXPENSE
Salaries			1,419				1,501				716				730
Pensions and other employee benefits			470				448				225				217
Occupancy, net			256				247				118				118
Equipment			222				242				107				121
State shares tax			163				159				78				77
Professional services			132				129				66				68
Directors’ fees			97				93				51				46
Stationery and supplies			54				95				27				54
Other			571				605				297				312
TOTAL NON-INTEREST EXPENSE			3,384				3,519				1,685				1,743
Income before income taxes			1,868				1,695				1,003				877
Income tax expense			470				426				256				223
NET INCOME		$	1,398			$	1,269			$	747			$	654
PER SHARE DATA
Net income		$	1.14			$	1.03			$	0.61			$	0.53
Cash dividends		$	0.42			$	0.40			$	0.21			$	0.20
Weighted average shares outstanding			1,224,552				1,237,119				1,224,552				1,237,119

See accompanying notes to Consolidated Financial Statements.

CCFNB Bancorp, Inc. and Subsidiary

		For the Six
		Months Ending
		June 30,
		2008				2007
OPERATING ACTIVITIES
Net income		$	1,398			$	1,269
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses			—				30
Depreciation and amortization			188				202
Employee stock purchase plan expense			2				2
Premium amortization on investment securities			46				45
Discount accretion on investment securities			(26	)			(10	)
Deferred income taxes (benefit)			(62	)			(40	)
(Gain) on sale of loans			(106	)			(64	)
Proceeds from sale of mortgage loans			6,182				3,994
Originations of mortgage loans for resale			(5,921	)			(4,067	)
(Income) from investment in insurance agency			(10	)			(1	)
(Increase) in accrued interest receivable and other assets			(678	)			(251	)
Net (increase) in cash surrender value of bank-owned life insurance			(157	)			(159	)
Increase in accrued interest, other expenses and other liabilities			(236	)			72
NET CASH PROVIDED BY OPERATING ACTIVITIES			620				1,022
INVESTING ACTIVITIES
Purchase of investment securities available-for-sale			(29,600	)			(22,515	)
Proceeds from sales, maturities and redemptions of investment securities available-for-sale			25,497				16,274
Net (increase) decrease in loans			64				2,737
Purchases of premises and equipment			(18	)			(192	)
NET CASH (USED IN) INVESTING ACTIVITIES			(4,057	)			(3,696	)
FINANCING ACTIVITIES
Net increase in deposits			4,283				5,019
Net increase in short-term borrowings			(538	)			2,667
Net (decrease) in long-term borrowings			(2,003	)			(158	)
Acquisition of treasury stock			(304	)			(338	)
Proceeds from issuance of common stock			128				122
Cash dividends paid			(514	)			(494	)
NET CASH PROVIDED BY FINANCING ACTIVITIES			1,052				6,818
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			(2,385	)			4,144
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			13,401				15,531
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	11,016			$	19,675
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest		$	2,717			$	3,068
Income taxes		$	622			$	443

See accompanying notes to Consolidated Financial Statements.

CCFNB Bancorp, Inc. and Subsidiary

NOTE 1 — Summary of Significant Accounting Policies

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

Principles of Consolidation

The consolidated financial statements include the accounts of CCFNB Bancorp, Inc. and its wholly owned subsidiary, Columbia County Farmers National Bank (the “Bank”). All significant inter-company balances and transactions have been eliminated in consolidation.

Nature of Operations & Lines of Business

The Corporation provides full banking services, including trust services, through the Bank, to individuals and corporate customers. The Bank has eight offices covering an area of approximately 484 square miles in Northcentral Pennsylvania. The Corporation and its banking subsidiary are subject to regulation of the Office of the Comptroller of the Currency, The Federal Deposit Insurance Corporation and the Federal Reserve Bank of Philadelphia.

Procuring deposits and making loans are the major lines of business. The deposits are mainly deposits of individuals and small businesses and the loans are mainly real estate loans covering primary residences and small business enterprises. The trust services, under the name of CCFNB and Co., include administration of various estates, pension plans, self-directed IRA’s and other services. A third-party brokerage arrangement is also resident in the Lightstreet branch. This investment center offers a full line of stocks, bonds and other non-insured financial services.

Segment Reporting

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

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

Use of Estimates

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

Investment Securities

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

Debt securities not classified as held-to-maturity and equity securities included in the available-for-sale category, are carried at fair value, and the amount of any unrealized gain or loss net of the effect of deferred income taxes is reported as other comprehensive income (loss) (see Note 6). Management’s decision to sell available-for-sale securities is based on changes in economic conditions controlling the sources and uses of funds, terms, availability of and yield of alternative investments, interest rate risk, and the need for liquidity.

The cost of debt securities classified as held-to-maturity or available-for-sale is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion, as well as interest and dividends, is included in interest income from investments. Realized gains and losses are included in net investment securities gains. The cost of investment securities sold, redeemed or matured is based on the specific identification method.

Loans

Loans are stated at their outstanding principal balances, net of deferred fees or costs, unearned income, and the allowance for loan losses. Interest on loans is accrued on the principal amount outstanding, primarily on an actual day basis. Non-refundable loan fees and certain direct costs are deferred and amortized over the life of the loans using the interest method. The amortization is reflected as an interest yield adjustment, and the deferred portion of the net fees and costs is reflected as a part of the loan balance.

Real estate mortgage loans held for resale are carried at the lower of cost or market on an aggregate basis. These loans are sold with limited recourse to the Corporation.

Past Due Loans - Generally, a loan is considered past due when a payment is in arrears for a period of 10 or 15 days, depending on the type of loan. Delinquent notices are issued at this point and collection efforts will continue on loans past due beyond 60 days which have not been satisfied. Past due loans are continually evaluated with determination for charge-off being made when no reasonable chance remains that the status of the loan can be improved.

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

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

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

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

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

Derivatives

The Bank has outstanding loan commitments that relate to the origination of mortgage loans that will be held for resale. Pursuant to Statement of Financial Accounting Standards (SFAS) No. 133 “Accounting for Derivative Instruments and Hedging Activities” as amended by SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities”, and SFAS No. 149 “Amendments to SFAS 133 on Derivative Instruments and Hedging Activities” and the guidance contained in the Derivatives Implementation Group Statement 133 Implementation Issue No. C 13, the Bank has accounted for such loan commitments as derivative instruments. The outstanding loan commitments in this category did not give rise to any losses for the six-month period ended June 30, 2008 and the year ended December 31, 2007, as the fair market value of each outstanding loan commitment exceeded the Bank’s cost basis in each loan commitment.

Premises and Equipment

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

Mortgage Servicing Rights

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

Other Real Estate Owned

Real estate properties acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value on the date of foreclosure establishing a new cost basis. After foreclosure, valuations are periodically performed by management and the real estate is carried at the lower of carrying amount or fair value less cost to sell and is included in other assets. Revenues derived from and costs to maintain the assets and subsequent gains and losses on sales are included in other non-interest income and expense.

Bank Owned Life Insurance

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

Investment in Insurance Agency

On January 2, 2001, the Corporation acquired a 50% interest in a local insurance agency, a corporation organized under the laws of the Commonwealth of Pennsylvania. The income or loss from this investment is accounted for under the equity method of accounting. The carrying value of this investment as of June 30, 2008 and December 31, 2007 was $223,000 and $213,000, respectively, and is carried in other assets in the accompanying consolidated balance sheets.

Income Taxes

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

Per Share Data

Statement of Financial Accounting Standards (SFAS) No. 128, “Earnings Per Share”, requires dual presentation of basic and diluted earnings per share. Basic earnings per share is calculated by dividing net income by the weighted average number of shares of common stock outstanding at the end of each period. Diluted earnings per share is calculated by increasing the denominator for the assumed conversion of all potentially dilutive securities. The Corporation does not have any securities which have or will have a dilutive effect, accordingly, basic and diluted per share data are the same.

Cash Flow Information

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

Trust Assets and Income

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

Recent Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (FASB) issued State of Financial Accounting Standards SFAS
141(R), “Business Combinations”. SFAS 141(R) will significantly change how entities apply the acquisition method to business combinations. The most significant changes affecting how the Corporation will account for business combinations under this Statement include: the acquisition date will be the date the acquirer obtains control; all (and only) identifiable assets acquired, liabilities assumed, and noncontrolling interests in the acquiree will be stated at fair value on the acquisition date; assets or liabilities arising from noncontractual contingencies will be measured at their acquisition date fair value only if it is more likely than not that they meet the definition of an asset or liability on the acquisition date; adjustments subsequently made to the provisional amounts recorded on the acquisition date will be made retroactively during a measurement period not to exceed one year; acquisition-related restructuring costs that do not meet the criteria in SFAS 146, “Accounting for Costs Associated with Exit or Disposal Activities”, will be expensed as incurred; transaction costs will be expensed as incurred; reversals of deferred income tax valuation allowances and income tax contingencies will be recognized in earnings subsequent to the measurement period; and the allowance for loan losses of an acquiree will not be permitted to be recognized by the

acquirer. Additionally, SFAS 141(R) will require new and modified disclosures surrounding subsequent changes to acquisition-related contingencies, contingent consideration, noncontrolling interests, acquisition-related transaction costs, fair values and cash flows not expected to be collected for acquired loans, and an enhanced goodwill rollforward.

The Corporation will be required to prospectively apply SFAS 141(R) to all business combinations completed on or after January 1, 2009. Early adoption is not permitted. For business combinations in which the acquisition date was before the effective date, the provisions of SFAS 141(R) will apply to the subsequent accounting for deferred income tax valuation allowances and income tax contingencies and will require any changes in those amounts to be recorded in earnings. Management is currently evaluating the effects that SFAS 141(R) will have on the financial condition, results of operations, liquidity, and the disclosures that will be presented in the consolidated financial statements.

In December 2007, the FASB issued Statement of Financial Accounting Standards SFAS 160, “Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB 51”. SFAS 160 establishes new accounting and reporting standards for noncontrolling interests in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 will require entities to classify noncontrolling interests as a component of stockholders’ equity and will require subsequent changes in ownership interest in a subsidiary to be accounted for as an equity transaction. Additionally, SFAS 160 will require entities to recognize a gain or loss upon the loss of control of a subsidiary and to remeasure any ownership interest retained at fair value on that date. This statement also requires expanded disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS 160 is effective on a prospective basis for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008, except for the presentation and disclosure requirements, which are required to be applied retrospectively. Early adoption is not permitted. The adoption of this standard is not expected to have a material impact on the Corporation’s consolidated financial condition, results of operations or liquidity.

EITF 06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements”, was issued in September 2006 and is effective for fiscal years beginning after December 15, 2007 with earlier application permitted. EITF 06-4 requires that, for split-dollar life insurance arrangements that provide a benefit to an employee that extends to postretirement periods, an employer should recognize a liability for future benefits in accordance with SFAS No. 106. EITF 06-4 requires that recognition of the effects of adoption should be either by (a) a change in accounting principle through a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption or (b) a change in accounting principle through retrospective application to all prior periods. The Corporation adopted this standard as of January 1, 2007 through a cumulative-effect adjustment to beginning retained earnings. This adjustment represented a decrease of $12,570 to retained earnings.

In November 2007, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 109, which addresses the valuation of written loan commitments accounted for at fair value through earnings. The guidance in SAB 109 expresses the staff’s view that the measurement of fair value for a written loan commitment accounted for at fair value through earnings should incorporate the expected net future cash flows related to the associated servicing of the loan. Previously under SAB 105, Application of Accounting Principles to Loan Commitments, this component of value was not incorporated into the fair value of the loan commitment. The Corporation does not account for any written loan commitments at fair value through earnings.

In June 2007, the FASB ratified the consensus reached in EITF 06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards”. EITF 06-11 applies to entities that have share-based payment arrangements that entitle employees to receive dividends or dividend equivalents on equity-classified nonvested shares when those dividends or dividend equivalents are charged to retained earnings and result in an income tax deduction. Entities that have share-based payment arrangements that fall within the scope of EITF 06-11 will be required to increase capital surplus for any realized income tax benefit associated with dividends or dividend equivalents paid to employees for equity classified nonvested equity awards. Any increase recorded to capital surplus is required to be included in an entity’s pool of excess tax benefits that are available to absorb potential future tax deficiencies on share-based payment awards. The Corporation will adopt EITF 06-11 on January 1, 2008 for dividends declared on share-based payment awards subsequent to this date. The impact of adoption is not expected to have a material impact on financial condition, results of operations, or liquidity.

In April 2007, the FASB issued FSP 39-1, “Amendment of FASB Interpretation No. 39, Offsetting of Amounts Related to Certain Contracts”. FSP 39-1 permits entities to offset fair value amounts recognized for multiple derivative instruments executed with the same counterparty under a master netting agreement. FSP 39-1 clarifies that the fair value amounts recognized for the right to reclaim cash collateral, or the obligation to return cash collateral, arising from the same master netting arrangement, should also be offset against the fair value of the related derivative instruments.

Effective January 1, 2008, the Corporation adopted a net presentation for derivative positions and related collateral entered into under master netting agreements pursuant to the guidance in FIN 39 and FSP 39-1. The adoption of this guidance would result in balance sheet reclassifications of certain cash collateral-based short-term investments against the related derivative liabilities and certain deposit liability balances against the related fair values of derivative assets. The effects of these reclassifications will fluctuate based on the fair values of derivative contracts but overall would not have a material impact on either total assets or total liabilities. The adoption of these standards will not have an impact on the Corporations consolidated financial condition, results of operations or liquidity

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Liabilities”. The statement allows an entity to elect to measure certain financial assets and liabilities at fair value with changes in fair value recognized in the income statement each period. The statement also requires additional disclosures to identify the effects of an entity’s fair value election on its earnings. The election is irrevocable. The Corporation is currently assessing whether it will elect to adopt
SFAS 159.

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards SFAS 158 “Employers’ Accounting for Defined Benefit Pension and Other Post Retirement Plans” which requires the Corporation to recognize the funded status of a benefit plan as either assets or liabilities in the consolidated balance sheet and to recognize as a component of other comprehensive income, net of tax, the unrecognized actuarial gains or losses, prior service costs and transition obligations that arise during the period. The adoption of SFAS 158 for the year ended December 31, 2007 did not have a material impact on the Corporation’s consolidated financial condition, results of operations or liquidity.

In September 2006, the FASB issued Statement of Financial Accounting Standards SFAS 157, “Fair Value Measurements”, which upon adoption will replace various definitions of fair value in existing accounting literature with a single definition, will establish a framework for measuring fair value, and will require additional disclosures about fair value measurements. The statement clarifies that fair value is the price that would be received to sell an asset or the price paid to transfer a liability in the most advantageous market available to the entity and emphasizes that fair value is a market-based measurement and should be based on the assumptions market participants would use. The statement also creates a three-level hierarchy under which individual fair value estimates are to be ranked based on the relative reliability of the inputs used in the valuation. This hierarchy is the basis for the disclosure requirements, with fair value estimates based on the least reliable inputs requiring more extensive disclosures about the valuation method used and the gains and losses associated with those estimates. SFAS 157 is required to be applied whenever another financial accounting standard requires or permits an asset or liability to be measured at fair value. The statement does not expand the use of fair value to any new circumstances. The Corporation will adopt SFAS 157 on January 1, 2008, and does not expect it to have a material impact on the Corporation’s consolidated financial condition, results of operations or liquidity.

In July 2006, the FASB issued FASB Staff Position FSP 13-2, “Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction”. This FSP amends SFAS 13, “Accounting for Leases”, to require a lessor in a leveraged lease transaction to recalculate the leveraged lease for the effects of a change or projected change in the timing of cash flows relating to income taxes that are generated by the leveraged lease. The guidance in FSP 13-2 was adopted by the Corporation on January 1, 2007. The application of this FSP did not have a material impact on the Corporation’s consolidated financial condition, results of operations or liquidity.

In June 2006, the FASB issued Interpretation No. 48 FIN 48, “Accounting for Uncertainty in Income Taxes”, an interpretation of SFAS 109, “Accounting for Income Taxes”. FIN 48 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under FIN 48, tax positions shall initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions shall initially and subsequently be measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and all relevant facts. FIN 48 also revises disclosure requirements to include an annual tabular roll-forward of unrecognized tax benefits. The provisions of this interpretation were adopted by the Corporation on January 1, 2007. The adoption of FIN 48 did not have a material impact on the Corporation’s consolidated financial condition, results of operations or liquidity.

In March 2006, the FASB issued Statement of Financial Accounting Standards SFAS 156, “Accounting for Servicing of Financial Assets”, an amendment of SFAS 140. This standard requires entities to separately recognize a servicing asset or liability whenever it undertakes an obligation to service financial assets and also requires all separately recognized servicing assets or liabilities to be initially measured at fair value. Additionally, this standard permits entities to choose among two alternatives, the amortization method or fair value measurement method, for the subsequent measurement of each class of separately recognized servicing assets and liabilities. Under the amortization method, an entity shall amortize the value of servicing assets or liabilities in proportion to and over the period of estimated net servicing income or net servicing loss and assess servicing assets or liabilities for impairment or increased obligation based on fair value at each reporting date. Under the fair value measurement method, an entity shall measure servicing assets or liabilities at fair value at each reporting date and report changes in fair value in earnings in the period in which the changes occur.

Effective January 1, 2006, the Corporation adopted this statement by electing amortization method as its measurement method for residential real estate mortgage servicing rights (MSRs).

In February 2006, the FASB issued Statement of Financial Accounting Standards SFAS 155, “Accounting for Certain Hybrid Financial Instruments”, which amends SFAS 133, “Accounting for Derivative Instruments and Hedging Activities”, and SFAS 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”. SFAS 155 requires entities to evaluate and identify whether interests in securitized financial assets are freestanding derivatives, hybrid financial instruments that contain an embedded derivative requiring bifurcation, or hybrid financial instruments that contain embedded derivatives that do not require bifurcation. SFAS 155 also permits fair value measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation. This statement was effective for all financial instruments acquired or issued by the Corporation on or after January 1, 2007 and the adoption of SFAS 155 did not have a material impact on the Corporation’s consolidated financial condition, results of operations or liquidity.

Advertising Costs

It is the Corporation’s policy to expense advertising costs in the period in which they are incurred. Advertising expense for the six-month periods ended June 30, 2008 and 2007 was approximately $39,000 and $52,000, respectively.

Reclassification

Certain amounts in the consolidated financial statements of the prior years have been reclassified to conform with presentation used in the 2008 consolidated financial statements. Such reclassifications had no effect on the Corporation’s consolidated financial condition or net income.

NOTE 2 — Allowance for Loan Losses

Changes in the allowance for loan losses for the six-month periods ended June 30, 2008 and June 30, 2007 were as follows:

		(Amounts in Thousands)
		2008				2007
Balance, beginning of year		$	1,437			$	1,457
Provision charged to operations			—				30
Loans charged-off			(19	)			(47	)
Recoveries			18				29
Balance, June 30		$	1,436			$	1,469

At June 30, 2008, the total recorded investment in loans that are considered to be impaired as defined by SFAS No. 114 was $77,000. These impaired loans had a related allowance for loan losses of $34,000. No additional charge to operations was required to provide for the impaired loans since the total allowance for loan losses is estimated by management to be adequate to provide for the loan loss allowance required by SFAS No. 114 along with any other potential losses.

At June 30, 2008, there were no significant commitments to lend additional funds with respect to non-accrual and restructured loans.

Non-accrual loans at June 30, 2008, and December 31, 2007 were $226,000 and $77,000, respectively, all of which were considered impaired.

Loans past due 90 days or more and still accruing interest amounted to $6,000 at June 30, 2008.

NOTE 3 — Short-Term Borrowings

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

NOTE 4 — Long-Term Borrowings

Long-term borrowings are comprised of advances from the Federal Home Loan Bank.

NOTE 5 — Deferred Compensation Plans

The Bank has entered into certain non-qualified deferred compensation agreements with certain executive officers and directors. Expenses related to these non-qualified deferred compensation plans amounted to $77,000 and $70,000 for the six-month periods ended June 30, 2008 and 2007, respectively.

There were no substantial changes in other plans as disclosed in the 2007 Annual Report.

NOTE 6 — Stockholders’ Equity

Changes in stockholders’ equity for the six-month period ended June 30, 2008 were as follows:

		(Amounts in Thousands, Except Common Share Data)
																						Accumulated
																						Other
																						Comprehensive
		Common				Common								Comprehensive				Retained				Income				Treasury
		Shares				Stock				Surplus				Income				Earnings				(Loss)				Stock				Total
Balance at January 1, 2008			1,226,536			$	1,533			$	2,271							$	27,679			$	144			$	—			$	31,627
Comprehensive Income:
Net income														$	1,398				1,398												1,398
Change in unrealized gain (loss) on investment securities available-for-sale net of reclassification adjustment and tax effects															(361	)							(361	)							(361	)
TOTAL COMPREHENSIVE INCOME														$	1,037
Issuance of 5,247 shares of common stock under dividend reinvestment and stock purchase plans			5,247				7				121																				128
Recognition of employee stock purchase plan expense											2																				2
Purchase of 2,000 shares of treasury stock																											(304	)			(304	)
Retirement of 12,000 shares of treasury stock			(12,000	)			(15	)			(289	)															304				—
Cash dividends $.42 per share																			(514	)											(514	)
Balance at June 30, 2008			1,219,783			$	1,525			$	2,105							$	28,563			$	(217	)		$	—			$	31,976

NOTE 7 — Acquisition

     On July 18, 2008, the Corporation consummated the Agreement and Plan or Reorganization dated as of November 29, 2007, with Columbia Financial Corporation (“CFC”), whereby CFC merged with and into the Corporation; and the Corporations’ wholly-owned subsidiary, Columbia County Farmers National Bank merged with and into First Columbia Bank & Trust Co. (“First Columbia Bank”).

The result of these mergers was that First Columbia Bank became the wholly-owned subsidiary of the Corporation on July 18, 2008, with pro forma combined assets of $575,063,000, deposits of $441,677,000 and other liabilities and stockholders equity of $133,386,000 as of June 30, 2008.

Also, on July 18, 2008, the Corporation issued approximately 1,030,286 shares of its common stock and paid cash of approximately $2,804 in lieu of the issuance of fractional shares in exchange for all of the issued and outstanding shares of common stock of CFC.

NOTE 8 — Financial Instruments with Off-Balance Sheet Risk and Concentrations of Credit Risk

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

The Corporation may require collateral or other security to support financial instruments with off-balance sheet credit risk. The contract or notional amounts at June 30, 2008 and December 31, 2007 were as follows:

		(Amounts in Thousands)
		June				December
		30, 2008				31, 2007
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit		$	20,891			$	20,492
Financial standby letters of credit			689				756
Performance standby letters of credit			934				923
Dealer floor plans			210				66
Loans for resale			264				418

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

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

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

The Corporation granted commercial, consumer and residential loans to customers primarily within Pennsylvania. Of the total loan portfolio at June 30, 2008, 84.0% was for real estate loans, with significantly most being residential. It was the opinion of management that the high concentration did not pose an adverse credit risk. Further, it was management’s opinion that the remainder of the loan portfolio was balanced and diversified to the extent necessary to avoid any significant concentration of credit.

NOTE 9 — Management’s Assertions and Comments Required to be Provided with Form 10Q Filing

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

Due to the mergers with Columbia Financial Corporation and First Columbia Bank & Trust Co., the results of operations for the six-month period ended June 30, 2008, are not indicative of the results to be expected for the full year.

These consolidated interim financial statements have been prepared in accordance with requirements of Form 10Q and therefore do not include all disclosures normally required by accounting principles generally accepted in the United States of America applicable to financial institutions as included with consolidated financial statements included in the Corporation’s annual Form 10K filing. The reader of these consolidated interim financial statements may wish to refer to the Corporation’s annual report or Form 10K for the period ended December 31, 2007 filed with the Securities and Exchange Commission.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We have reviewed the accompanying consolidated balance sheet of CCFNB Bancorp, Inc. and Subsidiary as of June 30, 2008, the related consolidated statements of income for the three and six-month periods ended June 30, 2008 and 2007 and cash flows for the six-month periods ended June 30, 2008 and 2007. These consolidated interim financial statements are the responsibility of the management of CCFNB Bancorp, Inc. and Subsidiary.

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

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

We have previously audited, in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of CCFNB Bancorp, Inc. and Subsidiary as of December 31, 2007, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated February 28, 2008, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2007, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ J. H. Williams & Co., LLP

J.H. Williams & Co., LLP
Kingston, Pennsylvania
August 8, 2008

CCFNB Bancorp, Inc.
Form 10-Q
For the Quarter Ended June 30, 2008

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

Consolidated Summary of Operations
(Dollars in Thousands, except for per share data)

		At and For the Six
		Months
		Ended June 30,								At and For the Years Ended December 31,
		2008				2007				2007				2006				2005				2004				2003
Income and Expense:
Interest income		$	6,891			$	7,109			$	14,483			$	13,202			$	11,442			$	10,843			$	11,221
Interest expense			2,676				3,014				6,185				5,301				4,131				3,669				4,366
Net interest income			4,215				4,095				8,298				7,901				7,311				7,174				6,855
Provision for possible loan losses			0				30				30				175				90				140				200
Net interest income after loan loss provision			4,215				4,065				8,268				7,726				7,221				7,034				6,655
Non-interest income			1,037				1,149				2,305				1,900				1,713				1,530				1,508
Non-interest expense			3,384				3,519				7,038				6,437				6,077				5,746				5,409
Income before income taxes			1,868				1,695				3,535				3,189				2,857				2,818				2,754
Income taxes			470				426				888				777				631				601				591
Net income		$	1,398			$	1,269			$	2,647			$	2,412			$	2,226			$	2,217			$	2,163
Per Share: (1)
Net income		$	1.14			$	1.03			$	2.15			$	1.93			$	1.76			$	1.74			$	1.69
Cash dividends paid			.42				.40				.82				.78				.74				.70				.66
Average shares outstanding			1,224,552				1,237,119				1,233,339				1,249,844				1,262,171				1,267,718				1,281,265
Average Balance Sheet:
Loans		$	160,343			$	159,847			$	160,348			$	158,554			$	150,065			$	147,348			$	149,485
Investments			60,082				54,782				58,553				53,703				54,943				61,999				58,152
Other earning assets			9,835				13,692				12,767				7,621				7,503				5,705				8,036
Total assets			248,496				243,189				248,476				236,569				230,081				231,477				230,975
Deposits			173,756				170,237				172,803				167,024				167,812				172,028				171,956
Other interest-bearing liabilities			38,593				40,634				42,770				36,676				32,253				29,823				29,772
Stockholders’ equity			31,807				30,327				31,003				29,672				28,789				28,136				27,223
Balance Sheet Data:
Loans		$	161,240			$	158,024			$	161,460			$	160,641			$	154,271			$	149,900			$	147,631
Investments			61,223				59,396				57,686				53,486				53,919				61,834				62,775
Other earning assets			6,612				14,603				13,401				10,712				6,239				6,233				6,882
Total assets			247,179				249,885				245,324				241,920				231,218				235,377				232,914
Deposits			175,221				174,304				170,938				169,285				164,847				172,487				171,786
Other interest-bearing liabilities			38,107				43,116				40,648				40,607				35,910				30,080				32,325
Stockholders’ equity			31,976				30,613				31,627				30,248				29,012				28,506				27,603
Ratios: (2)
Return on average assets			1.13	%			1.04	%			1.07	%			1.02	%			.97	%			.96	%			.94	%
Return on average equity			8.79	%			8.37	%			8.54	%			8.13	%			7.73	%			7.88	%			7.95	%
Dividend payout ratio			36.77	%			38.93	%			38.15	%			40.39	%			41.92	%			40.19	%			39.02	%
Average equity to average assets ratio			12.80	%			12.47	%			12.89	%			12.54	%			12.51	%			12.17	%			11.79	%

Cautionary Statement Concerning Forward-Looking Statements

This Form 10-Q, both in the MD & A and elsewhere, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about our confidence and strategies and our expectations about new and existing programs and products, relationships, opportunities, technology and market conditions. These statements may be identified by such forward-looking terminology as “expect,” “look,” “believe,” “anticipate,” “may,” “will,” or similar statements or variations of such terms. Such forward-looking statements involve certain risks and uncertainties. These include, but are not limited to, the direction of interest rates, continued levels of loan quality and origination volume, continued relationships with major customers, and sources for loans, as well as the effects of economic conditions and legal and regulatory barriers and structure. Actual results may differ materially from such forward-looking statements. We assume no obligation for updating any such forward-looking statement at any time. Our consolidated financial condition and results of operations are essentially those of our wholly-owned subsidiary bank, Columbia County Farmers National Bank. Therefore, our discussion and analysis that follows is primarily centered on the performance of this bank.

Earnings Summary

Net income for the six months ended June 30, 2008 was $1,398 thousand or $1.14 per basic and diluted share. These results compare with net income of $1,269 thousand or $1.03 per basic and diluted share for the same period in 2007. Annualized return on average equity increased to 8.79 percent from 8.37 percent, while the annualized return on average assets increased to 1.13 percent from 1.04 percent, for the six months ended June 30, 2008 and 2007 respectively.

Net interest income continues to be the largest source of our operating income. Net interest income on a tax equivalent basis increased 3.47 percent to $4,412 thousand at June 30, 2008 from $4,264 thousand at June 30, 2007. Overall, interest earning assets yielded 6.16 percent for the six months ended June 30, 2008 compared to 6.38 percent yield for the six months ended June 30, 2007. The tax equivalized net interest margin increased to 3.83 percent compared to 3.74 percent for the six months ended June 30, 2007.

Average interest earning assets increased $2.0 million or 8.76 percent for the six months ended June 30, 2008 over the same period in 2007 from $228.3 million at June 30, 2007 to $230.3 million at June 30, 2008. Average loans increased $.5 million for the six months ended June 30, 2008 from $159.8 million at June 30, 2007 to $160.3 at June 30, 2008. Average investments increased $5.3 million or 9.67 percent from $54.8 million at June 30, 2007 to $60.1 million at June 30, 2008 and average federal funds sold and interest-bearing deposits with other financial institutions decreased $3.9 million or 28.47 percent from $13.7 million at June 30, 2007 to $9.8 million at June 30, 2008.

Average interest bearing liabilities for the six months ended June 30, 2008 were $192.3 million and for the six month period ending June 30, 2007, they were $191.5 million, an increase of $.8 million or .42 percent. Average short-term borrowings were $29.4 million at June 30, 2007 and $28.6 million at June 30, 2008. Average long-term debt, which includes primarily FHLB advances, was $11.2 million at June 30, 2007 and $10.0 million at June 30, 2008. Average demand deposits increased from $19.3 million at June 30, 2007 to $20.0 million at June 30, 2008.

The average interest rate for loans decreased to 6.90% at June 30, 2008 from 7.02% at June 30, 2007, a 12 basis point decrease. Interest-bearing deposits with other Financial Institutions and Federal Funds Sold rates decreased 266 basis points to 2.62 percent at June 30, 2008 from 5.28 percent at June 30, 2007. Average rates on interest bearing deposits increased by 2 basis points from 2.62 percent to 2.64 percent in one year. Average interest rates decreased on total interest bearing liabilities by 32 basis points to 2.78 percent from 3.10 percent. The cost of long-term debt averaged 5.82% percent at June 30, 2008 compared to 5.94% at June 30, 2007. $2 million of this long term debt was able to be paid off in 2008 with the remaining $9 million due in 2010. This high costing liability will remain due to the fact that the Federal Home Loan Bank has the option to reprice these loans at their discretion. We will continue to price deposits accordingly.

Net Interest Income

Tax equivalized net interest income increased $.1 million at June 30, 2008 from $4.3 million at June 30, 2007 to $4.4 million at June 30, 2008.

The following table reflects the components of net interest income for each of the six months ended June 30, 2008 and 2007:

ANALYSIS OF AVERAGE ASSETS, LIABILITIES AND CAPITAL EQUITY
AND
NET INTEREST INCOME ON A TAX EQUIVALENT BASIS

Average Balance Sheet and Rate Analysis
(Dollars in Thousands)

		Six Months Ended June 30, 2008 and 2007
						Interest				Average								Interest				Average
		Average				Income /				Yield /				Average				Income /				Yield /
		Balance				Expense				Rate				Balance				Expense				Rate
		(1)				(2)								(1)				(2)
ASSETS:
Interest-bearing deposits with other financial institutions		$	1,450			$	20				2.76	%		$	3,358			$	88				5.24	%
Investment securities (3)			60,082				1,386				4.76	%			54,782				1,257				4.78	%
Federal funds sold			8,385				108				2.58	%			10,334				274				5.30	%
Loans			160,343				5,377				6.90	%			159,847				5,490				7.02	%
Total interest earning assets		$	230,260			$	6,891				6.16	%		$	228,321			$	7,109				6.38	%
Reserve for loan losses			(1,438	)											(1,483	)
Cash and due from banks			4,704												4,381
Other assets			14,970												11,970
Total assets		$	248,496											$	243,189
LIABILITIES AND CAPITAL:
Interest bearing deposits		$	153,747			$	2,026				2.64	%		$	150,892			$	1,978				2.62	%
Short-term borrowings			28,559				358				2.51	%			29,395				702				4.78	%
Long-term borrowings			10,034				292				5.82	%			11,239				334				5.94	%
Total interest-bearing liabilities		$	192,340			$	2,676				2.78	%		$	191,526			$	3,014				3.10	%
Demand deposits		$	20,009											$	19,345
Other liabilities			4,340												1,991
Stockholders’ equity			31,807												30,327
Total liabilities and capital		$	248,496											$	243,189
NET INTEREST INCOME / NET INTEREST MARGIN (4)						$	4,215				3.66	%						$	4,095				3.59	%
TAX EQUIVALENT NET INTEREST INCOME / NET INTEREST MARGIN (5)						$	4,412				3.83	%						$	4,264				3.74	%

The following table demonstrates the relative impact on net interest income of changes in volume of interest earning assets and interest bearing liabilities and changes in rates earned and paid by us on such assets and liabilities.

CHANGE IN NET INTEREST INCOME ON A TAX EQUIVALENT BASIS

		Sxi Months Ended June 30, 2008
		Compared with 2007
		Increase (Decrease) (2)
		Volume				Rate				Total
		(In thousands)
Interest income:
Loans (1)		$	35			$	(192	)		$	(157	)
Investments (1)			253				(11	)			242
Federal funds sold and other short-term investments			(204	)			(368	)			(572	)
Total Interest Income:			84				(571	)			(487	)
Interest expense:
Deposits			75				30				105
Short-term borrowings			(40	)			(667	)			(707	)
Long term debt			(72	)			(13	)			(85	)
Total Interest Expense:			(37	)			(650	)			(687	)
Net Interest Income:		$	121			$	79			$	200

The outstanding balance of loans at June 30, 2008 was $161.2 million and June 30, 2007 was $158.0 million.

Income from investment securities increased to $1,386 thousand at June 30, 2008 compared to $1,257 thousand at June 30, 2007. The average balance of investment securities for the six months ended June 30, 2008 was $60.1 million compared to $54.8 million at June 30, 2007.

Total interest expense decreased $.3 million or 11.21 percent for the first six months of 2008 as compared to the first six months of 2007.         .

Non-Interest Income

The following table presents the components of non-interest income for the six months ended June 30, 2008 and 2007:

		Six Months Ended
		June 30,
		(Dollars in thousands)
		2008				2007
Service charges and fees		$	480			$	440
Gain on sale of loans			106				64
Bank-owned life insurance income			133				143
Investment center			92				271
Trust department			74				82
Other			152				149
Total		$	1,037			$	1,149

Non-interest income continues to represent a considerable source of our income. We are committed to increasing non-interest income. Increases will be from our existing sources of non-interest income and any new opportunities that may develop. For the six months ended June 30, 2008 and June 30, 2007 total non-interest income decreased $112 thousand from $1,149 thousand at June 30, 2007 to $1,037 thousand at June 30, 2008.

Service charges and fees increased $40 thousand from $440 thousand at June 30, 2007 to $480 thousand or 9.09 percent at June 30, 2008.

Income from sales of fixed rate mortgages through the Mortgage Partnership Finance (MPF) and PHFA programs reflected an increase at June 30, 2008 to $106 thousand compared to $64 thousand at June 30, 2007. The MPF loans are being serviced by the bank and the bank retains minimal credit risk.

Third party brokerage fees at June 30, 2007 of $271 thousand included $68 thousand from the one time sale of non deposit retail products. Other income increased from $149 thousand at June 30, 2007 to $152 thousand at June 30, 2008.

Non-Interest Expense

The following table presents the components of non-interest expense for the six months ended June 30, 2008 and 2007:

		Six Months Ended
		June 30,
		2008				2007
		(Dollars in Thousands)
Salaries		$	1,419			$	1,501
Pensions and other employee benefits			470				448
Occupancy expense-net			256				247
Equipment			222				242
State shares tax			163				159
Professional services			132				129
Director‘s fees			97				93
Stationery and supplies			54				95
Other			571				605
Total		$	3,384			$	3,519

Non-interest expense decreased from $3.5 million at June 30, 2007 to $3.4 million at June 30, 2008, a decrease of 2.86 percent. Generally, non-interest expense accounts for the cost of maintaining facilities; providing salaries and benefits to employees; and paying for insurance, supplies, advertising, data processing services, taxes and other related expenses. Some of the costs and expenses are variable while others are fixed. To the extent possible, the bank utilizes budgets and related measures to control variable expenses.

Salaries decreased 6.67 percent from $1.5 million at June 30, 2007 to $1.4 million at June 30, 2008. This is attributable to commissions paid on third party brokerage firm sales. Commissions at June 30, 2007 were $138 thousand and at June 30, 2008 were $27 thousand due to the factors discussed above under third party brokerage fee income. Pensions and other employee benefits increased 4.91 percent from $448 thousand at June 30, 2007 to $470 thousand at June 30, 2008.

Occupancy expense increased 3.64 percent from $247 thousand at June 30, 2007 to $256 thousand at June 30, 2008. This increase is attributable to general increases in the cost of utilities.

Pennsylvania Bank Shares Tax increased 2.52 percent from $159 thousand at June 30, 2007 to $163 thousand at June 30, 2008.

Professional services increased 2.33 percent from $129 thousand at June 30, 2007 to $132 thousand at June 30, 2008.

Director’s fees increased 4.30 percent from $93 thousand through June 30, 2007 compared to $97 thousand through June 30, 2008.

Stationery and supplies decreased $41 thousand in comparing June 30, 2007 at $95 thousand and June 30, 2008 at $54 thousand, a 43.16 percent decrease. Due to the mergers with Columbia Financial Corporation and First Columbia Bank & Trust Co., consummated on July 18, 2008, supply expenditures were greatly reduced due to the new name our bank has assumed.

Other expenses decreased $34 thousand from $605 thousand at June 30, 2007 to $571 thousand at June 30, 2008, a 5.62 percent decrease. Advertising was $13 thousand less than 2007, Training was $11 thousand less than 2007 and ATM communication fees were $7 thousand less than 2007. The advertising and training are a result of the merger and the ATM communication fees are a result of a different mode of communication being installed in 2007.

Income Taxes

Income tax expense as a percentage of pre-tax income was 25.16 percent for the six months ended June 30, 2008 compared with 25.13 percent for the same period in 2007.

ASSET / LIABILITY MANAGEMENT

Interest Rate Sensitivity

Our success is largely dependent upon our ability to manage interest rate risk. Interest rate risk can be defined as the exposure of our net interest income to the movement in interest rates. We do not currently use derivatives to manage market and interest rate risks. Our interest rate risk management is the responsibility of the Asset / Liability Management Committee (“ALCO”), which reports to the Board of Directors. ALCO establishes policies that monitor and coordinate our sources, uses and pricing of funds as well as interest-earning asset pricing and volume.

We use a simulation model to analyze net interest income sensitivity to movements in interest rates. The simulation model projects net interest income based on various interest rate scenarios over a 12 and 24 month period. The model is based on the actual maturity and repricing characteristics of rate sensitive assets and liabilities. The model incorporates assumptions regarding the impact of changing interest rates on the prepayment rates of certain assets and liabilities. In the current interest rate environment, our net interest income is not expected to change materially.

Liquidity

Liquidity measures the ability to satisfy current and future cash flow needs as they become due. Maintaining a level of liquid funds through asset / liability management seeks to ensure that these needs are met at a reasonable cost. As of June 30, 2008, we had $61.2 million of securities available for sale recorded at their fair value, compared with $59.4 million at June 30, 2007. As of June 30, 2008, the investment securities available for sale had a net unrealized loss of $217 thousand, net of deferred taxes, compared with a net unrealized loss of $224 thousand, net of deferred taxes, at June 30, 2007. These securities are not considered trading account securities, which may be sold on a continuous basis, but rather are securities which the Corporation has the ability and positive intent to hold the securities to maturity and are classified as available-for-sale.

In accordance with disclosures required by EITF NO. 03-1, the summary below reflects the gross unrealized losses and fair value, aggregated by investment category the individual securities which have been in a continuous unrealized loss position for less than or more than 12 months as of June 30, 2008:

		Less than 12 months								12 months or more								Total
Description of Security						Unrealized								Unrealized								Unrealized
(Dollars in thousands)		Fair Value				Loss				Fair Value				Loss				Fair Value				Loss
Obligations of U.S. Government Corporations and Agencies:
Mortgage backed		$	28,232			$	307			$	663			$	4			$	28,895			$	311
Other			0				0				0				0				0				0
Obligations of State and Political Subdivisions			771				22				0				0				771				22
Marketable Equity Securities			243				79				338				231				581				310
Total		$	29,246			$	408			$	1,001			$	235			$	30,247			$	643

Note: This schedule reflects only unrealized losses without the effect of unrealized gains.

The Corporation invests in various forms of agency debt including mortgage backed securities and callable agency debt. The fair market value of these securities is influenced by market interest rates, prepayment speeds on mortgage securities, bid to offer spreads in the market place and credit premiums for various types of agency debt. These factors change continuously and therefore the market value of these securities may be higher or lower than the Corporation’s carrying value at any measurement date. The Corporation’s marketable equity securities represent common stock positions in various financial institutions. The fair market value of these equities tends to fluctuate with the overall equity markets as well as the trends specific to each institution.

Non-Performing Assets

Shown below is a summary of past due and non-accrual loans:

		June				December
		30, 2008				31,2007
Past due and non-accrual:
Days 30 – 89		$	1,929			$	460
Days 90 plus			6				80
Non-accrual			226				77
Total		$	2,161			$	617

Past due and non-accrual loans increased 250.24 percent from $617 thousand at December 31, 2007 to $2,161 thousand at June 30, 2008. The non-performing assets expressed as a ratio to total loans was .29 percent at June 30, 2008 and .74 at December 31, 2007. Non-performing loans are comprised of loans which are on a non-accrual basis, accruing loans that are 90 days or more past due, and restructured loans. Non-performing assets are comprised of non-performing loans and foreclosed real estate (assets acquired in foreclosure), if applicable.

The provision for loan losses for the first three months of 2008 was $0 compared to the first three months of 2007 at $30 thousand. Management is diligent in its efforts to maintain low delinquencies and continues to monitor and review current loans to foresee future delinquency occurrences and react to them quickly. See the following discussion under Allowance for Loan Losses below.

Any loans classified for regulatory purposes as loss, doubtful, substandard, or special mention that have not been disclosed under Industry Guide 3 do not (i) represent or result from trends or uncertainties which we reasonably expect will materially impact future operating results, liquidity, or capital resources, or (ii) represent material credits about which we are aware of any information which causes us to have serious doubts as to the ability of such borrowers to comply with the loan repayment terms.

We adhere to principles provided by Financial Accounting Standards Board Statement No. 114, “Accounting by Creditors for Impairment of a Loan” – Refer to Note 2 above for other details.

The following analysis provides a schedule of loan maturities / interest rate sensitivities. This schedule presents a repricing and maturity analysis as required by the FFIEC:

MATURITY AND REPRICING DATA FOR LOANS AND LEASES

		June 30
		2008
		(Dollars in
		thousands)
(1) Three months or less		$	4,617
(2) Over three months through 12 months			13,570
(3) Over one year through three years			26,107
(4) Over three years through five years			4,132
(5) Over five years through 15 years			18,257
(6) Over 15 years			286
All loans and leases other than closed-end loans secured by first liens on 1-4 family residential properties with a remaining maturity or repricing frequency of:
(1) Three months or less			17,680
(2) Over three months through 12 months			16,295
(3) Over one year through three years			25,366
(4) Over three years through five years			12,877
(5) Over five years through 15 years			21,712
(6) Over 15 years			142
Sub-total			161,041
Add: Non-accrual loans not included above			226
Less: Unearned income			(27	)
Total Loans and Leases		$	161,240

Allowance for Loan Losses

Because our loan portfolio contain a significant number of commercial loans with relatively large balances, the deterioration of one or several of these loans may result in a possible significant increase in loss of interest income, higher carrying costs, and 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 our historical experience, an evaluation of economic conditions, and regular reviews of delinquencies and loan portfolio quality. In evaluating our allowance for loan losses, we segment our loans into the following categories:

Commercial mortgages, Residential mortgages, Consumer loans, Municipal loans and Non real estate commercial loans.

We evaluate some loans as a homogeneous group and others on an individual basis. Commercial loans with balances exceeding $250 thousand are reviewed individually. After our evaluation of all loans, we determine the required allowance for loan losses based upon the following considerations:

Historical loss levels,
Prevailing economic conditions,
Delinquency trends,
Changes in the nature and volume of the portfolio,
Concentrations of credit risk, and
Changes in loan policies or underwriting standards.

Management and the Board of Directors review the adequacy of the reserve on a quarterly basis and adjustments, if needed, are made accordingly.

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

		For the Six Months
		Ended June 30,
		(Dollars in thousands)
		2008				2007
Average loans outstanding:		$	160,343			$	159,847
Total loans at end of period			161,240				158,024
Balance at beginning of period		$	1,437			$	1,457
Total charge-offs			(19	)			(47	)
Total recoveries			18				29
Net charge-offs			(1	)			(18	)
Provision for loan losses			0				30
Balance at end of period		$	1,436			$	1,469
Net charge-offs as a percent of average loans outstanding during period			—				(.01	)%
Allowance for loan losses as a percent of total loans			.89	%			.93	%

The allowance for loan losses is based on our evaluation of the allowance for loan losses in relation to the credit risk inherent in the loan portfolio. In establishing the amount of the provision required, management considers a variety of factors, including but not limited to, general economic conditions, volumes of various types of loans, collateral adequacy and potential losses from significant borrowers. On a monthly basis, the Board of Directors and the bank’s Credit Administration Committee review information regarding specific loans and the total loan portfolio in general in order to determine the amount to be charged to the provision for loan losses.

Capital Adequacy

A major strength of any financial institution is a strong capital position. This capital is very critical as it must provide growth, dividend payments to shareholders, and absorption of unforeseen losses. Our federal regulators provide standards that must be met. These standards measure “risk-adjusted” assets against different categories of capital. The “risk-adjusted” assets reflect off balance sheet items, such as commitments to make loans, and also place balance sheet assets on a “risk” basis for collectibility. The adjusted assets are measured against the standards of Tier I Capital and Total Qualifying Capital. Tier I Capital is common shareholders’ equity. Total Qualifying Capital includes so-called Tier II Capital, which are common shareholders’ equity and the allowance for loan and lease losses. The allowance for loan and lease losses must be lower than or equal to common shareholders’ equity to be eligible for Total Qualifying Capital.

We exceed all minimum capital requirements as reflected in the following table:

		June 30, 2008								December 31, 2007
						Minimum								Minimum
		Calculated				Standard				Calculated				Standard
		Ratios				Ratios				Ratios				Ratios
Risk Based Ratios:
Tier I Capital to risk-weighted assets			19.23	%			4.00	%			18.10	%			4.00	%
Total Qualifying Capital to risk-weighted assets			20.14	%			8.00	%			18.93	%			8.00	%

Additionally, certain other ratios also provide capital analysis as follows:

		June 30,				December 31,
		2008				2007
Tier I Capital to average assets			12.36	%			12.71	%

We believe that the bank’s current capital position and liquidity positions are strong and that its capital position is adequate to support its operations.

Book value per share amounted to $26.21 at June 30, 2008, compared with $25.79 per share at December 31, 2007.

Cash dividends declared amounted to $.42 per share for the six months ended June 30, 2008, equivalent to a dividend payout ratio of 36.77 percent, compared with 38.93 percent for the same period in 2007. The Board of Directors continues to believe that cash dividends are an important component of shareholder value and that, at the bank’s current level of performance and capital; we expect to continue our current dividend policy of a quarterly cash distribution of earnings to our shareholders. Pursuant to the agreement and plan of reorganization with Columbia Financial Corporation, which was consummated July 18, 2008, the Board of Directors has increased the third quarter cash dividend to at least 23 cents per share.

The following table presents information on the shares of our common stock that we repurchased during the second quarter of 2008:

CCFNB BANCORP, INC.
ISSUER PURCHASES OF EQUITY SECURITIES

										NUMBER OF SHARES
										PURCHASED AS PART				NUMBER OF SHARES
										OF PUBLICLY				THAT MAY YET BE
		NUMBER OF SHARES				PRICE PAID PER				ANNOUNCED				PURCHASED UNDER
PERIOD		PURCHASED				SHARE				PROGRAM (1)				THE PROGRAM
04/01/08 – 04/30/08			4,000			$	25.48				4,000				10,000
05/01/08 – 05/31/08			2,000			$	25.45				2,000				8,000
06/01/08 – 06/30/08			4,000			$	24.50				4,000				4,000
TOTAL			10,000								10,000