0PER COMMON SHARENet loss income Basic0

Compared to the thirdquarter o 2008, other expenses, excluding the goodwill impairment charge,increased $1.5 million, or 1.5 percent. ulton inancial Corporation is a Lancaster, Pennsyl ania-based inancialholding company which has nearly 3,900 employees and operates more than265 banking o ices in Pennsyl ania, Maryland, Delaware, New Jersey and irginia through the ollowing a iliates: ulton Bank, Lancaster, PA;Swine ord National Bank, Middleburg, PA; La ayette Ambassador Bank,Easton, PA; NB Bank, N.A., Dan ille, PA; Hagerstown Trust Company,Hagerstown, MD; Delaware National Bank, Georgetown, DE; The Bank,Woodbury, NJ; The Peoples Bank o Elkton, Elkton, MD; Skylands CommunityBank, Hackettstown, NJ and The Columbia Bank, Columbia, MD.The Corporation's inancial ser ices a iliates include: ulton inancialAd isors, N.A., Lancaster, PA; ulton Insurance Ser ices Group, Inc.,Lancaster, PA; and Dearden, Maguire, Wea er and Barrett, LLC, WestConshohocken, PA. Residential mortgage lending is o ered by all banksthrough ulton Mortgage Company.Additional in ormation on ulton inancial Corporation is a ailable on theInternet at Harbor Statement:This news release may contain orward-looking statements with respect toour inancial condition, results o operations and business. orward-looking statements are encouraged by the Pri ate SecuritiesLitigation Re orm Act o 1995. When words such as "belie es," "expects,""anticipates" or similar expressions are used in this release, theCorporation is making orward-looking statements.Such orward-looking statements re lect the Corporation's current iewsand expectations based largely on in ormation currently a ailable to itsmanagement, and on its current expectations, assumptions, plan, estimates,judgments, and projections about its business and its industry, and theyin ol e inherent risks, contingencies, uncertainties and other actors.Although the Corporation belie es that these orward-looking statementsare based on reasonable estimates and assumptions, the Corporation isunable to pro ide any assurance that its expectations will, in act,occur or that its estimates or assumptions will be correct and actualresults could di er materially rom those expressed or implied by such orward-looking statements and such statements are not guarantees o uture per ormance. The Corporation undertakes no obligation to update orre ise any orward-looking statements. Accordingly, in estors and othersare cautioned not to place undue reliance on such orward-lookingstatements.Many actors could a ect uture inancial results including, withoutlimitation, acquisition and growth strategies; market risk; changes orad erse de elopments in economic, political or regulatory conditions; acontinuation or worsening o the current disruption in credit and othermarkets, including the lack o or reduced access to, and the abnormal unctioning o markets or mortgage and other asset-backed securities and or commercial paper and other short-term borrowings; the e ect o competition and interest rates on net interest margin and net interestincome; in estment strategy and income growth; in estment securitiesgains; declines in the alue o securities which may result in charges toearnings; changes in rates o deposit and loan growth; asset quality andthe impact on assets rom ad erse changes in the economy and in credit andother markets and resulting e ects on credit risk and asset alues;balances o risk-sensiti e assets to risk-sensiti e liabilities; salariesand employee bene its and other expenses; amortization o intangibleassets; goodwill impairment; capital and liquidity strategies; and other inancial and business matters or uture periods. or a more complete discussion o certain risks and uncertaintiesa ecting the Corporation, please see the sections entitled "Risk actors" and "Management's Discussion and Analysis o inancial Conditionand Results o Operations" set orth in the Corporation's ilings withthe Securities and Exchange Commission.2009 ULTON INANCIAL CORPORATION INANCIAL HIGHLIGHTS (UNAUDITED)dollars in thousands, except per-share dataDecember 31BALANCE SHEET DATA20082007 Change-Total assets$ 16,185,106$ 15,923,0981.6Loans, net o unearned income 12,042,62011,204,4247.5In estment securities2,724,841 3,153,552(13.6)Deposits10,551,91610,105,4454.4Shareholders' equity 1,859,647 1,574,920 18.1Quarter Ended December 31INCOME SUMMARY20082007 Change-Interest income $209,073$240,069(12.9)Interest expense (76,732) (116,418) (34.1) Net interest income 132,341 123,6517.0Pro ision or loan losses(65,000) (6,800) 855.9In estment securities (losses) gains (28,339) (537) N/MGain on sale o credit card port olio - -N/AOther income38,75035,7488.4Goodwill impairment(90,000)-N/AOther expenses(100,874)(98,447) 2.5(Loss) income be ore income taxes(113,122) 53,615 (311.0)Income tax bene it (expense)11,255 (15,436)(172.9) Net (loss) income$ (101,867) $ 38,179 (366.8)Pre erred stock di idends and discount accretion (463)- N/A Net (loss) income a ailable tocommon shareholders $ (102,330) $ 38,179(368.0)PER COMMON SHARE:Net (loss) income: Basic$(0.58) $ 0.22 (363.6) Diluted (0.58) 0.22 (363.6) Cash di idends 0.150.15-Shareholders' equity8.479.08 (6.7)Shareholders' equity (tangible) 5.295.30 (0.2)SELECTED INANCIAL RATIOS:Return on a erage assets(2.51) 0.97Return on a erage shareholders' equity(24.89) 9.72Return on a erage shareholders' equity (tangible)(4.35)17.44Net interest margin3.643.56E iciency ratio56.57 59.09Non-per orming assets to total assets1.350.76Year Ended December 31INCOME SUMMARY20082007 Change-Interest income $867,494$939,577 (7.7)Interest expense(343,346) (450,833) (23.8) Net interest income 524,148 488,7447.2Pro ision or loan losses (119,626)(15,063) 694.2In estment securities (losses) gains (58,241)1,740N/MGain on sale o credit card port olio13,910 -N/AOther income 155,387 146,2846.2Goodwill impairment(90,000)-N/AOther expenses(406,625) (405,455) 0.3 Income be ore income taxes 18,953 216,250(91.2)Income tax bene it (expense) (24,570)(63,532) (61.3) Net (loss) income$ (5,617) $152,718 (103.7)Pre erred stock di idends and discount accretion (463)-N/A Net (loss) income a ailable to common shareholders$ (6,080) $152,718 (104.0)PER COMMON SHARE:Net (loss) income: Basic$(0.03) $ 0.88 (103.4) Diluted (0.03) 0.88 (103.4) Cash di idends0.600 0.5980.3SELECTED INANCIAL RATIOS:Return on a erage assets(0.04) 1.01Return on a erage shareholders' equity (0.35) 9.98Return on a erage shareholders' equity (tangible) 9.29 18.16Net interest margin3.683.66E iciency ratio56.31 61.19Non-per orming assets to total assetsN/M - Not meaning ulN/A - Not applicable ULTON INANCIAL CORPORATIONCONDENSED CONSOLIDATED ENDING BALANCE SHEETS (UNAUDITED)dollars in thousands Change rom December 31December 31 September 30 December 31 September 30 2008 2007 200820072008 -ASSETS Cash anddue rombanks$ 331,164$ 381,283$ 315,841(13.1) 4.9 Loans held or sale95,840103,984 71,090 (7.8)34.8 Otherinterest-earningassets21,710 21,153 50,1892.6(56.7) In estmentsecurities 2,724,8413,153,5522,806,535(13.6)(2.9) Loans, neto unearnedincome12,042,620 11,204,424 11,823,5297.51.9 Allowance or loanlosses(173,946)(107,547)(136,988)61.7 27.0 - Net Loans11,868,674 11,096,877 11,686,5417.01.6 Premises andequipment202,657193,296199,4644.81.6 Accruedinterestrecei able58,566 73,435 62,018(20.2)(5.6) Goodwill andintangibleassets 557,833654,908649,635(14.8) (14.1) Other assets323,821244,610294,832 32.49.8 - TotalAssets $16,185,106$15,923,098$16,136,1451.60.3 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits$10,551,916$10,105,445$ 9,916,5554.46.4 Short-termborrowings 1,762,7702,383,9442,589,966(26.1) (31.9) ederalHome LoanBank ad ancesand long-term debt1,787,7971,642,1331,819,8898.9 (1.8) Otherliabilities222,976216,656205,8252.98.3 - TotalLiabili-ties14,325,459 14,348,178 14,532,235 (0.2)(1.4) Share-holders'equity 1,859,6471,574,9201,603,910 18.1 15.9 - TotalLiabili-ties andShare-holders'Equity $16,185,106$15,923,098$16,136,1451.60.3 LOANS, DEPOSITS AND SHORT-TERM BORROWINGS DETAIL:Loans, by type: Real estate -commercialmortgage $ 4,082,755$ 3,502,282$ 3,897,703 16.64.7 Commercial -industrial, inancial andagricultural 3,635,5443,427,0853,554,6156.12.3 Real estate -home equity1,695,6711,501,2311,647,245 13.02.9 Real estate - construction1,196,0501,342,9231,277,552(10.9)(6.4) Real estate -residentialmortgage 980,022851,577979,486 15.10.1 Consumer365,419500,708387,849(27.0)(5.8) Leasing andother 87,159 78,618 79,079 10.9 10.2 - Total Loans,net o unearnedincome $12,042,620$11,204,424$11,823,5297.51.9 Deposits, by type: Noninterest-bearingdemand $ 1,653,440$ 1,722,211$ 1,690,499 (4.0)(2.2) Interest-bearingdemand 1,789,8331,715,3151,690,3304.35.9 Sa ingsdeposits 2,010,5262,131,3742,166,998 (5.7)(7.2) Timedeposits 5,098,1174,536,5454,368,728 12.4 16.7 - TotalDeposits $10,551,916$10,105,445$ 9,916,5554.46.4 Short-term borrowings, by type: ederal undspurchased$ 1,147,673$ 1,057,335$ 1,326,8738.5(13.5) Short-termpromissorynotes356,788443,002460,512(19.5) (22.5) Customerrepurchaseagreements 255,796228,061222,415 12.2 15.0 Othershort-termborrowings 2,513655,546580,166(99.6) (99.6) - TotalShort-termborrowings $ 1,762,770$ 2,383,944$ 2,589,966(26.1) (31.9) ULTON INANCIAL CORPORATIONCONDENSED CONSOLIDATED STATEMENTS O OPERATION (UNAUDITED)dollars in thousands, except per-share data Quarter Ended Change rom - DecemberDecemberSeptemberDecember September 31 2008 31 200730 2008 31 2007 30 2008 -Interest Income: Interest Income $ 209,073$ 240,069$ 213,809 (12.9) (2.2) Interest Expense 76,732116,418 79,791 (34.1) (3.8) - Net InterestIncome 132,341123,651134,018 7.0(1.3) Pro ision or LoanLosses65,0006,800 26,700 855.9 143.4 - Net InterestIncome a terPro ision 67,341116,851107,318 (42.4)(37.3)Other Income: Ser ice charges ondeposit accounts16,177 13,355 16,17721.1 - Other ser icecharges and ees 8,9278,4059,598 6.2(7.0) In estmentmanagement andtrust ser ices 7,5419,2918,045 (18.8) (6.3) Gains on sale o mortgage loans 3,0852,1812,26641.436.1 In estmentsecurities(losses) gains (28,339)(537)(9,501)N/M (198.3) Gain on sale o credit cardport olio- N/AN/A Other 3,0202,5164,23020.0 (28.6) - Total OtherIncome10,411 35,211 30,815 (70.4)(66.2)Other Expenses: Salaries andemployee bene its 48,771 53,173 55,310(8.3)(11.8) Net occupancyexpense 11,240 10,002 10,23712.4 9.8 Operating riskloss 5,2007673,480 578.449.4 Marketing 3,7463,4653,097 8.121.0 Equipment expense 3,4253,3033,061 3.711.9 Data processing 3,2093,2053,242 0.1(1.0) Intangibleamortization 1,7762,1581,730 (17.7)2.7 Goodwillimpairment90,000 N/AN/A Other23,507 22,374 19,198 5.122.4 - Total OtherExpenses 190,874 98,447 99,35593.992.1 - (Loss) IncomeBe ore IncomeTaxes (113,122)53,615 38,778(311.0) (391.7) Income tax(bene it) expense(11,255)15,4369,702(172.9) (216.0) - Net (Loss)Income $(101,867) $38,179$29,076(366.8) (450.3) Pre erred stockdi idends anddiscountaccretion (463) N/AN/A - Net (loss)incomea ailable tocommonshareholders $(102,330) $38,179$29,076(368.0) (451.9) PER COMMON SHARE: Net (loss) income: Basic $ (0.58) $0.22$0.17(363.6) (441.2) Diluted (0.58)0.22 0.17(363.6) (441.2) Cash di idends$0.15$0.15$0.15 Shareholders' equity 8.47 9.08 9.18(6.7) (7.7) Shareholders'equity (tangible) 5.29 5.30 5.41(0.2) (2.2) Weighted a erageshares (basic) 174,889173,416174,463 0.8 0.2 Weighted a erageshares (diluted) 175,255174,155174,912 0.6 0.2 Shares outstanding,end o period175,044173,503174,687 0.9 0.2SELECTED INANCIAL RATIOS: Return on a erageassets (2.51) 0.970.73 Return on a erageshareholders'equity(24.89) 9.727.25 Return on a erageshareholders'equity (tangible)(4.35)17.44 12.72 Net interestmargin3.643.563.74 E iciency ratio56.57 59.09 54.69 Year Ended December 312008 2007 Change-Interest Income: Interest Income$ 867,494$ 939,577 (7.7) Interest Expense 343,346450,833(23.8) Net InterestIncome524,148488,7447.2 Pro ision or LoanLosses119,626 15,063694.2 Net InterestIncome a terPro ision 404,522473,681(14.6)Other Income: Ser ice charges ondeposit accounts 61,640 46,500 32.6 Other ser icecharges and ees 36,247 32,151 12.7 In estmentmanagement andtrust ser ices 32,734 38,665(15.3) Gains on sale o mortgage loans 10,332 14,294(27.7) In estmentsecurities(losses) gains(58,241) 1,740N/M Gain on sale o credit cardport olio13,910-N/A Other 14,434 14,674 (1.6) Total OtherIncome111,056148,024(25.0)Other Expenses: Salaries andemployee bene its 213,557217,526 (1.8) Net occupancyexpense42,239 39,9655.7 Operating riskloss 24,308 27,229(10.7) Marketing 13,267 11,334 17.1 Equipment expense 13,332 13,892 (4.0) Data processing 12,813 12,7550.5 Intangibleamortization7,1628,334(14.1) Goodwillimpairment 90,000-N/A Other 79,947 74,4207.4 Total OtherExpenses496,625405,455 22.5 Income Be oreIncome Taxes 18,953216,250(91.2) Income tax(bene it) expense24,570 63,532(61.3) Net (Loss)Income$(5,617) $ 152,718 (103.7) Pre erred stockdi idends anddiscountaccretion(463) -N/A Net (loss)incomea ailable tocommonshareholders$(6,080) $ 152,718 (104.0)PER COMMON SHARE: Net (loss) income: Basic$ (0.03) $0.88 (103.4) Diluted(0.03)0.88 (103.4) Cash di idends $ 0.600$ 0.5980.3 Shareholders' equity Shareholders'equity (tangible) Weighted a erageshares (basic)174,236173,2950.5 Weighted a erageshares (diluted)174,728174,3860.2 Shares outstanding,end o periodSELECTED INANCIAL RATIOS: Return on a erageassets(0.04) 1.01 Return on a erageshareholders'equity(0.35) 9.98 Return on a erageshareholders'equity (tangible)9.29 18.16 Net interestmargin 3.683.66 E iciency ratio 56.31 61.19N/M - Not meaning ulN/A - Not applicable ULTON INANCIAL CORPORATIONCONDENSED CONSOLIDATED A ERAGE BALANCE SHEET ANALYSIS (UNAUDITED)dollars in thousandsQuarter EndedDecember 31, 2008A erageYield/Balance Interest (1)RateASSETSInterest-earning assets:Loans, net o unearned income $ 11,960,067$178,0965.93Taxable in estment securities2,086,80826,1064.72Tax-exempt in estment securities516,045 7,0735.48Equity securities154,660 7972.05Total In estment Securities2,757,51333,9764.71Loans held or sale 64,096 9756.08Other interest-earning assets 23,889 1242.08Total Interest-earning Assets 14,805,565 213,1715.70Noninterest-earning assets:Cash and due rom banks317,571Premises and equipment 200,918Other assets 960,606Less: allowance or loan losses (150,266)Total Assets$ 16,134,394LIABILITIES AND SHAREHOLDERS' EQUITYInterest-bearing liabilities:Demand deposits $1,727,874$2,6300.61Sa ings deposits 2,070,931 6,1241.18Time deposits4,818,06841,5533.43Total Interest-bearing Deposits8,616,87350,3072.32Short-term borrowings2,251,571 5,9981.05 ederal Home Loan Bank ad ances and long-term debt1,798,68820,4274.53Total Interest-bearing Liabilities12,667,13276,7322.41Noninterest-bearing liabilities:Demand deposits1,643,118Other196,004Total Liabilities 14,506,254Shareholders' equity 1,628,140Total Liabilities and Shareholders' Equity $ 16,134,394Net interest income/net interest margin ( ully taxable equi alent) 136,4393.64Tax equi alent adjustment (4,098)Net interest income $132,341Quarter EndedDecember 31, 2007A erageYield/Balance Interest (1)RateASSETSInterest-earning assets:Loans, net o unearned income $ 11,082,957$204,2817.32Taxable in estment securities2,348,44928,4204.84Tax-exempt in estment securities494,790 6,4625.22Equity securities201,554 2,4454.84Total In estment Securities3,044,79337,3274.90Loans held or sale101,788 1,7306.79Other interest-earning assets 24,136 2914.78Total Interest-earning Assets 14,253,674 243,6296.80Noninterest-earning assets:Cash and due rom banks323,490Premises and equipment 191,502Other assets 907,267Less: allowance or loan losses (110,922)Total Assets$ 15,565,011LIABILITIES AND SHAREHOLDERS' EQUITYInterest-bearing liabilities:Demand deposits $1,721,831$6,5981.52Sa ings deposits 2,179,75312,0462.19Time deposits4,603,94454,3414.68Total Interest-bearing Deposits8,505,52872,9853.40Short-term borrowings2,020,75122,2494.33 ederal Home Loan Bank ad ances and long-term debt1,624,61321,1845.19Total Interest-bearing Liabilities12,150,892 116,4183.80Noninterest-bearing liabilities:Demand deposits1,675,528Other180,907Total Liabilities 14,007,327Shareholders' equity 1,557,684Total Liabilities and Shareholders' Equity $ 15,565,011Net interest income/net interest margin ( ully taxable equi alent) 127,2113.56Tax equi alent adjustment (3,560)Net interest income $123,651Quarter Ended September 30, 2008A erageYield/Balance Interest (1)RateASSETSInterest-earning assets:Loans, net o unearned income $ 11,696,841$181,5626.18Taxable in estment securities2,117,20726,0254.70Tax-exempt in estment securities509,994 6,9445.45Equity securities168,690 1,6143.82Total In estment Securities2,795,89134,5834.78Loans held or sale101,319 1,5396.08Other interest-earning assets 19,013 1422.94Total Interest-earning Assets 14,613,064 217,8265.91Noninterest-earning assets:Cash and due rom banks322,550Premises and equipment 197,895Other assets 933,303Less: allowance or loan losses (123,865)Total Assets$ 15,942,947LIABILITIES AND SHAREHOLDERS' EQUITYInterest-bearing liabilities:Demand deposits $1,734,198$3,1660.73Sa ings deposits 2,192,747 6,6331.20Time deposits4,308,90337,3933.45Total Interest-bearing Deposits8,235,84847,1922.28Short-term borrowings2,432,10912,8772.08 ederal Home Loan Bank ad ances and long-term debt1,819,89719,7224.32Total Interest-bearing Liabilities12,487,85479,7912.54Noninterest-bearing liabilities:Demand deposits1,669,908Other190,012Total Liabilities 14,347,774Shareholders' equity 1,595,173Total Liabilities and Shareholders' Equity $ 15,942,947Net interest income/net interest margin ( ully taxable equi alent) 138,0353.74Tax equi alent adjustment (4,017)Net interest income $134,018 (1)Presented on a tax-equi alent basis using a 35 ederal tax rate andstatutory interest expense disallowances.A ERAGE LOANS, DEPOSITS AND SHORT-TERM BORROWINGS DETAIL: Quarter Ended Change rom December 31December 31September 30 Dec 31Sept 30 2008 20072008 2007 2008 Loans, by type:Real estate - commercial mortgage$3,994,730 $3,438,386 $3,820,04516.24.6Commercial - industrial, inancial and agricultural 3,603,7903,364,2113,557,142 7.11.3Real estate - home equity1,673,8341,486,3671,619,93512.63.3Real estate - construction 1,232,0821,377,3911,293,096 (10.5)(4.7)Real estate - residential mortgage 985,660831,825953,42018.53.4Consumer378,422499,253368,804 (24.2) 2.6Leasing and other91,549 85,524 84,399 7.08.5 Total Loans, net o unearned income $ 11,960,067 $ 11,082,957 $ 11,696,841 7.92.3 Deposits, by type:Noninterest-bearing demand$1,643,118 $1,675,528 $1,669,908(1.9)(1.6)Interest-bearing demand 1,727,8741,721,8311,734,198 0.4 (0.4)Sa ings deposits2,070,9312,179,7532,192,747(5.0)(5.6)Time deposits 4,818,0684,603,9444,308,903 4.7 11.8 Total Deposits $ 10,259,991 $ 10,181,056 $9,905,756 0.83.6 Short-term borrowings, by type: ederal unds purchased $1,426,618 $975,732 $1,399,13046.22.0Short-term promissory notes 391,781478,018486,179 (18.0) (19.4)Customer repurchase agreements 244,633237,346213,827 3.1 14.4Other short-term borrowings 188,539329,655332,973 (42.8) (43.4) Total Short-term borrowings$2,251,571 $2,020,751 $2,432,10911.4(7.4) ULTON INANCIAL CORPORATIONCONDENSED CONSOLIDATED A ERAGE BALANCE SHEET ANALYSIS (UNAUDITED)dollars in thousands Year Ended December 31 2008 2007A erageYield A erageYieldBalance Interest (1) /Rate Balance Interest (1) /RateASSETSInterest-earning assets:Loans, net o unearned income $11,595,243 $ 732,5336.32 $10,736,566 $ 805,8817.51Taxable in estment securities 2,228,204 110,2204.82 2,157,32599,6214.62Tax-exempt in estment securities 512,92027,9045.44 496,82025,8565.20Equity securities 183,216 6,5203.56 189,333 9,0734.79Total In estment Securities 2,924,340 144,6444.85 2,843,478 134,5504.73Loans held or sale93,085 5,7016.12 166,43711,5016.91Other interest- earning assets21,503 5862.7133,015 1,6304.90Total Interest- earning Assets14,634,171 883,4646.0213,779,496 953,5626.93Noninterest- earning assets:Cash and due rom banks318,524329,814Premises and equipment197,967190,910Other assets951,270899,292Less: allowance or loan losses(125,061)(109,054)Total Assets $15,976,871$15,090,458LIABILITIES AND SHAREHOLDERS' EQUITYInterest- bearing liabilities:Demand deposits $ 1,714,029$ 13,1680.77 $ 1,696,624$ 28,3311.67Sa ings deposits 2,152,15828,5201.32 2,258,11353,3122.36Time deposits 4,502,399 170,4263.79 4,553,994 212,7524.67Total Interest- bearing Deposits 8,368,586 212,1142.53 8,508,731 294,3953.46Short-term borrowings 2,336,52650,0912.12 1,574,49573,9834.66 ederal Home Loan Bank ad ances and long- term debt1,822,11581,1414.45 1,579,52782,4555.22Total Interest- bearing Liabilities 12,527,227 343,3462.7411,662,753 450,8333.86Noninterest- bearing liabilities:Demand deposits 1,647,9421,713,863Other 191,874183,229Total Liabilities 14,367,043 13,559,845Shareholders' equity 1,609,8281,530,613Total Liabilities and Share- holders' Equity $15,976,871$15,090,458Net interest income/net interest margin ( ully taxable equi alent)540,1183.68 502,7293.66 Tax equi alent adjustment (15,970) (13,985) Net interest income$524,148 $488,744 (1) Presented on a tax-equi alent basis using a 35 ederal tax rateand statutory interest expense disallowances.A ERAGE LOANS, DEPOSITS AND SHORT-TERM BORROWINGS DETAIL: Year Ended December 312008 2007 Change -Loans, by type:Real estate - commercial mortgage $ 3,765,762$ 3,337,76212.8Commercial - industrial, inancial and agricultural 3,536,1253,213,35710.0Real estate - home equity1,597,3761,454,753 9.8Real estate - construction 1,286,1111,384,548(7.1)Real estate - residential mortgage 923,947753,78922.6Consumer399,112506,201 (21.2)Leasing and other 86,810 86,156 0.8Total Loans, net o unearned income $11,595,243$10,736,566 8.0Deposits, by type:Noninterest- bearing demand $ 1,647,942$ 1,713,863(3.8)Interest- bearing demand 1,714,0291,696,624 1.0Sa ings deposits 2,152,1582,258,113(4.7)Time deposits 4,502,3994,553,994(1.1)Total Deposits $10,016,528$10,222,594(2.0)Short-term borrowings, by type: ederal unds purchased$ 1,328,888$ 808,35864.4Short-term promissory notes454,473404,52712.3Customer repurchase agreements 227,130247,948(8.4)Other short-term borrowings 326,035113,662 186.8Total Short-term borrowings $ 2,336,526$ 1,574,49548.4 ULTON INANCIAL CORPORATIONASSET QUALITY IN ORMATION (UNAUDITED)dollars in thousandsQuarter Ended Year EndedDecember 31 December 31 December 31 September 30 200820072008 2008 2007ALLOWANCE OR CREDIT LOSSES: Balance atbeginning o period$141,829$109,435$126,223$ 112,209$ 106,884 Loanscharged o : Commercial - inancial andagricultural(6,392) (2,200) (4,684) (18,592)(6,796) Real estate -mortgage (19,464) (679) (5,857) (28,275)(1,206) Consumer (1,450) (1,169) (991)(5,188)(3,678) Leasing andother (1,033) (1,020) (1,166)(4,804)(2,059) Total loanscharged o (28,339) (5,068)(12,698) (56,859) (13,739) Reco eries o loans chargedo : Commercial - inancial andagricultural 770 197 7491,7951,664 Real estate -mortgage6189 238446178 Consumer465 343 3041,4871,246 Leasing andother351 413 3131,433913 Reco eries o loanspre iouslycharged o 1,647 1,042 1,6045,1614,001 Net loanscharged o (26,692) (4,026)(11,094) (51,698)(9,738) Pro ision orloan losses 65,000 6,80026,700119,626 15,063 Balance at endo period $180,137$112,209$141,829$ 180,137$ 112,209 Net charge-o sto a erageloans(annualized)0.89 0.15 0.380.450.09COMPONENTS O ALLOWANCE OR CREDIT LOSSES: Allowance orloan losses $173,946$107,547$136,988 Reser e orun undedlendingcommitments6,191 4,662 4,841 Allowance orcredit losses $180,137$112,209$141,829NON-PER ORMING ASSETS: Non-accrualloans $161,962$ 76,150$143,310 Loans 90 dayspast due andaccruing35,17729,78221,354 Totalnon-per ormingloans197,139 105,932 164,664 Other realestate owned21,85514,93421,706 Totalnon-per ormingassets$218,994$120,866$186,370NON-PER ORMING LOANS, BY TYPE: Commercial -industrial,agriculturaland inancial $ 40,294$ 27,715$ 41,489 Real estate -commercialmortgage41,74514,51532,642 Real estate -residentialmortgage andhome equity 26,30425,77426,274 Real estate -construction80,08330,92757,436 Consumer8,374 4,741 6,558 Leasing 339 2,260 265 Totalnon-per ormingloans $197,139$105,932$164,664ASSET QUALITY RATIOS: Non-accrualloans to totalloans 1.34 0.68 1.21 Non-per ormingassets to totalloans and OREO1.82 1.08 1.57 Non-per ormingassets to totalassets1.35 0.76 1.15 Allowance orcredit lossesto loansoutstanding 1.50 1.00 1.20 Allowance orloan losses toloansoutstanding 1.44 0.96 1.16 Allowance orcredit lossesto non-per ormingloans 91106 86 ULTON INANCIAL CORPORATIONRECONCILIATION O NON-GAAP MEASURE (UNAUDITED)dollars in thousands, except per-share dataExplanatory note:This press release contains certain inancial in ormation, as detailed below, which has been deri ed by methods other than Generally Accepted Accounting Standards ("GAAP") that Management uses in its analysis o the Corporation's per ormance.

These non-GAAP measures should not be considered a substitute or GAAP basis measures and the Corporation strongly encourages a re iew o its condensed consolidated inancial statements in their entirety.Quarter EndedDecember 31, 2008 Pre-taxA ter-tax Diluted(Expense)/(Expense)/EPSIncomeIncomeImpact Goodwill impairment charge $(90,000) $(90,000) $(0.51) Other-than-temporary impairment o securities (26,065)(16,942)(0.10) Guarantee related to purchase o customer auction rate securities(3,950) (2,568)(0.01) In estment securities gains and(losses) on sale(2,274) (1,478)(0.01) Totals (122,289) (110,988)(0.63) Net (loss) income a ailable to commonshareholders(102,330)(0.58) Adjusted net income a ailable tocommon shareholders $8,658$ 0.05Quarter EndedDecember 31, 2007 Pre-taxA ter-tax Diluted(Expense)/(Expense)/EPSIncomeIncomeImpact Goodwill impairment charge $-$-$- Other-than-temporary impairment o securities(175) (114)- Guarantee related to purchase o customer auction rate securities - - - In estment securities gains and(losses) on sale(362) (235)- Totals (537) (349)- Net (loss) income a ailable to commonshareholders38,1790.22 Adjusted net income a ailable tocommon shareholders $ 38,528$ 0.22Quarter EndedSeptember 30, 2008 Pre-taxA ter-tax Diluted(Expense)/(Expense)/EPSIncomeIncomeImpact Goodwill impairment charge $-$-$- Other-than-temporary impairment o securities (10,682) (6,943)(0.04) Guarantee related to purchase o customer auction rate securities(2,660) (1,729)(0.01) In estment securities gains and(losses) on sale 1,181 768 - Totals(12,161) (7,904)(0.05) Net (loss) income a ailable to commonshareholders29,0760.17 Adjusted net income a ailable tocommon shareholders $ 36,980$ 0.21 Year Ended December 312008Pre-taxA ter-taxDiluted (Expense)/(Expense)/ EPSIncome IncomeImpact Goodwill impairment charge $(90,000) $(90,000) $(0.52) Other-than-temporary impairment o securities (65,336)(42,468)(0.24) Guarantee related to purchase o customer auction rate securities (19,810)(12,877)(0.07) Gain on sale o credit card port olio13,900 9,0350.05 In estment securities gains and(losses) on sale 7,095 4,6120.03 Contingent losses related torepurchase o pre iously sold loans (2,300) (1,495)(0.01) Totals $ (156,451) $ (133,193)(0.76) Net (loss) income a ailable to commonshareholders(6,080)(0.03) Adjusted net income a ailable tocommon shareholders $127,113$ 0.73 Year Ended December 312007Pre-taxA ter-taxDiluted (Expense)/(Expense)/ EPSIncome IncomeImpact Goodwill impairment charge $-$-$- Other-than-temporary impairment o securities(292) (190)- Guarantee related to purchase o customer auction rate securities - - - Gain on sale o credit card port olio - - - In estment securities gains and(losses) on sale 2,032 1,3210.01 Contingent losses related torepurchase o pre iously sold loans(25,100)(16,315)(0.09) Totals $(23,360) $(15,184)(0.09) Net (loss) income a ailable to commonshareholders 152,7180.88 Adjusted net income a ailable tocommon shareholders $167,902$ 0.96Contact:Laura J. WakeleyO ice: 717-291-2616Copyright 2009, Market Wire, All rights reser ed.-0-. Peoples inancial Corporation Earns $1.8 Million in ourth Quarter 2008, $5.0Million or YearBILOXI, Miss., Jan. 20 /PRNewswire- irstCall/ Peoples inancial Corporation(Nasdaq: P BX), parent o The Peoples Bank, earned $1,820,000 in ourthquarter 2008 and $5,034,000 or the year ended December 31, 2008, announcedChe is C. Swetman, chairman and chie executi e o icer o the holding companyand the bank.Earnings per share were $.34 per a erage weighted share or the ourth quartero 2008 and totaled $.94 per a erage weighted share or the ull year.Earnings per share igures are based on a erage weighted shares outstanding o 5,342,470 or the 12 months ended December 31, 2008 and 5,489,861 or the 12months ended December 31, 2007."Our bank returned to pro itability in the ourth quarter o 2008, despite theworst paralysis o the capital markets in my li etime or e en since the GreatDepression," said Swetman. "Our loan olume grew in the ourth quarter,although ar more slowly than we would like. We ha e money to lend, and we areaggressi ely seeking business in a market largely dri en by ear o theunknown and ear o the uture," he added. ourth quarter income was 38 lower than earnings or the same period the yearbe ore.

ull year net income was 54 lower, due mainly to non-cash chargesrecorded in the third quarter o 2008 or increased loan loss pro ision andloss on in estment in pre erred shares o ederal Home Loan Mortgage Company( HLMC, commonly known as reddie Mac).In No ember, 2008, Peoples inancial announced it had declined to participatein the ederal go ernment's $700 billion rescue und or inancialinstitutions "We ha e plenty o capital," said Swetman. "In act, our primarycapital as o the end o 2008 rose to 12.91, despite the meltdown o the inancial markets around us. Times like these alidate the care ul,conser ati e philosophy that our Board o Directors and senior management teamha e always ollowed in operating our bank," he added. ounded in 1896, with $896 million in assets as o December 31, 2008, ThePeoples Bank operates 16 branches along the Mississippi Gul Coast in Hancock,Harrison, Jackson and Stone counties. In addition to a comprehensi e range o retail and commercial banking ser ices, the bank also operates a trust andin estment ser ices department that has pro ided customers with inancial,estate and retirement planning ser ices since 1936.

The bank also operates amortgage loan department pro iding residential loans or primary, secondaryand multi- amily homes up to our units.The Peoples Bank is a wholly-owned subsidiary o Peoples inancialCorporation, listed on the NASDAQ Capital Market under the symbol P BX.Additional in ormation is a ailable on the Internet at news release contains orward-looking statements and re lects industryconditions, company per ormance and inancial results. These orward-lookingstatements are subject to a number o risk actors and uncertainties whichcould cause the Company's actual results and experience to di er rom theanticipated results and expectation expressed in such orward-lookingstatements.PEOPLES INANCIAL CORPORATION(Unaudited)(In thousands, except per share igures)EARNINGS SUMMARYThree Months Ended December 31, 20082007Net interest income $6,837$7,665Pro ision or loan losses25252Non-interest income2,523 2,651Non-interest expense 6,829 6,370Income taxes 459 964Net income 1,820 2,930Earnings per share0.340.54Year Ended December 31, 20082007Net interest income$28,339 $30,519Pro ision or loan losses2,347(1,045)Non-interest income7,539 9,767Non-interest expense26,52025,263Income taxes 1,977 5,042Net income 5,03411,026Earnings per share0.942.01PER ORMANCE RATIOS-December 31,20082007Return on a erage assets0.55 1.15Return on a erage equity4.7110.77Net interest margin 3.58 3.55E iciency ratio78 61BALANCE SHEET SUMMARY-December 31,20082007Total assets$896,408$927,357Loans467,377 450,992Securities 349,816 392,595Total deposits 510,476 569,130Total ederal unds purchased226,609 231,225Shareholders' equity 107,966 106,542Book alue per share 20.45 19.66Weighted a erage shares5,342,470 5,489,861PERIOD END DATA-December 31,20082007Allowance or loan losses as a percentage o loans2.38 2.08Loans past due 90 days and still accruing2,340 1,234Nonaccrual loans15,55345Primary capital12.9112.13SOURCEPeoples inancial CorporationIn estor Relations o Peoples inancial Corporation, 1-228-435-8208,. WASHINGTON, Jan 20 (Reuters) - U.S Sen. Edward Kennedy,who su ered a seizure at an inaugural lunch or DemocraticPresident Barack Obama on Tuesday, has a brain tumor thatdoctors say could ha e caused the collapse. Bonds Here are some questions and answers about the MassachusettsDemocrat's condition: Q Could the tumor ha e caused Kennedy's collapse A Yes. Kennedy was diagnosed in May with malignant glioma,a type o brain tumor that is incurable.