Employees Lending Activities  At December 31, 2012, the Bank had a total of 215 employees (199 full time equivalent employees). The  Company has no employees, although the Company is a party to several employment agreements with executives of  the Bank. Employees are provided with a comprehensive benefits program, including basic and major medical  insurance, life and disability insurance, sick leave, and a 401(k) profit sharing plan. Employees are not represented  by any union or collective bargaining group and the Bank considers its employee relations to be good.  General . The Bank strives to provide a full range of financial products and services to small- and medium- sized businesses and to consumers to each market area it serves. The Bank targets owner-operated businesses and  utilizes Small Business Administration lending as a part of its product mix. The Bank has a loan committee for each  of its markets, which has authority to approve credits, within established guidelines. Concentrations in excess of  those guidelines must be approved by either a corporate loan committee comprised of the Bank’s Chief Executive  Officer, the Credit Risk Manager, and other senior commercial lenders or the Bank’s board of directors. When  lending to an entity, the Bank generally obtains a guaranty from the principals of the entity. The loan mix is subject  to the discretion of the Bank’s board of directors and the demands of the local marketplace.  The following is a brief description of each major category of the Bank’s lending activity.  One-to-Four Family Residential Real Estate Lending . The Bank originates one-to-four family residential  real estate loans with both fixed and variable rates. One-to-four family residential real estate loans are priced and  originated following global underwriting standards that are consistent with guidelines established by the major  buyers in the secondary market. Generally, residential real estate loans retained in the Bank’s loan portfolio have  fixed or variable rates with adjustment periods of five years or less and amortization periods of typically either 15 or  30 years. A significant portion of these loans prepay prior to maturity. The Bank has no potential negative  amortization loans. While the origination of fixed-rate, one-to-four family residential loans continues to be a key  component of our business, the majority of these loans are sold in the secondary market. One-to-four family  residential real estate loans that exceed 80% of the appraised value of the real estate generally are required, by  policy, to be supported by private mortgage insurance, although on occasion the Bank will retain non-conforming  residential loans to known customers at premium pricing. The Bank’s one-to-four family residential real estate loan  portfolio increased primarily as a result of the acquisition of The Wellsville Bank during 2012; however the Bank  also retained some newly originated one-to-four family residential real estate loans that met internal criteria in  addition to secondary market qualifications. These are typically loans with maturities of 15 years or less. While the  Bank does not intend to increase its one-to-four family residential real estate loan portfolio, the Bank slowed the  runoff of the portfolio by retaining some of the new loan originations to offset weak commercial loan demand;  however, most of the new loan originations continue to be sold.  Construction and Land Lending. Loans in this category include loans to facilitate the development of both  residential and commercial real estate. Construction and land loans generally have terms of less than 18 months and  the Bank will retain a security interest in the borrower’s real estate. Construction loans are generally limited, by  policy, to 80% of the appraised value of the property. Land loans are generally limited, by policy, to 65% of the  appraised value of the property. The Bank has generally been reducing its exposure to construction and land loans  over the past few years. However, recently loan demand has began to increase for these type of loans. Commercial Real Estate Lending . Commercial real estate loans, including multi-family loans, represent  the largest class of loans of the Bank. Commercial and multi-family real estate loans generally have amortization  periods of 15 or 20 years. Commercial real estate and multi-family loans are generally limited, by policy, to 80% of  the appraised value of the property. Commercial real estate loans are also supported by an analysis demonstrating  the borrower’s ability to repay. The Bank continues to focus on generating additional commercial real estate loan  relationships; However, this has been difficult over the past few years as a result of flat or declining commercial real  estate values. 13 