President Hines reported that second quarter operating revenues of$7,862,000 decreased 1.3% from the second quarter of 2007, net income of$1,520,000 decreased 8.5% compared to the second quarter of 2007 andearnings per share for the three-month period declined by $0.02.

President Hines also reported that first six months' operating revenues of$15,368,000 increased 0.1% over the first six months of 2007, and that thefirst six months' net income of $2,726,000 decreased 8.7% compared to thefirst six months of 2007. The primary reason for the increase in revenueswas growth in the customer base of 1.5%. Residential sector demanddeclined primarily due to higher than normal rainfall, and in thecommercial and industrial sectors primarily due to adverse economicconditions. The primary contributing factors to the decrease in net incomewere lower than expected revenues and higher operating expenses includingdepreciation, wages, electric, and health insurance expenses. Interestexpense was also higher in 2008 compared to 2007. Earnings per share forthe six-month period declined by $0.03 per share.

In May 2008 the Company initiated a request for rate relief with thePennsylvania Public Utility Commission (PPUC). The request is currentlyunder review. Any rate relief approved by the PPUC will be effective notlater than February 15, 2009.

During the first six months of 2008, the Company invested $8.8 million inconstruction projects. The majority of the construction expenditures werefor distribution system improvements and replacements, an emergency dieselgenerator for the main pumping station and a water treatment improvementproject. The Company will continue to invest in infrastructure at a ratenecessary to ensure a safe, adequate and reliable supply of drinking water.

                                               Period Ended June 30                                            In 000's (except per share)                                            Quarter          Six Months                                        ----------------- -----------------                                          2008     2007     2008     2007                                        -------- -------- -------- --------Water Operating Revenues                $  7,862 $  7,962 $ 15,368 $ 15,347Net Income from Water Operations        $  1,520 $  1,661 $  2,726 $  2,987Average Number of Common Shares Outstanding                              11,282   11,218   11,276   11,211Basic Earnings Per Common Share         $   0.13 $   0.15 $   0.24 $   0.27Dividends Paid Per Common Share         $  0.121 $  0.118 $  0.242 $  0.236