| MAINE                                                               | 01-0404322                                |
|---------------------------------------------------------------------|-------------------------------------------|
| (State      or other jurisdiction of incorporation or organization) | (I.R.S.      Employer Identification No.) |

| MAIN      STREET, DAMARISCOTTA, MAINE         | 04543                 |
|-----------------------------------------------|-----------------------|
| (Address      of principal executive offices) |  (Zip      code) |

| ITEM 1. Discussion of      Business                                                                           | 1      |
|---------------------------------------------------------------------------------------------------------------|--------|
| ITEM 1A. Risk      Factors                                                                                    | 8      |
| ITEM 1B. Unresolved Staff      Comments                                                                       | 13     |
| ITEM 2.      Properties                                                                                       | 14     |
| ITEM 3. Legal      Proceedings                                                                                | 14     |
| ITEM 4. Submission of Matters      to a Vote of Security Holders                                              | 14     |
| ITEM 5. Market for      Registrant’s Common Equity and Related Shareholder      Matters                 | 15     |
| ITEM 6. Selected Financial      Data                                                                          | 18     |
| ITEM 7. Management’s      Discussion and Analysis of Financial Condition and Results of      Operations | 19     |
| ITEM 7A. Quantitative and      Qualitative Disclosures about Market Risk                                      | 42     |
| ITEM 8. Financial Statements      and Supplemental Data                                                       | 44     |
| ITEM 9. Changes in and/or      Disagreements with Accountants on Accounting and Financial      Disclosure     | 75     |
| ITEM 9A. Controls and      Procedures                                                                         | 75     |
| ITEM 9B. Other      Information                                                                               | 76     |
| ITEM 10. Directors and      Executive Officers of the Registrant                                              | 76     |
| ITEM 11. Executive      Compensation                                                                          | 76     |
| ITEM 12. Security Ownership      of Certain Beneficial Owners and Management                                  | 76     |
| ITEM 13. Certain      Relationships and Related Transactions, and Director      Independence                  | 76     |
| ITEM 14. Principal Accounting      Fees and Services                                                          | 76     |
| ITEM 15. Exhibits, Financial      Statement Schedules                                                         | 77     |
|                                                                                                          |   |
| SIGNATURES                                                                                                    | 78     |
|                                                                                                          |   |

ITEM 1.Discussion of Business

| ·   | The      creation of an independent accounting oversight  board; |
|--------------------|------------------------------------------------------------------|

| ·   | Auditor      independence provisions which restrict non-audit services that accountants      may provide to clients; |
|--------------------|----------------------------------------------------------------------------------------------------------------------|

| ·   | Additional      corporate governance and responsibility measures, including the      requirement that the chief executive officer and chief financial officer      of a public company certify financial  statements; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      forfeiture of bonuses or other incentive-based compensation and profits      from the sale of an issuer’s securities by directors and senior officers      in the twelve-month period following initial publication of any financial      statements that later requirerestatement; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | An      increase in the oversight of, and enhancement of certain requirements      relating to, audit committees of public companies and how they interact      with the public company’s independentauditors; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Requirements      that audit committee members must be independent and are barred from      accepting consulting, advisory or other compensatory fees from the      issuer; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Requirements      that companies disclose whether at least one member of the audit committee      is a ‘financial expert’ (as such term is defined by the Securities and      Exchange Commission (“SEC”) ) and if not, why  not; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Expanded      disclosure requirements for corporate insiders, including accelerated      reporting of stock transactions by insiders and a prohibition on insider      trading during pension blackoutperiods; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | A      prohibition on personal loans to directors and officers, except certain      loans made by insured financial institutions, such as the Bank, on      nonpreferential terms and in compliance with bank regulatory      requirements; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Disclosure      of a code of ethics and filing a Form 8-K in the event of a change or      waiver of such code; and |
|--------------------|---------------------------------------------------------------------------------------------------------------------|

| ·   | A      range of enhanced penalties for fraud and other  violations. |
|--------------------|---------------------------------------------------------------------|

| ·   | Impose      no further special assessments under the final rule adopted in May      2009. |
|--------------------|-------------------------------------------------------------------------------------------|

| ·   | Maintain      assessment rates at their current levels through the end of 2010 and      thereafter adopt a uniform 3 basis point increase in assessment rates      effective January 1, 2011. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Extend      to eight years the Amended Restoration Plan to raise the Deposit Insurance      Fund reserve ratio to 1.15 percent. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------|

| ·   | Require      all institutions to prepay, on December 30, 2009, their estimated      risk-based assessments for the fourth quarter of 2009 and for all of 2010,      2011, and 2012, at the same time that institutions pay their regular      quarterly deposit insurance assessments for the third quarter of 2009. An      institution would initially account for the prepaid assessments as a      prepaid expense and amortize this amount over a three-year      period. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

ITEM 1A.Risk Factors

| ·   | Impose      no further special assessments under the final rule adopted in May      2009. |
|--------------------|-------------------------------------------------------------------------------------------|

| ·   | Maintain      assessment rates at their current levels through the end of 2010 and      thereafter adopt a uniform 3 basis point increase in assessment rates      effective January 1, 2011. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Extend      to eight years the Amended Restoration Plan to raise the Deposit Insurance      Fund reserve ratio to 1.15 percent. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------|

| ·   | Require      all institutions to prepay, on December 30, 2009, their estimated      risk-based assessments for the fourth quarter of 2009 and for all of 2010,      2011, and 2012, at the same time that institutions pay their regular      quarterly deposit insurance assessments for the third quarter of 2009. An      institution would initially account for the prepaid assessments as a      prepaid expense and amortize this amount over a three-year      period. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | quarterly      fluctuations in our operating and financial  results; |
|--------------------|----------------------------------------------------------------------|

| ·   | operating      results that vary from the expectations of Management, securities analysts      and investors; |
|--------------------|---------------------------------------------------------------------------------------------------------------|

| ·   | changes      in expectations as to our future financial performance, including      financial estimates by securitiesanalysts; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------|

| ·   | events      negatively impacting the financial services industry which result in a      general decline for the industry; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------|

| ·   | announcements      of material developments affecting our operations or our dividend      policy; |
|--------------------|---------------------------------------------------------------------------------------------------|

| ·   | future      sales of our equity securities; |
|--------------------|---------------------------------------------|

| ·   | new      laws or regulations or new interpretations of existing laws or regulations      applicable to our business; |
|--------------------|----------------------------------------------------------------------------------------------------------------------|

| ·   | changes      in accounting standards, policies, guidance, interpretations or      principles; and |
|--------------------|---------------------------------------------------------------------------------------------------|

| ·   | general      domestic economic and marketconditions. |
|--------------------|------------------------------------------------------|

ITEM 1B.Unresolved Staff Comments

| Lincoln      County  | Knox      County | Hancock      County   | Washington      County |
|----------------------|------------------|-----------------------|------------------------|
| Boothbay      Harbor | Camden           | Bar      Harbor       | Eastport               |
| Damariscotta         | Rockland         | Blue      Hill        | Calais                 |
| Waldoboro            | Rockport         | Ellsworth             |                   |
| Wiscasset            |             | Northeast      Harbor |                   |
|                 |             | Southwest      Harbor |                   |

ITEM 3.Legal Proceedings

ITEM 4.Submission of Matters to a Vote of Security Holders

ITEM 5.Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases ofEquity Securities

|             |   | 2009   |   |   | 2008   |   |
|------------------|--------|--------|--------|--------|--------|--------|
|             |   | High   |   |   | Low    |   |   | High |   |   | Low |   |
| 1st      Quarter |   | $      | 20.29  |   |   | $      | 10.77 |   |   | $ | 15.74 |   |   | $ | 13.95 |   |
| 2nd      Quarter |   |   | 21.80  |   |   |   | 14.49 |   |   |   | 18.00 |   |   |   | 13.65 |   |
| 3rd      Quarter |   |   | 20.50  |   |   |   | 17.29 |   |   |   | 23.05 |   |   |   | 12.88 |   |
| 4th      Quarter |   |   | 19.00  |   |   |   | 14.65 |   |   |   | 22.98 |   |   |   | 12.84 |   |

| Date      Declared      |   | Amount      Per Share |   | Date      Payable |
|-------------------------|--------|-----------------------|--------|-------------------|
| March      20, 2008     |   | $                     | 0.185  |              | April      30, 2008 |
| June      19, 2008      |   | $                     | 0.190  |              | July      31, 2008 |
| September      18, 2008 |   | $                     | 0.195  |              | October      31, 2008 |
| December      18, 2008  |   | $                     | 0.195  |              | January      30, 2009 |
| March      18, 2009     |   | $                     | 0.195  |              | April      30, 2009 |
| June      18, 2009      |   | $                     | 0.195  |              | July      31, 2009 |
| September      17, 2009 |   | $                     | 0.195  |              | October      30, 2009 |
| December      17, 2009  |   | $                     | 0.195  |              | January      29, 2010 |

|                                                            |   | Number      of securities to be issued upon exercise of outstanding options, warrants      and rights |   |   | Weighted-average      exercise price of outstanding options, warrants and rights |   |   | Number      of securities remaining available for future issuance under equity      compensation plans (excluding securities reflected in column      (a)) |   |
|-----------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Plan      category                                              |   | (a)                                                                                                   |   |   | (b)                                                                              |   |   | (c)                                                                                                                                                        |   |
| Equity      compensation plans approved by security holders     |   |                                                                                                  | 55,000 |   |                                                                             | $      | 15.89  |                                                                                                                                                       |   |   | - |   |
| Equity      compensation plans not approved by security holders |   |                                                                                                  | -      |   |                                                                             | $      | -      |                                                                                                                                                       |   |   | - |   |
| Total                                                           |   |                                                                                                  | 55,000 |   |                                                                             | $      | 15.89  |                                                                                                                                                       |   |   | - |   |

|             | 2004   | 2005   | 2006   | 2007   | 2008   | 2009   |
|------------------|--------|--------|--------|--------|--------|--------|
| FNLC             | 100.00 | 103.71 | 102.02 | 93.15  | 133.86 | 107.09 |
| S&P      500 | 100.00 | 104.92 | 121.49 | 128.13 | 80.72  | 102.09 |
| NASD      Bank   | 100.00 | 98.04  | 111.59 | 89.48  | 70.25  | 58.99  |

| Month               |   | TotalNumber      ofShares      Purchased |   |   | Average      Price Paid Per Share |   |   | Total      Number of Shares Purchased as Part of a Publicly Announced Plan or      Program |   |   | Maximum      Number of Shares that may yet be Purchased under the Plan or      Program |   |
|---------------------|--------|------------------------------------------|--------|--------|-----------------------------------|--------|--------|--------------------------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------|--------|
| January      2009   |   |                                     | 1,077  |   |                              | $      | 16.50  |                                                                                       |   |   | 1,077                                                                                  |   |   |   | 123,450 |   |
| February      2009  |   |                                     | 820    |   |                              |   | 14.46  |                                                                                       |   |   | 820                                                                                    |   |   |   | 122,630 |   |
| March      2009     |   |                                     | 666    |   |                              |   | 13.93  |                                                                                       |   |   | 666                                                                                    |   |   |   | 121,964 |   |
| April      2009     |   |                                     | 1      |   |                              |   | 20.00  |                                                                                       |   |   | 1                                                                                      |   |   |   | 121,963 |   |
| May      2009       |   |                                     | 75     |   |                              |   | 16.21  |                                                                                       |   |   | 75                                                                                     |   |   |   | 121,888 |   |
| June      2009      |   |                                     | -      |   |                              |   | -      |                                                                                       |   |   | -                                                                                      |   |   |   | 121,888 |   |
| July      2009      |   |                                     | 4,717  |   |                              |   | 19.26  |                                                                                       |   |   | 4,717                                                                                  |   |   |   | 117,171 |   |
| August      2009    |   |                                     | 260    |   |                              |   | 19.89  |                                                                                       |   |   | 40                                                                                     |   |   |   | - |   |
| September      2009 |   |                                     | 70     |   |                              |   | 19.13  |                                                                                       |   |   | -                                                                                      |   |   |   | - |   |
| October      2009   |   |                                     | 860    |   |                              |   | 17.06  |                                                                                       |   |   | -                                                                                      |   |   |   | - |   |
| November      2009  |   |                                     | 7,378  |   |                              |   | 15.02  |                                                                                       |   |   | -                                                                                      |   |   |   | - |   |
| December      2009  |   |                                     | 1      |   |                              |   | 11.00  |                                                                                       |   |   | -                                                                                      |   |   |   | - |   |
| Total               |   |                                     | 15,925 |   |                              | $      | 16.51  |                                                                                       |   |   | 7,396                                                                                  |   |   |   | - |   |

| Month                     |   | Shares |   |   | Average      Price |   |   | Proceeds |   |
|---------------------------|--------|--------|--------|--------|--------------------|--------|--------|----------|--------|
| January      2009         |   |   | 385    |   |               | $      | 16.57  |     |   | $ | 6,378 |   |
| February      2009        |   |   | 671    |   |               |   | 14.62  |     |   |   | 9,807 |   |
| March      2009           |   |   | 5,552  |   |               |   | 12.46  |     |   |   | 69,183 |   |
| April      2009           |   |   | 1,138  |   |               |   | 16.77  |     |   |   | 19,088 |   |
| May      2009             |   |   | 633    |   |               |   | 15.61  |     |   |   | 9,880 |   |
| June      2009            |   |   | 592    |   |               |   | 17.39  |     |   |   | 10,296 |   |
| July  2009      |   |   | 577    |   |               |   | 19.05  |     |   |   | 10,990 |   |
| August  2009    |   |   | 355    |   |               |   | 19.85  |     |   |   | 7,047 |   |
| September  2009 |   |   | 400    |   |               |   | 18.69  |     |   |   | 7,477 |   |
| October      2009         |   |   | 404    |   |               |   | 17.67  |     |   |   | 7,137 |   |
| November      2009        |   |   | 705    |   |               |   | 15.31  |     |   |   | 10,794 |   |
| December      2009        |   |   | -      |   |               |   | -      |     |   |   | - |   |
| Total                     |   |   | 11,412 |   |               | $      | 14.73  |     |   | $ | 168,077 |   |

ITEM 6. Selected FinancialData

|                                                        |   | Years ended December 31, |      |
|-------------------------------------------------------------|--------|--------------------------|-----------|
| Dollars      in thousands,except      for per share amounts |   | 2009                     |      |   | 2008 |   |   | 2007 |   |   | 2006 |   |   | 2005 |   |
| Summary      of Operations                                  |   |                     |      |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      Income                                        |   | $                        | 62,569    |   |   | $ | 71,372 |   |   | $ | 71,721 |   |   | $ | 64,204 |   |   | $ | 50,431 |   |
| Interest      Expense                                       |   |                     | 18,916    |   |   |   | 33,669 |   |   |   | 39,885 |   |   |   | 33,589 |   |   |   | 18,848 |   |
| Net      Interest Income                                    |   |                     | 43,653    |   |   |   | 37,703 |   |   |   | 31,836 |   |   |   | 30,615 |   |   |   | 31,583 |   |
| Provision      for Loan Losses                              |   |                     | 12,160    |   |   |   | 4,700 |   |   |   | 1,432 |   |   |   | 1,325 |   |   |   | 200 |   |
| Non-Interest      Income                                    |   |                     | 12,754    |   |   |   | 9,646 |   |   |   | 10,145 |   |   |   | 10,306 |   |   |   | 9,034 |   |
| Non-Interest      Expense                                   |   |                     | 26,658    |   |   |   | 22,994 |   |   |   | 22,183 |   |   |   | 22,439 |   |   |   | 22,518 |   |
| Net      Income                                             |   |                     | 13,042    |   |   |   | 14,034 |   |   |   | 13,101 |   |   |   | 12,295 |   |   |   | 12,843 |   |
| Per      Common Share Data                                  |   |                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      Income                                             |   |                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Basic                         |   | $                        | 1.22      |   |   | $ | 1.45 |   |   | $ | 1.34 |   |   | $ | 1.25 |   |   | $ | 1.32 |   |
|      Diluted                       |   |                     | 1.22      |   |   |   | 1.44 |   |   |   | 1.34 |   |   |   | 1.25 |   |   |   | 1.30 |   |
| Cash      Dividends (Declared)                              |   |                     | 0.780     |   |   |   | 0.765 |   |   |   | 0.690 |   |   |   | 0.610 |   |   |   | 0.530 |   |
| Book      Value                                             |   |                     | 12.66     |   |   |   | 12.09 |   |   |   | 11.58 |   |   |   | 10.98 |   |   |   | 10.52 |   |
| Market      Value                                           |   | $                        | 15.42     |   |   |   | 19.89 |   |   |   | 14.64 |   |   |   | 16.72 |   |   |   | 17.58 |   |
| Financial      Ratios                                       |   |                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Return      on Average Equity                               |   |                     | 10.66     | % |   |   | 12.02 | % |   |   | 11.89 | % |   |   | 11.63 | % |   |   | 12.98 | % |
| Return      on Average Tangible Equity                      |   |                     | 13.77     |   |   |   | 15.75 |   |   |   | 15.89 |   |   |   | 15.75 |   |   |   | 17.81 |   |
| Return      on Average Assets                               |   |                     | 0.96      |   |   |   | 1.10 |   |   |   | 1.13 |   |   |   | 1.14 |   |   |   | 1.36 |   |
| Average      Equity to Average Assets                       |   |                     | 10.85     |   |   |   | 9.14 |   |   |   | 9.53 |   |   |   | 9.81 |   |   |   | 10.44 |   |
| Average      Tangible Equity to Average Assets              |   |                     | 8.80      |   |   |   | 6.98 |   |   |   | 7.13 |   |   |   | 7.24 |   |   |   | 7.61 |   |
| Net      Interest Margin (Tax-Equivalent)                   |   |                     | 3.66      |   |   |   | 3.33 |   |   |   | 3.13 |   |   |   | 3.24 |   |   |   | 3.84 |   |
| Dividend      Payout Ratio (Declared)                       |   |                     | 63.93     |   |   |   | 52.76 |   |   |   | 51.49 |   |   |   | 48.80 |   |   |   | 40.15 |   |
| Allowance      for Loan Losses/Total Loans                  |   |                     | 1.43      |   |   |   | 0.90 |   |   |   | 0.74 |   |   |   | 0.76 |   |   |   | 0.79 |   |
| Non-Performing      Loans to Total Loans                    |   |                     | 1.95      |   |   |   | 1.27 |   |   |   | 0.31 |   |   |   | 0.42 |   |   |   | 0.40 |   |
| Non-Performing      Assets to Total Assets                  |   |                     | 1.80      |   |   |   | 1.31 |   |   |   | 0.56 |   |   |   | 0.32 |   |   |   | 0.30 |   |
| Efficiency      Ratio (Tax-equivalent)                      |   |                     | 43.39     |   |   |   | 46.07 |   |   |   | 50.16 |   |   |   | 52.12 |   |   |   | 52.89 |   |
| At      Year End                                            |   |                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      Assets                                           |   | $                        | 1,331,394 |   |   | $ | 1,325,744 |   |   | $ | 1,223,250 |   |   | $ | 1,104,869 |   |   | $ | 1,042,209 |   |
| Total      Loans                                            |   |                     | 952,492   |   |   |   | 979,273 |   |   |   | 920,164 |   |   |   | 838,145 |   |   |   | 772,338 |   |
| Total      Investment Securities                            |   |                     | 272,375   |   |   |   | 247,839 |   |   |   | 208,585 |   |   |   | 172,301 |   |   |   | 173,033 |   |
| Total      Deposits                                         |   |                     | 922,667   |   |   |   | 925,736 |   |   |   | 781,280 |   |   |   | 805,235 |   |   |   | 713,964 |   |
| Total      Borrowings                                       |   |                     | 249,778   |   |   |   | 272,074 |   |   |   | 316,719 |   |   |   | 179,862 |   |   |   | 215,189 |   |
| Total      Shareholders’ Equity                       |   | $                        | 147,938   |   |   | $ | 117,181 |   |   | $ | 112,453 |   |   | $ | 107,327 |   |   | $ | 103,452 |   |
|                                                        |   |                     |      |   |   |   |   |   |   |   |   |   |   | High |   |   | Low |   |
| Market      price per common share of stock during 2009     |   |                     |      |   |   |   |   |   |   |   | $ | 21.80 |   |   | $ | 10.77 |   |

ITEM 7.Management’s Discussion and Analysis of Financial Condition and Results ofOperations

|                                     |   | Years      ended December 31, |   |
|------------------------------------------|--------|-------------------------------|--------|
|  Dollars in      thousands          |   | 2009                          |   |   | 2008 |   |   | 2007 |   |
| Net      interest income as presented    |   | $                             | 43,653 |   |   | $ | 37,703 |   |   | $ | 31,836 |   |
| Effect      of tax-exempt income         |   |                          | 2,395  |   |   |   | 2,187 |   |   |   | 2,081 |   |
| Net      interest income, tax equivalent |   | $                             | 46,048 |   |   | $ | 39,890 |   |   | $ | 33,917 |   |

|                                                       |   | Years      ended December 31, |   |
|------------------------------------------------------------|--------|-------------------------------|--------|
| In      thousands of dollars                               |   | 2009                          |   |   | 2008 |   |   | 2007 |   |
| Non-interest      expense, as presented                    |   | $                             | 26,658 |   |   | $ | 22,994 |   |   | $ | 22,183 |   |
| Net      securities losses                                 |   |                          | (150   | ) |   |   | (89 | ) |   |   | - |   |
| Other      than temporary impairment charge                |   |                          | (916   | ) |   |   | - |   |   |   | - |   |
| Adjusted      non-interest expense                         |   |                          | 25,592 |   |   |   | 22,905 |   |   |   | 22,183 |   |
| Net      interest income, as presented                     |   |                          | 43,653 |   |   |   | 37,703 |   |   |   | 31,836 |   |
| Effect      of tax-exempt income                           |   |                          | 2,395  |   |   |   | 2,187 |   |   |   | 2,081 |   |
| Non-interest      income, as presented                     |   |                          | 12,754 |   |   |   | 9,646 |   |   |   | 10,145 |   |
| Effect      of non-interest tax-exempt income              |   |                          | 185    |   |   |   | 186 |   |   |   | 165 |   |
| Net      securities gains                                  |   |                          | -      |   |   |   | - |   |   |   | 2 |   |
| Adjusted      net interest income plus non-interest income |   | $                             | 58,987 |   |   | $ | 49,722 |   |   | $ | 44,229 |   |
| Non-GAAP      efficiency ratio                             |   |                          | 43.39  | % |   |   | 46.07 | % |   |   | 50.16 | % |
| GAAP      efficiency ratio                                 |   |                          | 47.26  | % |   |   | 48.56 | % |   |   | 52.84 | % |

|                                                 |   | Years      ended December 31, |    |
|------------------------------------------------------|--------|-------------------------------|---------|
|  In thousands of      dollars                   |   | 2009                          |    |   | 2008 |   |   | 2007 |   |
| Average      shareholders’ equity as presented |   | $                             | 146,854 |   |   | $ | 116,448 |   |   | $ | 111,422 |   |
| Intangible      assets                               |   |                          | 27,684  |   |   |   | 27,684 |   |   |   | 27,684 |   |
| Tangible      average shareholders’ equity     |   | $                             | 119,170 |   |   | $ | 88,764 |   |   | $ | 83,738 |   |

| Year      ended December 31, 2009 compared to 2008 |   |   |   |   |   |   |    |
|----------------------------------------------------|--------|--------|--------|--------|--------|--------|---------|
| Dollars      in thousands                          |   | Volume |   |   | Rate   |   |    | Rate/Volume1 |   |   | Total |   |
| Interest      on earning assets                    |   |   |   |   |   |   |    |   |   |   |   |   |
| Interest-bearing      deposits                     |   | $      | 4      |   |   | $      | (3      | ) |   | $ | (3 | ) |   | $ | (2 | ) |
| Investment      securities                         |   |   | 3,002  |   |   |   | (2,424  | ) |   |   | (491 | ) |   |   | 87 |   |
| Loans      held for sale                           |   |   | 30     |   |   |   | (4      | ) |   |   | (1 | ) |   |   | 25 |   |
| Loans                                              |   |   | 2,008  |   |   |   | (10,359 | ) |   |   | (355 | ) |   |   | (8,706 | ) |
| Total      interest income                         |   |   | 5,044  |   |   |   | (12,790 | ) |   |   | (850 | ) |   |   | (8,596 | ) |
| Interest      expense                              |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Deposits                                           |   |   | 2,694  |   |   |   | (12,373 | ) |   |   | (1,449 | ) |   |   | (11,128 | ) |
| Borrowings                                         |   |   | (1,651 | )      |   |   | (2,335  | ) |   |   | 361 |   |   |   | (3,625 | ) |
| Total      interest expense                        |   |   | 1,043  |   |   |   | (14,708 | ) |   |   | (1,088 | ) |   |   | (14,753 | ) |
| Change      in net interest income                 |   | $      | 4,001  |   |   | $      | 1,918   |   |   | $ | 238 |   |   | $ | 6,157 |   |

| Year      ended December 31, 2008 compared to 2007 |   |   |   |   |   |   |    |
|----------------------------------------------------|--------|--------|--------|--------|--------|--------|---------|
| Dollars      in thousands                          |   | Volume |   |   | Rate   |   |    | Rate/Volume1 |   |   | Total |   |
| Interest      on earning assets                    |   |   |   |   |   |   |    |   |   |   |   |   |
| Interest-bearing      deposits                     |   | $      | -      |   |   | $      | -       |   |   | $ | 3 |   |   | $ | 3 |   |
| Investment      securities                         |   |   | 2,592  |   |   |   | (305    | ) |   |   | (63 | ) |   |   | 2,224 |   |
| Loans      held for sale                           |   |   | 6      |   |   |   | 22      |   |   |   | 47 |   |   |   | 75 |   |
| Loans                                              |   |   | 5,338  |   |   |   | (7,251  | ) |   |   | (632 | ) |   |   | (2,545 | ) |
| Total      interest income                         |   |   | 7,936  |   |   |   | (7,534  | ) |   |   | (645 | ) |   |   | (243 | ) |
| Interest      expense                              |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Deposits                                           |   |   | 1,272  |   |   |   | (7,688  | ) |   |   | (329 | ) |   |   | (6,745 | ) |
| Borrowings                                         |   |   | 3,688  |   |   |   | (2,317  | ) |   |   | (842 | ) |   |   | 529 |   |
| Total      interest expense                        |   |   | 4,960  |   |   |   | (10,005 | ) |   |   | (1,171 | ) |   |   | (6,216 | ) |
| Change      in net interest income                 |   | $      | 2,976  |   |   | $      | 2,471   |   |   | $ | 526 |   |   | $ | 5,973 |   |

|                                                      |   | 2009                    |   |   | 2008                    |   |   | 2007                    |   |
|-----------------------------------------------------------|--------|-------------------------|--------|--------|-------------------------|--------|--------|-------------------------|--------|
| Dollars      in thousands                                 |   | Amount      of interest |   |   | Average      Yield/Rate |   |   | Amount      of interest |   |   | Average      Yield/Rate |   |   | Amount      of interest |   |   | Average      Yield/Rate |   |
| Interest      on earning assets                           |   |                    |   |   |                    |   |   |                    |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing      deposits                            |   | $                       | 1      |   |                    |   | 0.25   | %                       |   | $ | 3 |   |   |   | 1.65 | % |   | $ | - |   |   |   | 0.00 | % |
| Investment      securities                                |   |                    | 14,893 |   |                    |   | 5.42   | %                       |   |   | 14,806 |   |   |   | 6.07 | % |   |   | 12,582 |   |   |   | 5.98 | % |
| Loans      held for sale                                  |   |                    | 125    |   |                    |   | 4.99   | %                       |   |   | 78 |   |   |   | 4.05 | % |   |   | 53 |   |   |   | 8.43 | % |
| Loans                                                     |   |                    | 49,945 |   |                    |   | 5.09   | %                       |   |   | 58,672 |   |   |   | 6.16 | % |   |   | 61,167 |   |   |   | 7.01 | % |
|    Total      interest-earning assets      |   |                    | 64,964 |   |                    |   | 5.16   | %                       |   |   | 73,559 |   |   |   | 6.14 | % |   |   | 73,802 |   |   |   | 6.81 | % |
| Interest-bearing      liabilities                         |   |                    |   |   |                    |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                  |   |                    | 11,872 |   |                    |   | 1.35   | %                       |   |   | 23,000 |   |   |   | 2.90 | % |   |   | 29,745 |   |   |   | 3.93 | % |
| Borrowings                                                |   |                    | 7,044  |   |                    |   | 2.84   | %                       |   |   | 10,669 |   |   |   | 3.62 | % |   |   | 10,140 |   |   |   | 4.71 | % |
|    Total      interest-bearing liabilities |   |                    | 18,916 |   |                    |   | 1.67   | %                       |   |   | 33,669 |   |   |   | 3.10 | % |   |   | 39,885 |   |   |   | 4.10 | % |
| Net      interest income                                  |   | $                       | 46,048 |   |                    |   |   |                    |   | $ | 39,890 |   |   |   |   |   |   | $ | 33,917 |   |   |   |   |   |
| Interest      rate spread                                 |   |                    |   |   |                    |   | 3.48   | %                       |   |   |   |   |   |   | 3.04 | % |   |   |   |   |   |   | 2.71 | % |
| Net      interest margin                                  |   |                    |   |   |                    |   | 3.66   | %                       |   |   |   |   |   |   | 3.33 | % |   |   |   |   |   |   | 3.13 | % |

|                                                                                        |   | Years      ended December 31, |      |
|---------------------------------------------------------------------------------------------|--------|-------------------------------|-----------|
| In      thousands of dollars                                                                |   | 2009                          |      |   | 2008 |   |   | 2007 |   |
| Assets                                                                                      |   |                          |      |   |   |   |   |   |   |
| Cash      and due from banks                                                                |   | $                             | 14,288    |   |   | $ | 16,281 |   |   | $ | 19,978 |   |
| Overnight      funds sold                                                                   |   |                          | 407       |   |   |   | 181 |   |   |   | - |   |
| Securities      available for sale                                                          |   |                          | 29,040    |   |   |   | 22,865 |   |   |   | 33,765 |   |
| Securities      to be held to maturity                                                      |   |                          | 245,972   |   |   |   | 205,783 |   |   |   | 158,080 |   |
| Federal      Home Loan Bank and Federal Reserve Bank Stock                                  |   |                          | 14,814    |   |   |   | 14,641 |   |   |   | 9,887 |   |
| Loans      held for sale (fair value approximates cost)                                     |   |                          | 2,506     |   |   |   | 1,923 |   |   |   | 623 |   |
| Loans                                                                                       |   |                          | 981,628   |   |   |   | 949,135 |   |   |   | 873,009 |   |
| Allowance      for loan losses                                                              |   |                          | (11,277   | ) |   |   | (7,607 | ) |   |   | (6,634 | ) |
| Net      loans                                                                              |   |                          | 970,351   |   |   |   | 941,528 |   |   |   | 866,375 |   |
| Accrued      interest receivable                                                            |   |                          | 6,027     |   |   |   | 6,846 |   |   |   | 6,697 |   |
| Premises      and equipment, net of accumulated depreciation                                |   |                          | 18,024    |   |   |   | 16,228 |   |   |   | 15,664 |   |
| Other      real estate owned                                                                |   |                          | 2,652     |   |   |   | 1,736 |   |   |   | 931 |   |
| Goodwill                                                                                    |   |                          | 27,684    |   |   |   | 27,684 |   |   |   | 27,684 |   |
| Other      assets                                                                           |   |                          | 21,752    |   |   |   | 17,737 |   |   |   | 16,833 |   |
|         Total      Assets                           |   | $                             | 1,353,517 |   |   | $ | 1,273,433 |   |   | $ | 1,156,517 |   |
|                                                                                        |   |                          |      |   |   |   |   |   |   |   |   |   |
| Liabilities      & Stockholders' Equity                                                 |   |                          |      |   |   |   |   |   |   |   |   |   |
| Demand      deposits                                                                        |   | $                             | 65,567    |   |   | $ | 63,495 |   |   | $ | 61,678 |   |
| NOW      deposits                                                                           |   |                          | 106,895   |   |   |   | 105,689 |   |   |   | 102,083 |   |
| Money      market deposits                                                                  |   |                          | 108,922   |   |   |   | 123,699 |   |   |   | 125,370 |   |
| Savings      deposits                                                                       |   |                          | 87,921    |   |   |   | 86,018 |   |   |   | 91,967 |   |
| Certificates      of deposit                                                                |   |                          | 227,161   |   |   |   | 364,529 |   |   |   | 323,367 |   |
| Certificates      $100M and over                                                            |   |                          | 351,552   |   |   |   | 109,988 |   |   |   | 114,764 |   |
| Total      deposits                                                                         |   |                          | 948,018   |   |   |   | 853,418 |   |   |   | 819,229 |   |
| Borrowed      funds                                                                         |   |                          | 248,291   |   |   |   | 293,745 |   |   |   | 215,403 |   |
| Dividends      payable                                                                      |   |                          | 953       |   |   |   | 850 |   |   |   | 739 |   |
| Other      liabilities                                                                      |   |                          | 9,401     |   |   |   | 8,972 |   |   |   | 9,724 |   |
|      Total      Liabilities                                        |   |                          | 1,206,663 |   |   |   | 1,156,985 |   |   |   | 1,045,095 |   |
| Shareholders'      Equity:                                                                  |   |                          |      |   |   |   |   |   |   |   |   |   |
| Preferred      Stock                                                                        |   |                          | 24,452    |   |   |   | - |   |   |   | - |   |
| Common      stock                                                                           |   |                          | 97        |   |   |   | 97 |   |   |   | 98 |   |
| Additional      paid-in capital                                                             |   |                          | 44,807    |   |   |   | 44,214 |   |   |   | 45,644 |   |
| Retained      earnings                                                                      |   |                          | 78,072    |   |   |   | 72,492 |   |   |   | 65,366 |   |
| Accumulated      other comprehensive (loss) income                                          |   |                          |      |   |   |   |   |   |   |   |   |   |
|     Net      unrealized gains (losses) on available-for-sale securities |   |                          | (310      | ) |   |   | (87 | ) |   |   | 574 |   |
|     Net      unrealized loss on postretirement benefit costs            |   |                          | (264      | ) |   |   | (268 | ) |   |   | (260 | ) |
|     Total      Stockholders' Equity                                     |   |                          | 146,854   |   |   |   | 116,448 |   |   |   | 111,422 |   |
|        Total      Liabilities & Stockholders' Equity |   | $                             | 1,353,517 |   |   | $ | 1,273,433 |   |   | $ | 1,156,517 |   |

Non-Interest Expense

| Dollars      in thousands              |   | 2009   |    |   | 2008   |   |    | 2007   |   |
|----------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
| Securities      available for sale     |   |   |    |   |   |   |    |   |   |
| U.S.      Treasury and agency          |   | $      | 30,959  |   |   | $      | -       |   |   | $ | - |   |
| Mortgage-backed      securities        |   |   | 31,148  |   |   |   | 922     |   |   |   | 1,322 |   |
| State      and political subdivisions  |   |   | 18,514  |   |   |   | 8,910   |   |   |   | 10,855 |   |
| Corporate      securities              |   |   | 818     |   |   |   | 2,977   |   |   |   | 14,727 |   |
| Other      equity securities           |   |   | 399     |   |   |   | 263     |   |   |   | 326 |   |
|                                   |   | $      | 81,838  |   |   | $      | 13,072  |   |   | $ | 27,230 |   |
| Securities      to be held to maturity |   |   |    |   |   |   |    |   |   |   |   |   |
| U.S.      Treasury and agency          |   | $      | 39,099  |   |   | $      | 110,513 |   |   | $ | 95,009 |   |
| Mortgage-backed      securities        |   |   | 90,193  |   |   |   | 60,774  |   |   |   | 30,786 |   |
| State      and political subdivisions  |   |   | 61,095  |   |   |   | 62,330  |   |   |   | 53,914 |   |
| Corporate      securities              |   |   | 150     |   |   |   | 1,150   |   |   |   | 1,645 |   |
|                                   |   |   | 190,537 |   |   |   | 234,767 |   |   |   | 181,354 |   |
| Total      securities                  |   | $      | 272,375 |   |   | $      | 247,839 |   |   | $ | 208,584 |   |

|                                          |   | Available For Sale |   |   | Held to Maturity       |   |
|-----------------------------------------------|--------|--------------------|--------|--------|------------------------|--------|
|  Dollars      in thousands               |   | Fair      Value    |   |   | Yield      to maturity |   |   | Amortized      Cost |   |   | Yield      to maturity |   |
|  U.S.      Treasury & Agency         |   |               |   |   |                   |   |   |   |   |   |   |   |
|  Due      in 1 year or less              |   | $                  | -      |   |                   |   | 0.00 | % |   | $ | - |   |   |   | 0.00 | % |
|  Due      in 1 to 5 years                |   |               | 15,000 |   |                   |   | 2.75 | % |   |   | - |   |   |   | 0.00 | % |
|  Due      in 5 to 10 years               |   |               | -      |   |                   |   | 0.00 | % |   |   | - |   |   |   | 0.00 | % |
|  Due      after 10 years                 |   |               | 15,959 |   |                   |   | 5.35 | % |   |   | 39,099 |   |   |   | 6.07 | % |
|   Total                             |   |               | 30,959 |   |                   |   | 4.09 | % |   |   | 39,099 |   |   |   | 6.07 | % |
|  Mortgage-Backed      Securities         |   |               |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|  Due      in 1 year or less              |   |               | -      |   |                   |   | 0.00 | % |   |   | 125 |   |   |   | 4.50 | % |
|  Due      in 1 to 5 years                |   |               | 91     |   |                   |   | 5.71 | % |   |   | 1,662 |   |   |   | 4.17 | % |
|  Due      in 5 to 10 years               |   |               | 82     |   |                   |   | 8.50 | % |   |   | 1,255 |   |   |   | 5.79 | % |
|  Due      after 10 years                 |   |               | 30,975 |   |                   |   | 3.52 | % |   |   | 87,151 |   |   |   | 3.80 | % |
|   Total                             |   |               | 31,148 |   |                   |   | 3.54 | % |   |   | 90,193 |   |   |   | 3.84 | % |
|  State      & Political Subdivisions |   |               |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|  Due      in 1 year or less              |   |               | -      |   |                   |   | 0.00 | % |   |   | 205 |   |   |   | 6.95 | % |
|  Due      in 1 to 5 years                |   |               | 3,290  |   |                   |   | 7.13 | % |   |   | 6,122 |   |   |   | 6.51 | % |
|  Due      in 5 to 10 years               |   |               | 3,701  |   |                   |   | 7.57 | % |   |   | 13,765 |   |   |   | 6.53 | % |
|  Due      after 10 years                 |   |               | 11,523 |   |                   |   | 6.24 | % |   |   | 41,003 |   |   |   | 6.40 | % |
|   Total                             |   |               | 18,514 |   |                   |   | 6.66 | % |   |   | 61,095 |   |   |   | 6.44 | % |
|  Corporate      Securities               |   |               |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|  Due      in 1 year or less              |   |               | -      |   |                   |   | 0.00 | % |   |   | - |   |   |   | 0.00 | % |
|  Due      in 1 to 5 years                |   |               | -      |   |                   |   | 0.00 | % |   |   | 150 |   |   |   | 1.50 | % |
|  Due      in 5 to 10 years               |   |               | -      |   |                   |   | 0.00 | % |   |   | - |   |   |   | 0.00 | % |
|  Due      after 10 years                 |   |               | 818    |   |                   |   | 1.38 | % |   |   | - |   |   |   | 0.00 | % |
|   Total                             |   |               | 818    |   |                   |   | 1.38 | % |   |   | 150 |   |   |   | 1.50 | % |
|  Equity      Securities                  |   |               | 399    |   |                   |   | 2.43 | % |   |   |   |   |   |   |   |   |
|                                          |   | $                  | 81,838 |   |                   |   | 4.43 | % |   | $ | 190,537 |   |   |   | 5.13 | % |

|                                  |   | Less      than 12 months |   |   | 12      months or more |   |   | Total  |   |
|---------------------------------------|--------|--------------------------|--------|--------|------------------------|--------|--------|--------|--------|
|                                  |   | Fair                     |   |   | Unrealized             |   |   | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
| In      thousands of dollars          |   | Value                    |   |   | Losses                 |   |   | Value  |   |   | Losses |   |   | Value |   |   | Losses |   |
| U.S.      Treasury and agency         |   | $                        | 19,999 |   |                   | $      | (707   | )      |   | $ | - |   |   | $ | - |   |   | $ | 19,999 |   |   | $ | (707 | ) |
| Mortgage-backed      securities       |   |                     | 47,509 |   |                   |   | (602   | )      |   |   | - |   |   |   | - |   |   |   | 47,509 |   |   |   | (602 | ) |
| State      and political subdivisions |   |                     | 9,396  |   |                   |   | (147   | )      |   |   | 1,350 |   |   |   | (338 | ) |   |   | 10,746 |   |   |   | (485 | ) |
| Corporate      securities             |   |                     | -      |   |                   |   | -      |   |   |   | 818 |   |   |   | (302 | ) |   |   | 818 |   |   |   | (302 | ) |
| Other      equity securities          |   |                     | -      |   |                   |   | -      |   |   |   | 44 |   |   |   | (21 | ) |   |   | 44 |   |   |   | (21 | ) |
|                                  |   | $                        | 76,904 |   |                   | $      | (1,456 | )      |   | $ | 2,212 |   |   | $ | (661 | ) |   | $ | 79,116 |   |   | $ | (2,117 | ) |

|                                                  |   | As      of December 31, |    |
|-------------------------------------------------------|--------|-------------------------|---------|
|  In      thousandsof      dollars                |   | 2009                    |    |   | 2008 |   |   | 2007 |   |   | 2006 |   |   | 2005 |   |
| Commercial                                            |   |                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Real      estate                    |   | $                       | 240,178 |   |   |   | 25.2 | % |   | $ | 219,057 |   |   |   | 22.3 | % |   | $ | 202,301 |   |   |   | 22.0 | % |   | $ | 140,626 |   |   |   | 16.8 | % |   | $ | 142,137 |   |   |   | 18.4 | % |
|    Construction                        |   |                    | 48,714  |   |   |   | 5.1 | % |   |   | 48,182 |   |   |   | 4.9 | % |   |   | - |   |   |   | 0.0 | % |   |   | - |   |   |   | 0.0 | % |   |   | - |   |   |   | 0.0 | % |
|    Other                               |   |                    | 114,486 |   |   |   | 12.0 | % |   |   | 118,109 |   |   |   | 12.1 | % |   |   | 109,954 |   |   |   | 11.9 | % |   |   | 189,908 |   |   |   | 22.7 | % |   |   | 170,108 |   |   |   | 22.0 | % |
| Municipal                                             |   |                    | 45,952  |   |   |   | 4.8 | % |   |   | 34,832 |   |   |   | 3.6 | % |   |   | 34,425 |   |   |   | 3.7 | % |   |   | 23,724 |   |   |   | 2.8 | % |   |   | 20,270 |   |   |   | 2.7 | % |
| Residential                                           |   |                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Term                                |   |                    | 367,267 |   |   |   | 38.7 | % |   |   | 431,520 |   |   |   | 44.0 | % |   |   | 431,237 |   |   |   | 46.9 | % |   |   | 371,242 |   |   |   | 44.3 | % |   |   | 309,689 |   |   |   | 40.1 | % |
|    Construction                        |   |                    | 17,361  |   |   |   | 1.8 | % |   |   | 26,235 |   |   |   | 2.7 | % |   |   | 45,942 |   |   |   | 5.0 | % |   |   | 20,258 |   |   |   | 2.4 | % |   |   | 26,909 |   |   |   | 3.5 | % |
| Home      equity   line      of credit |   |                    | 94,324  |   |   |   | 9.9 | % |   |   | 77,206 |   |   |   | 7.9 | % |   |   | 74,199 |   |   |   | 8.1 | % |   |   | 73,453 |   |   |   | 8.8 | % |   |   | 83,587 |   |   |   | 10.8 | % |
| Consumer                                              |   |                    | 24,210  |   |   |   | 2.5 | % |   |   | 24,132 |   |   |   | 2.5 | % |   |   | 22,106 |   |   |   | 2.4 | % |   |   | 18,934 |   |   |   | 2.3 | % |   |   | 19,638 |   |   |   | 2.5 | % |
| Total      loans                                      |   | $                       | 952,492 |   |   |   | 100.0 | % |   | $ | 979,273 |   |   |   | 100.0 | % |   | $ | 920,164 |   |   |   | 100.0 | % |   | $ | 838,145 |   |   |   | 100.0 | % |   | $ | 772,338 |   |   |   | 100.0 | % |

| In      thousands of dollars       |   | <      1 Year |   |   | 1 -      5 Years |   |   | 5 -      10 Years |   |   | >      10 Years |   |   | Total  |    |
|------------------------------------|--------|------------------|--------|--------|------------------|--------|--------|-------------------|--------|--------|--------------------|--------|--------|--------|---------|
| Commercial                         |   |             |   |   |             |   |   |              |   |   |               |   |   |   |    |
|    Real      estate |   | $                | 10,314 |   |             | $      | 8,600  |              |   | $      | 25,331             |   |   | $      | 195,933 |   |   | $ | 240,178 |   |
|    Construction     |   |             | 18,506 |   |             |   | 3,243  |              |   |   | 454                |   |   |   | 26,511  |   |   |   | 48,714 |   |
|    Other            |   |             | 17,690 |   |             |   | 22,494 |              |   |   | 34,446             |   |   |   | 39,856  |   |   |   | 114,486 |   |
| Municipal                          |   |             | 26,277 |   |             |   | 2,607  |              |   |   | 6,375              |   |   |   | 10,693  |   |   |   | 45,952 |   |
| Residential                        |   |             |   |   |             |   |   |              |   |   |               |   |   |   |    |   |   |   |   |   |
|    Term             |   |             | 5,944  |   |             |   | 8,394  |              |   |   | 35,013             |   |   |   | 317,916 |   |   |   | 367,267 |   |
|    Construction     |   |             | 9,842  |   |             |   | 947    |              |   |   | 19                 |   |   |   | 6,553   |   |   |   | 17,361 |   |
| Home      equity line of credit    |   |             | 1,030  |   |             |   | 1,232  |              |   |   | 1,129              |   |   |   | 90,933  |   |   |   | 94,324 |   |
| Consumer                           |   |             | 7,440  |   |             |   | 10,343 |              |   |   | 1,454              |   |   |   | 4,973   |   |   |   | 24,210 |   |
| Total      loans                   |   | $                | 97,043 |   |             | $      | 57,860 |              |   | $      | 104,221            |   |   | $      | 693,368 |   |   | $ | 952,492 |   |

|                               |   | Fixed-Rate |    |   | Adjustable-Rate |   |   | Total  |   |
|------------------------------------|--------|------------|---------|--------|-----------------|--------|--------|--------|--------|
| In      thousands of dollars       |   | Amount     |    |   | %      of total |   |   | Amount |   |   | %      of total |   |   | Amount |   |   | %      of total |   |
| Commercial                         |   |       |    |   |            |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Real      estate |   | $          | 55,378  |   |            |   | 5.8    | %      |   | $ | 184,800 |   |   |   | 19.4 | % |   | $ | 240,178 |   |   |   | 25.2 | % |
|    Construction     |   |       | 13,733  |   |            |   | 1.4    | %      |   |   | 34,981 |   |   |   | 3.7 | % |   |   | 48,714 |   |   |   | 5.1 | % |
|    Other            |   |       | 53,399  |   |            |   | 5.6    | %      |   |   | 61,087 |   |   |   | 6.4 | % |   |   | 114,486 |   |   |   | 12.0 | % |
| Municipal                          |   |       | 42,072  |   |            |   | 4.4    | %      |   |   | 3,880 |   |   |   | 0.4 | % |   |   | 45,952 |   |   |   | 4.8 | % |
| Residential                        |   |       |    |   |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Term             |   |       | 128,901 |   |            |   | 13.5   | %      |   |   | 238,366 |   |   |   | 25.0 | % |   |   | 367,267 |   |   |   | 38.7 | % |
|    Construction     |   |       | 6,726   |   |            |   | 0.7    | %      |   |   | 10,635 |   |   |   | 1.1 | % |   |   | 17,361 |   |   |   | 1.8 | % |
| Home      equity line of credit    |   |       | 2,111   |   |            |   | 0.2    | %      |   |   | 92,213 |   |   |   | 9.7 | % |   |   | 94,324 |   |   |   | 9.9 | % |
| Consumer                           |   |       | 19,454  |   |            |   | 2.0    | %      |   |   | 4,756 |   |   |   | 0.5 | % |   |   | 24,210 |   |   |   | 2.5 | % |
| Total      loans                   |   | $          | 321,774 |   |            |   | 33.8   | %      |   | $ | 630,718 |   |   |   | 66.2 | % |   | $ | 952,492 |   |   |   | 100.0 | % |

| Dollars      in                                       |   | As      of December 31, |   |
|-------------------------------------------------------|--------|-------------------------|--------|
| thousands                                             |   | 2009                    |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |   | 2005 |   |
| Commercial                                            |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Real      estate                    |   | $                       | 5,297  |   |   |   | 25.2 | % |   | $ | 2,958 |   |   |   | 22.3 | % |   | $ | 3,020 |   |   |   | 22.0 | % |   | $ | 1,905 |   |   |   | 16.8 | % |   | $ | 1,791 |   |   |   | 18.4 | % |
|    Construction                        |   |                    | 896    |   |   |   | 5.1 | % |   |   | 650 |   |   |   | 4.9 | % |   |   | - |   |   |   | 0.0 | % |   |   | - |   |   |   | 0.0 | % |   |   | - |   |   |   | 0.0 | % |
|    Other                               |   |                    | 3,095  |   |   |   | 12.0 | % |   |   | 2,595 |   |   |   | 12.1 | % |   |   | 1,633 |   |   |   | 11.9 | % |   |   | 2,573 |   |   |   | 22.7 | % |   |   | 2,142 |   |   |   | 22.0 | % |
| Municipal                                             |   |                    | 23     |   |   |   | 4.8 | % |   |   | 20 |   |   |   | 3.6 | % |   |   | 25 |   |   |   | 3.7 | % |   |   | 25 |   |   |   | 2.8 | % |   |   | 50 |   |   |   | 2.6 | % |
| Residential                                           |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Term                                |   |                    | 1,197  |   |   |   | 38.7 | % |   |   | 713 |   |   |   | 44.0 | % |   |   | 706 |   |   |   | 46.9 | % |   |   | 711 |   |   |   | 44.3 | % |   |   | 734 |   |   |   | 40.1 | % |
|    Construction                        |   |                    | 43     |   |   |   | 1.8 | % |   |   | 44 |   |   |   | 2.7 | % |   |   | 75 |   |   |   | 5.0 | % |   |   | 38 |   |   |   | 2.4 | % |   |   | 64 |   |   |   | 3.5 | % |
| Home      equity   line      of credit |   |                    | 515    |   |   |   | 9.9 | % |   |   | 482 |   |   |   | 7.9 | % |   |   | 491 |   |   |   | 8.1 | % |   |   | 470 |   |   |   | 8.8 | % |   |   | 560 |   |   |   | 10.8 | % |
| Consumer                                              |   |                    | 716    |   |   |   | 2.5 | % |   |   | 662 |   |   |   | 2.5 | % |   |   | 606 |   |   |   | 2.4 | % |   |   | 537 |   |   |   | 2.3 | % |   |   | 483 |   |   |   | 2.5 | % |
| Unallocated                                           |   |                    | 1,855  |   |   |   | 0.0 | % |   |   | 676 |   |   |   | 0.0 | % |   |   | 244 |   |   |   | 0.0 | % |   |   | 105 |   |   |   | 0.0 | % |   |   | 262 |   |   |   | 0.0 | % |
| Total                                                 |   | $                       | 13,637 |   |   |   | 100.0 | % |   | $ | 8,800 |   |   |   | 100.0 | % |   | $ | 6,800 |   |   |   | 100.0 | % |   | $ | 6,364 |   |   |   | 100.0 | % |   | $ | 6,086 |   |   |   | 100.0 | % |

|                                                               |   | As      of December 31, |   |
|--------------------------------------------------------------------|--------|-------------------------|--------|
| Dollars      in thousands                                          |   | 2009                    |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |   | 2005 |   |
| Balance      at beginning of year                                  |   | $                       | 8,800  |   |   | $ | 6,800 |   |   | $ | 6,364 |   |   | $ | 6,086 |   |   | $ | 4,714 |   |
| Acquisition      of FNB Bankshares                                 |   |                    | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 2,066 |   |
| Loans      charged off:                                            |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                                         |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Real      estate                                 |   |                    | 2,430  |   |   |   | 3 |   |   |   | 27 |   |   |   | 2 |   |   |   | - |   |
|    Construction                                     |   |                    | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|    Other                                            |   |                    | 2,329  |   |   |   | 1,997 |   |   |   | 477 |   |   |   | 854 |   |   |   | 473 |   |
| Municipal                                                          |   |                    | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Residential                                                        |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Term                                             |   |                    | 1,767  |   |   |   | 113 |   |   |   | 13 |   |   |   | 42 |   |   |   | 256 |   |
|    Construction                                     |   |                    | 47     |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Home      equity line of credit                                    |   |                    | 177    |   |   |   | 83 |   |   |   | 50 |   |   |   | 21 |   |   |   | - |   |
| Consumer                                                           |   |                    | 826    |   |   |   | 745 |   |   |   | 770 |   |   |   | 394 |   |   |   | 323 |   |
| Total                                                              |   |                    | 7,576  |   |   |   | 2,941 |   |   |   | 1,337 |   |   |   | 1,313 |   |   |   | 1,052 |   |
| Recoveries      on loans previously charged off                    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                                         |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Real      estate                                 |   |                    | -      |   |   |   | - |   |   |   | - |   |   |   | 30 |   |   |   | 18 |   |
|    Construction                                     |   |                    | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|    Other                                            |   |                    | 79     |   |   |   | 32 |   |   |   | 142 |   |   |   | 60 |   |   |   | 31 |   |
| Municipal                                                          |   |                    | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Residential                                                        |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Term                                             |   |                    | 59     |   |   |   | 5 |   |   |   | 4 |   |   |   | 16 |   |   |   | - |   |
|    Construction                                     |   |                    | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Home      equity line of credit                                    |   |                    | 1      |   |   |   | - |   |   |   | 21 |   |   |   | - |   |   |   | - |   |
| Consumer                                                           |   |                    | 114    |   |   |   | 204 |   |   |   | 174 |   |   |   | 160 |   |   |   | 109 |   |
| Total                                                              |   |                    | 253    |   |   |   | 241 |   |   |   | 341 |   |   |   | 266 |   |   |   | 158 |   |
| Net      loans charged off                                         |   |                    | 7,323  |   |   |   | 2,700 |   |   |   | 996 |   |   |   | 1,047 |   |   |   | 894 |   |
| Provision      for loan losses                                     |   |                    | 12,160 |   |   |   | 4,700 |   |   |   | 1,432 |   |   |   | 1,325 |   |   |   | 200 |   |
| Balance      at end of period                                      |   | $                       | 13,637 |   |   | $ | 8,800 |   |   | $ | 6,800 |   |   | $ | 6,364 |   |   | $ | 6,086 |   |
| Ratio      of net loans charged off to average loans outstanding   |   |                    | 0.75   | % |   |   | 0.28 | % |   |   | 0.11 | % |   |   | 0.13 | % |   |   | 0.13 | % |
| Ratio      of allowance for loan losses to total loans outstanding |   |                    | 1.43   | % |   |   | 0.90 | % |   |   | 0.74 | % |   |   | 0.76 | % |   |   | 0.79 | % |

|                                           |   | As      of December 31, |   |
|------------------------------------------------|--------|-------------------------|--------|
| Dollars      in thousands                      |   | 2009                    |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |   | 2005 |   |
| Commercial                                     |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Real      estate             |   | $                       | 6,589  |   |   | $ | 7,477 |   |   | $ | 734 |   |   | $ | 1,105 |   |   | $ | 744 |   |
|    Construction                 |   |                    | 458    |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|    Other                        |   |                    | 2,735  |   |   |   | 2,908 |   |   |   | 2,011 |   |   |   | 2,285 |   |   |   | 1,697 |   |
| Municipal                                      |   |                    | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Residential                                    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Term                         |   |                    | 6,322  |   |   |   | 6,594 |   |   |   | 2,109 |   |   |   | 606 |   |   |   | 914 |   |
|    Construction                 |   |                    | 3,182  |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Home      equity line of credit                |   |                    | 143    |   |   |   | 313 |   |   |   | 299 |   |   |   | 190 |   |   |   | 20 |   |
| Consumer                                       |   |                    | 309    |   |   |   | 137 |   |   |   | 1 |   |   |   | 46 |   |   |   | 45 |   |
| Total      loans 90 or more days past due      |   | $                       | 19,738 |   |   | $ | 17,429 |   |   | $ | 5,154 |   |   | $ | 4,232 |   |   | $ | 3,420 |   |
| Non-accrual      loans included in above total |   | $                       | 18,562 |   |   | $ | 12,449 |   |   | $ | 2,867 |   |   | $ | 3,485 |   |   | $ | 3,095 |   |

| ·   | The      borrower demonstrates financial difficulty; common indicators include past      due status with bank obligations, substandard credit bureau reports, or an      inability to refinance with another lender,and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      Bank has granted a concession; common concession types include maturity      date extension, interest rate adjustments to below market pricing, and      deferment of payments. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                       |   | As      of December 31, |   |
|------------------------------------------------------------|--------|-------------------------|--------|
| Dollars      in thousands                                  |   | 2009                    |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |   | 2005 |   |
| Commercial                                                 |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Real      estate                         |   | $                       | 9,443  |   |   | $ | 10,446 |   |   | $ | 2,607 |   |   | $ | 2,326 |   |   | $ | 1,006 |   |
|   Construction                                   |   |                    | 458    |   |   |   | 584 |   |   |   | 325 |   |   |   | 9 |   |   |   | - |   |
|    Other                                    |   |                    | 3,607  |   |   |   | 4,713 |   |   |   | 8,393 |   |   |   | 5,575 |   |   |   | 4,331 |   |
| Municipal                                                  |   |                    | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Residential                                                |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Term                                     |   |                    | 11,747 |   |   |   | 11,526 |   |   |   | 8,803 |   |   |   | 4,067 |   |   |   | 3,093 |   |
|    Construction                             |   |                    | 3,182  |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Home      equity line of credit                            |   |                    | 682    |   |   |   | 1,423 |   |   |   | 872 |   |   |   | 627 |   |   |   | 729 |   |
| Consumer                                                   |   |                    | 775    |   |   |   | 609 |   |   |   | 496 |   |   |   | 312 |   |   |   | 328 |   |
| Total                                                      |   | $                       | 29,894 |   |   | $ | 29,301 |   |   | $ | 21,496 |   |   | $ | 12,916 |   |   | $ | 9,487 |   |
| Loans      30-89 days past due to total loans              |   |                    | 1.26   | % |   |   | 1.21 | % |   |   | 1.78 | % |   |   | 1.04 | % |   |   | 0.79 | % |
| Loans      90+ days past due and accruing to total loans   |   |                    | 0.12   | % |   |   | 0.51 | % |   |   | 0.25 | % |   |   | 0.09 | % |   |   | 0.04 | % |
| Loans      90+ days past due on non-accrual to total loans |   |                    | 1.76   | % |   |   | 1.27 | % |   |   | 0.31 | % |   |   | 0.42 | % |   |   | 0.40 | % |
| Total      past due loans to total loans                   |   |                    | 3.14   | % |   |   | 2.99 | % |   |   | 2.34 | % |   |   | 1.54 | % |   |   | 1.23 | % |

|                               |   | As      of December 31, |   |
|------------------------------------|--------|-------------------------|--------|
| Dollars      in thousands          |   | 2009                    |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |   | 2005 |   |
| Carrying      Value                |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                         |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Real      estate |   | $                       | -      |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
|   Construction           |   |                    | 1,182  |   |   |   | 1,172 |   |   |   | 1,152 |   |   |   | 950 |   |   |   | - |   |
|    Other            |   |                    | 1,920  |   |   |   | 731 |   |   |   | - |   |   |   | 463 |   |   |   | - |   |
| Municipal                          |   |                    | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Residential                        |   |                    | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|    Term             |   |                    | 2,826  |   |   |   | 849 |   |   |   | - |   |   |   | - |   |   |   | - |   |
|    Construction     |   |                    | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Home      equity line of credit    |   |                    | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Consumer                           |   |                    | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total                              |   | $                       | 5,928  |   |   | $ | 2,752 |   |   | $ | 1,152 |   |   | $ | 1,413 |   |   | $ | - |   |
| Related      Allowance             |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                         |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Real      estate |   | $                       | -      |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
|   Construction           |   |                    | 476    |   |   |   | 325 |   |   |   | 325 |   |   |   | 250 |   |   |   | - |   |
|    Other            |   |                    | -      |   |   |   | - |   |   |   | - |   |   |   | 19 |   |   |   | - |   |
| Municipal                          |   |                    | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Residential                        |   |                    | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|    Term             |   |                    | 107    |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|    Construction     |   |                    | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Home      equity line of credit    |   |                    | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Consumer                           |   |                    | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total                              |   | $                       | 583    |   |   | $ | 325 |   |   | $ | 325 |   |   | $ | 269 |   |   | $ | - |   |
| Net      Value                     |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                         |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Real      estate |   | $                       | -      |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
|   Construction           |   |                    | 706    |   |   |   | 848 |   |   |   | 827 |   |   |   | 700 |   |   |   | - |   |
|    Other            |   |                    | 1,920  |   |   |   | 731 |   |   |   | - |   |   |   | 444 |   |   |   | - |   |
| Municipal                          |   |                    | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Residential                        |   |                    | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|    Term             |   |                    | 2,719  |   |   |   | 849 |   |   |   | - |   |   |   | - |   |   |   | - |   |
|    Construction     |   |                    | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Home      equity line of credit    |   |                    | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Consumer                           |   |                    | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total                              |   | $                       | 5,345  |   |   | $ | 2,428 |   |   | $ | 827 |   |   | $ | 1,144 |   |   | $ | - |   |

|                         |   | Years ended December 31, |    |   | %      change |   |
|------------------------------|--------|--------------------------|---------|--------|---------------|--------|
| Dollars      in thousands    |   | 2009                     |    |   | 2008          |   |   | 2007 |   |   | 2009      vs. 2008 |   |
| Demand      deposits         |   | $                        | 65,567  |   |          | $      | 63,495 |   |   | $ | 61,678 |   |   |   | 3.26 | % |
| NOW      accounts            |   |                     | 106,895 |   |          |   | 105,689 |   |   |   | 102,083 |   |   |   | 1.14 | % |
| Money      market accounts   |   |                     | 108,922 |   |          |   | 123,699 |   |   |   | 125,370 |   |   |   | -11.95 | % |
| Savings                      |   |                     | 87,921  |   |          |   | 86,018 |   |   |   | 91,967 |   |   |   | 2.21 | % |
| Certificates      of deposit |   |                     | 578,713 |   |          |   | 474,517 |   |   |   | 438,131 |   |   |   | 21.96 | % |
| Total      deposits          |   | $                        | 948,018 |   |          | $      | 853,418 |   |   | $ | 819,229 |   |   |   | 11.08 | % |

|                                 | Years ended December 31, |
|--------------------------------------|--------------------------|
|                                 | 2009                     | 2008 | 2007 |
| NOW                                  | 0.35%                    | 0.63% | 0.66% |
| Money      market                    | 1.07%                    | 2.88% | 4.82% |
| Savings                              | 0.62%                    | 0.97% | 1.12% |
| Certificates      of deposit         | 1.75%                    | 3.78% | 5.12% |
| Total      interest-bearing deposits | 1.35%                    | 2.90% | 3.93% |

|                            |   | As of December 31, |    |
|---------------------------------|--------|--------------------|---------|
| Dollars      in thousands       |   | 2009               |    |   | 2008 |   |
| Within      3 Months            |   | $                  | 184,574 |   |   | $ | 214,491 |   |
| 3      Months through 6 months  |   |               | 94,778  |   |   |   | 35,475 |   |
| 6      months through 12 months |   |               | 27,709  |   |   |   | 22,631 |   |
| Over      12 months             |   |               | 36,143  |   |   |   | 18,200 |   |
| Total                           |   | $                  | 343,204 |   |   | $ | 290,797 |   |

| Dollars      in thousands                                          |   | Total  |    |   | Less      than1      year |   |    | 1-3      years |   |   | 3-5      years |   |   | More      than 5 years |   |
|--------------------------------------------------------------------|--------|--------|---------|--------|---------------------------|--------|---------|----------------|--------|--------|----------------|--------|--------|------------------------|--------|
|  Borrowed      funds                                          |   | $      | 249,778 |   |                      |   | 149,601 |           |   |   | 20,000         |   |   |                   | 30,000 |   |   |   | 50,177 |   |
|  Operating      leases                                        |   |   | 907     |   |                      |   | 190     |           |   |   | 334            |   |   |                   | 131    |   |   |   | 252 |   |
|  Certificates      of deposit                                 |   |   | 556,097 |   |                      |   | 452,129 |           |   |   | 56,379         |   |   |                   | 47,589 |   |   |   | - |   |
|  Total                                                        |   | $      | 806,782 |   |                      |   | 601,920 |           |   |   | 76,713         |   |   |                   | 77,720 |   |   |   | 50,429 |   |
|  Unused      lines, collateralized by residential real estate |   | $      | 58,751  |   |                      |   | 58,751  |           |   |   | -              |   |   |                   | -      |   |   |   | - |   |
|  Other      unused commitments                                |   |   | 76,125  |   |                      |   | 76,125  |           |   |   | -              |   |   |                   | -      |   |   |   | - |   |
|  Standby      letters of credit                               |   |   | 3,449   |   |                      |   | 3,449   |           |   |   | -              |   |   |                   | -      |   |   |   | - |   |
|  Commitments      to extend credit                            |   |   | 4,512   |   |                      |   | 4,512   |           |   |   | -              |   |   |                   | -      |   |   |   | - |   |
|  Total      loan commitments and unused lines of credit       |   | $      | 142,837 |   |                      |   | 142,837 |           |   |   | -              |   |   |                   | -      |   |   |   | - |   |

ITEM 7A.Quantitative and Qualitative Disclosures about MarketRisk

|                                                                |   |   | 0-90    |   |   |   | 90-365  |   |   |   | 1-5     |   |   |   | 5+       |   |
|---------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|----------|--------|
| Dollars in      thousands                                      |   | Days   |    |   | Days   |   |    | Years  |   |   | Years   |   |
| Investment      securities at amortized cost                        |   | $      | 28,564  |   |   | $      | 69,880  |   |   | $      | 98,862  |   |   | $      | 75,260   |   |
| Federal      Home Loan Bank and Federal Reserve Bank Stock, at cost |   |   | 14,031  |   |   |   | -       |   |   |   | -       |   |   |   | 1,412    |   |
| Loans      held for sale                                            |   |   | -       |   |   |   | -       |   |   |   | -       |   |   |   | 2,876    |   |
| Loans                                                               |   |   | 426,650 |   |   |   | 157,308 |   |   |   | 280,994 |   |   |   | 87,540   |   |
| Other      interest-earning assets                                  |   |   | -       |   |   |   | 9,492   |   |   |   | -       |   |   |   | -        |   |
| Non-rate-sensitive      assets                                      |   |   | 8,115   |   |   |   | -       |   |   |   | -       |   |   |   | 70,410   |   |
|  Total      assets                                             |   |   | 477,360 |   |   |   | 236,680 |   |   |   | 379,856 |   |   |   | 237,498  |   |
| Interest-bearing      deposits                                      |   |   | 325,829 |   |   |   | 221,275 |   |   |   | 103,471 |   |   |   | 205,775  |   |
| Borrowed      funds                                                 |   |   | 79,604  |   |   |   | 70,008  |   |   |   | 40,047  |   |   |   | 60,119   |   |
| Non-rate-sensitive      liabilities and equity                      |   |   | 1,850   |   |   |   | 5,850   |   |   |   | 38,800  |   |   |   | 178,766  |   |
|  Total      liabilities and equity                             |   |   | 407,283 |   |   |   | 297,133 |   |   |   | 182,318 |   |   |   | 444,660  |   |
| Period      gap                                                     |   | $      | 70,077  |   |   | $      | (60,453 | )      |   | $      | 197,538 |   |   | $      | (207,162 | )      |
| Percent      of total assets                                        |   |   | 5.26    | %      |   |   | -4.54   | %      |   |   | 14.84   | %      |   |   | -15.56   | %      |
| Cumulative      gap (current)                                       |   |   | 70,077  |   |   |   | 9,624   |   |   |   | 207,162 |   |   |   | -        |   |
| Percent      of total assets                                        |   |   | 5.26    | %      |   |   | 0.72    | %      |   |   | 15.56   | %      |   |   | 0.00     | %      |

| Changes      in Net Interest Income              | 2009   | 2008   |
|--------------------------------------------------|--------|--------|
| Year      1                                      |   |   |
| Projected      changes if rates decrease by 1.0% | -0.1%  | +1.8%  |
| Projected      change if rates increase by 2.0%  | -1.0%  | -1.2%  |
| Year      2                                      |   |   |
| Projected      changes if rates decrease by 1.0% | -0.8%  | -.0.5% |
| Projected      change if rates increase by 2.0%  | -4.4%  | -6.4%  |

ITEM 8.Financial Statements and Supplementary Data

| As      of December 31,                                                                                                                                                    |   | 2009   |          |   | 2008   |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------------|--------|--------|--------|
| Assets                                                                                                                                                                     |   |   |          |   |   |   |
| Cash      and cash equivalents                                                                                                                                             |   | $      | 15,332,000    |   |   | $      | 16,856,000 |   |
| Securities      available for sale                                                                                                                                         |   |   | 81,838,000    |   |   |   | 13,072,000 |   |
| Securities      to be held to maturity, fair value of $192,838,000at      December 31, 2009, and $229,460,000 at December 31, 2008                                         |   |   | 190,537,000   |   |   |   | 234,767,000 |   |
| Federal      Home Loan Bank and Federal Reserve Bank stock, at cost                                                                                                        |   |   | 15,443,000    |   |   |   | 14,693,000 |   |
| Loans      held for sale                                                                                                                                                   |   |   | 2,876,000     |   |   |   | 1,298,000 |   |
| Loans                                                                                                                                                                      |   |   | 952,492,000   |   |   |   | 979,273,000 |   |
| Less      allowance for loan losses                                                                                                                                        |   |   | 13,637,000    |   |   |   | 8,800,000 |   |
| Net      loans                                                                                                                                                             |   |   | 938,855,000   |   |   |   | 970,473,000 |   |
| Accrued      interest receivable                                                                                                                                           |   |   | 4,889,000     |   |   |   | 5,783,000 |   |
| Premises      and equipment, net                                                                                                                                           |   |   | 18,331,000    |   |   |   | 16,028,000 |   |
| Other      real estate owned                                                                                                                                               |   |   | 5,345,000     |   |   |   | 2,428,000 |   |
| Goodwill                                                                                                                                                                   |   |   | 27,684,000    |   |   |   | 27,684,000 |   |
| Other      assets                                                                                                                                                          |   |   | 30,264,000    |   |   |   | 22,662,000 |   |
| Total      assets                                                                                                                                                          |   | $      | 1,331,394,000 |   |   | $      | 1,325,744,000 |   |
| Liabilities                                                                                                                                                                |   |   |          |   |   |   |   |   |
| Demand      deposits                                                                                                                                                       |   | $      | 66,317,000    |   |   | $      | 68,399,000 |   |
| NOW      deposits                                                                                                                                                          |   |   | 114,955,000   |   |   |   | 108,188,000 |   |
| Money      market deposits                                                                                                                                                 |   |   | 94,425,000    |   |   |   | 129,333,000 |   |
| Savings      deposits                                                                                                                                                      |   |   | 90,873,000    |   |   |   | 82,867,000 |   |
| Certificates      of deposit under $100,000                                                                                                                                |   |   | 212,893,000   |   |   |   | 246,152,000 |   |
| Certificates      of deposit $100,000 or more                                                                                                                              |   |   | 343,204,000   |   |   |   | 290,797,000 |   |
| Total      deposits                                                                                                                                                        |   |   | 922,667,000   |   |   |   | 925,736,000 |   |
| Borrowed      funds                                                                                                                                                        |   |   | 249,778,000   |   |   |   | 272,074,000 |   |
| Other      liabilities                                                                                                                                                     |   |   | 11,011,000    |   |   |   | 10,753,000 |   |
| Total      liabilities                                                                                                                                                     |   |   | 1,183,456,000 |   |   |   | 1,208,563,000 |   |
| Commitments      and contingent liabilities (notes 12, 15, 19 and 20)                                                                                                      |   |   |          |   |   |   |   |   |
| Shareholders’ equity                                                                                                                                                 |   |   |          |   |   |   |   |   |
| Preferred      stock, $1,000 preference value per share                                                                                                                    |   |   | 24,606,000    |   |   |   | - |   |
| Common      stock, one cent par value per share                                                                                                                            |   |   | 97,000        |   |   |   | 97,000 |   |
| Additional      paid-in capital                                                                                                                                            |   |   | 45,121,000    |   |   |   | 44,117,000 |   |
| Retained      earnings                                                                                                                                                     |   |   | 78,450,000    |   |   |   | 74,057,000 |   |
| Accumulated      other comprehensive loss                                                                                                                                  |   |   |          |   |   |   |   |   |
|     Net      unrealized loss on securities available for sale, net of    tax      benefit of $67,000 in 2009 and $441,000 in 2008  |   |   | (125,000      | )      |   |   | (819,000 | ) |
|     Net      unrealized loss on post-retirement benefit costs,    net      of tax benefit of $114,000 in 2009 and $146,000 in 2008 |   |   | (211,000      | )      |   |   | (271,000 | ) |
| Total      shareholders’ equity                                                                                                                                      |   |   | 147,938,000   |   |   |   | 117,181,000 |   |
| Total      liabilities and shareholders’ equity                                                                                                                      |   | $      | 1,331,394,000 |   |   | $      | 1,325,744,000 |   |
| Common stock                                                                                                                                                               |   |   |          |   |   |   |   |   |
| Number      of shares authorized                                                                                                                                           |   |   | 18,000,000    |   |   |   | 18,000,000 |   |
| Number      of shares issued                                                                                                                                               |   |   | 9,744,170     |   |   |   | 9,696,397 |   |
| Number      of shares outstanding                                                                                                                                          |   |   | 9,744,170     |   |   |   | 9,696,397 |   |
| Book      value per share                                                                                                                                                  |   | $      | 12.66         |   |   | $      | 12.09 |   |
| The      accompanying notes are an integral part of these consolidated financial      statements                                                                           |   |

| Years      ended December 31,                                                                                                                  |   | 2009   |       |   | 2008   |   |       | 2007   |   |
|------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
| Interest      and dividend income                                                                                                              |   |   |       |   |   |   |       |   |   |
| Interest      and fees on loans (includes tax-exempt income of$1,472,000      in 2009, $1,245,000 in 2008, and $1,179,000 in 2007)             |   | $      | 49,277,000 |   |   | $      | 58,079,000 |   |   | $ | 60,585,000 |   |
| Interest      on deposits with other banks                                                                                                     |   |   | 1,000      |   |   |   | 3,000      |   |   |   | - |   |
| Interest      and dividends on investments (includes tax-exempt income of $2,980,000 in      2009, $2,820,000 in 2008, and $2,685,000 in 2007) |   |   | 13,291,000 |   |   |   | 13,290,000 |   |   |   | 11,136,000 |   |
| Total      interest and dividend income                                                                                                        |   |   | 62,569,000 |   |   |   | 71,372,000 |   |   |   | 71,721,000 |   |
| Interest      expense                                                                                                                          |   |   |       |   |   |   |       |   |   |   |   |   |
| Interest      on deposits                                                                                                                      |   |   | 11,872,000 |   |   |   | 23,000,000 |   |   |   | 29,745,000 |   |
| Interest      on borrowed funds                                                                                                                |   |   | 7,044,000  |   |   |   | 10,669,000 |   |   |   | 10,140,000 |   |
| Total      interest expense                                                                                                                    |   |   | 18,916,000 |   |   |   | 33,669,000 |   |   |   | 39,885,000 |   |
| Net      interest income                                                                                                                       |   |   | 43,653,000 |   |   |   | 37,703,000 |   |   |   | 31,836,000 |   |
| Provision      for loan losses                                                                                                                 |   |   | 12,160,000 |   |   |   | 4,700,000  |   |   |   | 1,432,000 |   |
| Net      interest income after provision for loan losses                                                                                       |   |   | 31,493,000 |   |   |   | 33,003,000 |   |   |   | 30,404,000 |   |
| Non-interest      income                                                                                                                       |   |   |       |   |   |   |       |   |   |   |   |   |
| Fiduciary      and investment management income                                                                                                |   |   | 1,331,000  |   |   |   | 1,475,000  |   |   |   | 1,737,000 |   |
| Service      charges on deposit accounts                                                                                                       |   |   | 2,516,000  |   |   |   | 2,837,000  |   |   |   | 2,740,000 |   |
| Net      securities gains                                                                                                                      |   |   | -          |   |   |   | -          |   |   |   | 2,000 |   |
| Mortgage      origination and servicing income                                                                                                 |   |   | 2,341,000  |   |   |   | 145,000    |   |   |   | 589,000 |   |
| Other      operating income                                                                                                                    |   |   | 6,566,000  |   |   |   | 5,189,000  |   |   |   | 5,077,000 |   |
| Total      non-interest income                                                                                                                 |   |   | 12,754,000 |   |   |   | 9,646,000  |   |   |   | 10,145,000 |   |
| Non-interest      expense                                                                                                                      |   |   |       |   |   |   |       |   |   |   |   |   |
| Salaries      and employee benefits                                                                                                            |   |   | 10,935,000 |   |   |   | 11,333,000 |   |   |   | 11,037,000 |   |
| Occupancy      expense                                                                                                                         |   |   | 1,580,000  |   |   |   | 1,518,000  |   |   |   | 1,438,000 |   |
| Furniture      and equipment expense                                                                                                           |   |   | 2,273,000  |   |   |   | 2,005,000  |   |   |   | 1,944,000 |   |
| FDIC      insurance premiums                                                                                                                   |   |   | 1,666,000  |   |   |   | 402,000    |   |   |   | 97,000 |   |
| Net      securities losses                                                                                                                     |   |   | 150,000    |   |   |   | 89,000     |   |   |   | - |   |
| Other      than temporary impairment charge                                                                                                    |   |   | 916,000    |   |   |   | -          |   |   |   | - |   |
| Amortization      of core deposit intangible                                                                                                   |   |   | 283,000    |   |   |   | 283,000    |   |   |   | 283,000 |   |
| Other      operating expenses                                                                                                                  |   |   | 8,855,000  |   |   |   | 7,364,000  |   |   |   | 7,384,000 |   |
| Total      non-interest expense                                                                                                                |   |   | 26,658,000 |   |   |   | 22,994,000 |   |   |   | 22,183,000 |   |
| Income      before income taxes                                                                                                                |   |   | 17,589,000 |   |   |   | 19,655,000 |   |   |   | 18,366,000 |   |
| Income      tax expense                                                                                                                        |   |   | 4,547,000  |   |   |   | 5,621,000  |   |   |   | 5,265,000 |   |
| Net      income                                                                                                                                |   | $      | 13,042,000 |   |   | $      | 14,034,000 |   |   | $ | 13,101,000 |   |
| Less      dividends and amortization of premium on preferred stock                                                                             |   |   | 1,161,000  |   |   |   | -          |   |   |   | - |   |
| Net      income available to common shareholders                                                                                               |   | $      | 11,881000  |   |   | $      | 14,034,000 |   |   | $ | 13,101,000 |   |
| Earnings      per common share                                                                                                                 |   |   |       |   |   |   |       |   |   |   |   |   |
| Basic      earnings per share                                                                                                                  |   | $      | 1.22       |   |   | $      | 1.45       |   |   | $ | 1.34 |   |
| Diluted      earnings per share                                                                                                                |   |   | 1.22       |   |   |   | 1.44       |   |   |   | 1.34 |   |
| Cash      dividends declared per share                                                                                                         |   |   | 0.780      |   |   |   | 0.765      |   |   |   | 0.690 |   |
| Weighted      average number of shares outstanding                                                                                             |   |   | 9,721,172  |   |   |   | 9,701,379  |   |   |   | 9,787,287 |   |
| Incremental      shares                                                                                                                        |   |   | 12,072     |   |   |   | 18,952     |   |   |   | 25,731 |   |
| The      accompanying notes are an integral part of these consolidated financial      statements                                               |   |

|                                                                                             |   |      |       |   | Common      stock and           |   |      |     |   |   | Accumulated other |   |   | Total               |       |
|--------------------------------------------------------------------------------------------------|--------|-----------|------------|--------|---------------------------------|--------|-----------|----------|--------|--------|------------------------|--------|--------|---------------------|------------|
|                                                                                             |   | Preferred |       |   | additional      paid-in capital |   |      | Retained |   |   | comprehensive          |   |   | shareholders’ |       |
|                                                                                             |   | stock     |       |   | Shares                          |   |      | Amount   |   |   | earnings               |   |   | income      (loss)  |       |   | equity |   |
| Balance      at December 31, 2006                                                                |   | $         | -          |   |                            |   | 9,770,792 |     |   | $      | 45,685,000             |   |   | $                   | 61,298,000 |   |   | $ | 344,000 |   |   | $ | 107,327,000 |   |
| Net      income                                                                                  |   |      | -          |   |                            |   | -         |     |   |   | -                      |   |   |                | 13,101,000 |   |   |   | - |   |   |   | 13,101,000 |   |
| Net      unrealized loss on securities available for sale, net of tax benefit of      $100,000   |   |      | -          |   |                            |   | -         |     |   |   | -                      |   |   |                | -          |   |   |   | (260,000 | ) |   |   | (260,000 | ) |
| Unrecognized      actuarial gainfor      post-retirement benefits,net      of taxes of $42,000   |   |      | -          |   |                            |   | -         |     |   |   | -                      |   |   |                | -          |   |   |   | 78,000 |   |   |   | 78,000 |   |
| Comprehensive      income                                                                        |   |      | -          |   |                            |   | -         |     |   |   | -                      |   |   |                | 13,101,000 |   |   |   | (182,000 | ) |   |   | 12,919,000 |   |
| Cash      dividends declared                                                                     |   |      | -          |   |                            |   | -         |     |   |   | -                      |   |   |                | (6,752,000 | ) |   |   | - |   |   |   | (6,752,000 | ) |
| Equity      compensation expense                                                                 |   |      | -          |   |                            |   | -         |     |   |   | 59,000                 |   |   |                | -          |   |   |   | - |   |   |   | 59,000 |   |
| Payment      to repurchase common stock                                                          |   |      | -          |   |                            |   | (109,860  | )        |   |   | (1,687,000             | )      |   |                | -          |   |   |   | - |   |   |   | (1,687,000 | ) |
| Proceeds      from sale of common stock                                                          |   |      | -          |   |                            |   | 71,561    |     |   |   | 802,000                |   |   |                | -          |   |   |   | - |   |   |   | 802,000 |   |
| Change      in accounting for split dollar life insurance arrangements                           |   |      | -          |   |                            |   | -         |     |   |   | -                      |   |   |                | (215,000   | ) |   |   | - |   |   |   | (215,000 | ) |
| Balance      at December 31, 2007                                                                |   | $         | -          |   |                            |   | 9,732,493 |     |   | $      | 44,859,000             |   |   | $                   | 67,432,000 |   |   | $ | 162,000 |   |   | $ | 112,453,000 |   |
| Net      income                                                                                  |   |      | -          |   |                            |   | -         |     |   |   | -                      |   |   |                | 14,034,000 |   |   |   | - |   |   |   | 14,034,000 |   |
| Net      unrealized loss on securities available for sale, net of tax benefit of      $675,000   |   |      | -          |   |                            |   | -         |     |   |   | -                      |   |   |                | -          |   |   |   | (1,255,000 | ) |   |   | (1,255,000 | ) |
| Unrecognized      actuarial gainfor      post-retirement benefits,net      of taxes of $1,000    |   |      | -          |   |                            |   | -         |     |   |   | -                      |   |   |                | -          |   |   |   | 3,000 |   |   |   | 3,000 |   |
| Comprehensive      income                                                                        |   |      | -          |   |                            |   | -         |     |   |   | -                      |   |   |                | 14,034,000 |   |   |   | (1,252,000 | ) |   |   | 12,782,000 |   |
| Cash      dividends declared                                                                     |   |      | -          |   |                            |   | -         |     |   |   | -                      |   |   |                | (7,416,000 | ) |   |   | - |   |   |   | (7,416,000 | ) |
| Equity      compensation expense                                                                 |   |      | -          |   |                            |   | -         |     |   |   | 37,000                 |   |   |                | -          |   |   |   | - |   |   |   | 37,000 |   |
| Payment      to repurchase common stock                                                          |   |      | -          |   |                            |   | (88,764   | )        |   |   | (1,414,000             | )      |   |                | -          |   |   |   | - |   |   |   | (1,414,000 | ) |
| Proceeds      from sale of common stock                                                          |   |      | -          |   |                            |   | 52,668    |     |   |   | 732,000                |   |   |                | -          |   |   |   | - |   |   |   | 732,000 |   |
| Tax      benefit of disqualifying disposition of stock optionshares                              |   |      | -          |   |                            |   | -         |     |   |   | -                      |   |   |                | 7,000      |   |   |   | - |   |   |   | 7,000 |   |
| Balance      at December 31, 2008                                                                |   | $         | -          |   |                            |   | 9,696,397 |     |   | $      | 44,214,000             |   |   | $                   | 74,057,000 |   |   | $ | (1,090,000 | ) |   | $ | 117,181,000 |   |
| Net      income                                                                                  |   |      | -          |   |                            |   | -         |     |   |   | -                      |   |   |                | 13,042,000 |   |   |   | - |   |   |   | 13,042,000 |   |
| Net      unrealized gain on securities available for sale, net oftaxesof      $374,000           |   |      | -          |   |                            |   | -         |     |   |   | -                      |   |   |                | -          |   |   |   | 694,000 |   |   |   | 694,000 |   |
| Unrecognized      actuarial gainfor      post-retirement benefits, net of tax benefit of $32,000 |   |      | -          |   |                            |   | -         |     |   |   | -                      |   |   |                | -          |   |   |   | 60,000 |   |   |   | 60,000 |   |
| Comprehensive      income                                                                        |   |      | -          |   |                            |   | -         |     |   |   | -                      |   |   |                | 13,042,000 |   |   |   | 754,000 |   |   |   | 13,796,000 |   |
| Cash      dividends declared                                                                     |   |      | -          |   |                            |   | -         |     |   |   | -                      |   |   |                | (8,649,000 | ) |   |   | - |   |   |   | (8,649,000 | ) |
| Equity      compensation expense                                                                 |   |      | -          |   |                            |   | -         |     |   |   | 37,000                 |   |   |                | -          |   |   |   | - |   |   |   | 37,000 |   |
| Proceeds      from sale of preferred stock                                                       |   |      | 25,000,000 |   |                            |   | -         |     |   |   | -                      |   |   |                | -          |   |   |   | - |   |   |   | 25,000,000 |   |
| Premium      on preferred stock issuance                                                         |   |      | (493,000   | )      |                            |   | -         |     |   |   | 493,000                |   |   |                | -          |   |   |   | - |   |   |   | - |   |
| Amortization      of premium on preferred stock                                                  |   |      | 99,000     |   |                            |   | -         |     |   |   | (99,000                | )      |   |                | -          |   |   |   | - |   |   |   | - |   |
| Payment      to repurchase common stock                                                          |   |      | -          |   |                            |   | (15,925   | )        |   |   | (263,000               | )      |   |                | -          |   |   |   | - |   |   |   | (263,000 | ) |
| Proceeds      from sale of common stock                                                          |   |      | -          |   |                            |   | 63,698    |     |   |   | 836,000                |   |   |                | -          |   |   |   | - |   |   |   | 836,000 |   |
| Balance      at December 31, 2009                                                                |   | $         | 24,606,000 |   |                            |   | 9,744,170 |     |   | $      | 45,218,000             |   |   | $                   | 78,450,000 |   |   | $ | (336,000 | ) |   | $ | 147,938,000 |   |
| The      accompanying notes are an integral part of these consolidated financial      statements |   |

| For      the years ended December 31,                                                                         |   | 2009   |         |   | 2008   |   |         | 2007   |   |
|---------------------------------------------------------------------------------------------------------------|--------|--------|--------------|--------|--------|--------|--------------|--------|--------|
| Cash      flows from operating activities                                                                     |   |   |         |   |   |   |         |   |   |
| Net      income                                                                                               |   | $      | 13,042,000   |   |   | $      | 14,034,000   |   |   | $ | 13,101,000 |   |
| Adjustments      to reconcile net income to net cash provided by operating      activities:                   |   |
|     Depreciation                                                                          |   |   | 1,483,000    |   |   |   | 1,232,000    |   |   |   | 1,224,000 |   |
|     Change      in deferred income taxes                                                  |   |   | (1,210,000   | )      |   |   | (1,039,000   | )      |   |   | (464,000 | ) |
|     Provision      for loan losses                                                        |   |   | 12,160,000   |   |   |   | 4,700,000    |   |   |   | 1,432,000 |   |
|     Loans      originated for resale                                                      |   |   | (117,282,000 | )      |   |   | (19,199,000  | )      |   |   | (24,081,000 | ) |
|     Proceeds      from sales of loans                                                     |   |   | 115,704,000  |   |   |   | 19,718,000   |   |   |   | 22,724,000 |   |
|     Net      (gain) loss on sale or call of securities                                    |   |   | 150,000      |   |   |   | 89,000       |   |   |   | (2,000 | ) |
|     Write-down      of securities available for sale                                      |   |   | 916,000      |   |   |   | -            |   |   |   | - |   |
|     Net      accretion of discounts on investments                                        |   |   | (2,774,000   | )      |   |   | (5,475,000   | )      |   |   | (2,996,000 | ) |
|     Net      loss on sale of other real estate owned                                      |   |   | 223,000      |   |   |   | -            |   |   |   | 20,000 |   |
|     Provision      for losses on other real estate owned                                  |   |   | 481,000      |   |   |   | -            |   |   |   | 56,000 |   |
|     Equity      compensation expense                                                      |   |   | 37,000       |   |   |   | 37,000       |   |   |   | 59,000 |   |
|     Net      change in other assets and accrued interest receivable                       |   |   | (4,013,000   | )      |   |   | (1,627,000   | )      |   |   | (926,000 | ) |
|     Net      change in other liabilities                                                  |   |   | (728,000     | )      |   |   | (1,933,000   | )      |   |   | 486,000 |   |
|     Net      (gain) loss on sale of premises and equipment                                |   |   | 11,000       |   |   |   | 17,000       |   |   |   | (34,000 | ) |
|     Amortization      of investments in limited partnerships                              |   |   | 275,000      |   |   |   | 84,000       |   |   |   | - |   |
|     Net      acquisition amortization                                                     |   |   | 260,000      |   |   |   | 239,000      |   |   |   | 228,000 |   |
| Net      cash provided by operating activities                                                                |   |   | 18,735,000   |   |   |   | 10,877,000   |   |   |   | 10,827,000 |   |
| Cash      flows from investing activities                                                                     |   |   |         |   |   |   |         |   |   |   |   |   |
|     Proceeds      from sales of securities available for sale                             |   |   | 4,051,000    |   |   |   | 14,192,000   |   |   |   | 179,000 |   |
|     Proceeds      from maturities, payments, calls of securities available for      sale  |   |   | 10,255,000   |   |   |   | 3,551,000    |   |   |   | 8,883,000 |   |
|     Proceeds      from maturities, payments, calls of securities held to      maturity    |   |   | 183,973,000  |   |   |   | 106,450,000  |   |   |   | 90,261,000 |   |
|     Proceeds      from sales of other real estate owned                                   |   |   | 820,000      |   |   |   | -            |   |   |   | 978,000 |   |
|     Purchases      of securities available for sale                                       |   |   | (81,853,000  | )      |   |   | (5,373,000   | )      |   |   | - |   |
|     Investments      in limited partnerships                                              |   |   | (1,371,000   | )      |   |   | (1,700,000   | )      |   |   | - |   |
|     Purchases      of securities to be held to maturity                                   |   |   | (138,186,000 | )      |   |   | (154,618,000 | )      |   |   | (133,008,000 | ) |
|     Purchases      of FRB and FHLB stock                                                  |   |   | (750,000     | )      |   |   | (1,463,000   | )      |   |   | (4,983,000 | ) |
|     Net      (increase) decrease in loans                                                 |   |   | 15,017,000   |   |   |   | (63,410,000  | )      |   |   | (83,804,000 | ) |
|     Capital      expenditures                                                             |   |   | (3,798,000   | )      |   |   | (796,000     | )      |   |   | (2,108,000 | ) |
|     Proceeds      from sale of premises and equipment                                     |   |   | 1,000        |   |   |   | -            |   |   |   | 282,000 |   |
| Net      cash used in investing activities                                                                    |   |   | (11,841,000  | )      |   |   | (103,167,000 | )      |   |   | (123,320,000 | ) |
| Cash      flows from financing activities                                                                     |   |   |         |   |   |   |         |   |   |   |   |   |
|     Net      increase (decrease) in transaction and savings accounts                      |   |   | (22,217,000  | )      |   |   | 15,826,000   |   |   |   | (24,102,000 | ) |
|     Net      increase in certificates of deposit                                          |   |   | 19,164,000   |   |   |   | 128,651,000  |   |   |   | 231,000 |   |
|     Advances      on long-term borrowings                                                 |   |   | 10,000,000   |   |   |   | 50,000,000   |   |   |   | 100,000,000 |   |
|     Repayments      on long-term borrowings                                               |   |   | (27,000,000  | )      |   |   | -            |   |   |   | (62,000,000 | ) |
|     Net      increase (decrease) in short-term borrowings                                 |   |   | (5,289,000   | )      |   |   | (94,622,000  | )      |   |   | 98,880,000 |   |
|     Proceeds      from issuance of preferred stock                                        |   |   | 25,000,000   |   |   |   | -            |   |   |   | - |   |
|     Payments      to repurchase common stock                                              |   |   | (263,000     | )      |   |   | (1,414,000   | )      |   |   | (1,687,000 | ) |
|     Proceeds      from sale of common stock                                               |   |   | 836,000      |   |   |   | 732,000      |   |   |   | 802,000 |   |
|     Dividends      paid                                                                   |   |   | (8,649,000   | )      |   |   | (7,281,000   | )      |   |   | (6,565,000 | ) |
| Net      cash provided (used) by financing activities                                                         |   |   | (8,418,000   | )      |   |   | 91,892,000   |   |   |   | 105,559,000 |   |
| Net      decrease in cash and cash equivalents                                                                |   |   | (1,524,000   | )      |   |   | (398,000     | )      |   |   | (6,934,000 | ) |
| Cash      and cash equivalents at beginning of year                                                           |   |   | 16,856,000   |   |   |   | 17,254,000   |   |   |   | 24,188,000 |   |
| Cash      and cash equivalents at end of year                                                                 |   | $      | 15,332,000   |   |   | $      | 16,856,000   |   |   | $ | 17,254,000 |   |
| Interest      paid                                                                                            |   | $      | 19,160,000   |   |   | $      | 34,558,000   |   |   | $ | 39,265,000 |   |
| Income      taxes paid                                                                                        |   |   | 5,859,000    |   |   |   | 7,111,000    |   |   |   | 5,919,000 |   |
| Non-cash      transactions:                                                                                   |   |   |         |   |   |   |         |   |   |   |   |   |
|     Transfer      from loans to other real estate owned                                   |   |   | 4,441,000    |   |   |   | 1,601,000    |   |   |   | 737,000 |   |
|     Net      (increase) decrease in unrealized gain on securities available for      sale |   |   | (1,068,000   | )      |   |   | 1,930,000    |   |   |   | 360,000 |   |
|     Net      decrease in net unrealized loss on postretirement benefit      costs         |   |   | 60,000       |   |   |   | 3,000        |   |   |   | 78,000 |   |

|                                                 |   | Number      of Shares |   |   | Weighted      Average Grant Date Fair Value |   |
|------------------------------------------------------|--------|-----------------------|--------|--------|---------------------------------------------|--------|
| Non-vested      at December 31, 2008                 |   |                  | 21,000 |   |                                        | $      | 4.41 |   |
|      Granted      in 2009   |   |                  | -      |   |                                        |   | - |   |
|      Vested      in 2009    |   |                  | -      |   |                                        |   | - |   |
|      Forfeited      in 2009 |   |                  | -      |   |                                        |   | - |   |
| Non-vested      at December 31, 2009                 |   |                  | 21,000 |   |                                        | $      | 4.41 |   |

|                                                 |   | Number      of Shares |    |   | Weighted      Average Exercise Price |   |   | Weighted      Average Remaining Contractual Term |   |   | Aggregate      IntrinsicValue |   |
|------------------------------------------------------|--------|-----------------------|---------|--------|--------------------------------------|--------|--------|--------------------------------------------------|--------|--------|-------------------------------|--------|
| Outstanding      at December 31, 2008                |   |                  | 76,500  |   |                                 | $      | 13.27  |                                             |   |   |                          |   |   |   |
|      Granted      in 2009   |   |                  | -       |   |                                 |   | -      |                                             |   |   |                          |   |   |   |
|      Vested      in 2009    |   |                  | -       |   |                                 |   | -      |                                             |   |   |                          |   |   |   |
|      Exercised      in 2009 |   |                  | (21,000 | )      |                                 |   | 6.36   |                                             |   |   |                          |   |   |   |
|      Forfeited      in 2009 |   |                  | -       |   |                                 |   | -      |                                             |   |   |                          |   |   |   |
| Outstanding      at December 31, 2009                |   |                  | 55,500  |   |                                 | $      | 15.89  |                                             |   |   | 4.6                           |   |   | $ | 82,000 |   |
| Exercisable      at December 31, 2009                |   |                  | 34,500  |   |                                 | $      | 14.61  |                                             |   |   | 4.1                           |   |   | $ | 82,000 |   |

|                                   |   | Amortized |        |   | Unrealized |   |      | Unrealized |   |   | Fair      Value |   |
|----------------------------------------|--------|-----------|-------------|--------|------------|--------|-----------|------------|--------|--------|-----------------|--------|
|  As of December 31,      2009     |   | Cost      |        |   | Gains      |   |      | Losses     |   |   | (Estimated)     |   |
| Securities      available for sale     |   |      |        |   |       |   |      |       |   |   |            |   |
| U.S.      Treasury and agency          |   | $         | 31,022,000  |   |       | $      | 90,000    |       |   | $      | (153,000        | )      |   | $ | 30,959,000 |   |
| Mortgage-backed      securities        |   |      | 31,254,000  |   |       |   | 133,000   |       |   |   | (239,000        | )      |   |   | 31,148,000 |   |
| State      and political subdivisions  |   |      | 18,219,000  |   |       |   | 414,000   |       |   |   | (119,000        | )      |   |   | 18,514,000 |   |
| Corporate      securities              |   |      | 1,120,000   |   |       |   | -         |       |   |   | (302,000        | )      |   |   | 818,000 |   |
| Other      equity securities           |   |      | 414,000     |   |       |   | 6,000     |       |   |   | (21,000         | )      |   |   | 399,000 |   |
|                                   |   | $         | 82,029,000  |   |       | $      | 643,000   |       |   | $      | (834,000        | )      |   | $ | 81,838,000 |   |
| Securities      to be held to maturity |   |      |        |   |       |   |      |       |   |   |            |   |   |   |   |   |
| U.S.      Treasury and agency          |   | $         | 39,099,000  |   |       | $      | 142,000   |       |   | $      | (554,000        | )      |   | $ | 38,687,000 |   |
| Mortgage-backed      securities        |   |      | 90,193,000  |   |       |   | 1,839,000 |       |   |   | (363,000        | )      |   |   | 91,669,000 |   |
| State      and political subdivisions  |   |      | 61,095,000  |   |       |   | 1,603,000 |       |   |   | (366,000        | )      |   |   | 62,332,000 |   |
| Corporate      securities              |   |      | 150,000     |   |       |   | -         |       |   |   | -               |   |   |   | 150,000 |   |
|                                   |   | $         | 190,537,000 |   |       | $      | 3,584,000 |       |   | $      | (1,283,000      | )      |   | $ | 192,838,000 |   |

|                                   |   | Amortized |        |   | Unrealized |   |      | Unrealized |   |   | Fair      Value |   |
|----------------------------------------|--------|-----------|-------------|--------|------------|--------|-----------|------------|--------|--------|-----------------|--------|
| As      of December 31, 2008           |   | Cost      |        |   | Gains      |   |      | Losses     |   |   | (Estimated)     |   |
| Securities      available for sale     |   |      |        |   |       |   |      |       |   |   |            |   |
| Mortgage-backed      securities        |   | $         | 900,000     |   |       | $      | 22,000    |       |   | $      | -               |   |   | $ | 922,000 |   |
| State      and political subdivisions  |   |      | 8,571,000   |   |       |   | 339,000   |       |   |   | -               |   |   |   | 8,910,000 |   |
| Corporate      securities              |   |      | 4,566,000   |   |       |   | -         |       |   |   | (1,589,000      | )      |   |   | 2,977,000 |   |
| Other      equity securities           |   |      | 295,000     |   |       |   | 2,000     |       |   |   | (34,000         | )      |   |   | 263,000 |   |
|                                   |   | $         | 14,332,000  |   |       | $      | 363,000   |       |   | $      | (1,623,000      | )      |   | $ | 13,072,000 |   |
| Securities      to be held to maturity |   |      |        |   |       |   |      |       |   |   |            |   |   |   |   |   |
| U.S.      Treasury and agency          |   | $         | 110,513,000 |   |       | $      | 74,000    |       |   | $      | (5,871,000      | )      |   | $ | 104,716,000 |   |
| Mortgage-backed      securities        |   |      | 60,774,000  |   |       |   | 640,000   |       |   |   | (297,000        | )      |   |   | 61,117,000 |   |
| State      and political subdivisions  |   |      | 62,330,000  |   |       |   | 952,000   |       |   |   | (684,000        | )      |   |   | 62,598,000 |   |
| Corporate      securities              |   |      | 1,150,000   |   |       |   | -         |       |   |   | (121,000        | )      |   |   | 1,029,000 |   |
|                                   |   | $         | 234,767,000 |   |       | $      | 1,666,000 |       |   | $      | (6,973,000      | )      |   | $ | 229,460,000 |   |

|                       |   | Securities      available for sale |       |   | Securities      to be held to maturity |   |
|----------------------------|--------|------------------------------------|------------|--------|----------------------------------------|--------|
|                       |   | Amortized      Cost                |       |   | Fair      Value (Estimated)            |   |   | Amortized      Cost |   |   | Fair      Value (Estimated) |   |
| Due      in 1 year or less |   | $                                  | -          |   |                                   | $      | - |   |   | $ | 330,000 |   |   | $ | 335,000 |   |
| Due      in 1 to 5 years   |   |                               | 18,144,000 |   |                                   |   | 18,381,000 |   |   |   | 7,934,000 |   |   |   | 8,245,000 |   |
| Due      in 5 to 10 years  |   |                               | 3,671,000  |   |                                   |   | 3,783,000 |   |   |   | 15,020,000 |   |   |   | 15,591,000 |   |
| Due      after 10 years    |   |                               | 59,800,000 |   |                                   |   | 59,275,000 |   |   |   | 167,253,000 |   |   |   | 168,667,000 |   |
| Equity      securities     |   |                               | 414,000    |   |                                   |   | 399,000 |   |   |   | - |   |   |   | - |   |
|                       |   | $                                  | 82,029,000 |   |                                   | $      | 81,838,000 |   |   | $ | 190,537,000 |   |   | $ | 192,838,000 |   |

|                      |   | 2009   |      |   | 2008   |   |       | 2007   |   |
|---------------------------|--------|--------|-----------|--------|--------|--------|------------|--------|--------|
| Proceeds      from sales  |   | $      | 4,051,000 |   |   | $      | 14,192,000 |   |   | $ | 179,000 |   |
| Gross      gains          |   |   | 20,000    |   |   |   | 123,000    |   |   |   | 2,000 |   |
| Gross      losses         |   |   | (170,000  | )      |   |   | (212,000   | )      |   |   | - |   |
| Net      gain (loss)      |   | $      | (150,000  | )      |   | $      | (89,000    | )      |   | $ | 2,000 |   |
| Related      income taxes |   | $      | (52,000   | )      |   | $      | (31,000    | )      |   | $ | 1,000 |   |

|                                  |   | Less      than 12 months |       |   | 12      months or more |   |       | Total  |   |
|---------------------------------------|--------|--------------------------|------------|--------|------------------------|--------|------------|--------|--------|
|                                  |   | Fair                     |       |   | Unrealized             |   |       | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
|  As of December 31,      2009    |   | Value                    |       |   | Losses                 |   |       | Value  |   |   | Losses |   |   | Value |   |   | Losses |   |
| U.S.      Treasury and agency         |   | $                        | 19,999,000 |   |                   | $      | (707,000   | )      |   | $ | - |   |   | $ | - |   |   | $ | 19,999,000 |   |   | $ | (707,000 | ) |
| Mortgage-backed      securities       |   |                     | 47,509,000 |   |                   |   | (602,000   | )      |   |   | - |   |   |   | - |   |   |   | 47,509,000 |   |   |   | (602,000 | ) |
| State      and political subdivisions |   |                     | 9,396,000  |   |                   |   | (147,000   | )      |   |   | 1,350,000 |   |   |   | (338,000 | ) |   |   | 10,746,000 |   |   |   | (485,000 | ) |
| Corporate      securities             |   |                     | -          |   |                   |   | -          |   |   |   | 818,000 |   |   |   | (302,000 | ) |   |   | 818,000 |   |   |   | (302,000 | ) |
| Other      equity securities          |   |                     | -          |   |                   |   | -          |   |   |   | 44,000 |   |   |   | (21,000 | ) |   |   | 44,000 |   |   |   | (21,000 | ) |
|                                  |   | $                        | 76,904,000 |   |                   | $      | (1,456,000 | )      |   | $ | 2,212,000 |   |   | $ | (661,000 | ) |   | $ | 79,116,000 |   |   | $ | (2,117,000 | ) |

|                                  |   | Less      than 12 months |       |   | 12      months or more |   |       | Total  |
|---------------------------------------|--------|--------------------------|------------|--------|------------------------|--------|------------|--------|
|                                  |   | Fair                     |       |   | Unrealized             |   |       | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |
|  As of December 31,      2008    |   | Value                    |       |   | Losses                 |   |       | Value  |   |   | Losses |   |   | Value |   |   | Losses |
| U.S.      Treasury and agency         |   | $                        | 64,951,000 |   |                   | $      | (4,610,000 | )      |   | $ | 10,043,000 |   |   | $ | (1,261,000 | ) |   | $ | 74,994,000 |   |   | $ | (5,871,000 | ) |
| Mortgage-backed      securities       |   |                     | 12,498,000 |   |                   |   | (110,000   | )      |   |   | 3,534,000 |   |   |   | (187,000 | ) |   |   | 16,032,000 |   |   |   | (297,000 | ) |
| State      and political subdivisions |   |                     | 13,592,000 |   |                   |   | (573,000   | )      |   |   | 2,165,000 |   |   |   | (111,000 | ) |   |   | 15,757,000 |   |   |   | (684,000 | ) |
| Corporate      securities             |   |                     | 1,821,000  |   |                   |   | (187,000   | )      |   |   | 1,709,000 |   |   |   | (1,523,000 | ) |   |   | 3,530,000 |   |   |   | (1,710,000 | ) |
| Other      equity securities          |   |                     | -          |   |                   |   | -          |   |   |   | 32,000 |   |   |   | (34,000 | ) |   |   | 32,000 |   |   |   | (34,000 | ) |
|                                  |   | $                        | 92,862,000 |   |                   | $      | (5,480,000 | )      |   | $ | 17,483,000 |   |   | $ | (3,116,000 | ) |   | $ | 110,345,000 |   |   | $ | (8,596,000 | ) |

| As      of December 31,        |   | 2009   |       |   | 2008   |   |
|--------------------------------|--------|--------|------------|--------|--------|--------|
| Mortgage      servicing rights |   | $      | 5,086,000  |   |   | $      | 3,954,000 |   |
| Accumulated      amortization  |   |   | (3,814,000 | )      |   |   | (3,275,000 | ) |
| Impairment      reserve        |   |   | (73,000    | )      |   |   | (368,000 | ) |
|                           |   | $      | 1,199,000  |   |   | $      | 311,000 |   |

| As      of December 31,            |   | 2009   |        |   | 2008   |   |
|------------------------------------|--------|--------|-------------|--------|--------|--------|
| Commercial                         |   |   |        |   |   |   |
|    Real      estate |   | $      | 240,178,000 |   |   | $      | 219,057,000 |   |
|    Construction     |   |   | 48,714,000  |   |   |   | 48,182,000 |   |
|    Other            |   |   | 114,486,000 |   |   |   | 118,109,000 |   |
| Municipal                          |   |   | 45,952,000  |   |   |   | 34,832,000 |   |
| Residential                        |   |   |        |   |   |   |   |   |
|    Term             |   |   | 367,267,000 |   |   |   | 431,520,000 |   |
|    Construction     |   |   | 17,361,000  |   |   |   | 26,235,000 |   |
| Home      equity line of credit    |   |   | 94,324,000  |   |   |   | 77,206,000 |   |
| Consumer                           |   |   | 24,210,000  |   |   |   | 24,132,000 |   |
| Total      loans                   |   | $      | 952,492,000 |   |   | $      | 979,273,000 |   |

| For      the years ended December 31,        |   | 2009   |       |   | 2008   |   |       | 2007   |   |
|----------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
| Balance      at beginning of year            |   | $      | 8,800,000  |   |   | $      | 6,800,000  |   |   | $ | 6,364,000 |   |
| Provision      charged to operating expenses |   |   | 12,160,000 |   |   |   | 4,700,000  |   |   |   | 1,432,000 |   |
|                                         |   |   | 20,960,000 |   |   |   | 11,500,000 |   |   |   | 7,796,000 |   |
| Loans      charged off                       |   |   | (7,576,000 | )      |   |   | (2,941,000 | )      |   |   | (1,337,000 | ) |
| Recoveries      on loans                     |   |   | 253,000    |   |   |   | 241,000    |   |   |   | 341,000 |   |
|   Net      loans charged off       |   |   | (7,323,000 | )      |   |   | (2,700,000 | )      |   |   | (996,000 | ) |
| Balance      at end of year                  |   | $      | 13,637,000 |   |   | $      | 8,800,000  |   |   | $ | 6,800,000 |   |

| As      of December 31,                                              |   | 2009   |       |   | 2008   |   |      | 2007   |   |
|----------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|-----------|--------|--------|
| Average      investment in impaired loans                            |   | $      | 16,263,000 |   |   | $      | 6,199,000 |   |   | $ | 2,427,000 |   |
| Interest      income recognized on impaired loans, all on cash basis |   |   | 70,000     |   |   |   | 24,000    |   |   |   | 163,000 |   |

| As      of December 31,                                                                        |   | 2009   |        |   | 2008   |   |
|------------------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|
| Balance      of impaired loans                                                                 |   | $      | 25,843,000  |   |   | $      | 12,449,000 |   |
| Less      portion for which no allowance for loan losses isallocated                           |   |   | (13,682,000 | )      |   |   | (4,805,000 | ) |
| Portion      of impaired loan balance for which an allowance for loan losses is      allocated |   | $      | 12,161,000  |   |   | $      | 7,644,000 |   |
| Portion      of allowance for loan losses allocated to the impaired loan      balance          |   | $      | 2,196,000   |   |   | $      | 1,957,000 |   |

| For      the years ended December 31, |   | 2009   |       |   | 2008   |   |
|---------------------------------------|--------|--------|------------|--------|--------|--------|
| Balance      at beginning of year     |   | $      | 23,896,000 |   |   | $      | 20,886,000 |   |
| New      loans                        |   |   | 3,820,000  |   |   |   | 12,245,000 |   |
| Repayments                            |   |   | (2,341,000 | )      |   |   | (9,235,000 | ) |
| Balance      at end of year           |   | $      | 25,375,000 |   |   | $      | 23,896,000 |   |

| As      of December 31,            |   | 2009   |       |   | 2008   |   |
|------------------------------------|--------|--------|------------|--------|--------|--------|
| Land                               |   | $      | 3,556,000  |   |   | $      | 3,556,000 |   |
| Land      improvements             |   |   | 648,000    |   |   |   | 636,000 |   |
| Buildings                          |   |   | 13,821,000 |   |   |   | 13,788,000 |   |
| Equipment                          |   |   | 9,532,000  |   |   |   | 6,348,000 |   |
|                               |   |   | 27,557,000 |   |   |   | 24,328,000 |   |
| Less      accumulated depreciation |   |   | 9,226,000  |   |   |   | 8,300,000 |   |
|                               |   | $      | 18,331,000 |   |   | $      | 16,028,000 |   |

| As      of  December 31,               |   | 2009 |      |   | 2008   |   |
|--------------------------------------------------|--------|------|-----------|--------|--------|--------|
| Real      estate acquired in settlement of loans |   | $    | 5,345,000 |   |   | $      | 2,428,000 |   |

| For      the years ended December 31,        |   | 2009   |     |   | 2008   |   |    | 2007   |   |
|----------------------------------------------|--------|--------|----------|--------|--------|--------|---------|--------|--------|
| Balance      at beginning of year            |   | $      | 325,000  |   |   | $      | 325,000 |   |   | $ | 269,000 |   |
| Losses      charged to allowance             |   |   | (223,000 | )      |   |   | -       |   |   |   | - |   |
| Provision      charged to operating expenses |   |   | 481,000  |   |   |   | -       |   |   |   | 56,000 |   |
| Balance      at end of year                  |   | $      | 583,000  |   |   | $      | 325,000 |   |   | $ | 325,000 |   |

| For      the years ended December 31, |   | 2009   |       |   | 2008   |   |       | 2007   |   |
|---------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
| Federal      income tax               |   |   |       |   |   |   |       |   |   |
|    Current             |   | $      | 5,520,000  |   |   | $      | 6,415,000  |   |   | $ | 5,500,000 |   |
|    Deferred            |   |   | (1,210,000 | )      |   |   | (1,039,000 | )      |   |   | (464,000 | ) |
|                                  |   |   | 4,310,000  |   |   |   | 5,376,000  |   |   |   | 5,036,000 |   |
| State      franchise tax              |   |   | 237,000    |   |   |   | 245,000    |   |   |   | 229,000 |   |
|                                  |   | $      | 4,547,000  |   |   | $      | 5,621,000  |   |   | $ | 5,265,000 |   |

| For      the years ended December 31,                |   | 2009   |       |   | 2008   |   |       | 2007   |   |
|------------------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
| Expected      tax expense                            |   | $      | 6,156,000  |   |   | $      | 6,879,000  |   |   | $ | 6,428,000 |   |
| Non-taxable      income                              |   |   | (1,555,000 | )      |   |   | (1,364,000 | )      |   |   | (1,244,000 | ) |
| State      franchise tax, net of federal tax benefit |   |   | 154,000    |   |   |   | 159,000    |   |   |   | 149,000 |   |
| Tax      credits, net of amortization                |   |   | (345,000   | )      |   |   | (100,000   | )      |   |   | - |   |
| Other                                                |   |   | 137,000    |   |   |   | 47,000     |   |   |   | (68,000 | ) |
|                                                 |   | $      | 4,547,000  |   |   | $      | 5,621,000  |   |   | $ | 5,265,000 |   |

|                                                                  |   | 2009   |       |   | 2008   |   |
|-----------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
| Allowance      for loan losses                                        |   | $      | 4,773,000  |   |   | $      | 3,080,000 |   |
| Other      real estate owned                                          |   |   | 204,000    |   |   |   | 114,000 |   |
| Assets      related to FNB acquisition                                |   |   | 1,000      |   |   |   | 9,000 |   |
| Accrued      pension and post-retirement                              |   |   | 1,183,000  |   |   |   | 1,139,000 |   |
| Unrealized      loss on securities available for sale                 |   |   | 67,000     |   |   |   | 441,000 |   |
| Other      than temporary impairment of securities available for sale |   |   | 321,000    |   |   |   | - |   |
| Other      assets                                                     |   |   | 169,000    |   |   |   | 75,000 |   |
| Total      deferred tax asset                                         |   |   | 6,718,000  |   |   |   | 4,858,000 |   |
| Net      deferred loan costs                                          |   |   | (672,000   | )      |   |   | (578,000 | ) |
| Depreciation                                                          |   |   | (2,106,000 | )      |   |   | (1,422,000 | ) |
| Mortgage      servicing rights                                        |   |   | (420,000   | )      |   |   | (109,000 | ) |
| Core      deposit intangible                                          |   |   | (500,000   | )      |   |   | (600,000 | ) |
| Liabilities      related to FNB acquisition                           |   |   | (10,000    | )      |   |   | (32,000 | ) |
| Other      liabilities                                                |   |   | (114,000   | )      |   |   | (35,000 | ) |
| Total      deferred tax liability                                     |   |   | (3,822,000 | )      |   |   | (2,776,000 | ) |
| Net      deferred tax asset                                           |   | $      | 2,896,000  |   |   | $      | 2,082,000 |   |

| Year      ofMaturity |   | Less      than $100,000 |        |   | Greater      than $100,000 |   |        | All      Certificates of Deposit |   |
|----------------------|--------|-------------------------|-------------|--------|----------------------------|--------|-------------|----------------------------------|--------|
| 2010                 |   | $                       | 145,068,000 |   |                       | $      | 307,061,000 |                             |   | $ | 452,129,000 |   |
| 2011                 |   |                    | 15,885,000  |   |                       |   | 7,566,000   |                             |   |   | 23,451,000 |   |
| 2012                 |   |                    | 14,429,000  |   |                       |   | 3,119,000   |                             |   |   | 17,548,000 |   |
| 2013                 |   |                    | 11,850,000  |   |                       |   | 3,530,000   |                             |   |   | 15,380,000 |   |
| 2014                 |   |                    | 25,661,000  |   |                       |   | 21,928,000  |                             |   |   | 47,589,000 |   |
|                 |   | $                       | 212,893,000 |   |                       | $      | 343,204,000 |                             |   | $ | 556,097,000 |   |

| As      of December 31, 2009                                             |   |     |              |   |   |    |
|--------------------------------------------------------------------------|--------|----------|-------------------|--------|--------|---------|
| Federal      Home Loan Bank Advances                                     |   |     |              |   |   |    |
| 2010                                                                     |   |     | 0.20%      - 5.41 | %      |   | $       | 99,225,000 |   |
| 2012                                                                     |   |     | 4.39              | %      |   |    | 10,000,000 |   |
| 2013                                                                     |   |     | 3.49              | %      |   |    | 10,000,000 |   |
| 2014                                                                     |   |     | 2.73%      - 3.89 | %      |   |    | 20,000,000 |   |
| 2015      and thereafter                                                 |   |     | 0.00%      - 2.69 | %      |   |    | 60,177,000 |   |
|                                                                     |   |     |              |   |   |    | 199,402,000 |   |
| Treasury      Tax & Loan Notes (rate at December 31, 2009 was 0.00%) |   | variable |              |   |   | 638,000 |   |
| Repurchase      agreements                                               |   |     |              |   |   |    |   |   |
|      Municipal      and commercial customers    |   |     | 0.90%      - 4.00 | %      |   |    | 49,738,000 |   |
|                                                                     |   |     |              |   |   | $       | 249,778,000 |   |

| As      of December 31, 2008                                             |   |     |              |   |   |      |
|--------------------------------------------------------------------------|--------|----------|-------------------|--------|--------|-----------|
| Federal      Home Loan Bank Advances                                     |   |     |              |   |   |      |
| 2009                                                                     |   |     | 0.36%      - 5.00 | %      |   | $         | 80,227,000 |   |
| 2010                                                                     |   |     | 4.43%      - 5.41 | %      |   |      | 50,000,000 |   |
| 2012                                                                     |   |     | 4.39              | %      |   |      | 10,000,000 |   |
| 2013                                                                     |   |     | 3.49              | %      |   |      | 10,000,000 |   |
| 2014      and thereafter                                                 |   |     | 0.00%      - 3.89 | %      |   |      | 70,184,000 |   |
|                                                                     |   |     |              |   |   |      | 220,411,000 |   |
| Treasury      Tax & Loan Notes (rate at December 31, 2008 was 0.00%) |   | variable |              |   |   | 2,864,000 |   |
| Repurchase      agreements                                               |   |     |              |   |   |      |   |   |
|      Municipal      and commercial customers    |   |     | 1.49%      - 4.75 | %      |   |      | 48,799,000 |   |
|                                                                     |   |     |              |   |   | $         | 272,074,000 |   |

| At      December 31,                          |   | 2009   |       |   | 2008   |   |       | 2007   |   |
|-----------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
| Change      in benefit obligations            |   |   |       |   |   |   |       |   |   |
| Benefit      obligation at beginning of year: |   | $      | 1,990,000  |   |   | $      | 1,949,000  |   |   | $ | 2,005,000 |   |
| Service      cost                             |   |   | 21,000     |   |   |   | 19,000     |   |   |   | 20,000 |   |
| Interest      cost                            |   |   | 134,000    |   |   |   | 134,000    |   |   |   | 136,000 |   |
| Benefits      paid                            |   |   | (143,000   | )      |   |   | (155,000   | )      |   |   | (144,000 | ) |
| Actuarial      (gain) loss                    |   |   | (40,000    | )      |   |   | 43,000     |   |   |   | (68,000 | ) |
| Benefit      obligation at end of year:       |   | $      | 1,962,000  |   |   | $      | 1,990,000  |   |   | $ | 1,949,000 |   |
| Funded      status                            |   |   |       |   |   |   |       |   |   |   |   |   |
| Benefit      obligation at end of year        |   | $      | (1,962,000 | )      |   | $      | (1,990,000 | )      |   | $ | (1,949,000 | ) |
| Accrued      benefit cost                     |   | $      | (1,962,000 | )      |   | $      | (1,990,000 | )      |   | $ | (1,949,000 | ) |

| For      the years ended December 31,                   |   | 2009   |    |   | 2008   |   |    | 2007   |   |
|---------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
| Components      of net periodic benefit cost            |   |   |    |   |   |   |    |   |   |
| Service      cost                                       |   | $      | 21,000  |   |   | $      | 19,000  |   |   | $ | 20,000 |   |
| Interest      cost                                      |   |   | 134,000 |   |   |   | 134,000 |   |   |   | 136,000 |   |
| Amortization      of unrecognized transition obligation |   |   | 29,000  |   |   |   | 29,000  |   |   |   | 29,000 |   |
| Amortization      of prior service credit               |   |   | (1,000  | )      |   |   | (3,000  | )      |   |   | (3,000 | ) |
| Amortization      of accumulated losses                 |   |   | 24,000  |   |   |   | 21,000  |   |   |   | 26,000 |   |
| Net      periodic benefit cost                          |   | $      | 207,000 |   |   | $      | 200,000 |   |   | $ | 208,000 |   |
| Weighted      average assumptions as of December 31     |   |   |    |   |   |   |    |   |   |   |   |   |
| Discount      rate                                      |   |   | 7.0     | %      |   |   | 7.0     | %      |   |   | 7.0 | % |

| At      December 31,                                                                                  |   | 2009   |     |   | 2008   |   |     | Portion      to Be Recognized inIncome      in 2010 |   |
|-------------------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|----------|-----------------------------------------------------|--------|
| Unamortized      prior service credit                                                                 |   | $      | -        |   |   | $      | 1,000    |                                                |   | $ | - |   |
| Unamortized      net actuarial loss                                                                   |   |   | (233,000 | )      |   |   | (297,000 | )                                                   |   |   | - |   |
| Unrecognized      transition obligation                                                               |   |   | (92,000  | )      |   |   | (121,000 | )                                                   |   |   | 29,000 |   |
|                                                                                                  |   |   | (325,000 | )      |   |   | (417,000 | )                                                   |   |   | 29,000 |   |
| Deferred      tax benefit at 35%                                                                      |   |   | 114,000  |   |   |   | 146,000  |                                                |   |   | (10,000 | ) |
| Net      unrecognized post-retirement benefitsincluded      in accumulated other comprehensive income |   | $      | (211,000 | )      |   | $      | (271,000 | )                                                   |   | $ | 19,000 |   |

| As      of December 31,                                      |   | 2009   |        |   | 2008   |   |
|--------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|
| Unused      lines, collateralized by residential real estate |   | $      | 58,751,000  |   |   | $      | 55,370,000 |   |
| Other      unused commitments                                |   |   | 76,125,000  |   |   |   | 75,236,000 |   |
| Standby      letters of credit                               |   |   | 3,449,000   |   |   |   | 2,687,000 |   |
| Commitments      to extend credit                            |   |   | 4,512,000   |   |   |   | 12,496,000 |   |
| Total                                                        |   | $      | 142,837,000 |   |   | $      | 145,789,000 |   |

|                                                                                    |   | Income      |       |   | Shares        |   |      | Per-Share |   |
|-----------------------------------------------------------------------------------------|--------|-------------|------------|--------|---------------|--------|-----------|-----------|--------|
|                                                                                    |   | (Numerator) |       |   | (Denominator) |   |      | Amount    |   |
| For      the year ended December 31, 2009                                               |   |        |       |   |          |   |      |      |   |
| Net      income as reported                                                             |   | $           | 13,042,000 |   |          |   |      |      |   |   |
| Less      dividends and amortization of premium on preferred stock                      |   |        | 1,161,000  |   |          |   |      |      |   |   |
| Basic      EPS: Income available to common shareholders                                 |   |        | 11,881,000 |   |          |   | 9,721,172 |      |   | $ | 1.22 |   |
| Effect      of dilutive securities: incentive stock options                             |   |        |       |   |          |   | 12,072    |      |   |   |   |   |
| Diluted      EPS: Income available to common shareholders plus assumed      conversions |   | $           | 11,881,000 |   |          |   | 9,733,244 |      |   | $ | 1.22 |   |
| For      the year ended December 31, 2008                                               |   |        |       |   |          |   |      |      |   |   |   |   |
| Net      income as reported                                                             |   | $           | 14,034,000 |   |          |   |      |      |   |   |   |   |
| Basic      EPS: Income available to common shareholders                                 |   |        | 14,034,000 |   |          |   | 9,701,379 |      |   | $ | 1.45 |   |
| Effect      of dilutive securities: incentive stock options                             |   |        |       |   |          |   | 18,952    |      |   |   |   |   |
| Diluted      EPS: Income available to common shareholders plus assumed      conversions |   | $           | 14,034,000 |   |          |   | 9,720,331 |      |   | $ | 1.44 |   |
| For      the year ended December 31, 2007                                               |   |        |       |   |          |   |      |      |   |   |   |   |
| Net      income as reported                                                             |   | $           | 13,101,000 |   |          |   |      |      |   |   |   |   |
| Basic      EPS: Income available to common shareholders                                 |   | $           | 13,101,000 |   |          |   | 9,787,287 |      |   | $ | 1.34 |   |
| Effect      of dilutive securities: incentive stock options                             |   |        |       |   |          |   | 25,731    |      |   |   |   |   |
| Diluted      EPS: Income available to common shareholders plus assumed      conversions |   | $           | 13,101,000 |   |          |   | 9,813,018 |      |   | $ | 1.34 |   |

|                                                    |   | At      December 31, 2009 |   |
|---------------------------------------------------------|--------|---------------------------|--------|
|                                                    |   | Level      1              |   |   | Level      2 |   |   | Level      3 |   |   | Total |   |
| Securities      available for sale                      |   |                      |   |   |   |   |   |   |   |   |   |   |
|    U.S.      Treasury and agency         |   | $                         | -      |   |   | $ | 30,959,000 |   |   | $ | - |   |   | $ | 30,959,000 |   |
|    Mortgage-backed      securities       |   |                      | -      |   |   |   | 31,148,000 |   |   |   | - |   |   |   | 31,148,000 |   |
|    State      and political subdivisions |   |                      | -      |   |   |   | 18,514,000 |   |   |   | - |   |   |   | 18,514,000 |   |
|    Corporate      securities             |   |                      | -      |   |   |   | 818,000 |   |   |   | - |   |   |   | 818,000 |   |
|    Other      equity securities          |   |                      | -      |   |   |   | 399,000 |   |   |   | - |   |   |   | 399,000 |   |
| Total      assets                                       |   | $                         | -      |   |   | $ | 81,838,000 |   |   | $ | - |   |   | $ | 81,838,000 |   |

|                                                    |   | At      December 31, 2008 |   |
|---------------------------------------------------------|--------|---------------------------|--------|
|                                                    |   | Level      1              |   |   | Level      2 |   |   | Level      3 |   |   | Total |   |
| Securities      available for sale                      |   |                      |   |   |   |   |   |   |   |   |   |   |
|    Mortgage-backed      securities       |   | $                         | -      |   |   | $ | 922,000 |   |   | $ | - |   |   | $ | 922,000 |   |
|    State      and political subdivisions |   |                      | -      |   |   |   | 8,910,000 |   |   |   | - |   |   |   | 8,910,000 |   |
|    Corporate      securities             |   |                      | -      |   |   |   | 2,977,000 |   |   |   | - |   |   |   | 2,977,000 |   |
|    Other      equity securities          |   |                      | -      |   |   |   | 263,000 |   |   |   | - |   |   |   | 263,000 |   |
| Total      assets                                       |   | $                         | -      |   |   | $ | 13,072,000 |   |   | $ | - |   |   | $ | 13,072,000 |   |

|                           |   | At December 31, 2009 |   |
|--------------------------------|--------|----------------------|--------|
|                           |   | Level      1         |   |   | Level      2 |   |   | Level      3 |   |   | Total |   |
| Mortgage      servicing rights |   | $                    | -      |   |   | $ | 1,199,000 |   |   | $ | - |   |   | $ | 1,199,000 |   |
| Loans      held for sale       |   |                 | -      |   |   |   | 2,876,000 |   |   |   | - |   |   |   | 2,876,000 |   |
| Other      real estate owned   |   |                 | -      |   |   |   | 5,345,000 |   |   |   | - |   |   |   | 5,345,000 |   |
| Impaired      loans            |   |                 | -      |   |   |   | 9,965,000 |   |   |   | - |   |   |   | 9,965,000 |   |
| Total      Assets              |   | $                    | -      |   |   | $ | 19,385,000 |   |   | $ | - |   |   | $ | 19,385,000 |   |

|                           |   | At December 31, 2008 |   |
|--------------------------------|--------|----------------------|--------|
|                           |   | Level      1         |   |   | Level      2 |   |   | Level      3 |   |   | Total |   |
| Mortgage      servicing rights |   | $                    | -      |   |   | $ | 311,000 |   |   | $ | - |   |   | $ | 311,000 |   |
| Loans      held for sale       |   |                 | -      |   |   |   | 1,298,000 |   |   |   | - |   |   |   | 1,298,000 |   |
| Other      real estate owned   |   |                 | -      |   |   |   | 2,428,000 |   |   |   | - |   |   |   | 2,428,000 |   |
| Impaired      loans            |   |                 | -      |   |   |   | 10,492,000 |   |   |   | - |   |   |   | 10,492,000 |   |
| Total      Assets              |   | $                    | -      |   |   | $ | 14,529,000 |   |   | $ | - |   |   | $ | 14,529,000 |   |

|                                                       |   | December 31, 2009 |        |   | December 31, 2008 |   |
|------------------------------------------------------------|--------|-------------------|-------------|--------|-------------------|--------|
|                                                       |   | Carrying          |        |   | Estimated         |   |   | Carrying |   |   | Estimated |   |
|                                                       |   | amount            |        |   | fair      value   |   |   | amount |   |   | fair      value |   |
| Financial      assets                                      |   |              |        |   |              |   |   |   |   |   |   |   |
| Cash      and cash equivalents                             |   | $                 | 15,332,000  |   |              | $      | 15,332,000 |   |   | $ | 16,856,000 |   |   | $ | 16,856,000 |   |
| Securities      available for sale                         |   |              | 81,838,000  |   |              |   | 81,838,000 |   |   |   | 13,072,000 |   |   |   | 13,072,000 |   |
| Securities      to be held to maturity                     |   |              | 190,537,000 |   |              |   | 192,838,000 |   |   |   | 234,767,000 |   |   |   | 229,460,000 |   |
| Federal      Home Loan Bank and Federal Reserve Bank stock |   |              | 15,443,000  |   |              |   | 15,443,000 |   |   |   | 14,693,000 |   |   |   | 14,693,000 |   |
| Loans      held for sale                                   |   |              | 2,876,000   |   |              |   | 2,876,000 |   |   |   | 1,298,000 |   |   |   | 1,298,000 |   |
| Loans      (net of allowance for loan losses)              |   |              | 938,555,000 |   |              |   | 938,095,000 |   |   |   | 970,473,000 |   |   |   | 994,560,000 |   |
| Cash      surrender value of life insurance                |   |              | 9,492,000   |   |              |   | 9,492,000 |   |   |   | 9,148,000 |   |   |   | 9,148,000 |   |
| Accrued      interest receivable                           |   |              | 4,889,000   |   |              |   | 4,889,000 |   |   |   | 5,783,000 |   |   |   | 5,783,000 |   |
| Financial      liabilities                                 |   |              |        |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                   |   | $                 | 922,667,000 |   |              | $      | 877,883,000 |   |   | $ | 925,736,000 |   |   | $ | 904,926,000 |   |
| Borrowed      funds                                        |   |              | 249,778,000 |   |              |   | 255,292,000 |   |   |   | 272,074,000 |   |   |   | 290,336,000 |   |
| Accrued      interest payable                              |   |              | 1,078,000   |   |              |   | 1,078,000 |   |   |   | 1,322,000 |   |   |   | 1,322,000 |   |

| For      the years ended December 31,                          |   | 2009   |      |   | 2008   |   |      | 2007   |   |
|----------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|
| Other      operating income                                    |   |   |      |   |   |   |      |   |   |
| Merchant      credit card processing income                    |   | $      | 2,289,000 |   |   | $      | 2,433,000 |   |   | $ | 2,528,000 |   |
| ATM      income                                                |   |   | 1,184,000 |   |   |   | 1,156,000 |   |   |   | 971,000 |   |
| Gain      on sale of merchant credit card processing portfolio |   |   | 1,402,000 |   |   |   | -         |   |   |   | - |   |
| Other      operating expense                                   |   |   |      |   |   |   |      |   |   |   |   |   |
| Merchant      credit card processing fees                      |   | $      | 2,214,000 |   |   | $      | 2,358,000 |   |   | $ | 2,427,000 |   |

|                                                    |   |   |        |   | For      capital |   |       | To      be well-capitalized  |   |
|---------------------------------------------------------|--------|--------|-------------|--------|------------------|--------|------------|------------------------------|--------|
|                                                    |   |   |        |   | adequacy         |   |       | under      prompt corrective |   |
|                                                    |   | Actual |        |   | purposes         |   |       | action      provisions       |   |
| As      of December 31, 2009                            |   |   |        |   |             |   |       |                         |   |
| Tier      2 capital to                                  |   | $      | 129,338,000 |   |             | $      | 69,553,000 |                         |   | $ | 86,941,000 |   |
|      risk-weighted      assets |   |   | 14.88       | %      |             |   | 8.00       | %                            |   |   | 10.00 | % |
| Tier      1 capital to                                  |   | $      | 118,437,000 |   |             | $      | 34,776,000 |                         |   | $ | 52,165,000 |   |
|      risk-weighted      assets |   |   | 13.62       | %      |             |   | 4.00       | %                            |   |   | 6.00 | % |
| Tier      1 capital to                                  |   | $      | 118,437,000 |   |             | $      | 51,559,000 |                         |   | $ | 64,449,000 |   |
|      average      assets       |   |   | 9.19        | %      |             |   | 4.00       | %                            |   |   | 5.00 | % |
| As      of December 31, 2008                            |   |   |        |   |             |   |       |                         |   |   |   |   |
| Tier      2 capital to                                  |   | $      | 97,454,000  |   |             | $      | 70,243,000 |                         |   | $ | 87,804,000 |   |
|      risk-weighted      assets |   |   | 11.10       | %      |             |   | 8.00       | %                            |   |   | 10.00 | % |
| Tier      1 capital to                                  |   | $      | 88,554,000  |   |             | $      | 35,122,000 |                         |   | $ | 52,682,000 |   |
|      risk-weighted      assets |   |   | 10.09       | %      |             |   | 4.00       | %                            |   |   | 6.00 | % |
| Tier      1 capital to                                  |   | $      | 88,554,000  |   |             | $      | 51,311,000 |                         |   | $ | 64,139,000 |   |
|      average      assets       |   |   | 6.90        | %      |             |   | 4.00       | %                            |   |   | 5.00 | % |

|                                                    |   |   |        |   | For      capital |   |       | To      be well-capitalized  |   |
|---------------------------------------------------------|--------|--------|-------------|--------|------------------|--------|------------|------------------------------|--------|
|                                                    |   |   |        |   | adequacy         |   |       | under      prompt corrective |   |
|                                                    |   | Actual |        |   | purposes         |   |       | action      provisions       |   |
| As      of December 31, 2009                            |   |   |        |   |             |   |       |                         |   |
| Tier      2 capital to                                  |   | $      | 130,031,000 |   |             | $      | 69,557,000 |                         |   |   | n/a |   |
|      risk-weighted      assets |   |   | 14.96       | %      |             |   | 8.00       | %                            |   |   | n/a |   |
| Tier      1 capital to                                  |   | $      | 119,130,000 |   |             | $      | 34,778,000 |                         |   |   | n/a |   |
|      risk-weighted      assets |   |   | 13.70       | %      |             |   | 4.00       | %                            |   |   | n/a |   |
| Tier      1 capital to                                  |   | $      | 119,130,000 |   |             | $      | 50,461,000 |                         |   |   | n/a |   |
|      average      assets       |   |   | 9.44        | %      |             |   | 4.00       | %                            |   |   | n/a |   |
| As      of December 31, 2008                            |   |   |        |   |             |   |       |                         |   |   |   |   |
| Tier      2 capital to                                  |   | $      | 97,649,000  |   |             | $      | 70,218,000 |                         |   |   | n/a |   |
|      risk-weighted      assets |   |   | 11.13       | %      |             |   | 8.00       | %                            |   |   | n/a |   |
| Tier      1 capital to                                  |   | $      | 88,749,000  |   |             | $      | 35,109,000 |                         |   |   | n/a |   |
|      risk-weighted      assets |   |   | 10.11       | %      |             |   | 4.00       | %                            |   |   | n/a |   |
| Tier      1 capital to                                  |   | $      | 88,749,000  |   |             | $      | 50,204,000 |                         |   |   | n/a |   |
|      average      assets       |   |   | 7.07        | %      |             |   | 4.00       | %                            |   |   | n/a |   |

Note21.Reclassifications

| As      of December 31,                                                                                                                      |   | 2009   |        |   | 2008   |   |
|----------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|
| Assets                                                                                                                                       |   |   |        |   |   |   |
| Cash      and cash equivalents                                                                                                               |   | $      | 313,000     |   |   | $      | 213,000 |   |
| Dividends      receivable                                                                                                                    |   |   | 1,900,000   |   |   |   | 1,800,000 |   |
| Investments                                                                                                                                  |   |   | 260,000     |   |   |   | 123,000 |   |
| Investment      in subsidiary                                                                                                                |   |   | 119,786,000 |   |   |   | 89,323,000 |   |
| Goodwill                                                                                                                                     |   |   | 27,559,000  |   |   |   | 27,559,000 |   |
| Other      assets                                                                                                                            |   |   | 20,000      |   |   |   | 64,000 |   |
|         Total      assets                                                                            |   | $      | 149,838,000 |   |   | $      | 119,082,000 |   |
| Liabilities and shareholders’      equity                                                                                              |   |   |        |   |   |   |   |   |
| Dividends      payable                                                                                                                       |   | $      | 1,900,000   |   |   | $      | 1,891,000 |   |
| Other      liabilities                                                                                                                       |   |   | -           |   |   |   | 10,000 |   |
|      Total      liabilities                                                                                         |   |   | 1,900,000   |   |   |   | 1,901,000 |   |
| Shareholders’      equity                                                                                                              |   |   |        |   |   |   |   |   |
| Preferred      stock                                                                                                                         |   |   | 24,606,000  |   |   |   | - |   |
| Common      stock                                                                                                                            |   |   | 97,000      |   |   |   | 97,000 |   |
| Additional      paid-in capital                                                                                                              |   |   | 45,121,000  |   |   |   | 44,117,000 |   |
| Retained      earnings                                                                                                                       |   |   | 78,335,000  |   |   |   | 73,259,000 |   |
| Accumulated      other comprehensive loss                                                                                                    |   |   |        |   |   |   |   |   |
| Net      unrealized loss on available for sale securities, net   of      tax benefit of $3,000 in 2009 and $11,000 in 2008    |   |   | (10,000     | )      |   |   | (21,000 | ) |
| Net      unrealized loss on post-retirement benefit costs, net   of      tax benefit of $114,000 in 2009 and $146,000 in 2008 |   |   | (211,000    | )      |   |   | (271,000 | ) |
|   Total      accumulated other comprehensive loss                                                                                  |   |   | (221,000    | )      |   |   | (292,000 | ) |
|     Total      shareholders’ equity                                                                                |   |   | 147,938,000 |   |   |   | 117,181,000 |   |
|        Total      liabilities and shareholders’ equity                                              |   | $      | 149,838,000 |   |   | $      | 119,082,000 |   |

| For      the years ended December 31,         |   | 2009   |       |   | 2008   |   |       | 2007   |   |
|-----------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
| Investment      income                        |   | $      | 10,000     |   |   | $      | 11,000     |   |   | $ | 28,000 |   |
| Other      income                             |   |   | -          |   |   |   | -          |   |   |   | 26,000 |   |
| Other      expense                            |   |   | 152,000    |   |   |   | 136,000    |   |   |   | 179,000 |   |
| Loss      before Bank earnings                |   |   | (142,000   | )      |   |   | (125,000   | )      |   |   | (125,000 | ) |
| Equity      in earnings of Bank               |   |   |       |   |   |   |       |   |   |   |   |   |
|      Remitted        |   |   | 8,404,000  |   |   |   | 7,281,000  |   |   |   | 7,825,000 |   |
|      Unremitted      |   |   | 4,780,000  |   |   |   | 6,878,000  |   |   |   | 5,401,000 |   |
|      Net      income |   | $      | 13,042,000 |   |   | $      | 14,034,000 |   |   | $ | 13,101,000 |   |

| For      the years ended December 31,                                                       |   | 2009   |        |   | 2008   |   |       | 2007   |   |
|---------------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|------------|--------|--------|
| Cash      flows from operating activities:                                                  |   |   |        |   |   |   |       |   |   |
| Net      income                                                                             |   | $      | 13,042,000  |   |   | $      | 14,034,000 |   |   | $ | 13,101,000 |   |
| Adjustments      to reconcile net income to net cash provided by operating      activities: |   |
|   Depreciation                                                                    |   |   | -           |   |   |   | 2,000      |   |   |   | 1,000 |   |
|   Net      realized loss on sale of securities                                    |   |   | -           |   |   |   | 24,000     |   |   |   | - |   |
|   Equity      compensation expense                                                |   |   | 37,000      |   |   |   | 37,000     |   |   |   | 59,000 |   |
|   (Increase)      decrease in other assets                                        |   |   | 38,000      |   |   |   | (38,000    | )      |   |   | (134,000 | ) |
|   Increase      (decrease) in other liabilities                                   |   |   | (41,000     | )      |   |   | 278,000    |   |   |   | (73,000 | ) |
|   Gain      on sale of real estate                                                |   |   | -           |   |   |   | -          |   |   |   | (27,000 | ) |
|   Unremitted      earnings of Bank                                                |   |   | (4,780,000  | )      |   |   | (6,878,000 | )      |   |   | (5,401,000 | ) |
|    Net      cash provided by operating activities                            |   |   | 8,296,000   |   |   |   | 7,459,000  |   |   |   | 7,526,000 |   |
| Cash      flows from investing activities:                                                  |   |   |        |   |   |   |       |   |   |   |   |   |
|   Proceeds      from maturities and calls of investments                          |   |   | -           |   |   |   | -          |   |   |   | 251,000 |   |
|   Purchases      of investments                                                   |   |   | (120,000    | )      |   |   | -          |   |   |   | - |   |
|   Preferred      stock investment in subsidiary                                   |   |   | (25,000,000 | )      |   |   | -          |   |   |   | - |   |
|   Capital      expenditures                                                       |   |   | -           |   |   |   | -          |   |   |   | (350,000 | ) |
|    Net      cash used in investing activities                                |   |   | (25,120,000 | )      |   |   | -          |   |   |   | (99,000 | ) |
| Cash      flows from financing activities:                                                  |   |   |        |   |   |   |       |   |   |   |   |   |
|   Proceeds      from sale of real estate                                          |   |   | -           |   |   |   | 348,000    |   |   |   | 250,000 |   |
|   Proceeds      from issuance of preferred stock                                  |   |   | 25,000,000  |   |   |   | -          |   |   |   | - |   |
|   Payments      to purchase common stock                                          |   |   | (263,000    | )      |   |   | (1,414,000 | )      |   |   | (1,687,000 | ) |
|   Proceeds      from sale of common stock                                         |   |   | 836,000     |   |   |   | 732,000    |   |   |   | 802,000 |   |
|   Dividends      paid                                                             |   |   | (8,649,000  | )      |   |   | (7,281,000 | )      |   |   | (6,565,000 | ) |
|    Net      cash provided (used) in financing activities                     |   |   | 16,924,000  |   |   |   | (7,615,000 | )      |   |   | (7,200,000 | ) |
| Net      increase (decrease) in cash and cash equivalents                                   |   |   | 100,000     |   |   |   | (156,000   | )      |   |   | 227,000 |   |
| Cash      and cash equivalents at beginning of year                                         |   |   | 213,000     |   |   |   | 369,000    |   |   |   | 142,000 |   |
| Cash      and cash equivalents at end of year                                               |   | $      | 313,000     |   |   | $      | 213,000    |   |   | $ | 369,000 |   |

| 1.   | A      valuation technique that uses a) the quoted price of an identical      liability when traded as an asset, or b) quoted prices for similar      liabilities or similar liabilities when traded as  assets. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | Another      valuation technique that is consistent with the principles of ASC Topic      820, examples include an income approach, such as a present value      technique, or a market approach, such as a technique that is based on the      amount at measurement date that the reporting entity would pay to transfer      the identical liability or would receive to enter into the identical      liability. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Dollars      in thousands except per share data                        |   |   | 2008Q1    |   |   |   | 2008Q2    |   |   |   | 2008Q3    |   |   |   | 2008Q4    |   |   |   | 2009Q1    |   |   |   | 2009Q2    |   |   |   | 2009Q3    |   |   |   | 2009Q4    |   |
|------------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|--------|-----------|--------|
| Balance      Sheets                                                    |   |   |      |   |   |   |      |   |   |   |      |   |   |   |      |   |   |   |      |   |   |   |      |   |   |   |      |   |   |   |      |   |
| Cash                                                                   |   | $      | 15,837    |   |   | $      | 19,997    |   |   | $      | 21,667    |   |   | $      | 16,856    |   |   | $      | 15,815    |   |   | $      | 18,575    |   |   | $      | 23,921    |   |   | $      | 15,332    |   |
| Investments                                                            |   |   | 218,185   |   |   |   | 231,685   |   |   |   | 246,364   |   |   |   | 247,839   |   |   |   | 309,106   |   |   |   | 283,599   |   |   |   | 250,359   |   |   |   | 272,375   |   |
| FHLB      & FRB stock,   at      cost               |   |   | 14,693    |   |   |   | 14,693    |   |   |   | 14,693    |   |   |   | 14,693    |   |   |   | 14,693    |   |   |   | 14,693    |   |   |   | 14,693    |   |   |   | 15,443    |   |
| Net      loans                                                         |   |   | 928,887   |   |   |   | 946,267   |   |   |   | 953,797   |   |   |   | 971,771   |   |   |   | 982,158   |   |   |   | 973,746   |   |   |   | 963,817   |   |   |   | 941,730   |   |
| Other      assets                                                      |   |   | 70,606    |   |   |   | 72,731    |   |   |   | 74,636    |   |   |   | 74,585    |   |   |   | 76,728    |   |   |   | 79,373    |   |   |   | 79,052    |   |   |   | 86,514    |   |
|    Total      assets                                    |   | $      | 1,248,208 |   |   | $      | 1,285,373 |   |   | $      | 1,311,157 |   |   | $      | 1,325,744 |   |   | $      | 1,398,500 |   |   | $      | 1,369,986 |   |   | $      | 1,331,842 |   |   | $      | 1,331,394 |   |
| Deposits                                                               |   | $      | 826,477   |   |   | $      | 842,120   |   |   | $      | 918,856   |   |   | $      | 925,736   |   |   | $      | 987,440   |   |   | $      | 913,949   |   |   | $      | 960,072   |   |   | $      | 922,667   |   |
| Borrowed      funds                                                    |   |   | 295,253   |   |   |   | 317,055   |   |   |   | 264,617   |   |   |   | 272,074   |   |   |   | 254,124   |   |   |   | 297,361   |   |   |   | 213,061   |   |   |   | 249,778   |   |
| Other      liabilities                                                 |   |   | 12,867    |   |   |   | 11,440    |   |   |   | 11,812    |   |   |   | 10,753    |   |   |   | 12,336    |   |   |   | 12,478    |   |   |   | 11,095    |   |   |   | 11,011    |   |
| Shareholders’      equity                                        |   |   | 113,611   |   |   |   | 114,758   |   |   |   | 115,872   |   |   |   | 117,181   |   |   |   | 144,600   |   |   |   | 146,198   |   |   |   | 147,614   |   |   |   | 147,938   |   |
|   Total      liabilities   &      equity  |   | $      | 1,248,208 |   |   | $      | 1,285,373 |   |   | $      | 1,311,157 |   |   | $      | 1,325,744 |   |   | $      | 1,398,500 |   |   | $      | 1,369,986 |   |   | $      | 1,331,842 |   |   | $      | 1,331,394 |   |
| Income      Statements                                                 |   |   |      |   |   |   |      |   |   |   |      |   |   |   |      |   |   |   |      |   |   |   |      |   |   |   |      |   |   |   |      |   |
| Interest      income                                                   |   | $      | 18,330    |   |   | $      | 17,514    |   |   | $      | 17,891    |   |   | $      | 17,637    |   |   | $      | 16,618    |   |   | $      | 16,251    |   |   | $      | 15,224    |   |   | $      | 14,476    |   |
| Interest      expense                                                  |   |   | 9,513     |   |   |   | 8,572     |   |   |   | 8,268     |   |   |   | 7,316     |   |   |   | 5,545     |   |   |   | 4,814     |   |   |   | 4,409     |   |   |   | 4,148     |   |
|    Net      interest income                             |   |   | 8,817     |   |   |   | 8,942     |   |   |   | 9,623     |   |   |   | 10,321    |   |   |   | 11,073    |   |   |   | 11,437    |   |   |   | 10,815    |   |   |   | 10,328    |   |
|    Provision      for   loan      losses |   |   | 500       |   |   |   | 939       |   |   |   | 875       |   |   |   | 2,386     |   |   |   | 1,650     |   |   |   | 2,950     |   |   |   | 3,060     |   |   |   | 4,500     |   |
| Net      interest income after provision for loan losses               |   |   | 8,317     |   |   |   | 8,003     |   |   |   | 8,748     |   |   |   | 7,935     |   |   |   | 9,423     |   |   |   | 8,487     |   |   |   | 7,755     |   |   |   | 5,828     |   |
| Non-interest      income                                               |   |   | 2,176     |   |   |   | 2,518     |   |   |   | 2,856     |   |   |   | 2,096     |   |   |   | 2,586     |   |   |   | 2,963     |   |   |   | 2,977     |   |   |   | 4,229     |   |
| Non-interest      expense                                              |   |   | 5,449     |   |   |   | 5,425     |   |   |   | 6,284     |   |   |   | 5,836     |   |   |   | 6,787     |   |   |   | 6,234     |   |   |   | 6,872     |   |   |   | 6,766     |   |
|    Income      before taxes                             |   |   | 5,044     |   |   |   | 5,096     |   |   |   | 5,320     |   |   |   | 4,195     |   |   |   | 5,222     |   |   |   | 5,216     |   |   |   | 3,860     |   |   |   | 3,291     |   |
| Income      taxes                                                      |   |   | 1,453     |   |   |   | 1,493     |   |   |   | 1,488     |   |   |   | 1,187     |   |   |   | 1,494     |   |   |   | 1,454     |   |   |   | 970       |   |   |   | 629       |   |
|    Net      income                                      |   | $      | 3,591     |   |   | $      | 3,603     |   |   | $      | 3,832     |   |   | $      | 3,008     |   |   | $      | 3,728     |   |   | $      | 3,762     |   |   | $      | 2,890     |   |   | $      | 2,662     |   |
| Less      preferred stockpremium      amortizationand      dividends   |   |   | -         |   |   |   | -         |   |   |   | -         |   |   |   | -         |   |   |   | 150       |   |   |   | 337       |   |   |   | 337       |   |   |   | 337       |   |
| Net      income available to common shareholders                       |   | $      | 3,591     |   |   | $      | 3,603     |   |   | $      | 3,832     |   |   | $      | 3,008     |   |   | $      | 3,578     |   |   | $      | 3,425     |   |   | $      | 2,553     |   |   | $      | 2,325     |   |
| Basic      earnings per share                                          |   | $      | 0.37      |   |   | $      | 0.37      |   |   | $      | 0.40      |   |   | $      | 0.31      |   |   | $      | 0.37      |   |   | $      | 0.35      |   |   | $      | 0.26      |   |   | $      | 0.24      |   |
| Diluted      earnings per share                                        |   | $      | 0.37      |   |   | $      | 0.37      |   |   | $      | 0.39      |   |   | $      | 0.31      |   |   | $      | 0.37      |   |   | $      | 0.35      |   |   | $      | 0.26      |   |   | $      | 0.24      |   |

ITEM 9.Changes in and Disagreements with Accountants

ITEM 9A.Controls and Procedures

ITEM 9B.Other Information

ITEM 10.Directors, Executive Officers and Corporate Governance

ITEM 11.Executive Compensation

ITEM 12.Security Ownership of Certain Beneficial Owners and Management and RelatedStockholder Matters

ITEM 13.Certain Relationships and Related Transactions, and DirectorIndependence

ITEM 14.Principal Accounting Fees and Services

ITEM 15.Exhibits, Financial Statement Schedules

SIGNATURES

| /s/      DANIEL R.      DAIGNEAULT                                                      /s/      F. STEPHEN WARD                                                                                                                                                    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Daniel      R. Daigneault, President and      Director                              F.      Stephen Ward , Treasurer and Chief Financial Officer                                                                                                                                                                                                                                            |
| (Principal      Executive      Officer)                                                          (Principal      Financial Officer, Principal Accounting Officer)                                                                               |
| March      12,      2010                                                                                     March 12,      2010       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| /s/      STUART G. SMITH                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Stuart      G. Smith, Director and Chairman of the Board                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| March      12, 2010                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| /s/      KATHERINE M.      BOYD                                                            /s/      CARL S. POOLE, JR.                                                                                                                |
| Katherine      M. Boyd ,      Director                                                        Carl      S. Poole, Jr., Director                                                                                                                           |
| March      12,      2010                                                                                 March      12, 2010 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| /s/      ROBERT B.      GREGORY                                                             /s/      MARK N. ROSBOROUGH                                                                                                          |
| Robert      B. Gregory,      Director                                                           Mark      N. Rosborough, Director                                                                                                          |
| March      12,      2010                                                                                 March      12, 2010 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| /s/      TONY C.      MCKIM                                                                          /s/ DAVID B. SOULE, JR.                                                                  |
| Tony      C. McKim,      Director                                                              David      B. Soule, Jr. , Director                                                                                          |
| March      12,      2010                                                                                     March 12,      2010       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| /s/      BRUCE A. TINDAL                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Bruce      A. Tindal, Director                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| March      12, 2010                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |