----

----

----

material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. 

material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management identifiedand included in its assessment the following material weaknesses: (1) management has not sufficiently adapted it’s policies and procedures for the identification, monitoring and evaluation of impaired loans and for the timely revision to management’s approach for assessing credit risk inherent in the Company’s loan portfolio to reflect changes in the economic environment and (2) management has not adapted its policies and procedures for monitoring andapproving of disbursements, capitalizing of costs and reconciling of accounts for specific other real estate owned. 

es described above were considered in determining the nature, timing and extent of audit tests applied in our audit of the 2009 financial statements and this report does not affect our report thereon. 

aforementioned material weakness
 on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2009, based on the criteria established inInternal Control – Integrated Framework issued by the Committee of Sponsoring Organization of the Treadway Commission. 

----

|                                                                       |   | December 31, |      |
|----------------------------------------------------------------------------|--------|--------------|-----------|
|                                                                       |   | 2009         |      |   | 2008 |   |
| ASSETS                                                                     |   |         |      |   |   |   |
| Cash and due from banks                                                    |   | $            | 93,761    |   |   | $ | 52,022 |   |
| Federal funds sold                                                         |   |         | 333,819   |   |   |   | 117,740 |   |
| Securities                                                                 |   |         |      |   |   |   |   |   |
| Available for sale, at fair value                                          |   |         | 85,092    |   |   |   | 90,606 |   |
| Held to maturity (fair value $2,024 and $3,340)                            |   |         | 2,102     |   |   |   | 3,085 |   |
| Total securities                                                           |   |         | 87,194    |   |   |   | 93,691 |   |
|                                                                       |   |         |      |   |   |   |   |   |
| Loans held for resale                                                      |   |         | 3,221     |   |   |   | 6,678 |   |
| Loans                                                                      |   |         | 2,866,277 |   |   |   | 3,772,055 |   |
| Allowance for loan losses                                                  |   |         | (151,349  | ) |   |   | (112,556 | ) |
| Net loans                                                                  |   |         | 2,718,149 |   |   |   | 3,666,177 |   |
|                                                                       |   |         |      |   |   |   |   |   |
| Premises and equipment, net                                                |   |         | 47,704    |   |   |   | 51,502 |   |
| Intangible assets                                                          |   |         | 581       |   |   |   | 794 |   |
| Federal Home Loan Bank (FHLB) stock                                        |   |         | 19,885    |   |   |   | 19,885 |   |
| Bank owned life insurance (BOLI)                                           |   |         | 25,385    |   |   |   | 24,321 |   |
| Other real estate owned                                                    |   |         | 169,674   |   |   |   | 10,803 |   |
| Other assets                                                               |   |         | 98,832    |   |   |   | 67,510 |   |
| Total assets                                                               |   | $            | 3,594,984 |   |   | $ | 4,104,445 |   |
|                                                                       |   |         |      |   |   |   |   |   |
| LIABILITIES                                                                |   |         |      |   |   |   |   |   |
| Deposits                                                                   |   |         |      |   |   |   |   |   |
| Noninterest bearing                                                        |   | $            | 377,258   |   |   | $ | 395,451 |   |
| Interest bearing                                                           |   |         | 2,745,218 |   |   |   | 2,879,714 |   |
| Total deposits                                                             |   |         | 3,122,476 |   |   |   | 3,275,165 |   |
|                                                                       |   |         |      |   |   |   |   |   |
| Federal funds purchased and securities sold under agreements to repurchase |   |         | 11,107    |   |   |   | 21,616 |   |
| Federal Home Loan Bank advances                                            |   |         | 375,479   |   |   |   | 429,417 |   |
| Junior subordinated debentures                                             |   |         | 5,156     |   |   |   | 5,156 |   |
| Other liabilities                                                          |   |         | 19,280    |   |   |   | 21,048 |   |
| Total liabilities                                                          |   |         | 3,533,498 |   |   |   | 3,752,402 |   |
|                                                                       |   |         |      |   |   |   |   |   |
| Commitments and Contingent Liabilities (Note 18)                           |   |         |      |   |   |   |   |   |
|                                                                       |   |         |      |   |   |   |   |   |
| SHAREHOLDERS' EQUITY                                                       |   |         |      |   |   |   |   |   |
| Preferred stock, no par value; 10,000,000 shares authorized                |   |         | -         |   |   |   | - |   |
| Common stock, no par value; 10,000,000 shares authorized; 4,725,076 and    |   |         |      |   |   |   |   |   |
| 4,709,510 shares issued and outstanding in 2009 and 2008, respectively     |   |         | 258,202   |   |   |   | 256,137 |   |
| Retained earnings (accumulated deficit)                                    |   |         | (197,083  | ) |   |   | 98,020 |   |
| Accumulated other comprehensive income (loss), net of tax                  |   |         | 367       |   |   |   | (2,114 | ) |
| Total shareholders' equity                                                 |   |         | 61,486    |   |   |   | 352,043 |   |
| Total liabilities and shareholders' equity                                 |   | $            | 3,594,984 |   |   | $ | 4,104,445 |   |

----

|                                                       |   | For the Year Ended December 31, |      |
|------------------------------------------------------------|--------|---------------------------------|-----------|
|                                                       |   | 2009                            |      |   | 2008 |   |   | 2007 |   |
| INTEREST INCOME                                            |   |                            |      |   |   |   |   |   |   |
| Interest and fees on loans                                 |   | $                               | 173,934   |   |   | $ | 273,392 |   |   | $ | 294,099 |   |
| Interest on federal funds sold                             |   |                            | 766       |   |   |   | 457 |   |   |   | 958 |   |
| Interest on investments                                    |   |                            |      |   |   |   |   |   |   |   |   |   |
| Taxable                                                    |   |                            | 2,660     |   |   |   | 4,999 |   |   |   | 4,475 |   |
| Exempt from federal income tax                             |   |                            | 173       |   |   |   | 207 |   |   |   | 140 |   |
| Total interest income                                      |   |                            | 177,533   |   |   |   | 279,055 |   |   |   | 299,672 |   |
| INTEREST EXPENSE                                           |   |                            |      |   |   |   |   |   |   |   |   |   |
| Interest on deposits                                       |   |                            | 77,661    |   |   |   | 96,091 |   |   |   | 97,080 |   |
| Interest on FHLB advances                                  |   |                            | 15,555    |   |   |   | 14,244 |   |   |   | 13,402 |   |
| Interest on federal funds purchased and securities         |   |                            |      |   |   |   |   |   |   |   |   |   |
| sold under agreements to repurchase                        |   |                            | 246       |   |   |   | 1,850 |   |   |   | 2,559 |   |
| Total interest expense                                     |   |                            | 93,462    |   |   |   | 112,185 |   |   |   | 113,041 |   |
| Net interest income                                        |   |                            | 84,071    |   |   |   | 166,870 |   |   |   | 186,631 |   |
| PROVISION FOR LOAN LOSSES                                  |   |                            | 375,000   |   |   |   | 120,000 |   |   |   | 11,400 |   |
| Net interest income (loss) after provision for loan losses |   |                            | (290,929  | ) |   |   | 46,870 |   |   |   | 175,231 |   |
|                                                       |   |                            |      |   |   |   |   |   |   |   |   |   |
| NONINTEREST INCOME                                         |   |                            |      |   |   |   |   |   |   |   |   |   |
| Other-than-temporary impairment loss on securities         |   |                            | (4,289    | ) |   |   | (6,430 | ) |   |   | - |   |
| Net gain (loss) on sale of securities                      |   |                            | (102      | ) |   |   | 4,570 |   |   |   | (937 | ) |
| Gain on sale of secondary mortgage loans                   |   |                            | 1,675     |   |   |   | 1,321 |   |   |   | 1,586 |   |
| Gain on sale of premises and equipment                     |   |                            | 136       |   |   |   | 30 |   |   |   | 24 |   |
| Net gain (loss) on other real estate owned                 |   |                            | (7,054    | ) |   |   | 97 |   |   |   | - |   |
| Service charges on deposit accounts                        |   |                            | 6,154     |   |   |   | 5,421 |   |   |   | 4,721 |   |
| Other noninterest income                                   |   |                            | 8,394     |   |   |   | 9,821 |   |   |   | 7,915 |   |
| Total noninterest income                                   |   |                            | 4,914     |   |   |   | 14,830 |   |   |   | 13,309 |   |
|                                                       |   |                            |      |   |   |   |   |   |   |   |   |   |
| NONINTEREST EXPENSE                                        |   |                            |      |   |   |   |   |   |   |   |   |   |
| Salaries and employee benefits                             |   |                            | 46,985    |   |   |   | 48,403 |   |   |   | 48,297 |   |
| Occupancy expense                                          |   |                            | 10,953    |   |   |   | 11,148 |   |   |   | 9,956 |   |
| State business taxes                                       |   |                            | 1,068     |   |   |   | 2,013 |   |   |   | 2,066 |   |
| FHLB prepayment penalty                                    |   |                            | -         |   |   |   | - |   |   |   | 1,534 |   |
| Federal Deposit Insurance Corporation (FDIC) assessments   |   |                            | 15,962    |   |   |   | 2,650 |   |   |   | 362 |   |
| Other noninterest expense                                  |   |                            | 24,766    |   |   |   | 18,785 |   |   |   | 14,801 |   |
|                                                       |   |                            | 99,734    |   |   |   | 82,999 |   |   |   | 77,016 |   |
| Goodwill impairment                                        |   |                            | -         |   |   |   | 77,073 |   |   |   | - |   |
| Total noninterest expense                                  |   |                            | 99,734    |   |   |   | 160,072 |   |   |   | 77,016 |   |
| INCOME (LOSS) BEFORE PROVISION (BENEFIT)                   |   |                            |      |   |   |   |   |   |   |   |   |   |
| FOR INCOME TAX                                             |   |                            | (385,749  | ) |   |   | (98,372 | ) |   |   | 111,524 |   |
| PROVISION (BENEFIT) FOR INCOME TAX                         |   |                            | (90,655   | ) |   |   | (8,635 | ) |   |   | 37,586 |   |
| NET INCOME (LOSS)                                          |   | $                               | (295,094  | ) |   | $ | (89,737 | ) |   | $ | 73,938 |   |
| Weighted average number of                                 |   |                            |      |   |   |   |   |   |   |   |   |   |
| shares outstanding for the period                          |   |                            | 4,713,219 |   |   |   | 4,699,163 |   |   |   | 4,526,572 |   |
| Basic earnings (loss) per share                            |   | $                               | (62.61    | ) |   | $ | (19.10 | ) |   | $ | 16.33 |   |
| Weighted average number of diluted shares                  |   |                            |      |   |   |   |   |   |   |   |   |   |
| outstanding for the period                                 |   |                            | 4,713,219 |   |   |   | 4,699,163 |   |   |   | 4,560,107 |   |
| Diluted earnings (loss) per share                          |   | $                               | (62.61    | ) |   | $ | (19.10 | ) |   | $ | 16.21 |   |

----

|                                                                                                                                        |   |         |      |   |          |   |    |          |   |   |         |   |   | Retained      |   |   | Accumulated   |     |     |   |   |
|---------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|-----------|--------|---------------|--------|---------|---------------|--------|--------|--------------|--------|--------|---------------|--------|--------|---------------|----------|----------|--------|--------|
|                                                                                                                                        |   |         |      |   |          |   |    |          |   |   |         |   |   | Earnings      |   |   | Other         |     |     |   |   |
|                                                                                                                                        |   | Common Stock |      |   | Comprehensive |   |    |          |   |   | (Accumulated |   |   | Comprehensive |   |   |          |     |
|                                                                                                                                        |   | Shares (1)   |      |   | Amount        |   |    | Income (Loss) |   |   |         |   |   | Deficit)      |   |   | Income (Loss) |     |     | Total  |   |
| Balance, December 31, 2006                                                                                                                  |   |         | 4,535,032 |   |          |   | 186,163 |          |   |   |         |   |   |          |   |   | 202,945       |     |     |   | 6,175  |   |   |   | 395,283 |   |
|                                                                                                                                        |   |         |      |   |          |   |    |          |   |   |         |   |   |          |   |   |          |     |     |   |   |   |   |   |   |   |
| Comprehensive Income:                                                                                                                       |   |         |      |   |          |   |    |          |   |   |         |   |   |          |   |   |          |     |     |   |   |   |   |   |   |   |
| Net income                                                                                                                                  |   |         | -         |   |          |   | -       |          |   | $      | 73,938       |   |   |          |   |   |          | 73,938   |     |   |   | - |   |   |   | 73,938 |   |
| Other comprehensive income (loss),                                                                                                          |   |         |      |   |          |   |    |          |   |   |         |   |   |          |   |   |          |     |     |   |   |   |   |   |   |   |   |
| Unrealized loss on available                                                                                                                |   |         |      |   |          |   |    |          |   |   |         |   |   |          |   |   |          |     |     |   |   |   |   |   |   |   |   |
|  for sale securities, net of tax ($699)                                                                                                |   |         | -         |   |          |   | -       |          |   |   | (1,308       | )      |   |          |   |   |          | -        |     |   |   | (1,308 | ) |   |   | (1,308 | ) |
|      Total comprehensive income                                                                                    |   |         |      |   |          |   |    |          |   | $      | 72,630       |   |   |          |   |   |          |     |     |   |   |   |   |   |   |   |   |
| Stock-based compensation                                                                                                                    |   |         | -         |   |          |   | 2,583   |          |   |   |         |   |   |          |   |   |          | -        |     |   |   | - |   |   |   | 2,583 |   |
| Issuances of common stock under stock plans                                                                                                 |   |         | 7,199     |   |          |   | -       |          |   |   |         |   |   |          |   |   |          | -        |     |   |   | - |   |   |   | - |   |
| Stock options exercised                                                                                                                     |   |         | 13,910    |   |          |   | 1,861   |          |   |   |         |   |   |          |   |   |          | -        |     |   |   | - |   |   |   | 1,861 |   |
| Tax benefit from stock options                                                                                                              |   |         | -         |   |          |   | 237     |          |   |   |         |   |   |          |   |   |          | -        |     |   |   | - |   |   |   | 237 |   |
| Stock issued in connection with merger                                                                                                      |   |         | 323,079   |   |          |   | 61,613  |          |   |   |         |   |   |          |   |   |          | -        |     |   |   | - |   |   |   | 61,613 |   |
| Fractional shares -  merger                                                                                                       |   |         | -         |   |          |   | -       |          |   |   |         |   |   |          |   |   |          | (1       | )        |   |   | - |   |   |   | (1 | ) |
| Stock repurchased                                                                                                                           |   |         | (184,133  | )      |          |   | (165    | )             |   |   |         |   |   |          |   |   |          | (44,219  | )        |   |   | - |   |   |   | (44,384 | ) |
| Cash dividends declared ($6.50 per share)                                                                                                   |   |         | -         |   |          |   | -       |          |   |   |         |   |   |          |   |   |          | (30,210  | )        |   |   | - |   |   |   | (30,210 | ) |
| Balance, December 31, 2007                                                                                                                  |   |         | 4,695,087 |   |          |   | 252,292 |          |   |   |         |   |   |          |   |   |          | 202,453  |     |   |   | 4,867 |   |   |   | 459,612 |   |
|                                                                                                                                        |   |         |      |   |          |   |    |          |   |   |         |   |   |          |   |   |          |     |     |   |   |   |   |   |   |   |   |
| Comprehensive Loss:                                                                                                                         |   |         |      |   |          |   |    |          |   |   |         |   |   |          |   |   |          |     |     |   |   |   |   |   |   |   |   |
| Net loss                                                                                                                                    |   |         | -         |   |          |   | -       |          |   | $      | (89,737      | )      |   |          |   |   |          | (89,737  | )        |   |   | - |   |   |   | (89,737 | ) |
| Other comprehensive income (loss),                                                                                                          |   |         |      |   |          |   |    |          |   |   |         |   |   |          |   |   |          |     |     |   |   |   |   |   |   |   |   |
| Unrealized loss on available                                                                                                                |   |         |      |   |          |   |    |          |   |   |         |   |   |          |   |   |          |     |     |   |   |   |   |   |   |   |   |
|  for sale securities, net of tax ($4,085)                                                                                              |   |         | -         |   |          |   | -       |          |   |   | (6,981       | )      |   |          |   |   |          | -        |     |   |   | (6,981 | ) |   |   | (6,981 | ) |
|      Total comprehensive loss                                                                                      |   |         |      |   |          |   |    |          |   | $      | (96,718      | )      |   |          |   |   |          |     |     |   |   |   |   |   |   |   |   |
| Stock-based compensation                                                                                                                    |   |         | -         |   |          |   | 3,407   |          |   |   |         |   |   |          |   |   |          | -        |     |   |   | - |   |   |   | 3,407 |   |
| Issuances of common stock under stock plans                                                                                                 |   |         | 13,022    |   |          |   | -       |          |   |   |         |   |   |          |   |   |          | -        |     |   |   | - |   |   |   | - |   |
| Stock options exercised                                                                                                                     |   |         | 3,113     |   |          |   | 391     |          |   |   |         |   |   |          |   |   |          | -        |     |   |   | - |   |   |   | 391 |   |
| Tax benefit from stock options                                                                                                              |   |         | -         |   |          |   | 49      |          |   |   |         |   |   |          |   |   |          | -        |     |   |   | - |   |   |   | 49 |   |
| Stock repurchased                                                                                                                           |   |         | (1,712    | )      |          |   | (2      | )             |   |   |         |   |   |          |   |   |          | (70      | )        |   |   | - |   |   |   | (72 | ) |
| Cumulative effect of change in                                                                                                              |   |         |      |   |          |   |    |          |   |   |         |   |   |          |   |   |          |     |     |   |   |   |   |   |   |   |   |
| accounting principle, net of tax                                                                                                            |   |         | -         |   |          |   | -       |          |   |   |         |   |   |          |   |   |          | (413     | )        |   |   | - |   |   |   | (413 | ) |
| Cash dividends declared ($4.75 per share)                                                                                                   |   |         | -         |   |          |   | -       |          |   |   |         |   |   |          |   |   |          | (14,213  | )        |   |   | - |   |   |   | (14,213 | ) |
| Balance, December 31, 2008                                                                                                                  |   |         | 4,709,510 |   |          | $      | 256,137 |          |   |   |         |   |   |          |   |   | $             | 98,020   |     |   | $      | (2,114 | ) |   | $ | 352,043 |   |
|                                                                                                                                        |   |         |      |   |          |   |    |          |   |   |         |   |   |          |   |   |          |     |     |   |   |   |   |   |   |   |   |
| Comprehensive Loss:                                                                                                                         |   |         |      |   |          |   |    |          |   |   |         |   |   |          |   |   |          |     |     |   |   |   |   |   |   |   |   |
| Net loss                                                                                                                                    |   |         | -         |   |          |   | -       |          |   | $      | (295,094     | )      |   |          |   |   |          | (295,094 | )        |   |   | - |   |   |   | (295,094 | ) |
| Other comprehensive income (loss),                                                                                                          |   |         |      |   |          |   |    |          |   |   |         |   |   |          |   |   |          |     |     |   |   |   |   |   |   |   |   |
| Unrealized gain on available                                                                                                                |   |         |      |   |          |   |    |          |   |   |         |   |   |          |   |   |          |     |     |   |   |   |   |   |   |   |   |
|  for sale securities, net of tax $1,336                                                                                                |   |         | -         |   |          |   | -       |          |   |   | 2,481        |   |   |          | 2      |   |          |     | -        |   |   |   | 2,481 |   |   |   | 2,481 |   |
|      Total comprehensive loss                                                                                      |   |         |      |   |          |   |    |          |   | $      | (292,613     | )      |   |          |   |   |          |     |     |   |   |   |   |   |   |   |   |   |
| Stock-based compensation                                                                                                                    |   |         | -         |   |          |   | 2,067   |          |   |   |         |   |   |          |   |   |          |     | -        |   |   |   | - |   |   |   | 2,067 |   |
| Issuances of common stock under stock plans                                                                                                 |   |         | 15,269    |   |          |   | -       |          |   |   |         |   |   |          |   |   |          |     | -        |   |   |   | - |   |   |   | - |   |
| Stock repurchased                                                                                                                           |   |         | (2,546    | )      |          |   | (2      | )             |   |   |         |   |   |          |   |   |          |     | (9       | )      |   |   | - |   |   |   | (11 | ) |
| Stock issued in connection with reverse                                                                                                     |   |         |      |   |          |   |    |          |   |   |         |   |   |          |   |   |          |     |     |   |   |   |   |   |   |   |   |   |
| stock split (2)                                                                                                                             |   |         | 2,843     |   |          |   | -       |          |   |   |         |   |   |          |   |   |          |     | -        |   |   |   | - |   |   |   | - |   |
| Balance, December 31, 2009                                                                                                                  |   |         | 4,725,076 |   |          | $      | 258,202 |          |   |   |         |   |   |          |   |   |          | $        | (197,083 | )      |   | $ | 367 |   |   | $ | 61,486 |   |
|                                                                                                                                        |   |         |      |   |          |   |    |          |   |   |         |   |   |          |   |   |          |     |     |   |   |   |   |   |   |   |   |   |
| (1) Adjusted to reflect a one-for-ten reverse stock split, effective November 24, 2009.                                                     |   |         |      |   |          |   |    |          |   |   |         |   |   |          |   |   |          |
| (2) All fractional shares which resulted from the reverse stock split were rounded to the nearest whole share in lieu of fractional shares. |   |         |      |   |          |

----

|                                                               |   | For the Year Ended December 31, |     |
|--------------------------------------------------------------------|--------|---------------------------------|----------|
|                                                               |   | 2009                            |     |   | 2008 |   |   | 2007 |   |
| CASH FLOWS FROM OPERATING ACTIVITIES                               |   |                            |     |   |   |   |   |   |   |
| Net income (loss)                                                  |   | $                               | (295,094 | ) |   | $ | (89,737 | ) |   | $ | 73,938 |   |
| Adjustments to reconcile net income (loss) to net cash provided by |   |                            |     |   |   |   |   |   |   |   |   |   |
|  operating activities                                         |   |                            |     |   |   |   |   |   |   |   |   |   |
| Depreciation                                                       |   |                            | 3,923    |   |   |   | 3,750 |   |   |   | 2,733 |   |
| Amortization                                                       |   |                            | 848      |   |   |   | 247 |   |   |   | 64 |   |
| Intangible amortization                                            |   |                            | 213      |   |   |   | 283 |   |   |   | 235 |   |
| Provision for loan losses                                          |   |                            | 375,000  |   |   |   | 120,000 |   |   |   | 11,400 |   |
| Other-than-temporary impairment loss on securities                 |   |                            | 4,289    |   |   |   | 6,430 |   |   |   | - |   |
| (Gain) loss on sale of securities                                  |   |                            | 102      |   |   |   | (4,570 | ) |   |   | 937 |   |
| Gain on sale of other real estate owned                            |   |                            | (2,648   | ) |   |   | (97 | ) |   |   | - |   |
| Valuation adjustment on other real estate owned                    |   |                            | 9,702    |   |   |   | 68 |   |   |   | - |   |
| Gain on sale of secondary market loans                             |   |                            | (1,675   | ) |   |   | (1,321 | ) |   |   | (1,586 | ) |
| Gain on sale of premises and equipment                             |   |                            | (136     | ) |   |   | (30 | ) |   |   | (24 | ) |
| Goodwill impairment                                                |   |                            | -        |   |   |   | 77,073 |   |   |   | - |   |
| Deferred taxes                                                     |   |                            | 37,996   |   |   |   | (20,431 | ) |   |   | (5,480 | ) |
| Stock-based compensation                                           |   |                            | 2,067    |   |   |   | 3,407 |   |   |   | 2,583 |   |
| Excess tax benefits associated with stock-based compensation       |   |                            | -        |   |   |   | (49 | ) |   |   | (237 | ) |
| Increase in cash surrender value of BOLI                           |   |                            | (1,064   | ) |   |   | (587 | ) |   |   | (1,536 | ) |
| Changes in operating assets and liabilities                        |   |                            |     |   |   |   |   |   |   |   |   |   |
| Proceeds from sales of mortgage loans                              |   |                            | 140,386  |   |   |   | 94,815 |   |   |   | 158,345 |   |
| Origination of mortgage loans held for sale                        |   |                            | (135,254 | ) |   |   | (93,945 | ) |   |   | (155,766 | ) |
| Income taxes receivable                                            |   |                            | (73,560  | ) |   |   | (8,430 | ) |   |   | - |   |
| Income taxes payable                                               |   |                            | 185      |   |   |   | 665 |   |   |   | (2,100 | ) |
| Interest receivable                                                |   |                            | 8,147    |   |   |   | 1,254 |   |   |   | (2,689 | ) |
| Interest payable                                                   |   |                            | (8,787   | ) |   |   | 4,332 |   |   |   | 4,292 |   |
| Other operating activities                                         |   |                            | 2,938    |   |   |   | (6,182 | ) |   |   | (1,161 | ) |
| Net cash provided by operating activities                          |   |                            | 67,578   |   |   |   | 86,945 |   |   |   | 83,948 |   |
| CASH FLOWS FROM INVESTING ACTIVITIES                               |   |                            |     |   |   |   |   |   |   |   |   |   |
| Net change in federal funds sold                                   |   |                            | (216,079 | ) |   |   | (117,735 | ) |   |   | 18,668 |   |
| Purchase of securities available for sale                          |   |                            | (67,642  | ) |   |   | (306,126 | ) |   |   | (84,724 | ) |
| Proceeds from sales of available for sale securities               |   |                            | 1,360    |   |   |   | 45,568 |   |   |   | 48,039 |   |
| Principal repayments on mortgage-backed securities                 |   |                            | 8,174    |   |   |   | - |   |   |   | - |   |
| Proceeds from maturities of available for sale securities          |   |                            | 62,208   |   |   |   | 288,165 |   |   |   | 21,390 |   |
| Purchase of held to maturity securities                            |   |                            | -        |   |   |   | - |   |   |   | (1,019 | ) |
| Proceeds from maturities of held to maturity securities            |   |                            | 975      |   |   |   | 650 |   |   |   | 875 |   |
| Purchase of Federal Home Loan Bank stock                           |   |                            | -        |   |   |   | (1,147 | ) |   |   | (3,116 | ) |
| Net cash flows from loan activities                                |   |                            | 351,077  |   |   |   | (242,172 | ) |   |   | (510,865 | ) |
| Purchases of premises and equipment                                |   |                            | (1,496   | ) |   |   | (7,959 | ) |   |   | (16,665 | ) |
| Proceeds from the sale of premises and equipment                   |   |                            | 936      |   |   |   | 30 |   |   |   | 24 |   |
| Proceeds from the sale of other real estate owned                  |   |                            | 52,679   |   |   |   | 3,208 |   |   |   | - |   |
| Cash acquired in merger                                            |   |                            | -        |   |   |   | - |   |   |   | 1,234 |   |
| Other investing activities                                         |   |                            | (884     | ) |   |   | (623 | ) |   |   | 2,615 |   |
| Net cash provided by (used in) investing activities                |   | $                               | 191,308  |   |   | $ | (338,141 | ) |   | $ | (523,544 | ) |

----

|                                                                      |   | For the Year Ended December 31, |     |
|---------------------------------------------------------------------------|--------|---------------------------------|----------|
|                                                                      |   | 2009                            |     |   | 2008 |   |   | 2007 |   |
| CASH FLOWS FROM FINANCING ACTIVITIES                                      |   |                            |     |   |   |   |   |   |   |
| Net change in core deposit accounts                                       |   | $                               | 30,986   |   |   | $ | (304,909 | ) |   | $ | (35,344 | ) |
| Net change in certificates of deposit                                     |   |                            | (183,675 | ) |   |   | 636,838 |   |   |   | 354,906 |   |
| Net change in federal funds purchased and securities sold under           |   |                            |     |   |   |   |   |   |   |   |   |   |
| agreements to repurchase                                                  |   |                            | (10,509  | ) |   |   | (236,529 | ) |   |   | 176,472 |   |
| Advances from the Federal Home Loan Bank                                  |   |                            | 45,000   |   |   |   | 410,000 |   |   |   | 324,052 |   |
| Repayments to the Federal Home Loan Bank                                  |   |                            | (98,938  | ) |   |   | (279,219 | ) |   |   | (321,023 | ) |
| Stock options exercised                                                   |   |                            | -        |   |   |   | 391 |   |   |   | 1,861 |   |
| Excess tax benefits associated with stock-based compensation              |   |                            | -        |   |   |   | 49 |   |   |   | 237 |   |
| Repurchase of common stock                                                |   |                            | (11      | ) |   |   | (72 | ) |   |   | (44,384 | ) |
| Cash dividends paid                                                       |   |                            | -        |   |   |   | (22,433 | ) |   |   | (29,045 | ) |
| Other financing activities                                                |   |                            | -        |   |   |   | - |   |   |   | 6,744 |   |
| Net cash provided by (used in) financing activities                       |   |                            | (217,147 | ) |   |   | 204,116 |   |   |   | 434,476 |   |
| INCREASE (DECREASE) IN CASH AND DUE FROM BANKS                            |   |                            | 41,739   |   |   |   | (47,080 | ) |   |   | (5,120 | ) |
| CASH AND DUE FROM BANKS AT BEGINNING OF YEAR                              |   |                            | 52,022   |   |   |   | 99,102 |   |   |   | 104,222 |   |
| CASH AND DUE FROM BANKS AT END OF YEAR                                    |   | $                               | 93,761   |   |   | $ | 52,022 |   |   | $ | 99,102 |   |
|                                                                      |   |                            |     |   |   |   |   |   |   |   |   |   |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                          |   |                            |     |   |   |   |   |   |   |   |   |   |
| Cash paid during the year for interest                                    |   | $                               | 102,249  |   |   | $ | 107,853 |   |   | $ | 107,879 |   |
| Cash paid during the year for income taxes                                |   | $                               | -        |   |   | $ | 19,700 |   |   | $ | 40,000 |   |
|                                                                      |   |                            |     |   |   |   |   |   |   |   |   |   |
|                                                                      |   |                            |     |   |   |   |   |   |   |   |   |   |
| SUPPLEMENTAL INFORMATION ABOUT NONCASH INVESTING AND FINANCING ACTIVITIES |   |                            |     |   |   |
| Transfer of loans to other real estate owned                              |   | $                               | 217,720  |   |   | $ | 12,992 |   |   | $ | 367 |   |
| Change in portion of reserve identified for undisbursed loans and         |   |                            |     |   |   |   |   |   |   |   |   |   |
| reclassified as a liability                                               |   | $                               | 1,091    |   |   | $ | 1,581 |   |   | $ | (117 | ) |
| Acquisitions:                                                             |   |                            |     |   |   |   |   |   |   |   |   |   |
| Assets aquired                                                            |   | $                               | -        |   |   | $ | - |   |   | $ | 247,078 |   |
| Liabilities assumed                                                       |   | $                               | -        |   |   | $ | - |   |   | $ | 185,270 |   |
|   Net                                                                |   | $                               | -        |   |   | $ | - |   |   | $ | 61,808 |   |

----

----

----

----

| The allowance for loan losses is established to absorb probable future loan losses through a provision for loan losses charged to earnings.  Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed.  Subsequent recoveries, if any, are credited to the allowance. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions.  This evaluationis inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                         |   | 2009   |   |   | 2008   |   |   | 2007   |   |
|----------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|  Risk-free interest rate                |   |   | 2.72   | %      |   |   | 1.53   | %      |   |   | 3.41 | % |
|  Expected dividends                     |   |   | -      |   |   |   | 3.63   | %      |   |   | 2.45 | % |
|  Expected volatility                    |   |   | 81.62  | %      |   |   | 50.72  | %      |   |   | 36.50 | % |
|  Expected term (in years)               |   |   | 6.2    |   |   |   | 6.1    |   |   |   | 5.7 |   |
|  Weighted average grant date fair value |   | $      | 3.09   |   |   | $      | 10.50  |   |   | $ | 57.93 |   |

----

|                                                                             |   | For the Year Ended December 31, |   |
|----------------------------------------------------------------------------------|--------|---------------------------------|--------|
|                                                                             |   | 2009                            |   |   | 2008 |   |   | 2007 |   |
| Unrealized losses arising during the period on securities available for sale     |   | $                               | (574   | ) |   | $ | (12,926 | ) |   | $ | (2,944 | ) |
| Reclassification adjustment for losses realized in net income (loss), net of tax |   |                            |   |   |   |   |   |   |   |   |   |   |
| (tax benefit of $1,537, $651 and $328, respectively)                             |   |                            | 2,854  |   |   |   | 1,209 |   |   |   | 609 |   |
| Tax effect                                                                       |   |                            | 201    |   |   |   | 4,736 |   |   |   | 1,027 |   |
| Net unrealized gains (losses) on securities available for sale                   |   | $                               | 2,481  |   |   | $ | (6,981 | ) |   | $ | (1,308 | ) |

|                                                               |   | For the Year Ended December 31, |   |
|--------------------------------------------------------------------|--------|---------------------------------|--------|
|                                                               |   | 2009                            |   |   | 2008 |   |   | 2007 |   |
| Unrealized holding gains (losses) on available for sale securities |   | $                               | 244    |   |   | $ | (3,573 | ) |   | $ | 7,493 |   |
| Tax effect                                                         |   |                            | 123    |   |   |   | 1,459 |   |   |   | (2,626 | ) |
| Accumulated other comprehensive income (loss), net of tax          |   | $                               | 367    |   |   | $ | (2,114 | ) |   | $ | 4,867 |   |

----

----

----

----

----

|   |          |                                                                                                                                                             |
|--------|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | •  | Engaged Patrick M. Fahey as chairman of the board and chief executive officer of Frontier on December 4, 2008;                                              |
|   |          |                                                                                                                                                             |
|   | •  | Retained an independent consultant to review and evaluate the loan portfolio in the Fall of 2008, and again in July 2009;                                        |
|   |          |                                                                                                                                                             |
|   | •  | Organized a special assets group staffed by 42 managers and employees, to accelerate the collection and resolution of delinquent and adversely classified loans; |
|   |          |                                                                                                                                                             |
|   | •  | Developed capital management, liquidity and funds management plans;                                                                                              |
|   |          |                                                                                                                                                             |
|   | •  | Increased board and senior management oversight of Frontier Bank, its lending and operations, including special board meetings;                                  |
|   |          |                                                                                                                                                             |
|   | •  | Established a communications procedure for reporting progress in all areas to the FDIC, Washington DFI and FRB.                                                  |

----

----

----

| 2009                       |   |           |   |   |                   |   |   |                                          |   |   |                                        |   |   |                 |   |
|----------------------------|--------|----------------|--------|--------|------------------------|--------|--------|-----------------------------------------------|--------|--------|---------------------------------------------|--------|--------|----------------------|--------|
|                       |   | Amortized Cost |   |   | Gross Unrealized Gains |   |   | Gross Unrealized Losses (less than 12 months) |   |   | Gross Unrealized Losses (12 months or more) |   |   | Aggregate Fair Value |   |
| AFS Securities             |   |           |   |   |                   |   |   |                                          |   |   |                                        |   |   |                 |   |
| Equities                   |   | $              | 1,818  |   |                   | $      | 315    |                                          |   | $      | -                                           |   |   | $                    | (34    | ) |   | $ | 2,099 |   |
| U.S. Treasuries            |   |           | 250    |   |                   |   | 61     |                                          |   |   | -                                           |   |   |                 | -      |   |   |   | 311 |   |
| U.S. Agencies              |   |           | 39,786 |   |                   |   | 101    |                                          |   |   | (10                                         | )      |   |                 | -      |   |   |   | 39,877 |   |
| Corporate securities       |   |           | 7,841  |   |                   |   | -      |                                          |   |   | (959                                        | )      |   |                 | -      |   |   |   | 6,882 |   |
| Mortgage-backed securities |   |           | 32,653 |   |                   |   | 739    |                                          |   |   | (56                                         | )      |   |                 | -      |   |   |   | 33,336 |   |
| Municipal securities       |   |           | 2,500  |   |                   |   | 87     |                                          |   |   | -                                           |   |   |                 | -      |   |   |   | 2,587 |   |
|                       |   |           | 84,848 |   |                   |   | 1,303  |                                          |   |   | (1,025                                      | )      |   |                 | (34    | ) |   |   | 85,092 |   |
|                       |   |           |   |   |                   |   |   |                                          |   |   |                                        |   |   |                 |   |   |   |   |   |   |
| HTM Securities             |   |           |   |   |                   |   |   |                                          |   |   |                                        |   |   |                 |   |   |   |   |   |   |
| Corporate securities       |   |           | 1,524  |   |                   |   | -      |                                          |   |   | (89                                         | )      |   |                 | -      |   |   |   | 1,435 |   |
| Municipal securities       |   |           | 578    |   |                   |   | 11     |                                          |   |   | -                                           |   |   |                 | -      |   |   |   | 589 |   |
|                       |   |           | 2,102  |   |                   |   | 11     |                                          |   |   | (89                                         | )      |   |                 | -      |   |   |   | 2,024 |   |
| Total                      |   | $              | 86,950 |   |                   | $      | 1,314  |                                          |   | $      | (1,114                                      | )      |   | $                    | (34    | ) |   | $ | 87,116 |   |

| 2008                       |   |           |   |   |                   |   |   |                                          |   |   |                                        |   |   |                 |   |
|----------------------------|--------|----------------|--------|--------|------------------------|--------|--------|-----------------------------------------------|--------|--------|---------------------------------------------|--------|--------|----------------------|--------|
|                       |   | Amortized Cost |   |   | Gross Unrealized Gains |   |   | Gross Unrealized Losses (less than 12 months) |   |   | Gross Unrealized Losses (12 months or more) |   |   | Aggregate Fair Value |   |
| AFS Securities             |   |           |   |   |                   |   |   |                                          |   |   |                                        |   |   |                 |   |
| Equities                   |   | $              | 6,107  |   |                   | $      | 61     |                                          |   | $      | (4,057                                      | )      |   | $                    | (181   | ) |   | $ | 1,930 |   |
| U.S. Treasuries            |   |           | 6,304  |   |                   |   | 153    |                                          |   |   | -                                           |   |   |                 | -      |   |   |   | 6,457 |   |
| U.S. Agencies              |   |           | 51,594 |   |                   |   | 461    |                                          |   |   | -                                           |   |   |                 | -      |   |   |   | 52,055 |   |
| Corporate securities       |   |           | 4,528  |   |                   |   | 153    |                                          |   |   | -                                           |   |   |                 | (242   | ) |   |   | 4,439 |   |
| Mortgage-backed securities |   |           | 22,791 |   |                   |   | -      |                                          |   |   | -                                           |   |   |                 | -      |   |   |   | 22,791 |   |
| Municipal securities       |   |           | 2,855  |   |                   |   | 81     |                                          |   |   | -                                           |   |   |                 | (2     | ) |   |   | 2,934 |   |
|                       |   |           | 94,179 |   |                   |   | 909    |                                          |   |   | (4,057                                      | )      |   |                 | (425   | ) |   |   | 90,606 |   |
|                       |   |           |   |   |                   |   |   |                                          |   |   |                                        |   |   |                 |   |   |   |   |   |   |
| HTM Securities             |   |           |   |   |                   |   |   |                                          |   |   |                                        |   |   |                 |   |   |   |   |   |   |
| Corporate securities       |   |           | 1,524  |   |                   |   | 229    |                                          |   |   | -                                           |   |   |                 | -      |   |   |   | 1,753 |   |
| Municipal securities       |   |           | 1,561  |   |                   |   | 26     |                                          |   |   | -                                           |   |   |                 | -      |   |   |   | 1,587 |   |
|                       |   |           | 3,085  |   |                   |   | 255    |                                          |   |   | -                                           |   |   |                 | -      |   |   |   | 3,340 |   |
| Total                      |   | $              | 97,264 |   |                   | $      | 1,164  |                                          |   | $      | (4,057                                      | )      |   | $                    | (425   | ) |   | $ | 93,946 |   |

----

| 2009                       |   | Less Than 12 Months     |   |   | 12 Months or More |   |   | Total                   |   |
|----------------------------|--------|-------------------------|--------|--------|-------------------|--------|--------|-------------------------|--------|
|                       |   | Gross Unrealized Losses |   |   | Fair Value        |   |   | Gross Unrealized Losses |   |   | Fair Value |   |   | Gross Unrealized Losses |   |   | Fair Value |   |
| AFS Securities             |   |                    |   |   |              |   |   |                    |   |   |   |   |   |   |   |   |   |   |
| Equities                   |   | $                       | -      |   |              | $      | -      |                    |   | $ | (34 | ) |   | $ | 436 |   |   | $ | (34 | ) |   | $ | 436 |   |
| U.S. Agencies              |   |                    | (10    | )      |              |   | 20,244 |                    |   |   | - |   |   |   | - |   |   |   | (10 | ) |   |   | 20,244 |   |
| Corporate securities       |   |                    | (959   | )      |              |   | 1,556  |                    |   |   | - |   |   |   | - |   |   |   | (959 | ) |   |   | 1,556 |   |
| Mortgage-backed securities |   |                    | (56    | )      |              |   | 9,690  |                    |   |   | - |   |   |   | - |   |   |   | (56 | ) |   |   | 9,690 |   |
|                       |   |                    | (1,025 | )      |              |   | 31,490 |                    |   |   | (34 | ) |   |   | 436 |   |   |   | (1,059 | ) |   |   | 31,926 |   |
|                       |   |                    |   |   |              |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| HTM Securities             |   |                    |   |   |              |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporate securities       |   |                    | (89    | )      |              |   | 1,434  |                    |   |   | - |   |   |   | - |   |   |   | (89 | ) |   |   | 1,434 |   |
|                       |   |                    | (89    | )      |              |   | 1,434  |                    |   |   | - |   |   |   | - |   |   |   | (89 | ) |   |   | 1,434 |   |
| Total                      |   | $                       | (1,114 | )      |              | $      | 32,924 |                    |   | $ | (34 | ) |   | $ | 436 |   |   | $ | (1,148 | ) |   | $ | 33,360 |   |

| 2008                 |   | Less Than 12 Months     |   |   | 12 Months or More |   |   | Total                   |   |
|----------------------|--------|-------------------------|--------|--------|-------------------|--------|--------|-------------------------|--------|
|                 |   | Gross Unrealized Losses |   |   | Fair Value        |   |   | Gross Unrealized Losses |   |   | Fair Value |   |   | Gross Unrealized Losses |   |   | Fair Value |   |
| AFS Securities       |   |                    |   |   |              |   |   |                    |   |   |   |   |   |   |   |   |   |   |
| Equities             |   | $                       | (4,057 | )      |              | $      | 923    |                    |   | $ | (181 | ) |   | $ | 425 |   |   | $ | (4,238 | ) |   | $ | 1,348 |   |
| Corporate securities |   |                    | -      |   |              |   | -      |                    |   |   | (242 | ) |   |   | 1,769 |   |   |   | (242 | ) |   |   | 1,769 |   |
| Municipal securities |   |                    | -      |   |              |   | -      |                    |   |   | (2 | ) |   |   | 23 |   |   |   | (2 | ) |   |   | 23 |   |
|                 |   | $                       | (4,057 | )      |              | $      | 923    |                    |   | $ | (425 | ) |   | $ | 2,217 |   |   | $ | (4,482 | ) |   | $ | 3,140 |   |

----

|          |   | Available for sale |   |   | Held to maturity |   |
|---------------|--------|--------------------|--------|--------|------------------|--------|
| Maturity      |   | Amortized Cost     |   |   | Fair Value       |   |   | Amortized Cost |   |   | Fair Value |   |
| 0 - 1 years   |   | $                  | 7,008  |   |             | $      | 7,033 |   |   | $ | 578 |   |   | $ | 590 |   |
| 1 - 5 years   |   |               | 38,278 |   |             |   | 38,346 |   |   |   | - |   |   |   | - |   |
| 5 - 10 years  |   |               | 1,604  |   |             |   | 1,695 |   |   |   | - |   |   |   | - |   |
| Over 10 years |   |               | 37,958 |   |             |   | 38,018 |   |   |   | 1,524 |   |   |   | 1,434 |   |
|          |   | $                  | 84,848 |   |             | $      | 85,092 |   |   | $ | 2,102 |   |   | $ | 2,024 |   |

----

|                                               |   | Amortized Cost |   |   | Fair Value |   |
|----------------------------------------------------|--------|----------------|--------|--------|------------|--------|
| To the Federal Home Loan Bank to secure borrowings |   | $              | 6,516  |   |       | $      | 6,543 |   |
| To state government to secure public deposits      |   |           | 26,288 |   |       |   | 26,855 |   |
| To Federal Reserve to secure repurchase agreements |   |           | 9,013  |   |       |   | 9,042 |   |
| To Federal Reserve to secure customer tax payments |   |           | 4,508  |   |       |   | 4,578 |   |
| Other securities pledged                           |   |           | 33,221 |   |       |   | 33,430 |   |
| Total pledged securities                           |   | $              | 79,546 |   |       | $      | 80,448 |   |

|                        |   | 2009   |      |   | 2008   |   |
|-----------------------------|--------|--------|-----------|--------|--------|--------|
| Commercial and industrial   |   | $      | 389,171   |   |   | $      | 458,263 |   |
| Real Estate:                |   |   |      |   |   |   |   |   |
| Commercial                  |   |   | 968,474   |   |   |   | 1,048,431 |   |
| Construction                |   |   | 448,870   |   |   |   | 952,619 |   |
| Land development            |   |   | 319,566   |   |   |   | 581,683 |   |
| Completed lots              |   |   | 252,966   |   |   |   | 250,405 |   |
| Residential 1-4 family      |   |   | 424,193   |   |   |   | 425,874 |   |
| Installment and other loans |   |   | 69,761    |   |   |   | 65,490 |   |
|                        |   |   | 2,873,001 |   |   |   | 3,782,765 |   |
| Unearned fee income         |   |   | (6,724    | )      |   |   | (10,710 | ) |
| Total loans                 |   | $      | 2,866,277 |   |   | $      | 3,772,055 |   |

|                                                    |   | 2009   |     |   | 2008   |   |    | 2007   |   |
|---------------------------------------------------------|--------|--------|----------|--------|--------|--------|---------|--------|--------|
| Beginning balance                                       |   | $      | 114,638  |   |   | $      | 57,658  |   |   | $ | 44,195 |   |
| Provision for loan losses                               |   |   | 375,000  |   |   |   | 120,000 |   |   |   | 11,400 |   |
| Charge-offs                                             |   |   | (341,531 | )      |   |   | (63,526 | )      |   |   | (1,906 | ) |
| Recoveries                                              |   |   | 4,233    |   |   |   | 506     |   |   |   | 986 |   |
| Merger                                                  |   |   | -        |   |   |   | -       |   |   |   | 2,983 |   |
| Balance before portion identified for undisbursed loans |   |   | 152,340  |   |   |   | 114,638 |   |   |   | 57,658 |   |
| Portion of reserve identified for undisbursed           |   |   |     |   |   |   |    |   |   |   |   |   |
| loans and reclassified as a liability                   |   |   | (991     | )      |   |   | (2,082  | )      |   |   | (3,663 | ) |
| Balance at end of period                                |   | $      | 151,349  |   |   | $      | 112,556 |   |   | $ | 53,995 |   |

----

|                                |   | 2009   |   |   | 2008   |   |   | 2007   |   |
|-------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Additional interest income which    |   |   |   |   |   |   |   |   |   |
| would have been recorded during the |   |   |   |   |   |   |   |   |   |
| period under original loan terms    |   | $      | 65,790 |   |   | $      | 18,915 |   |   | $ | 757 |   |
|                                |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest collected and included in  |   |   |   |   |   |   |   |   |   |   |   |   |
| net income for the period           |   | $      | 18,100 |   |   | $      | 21,004 |   |   | $ | 1,131 |   |
|                                |   |   |   |   |   |   |   |   |   |   |   |   |
| Commitments for additional funds    |   |   |   |   |   |   |   |   |   |   |   |   |
| related to loans above              |   | $      | -      |   |   | $      | -      |   |   | $ | - |   |

|                              |   | 2009   |    |   | 2008   |   |
|-----------------------------------|--------|--------|---------|--------|--------|--------|
| Premises                          |   | $      | 44,767  |   |   | $      | 44,440 |   |
| Furniture, fixtures and equipment |   |   | 25,632  |   |   |   | 25,676 |   |
| Land                              |   |   | 15,484  |   |   |   | 15,593 |   |
| Construction in process           |   |   | 822     |   |   |   | 1,155 |   |
|                              |   |   | 86,705  |   |   |   | 86,864 |   |
| Accumulated depreciation          |   |   | (39,001 | )      |   |   | (35,362 | ) |
| Premises and equipment, net       |   | $      | 47,704  |   |   | $      | 51,502 |   |

----

|                       |   |     |    |   | Other Intangible Assets |   |
|----------------------------|--------|----------|---------|--------|-------------------------|--------|
|                       |   | Goodwill |    |   | Gross Carrying Amount   |   |   | Accumulated Amortization |   |   | Net |   |
| Balance, December 31, 2007 |   | $        | 77,073  |   |                    | $      | 1,543 |   |   | $ | (466 | ) |   | $ | 1,077 |   |
| Amortization               |   |     | -       |   |                    |   | - |   |   |   | (283 | ) |   |   | (283 | ) |
| Impairment                 |   |     | (77,073 | )      |                    |   | - |   |   |   | - |   |   |   | - |   |
| Balance, December 31, 2008 |   |     | -       |   |                    |   | 1,543 |   |   |   | (749 | ) |   |   | 794 |   |
| Amortization               |   |     | -       |   |                    |   | - |   |   |   | (213 | ) |   |   | (213 | ) |
| Balance, December 31, 2009 |   | $        | -       |   |                    | $      | 1,543 |   |   | $ | (962 | ) |   | $ | 581 |   |

|                     |   |   | Expected     |   |
|--------------------------|--------|--------|--------------|--------|
|                     |   |   | Amortization |   |
| Year Ending December 31, | 2010   |   | $            | 213    |   |
|                     | 2011   |   |         | 140    |   |
|                     | 2012   |   |         | 87     |   |
|                     | 2013   |   |         | 87     |   |
|                     | 2014   |   |         | 54     |   |
|                     |   |   | $            | 581    |   |

|                     |   | 2009   |    |   | 2008   |   |
|--------------------------|--------|--------|---------|--------|--------|--------|
|                     |   | Amount |    |   | Number |   |   | Amount |   |   | Number |   |
| Beginning balance        |   | $      | 10,803  |   |   |   | 64 |   |   | $ | 367 |   |   |   | 1 |   |
| Additions to OREO        |   |   | 217,720 |   |   |   | 618 |   |   |   | 12,992 |   |   |   | 76 |   |
| Capitalized improvements |   |   | 884     |   |   |   |   |   |   |   | 623 |   |   |   |   |   |
| Valuation adjustments    |   |   | (9,702  | )      |   |   |   |   |   |   | (68 | ) |   |   |   |   |
| Disposition of OREO      |   |   | (50,031 | )      |   |   | (188 | ) |   |   | (3,111 | ) |   |   | (13 | ) |
| Ending balance           |   | $      | 169,674 |   |   |   | 494 |   |   | $ | 10,803 |   |   |   | 64 |   |

----

|                                 |   | 2009   |      |   | 2008   |   |
|--------------------------------------|--------|--------|-----------|--------|--------|--------|
| Money market, sweep and NOW accounts |   | $      | 497,952   |   |   | $      | 325,554 |   |
| Savings                              |   |   | 241,261   |   |   |   | 365,114 |   |
| Time deposits, $100,000 and over     |   |   | 830,508   |   |   |   | 1,430,685 |   |
| Other time deposits                  |   |   | 1,175,497 |   |   |   | 758,361 |   |
| Total interest bearing deposits      |   | $      | 2,745,218 |   |   | $      | 2,879,714 |   |

| Year Ending December 31, | 2010       |   | $      | 1,564,745 |   |
|--------------------------|------------|--------|--------|-----------|--------|
|                     | 2011       |   |   | 291,218   |   |
|                     | 2012       |   |   | 98,026    |   |
|                     | 2013       |   |   | 23,258    |   |
|                     | 2014       |   |   | 27,425    |   |
|                     | Thereafter |   |   | 1,333     |   |
|                     |       |   | $      | 2,006,005 |   |

|                     |       |   | Amount |    |   | Interest Rates |   |
|--------------------------|------------|--------|--------|---------|--------|----------------|--------|
| Year Ending December 31, | 2010       |   | $      | 65,137  |   |           |   | 3.03% - 4.93 | % |
|                     | 2011       |   |   | 15,000  |   |           |   | 2.13 | % |
|                     | 2012       |   |   | 100,342 |   |           |   | 3.87% - 4.97 | % |
|                     | 2013       |   |   | 100,000 |   |           |   | 3.04 | % |
|                     | 2014       |   |   | -       |   |           |   | - |   |
|                     | Thereafter |   |   | 95,000  |   |           |   | 3.71% - 4.66 | % |
|                     |       |   | $      | 375,479 |   |           |   |   |   |

----

|                                 |   | 2009   |    |   | 2008   |   |
|--------------------------------------|--------|--------|---------|--------|--------|--------|
| Maximum outstanding at any month end |   | $      | 429,279 |   |   | $      | 429,417 |   |
| Average outstanding                  |   |   | 407,015 |   |   |   | 340,350 |   |
|                                 |   |   |    |   |   |   |   |   |
| Weighted average interest rates      |   |   |    |   |   |   |   |   |
| Annual                               |   |   | 3.78    | %      |   |   | 4.09 | % |
| End of year                          |   |   | 3.91    | %      |   |   | 3.91 | % |

----

|                               |   | 2009   |     |   | 2008   |   |    | 2007   |   |
|------------------------------------|--------|--------|----------|--------|--------|--------|---------|--------|--------|
| Current                            |   | $      | (128,651 | )      |   | $      | 11,796  |   |   | $ | 43,066 |   |
| Deferred                           |   |   | 37,996   |   |   |   | (20,431 | )      |   |   | (5,480 | ) |
| Provision (benefit) for income tax |   | $      | (90,655  | )      |   | $      | (8,635  | )      |   | $ | 37,586 |   |

|                                             |   | 2009   |     |   | 2008   |   |   | 2007   |   |
|--------------------------------------------------|--------|--------|----------|--------|--------|--------|--------|--------|--------|
|                                             |   | Amount |     |   | Rate   |   |   | Amount |   |   | Rate |   |   | Amount |   |   | Rate |   |
| Income tax provision (benefit) at statutory rate |   | $      | (135,012 | )      |   |   | (35    | %)     |   | $ | (34,627 | ) |   |   | (35 | %) |   | $ | 39,034 |   |   |   | 35 | % |
| Effect of nontaxable interest income             |   |   | (930     | )      |   |   | (1     | %)     |   |   | (1,123 | ) |   |   | (1 | %) |   |   | (1,085 | ) |   |   | (1 | %) |
| Goodwill                                         |   |   | -        |   |   |   | -      |   |   |   | 27,131 |   |   |   | 27 | % |   |   | - |   |   |   | - |   |
| Valuation allowance                              |   |   | 46,729   |   |   |   | 12     | %      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Other                                            |   |   | (1,442   | )      |   |   | 1      | %      |   |   | (16 | ) |   |   | - |   |   |   | (363 | ) |   |   | - |   |
| Income tax provision (benefit) at effective rate |   | $      | (90,655  | )      |   |   | (23    | %)     |   | $ | (8,635 | ) |   |   | (9 | %) |   | $ | 37,586 |   |   |   | 34 | % |

|                                                          |   | 2009   |    |   | 2008   |   |
|---------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Deferred tax assets                                           |   |   |    |   |   |   |
| Allowance for possible loan losses, in excess of tax reserves |   | $      | 49,657  |   |   | $      | 40,260 |   |
| Intangible assets                                             |   |   | 124     |   |   |   | 900 |   |
| Unrealized loss on available for sale securities              |   |   | 123     |   |   |   | 1,459 |   |
| Stock-based compensation                                      |   |   | 1,715   |   |   |   | 841 |   |
| Other deferred tax assets                                     |   |   | 6,239   |   |   |   | 1,256 |   |
| Total deferred tax assets                                     |   |   | 57,858  |   |   |   | 44,716 |   |
|                                                          |   |   |    |   |   |   |   |   |
| Deferred tax liabilities                                      |   |   |    |   |   |   |   |   |
| FHLB stock dividends                                          |   |   | (2,589  | )      |   |   | (2,589 | ) |
| Deferred loan fees                                            |   |   | (5,142  | )      |   |   | (2,239 | ) |
| Other deferred tax liabilities                                |   |   | (3,275  | )      |   |   | (1,892 | ) |
| Total deferred tax liabilities                                |   |   | (11,006 | )      |   |   | (6,720 | ) |
|                                                          |   |   | 46,852  |   |   |   | 37,996 |   |
| Valuation allowance                                           |   |   | (46,852 | )      |   |   | - |   |
| Net deferred tax assets                                       |   | $      | -       |   |   | $      | 37,996 |   |

----

|                    |   |   |    |   |        |   |   | To be Well        |   |   | For Capital |   |
|-------------------------|--------|--------|---------|--------|-------------|--------|--------|-------------------|--------|--------|-------------|--------|
|                    |   | Actual |    |   | Capitalized |   |   | Adequacy Purposes |   |
| 2009                    |   | Amount |    |   | Ratio       |   |   | Amount            |   |   | Ratio       |   |   | Amount |   |   | Ratio |   |
| Total Capital (to risk  |   |   |    |   |        |   |   |              |   |   |        |   |   |   |   |   |   |   |
| weighted assets)        |   |   |    |   |        |   |   |              |   |   |        |   |   |   |   |   |   |   |
| Consolidated            |   | $      | 102,322 |   |        |   | 3.58   | %                 |   |   | N/A         |   |   |   | N/A |   |   | $ | 228,823 |   |   |   | 8.00 | % |
| Frontier Bank           |   |   | 96,585  |   |        |   | 3.38   | %                 |   |   | 285,775     |   |   |   | 10.00 | % |   |   | 228,620 |   |   |   | 8.00 | % |
|                    |   |   |    |   |        |   |   |              |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier I Capital (to risk |   |   |    |   |        |   |   |              |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| weighted assets)        |   |   |    |   |        |   |   |              |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated            |   |   | 65,543  |   |        |   | 2.29   | %                 |   |   | N/A         |   |   |   | N/A |   |   |   | 114,411 |   |   |   | 4.00 | % |
| Frontier Bank           |   |   | 59,837  |   |        |   | 2.09   | %                 |   |   | 171,465     |   |   |   | 6.00 | % |   |   | 114,310 |   |   |   | 4.00 | % |
|                    |   |   |    |   |        |   |   |              |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier I Capital (to      |   |   |    |   |        |   |   |              |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| average assets)         |   |   |    |   |        |   |   |              |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated            |   |   | 65,543  |   |        |   | 1.80   | %                 |   |   | N/A         |   |   |   | N/A |   |   |   | 145,732 |   |   |   | 4.00 | % |
| Frontier Bank           |   |   | 59,837  |   |        |   | 1.65   | %                 |   |   | 181,863     |   |   |   | 5.00 | % |   |   | 145,490 |   |   |   | 4.00 | % |
|                    |   |   |    |   |        |   |   |              |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 2008                    |   |   |    |   |        |   |   |              |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                    |   |   |    |   |        |   |   |              |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Capital (to risk  |   |   |    |   |        |   |   |              |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| weighted assets)        |   |   |    |   |        |   |   |              |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated            |   | $      | 402,612 |   |        |   | 10.91  | %                 |   |   | N/A         |   |   |   | N/A |   |   | $ | 295,126 |   |   |   | 8.00 | % |
| Frontier Bank           |   |   | 390,260 |   |        |   | 10.55  | %                 |   |   | 370,006     |   |   |   | 10.00 | % |   |   | 296,005 |   |   |   | 8.00 | % |
|                    |   |   |    |   |        |   |   |              |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier I Capital (to risk |   |   |    |   |        |   |   |              |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| weighted assets)        |   |   |    |   |        |   |   |              |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated            |   |   | 355,653 |   |        |   | 9.64   | %                 |   |   | N/A         |   |   |   | N/A |   |   |   | 147,563 |   |   |   | 4.00 | % |
| Frontier Bank           |   |   | 343,165 |   |        |   | 9.27   | %                 |   |   | 222,003     |   |   |   | 6.00 | % |   |   | 148,002 |   |   |   | 4.00 | % |
|                    |   |   |    |   |        |   |   |              |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier I Capital (to      |   |   |    |   |        |   |   |              |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| average assets)         |   |   |    |   |        |   |   |              |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated            |   |   | 355,653 |   |        |   | 8.62   | %                 |   |   | N/A         |   |   |   | N/A |   |   |   | 164,981 |   |   |   | 4.00 | % |
| Frontier Bank           |   |   | 343,165 |   |        |   | 8.53   | %                 |   |   | 201,146     |   |   |   | 5.00 | % |   |   | 160,917 |   |   |   | 4.00 | % |

----

|                             |   |        |    |   |             |   |   | Weighted    |   |   | Aggregate   |   |
|----------------------------------|--------|-------------|---------|--------|------------------|--------|--------|-------------|--------|--------|-------------|--------|
|                             |   |        |    |   |             |   |   | Average     |   |   | Intrinsic   |   |
|                             |   | Options     |    |   | Weighted Average |   |   | Contractual |   |   | Value       |   |
|                             |   | Outstanding |    |   | Exercise Price   |   |   | Term        |   |   | (Thousands) |   |
| Outstanding, January 1, 2009     |   |        | 137,791 |   |             | $      | 166.84 |        |   |   |        |   |   |   |
| Granted                          |   |        | 118,310 |   |             |   | 4.31   |        |   |   |        |   |   |   |
| Exercised                        |   |        | -       |   |             |   | -      |        |   |   |        |   |   |   |
| Forfeited/Expired                |   |        | (24,377 | )      |             |   | 159.34 |        |   |   |        |   |   |   |
| Outstanding, December 31, 2009   |   |        | 231,724 |   |             | $      | 84.65  |        |   |   | 7.7         |   |   | $ | - |   |
|                             |   |        |    |   |             |   |   |        |   |   |        |   |   |   |   |   |
| Exercisable at December 31, 2009 |   |        | 92,819  |   |             | $      | 182.53 |        |   |   | 4.7         |   |   | $ | - |   |

----

|                           |   |   |    |   | Weighted Average |   |
|--------------------------------|--------|--------|---------|--------|------------------|--------|
|                           |   |   |    |   | Grant-Date       |   |
|                           |   | Shares |    |   | Fair Value       |   |
| Nonvested at January 1, 2009   |   |   | 27,018  |   |             | $      | 114.87 |   |
| Awarded                        |   |   | 3,600   |   |             |   | 30.15 |   |
| Released                       |   |   | (15,269 | )      |             |   | 124.81 |   |
| Forfeited                      |   |   | (2,894  | )      |             |   | 119.14 |   |
| Nonvested at December 31, 2009 |   |   | 12,455  |   |             | $      | 77.21 |   |

----

|                                        |   | 2009   |      |   | 2008   |   |      | 2007   |   |
|---------------------------------------------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|
| Net income (loss)                           |   | $      | (295,094  | )      |   | $      | (89,737   | )      |   | $ | 73,938 |   |
|                                        |   |   |      |   |   |   |      |   |   |   |   |   |
| Shares used in the calculation              |   |   |      |   |   |   |      |   |   |   |   |   |
| Weighted average shares outstanding         |   |   | 4,713,219 |   |   |   | 4,699,163 |   |   |   | 4,526,572 |   |
| Effect of dilutive stock options and awards |   |   | -         |   |   |   | -         |   |   |   | 33,535 |   |
| Diluted shares                              |   |   | 4,713,219 |   |   |   | 4,699,163 |   |   |   | 4,560,107 |   |
|                                        |   |   |      |   |   |   |      |   |   |   |   |   |
| Basic earnings (loss) per share             |   | $      | (62.61    | )      |   | $      | (19.10    | )      |   | $ | 16.33 |   |
| Diluted earnings (loss) per share           |   | $      | (62.61    | )      |   | $      | (19.10    | )      |   | $ | 16.21 |   |

|                                                                                                      |   | 2009   |    |   | 2008   |   |   | 2007   |   |
|-----------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|--------|--------|--------|
| Balance at beginning of year                                                                              |   | $      | 56,988  |   |   | $      | 52,649 |   |   | $ | 85,277 |   |
| New loans or advances                                                                                     |   |   | 1,385   |   |   |   | 6,471  |   |   |   | 10,089 |   |
| Repayments                                                                                                |   |   | (2,979  | )      |   |   | (2,132 | )      |   |   | (42,717 | ) |
| Reclassifications (1)                                                                                     |   |   | (21,670 | )      |   |   | -      |   |   |   | - |   |
| Balance at end of year                                                                                    |   | $      | 33,724  |   |   | $      | 56,988 |   |   | $ | 52,649 |   |
|                                                                                                      |   |   |    |   |   |   |   |   |   |   |   |   |
| (1) Represents loans that were once considered related party, but are no longer considered related party. |   |

----

| Year ending December 31, | 2010       |   | $      | 1,692 |   |
|--------------------------|------------|--------|--------|-------|--------|
|                     | 2011       |   |   | 1,467 |   |
|                     | 2012       |   |   | 963   |   |
|                     | 2013       |   |   | 915   |   |
|                     | 2014       |   |   | 626   |   |
|                     | Thereafter |   |   | 879   |   |
|                     |       |   | $      | 6,542 |   |

|                                     |   | Amount |    |
|------------------------------------------|--------|--------|---------|
| Commitments to extend credit             |   | $      | 225,882 |   |
| Credit card arrangements                 |   |   | 18,903  |   |
| Standby and commercial letters of credit |   |   | 19,591  |   |
|                                     |   | $      | 264,376 |   |

----

|                                   |   | 2009     |      |   | 2008   |   |
|----------------------------------------|--------|----------|-----------|--------|--------|--------|
|                                   |   | Carrying |      |   | Fair   |   |   | Carrying |   |   | Fair |   |
|                                   |   | Value    |      |   | Value  |   |   | Value |   |   | Value |   |
| Assets                                 |   |     |      |   |   |   |   |   |   |   |   |   |
| Cash and due from banks                |   | $        | 93,761    |   |   | $      | 93,761 |   |   | $ | 52,022 |   |   | $ | 52,022 |   |
| Federal funds sold                     |   |     | 333,819   |   |   |   | 333,819 |   |   |   | 117,740 |   |   |   | 117,740 |   |
| Securities                             |   |     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available for sale                     |   |     | 85,092    |   |   |   | 85,092 |   |   |   | 90,606 |   |   |   | 90,606 |   |
| Held to maturity                       |   |     | 2,102     |   |   |   | 2,024 |   |   |   | 3,085 |   |   |   | 3,340 |   |
| Loans held for resale                  |   |     | 3,221     |   |   |   | 3,221 |   |   |   | 6,678 |   |   |   | 6,678 |   |
| Loans, net                             |   |     | 2,714,928 |   |   |   | 2,408,312 |   |   |   | 3,659,499 |   |   |   | 3,714,492 |   |
| Bank owned life insurance              |   |     | 25,385    |   |   |   | 25,385 |   |   |   | 24,321 |   |   |   | 24,321 |   |
|                                   |   |     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities                            |   |     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest bearing deposits           |   |     | 377,258   |   |   |   | 377,258 |   |   |   | 395,451 |   |   |   | 395,451 |   |
| Interest bearing deposits              |   |     | 2,745,218 |   |   |   | 2,769,458 |   |   |   | 2,879,714 |   |   |   | 2,909,730 |   |
| Federal funds purchased and securities |   |     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| sold under agreements to repurchase    |   |     | 11,107    |   |   |   | 11,107 |   |   |   | 21,616 |   |   |   | 21,616 |   |
| FHLB Advances                          |   |     | 375,479   |   |   |   | 386,976 |   |   |   | 429,417 |   |   |   | 444,441 |   |
| Junior subordinated debentures         |   |     | 5,156     |   |   |   | 2,191 |   |   |   | 5,156 |   |   |   | 1,676 |   |

----

|                          |   | Fair Value at December 31, 2009 |   |
|-------------------------------|--------|---------------------------------|--------|
|                          |   | Level 1                         |   |   | Level 2 |   |   | Level 3 |   |   | Total |   |
| Available for sale securities |   |                            |   |   |   |   |   |   |   |   |   |   |
| Equities                      |   | $                               | 1,461  |   |   | $ | 638 |   |   | $ | - |   |   | $ | 2,099 |   |
| U.S. Treasuries               |   |                            | -      |   |   |   | 311 |   |   |   | - |   |   |   | 311 |   |
| U.S. Agencies                 |   |                            | -      |   |   |   | 39,877 |   |   |   | - |   |   |   | 39,877 |   |
| Corporate securities          |   |                            | -      |   |   |   | 6,282 |   |   |   | 600 |   |   |   | 6,882 |   |
| Mortgage-backed securities    |   |                            | -      |   |   |   | 33,336 |   |   |   | - |   |   |   | 33,336 |   |
| Municipal securities          |   |                            | -      |   |   |   | 2,587 |   |   |   | - |   |   |   | 2,587 |   |
| Total                         |   | $                               | 1,461  |   |   | $ | 83,031 |   |   | $ | 600 |   |   | $ | 85,092 |   |

|                          |   | Fair Value at December 31, 2008 |   |
|-------------------------------|--------|---------------------------------|--------|
|                          |   | Level 1                         |   |   | Level 2 |   |   | Level 3 |   |   | Total |   |
| Available for sale securities |   |                            |   |   |   |   |   |   |   |   |   |   |
| Equities                      |   | $                               | 1,327  |   |   | $ | 603 |   |   | $ | - |   |   | $ | 1,930 |   |
| U.S. Treasuries               |   |                            | -      |   |   |   | 6,457 |   |   |   | - |   |   |   | 6,457 |   |
| U.S. Agencies                 |   |                            | -      |   |   |   | 52,055 |   |   |   | - |   |   |   | 52,055 |   |
| Corporate securities          |   |                            | -      |   |   |   | 2,939 |   |   |   | 1,500 |   |   |   | 4,439 |   |
| Mortgage-backed securities    |   |                            | -      |   |   |   | 22,791 |   |   |   | - |   |   |   | 22,791 |   |
| Municipal securities          |   |                            | -      |   |   |   | 2,934 |   |   |   | - |   |   |   | 2,934 |   |
| Total                         |   | $                               | 1,327  |   |   | $ | 87,779 |   |   | $ | 1,500 |   |   | $ | 90,606 |   |

----

|                            |   | Fair Value Measurements Using Significant Unobservable Inputs (Level 3) |   |
|---------------------------------|--------|-------------------------------------------------------------------------|--------|
| Beginning balance               |   | $                                                                       | 1,500  |   |
| Total unrealized gains (losses) |   |                                                                    | (900   | ) |
| Purchases                       |   |                                                                    | -      |   |
| Transfers into Level 3          |   |                                                                    | -      |   |
| Ending balance                  |   | $                                                                       | 600    |   |

|               |   | Fair Value at December 31, 2009 |   |   | For the Year Ended December 31, 2009 |   |
|--------------------|--------|---------------------------------|--------|--------|--------------------------------------|--------|
|               |   | Level 1                         |   |   | Level 2                              |   |   | Level 3 |   |   | Total |   |   | Total Losses |   |
| Impaired loans (1) |   | $                               | -      |   |                                 | $      | - |   |   | $ | 535,734 |   |   | $ | 535,734 |   |   | $ | 240,124 |   |
| OREO (2)           |   |                            | -      |   |                                 |   | - |   |   |   | 158,959 |   |   |   | 158,959 |   |   |   | 100,443 |   |
|               |   | $                               | -      |   |                                 | $      | - |   |   | $ | 694,693 |   |   | $ | 694,693 |   |   | $ | 340,567 |   |

|               |   | Fair Value at December 31, 2008 |   |   | For the Year Ended December 31, 2008 |   |
|--------------------|--------|---------------------------------|--------|--------|--------------------------------------|--------|
|               |   | Level 1                         |   |   | Level 2                              |   |   | Level 3 |   |   | Total |   |   | Total Losses |   |
| Impaired loans (1) |   | $                               | -      |   |                                 | $      | - |   |   | $ | 268,193 |   |   | $ | 268,193 |   |   | $ | 60,828 |   |
| OREO (2)           |   |                            | -      |   |                                 |   | - |   |   |   | 10,803 |   |   |   | 10,803 |   |   |   | 3,880 |   |
|               |   | $                               | -      |   |                                 | $      | - |   |   | $ | 278,996 |   |   | $ | 278,996 |   |   | $ | 64,708 |   |

| (1)   | The balance of impaired loans measured at fair value at December 31, 2009 and 2008, represents nonaccruing loans that have had charge-offs and/or have a specific reserve in the allowance for loan losses.  The loss on impaired loans for the years ended December 31, 2009 and 2008, represents charge-offs or impairments on collateraldependent loans for fair value adjustments based on the fair value of collateral recognized through the allowance for loan losses. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | The balance of OREO measured at fair value at December 31, 2009 and 2008, represents real estate that was recorded at fair value less costs to sell at the time of foreclosure and/or has had a valuation adjustment subsequent to becoming OREO.  The loss on OREO for the year ended December 31, 2009, represents charge-offs of $90.7million at the time of foreclosure and subsequent valuation adjustments of $9.7 million.  The loss on OREO for the year ended December 31, 2008, presents charge-offs at the time of foreclosure. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                             |   | 2009   |     |   | 2008   |   |
|--------------------------------------------------|--------|--------|----------|--------|--------|--------|
| ASSETS                                           |   |   |     |   |   |   |
| Cash                                             |   | $      | 2,991    |   |   | $      | 5,702 |   |
| Investment in subsidiary                         |   |   | 61,070   |   |   |   | 346,336 |   |
| Available for sale securities, at fair value     |   |   | 1,862    |   |   |   | 2,847 |   |
| Other assets                                     |   |   | 992      |   |   |   | 2,343 |   |
| Total assets                                     |   | $      | 66,915   |   |   | $      | 357,228 |   |
|                                             |   |   |     |   |   |   |   |   |
| LIABILITIES                                      |   |   |     |   |   |   |   |   |
| Junior subordinated debentures                   |   | $      | 5,156    |   |   | $      | 5,156 |   |
| Other liabilities                                |   |   | 273      |   |   |   | 29 |   |
| Total liabilities                                |   |   | 5,429    |   |   |   | 5,185 |   |
|                                             |   |   |     |   |   |   |   |   |
| SHAREHOLDERS' EQUITY                             |   |   |     |   |   |   |   |   |
| Common stock                                     |   |   | 258,202  |   |   |   | 256,137 |   |
| Retained earnings (accumulated deficit)          |   |   | (197,083 | )      |   |   | 98,020 |   |
| Accumulated other comprehensive loss, net of tax |   |   | 367      |   |   |   | (2,114 | ) |
| Total shareholders' equity                       |   |   | 61,486   |   |   |   | 352,043 |   |
| Total liabilities and shareholders' equity       |   | $      | 66,915   |   |   | $      | 357,228 |   |

|                                                               |   | 2009   |     |   | 2008   |   |    | 2007   |   |
|--------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|---------|--------|--------|
| Income                                                             |   |   |     |   |   |   |    |   |   |
| Dividends from subsidiaries                                        |   | $      | -        |   |   | $      | 9,885   |   |   | $ | 71,569 |   |
| Other dividends                                                    |   |   | 26       |   |   |   | 332     |   |   |   | 819 |   |
| Interest                                                           |   |   | 225      |   |   |   | 174     |   |   |   | 177 |   |
| Other-than-temporary impairment loss on securities                 |   |   | (4,289   | )      |   |   | (460    | )      |   |   | - |   |
| Gain on sale of securities                                         |   |   | -        |   |   |   | 4,575   |   |   |   | - |   |
| Other income                                                       |   |   | 10       |   |   |   | -       |   |   |   | 21 |   |
| Total income (loss)                                                |   |   | (4,028   | )      |   |   | 14,506  |   |   |   | 72,586 |   |
| Expenses                                                           |   |   |     |   |   |   |    |   |   |   |   |   |
| Salaries and employee benefits                                     |   |   | 2,710    |   |   |   | 3,399   |   |   |   | 2,523 |   |
| Depreciation and amortization                                      |   |   | 160      |   |   |   | 238     |   |   |   | 260 |   |
| Goodwill impairment                                                |   |   | -        |   |   |   | 77,073  |   |   |   | - |   |
| Other                                                              |   |   | 2,982    |   |   |   | 1,881   |   |   |   | 2,457 |   |
| Total expenses                                                     |   |   | 5,852    |   |   |   | 82,591  |   |   |   | 5,240 |   |
| Income (loss) before provision (benefit) for income tax and equity |   |   |     |   |   |   |    |   |   |   |   |   |
| in undistributed income (loss) of subsidiaries                     |   |   | (9,880   | )      |   |   | (68,085 | )      |   |   | 67,346 |   |
| Benefit for income tax                                             |   |   | (386     | )      |   |   | (342    | )      |   |   | (1,566 | ) |
| Income (loss) before equity in undistributed income                |   |   |     |   |   |   |    |   |   |   |   |   |
| of subsidiaries                                                    |   |   | (9,494   | )      |   |   | (67,743 | )      |   |   | 68,912 |   |
| Equity in undistributed income (loss) of subsidiaries              |   |   | (285,600 | )      |   |   | (21,994 | )      |   |   | 5,026 |   |
| Net income (loss)                                                  |   | $      | (295,094 | )      |   | $      | (89,737 | )      |   | $ | 73,938 |   |

----

|                                                         |   | 2009   |     |   | 2008   |   |    | 2007   |   |
|--------------------------------------------------------------|--------|--------|----------|--------|--------|--------|---------|--------|--------|
| Cash flows from operating activities                         |   |   |     |   |   |   |    |   |   |
| Net income (loss)                                            |   | $      | (295,094 | )      |   | $      | (89,737 | )      |   | $ | 73,938 |   |
| Adjustments to reconcile net income (loss) to net cash       |   |   |     |   |   |   |    |   |   |   |   |   |
| provided by operating activities                             |   |   |     |   |   |   |    |   |   |   |   |   |
| Equity in undistributed (income) loss of subsidiaries        |   |   | 285,600  |   |   |   | 21,994  |   |   |   | (5,026 | ) |
| Intangible amortization                                      |   |   | 160      |   |   |   | 238     |   |   |   | 260 |   |
| Other-than-temporary impairment loss on securities           |   |   | 4,289    |   |   |   | 460     |   |   |   | - |   |
| Gain on sale of available for sale securities                |   |   | -        |   |   |   | (4,575  | )      |   |   | - |   |
| Gain on sale of premises and equipment                       |   |   | (10      | )      |   |   | -       |   |   |   | - |   |
| Goodwill impairment                                          |   |   | -        |   |   |   | 77,073  |   |   |   | - |   |
| Deferred taxes                                               |   |   | 326      |   |   |   | -       |   |   |   | - |   |
| Stock-based compensation                                     |   |   | 2,067    |   |   |   | 3,407   |   |   |   | 2,583 |   |
| Excess tax benefits associated with stock-based compensation |   |   | -        |   |   |   | (49     | )      |   |   | (237 | ) |
| Other operating activities                                   |   |   | (48      | )      |   |   | 229     |   |   |   | (1,940 | ) |
| Net cash flows provided by (used in) operating activities    |   |   | (2,710   | )      |   |   | 9,040   |   |   |   | 69,578 |   |
|                                                         |   |   |     |   |   |   |    |   |   |   |   |   |
| Cash flows from investing activities                         |   |   |     |   |   |   |    |   |   |   |   |   |
| Proceeds from sale of available for sale securities          |   |   | -        |   |   |   | 20,941  |   |   |   | - |   |
| Proceeds from maturity of available for sale securities      |   |   | -        |   |   |   | -       |   |   |   | 460 |   |
| Proceeds from sale of premises and equipment                 |   |   | 10       |   |   |   | -       |   |   |   | - |   |
| Other investment activities                                  |   |   | -        |   |   |   | (2,214  | )      |   |   | (139 | ) |
| Net cash flows provided by investing activities              |   |   | 10       |   |   |   | 18,727  |   |   |   | 321 |   |
|                                                         |   |   |     |   |   |   |    |   |   |   |   |   |
| Cash flows from financing activities                         |   |   |     |   |   |   |    |   |   |   |   |   |
| Stock options exercised                                      |   |   | -        |   |   |   | 391     |   |   |   | 1,861 |   |
| Excess tax benefits associated with stock-based compensation |   |   | -        |   |   |   | 49      |   |   |   | 237 |   |
| Repurchase of common stock                                   |   |   | (11      | )      |   |   | (72     | )      |   |   | (44,384 | ) |
| Cash dividends paid                                          |   |   | -        |   |   |   | (22,433 | )      |   |   | (29,045 | ) |
| Other financing activities                                   |   |   | -        |   |   |   | -       |   |   |   | 75 |   |
| Net cash flows used in financing activities                  |   | $      | (11      | )      |   | $      | (22,065 | )      |   | $ | (71,256 | ) |
|                                                         |   |   |     |   |   |   |    |   |   |   |   |   |
| Increase (decrease) in cash                                  |   | $      | (2,711   | )      |   | $      | 5,702   |   |   | $ | (1,357 | ) |
| Cash at beginning of year                                    |   |   | 5,702    |   |   |   | -       |   |   |   | 1,357 |   |
| Cash at end of year                                          |   | $      | 2,991    |   |   | $      | 5,702   |   |   | $ | - |   |

----

| (In thousands)                              |   | 2009 Quarter Ended |      |
|---------------------------------------------|--------|--------------------|-----------|
|                                        |   | (Unaudited)        |      |
|                                        |   | December 31        |      |   | September 30 |   |   | June 30 |   |   | March 31 |   |
| Interest income                             |   | $                  | 39,971    |   |   | $ | 41,490 |   |   | $ | 45,581 |   |   | $ | 50,491 |   |
| Interest expense                            |   |               | 19,981    |   |   |   | 22,612 |   |   |   | 24,132 |   |   |   | 26,737 |   |
|   Net interest income             |   |               | 19,990    |   |   |   | 18,878 |   |   |   | 21,449 |   |   |   | 23,754 |   |
| Provision for loan losses                   |   |               | 100,000   |   |   |   | 140,000 |   |   |   | 77,000 |   |   |   | 58,000 |   |
| Net interest loss after provision           |   |               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    for loan losses           |   |               | (80,010   | ) |   |   | (121,122 | ) |   |   | (55,551 | ) |   |   | (34,246 | ) |
| Non interest income                         |   |               | (5,876    | ) |   |   | 2,878 |   |   |   | 3,590 |   |   |   | 4,322 |   |
| Non interest expense                        |   |               | 26,241    |   |   |   | 24,814 |   |   |   | 25,387 |   |   |   | 23,292 |   |
| Loss before income tax                      |   |               | (112,127  | ) |   |   | (143,058 | ) |   |   | (77,348 | ) |   |   | (53,216 | ) |
| Benefit for income tax                      |   |               | (41,926   | ) |   |   | (1,970 | ) |   |   | (27,354 | ) |   |   | (19,405 | ) |
| Net loss                                    |   | $                  | (70,201   | ) |   | $ | (141,088 | ) |   | $ | (49,994 | ) |   | $ | (33,811 | ) |
| Basic earnings (losses) per share           |   | $                  | (14.89    | ) |   | $ | (29.93 | ) |   | $ | (10.61 | ) |   | $ | (7.17 | ) |
| Diluted earnings (losses) per share         |   | $                  | (14.89    | ) |   | $ | (29.93 | ) |   | $ | (10.61 | ) |   | $ | (7.17 | ) |
| Weighted average basic shares outstanding   |   |               | 4,715,370 |   |   |   | 4,713,185 |   |   |   | 4,713,185 |   |   |   | 4,712,680 |   |
| Weighted average diluted shares outstanding |   |               | 4,715,370 |   |   |   | 4,713,185 |   |   |   | 4,713,185 |   |   |   | 4,712,680 |   |
|                                        |   |               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                        |   | 2008 Quarter Ended |      |
|                                        |   | (Unaudited)        |      |
|                                        |   | December 31        |      |   | September 30 |   |   | June 30 |   |   | March 31 |   |
| Interest income                             |   | $                  | 60,392    |   |   | $ | 68,821 |   |   | $ | 72,342 |   |   | $ | 77,500 |   |
| Interest expense                            |   |               | 26,537    |   |   |   | 28,095 |   |   |   | 27,451 |   |   |   | 30,102 |   |
|   Net interest income             |   |               | 33,855    |   |   |   | 40,726 |   |   |   | 44,891 |   |   |   | 47,398 |   |
| Provision for loan losses                   |   |               | 44,400    |   |   |   | 42,100 |   |   |   | 24,500 |   |   |   | 9,000 |   |
| Net interest income (loss) after provision  |   |               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    for loan losses           |   |               | (10,545   | ) |   |   | (1,374 | ) |   |   | 20,391 |   |   |   | 38,398 |   |
| Non interest income                         |   |               | 7,502     |   |   |   | (3,173 | ) |   |   | 4,198 |   |   |   | 6,303 |   |
| Non interest expense                        |   |               | 94,937    |   |   |   | 22,057 |   |   |   | 21,533 |   |   |   | 21,545 |   |
| Income (loss) before income tax             |   |               | (97,980   | ) |   |   | (26,604 | ) |   |   | 3,056 |   |   |   | 23,156 |   |
| Provision (benefit) for income tax          |   |               | (8,464    | ) |   |   | (8,808 | ) |   |   | 982 |   |   |   | 7,655 |   |
| Net income (loss)                           |   | $                  | (89,516   | ) |   | $ | (17,796 | ) |   | $ | 2,074 |   |   | $ | 15,501 |   |
| Basic earnings (losses) per share           |   | $                  | (19.03    | ) |   | $ | (3.79 | ) |   | $ | 0.44 |   |   | $ | 3.30 |   |
| Diluted earnings (losses) per share         |   | $                  | (19.03    | ) |   | $ | (3.79 | ) |   | $ | 0.44 |   |   | $ | 3.29 |   |
| Weighted average basic shares outstanding   |   |               | 4,703,840 |   |   |   | 4,701,094 |   |   |   | 4,700,673 |   |   |   | 4,698,532 |   |
| Weighted average diluted shares outstanding |   |               | 4,703,840 |   |   |   | 4,701,094 |   |   |   | 4,706,914 |   |   |   | 4,709,865 |   |

----