banking products and services generally, and could negatively affect our financial conditionand performance.**We may incur losses if we are unable to successfully manage interest rate risk.**     Our future profitability will substantially depend upon our ability to maintain or increasethe spread between the interest rates earned on investments and loans and interest rates paid ondeposits and other interest-bearing liabilities. Changes in interest rates will affect ouroperating performance and financial condition. The shape of the yield curve can also impact netinterest income. Changing rates will impact how fast our mortgage loans and mortgage backedsecurities will have the principal repaid. Rate changes can also impact the behavior of ourdepositors, especially depositors in non-maturity deposits such as demand, interest checking,savings and money market accounts. While we attempt to minimize our exposure to interest rate risk,we are unable to eliminate it as it is an inherent part of our business. Our net interest spreadwill depend on many factors that are partly or entirely outside our control, including competition,federal economic, monetary and fiscal policies, and industry-specific conditions and economicconditions generally.**Current levels of market volatility are unprecedented.**     The capital and credit markets have been experiencing volatility and disruption for more than18 months. Recently, the volatility and disruption has reached unprecedented levels. In some cases,the markets have produced downward pressure on stock prices and credit availability for certainissuers without regard to those issuers’ underlying financial strength. If current levels of marketdisruption and volatility continue or worsen, there can be no assurance that we will not experiencean adverse effect, which may be material, on our ability to access capital and on our business,financial condition and results of operations.**The soundness of other financial institutions could adversely affect us.**     Our ability to engage in routine funding transactions could be adversely affected by theactions and commercial soundness of other financial institutions. Financial services institutionsare interrelated as a result of trading, clearing, counterparty or other relationships. We haveexposure to many different industries and counterparties, and we routinely execute transactionswith counterparties in the financial industry. As a result, defaults by, or even rumors orquestions about, one or more financial services institutions, or the financial services industrygenerally, have led to market-wide liquidity problems and could lead to losses or defaults by us orby other institutions. Many of these transactions expose us to credit risk in the event of defaultof our counterparty or client. In addition, our credit risk may be exacerbated when the collateralheld by us cannot be realized upon or is liquidated at prices not sufficient to recover the fullamount of the financial instrument exposure due us. There is no assurance that any such losseswould not materially and adversely affect our results of operations.**We may be adversely impacted by changes in the condition of financial markets.**     We are directly and indirectly affected by changes in market conditions. Market risk generallyrepresents the risk that values of assets and liabilities or revenues will be adversely affected bychanges in market conditions. Market risk is inherent in the financial instruments associated withour operations and activities including loans, deposits, securities, short-term borrowings,long-term debt, trading account assets and liabilities, and derivatives. Just a few of the marketconditions that may shift from time to time, thereby exposing us to market risk, includefluctuations in interest and currency exchange rates, equity and futures prices, and pricedeterioration or changes in value due to changes in market perception or
 

 
actual credit quality of issuers. Accordingly, depending on the instruments or activitiesimpacted, market risks can have adverse effects on our results of operations and our overallfinancial condition.**Our concentration in loans secured by real estate may increase our future credit losses, whichwould negatively affect our financial results.**     We offer a variety of secured loans, including commercial lines of credit, commercial termloans, real estate, construction, home equity, consumer and other loans. Approximately 91% of ourloans are secured by real estate, both residential and commercial, substantially all of which arelocated in our market area. A major change in the region’s real estate market, resulting in adeterioration in real estate values, or in the local or national economy, including changes causedby raising interest rates, could adversely affect our customers’ ability to pay these loans, whichin turn could adversely impact us. Risk of loan defaults and foreclosures are inherent in thebanking industry, and we try to limit our exposure to this risk by carefully underwriting andmonitoring our extensions of credit. We cannot fully eliminate credit risk, and as a result creditlosses may occur in the future.**If our allowance for loan losses becomes inadequate, our results of operations may be adverselyaffected.**     An essential element of our business is to make loans. We maintain an allowance for loanlosses that we believe is a reasonable estimate of known and inherent losses in our loan portfolio.Through a periodic review and analysis of the loan portfolio, management determines the adequacy ofthe allowance for loan losses by considering such factors as general and industry-specific marketconditions, credit quality of the loan portfolio, the collateral supporting the loans and financialperformance of our loan customers relative to their financial obligations to us. The amount offuture losses is impacted by changes in economic, operating and other conditions, including changesin interest rates, which may be beyond our control. Actual losses may exceed our current estimates.Rapidly growing loan portfolios are, by their nature, unseasoned. Estimating loan loss allowancesfor an unseasoned portfolio is more difficult than with seasoned portfolios, and may be moresusceptible to changes in estimates and to losses exceeding estimates. Although we believe theallowance for loan losses is a reasonable estimate of known and inherent losses in our loanportfolio, we cannot fully predict such losses or assert that our loan loss allowance will beadequate in the future. Future loan losses that are greater than current estimates could have amaterial impact on our future financial performance.     Banking regulators periodically review our allowance for loan losses and may require us toincrease our allowance for loan losses or recognize additional loan charge-offs, based on creditjudgments different than those of our management. Any increase in the amount of our allowance orloans charged-off as required by these regulatory agencies could have a negative effect on ouroperating results.**Nonperforming assets take significant time to resolve and adversely affect our results ofoperations and financial condition.**     Our nonperforming assets adversely affect our net income in various ways. Until economic andmarket conditions improve, we expect to continue to incur additional losses relating to an increasein nonperforming loans. We do not record interest income on non-accrual loans, thereby adverselyaffecting our income and increasing loan administration costs. When we receive collateral throughforeclosures and similar proceedings, we are required to mark the related loan to the then fairmarket value of the collateral less estimated selling costs, which may result in a loss. Anincrease in the level of nonperforming assets also increases our risk profile and may impact thecapital levels our regulators believe is appropriate in light of such risks. We utilize varioustechniques such as loan sales, workouts and restructurings to manage our problem assets. Decreasesin the value of these problem assets, the underlying collateral, or in
 

 
the borrowers’ performance or financial condition, could adversely affect our business,results of operations and financial condition.     In addition, the resolution of nonperforming assets requires significant commitments of timefrom management and staff, which can be detrimental to performance of their other responsibilities.Such resolution may also require the assistance of third parties, and thus the expense associatedwith it. There can be no assurance that we will avoid further increases in nonperforming loans inthe future.**Our accounting with respect to assets covered under the FDIC shared-loss agreements is notcomplete, and we may need to restate our results of operations for our 2009 interim periods.**     On January 30, 2009, the Bank entered into a purchase and assumption agreement with the FDIC,as receiver, for SFSB. The Bank assumed all deposit liabilities and purchased certain assets ofSFSB. In connection with the SFSB transaction, the Bank entered into two shared-loss agreementswith the FDIC with respect to the loan and foreclosed real estate assets purchased. Under theshared-loss agreements, the FDIC will reimburse the Bank for 80% of all losses, including expensesassociated with liquidating and maintaining properties arising from covered loan assets, on thefirst $118 million of all losses on such covered loans, and for 95% of losses on covered loansthereafter.     To date, we have accounted for this transaction in accordance with FSAB ASC 805, whichrequires us to record the assets acquired and liabilities assumed at their fair values. Inaddition, impaired loans that were acquired are accounted for under FASB ASC 310-30 (SOP 03-3,"*Accounting for Certain Loans or Debt Securities Acquired in a Transfer”)*. In order to be able topresent the appropriate accounting presentation under this guidance, we must review the details ofeach loan individually, and not on a pooled basis. Due to the volume of data that is necessary forus to evaluate for this purpose, we have recorded provisional amounts for the covered loans andrelated FDIC receivable for the period ended September 30, 2009. As a result, material adjustmentsto the provisional amounts may be necessary once we complete our evaluation. In addition, due tothe existence of the FDIC shared-loss agreements, we are in the process, after application of dataon a per loan basis, of identifying the value of the FDIC receivable asset and will account forthis asset separately from the loans covered by the shared-loss agreements.     While we expect that full application of the SFSB transaction under FASB ASC 805 and FASB ASC310-30 will be applied with the filing of our Annual Report on Form 10-K for the year endedDecember 31, 2009, we also expect that we may file amendments to the Quarterly Reports on Form 10-Qthat we have filed in 2009 to reflect this revised accounting presentation. We cannot make anyassurance that these adjustments will not materially change our financial condition and results ofoperations, as previously reported.**The failure of our Board and management to implement and maintain effective risk managementprograms may adversely affect our operations.**     As a banking organization, we are exposed to a variety of risks across our operations. Wedefine risk generally as the danger of not achieving our financial, operating, or strategic goalsas planned. As a result, to ensure our long-term corporate success, we must effectively identifyand analyze risks and then manage or mitigate them through appropriate control measures. We havedeveloped a plan to establish and maintain effective risk management programs to address oversight,control, and supervision of the management, major operations and activities across ourfunctional areas. We believe that this plan enables us to recognize and analyze risks early on andto take the appropriate action.     It is important to note that our organization has grown substantially over the past 18 months.In May 2008, we merged with each of BOE Financial Services of Virginia, Inc., the then holding company for our wholly-owned operating subsidiary, Essex Bank(the “Bank”), and TransCommunity Financial Corporation, the holdingcompany for TransCommunity Bank, N.A., and, in July 2008, TransCommunity Bank merged into the Bank. InNovember 2008, the Bank acquired certain assets and assumed all deposit liabilities of The Community Bank in Georgia and, inJanuary 2009, the Bank acquired certain assets and assumed all deposit liabilities of Suburban Federal Savings Bank. Thissignificant growth has put considerable strain on our organizational structure and theeffectiveness of risk management programs that are appropriate for the various functions of anorganization of our size and complexity. Furthermore, this growth has strained our controlstructure, including the structure that supports the effective application of policies and theexecution of procedures within the operation of financial reporting controls.     We have put in place internal remediation plans that address concerns that have arisen inmaintaining the effectiveness of our risk management programs. While our Board and management areworking diligently to ensure that our organization implements and maintains effective riskmanagement programs, any failure to do so may adversely affect our operations. As a result, we maynot be able to achieve our financial, operational and strategic goals.**We have identified a material weakness and significant deficiencies in our internal control overfinancial reporting that may adversely affect our ability to properly account for non-routinetransactions.**     As we have grown and expanded, we have acquired and added, and expect to continue to acquireand add, businesses and other activities that complement our core retail and commercial bankingfunctions. Such acquisitions or additions frequently involve complex operational and financialreporting issues. While we make every effort to thoroughly understand any new activity or acquiredentity’s business and plan for proper integration into our company, we can give no assurance thatwe will not encounter operational and financial reporting difficulties.     Our management is responsible for establishing and maintaining adequate internal control overfinancial reporting. Our internal control over financial reporting is a process designed under the
 

 
supervision of our chief executive officer and chief financial officer to provide reasonableassurance regarding the reliability of financial reporting and the preparation of our financialstatements for externalpurposes in accordance with generally accepted accounting principles. In the Annual Report onForm 10-K for the year ended December 31, 2008, management’s assessment of the effectiveness of ourinternal control over financial reporting cited a material weakness regarding the accounting fornon-routine transactions. While management is not required to re-assess the effectiveness ofinternal control over financial reporting during the fiscal year, we have concluded that thismaterial weakness continues to exist as of September 30, 2009. Specifically, our financial andaccounting department has lacked sufficient resources and expertise to properly account for certainnon-routine transactions, our policies and procedures have not provided for timely review ofsignificant non-routine transactions and related accounting entries and we have not maintainedsufficient documentation related to the application of GAAP to significant non-routinetransactions.     In addition, our financial and accounting department is currently understaffed for theresponsibilities that it has had in recent fiscal quarters. While we have a chief financial officerand a chief accounting officer, we have not had a controller since April 2009. Our financial andaccounting department has also had to evaluate numerous non-routine accounting issues in additionto focusing on our day-to-day fiscal operations and periodic filings with the Commission. Forexample, we acquired the operations of Suburban Federal in January 2009, and the on-going consolidation ofthose operations and analysis of unprecedented accounting issues relating to shared-loss agreementswith the FDIC have strained the resources that we have presently available.     To address the issues described above, we continue to take appropriate remediation steps. Weare evaluating our financial accounting staff levels and expertise and are implementing appropriateoversight and review procedures. Additional information on these and other actions is disclosed inour Quarterly Report on Form 10-Q for the period ended September 30, 2009.     Despite efforts to strengthen our internal and disclosure controls, we may identify additionalother internal or disclosure control deficiencies in the future. Any failure to maintain effectivecontrols or timely effect any necessary improvement of our internal and disclosure controls could,among other things, result in losses from fraud or error, harm our reputation or cause investors tolose confidence in our reported financial information, all of which could have a material adverseeffect on our results of operation and financial condition.**We may be required to write down goodwill and other intangible assets, causing our financialcondition and results to be negatively affected.**     When we acquire a business, a portion of the purchase price of the acquisition is allocated togoodwill and other identifiable intangible assets. The excess of the purchase price over the fairvalue of the net identifiable tangible and intangible assets acquired determines the amount of thepurchase price that is allocated to goodwill acquired. At September 30, 2009, our goodwill andother identifiable intangible assets were approximately $30.1 million. Under current accountingstandards, if we determine that goodwill or intangible assets are impaired, we would be required towrite down the value of these assets. We will conduct an annual review to determine whethergoodwill and other identifiable intangible assets are impaired. As of May 31, 2009, the one-yearanniversary date of our mergers with TransCommunity Financial and BOE Financial, we recorded agoodwill impairment charge of $24.0 million.     We cannot provide assurance whether we will be required to take an impairment charge in thefuture. Any impairment charge would have a negative effect on its shareholders’ equity andfinancial results and may cause a decline in our stock price.
 

 
**Banking regulators have broad enforcement power, but regulations are meant to protect depositors,and not investors.**     We are subject to supervision by several governmental regulatory agencies, including theFederal Reserve Bank of Richmond and the Bureau of Financial Institutions of the Commonwealth ofVirginia. Bank regulations, and the interpretation and application of them by regulators, arebeyond our control, may change rapidly and unpredictably and can be expected to influence earningsand growth. In addition, these regulations may limit our growth and the return to investors byrestricting activities such as the payment of dividends, mergers with, or acquisitions by, otherinstitutions, investments, loans and interest rates, interest rates paid on depositors and theopening of new branch offices. Although these regulations impose costs on us, they are intended toprotect depositors, and should not be assumed to protect the interest of shareholders. Theregulations to which we are subject may not always be in the best interest of investors.**Acquisition opportunities may present challenges.**     We continually evaluate opportunities to acquire other businesses. However, we may not havethe opportunity to make suitable acquisitions on favorable terms in the future, which couldnegatively impact the growth of our business. We expect that other banking and financial companies,many of which have significantly greater resources, will compete with us to acquire compatiblebusinesses. This competition could increase prices for acquisitions that we would likely pursue,and our competitors may have greater resources than we do. Also, acquisitions of regulatedbusinesses such as banks are subject to various regulatory approvals. If we fail to receive theappropriate regulatory approvals, we will not be able to consummate an acquisition that we believeis in our best interests.     Any future acquisitions may result in unforeseen difficulties, which could require significanttime and attention from our management that would otherwise be directed at developing our existingbusiness. In addition, we could discover undisclosed liabilities resulting from any acquisitionsfor which we may become responsible. Further, the benefits that we anticipate from theseacquisitions may not develop.**We may not be able to successfully manage our growth or implement our growth strategies, which mayadversely affect our results of operations and financial condition.**     During the past 18 months, we have experienced significant growth, and a key aspect of ourbusiness strategy is continued growth and expansion in the future. Our ability to continue to growdepends, in part, upon our ability to: **•** open new branch offices or acquire existing branches or other financial institutions;  **•** attract deposits to those locations and cross-sell new and existing depositorsadditional products and services; and  **•** identify attractive loan and investment opportunities.     We may not be able to successfully implement our growth strategy if we are unable to identifyattractive markets, locations or opportunities to expand. Our ability to successfully manage ourgrowth will also depend upon our ability to maintain capital levels sufficient to support thisgrowth, maintain effective cost controls and adequate asset quality such that earnings are notadversely impacted to a material degree.
 

 
     As we continue to implement our growth strategy by opening new branches or acquiring branchesor other banks, we expect to incur increased personnel, occupancy and other operating expenses. Inthe case of new branches, we must absorb those higher expenses while we begin to generate newdeposits, and there is a further time lag involved in redeploying new deposits into attractivelypriced loans and other higher yielding earning assets. Thus, our plans to branch aggressively coulddepress our earnings in the short run, even if we efficiently execute our branching strategy.**A loss of our senior officers could impair our relationship with our customers and adversely affectour business.**     Many community banks attract customers based on the personal relationships that the banks’officers and customers establish with each other and the confidence that the customers have in theofficers. We depend on the performance of our senior officers. These officers have many years ofexperience in the banking industry and have numerous contacts in our market area. The loss of theservices of any of our senior officers, or the failure of any of them to perform managementfunctions in the manner anticipated by our board of directors, could have a material adverse effecton our business. Our success will be dependent upon the board’s ability to attract and retainquality personnel, including these individuals.**Our ability to pay dividends is limited and we may be unable to pay future dividends.**     Our ability to pay dividends is limited by regulatory restrictions and the need to maintainsufficient capital in our organization. The ability of our bank subsidiary topay dividends to us is limited by the Bank’s obligations to maintain sufficient capital, earningsand liquidity and by other general restrictions on their dividends under federal and state bankregulatory requirements.     In addition, as a bank holding company, our ability to declare and pay dividends is subject tothe guidelines of the Board of Governors of the Federal Reserve System regarding capital adequacyand dividends. The Federal Reserve guidelines generally require us to review the effects of thecash payment of dividends on common stock and other Tier 1 capital instruments (*i.e.*, perpetualpreferred stock and trust preferred debt) on our financial condition. These guidelines also requirethat we review our net income for the current and past four quarters, and the level of dividends oncommon stock and other Tier 1 capital instruments for those periods, as well as our projected rateof earnings retention.     Under the Federal Reserve’s policy, the board of directors of a bank holding company shouldalso consider different factors to ensure that its dividend level is prudent relative to theorganization’s financial position and is not based on overly optimistic earnings scenarios such asany potential events that may occur before the payment date that could affect its ability to paywhile still maintaining a strong financial position. As a general matter, the Federal Reserve hasindicated that the board of directors of a bank holding company should consult with the FederalReserve and eliminate, defer, or significantly reduce the bank holding company’s dividends if: (i)its net income available to shareholders for the past four quarters, net of dividends previouslypaid during that period, is not sufficient to fully fund the dividends; (ii) its prospective rateof earnings retention is not consistent with  its capital needs and overall current andprospective financial condition; or (iii) it will not meet, or is in danger of not meeting, itsminimum regulatory capital adequacy ratios. If we do not satisfy these regulatory requirements orthe Federal Reserve’s policies, we will be unable to pay dividends on our common stock.     We also are subject to certain limitations on our ability to pay dividends as a result of ourissuance of preferred stock to the U.S. Department of the Treasury pursuant to the Capital Purchase Program. Thepreferred stock is in a superior ownership position compared to our common stock. Dividends must bepaid to the
 

 
preferred stock holder before they can be paid to our common stockholders. In addition,prior toDecember 19, 2011, unless we have redeemed the preferred stock or the Department of the Treasury hastransferred the preferred stock to a third party, the consent of the Department of the Treasury will be required forus to increase our common stock dividend or repurchase our common stock or other equity or capitalsecurities, other than in certain circumstances.     If the dividends on the preferred stock have not been paid for an aggregate of six quarterlydividend periods or more, whether or not consecutive, our authorized number of directors will beautomatically increased by two and the holders of the preferred stock will have the right to electthose directors at our next annual meeting or at a special meeting called for that purpose. Thesetwo directors will be elected annually and will serve until all accrued and unpaid dividends forall past dividend periods have been declared and paid in full. These restrictions could limit ourability to pay dividends on our common stock.**The FDIC has increased deposit insurance premiums to restore and maintain the federal depositinsurance fund, which has increased our costs and could adversely affect our business.**     The FDIC recently adopted a final rule revising its risk-based assessment system, effectiveApril 1, 2009. The changes to the assessment system involve adjustments to the risk-basedcalculation of an institution’s unsecured debt, secured liabilities and brokered deposits. Thepotential increase in FDIC deposit insurance premiums could have a significant impact on us.     On May 22, 2009, the FDIC imposed a special deposit insurance assessment of 5 basis points oneach insured institution’s total assets less Tier 1 capital. This emergency assessment wascalculated based on the insured institution’s assets at June 30, 2009 and was collected onSeptember 30, 2009. This special assessment is in addition to the regular quarterly risk-basedassessment. The FDIC has announced that an additional special assessment in 2009 of up to 5 basispoints is probable maintain property of assessments.     The FDIC deposit insurance fund may suffer additional losses in the future due to bankfailures. There can be no assurance that there will not be additional significant deposit insurancepremium increases in order to restore the insurance fund’s reserve ratio.**Our participation in the U.S. Department of the Treasury’s Capital Purchase Program imposesrestrictions on us that limit our ability to perform certain equity transactions, including thepayment of dividends and common stock purchases.**     On December 19, 2008, we issued and sold $17.7 million in preferred stock and a warrant topurchase our common stock to the Department of the Treasury as part of its Capital PurchaseProgram. The preferred shares will pay a cumulative dividend rate of five percent per annum for thefirst five years and will reset to a rate of nine percent per annum after year five. The dividends,and potential increase in dividends if we do not redeem the preferred stock, may significantlyimpact our operating results, liquidity, and capital position.     The preferred shares are non-voting, other than class voting rights on matters that couldadversely affect the shares. The preferred shares will be callable at par after December 19, 2011.Prior to that time, unless we have redeemed all of the preferred stock or the Department of theTreasury has transferred all of the preferred stock to a third party, we are limited in the paymentof dividends on our common stock to the current quarterly dividend of $0.04 per share without priorregulatory approval. In addition, our participation limits our ability to repurchase shares of ourcommon stock, with certain exceptions, which include repurchases of shares to offset share dilutionfrom equity-based compensation.
 

 
**Our participation in the Department of the Treasury’s Capital Purchase Program imposes restrictionson executive compensation corporate governance, which may affect our ability to retain or attractqualified executive officers.**     Companies participating in the Capital Purchase Program must adopt the Department of theTreasury’s standards for executive compensation and corporate governance for the period duringwhich the Department of the Treasury holds preferred stock issued under this program. Thesestandards generally apply to the chief executive officer, chief financial officer, plus the nextthree most highly compensated executive officers.     Because we are dependent upon the services of our current executive management team, theunexpected loss of executive officers or the inability to recruit qualified personnel in the futuredue to these compensation limitations, could have an adverse effect on our business, financialcondition, or operating results.**The impact on us of recently enacted legislation, in particular the Emergency EconomicStabilization Act of 2008 and the American Recovery and Reinvestment Act of 2009 and theirimplementing regulations, and actions by the FDIC, cannot be predicted at this time.**     The federal government has recently enacted legislation and other regulations in an effort tostabilize the U.S. financial system. The Emergency Economic Stabilization Act of 2008 (the “EESA”)provided the Department of the Treasury with the authority to, among other things, purchase up to$700 billion of mortgages, mortgage-backed securities and certain other financial instruments fromfinancial institutions for the purpose of stabilizing and providing liquidity to the U.S. financialmarkets. The Department of the Treasury subsequently announced a program under the EESA pursuant towhich it would make senior preferred stock investments in participating financial institutions. TheFederal Deposit Insurance Corporation announced the development of a guarantee program under thesystemic risk exception to the Federal Deposit Act pursuant to which the FDIC would offer aguarantee of certain financial institution indebtedness in exchange for an insurance premium to bepaid to the FDIC by issuing financial institutions. More recently, the American Recovery andReinvestment Act of 2009 (the “ARRA”) amends certain provisions of the EESA and contains a widearray of provisions aimed at stimulating the U.S. economy.     The programs established or to be established under the EESA, the ARRA and other troubledasset relief programs may have adverse effects upon us. We may face increased regulation of ourindustry. Compliance with such regulation may increase our costs and limit our ability to pursuebusiness opportunities. Also, participation in specific programs may subject us to additionalrestrictions. Similarly, programs established by the FDIC under the systemic risk exception,whether we participate or not, may have an adverse effect on us. The Bank is participating inthe FDIC temporary liquidity guarantee program, and such program likely will require the payment ofadditional insurance premiums to the FDIC. We may be required to pay significantly higher FDICpremiums because market developments have significantly depleted the insurance fund of the FDIC andreduced the ratio of reserves to insured deposits. The effects of participating or notparticipating in any such programs, and the extent of our participation in such programs cannotreliably be determined at this time.**Our businesses and earnings are impacted by governmental, fiscal and monetary policy.**     We are affected by domestic monetary policy. For example, the Federal Reserve Board regulatesthe supply of money and credit in the United States and its policies determine in large part ourcost of funds for lending, investing and capital raising activities and the return we earn on thoseloans and investments, both of which affect our net interest margin. The actions of the FederalReserve Board also
 

 
can materially affect the value of financial instruments we hold, such as loans and debtsecurities, and its policies also can affect our borrowers, potentially increasing the risk thatthey may fail to repay their loans. Our businesses and earnings also are affected by the fiscal orother policies that are adopted by various regulatory authorities of the United States. Changes infiscal or monetary policy are beyond our control and hard to predict.**Our profitability and the value of any equity investment in us may suffer because of rapid andunpredictable changes in the highly regulated environment in which we operate.**     We are subject to extensive supervision by several governmental regulatory agencies at thefederal and state levels. Recently enacted, proposed and future banking and other legislation andregulations have had, and will continue to have, or may have a significant impact on the financialservices industry. These regulations, which are generally intended to protect depositors and notour shareholders, and the interpretation and application of them by federal and state regulators,are beyond our control, may change rapidly and unpredictably, and can be expected to influence ourearnings and growth. Our success depends on our continued ability to maintain compliance with theseregulations. Many of these regulations increase our costs and thus place other financialinstitutions that may not be subject to similar regulation in stronger, more favorable competitivepositions.**If we need additional capital in the future to continue our growth, we may not be able to obtain iton terms that are favorable. This could negatively affect our performance and the value of ourcommon stock.**     Our business strategy calls for continued growth. We anticipate that we will be able tosupport this growth through the generation of additional deposits at existing and new branchlocations, as well as expanded loan and other investment opportunities. However, we may need toraise additional capital in the future to support our continued growth and to maintain desiredcapital levels. Our ability to raise capital through the sale of additional equity securities orthe placement of financial instruments that qualify as regulatory capital will depend primarilyupon our financial condition and the condition of financial markets at that time. We may not beable to obtain additional capital in the amounts or on terms satisfactory to us. Our growth may beconstrained if we are unable to raise additional capital as needed.**The trading volume in our common stock is less than that of other larger financial servicescompanies.**     Although our common stock is listed for trading on NYSE Amex (formerly known as NYSE AlternextUS), the trading volume in our common stock is less than that of other larger financial servicescompanies. A public trading market having the desired characteristics of depth, liquidity andorderliness depends on the presence in the marketplace of willing buyers and sellers of our commonstock at any given time. This presence depends on the individual decisions of investors and generaleconomic and market conditions over which we have no control. Given the lower trading volume of ourcommon stock, significant sales of our common stock, or the expectation of these sales, could causeour stock price to fall.