----

| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|-----------------------------------------------------------------------------------------|

|  ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|------------------------------------------------------------------------------------------|

| Maryland                                 | 52-1974638          |
|------------------------------------------|---------------------|
| (State or Other Jurisdiction of          | (I.R.S. Employer    |
| Incorporation or Organization)           | Identification No.) |
|                                     |                |
| 18 East Dover Street, Easton, Maryland   | 21601               |
| (Address of Principal Executive Offices) | (Zip Code)          |

| Large accelerated filer                       |  ̈ | Accelerated filer         | þ |
|-----------------------------------------------|--------|---------------------------|--------|
| Non-accelerated filer                         |  ̈ | Smaller reporting company |  ̈ |
| (Do not check if a smaller reporting company) |

----

|                                                                                                                             |   | Page   |
|----------------------------------------------------------------------------------------------------------------------------------|--------|--------|
|                                                                                                                             |   |   |   |
| Part I. Financial Information                                                                                                    |   | 2      |   |
|                                                                                                                             |   |   |   |
| Item 1.  Financial Statements                                                                                          |   | 2      |   |
|                                                                                                                             |   |   |   |
| Consolidated Balance Sheets -March 31, 2011 (unaudited) and December 31, 2010                                                    |   | 2      |   |
|                                                                                                                             |   |   |   |
| Consolidated Statements of Operations -For the three months ended March 31, 2011 and 2010 (unaudited)                            |   | 3      |   |
|                                                                                                                             |   |   |   |
| Consolidated Statements of Changes in Stockholders’ Equity -For the three months ended March 31, 2011 and 2010 (unaudited) |   | 4      |   |
|                                                                                                                             |   |   |   |
| Consolidated Statements of Comprehensive Loss -For the three months ended March 31, 2011 and 2010 (unaudited)                    |   | 5      |   |
|                                                                                                                             |   |   |   |
| Consolidated Statements of Cash Flows -For the three months ended March 31, 2011 and 2010 (unaudited)                            |   | 6      |   |
|                                                                                                                             |   |   |   |
| Notes to Consolidated Financial Statements (unaudited)                                                                           |   | 7      |   |
|                                                                                                                             |   |   |   |
| Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations                   |   | 22     |   |
|                                                                                                                             |   |   |   |
| Item 3.  Quantitative and Qualitative Disclosures about Market Risk                                                    |   | 30     |   |
|                                                                                                                             |   |   |   |
| Item 4.  Controls and Procedures                                                                                       |   | 30     |   |
|                                                                                                                             |   |   |   |
| Part II.  Other Information                                                                                            |   | 30     |   |
|                                                                                                                             |   |   |   |
| Item 1A.  Risk Factors                                                                                                 |   | 30     |   |
|                                                                                                                             |   |   |   |
| Item 6.  Exhibits                                                                                                      |   | 31     |   |
|                                                                                                                             |   |   |   |
| Signatures                                                                                                                       |   | 31     |   |
|                                                                                                                             |   |   |   |
| Exhibit Index                                                                                                                    |   | 32     |   |

----

|                                                                                                                                            |   | March 31, |      |   | December 31, |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------|-----------|--------|-------------------|--------|
|                                                                                                                                            |   | 2011           |      |   | 2010              |   |
|                                                                                                                                            |   | (Unaudited)    |      |   |              |   |
| ASSETS                                                                                                                                          |   |           |      |   |              |   |
| Cash and due from banks                                                                                                                         |   | $              | 19,074    |   |              | $      | 19,680 |   |
| Interest-bearing deposits with other banks                                                                                                      |   |           | 31,311    |   |              |   | 21,593 |   |
| Federal funds sold                                                                                                                              |   |           | 39,597    |   |              |   | 36,691 |   |
| Investment securities:                                                                                                                          |   |           |      |   |              |   |   |   |
| Available for sale, at fair value                                                                                                               |   |           | 100,234   |   |              |   | 99,055 |   |
| Held to maturity, at amortized cost – fair value of $6,843 (2011) and $6,851 (2010)                                                       |   |           | 6,686     |   |              |   | 6,727 |   |
|                                                                                                                                            |   |           |      |   |              |   |   |   |
| Loans                                                                                                                                           |   |           | 884,715   |   |              |   | 895,404 |   |
| Less:  allowance for credit losses                                                                                                    |   |           | (17,471   | )      |              |   | (14,227 | ) |
| Loans, net                                                                                                                                      |   |           | 867,244   |   |              |   | 881,177 |   |
|                                                                                                                                            |   |           |      |   |              |   |   |   |
| Premises and equipment, net                                                                                                                     |   |           | 14,304    |   |              |   | 14,483 |   |
| Goodwill                                                                                                                                        |   |           | 13,678    |   |              |   | 13,678 |   |
| Other intangible assets, net                                                                                                                    |   |           | 4,711     |   |              |   | 4,840 |   |
| Other real estate and other assets owned, net                                                                                                   |   |           | 4,802     |   |              |   | 3,702 |   |
| Other assets                                                                                                                                    |   |           | 29,693    |   |              |   | 28,685 |   |
| TOTAL ASSETS                                                                                                                                    |   | $              | 1,131,334 |   |              | $      | 1,130,311 |   |
|                                                                                                                                            |   |           |      |   |              |   |   |   |
| LIABILITIES                                                                                                                                     |   |           |      |   |              |   |   |   |
| Deposits:                                                                                                                                       |   |           |      |   |              |   |   |   |
| Noninterest-bearing demand                                                                                                                      |   | $              | 122,490   |   |              | $      | 124,188 |   |
| Interest-bearing demand                                                                                                                         |   |           | 137,108   |   |              |   | 128,426 |   |
| Money market and savings                                                                                                                        |   |           | 262,983   |   |              |   | 255,515 |   |
| Certificates of deposit $100,000 or more                                                                                                        |   |           | 256,281   |   |              |   | 263,665 |   |
| Other time                                                                                                                                      |   |           | 207,624   |   |              |   | 207,722 |   |
| Total deposits                                                                                                                                  |   |           | 986,486   |   |              |   | 979,516 |   |
|                                                                                                                                            |   |           |      |   |              |   |   |   |
| Short-term borrowings                                                                                                                           |   |           | 12,078    |   |              |   | 16,041 |   |
| Accrued expenses and other liabilities                                                                                                          |   |           | 10,912    |   |              |   | 11,309 |   |
| Long-term debt                                                                                                                                  |   |           | 932       |   |              |   | 932 |   |
| TOTAL LIABILITIES                                                                                                                               |   |           | 1,010,408 |   |              |   | 1,007,798 |   |
|                                                                                                                                            |   |           |      |   |              |   |   |   |
| STOCKHOLDERS’ EQUITY                                                                                                                      |   |           |      |   |              |   |   |   |
| Common stock, par value $.01 per share; shares authorized – 35,000,000; shares issued and outstanding – 8,443,436 (2011) and (2010) |   |           |   84 |   |              |   |   84 |   |
| Warrant                                                                                                                                         |   |           | 1,543     |   |              |   | 1,543 |   |
| Additional paid in capital                                                                                                                      |   |           | 30,290    |   |              |   | 30,242 |   |
| Retained earnings                                                                                                                               |   |           | 90,868    |   |              |   | 92,458 |   |
| Accumulated other comprehensive loss                                                                                                            |   |           | (1,859    | )      |              |   | (1,814 | ) |
| TOTAL STOCKHOLDERS’ EQUITY                                                                                                                |   |           | 120,926   |   |              |   | 122,513 |   |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                |   | $              | 1,131,334 |   |              | $      | 1,130,311 |   |

----

|                                                  |   | For the Three Months Ended |   |
|-------------------------------------------------------|--------|------------------------------------------------|--------|
|                                                  |   | March 31,                                 |   |
|                                                  |   | 2011                                           |   |   | 2010 |   |
|                                                  |   |                                           |   |   |   |   |
| INTEREST INCOME                                       |   |                                           |   |   |   |   |
| Interest and fees on loans                            |   | $                                              | 12,001 |   |   | $ | 12,874 |   |
| Interest and dividends on investment securities:      |   |                                           |   |   |   |   |   |   |
| Taxable                                               |   |                                           | 657    |   |   |   | 882 |   |
| Tax-exempt                                            |   |                                           | 38     |   |   |   | 59 |   |
| Interest on federal funds sold                        |   |                                           | 16     |   |   |   | 12 |   |
| Interest on deposits with other banks                 |   |                                           | 6      |   |   |   | 1 |   |
| Total interest income                                 |   |                                           | 12,718 |   |   |   | 13,828 |   |
|                                                  |   |                                           |   |   |   |   |   |   |
| INTEREST EXPENSE                                      |   |                                           |   |   |   |   |   |   |
| Interest on deposits                                  |   |                                           | 2,833  |   |   |   | 3,385 |   |
| Interest on short-term borrowings                     |   |                                           | 13     |   |   |   | 32 |   |
| Interest on long-term debt                            |   |                                           | 10     |   |   |   | 16 |   |
| Total interest expense                                |   |                                           | 2,856  |   |   |   | 3,433 |   |
|                                                  |   |                                           |   |   |   |   |   |   |
| NET INTEREST INCOME                                   |   |                                           | 9,862  |   |   |   | 10,395 |   |
| Provision for credit losses                           |   |                                           | 6,390  |   |   |   | 7,617 |   |
|                                                  |   |                                           |   |   |   |   |   |   |
| NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES |   |                                           | 3,472  |   |   |   | 2,778 |   |
|                                                  |   |                                           |   |   |   |   |   |   |
| NONINTEREST INCOME                                    |   |                                           |   |   |   |   |   |   |
| Service charges on deposit accounts                   |   |                                           | 704    |   |   |   | 786 |   |
| Trust and investment fee income                       |   |                                           | 376    |   |   |   | 416 |   |
| Gains on sales of investment securities               |   |                                           | 79     |   |   |   | - |   |
| Insurance agency commissions                          |   |                                           | 2,510  |   |   |   | 2,889 |   |
| Other noninterest income                              |   |                                           | 726    |   |   |   | 791 |   |
| Total noninterest income                              |   |                                           | 4,395  |   |   |   | 4,882 |   |
|                                                  |   |                                           |   |   |   |   |   |   |
| NONINTEREST EXPENSE                                   |   |                                           |   |   |   |   |   |   |
| Salaries and wages                                    |   |                                           | 4,246  |   |   |   | 4,490 |   |
| Employee benefits                                     |   |                                           | 1,153  |   |   |   | 1,281 |   |
| Occupancy expense                                     |   |                                           | 596    |   |   |   | 622 |   |
| Furniture and equipment expense                       |   |                                           | 272    |   |   |   | 300 |   |
| Data processing                                       |   |                                           | 851    |   |   |   | 631 |   |
| Directors’ fees                                 |   |                                           | 107    |   |   |   | 121 |   |
| Amortization of other intangible assets               |   |                                           | 129    |   |   |   | 129 |   |
| Insurance agency commissions expense                  |   |                                           | 375    |   |   |   | 428 |   |
| FDIC insurance premium expense                        |   |                                           | 460    |   |   |   | 481 |   |
| Other noninterest expenses                            |   |                                           | 1,702  |   |   |   | 1,838 |   |
| Total noninterest expense                             |   |                                           | 9,891  |   |   |   | 10,321 |   |
|                                                  |   |                                           |   |   |   |   |   |   |
| LOSS BEFORE INCOME TAX BENEFIT                        |   |                                           | (2,024 | ) |   |   | (2,661 | ) |
| Income tax benefit                                    |   |                                           | (941   | ) |   |   | (1,099 | ) |
|                                                  |   |                                           |   |   |   |   |   |   |
| NET LOSS                                              |   | $                                              | (1,083 | ) |   | $ | (1,562 | ) |
|                                                  |   |                                           |   |   |   |   |   |   |
| Basic net loss per common share                       |   | $                                              | (0.13  | ) |   | $ | (0.19 | ) |
| Diluted net loss per common share                     |   | $                                              | (0.13  | ) |   | $ | (0.19 | ) |
| Dividends paid per common share                       |   | $                                              | 0.06   |   |   | $ | 0.06 |   |

----

|                                                             |   |   |   |   |    |   |   |         |   |   |     |   |   | Accumulated        |   |   |                |   |
|------------------------------------------------------------------|--------|--------|--------|--------|---------|--------|--------|--------------|--------|--------|----------|--------|--------|--------------------|--------|--------|---------------------|--------|
|                                                             |   |   |   |   |    |   |   | Additional   |   |   |     |   |   | Other              |   |   | Total               |   |
|                                                             |   | Common |   |   |    |   |   | Paid in |   |   | Retained |   |   | Comprehensive      |   |   | Stockholders’ |   |
|                                                             |   | Stock  |   |   | Warrant |   |   | Capital      |   |   | Earnings |   |   | Income (Loss) |   |   | Equity              |   |
| Balances, January 1, 2011                                        |   | $      | 84     |   |    | $      | 1,543  |         |   | $      | 30,242   |   |   | $                  | 92,458 |   |                | $      | (1,814 | ) |   | $ | 122,513 |   |
|                                                             |   |   |   |   |    |   |   |         |   |   |     |   |   |               |   |   |                |   |   |   |   |   |   |   |
| Comprehensive loss:                                              |   |   |   |   |    |   |   |         |   |   |     |   |   |               |   |   |                |   |   |   |   |   |   |   |
| Net loss                                                         |   |   | -      |   |    |   | -      |         |   |   | -        |   |   |               | (1,083 | )      |                |   | - |   |   |   | (1,083 | ) |
| Unrealized losses on available-for-sale securities, net of taxes |   |   | -      |   |    |   | -      |         |   |   | -        |   |   |               | -      |   |                |   | (269 | ) |   |   | (269 | ) |
| Unrealized gains on cash flow hedging activities, net of taxes   |   |   | -      |   |    |   | -      |         |   |   | -        |   |   |               | -      |   |                |   | 224 |   |   |   | 224 |   |
| Total comprehensive loss                                         |   |   |   |   |    |   |   |         |   |   |     |   |   |               |   |   |                |   |   |   |   |   | (1,128 | ) |
|                                                             |   |   |   |   |    |   |   |         |   |   |     |   |   |               |   |   |                |   |   |   |   |   |   |   |
| Stock-based compensation                                         |   |   | -      |   |    |   | -      |         |   |   | 48       |   |   |               | -      |   |                |   | - |   |   |   | 48 |   |
|                                                             |   |   |   |   |    |   |   |         |   |   |     |   |   |               |   |   |                |   |   |   |   |   |   |   |
| Cash dividends paid ($0.06 per share)                            |   |   | -      |   |    |   | -      |         |   |   | -        |   |   |               | (507   | )      |                |   | - |   |   |   | (507 | ) |
|                                                             |   |   |   |   |    |   |   |         |   |   |     |   |   |               |   |   |                |   |   |   |   |   |   |   |
| Balances, March 31, 2011                                         |   | $      | 84     |   |    | $      | 1,543  |         |   | $      | 30,290   |   |   | $                  | 90,868 |   |                | $      | (1,859 | ) |   | $ | 120,926 |   |
|                                                             |   |   |   |   |    |   |   |         |   |   |     |   |   |               |   |   |                |   |   |   |   |   |   |   |
| Balances, January 1, 2010                                        |   | $      | 84     |   |    | $      | 1,543  |         |   | $      | 29,872   |   |   | $                  | 96,151 |   |                | $      | 160 |   |   | $ | 127,810 |   |
|                                                             |   |   |   |   |    |   |   |         |   |   |     |   |   |               |   |   |                |   |   |   |   |   |   |   |
| Comprehensive loss:                                              |   |   |   |   |    |   |   |         |   |   |     |   |   |               |   |   |                |   |   |   |   |   |   |   |
| Net loss                                                         |   |   | -      |   |    |   | -      |         |   |   | -        |   |   |               | (1,562 | )      |                |   | - |   |   |   | (1,562 | ) |
| Unrealized gains on available-for-sale securities, net of taxes  |   |   | -      |   |    |   | -      |         |   |   | -        |   |   |               | -      |   |                |   | 44 |   |   |   | 44 |   |
| Unrealized losses on cash flow hedging activities, net of taxes  |   |   | -      |   |    |   | -      |         |   |   | -        |   |   |               | -      |   |                |   | (794 | ) |   |   | (794 | ) |
| Total comprehensive loss                                         |   |   |   |   |    |   |   |         |   |   |     |   |   |               |   |   |                |   |   |   |   |   | (2,312 | ) |
|                                                             |   |   |   |   |    |   |   |         |   |   |     |   |   |               |   |   |                |   |   |   |   |   |   |   |
| Stock-based compensation                                         |   |   | -      |   |    |   | -      |         |   |   | 116      |   |   |               | -      |   |                |   | - |   |   |   | 116 |   |
|                                                             |   |   |   |   |    |   |   |         |   |   |     |   |   |               |   |   |                |   |   |   |   |   |   |   |
| Cash dividends paid ($0.06 per share)                            |   |   | -      |   |    |   | -      |         |   |   | -        |   |   |               | (506   | )      |                |   | - |   |   |   | (506 | ) |
|                                                             |   |   |   |   |    |   |   |         |   |   |     |   |   |               |   |   |                |   |   |   |   |   |   |   |
| Balances, March 31, 2010                                         |   | $      | 84     |   |    | $      | 1,543  |         |   | $      | 29,988   |   |   | $                  | 94,083 |   |                | $      | (590 | ) |   | $ | 125,108 |   |

----

|                                                               |   | For the Three Months EndedMarch 31, |   |
|--------------------------------------------------------------------|--------|--------------------------------------------------------------|--------|
|                                                               |   | 2011                                                         |   |   | 2010 |   |
|                                                               |   |                                                         |   |   |   |   |
| Net loss                                                           |   | $                                                            | (1,083 | ) |   | $ | (1,562 | ) |
|                                                               |   |                                                         |   |   |   |   |   |   |
| Other comprehensive loss:                                          |   |                                                         |   |   |   |   |   |   |
| Securities available for sale:                                     |   |                                                         |   |   |   |   |   |   |
| Unrealized holding (losses) gains on available-for-sale securities |   |                                                         | (372   | ) |   |   | 74 |   |
| Tax effect                                                         |   |                                                         | 150    |   |   |   | (30 | ) |
| Reclassification of gains recognized in net income                 |   |                                                         | (79    | ) |   |   | - |   |
| Tax effect                                                         |   |                                                         | 32     |   |   |   | - |   |
| Net of tax amount                                                  |   |                                                         | (269   | ) |   |   | 44 |   |
|                                                               |   |                                                         |   |   |   |   |   |   |
| Cash flow hedging activities:                                      |   |                                                         |   |   |   |   |   |   |
| Unrealized holding gains (losses) on cash flow hedging activities  |   |                                                         | 377    |   |   |   | (1,331 | ) |
| Tax effect                                                         |   |                                                         | (153   | ) |   |   | 537 |   |
| Net of tax amount                                                  |   |                                                         | 224    |   |   |   | (794 | ) |
| Total other comprehensive loss                                     |   |                                                         | (45    | ) |   |   | (750 | ) |
| Comprehensive loss                                                 |   | $                                                            | (1,128 | ) |   | $ | (2,312 | ) |

----

|                                                                             |   | For the Three Months Ended |    |
|----------------------------------------------------------------------------------|--------|------------------------------------------------|---------|
|                                                                             |   | March 31,                                 |    |
|                                                                             |   | 2011                                           |    |   | 2010 |   |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                            |   |                                           |    |   |   |   |
| Net loss                                                                         |   | $                                              | (1,083  | ) |   | $ | (1,562 | ) |
| Adjustments to reconcile net loss to net cash provided by operating activities:  |   |                                           |    |   |   |   |   |   |
| Provision for credit losses                                                      |   |                                           | 6,390   |   |   |   | 7,617 |   |
| Depreciation and amortization                                                    |   |                                           | 725     |   |   |   | 564 |   |
| Discount accretion on debt securities                                            |   |                                           | (25     | ) |   |   | (27 | ) |
| Stock-based compensation expense                                                 |   |                                           | 69      |   |   |   | 115 |   |
| Excess tax benefits from stock-based arrangements                                |   |                                           | (21     | ) |   |   | 1 |   |
| Deferred income taxes                                                            |   |                                           | (1,552  | ) |   |   | (1,103 | ) |
| Gains on sales of securities                                                     |   |                                           | (79     | ) |   |   | - |   |
| Gains on disposals of premises and equipment                                     |   |                                           | (3      | ) |   |   | - |   |
| Losses on sales of other real estate owned                                       |   |                                           | 40      |   |   |   | - |   |
| Write-downs of other real estate owned                                           |   |                                           | 163     |   |   |   | 247 |   |
| Net changes in:                                                                  |   |                                           |    |   |   |   |   |   |
| Insurance premiums receivable                                                    |   |                                           | 110     |   |   |   | (355 | ) |
| Accrued interest receivable                                                      |   |                                           | 812     |   |   |   | 24 |   |
| Other assets                                                                     |   |                                           | 30      |   |   |   | 459 |   |
| Accrued interest payable                                                         |   |                                           | 44      |   |   |   | (165 | ) |
| Other liabilities                                                                |   |                                           | (463    | ) |   |   | (725 | ) |
| Net cash provided by operating activities                                        |   |                                           | 5,157   |   |   |   | 5,090 |   |
|                                                                             |   |                                           |    |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                            |   |                                           |    |   |   |   |   |   |
| Proceeds from maturities and principal payments of securities available for sale |   |                                           | 14,979  |   |   |   | 11,742 |   |
| Proceeds from sales of securities available for sale                             |   |                                           | 12,061  |   |   |   | - |   |
| Purchases of securities available for sale                                       |   |                                           | (28,886 | ) |   |   | (18,299 | ) |
| Proceeds from maturities and principal payments of securities held to maturity   |   |                                           | 35      |   |   |   | 115 |   |
| Net decrease in loans                                                            |   |                                           | 5,713   |   |   |   | 5,520 |   |
| Purchases of premises and equipment                                              |   |                                           | (93     | ) |   |   | (660 | ) |
| Proceeds from sales of premises and equipment                                    |   |                                           | 4       |   |   |   | - |   |
| Proceeds from sales of other real estate owned                                   |   |                                           | 527     |   |   |   | 63 |   |
| Net cash provided by (used in) investing activities                              |   |                                           | 4,340   |   |   |   | (1,519 | ) |
|                                                                             |   |                                           |    |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                            |   |                                           |    |   |   |   |   |   |
| Net increase in demand, money market and savings deposits                        |   |                                           | 14,452  |   |   |   | 5,844 |   |
| Net decrease in certificates of deposit                                          |   |                                           | (7,482  | ) |   |   | (6,031 | ) |
| Excess tax benefits from stock-based arrangements                                |   |                                           | 21      |   |   |   | (1 | ) |
| Net decrease in short-term borrowings                                            |   |                                           | (3,963  | ) |   |   | (6,403 | ) |
| Common stock dividends paid                                                      |   |                                           | (507    | ) |   |   | (506 | ) |
| Net cash provided by (used in) financing activities                              |   |                                           | 2,521   |   |   |   | (7,097 | ) |
| Net increase (decrease) in cash and cash equivalents                             |   |                                           | 12,018  |   |   |   | (3,526 | ) |
| Cash and cash equivalents at beginning of period                                 |   |                                           | 77,964  |   |   |   | 75,646 |   |
| Cash and cash equivalents at end of period                                       |   | $                                              | 89,982  |   |   | $ | 72,120 |   |
|                                                                             |   |                                           |    |   |   |   |   |   |
| Supplemental cash flows information:                                             |   |                                           |    |   |   |   |   |   |
| Interest paid                                                                    |   | $                                              | 2,813   |   |   | $ | 3,598 |   |
| Income taxes paid                                                                |   | $                                              | 817     |   |   | $ | 91 |   |
| Transfers from loans to other real estate owned                                  |   | $                                              | 1,830   |   |   | $ | 141 |   |

----

|                                          |   | For the Three Months Ended |   |
|-----------------------------------------------|--------|------------------------------------------------|--------|
|                                          |   | March 31,                                 |   |
| (In thousands, except per share data)         |   | 2011                                           |   |   | 2010 |   |
| Net loss available to common shareholders     |   | $                                              | (1,083 | ) |   | $ | (1,562 | ) |
| Weighted average shares outstanding - Basic   |   |                                           | 8,443  |   |   |   | 8,436 |   |
| Dilutive effect of stock-based awards         |   |                                           | -      |   |   |   | - |   |
| Weighted average shares outstanding - Diluted |   |                                           | 8,443  |   |   |   | 8,436 |   |
| Loss per common share - Basic                 |   | $                                              | (0.13  | ) |   | $ | (0.19 | ) |
| Loss per common share - Diluted               |   | $                                              | (0.13  | ) |   | $ | (0.19 | ) |

----

|                                                     |   |      |   |   | Gross      |   |   | Gross      |   |   | Estimated |   |
|----------------------------------------------------------|--------|-----------|--------|--------|------------|--------|--------|------------|--------|--------|-----------|--------|
|                                                     |   | Amortized |   |   | Unrealized |   |   | Unrealized |   |   | Fair      |   |
| (Dollars in thousands)                         |   | Cost      |   |   | Gains      |   |   | Losses     |   |   | Value     |   |
| Available-for-sale securities:                           |   |      |   |   |       |   |   |       |   |   |      |   |
| March 31, 2011:                                          |   |      |   |   |       |   |   |       |   |   |      |   |
| Obligations of U.S. Government agencies and corporations |   | $         | 47,474 |   |       | $      | 656    |       |   | $      | 131       |   |   | $ | 47,999 |   |
| Mortgage-backed securities                               |   |      | 51,019 |   |       |   | 886    |       |   |   | 248       |   |   |   | 51,657 |   |
| Other equity securities                                  |   |      | 570    |   |       |   | 8      |       |   |   | -         |   |   |   | 578 |   |
| Total                                                    |   | $         | 99,063 |   |       | $      | 1,550  |       |   | $      | 379       |   |   | $ | 100,234 |   |
|                                                     |   |      |   |   |       |   |   |       |   |   |      |   |   |   |   |   |
| December 31, 2010:                                       |   |      |   |   |       |   |   |       |   |   |      |   |   |   |   |   |
| Obligations of U.S. Government agencies and corporations |   | $         | 58,052 |   |       | $      | 921    |       |   | $      | 69        |   |   | $ | 58,904 |   |
| Mortgage-backed securities                               |   |      | 38,817 |   |       |   | 933    |       |   |   | 173       |   |   |   | 39,577 |   |
| Other equity securities                                  |   |      | 566    |   |       |   | 8      |       |   |   | -         |   |   |   | 574 |   |
| Total                                                    |   | $         | 97,435 |   |       | $      | 1,862  |       |   | $      | 242       |   |   | $ | 99,055 |   |
|                                                     |   |      |   |   |       |   |   |       |   |   |      |   |   |   |   |   |
| Held-to-maturity securities:                             |   |      |   |   |       |   |   |       |   |   |      |   |   |   |   |   |
| March 31, 2011:                                          |   |      |   |   |       |   |   |       |   |   |      |   |   |   |   |   |
| Obligations of states and political subdivisions         |   | $         | 6,686  |   |       | $      | 161    |       |   | $      | 4         |   |   | $ | 6,843 |   |
|                                                     |   |      |   |   |       |   |   |       |   |   |      |   |   |   |   |   |
| December 31, 2010:                                       |   |      |   |   |       |   |   |       |   |   |      |   |   |   |   |   |
| Obligations of states and political subdivisions         |   | $         | 6,727  |   |       | $      | 143    |       |   | $      | 19        |   |   | $ | 6,851 |   |

|                                   |   | Available for sale |   |   | Held to maturity |   |
|----------------------------------------|--------|------------------------------|--------|--------|----------------------------|--------|
|                                   |   | Amortized                    |   |   | Estimated                  |   |   | Amortized |   |   | Estimated |   |
| (Dollars in thousands)       |   | Cost                         |   |   | Fair Value            |   |   | Cost |   |   | Fair Value |   |
| Due in one year or less                |   | $                            | 8,046  |   |                       | $      | 8,193 |   |   | $ | 101 |   |   | $ | 102 |   |
| Due after one year through five years  |   |                         | 20,906 |   |                       |   | 21,056 |   |   |   | 3,050 |   |   |   | 3,118 |   |
| Due after five years through ten years |   |                         | 9,321  |   |                       |   | 9,555 |   |   |   | 2,524 |   |   |   | 2,603 |   |
| Due after ten years                    |   |                         | 60,220 |   |                       |   | 60,852 |   |   |   | 1,011 |   |   |   | 1,020 |   |
|                                   |   |                         | 98,493 |   |                       |   | 99,656 |   |   |   | 6,686 |   |   |   | 6,843 |   |
| Equity securities                      |   |                         | 570    |   |                       |   | 578 |   |   |   | - |   |   |   | - |   |
| Total                                  |   | $                            | 99,063 |   |                       | $      | 100,234 |   |   | $ | 6,686 |   |   | $ | 6,843 |   |

----

|                                        |   | Less than12 Months |   |   | More than12 Months |   |   | Total     |   |
|---------------------------------------------|--------|------------------------------|--------|--------|------------------------------|--------|--------|-----------|--------|
| (Dollars in thousands)            |   | FairValue                    |   |   | UnrealizedLosses             |   |   | FairValue |   |   | UnrealizedLosses |   |   | FairValue |   |   | UnrealizedLosses |   |
| Available-for-sale securities:              |   |                         |   |   |                         |   |   |      |   |   |   |   |   |   |   |   |   |   |
| U.S. Gov’t. agencies and corporations |   | $                            | 16,160 |   |                         | $      | 131    |      |   | $ | - |   |   | $ | - |   |   | $ | 16,160 |   |   | $ | 131 |   |
| Mortgage-backed securities                  |   |                         | 23,447 |   |                         |   | 248    |      |   |   | - |   |   |   | - |   |   |   | 23,447 |   |   |   | 248 |   |
| Total                                       |   | $                            | 39,607 |   |                         | $      | 379    |      |   | $ | - |   |   | $ | - |   |   | $ | 39,607 |   |   | $ | 379 |   |

|                                             |   | Less than12 Months |   |   | More than12 Months |   |   | Total     |   |
|--------------------------------------------------|--------|------------------------------|--------|--------|------------------------------|--------|--------|-----------|--------|
| (Dollars in thousands)                 |   | FairValue                    |   |   | UnrealizedLosses             |   |   | FairValue |   |   | UnrealizedLosses |   |   | FairValue |   |   | UnrealizedLosses |   |
| Held-to-maturity securities:                     |   |                         |   |   |                         |   |   |      |   |   |   |   |   |   |   |   |   |   |
| Obligations of states and political subdivisions |   | $                            | 660    |   |                         | $      | 4      |      |   | $ | - |   |   | $ | - |   |   | $ | 660 |   |   | $ | 4 |   |

| (Dollars in thousands) |   | March 31, 2011 |    |   | December 31, 2010 |   |
|----------------------------------|--------|--------------------------|---------|--------|-----------------------------|--------|
| Real estate – construction |   | $                        | 135,354 |   |                        | $      | 143,952 |   |
| Real estate – residential  |   |                     | 332,449 |   |                        |   | 333,738 |   |
| Real estate – commercial   |   |                     | 322,996 |   |                        |   | 318,726 |   |
| Commercial                       |   |                     | 78,324  |   |                        |   | 82,787 |   |
| Consumer                         |   |                     | 15,592  |   |                        |   | 16,201 |   |
| Total loans                      |   |                     | 884,715 |   |                        |   | 895,404 |   |
| Allowance for credit losses      |   |                     | (17,471 | )      |                        |   | (14,227 | ) |
| Total loans, net                 |   | $                        | 867,244 |   |                        | $      | 881,177 |   |

----

|                                          |   | For the Three Months Ended |   |
|-----------------------------------------------|--------|------------------------------------------------|--------|
|                                          |   | March 31,                                 |   |
| (Dollars in thousands)                        |   | 2011                                           |   |   | 2010 |   |
| Allowance balance – beginning of period |   | $                                              | 14,227 |   |   | $ | 10,876 |   |
| Charge-offs:                                  |   |                                           |   |   |   |   |   |   |
| Real estate – construction              |   |                                           | (686   | ) |   |   | (3,509 | ) |
| Real estate – residential               |   |                                           | (2,091 | ) |   |   | (991 | ) |
| Real estate – commercial                |   |                                           | (228   | ) |   |   | - |   |
| Commercial                                    |   |                                           | (246   | ) |   |   | (1,224 | ) |
| Consumer                                      |   |                                           | (75    | ) |   |   | (166 | ) |
| Total                                         |   |                                           | (3,326 | ) |   |   | (5,890 | ) |
| Recoveries:                                   |   |                                           |   |   |   |   |   |   |
| Real estate – construction              |   |                                           | 49     |   |   |   | - |   |
| Real estate – residential               |   |                                           | 34     |   |   |   | 38 |   |
| Real estate – commercial                |   |                                           | -      |   |   |   | 101 |   |
| Commercial                                    |   |                                           | 77     |   |   |   | 3 |   |
| Consumer                                      |   |                                           | 20     |   |   |   | 46 |   |
| Total                                         |   |                                           | 180    |   |   |   | 188 |   |
| Net charge-offs                               |   |                                           | (3,146 | ) |   |   | (5,702 | ) |
| Provision for credit losses                   |   |                                           | 6,390  |   |   |   | 7,617 |   |
| Allowance balance – end of period       |   | $                                              | 17,471 |   |   | $ | 12,791 |   |

----

| (Dollars in thousands)    |   | Unpaidprincipalbalance |   |   | Recordedinvestment |   |   | Relatedallowance |   |   | Averagerecordedinvestment |   |
|-------------------------------------|--------|------------------------|--------|--------|--------------------|--------|--------|------------------|--------|--------|---------------------------|--------|
| March 31, 2011                      |   |                   |   |   |               |   |   |             |   |   |                      |   |
| With no related allowance recorded: |   |                   |   |   |               |   |   |             |   |   |                      |   |
| Real estate – construction    |   | $                      | 20,595 |   |               | $      | 15,359 |             |   | $      | -                         |   |   | $ | 16,310 |   |
| Real estate – residential     |   |                   | 9,026  |   |               |   | 7,448  |             |   |   | -                         |   |   |   | 8,288 |   |
| Real estate – commercial      |   |                   | 8,678  |   |               |   | 8,283  |             |   |   | -                         |   |   |   | 6,708 |   |
| Commercial                          |   |                   | 2,847  |   |               |   | 2,487  |             |   |   | -                         |   |   |   | 3,166 |   |
| Consumer                            |   |                   | 30     |   |               |   | 29     |             |   |   | -                         |   |   |   | 30 |   |
| Total                               |   |                   | 41,176 |   |               |   | 33,606 |             |   |   | -                         |   |   |   | 34,502 |   |
|                                |   |                   |   |   |               |   |   |             |   |   |                      |   |   |   |   |   |
| With a related allowance recorded:  |   |                   |   |   |               |   |   |             |   |   |                      |   |   |   |   |   |
| Real estate – construction    |   |                   | -      |   |               |   | -      |             |   |   | -                         |   |   |   | - |   |
| Real estate – residential     |   |                   | 5,960  |   |               |   | 5,850  |             |   |   | 1,053                     |   |   |   | 3,344 |   |
| Real estate – commercial      |   |                   | 7,983  |   |               |   | 7,983  |             |   |   | 1,022                     |   |   |   | 3,992 |   |
| Commercial                          |   |                   | 1,521  |   |               |   | 1,321  |             |   |   | 1,147                     |   |   |   | 661 |   |
| Consumer                            |   |                   | -      |   |               |   | -      |             |   |   | -                         |   |   |   | - |   |
| Total                               |   |                   | 15,464 |   |               |   | 15,154 |             |   |   | 3,222                     |   |   |   | 7,997 |   |
|                                |   |                   |   |   |               |   |   |             |   |   |                      |   |   |   |   |   |
| Total:                              |   |                   |   |   |               |   |   |             |   |   |                      |   |   |   |   |   |
| Real estate – construction    |   |                   | 20,595 |   |               |   | 15,359 |             |   |   | -                         |   |   |   | 16,310 |   |
| Real estate – residential     |   |                   | 14,986 |   |               |   | 13,298 |             |   |   | 1,053                     |   |   |   | 11,632 |   |
| Real estate – commercial      |   |                   | 16,661 |   |               |   | 16,266 |             |   |   | 1,022                     |   |   |   | 10,700 |   |
| Commercial                          |   |                   | 4,368  |   |               |   | 3,808  |             |   |   | 1,147                     |   |   |   | 3,827 |   |
| Consumer                            |   |                   | 30     |   |               |   | 29     |             |   |   | -                         |   |   |   | 30 |   |
| Total                               |   | $                      | 56,640 |   |               | $      | 48,760 |             |   | $      | 3,222                     |   |   | $ | 42,499 |   |

----

| (Dollars in thousands)    |   | Unpaidprincipalbalance |   |   | Recordedinvestment |   |   | Relatedallowance |   |   | Averagerecordedinvestment |   |
|-------------------------------------|--------|------------------------|--------|--------|--------------------|--------|--------|------------------|--------|--------|---------------------------|--------|
| December 31, 2010                   |   |                   |   |   |               |   |   |             |   |   |                      |   |
| With no related allowance recorded: |   |                   |   |   |               |   |   |             |   |   |                      |   |
| Real estate – construction    |   | $                      | 22,643 |   |               | $      | 17,261 |             |   | $      | -                         |   |   | $ | 17,784 |   |
| Real estate – residential     |   |                   | 11,038 |   |               |   | 9,132  |             |   |   | -                         |   |   |   | 8,368 |   |
| Real estate – commercial      |   |                   | 5,558  |   |               |   | 5,133  |             |   |   | -                         |   |   |   | 3,827 |   |
| Commercial                          |   |                   | 4,305  |   |               |   | 3,845  |             |   |   | -                         |   |   |   | 2,793 |   |
| Consumer                            |   |                   | 30     |   |               |   | 30     |             |   |   | -                         |   |   |   | 56 |   |
| Total                               |   |                   | 43,574 |   |               |   | 35,401 |             |   |   | -                         |   |   |   | 32,828 |   |
|                                |   |                   |   |   |               |   |   |             |   |   |                      |   |   |   |   |   |
| With a related allowance recorded:  |   |                   |   |   |               |   |   |             |   |   |                      |   |   |   |   |   |
| Real estate – construction    |   |                   | -      |   |               |   | -      |             |   |   | -                         |   |   |   | 1,596 |   |
| Real estate – residential     |   |                   | 945    |   |               |   | 837    |             |   |   | 203                       |   |   |   | 420 |   |
| Real estate – commercial      |   |                   | -      |   |               |   | -      |             |   |   | -                         |   |   |   | - |   |
| Commercial                          |   |                   | -      |   |               |   | -      |             |   |   | -                         |   |   |   | 398 |   |
| Consumer                            |   |                   | -      |   |               |   | -      |             |   |   | -                         |   |   |   | - |   |
| Total                               |   |                   | 945    |   |               |   | 837    |             |   |   | 203                       |   |   |   | 2,414 |   |
|                                |   |                   |   |   |               |   |   |             |   |   |                      |   |   |   |   |   |
| Total:                              |   |                   |   |   |               |   |   |             |   |   |                      |   |   |   |   |   |
| Real estate – construction    |   |                   | 22,643 |   |               |   | 17,261 |             |   |   | -                         |   |   |   | 19,380 |   |
| Real estate – residential     |   |                   | 11,983 |   |               |   | 9,969  |             |   |   | 203                       |   |   |   | 8,788 |   |
| Real estate – commercial      |   |                   | 5,558  |   |               |   | 5,133  |             |   |   | -                         |   |   |   | 3,827 |   |
| Commercial                          |   |                   | 4,305  |   |               |   | 3,845  |             |   |   | -                         |   |   |   | 3,191 |   |
| Consumer                            |   |                   | 30     |   |               |   | 30     |             |   |   | -                         |   |   |   | 56 |   |
| Total                               |   | $                      | 44,519 |   |               | $      | 36,238 |             |   | $      | 203                       |   |   | $ | 35,242 |   |

----

| (Dollars in thousands)          |   | Real estate -construction |    |   | Real estate -residential |   |    | Real estate -commercial |   |   | Commercial |   |   | Consumer |   |   | Unallocated |   |   | Total  |   |
|-------------------------------------------|--------|-------------------------------------|---------|--------|------------------------------------|--------|---------|-----------------------------------|--------|--------|------------|--------|--------|----------|--------|--------|-------------|--------|--------|--------|--------|
| For the three months ended March 31, 2011 |   |                                |    |   |                               |   |    |                              |   |   |       |   |   |     |   |   |        |   |   |   |   |
| Allowance for credit losses:              |   |                                |    |   |                               |   |    |                              |   |   |       |   |   |     |   |   |        |   |   |   |   |
| Beginning balance                         |   | $                                   | 3,327   |   |                               | $      | 4,833   |                              |   | $      | 3,665      |   |   | $        | 1,422  |   |        | $      | 637    |   |   | $ | 343 |   |   | $ | 14,227 |   |
| Charge-offs                               |   |                                | (686    | )      |                               |   | (2,091  | )                                 |   |   | (228       | )      |   |     | (246   | )      |        |   | (75    | )      |   |   | - |   |   |   | (3,326 | ) |
| Recoveries                                |   |                                | 49      |   |                               |   | 34      |                              |   |   | -          |   |   |     | 77     |   |        |   | 20     |   |   |   | - |   |   |   | 180 |   |
| Provision                                 |   |                                | 634     |   |                               |   | 2,644   |                              |   |   | 1 ,843     |   |   |     | 1,523  |   |        |   | 9      |   |   |   | (263 | ) |   |   | 6,390 |   |
| Ending balance                            |   | $                                   | 3,324   |   |                               | $      | 5,420   |                              |   | $      | 5,280      |   |   | $        | 2,776  |   |        | $      | 591    |   |   | $ | 80 |   |   | $ | 17,471 |   |
| Individually evaluated for impairment     |   | $                                   | -       |   |                               | $      | 1,053   |                              |   | $      | 1,022      |   |   | $        | 1,147  |   |        | $      | -      |   |   | $ | - |   |   | $ | 3,222 |   |
| Collectively evaluated for impairment     |   | $                                   | 3,324   |   |                               | $      | 4,367   |                              |   | $      | 4,258      |   |   | $        | 1,629  |   |        | $      | 591    |   |   | $ | 80 |   |   | $ | 14,249 |   |
|                                      |   |                                |    |   |                               |   |    |                              |   |   |       |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |   |   |
| Total loans                               |   | $                                   | 135,354 |   |                               | $      | 332,449 |                              |   | $      | 322,996    |   |   | $        | 78,324 |   |        | $      | 15,592 |   |   | $ | - |   |   | $ | 884,715 |   |
| Individually evaluated for impairment     |   | $                                   | 15,359  |   |                               | $      | 13,298  |                              |   | $      | 16,266     |   |   | $        | 3,808  |   |        | $      | 29     |   |   | $ | - |   |   | $ | 48,760 |   |
| Collectively evaluated for impairment     |   | $                                   | 119,995 |   |                               | $      | 319,151 |                              |   | $      | 306,730    |   |   | $        | 74,516 |   |        | $      | 15,563 |   |   | $ | - |   |   | $ | 835,955 |   |

| (Dollars in thousands)          |   | Real estate -construction |    |   | Real estate -residential |   |    | Real estate -commercial |   |   | Commercial |   |   | Consumer |   |   | Unallocated |   |   | Total  |   |
|-------------------------------------------|--------|-------------------------------------|---------|--------|------------------------------------|--------|---------|-----------------------------------|--------|--------|------------|--------|--------|----------|--------|--------|-------------|--------|--------|--------|--------|
| For the three months ended March 31, 2010 |   |                                |    |   |                               |   |    |                              |   |   |       |   |   |     |   |   |        |   |   |   |   |
| Allowance for credit losses:              |   |                                |    |   |                               |   |    |                              |   |   |       |   |   |     |   |   |        |   |   |   |   |
| Beginning balance                         |   | $                                   | 2,630   |   |                               | $      | 1,528   |                              |   | $      | 3,947      |   |   | $        | 2,132  |   |        | $      | 515    |   |   | $ | 124 |   |   | $ | 10,876 |   |
| Charge-offs                               |   |                                | (3,509  | )      |                               |   | (991    | )                                 |   |   | -          |   |   |     | (1,224 | )      |        |   | (166   | )      |   |   | - |   |   |   | (5,890 | ) |
| Recoveries                                |   |                                | -       |   |                               |   | 38      |                              |   |   | 101        |   |   |     | 3      |   |        |   | 46     |   |   |   | - |   |   |   | 188 |   |
| Provision                                 |   |                                | 3,914   |   |                               |   | 2,751   |                              |   |   | (242       | )      |   |     | 986    |   |        |   | 121    |   |   |   | 87 |   |   |   | 7,617 |   |
| Ending balance                            |   | $                                   | 3,035   |   |                               | $      | 3,326   |                              |   | $      | 3,806      |   |   | $        | 1,897  |   |        | $      | 516    |   |   | $ | 211 |   |   | $ | 12,791 |   |
| Individually evaluated for impairment     |   | $                                   | 422     |   |                               | $      | -       |                              |   | $      | -          |   |   | $        | -      |   |        | $      | -      |   |   | $ | - |   |   | $ | 422 |   |
| Collectively evaluated for impairment     |   | $                                   | 2,613   |   |                               | $      | 3,326   |                              |   | $      | 3,806      |   |   | $        | 1,897  |   |        | $      | 516    |   |   | $ | 211 |   |   | $ | 12,369 |   |
|                                      |   |                                |    |   |                               |   |    |                              |   |   |       |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |   |   |
| Total loans                               |   | $                                   | 158,519 |   |                               | $      | 324,070 |                              |   | $      | 316,259    |   |   | $        | 87,399 |   |        | $      | 18,947 |   |   | $ | - |   |   | $ | 905,194 |   |
| Individually evaluated for impairment     |   | $                                   | 21,384  |   |                               | $      | 5,083   |                              |   | $      | 2,854      |   |   | $        | 1,099  |   |        | $      | 35     |   |   | $ | - |   |   | $ | 30,455 |   |
| Collectively evaluated for impairment     |   | $                                   | 137,135 |   |                               | $      | 318,987 |                              |   | $      | 313,405    |   |   | $        | 86,300 |   |        | $      | 18,912 |   |   | $ | - |   |   | $ | 874,739 |   |

----

| (Dollars in thousands) |   | Real estate -construction |    |   | Real estate -residential |   |    | Real estate -commercial |   |   | Commercial |   |   | Consumer |   |   | Total  |   |
|----------------------------------|--------|-------------------------------------|---------|--------|------------------------------------|--------|---------|-----------------------------------|--------|--------|------------|--------|--------|----------|--------|--------|--------|--------|
| March 31, 2011                   |   |                                |    |   |                               |   |    |                              |   |   |       |   |   |     |   |   |   |   |
| Pass/Performing                  |   | $                                   | 69,312  |   |                               | $      | 276,255 |                              |   | $      | 262,195    |   |   | $        | 69,465 |   |   | $      | 15,458 |   |   | $ | 692,685 |   |
| Special mention                  |   |                                | 29,264  |   |                               |   | 19,015  |                              |   |   | 14,697     |   |   |     | 1,520  |   |   |   | 9 |   |   |   | 64,505 |   |
| Substandard                      |   |                                | 21,419  |   |                               |   | 21,684  |                              |   |   | 29,838     |   |   |     | 3,434  |   |   |   | 96 |   |   |   | 76,471 |   |
| Doubtful                         |   |                                | -       |   |                               |   | 2,197   |                              |   |   | -          |   |   |     | 97     |   |   |   | - |   |   |   | 2,294 |   |
| Nonaccrual                       |   |                                | 15,359  |   |                               |   | 13,298  |                              |   |   | 16,266     |   |   |     | 3,808  |   |   |   | 29 |   |   |   | 48,760 |   |
| Total                            |   | $                                   | 135,354 |   |                               | $      | 332,449 |                              |   | $      | 322,996    |   |   | $        | 78,324 |   |   | $      | 15,592 |   |   | $ | 884,715 |   |

| (Dollars in thousands) |   | Real estate -construction |    |   | Real estate -residential |   |    | Real estate -commercial |   |   | Commercial |   |   | Consumer |   |   | Total  |   |
|----------------------------------|--------|-------------------------------------|---------|--------|------------------------------------|--------|---------|-----------------------------------|--------|--------|------------|--------|--------|----------|--------|--------|--------|--------|
| December 31, 2010                |   |                                |    |   |                               |   |    |                              |   |   |       |   |   |     |   |   |   |   |
| Pass/Performing                  |   | $                                   | 83,344  |   |                               | $      | 283,895 |                              |   | $      | 260,040    |   |   | $        | 73,502 |   |   | $      | 16,043 |   |   | $ | 716,824 |   |
| Special mention                  |   |                                | 23,090  |   |                               |   | 23,847  |                              |   |   | 17,821     |   |   |     | 2,249  |   |   |   | - |   |   |   | 67,007 |   |
| Substandard                      |   |                                | 20,257  |   |                               |   | 13,752  |                              |   |   | 35,732     |   |   |     | 3,088  |   |   |   | 128 |   |   |   | 72,957 |   |
| Doubtful                         |   |                                | -       |   |                               |   | 2,275   |                              |   |   | -          |   |   |     | 103    |   |   |   | - |   |   |   | 2,378 |   |
| Nonaccrual                       |   |                                | 17,261  |   |                               |   | 9,969   |                              |   |   | 5,133      |   |   |     | 3,845  |   |   |   | 30 |   |   |   | 36,238 |   |
| Total                            |   | $                                   | 143,952 |   |                               | $      | 333,738 |                              |   | $      | 318,726    |   |   | $        | 82,787 |   |   | $      | 16,201 |   |   | $ | 895,404 |   |

|                        |   | Accruing |    |   |                   |   |   |                   |   |
|----------------------------------|--------|----------|---------|--------|------------------------|--------|--------|------------------------|--------|
| (Dollars in thousands) |   | Current  |    |   | 30-59dayspast due |   |   | 60-89days pastdue |   |   | 90 days ormore pastdue |   |   | Total pastdue |   |   | Non-performing |   |   | Total |   |
| March 31, 2011                   |   |     |    |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Real estate – construction |   | $        | 119,308 |   |                   | $      | 637    |                   |   | $ | 50 |   |   | $ | - |   |   | $ | 687 |   |   | $ | 15,359 |   |   | $ | 135,354 |   |
| Real estate – residential  |   |     | 311,893 |   |                   |   | 3,360  |                   |   |   | 872 |   |   |   | 3,026 |   |   |   | 7,258 |   |   |   | 13,298 |   |   |   | 332,449 |   |
| Real estate – commercial   |   |     | 299,583 |   |                   |   | 2,029  |                   |   |   | 3,158 |   |   |   | 1,960 |   |   |   | 7,147 |   |   |   | 16,266 |   |   |   | 322,996 |   |
| Commercial                       |   |     | 72,943  |   |                   |   | 920    |                   |   |   | 151 |   |   |   | 502 |   |   |   | 1,573 |   |   |   | 3,808 |   |   |   | 78,324 |   |
| Consumer                         |   |     | 15,465  |   |                   |   | 70     |                   |   |   | 10 |   |   |   | 18 |   |   |   | 98 |   |   |   | 29 |   |   |   | 15,592 |   |
| Total                            |   | $        | 819,192 |   |                   | $      | 7,016  |                   |   | $ | 4,241 |   |   | $ | 5,506 |   |   | $ | 16,763 |   |   | $ | 48,760 |   |   | $ | 884,715 |   |

|                        |   | Accruing |    |   |                   |   |   |                   |   |
|----------------------------------|--------|----------|---------|--------|------------------------|--------|--------|------------------------|--------|
| (Dollars in thousands) |   | Current  |    |   | 30-59dayspast due |   |   | 60-89days pastdue |   |   | 90 days ormore pastdue |   |   | Total pastdue |   |   | Non-performing |   |   | Total |   |
| December 31, 2010                |   |     |    |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Real estate – construction |   | $        | 124,892 |   |                   | $      | 1,691  |                   |   | $ | 108 |   |   | $ | - |   |   | $ | 1,799 |   |   | $ | 17,261 |   |   | $ | 143,952 |   |
| Real estate – residential  |   |     | 314,914 |   |                   |   | 4,046  |                   |   |   | 1,355 |   |   |   | 3,454 |   |   |   | 8,855 |   |   |   | 9,969 |   |   |   | 333,738 |   |
| Real estate – commercial   |   |     | 306,497 |   |                   |   | 3,393  |                   |   |   | 2,717 |   |   |   | 986 |   |   |   | 7,096 |   |   |   | 5,133 |   |   |   | 318,726 |   |
| Commercial                       |   |     | 77,833  |   |                   |   | 470    |                   |   |   | 465 |   |   |   | 174 |   |   |   | 1,109 |   |   |   | 3,845 |   |   |   | 82,787 |   |
| Consumer                         |   |     | 15,572  |   |                   |   | 486    |                   |   |   | 25 |   |   |   | 88 |   |   |   | 599 |   |   |   | 30 |   |   |   | 16,201 |   |
| Total                            |   | $        | 839,708 |   |                   | $      | 10,086 |                   |   | $ | 4,670 |   |   | $ | 4,702 |   |   | $ | 19,458 |   |   | $ | 36,238 |   |   | $ | 895,404 |   |

----

|                             |   | Accruing |   |   |                   |   |
|----------------------------------|--------|----------|--------|--------|------------------------|--------|
|                             |   | Current  |   |   | 30-59dayspast due |   |   | 60-89days pastdue |   |   | 90 days ormore pastdue |   |   | Total pastdue |   |   | Non-performing |   |
| March 31, 2011                   |   |     |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Real estate – construction |   |     | 88.1   | %      |                   |   | 0.6 | % |   |   | - | % |   |   | - | % |   |   | 0.6 | % |   |   | 11.3 | % |
| Real estate – residential  |   |     | 93.8   |   |                   |   | 1.0 |   |   |   | 0.3 |   |   |   | 0.9 |   |   |   | 2.2 |   |   |   | 4.0 |   |
| Real estate – commercial   |   |     | 92.8   |   |                   |   | 0.6 |   |   |   | 1.0 |   |   |   | 0.6 |   |   |   | 2.2 |   |   |   | 5.0 |   |
| Commercial                       |   |     | 93.1   |   |                   |   | 1.2 |   |   |   | 0.2 |   |   |   | 0.6 |   |   |   | 2.0 |   |   |   | 4.9 |   |
| Consumer                         |   |     | 99.2   |   |                   |   | 0.4 |   |   |   | 0.1 |   |   |   | 0.1 |   |   |   | 0.6 |   |   |   | 0.2 |   |
| Total                            |   |     | 92.6   |   |                   |   | 0.8 |   |   |   | 0.5 |   |   |   | 0.6 |   |   |   | 1.9 |   |   |   | 5.5 |   |

|                             |   | Accruing |   |   |                   |   |
|----------------------------------|--------|----------|--------|--------|------------------------|--------|
|                             |   | Current  |   |   | 30-59dayspast due |   |   | 60-89days pastdue |   |   | 90 days ormore pastdue |   |   | Total pastdue |   |   | Non-performing |   |
| December 31, 2010                |   |     |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Real estate – construction |   |     | 86.8   | %      |                   |   | 1.1 | % |   |   | 0.1 | % |   |   | - | % |   |   | 1.2 | % |   |   | 12.0 | % |
| Real estate – residential  |   |     | 94.4   |   |                   |   | 1.2 |   |   |   | 0.4 |   |   |   | 1.0 |   |   |   | 2.6 |   |   |   | 3.0 |   |
| Real estate – commercial   |   |     | 96.2   |   |                   |   | 1.0 |   |   |   | 0.9 |   |   |   | 0.3 |   |   |   | 2.2 |   |   |   | 1.6 |   |
| Commercial                       |   |     | 94.0   |   |                   |   | 0.6 |   |   |   | 0.6 |   |   |   | 0.2 |   |   |   | 1.4 |   |   |   | 4.6 |   |
| Consumer                         |   |     | 96.1   |   |                   |   | 3.0 |   |   |   | 0.2 |   |   |   | 0.5 |   |   |   | 3.7 |   |   |   | 0.2 |   |
| Total                            |   |     | 93.8   |   |                   |   | 1.2 |   |   |   | 0.5 |   |   |   | 0.5 |   |   |   | 2.2 |   |   |   | 4.0 |   |

| (Dollars in thousands)    |   | March 31, 2011 |   |   | December 31, 2010 |   |
|-------------------------------------|--------|--------------------------|--------|--------|-----------------------------|--------|
| Nonmarketable investment securities |   | $                        | 2,916  |   |                        | $      | 2,949 |   |
| Insurance premiums receivable       |   |                     | 631    |   |                        |   | 741 |   |
| Accrued interest receivable         |   |                     | 4,248  |   |                        |   | 5,060 |   |
| Deferred income taxes               |   |                     | 9,159  |   |                        |   | 7,578 |   |
| Interest rate caps (1)              |   |                     | 2,139  |   |                        |   | 2,022 |   |
| Prepaid FDIC premium expense        |   |                     | 3,727  |   |                        |   | 4,073 |   |
| Other assets                        |   |                     | 6,873  |   |                        |   | 6,262 |   |
| Total                               |   | $                        | 29,693 |   |                        | $      | 28,685 |   |

| (Dollars in thousands)                 |   | March 31, 2011 |   |   | December 31, 2010 |   |
|--------------------------------------------------|--------|--------------------------|--------|--------|-----------------------------|--------|
| Accrued interest payable                         |   | $                        | 904    |   |                        | $      | 860 |   |
| Counterparty collateral - interest rate caps (1) |   |                     | 1,692  |   |                        |   | 1,390 |   |
| Other liabilities                                |   |                     | 8,316  |   |                        |   | 9,059 |   |
| Total                                            |   | $                        | 10,912 |   |                        | $      | 11,309 |   |

----

|                             |   | Number         |   |   | Weighted Average Grant |   |
|----------------------------------|--------|----------------|--------|--------|----------------------------------|--------|
|                             |   | of Shares |   |   | Date Fair Value        |   |
| Nonvested at beginning of period |   |           | 44,127 |   |                             | $      | 16.76 |   |
| Granted                          |   |           | -      |   |                             |   | - |   |
| Vested                           |   |           | (5,988 | )      |                             |   | 18.89 |   |
| Cancelled                        |   |           | -      |   |                             |   | - |   |
| Nonvested at end of period       |   |           | 38,139 |   |                             | $      | 16.42 |   |

|                             |   |           |   |   | Weighted            |   |   | Aggregate |   |
|----------------------------------|--------|----------------|--------|--------|---------------------|--------|--------|-----------|--------|
|                             |   | Number         |   |   | Average             |   |   | Intrinsic |   |
|                             |   | of Shares |   |   | Exercise Price |   |   | Value     |   |
| Outstanding at beginning of year |   |           | 8,420  |   |                | $      | 13.17  |      |   |   |   |
| Granted                          |   |           | -      |   |                |   | -      |      |   |   |   |
| Exercised                        |   |           | -      |   |                |   | -      |      |   |   |   |
| Expired/Cancelled                |   |           | (1,295 | )      |                |   | 13.17  |      |   |   |   |
| Outstanding at end of period     |   |           | 7,125  |   |                |   | 13.17  |      |   | $ | - |   |
|                             |   |           |   |   |                |   |   |      |   |   |   |   |
| Exercisable at end of period     |   |           | 7,125  |   |                | $      | 13.17  |      |   | $ | - |   |

----

----

|                             |   |            |    |   |           |   |   | Significant    |   |   |           |   |
|----------------------------------|--------|-----------------|---------|--------|----------------|--------|--------|----------------|--------|--------|----------------|--------|
|                             |   |            |    |   |           |   |   | Other          |   |   | Significant    |   |
|                             |   |            |    |   | Quoted         |   |   | Observable     |   |   | Unobservable   |   |
|                             |   |            |    |   | Prices         |   |   | Inputs         |   |   | Inputs         |   |
| (Dollars in thousands) |   | Fair Value |    |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3) |   |
| Securities available for sale:   |   |            |    |   |           |   |   |           |   |   |           |   |
| U.S. Government agencies         |   | $               | 47,999  |   |           | $      | -      |           |   | $      | 47,999         |   |   | $ | - |   |
| Mortgage-backed securities       |   |            | 51,657  |   |           |   | -      |           |   |   | 51,657         |   |   |   | - |   |
| Other equity securities          |   |            | 578     |   |           |   | -      |           |   |   | 578            |   |   |   | - |   |
| Total                            |   | $               | 100,234 |   |           | $      | -      |           |   | $      | 100,234        |   |   | $ | - |   |
|                             |   |            |    |   |           |   |   |           |   |   |           |   |   |   |   |   |
| Interest rate caps               |   | $               | 2,139   |   |           | $      | -      |           |   | $      | 2,139          |   |   | $ | - |   |

|                                           |   |            |   |   |           |   |   | Significant    |   |   |           |   |
|------------------------------------------------|--------|-----------------|--------|--------|----------------|--------|--------|----------------|--------|--------|----------------|--------|
|                                           |   |            |   |   |           |   |   | Other          |   |   | Significant    |   |
|                                           |   |            |   |   | Quoted         |   |   | Observable     |   |   | Unobservable   |   |
|                                           |   |            |   |   | Prices         |   |   | Inputs         |   |   | Inputs         |   |
| (Dollars in thousands)               |   | Fair Value |   |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3) |   |
| Impaired loans                                 |   |            |   |   |           |   |   |           |   |   |           |   |
| Real estate - construction                     |   | $               | 15,359 |   |           | $      | -      |           |   | $      | -              |   |   | $ | 15,359 |   |
| Real estate - residential                      |   |            | 12,245 |   |           |   | -      |           |   |   | -              |   |   |   | 12,245 |   |
| Real estate - commercial                       |   |            | 15,244 |   |           |   | -      |           |   |   | -              |   |   |   | 15,244 |   |
| Commercial                                     |   |            | 2,661  |   |           |   | -      |           |   |   | -              |   |   |   | 2,661 |   |
| Consumer                                       |   |            | 29     |   |           |   | -      |           |   |   | -              |   |   |   | 29 |   |
| Total                                          |   | $               | 45,538 |   |           | $      | -      |           |   | $      | -              |   |   | $ | 45,538 |   |
|                                           |   |            |   |   |           |   |   |           |   |   |           |   |   |   |   |   |
| Other real estate owned and other assets owned |   | $               | 4,802  |   |           | $      | -      |           |   | $      | -              |   |   | $ | 4,802 |   |

----

| (Dollars in thousands)                         |   | Real estate -construction |   |   | Real estate -residential |   |   | Real estate -commercial |   |   | Commercial |   |   | Consumer |   |   | Total  |   |
|----------------------------------------------------------|--------|-------------------------------------|--------|--------|------------------------------------|--------|--------|-----------------------------------|--------|--------|------------|--------|--------|----------|--------|--------|--------|--------|
| For the three months ended March 31, 2011 |   |                                |   |   |                               |   |   |                              |   |   |       |   |   |     |   |   |   |   |
| Impaired loans:                                          |   |                                |   |   |                               |   |   |                              |   |   |       |   |   |     |   |   |   |   |
| Beginning balance                                        |   | $                                   | 17,261 |   |                               | $      | 9,766  |                              |   | $      | 5,133      |   |   | $        | 3,845  |   |   | $      | 30 |   |   | $ | 36,035 |   |
| Charge-offs                                              |   |                                | (535   | )      |                               |   | (1,712 | )                                 |   |   | (228       | )      |   |     | (100   | )      |   |   | - |   |   |   | (2,575 | ) |
| Payments                                                 |   |                                | (124   | )      |                               |   | (1,915 | )                                 |   |   | (1,921     | )      |   |     | -      |   |   |   | (1 | ) |   |   | (3,961 | ) |
| Transfers to other real estate owned                     |   |                                | (1,372 | )      |                               |   | -      |                              |   |   | -          |   |   |     | -      |   |   |   | - |   |   |   | (1,372 | ) |
| Return to performing                                     |   |                                | -      |   |                               |   | (1,295 | )                                 |   |   | -          |   |   |     | -      |   |   |   | - |   |   |   | (1,295 | ) |
| Additions                                                |   |                                | 129    |   |                               |   | 8,251  |                              |   |   | 13,282     |   |   |     | 63     |   |   |   | - |   |   |   | 21,725 |   |
| Changes in allowance                                     |   |                                | -      |   |                               |   | (850   | )                                 |   |   | (1,022     | )      |   |     | (1,147 | )      |   |   | - |   |   |   | (3,019 | ) |
| Ending balance                                           |   | $                                   | 15,359 |   |                               | $      | 12,245 |                              |   | $      | 15,244     |   |   | $        | 2,661  |   |   | $      | 29 |   |   | $ | 45,538 |   |

| (Dollars in thousands)          |   | Other realestate owned |   |
|-------------------------------------------|--------|----------------------------------|--------|
| For the three months ended March 31, 2011 |   |                             |   |
| Beginning balance                         |   | $                                | 3,702  |   |
| Sales                                     |   |                             | (567   | ) |
| Write-downs                               |   |                             | (163   | ) |
| Additions                                 |   |                             | 1,830  |   |
| Ending balance                            |   | $                                | 4,802  |   |

----

|                                                  |   | March 31, 2011 |      |   | December 31, 2010 |   |
|-------------------------------------------------------|--------|--------------------------|-----------|--------|-----------------------------|--------|
|                                                  |   |                     |      |   | Estimated                   |   |   |   |   |   | Estimated |   |
|                                                  |   | Carrying                 |      |   | Fair                        |   |   | Carrying |   |   | Fair |   |
| (Dollars in thousands)                      |   | Amount                   |      |   | Value                       |   |   | Amount |   |   | Value |   |
| Financial assets:                                |   |                     |      |   |                        |   |   |   |   |   |   |   |
| Cash and cash equivalents                             |   | $                        | 89,982    |   |                        | $      | 89,982 |   |   | $ | 77,964 |   |   | $ | 77,964 |   |
| Investment securities                                 |   |                     | 106,920   |   |                        |   | 107,077 |   |   |   | 105,782 |   |   |   | 105,906 |   |
| Loans                                                 |   |                     | 884,715   |   |                        |   | 893,262 |   |   |   | 895,404 |   |   |   | 908,745 |   |
| Less:  allowance for loan  losses |   |                     | (17,471   | )      |                        | _ -    |   |   |   | (14,227 | ) |   |   | - |   |
| Total                                                 |   | $                        | 1,064,146 |   |                        | $      | 1,090,321 |   |   | $ | 1,064,923 |   |   | $ | 1,092,615 |   |
|                                                  |   |                     |      |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities:                                |   |                     |      |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                              |   | $                        | 986,486   |   |                        | $      | 987,477 |   |   | $ | 979,516 |   |   | $ | 983,257 |   |
| Short-term borrowings                                 |   |                     | 12,078    |   |                        |   | 12,078 |   |   |   | 16,041 |   |   |   | 16,041 |   |
| Long-term debt                                        |   |                     | 932       |   |                        |   | 972 |   |   |   | 932 |   |   |   | 982 |   |
| Total                                                 |   | $                        | 999,496   |   |                        | $      | 1,000,527 |   |   | $ | 996,489 |   |   | $ | 1,000,280 |   |

----

|                              |   | Community |      |   | Insurance Products |   |   | Parent  |   |   | Consolidated |   |
|-----------------------------------|--------|-----------|-----------|--------|-------------------------|--------|--------|---------|--------|--------|--------------|--------|
| (Dollars in thousands)  |   | Banking   |      |   | and Services       |   |   | Company |   |   | Total        |   |
| 2011                              |   |      |      |   |                    |   |   |    |   |   |         |   |
| Interest income                   |   | $         | 12,683    |   |                    | $      | 35     |    |   | $      | -            |   |   | $ | 12,718 |   |
| Interest expense                  |   |      | (2,846    | )      |                    |   | -      |    |   |   | (10          | )      |   |   | (2,856 | ) |
| Provision for credit losses       |   |      | (6,390    | )      |                    |   | -      |    |   |   | -            |   |   |   | (6,390 | ) |
| Noninterest income                |   |      | 1,694     |   |                    |   | 2,656  |    |   |   | 45           |   |   |   | 4,395 |   |
| Noninterest expense               |   |      | (5,937    | )      |                    |   | (2,399 | )       |   |   | (1,555       | )      |   |   | (9,891 | ) |
| Net intersegment (expense) income |   |      | (1,493    | )      |                    |   | (109   | )       |   |   | 1,602        |   |   |   | - |   |
| Loss before tax benefit           |   |      | (2,289    | )      |                    |   | 183    |    |   |   | 82           |   |   |   | (2,024 | ) |
| Income tax benefit                |   |      | 1,064     |   |                    |   | (85    | )       |   |   | (38          | )      |   |   | 941 |   |
| Net loss                          |   | $         | (1,225    | )      |                    | $      | 98     |    |   | $      | 44           |   |   | $ | (1,083 | ) |
|                              |   |      |      |   |                    |   |   |    |   |   |         |   |   |   |   |   |
| Total assets                      |   | $         | 1,110,148 |   |                    | $      | 18,266 |    |   | $      | 2,920        |   |   | $ | 1,131,334 |   |
|                              |   |      |      |   |                    |   |   |    |   |   |         |   |   |   |   |   |
| 2010                              |   |      |      |   |                    |   |   |    |   |   |         |   |   |   |   |   |
| Interest income                   |   | $         | 13,784    |   |                    | $      | 44     |    |   | $      | -            |   |   | $ | 13,828 |   |
| Interest expense                  |   |      | (3,404    | )      |                    |   | -      |    |   |   | (29          | )      |   |   | (3,433 | ) |
| Provision for credit losses       |   |      | (7,617    | )      |                    |   | -      |    |   |   | -            |   |   |   | (7,617 | ) |
| Noninterest income                |   |      | 1,832     |   |                    |   | 3,050  |    |   |   | -            |   |   |   | 4,882 |   |
| Noninterest expense               |   |      | (6,058    | )      |                    |   | (2,470 | )       |   |   | (1,793       | )      |   |   | (10,321 | ) |
| Net intersegment (expense) income |   |      | (1,447    | )      |                    |   | (130   | )       |   |   | 1,577        |   |   |   | - |   |
| Loss before tax benefit           |   |      | (2,910    | )      |                    |   | 494    |    |   |   | (245         | )      |   |   | (2,661 | ) |
| Income tax benefit                |   |      | 1,202     |   |                    |   | (204   | )       |   |   | 101          |   |   |   | 1,099 |   |
| Net loss                          |   | $         | (1,708    | )      |                    | $      | 290    |    |   | $      | (144         | )      |   | $ | (1,562 | ) |
|                              |   |      |      |   |                    |   |   |    |   |   |         |   |   |   |   |   |
| Total assets                      |   | $         | 1,122,636 |   |                    | $      | 20,531 |    |   | $      | 3,177        |   |   | $ | 1,146,344 |   |

----

----

----

----

|                                        |   | For the Three Months Ended |      |   | For the Three Months Ended |   |
|--------------------------------------------------|--------|------------------------------------------------|-----------|--------|------------------------------------------------|--------|
|                                             |   | March 31, 2011                       |      |   | March 31, 2010                       |   |
|                                             |   | Average                                        |      |   | Income(1)/                                     |   |   | Yield/ |   |   | Average |   |   | Income(1)/ |   |   | Yield/ |   |
| (Dollars in thousands)                 |   | Balance                                        |      |   | Expense                                        |   |   | Rate |   |   | Balance |   |   | Expense |   |   | Rate |   |
| Earning assets                              |   |                                           |      |   |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans (2), (3)                                   |   | $                                              | 887,531   |   |                                           | $      | 12,040 |   |   |   | 5.50 | % |   | $ | 910,374 |   |   | $ | 12,910 |   |   |   | 5.75 | % |
| Investment securities                            |   |                                           |      |   |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                          |   |                                           | 101,625   |   |                                           |   | 657 |   |   |   | 2.62 |   |   |   | 103,488 |   |   |   | 882 |   |   |   | 3.45 |   |
| Tax-exempt                                       |   |                                           | 4,610     |   |                                           |   | 58 |   |   |   | 5.08 |   |   |   | 6,764 |   |   |   | 90 |   |   |   | 5.39 |   |
| Federal funds sold                               |   |                                           | 46,813    |   |                                           |   | 16 |   |   |   | 0.14 |   |   |   | 46,553 |   |   |   | 12 |   |   |   | 0.11 |   |
| Interest-bearing deposits                        |   |                                           | 21,585    |   |                                           |   | 6 |   |   |   | 0.12 |   |   |   | 8,246 |   |   |   | 1 |   |   |   | 0.06 |   |
| Total earning assets                             |   |                                           | 1,062,164 |   |                                           |   | 12,777 |   |   |   | 4.88 | % |   |   | 1,075,425 |   |   |   | 13,895 |   |   |   | 5.24 | % |
| Cash and due from banks                          |   |                                           | 19,316    |   |                                           |   |   |   |   |   |   |   |   |   | 14,422 |   |   |   |   |   |   |   |   |   |
| Other assets                                     |   |                                           | 65,426    |   |                                           |   |   |   |   |   |   |   |   |   | 67,914 |   |   |   |   |   |   |   |   |   |
| Allowance for credit losses                      |   |                                           | (15,647   | )      |                                           |   |   |   |   |   |   |   |   |   | (12,154 | ) |   |   |   |   |   |   |   |   |
| Total assets                                     |   | $                                              | 1,131,259 |   |                                           |   |   |   |   |   |   |   |   | $ | 1,145,607 |   |   |   |   |   |   |   |   |   |
|                                             |   |                                           |      |   |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities                     |   |                                           |      |   |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand deposits                                  |   | $                                              | 131,628   |   |                                           |   | 73 |   |   |   | 0.22 | % |   | $ | 127,986 |   |   |   | 80 |   |   |   | 0.25 | % |
| Money market and savings deposits                |   |                                           | 260,841   |   |                                           |   | 595 |   |   |   | 0.93 |   |   |   | 256,818 |   |   |   | 428 |   |   |   | 0.68 |   |
| Certificates of deposit $100,000 or more         |   |                                           | 259,179   |   |                                           |   | 1,086 |   |   |   | 1.70 |   |   |   | 259,538 |   |   |   | 1,433 |   |   |   | 2.24 |   |
| Other time deposits                              |   |                                           | 208,301   |   |                                           |   | 1,079 |   |   |   | 2.10 |   |   |   | 219,731 |   |   |   | 1,444 |   |   |   | 2.67 |   |
| Interest-bearing deposits                        |   |                                           | 859,949   |   |                                           |   | 2,833 |   |   |   | 1.34 |   |   |   | 864,073 |   |   |   | 3,385 |   |   |   | 1.59 |   |
| Short-term borrowings                            |   |                                           | 14,165    |   |                                           |   | 13 |   |   |   | 0.37 |   |   |   | 18,032 |   |   |   | 32 |   |   |   | 0.71 |   |
| Long-term debt                                   |   |                                           | 932       |   |                                           |   | 10 |   |   |   | 4.56 |   |   |   | 1,429 |   |   |   | 16 |   |   |   | 4.45 |   |
| Total interest-bearing liabilities               |   |                                           | 875,046   |   |                                           |   | 2,856 |   |   |   | 1.32 | % |   |   | 883,534 |   |   |   | 3,433 |   |   |   | 1.58 | % |
| Noninterest-bearing deposits                     |   |                                           | 122,300   |   |                                           |   |   |   |   |   |   |   |   |   | 118,192 |   |   |   |   |   |   |   |   |   |
| Other liabilities                                |   |                                           | 11,447    |   |                                           |   |   |   |   |   |   |   |   |   | 15,800 |   |   |   |   |   |   |   |   |   |
| Stockholders’ equity                       |   |                                           | 122,466   |   |                                           |   |   |   |   |   |   |   |   |   | 128,081 |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders’ equity |   | $                                              | 1,131,259 |   |                                           |   |   |   |   |   |   |   |   | $ | 1,145,607 |   |   |   |   |   |   |   |   |   |
|                                             |   |                                           |      |   |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest spread                              |   |                                           |      |   |                                           | $      | 9,921 |   |   |   | 3.56 | % |   |   |   |   |   | $ | 10,462 |   |   |   | 3.66 | % |
| Net interest margin                              |   |                                           |      |   |                                           |   |   |   |   |   | 3.79 | % |   |   |   |   |   |   |   |   |   |   | 3.95 | % |
|                                             |   |                                           |      |   |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tax-equivalent adjustment                        |   |                                           |      |   |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                            |   |                                           |      |   |                                           | $      | 39 |   |   |   |   |   |   |   |   |   |   | $ | 36 |   |   |   |   |   |
| Investment securities                            |   |                                           |      |   |                                           |   | 20 |   |   |   |   |   |   |   |   |   |   |   | 31 |   |   |   |   |   |
| Total                                            |   |                                           |      |   |                                           | $      | 59 |   |   |   |   |   |   |   |   |   |   | $ | 67 |   |   |   |   |   |

| (1) | All amounts are reported on a tax equivalent basis computed using the statutory federal income tax rate of 34.0% for 2011 and 2010 exclusive of the alternative minimum tax rate and nondeductible interest expense. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Average loan balances include nonaccrual loans. |
|-----|-------------------------------------------------|

| (3) | Interest income on loans includes amortized loan fees, net of costs, and all are included in the yield calculations. |
|-----|----------------------------------------------------------------------------------------------------------------------|

----

----

|                                                                                        |   | For the Three Months Ended |    |
|---------------------------------------------------------------------------------------------|--------|------------------------------------------------|---------|
|                                                                                        |   | March 31,                                 |    |
| (Dollars in thousands)                                                                      |   | 2011                                           |    |   | 2010 |   |
| Allowance balance – beginning of period                                               |   | $                                              | 14,227  |   |   | $ | 10,876 |   |
| Charge-offs:                                                                                |   |                                           |    |   |   |   |   |   |
| Real estate – construction                                                            |   |                                           | (686    | ) |   |   | (3,509 | ) |
| Real estate – residential                                                             |   |                                           | (2,091  | ) |   |   | (991 | ) |
| Real estate – commercial                                                              |   |                                           | (228    | ) |   |   | - |   |
| Commercial                                                                                  |   |                                           | (246    | ) |   |   | (1,224 | ) |
| Consumer                                                                                    |   |                                           | (75     | ) |   |   | (166 | ) |
| Total                                                                                       |   |                                           | (3,326  | ) |   |   | (5,890 | ) |
| Recoveries:                                                                                 |   |                                           |    |   |   |   |   |   |
| Real estate – construction                                                            |   |                                           | 49      |   |   |   | - |   |
| Real estate – residential                                                             |   |                                           | 34      |   |   |   | 38 |   |
| Real estate – commercial                                                              |   |                                           | -       |   |   |   | 101 |   |
| Commercial                                                                                  |   |                                           | 77      |   |   |   | 3 |   |
| Consumer                                                                                    |   |                                           | 20      |   |   |   | 46 |   |
| Total                                                                                       |   |                                           | 180     |   |   |   | 188 |   |
| Net charge-offs                                                                             |   |                                           | (3,146  | ) |   |   | (5,702 | ) |
| Provision for credit losses                                                                 |   |                                           | 6,390   |   |   |   | 7,617 |   |
| Allowance balance – end of period                                                     |   | $                                              | 17,471  |   |   | $ | 12,791 |   |
|                                                                                        |   |                                           |    |   |   |   |   |   |
| Average loans outstanding during the period                                                 |   | $                                              | 887,531 |   |   | $ | 910,374 |   |
| Net charge-offs (annualized) as a percentage of average loans outstanding during the period |   |                                           | 1.44    | % |   |   | 2.54 | % |
| Allowance for credit losses at period end as a percentage of average loans                  |   |                                           | 1.97    | % |   |   | 1.41 | % |

----

|                                                                                                |   | March 31, |   |   | December 31, |   |
|-----------------------------------------------------------------------------------------------------|--------|----------------|--------|--------|-------------------|--------|
| (Dollars in thousands)                                                                    |   | 2011           |   |   | 2010              |   |
| Nonperforming assets                                                                                |   |           |   |   |              |   |
| Nonaccrual loans                                                                                    |   |           |   |   |              |   |
| Real estate – construction                                                                    |   | $              | 15,359 |   |              | $      | 17,261 |   |
| Real estate – residential                                                                     |   |           | 13,298 |   |              |   | 9,969 |   |
| Real estate – commercial                                                                      |   |           | 16,266 |   |              |   | 5,133 |   |
| Commercial                                                                                          |   |           | 3,808  |   |              |   | 3,845 |   |
| Consumer                                                                                            |   |           | 29     |   |              |   | 30 |   |
| Total nonaccrual loans                                                                              |   |           | 48,760 |   |              |   | 36,238 |   |
| Other real estate owned                                                                             |   |           | 4,802  |   |              |   | 3,702 |   |
| Total nonperforming assets                                                                          |   |           | 53,562 |   |              |   | 39,940 |   |
| Loans 90 days or more past due and still accruing                                                   |   |           |   |   |              |   |   |   |
| Real estate – construction                                                                    |   |           | -      |   |              |   | - |   |
| Real estate – residential                                                                     |   |           | 3,026  |   |              |   | 3,454 |   |
| Real estate – commercial                                                                      |   |           | 1,960  |   |              |   | 986 |   |
| Commercial                                                                                          |   |           | 502    |   |              |   | 174 |   |
| Consumer                                                                                            |   |           | 18     |   |              |   | 88 |   |
| Total loans 90 days or more past due and still accruing                                             |   |           | 5,506  |   |              |   | 4,702 |   |
| Total nonperforming assets and 90 days or more past due loans                                       |   | $              | 59,068 |   |              | $      | 44,642 |   |
|                                                                                                |   |           |   |   |              |   |   |   |
| Nonperforming assets to total loans and other real estate owned                                     |   |           | 6.02   | %      |              |   | 4.44 | % |
| Nonperforming assets to total assets                                                                |   |           | 4.73   | %      |              |   | 3.53 | % |
| Nonperforming assets and 90 days or more past due loans, to total loans and other real estate owned |   |           | 6.64   | %      |              |   | 4.97 | % |
| Nonperforming assets and 90 days or more past due loans to total assets                             |   |           | 5.22   | %      |              |   | 3.95 | % |

----

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|                            |   |           |   |   |              |   |   | Minimum      |   |
|---------------------------------|--------|----------------|--------|--------|-------------------|--------|--------|--------------|--------|
|                            |   | March 31, |   |   | December 31, |   |   | Regulatory   |   |
|                            |   | 2011           |   |   | 2010              |   |   | Requirements |   |
| Tier 1 risk-based capital ratio |   |           | 11.79  | %      |              |   | 11.81  | %            |   |   | 4.00 | % |
| Total risk-based capital ratio  |   |           | 13.05  | %      |              |   | 13.07  | %            |   |   | 8.00 | % |
| Leverage ratio                  |   |           | 9.38   | %      |              |   | 9.53   | %            |   |   | 4.00 | % |

----

|              | SHORE BANCSHARES, INC. |
|-------------------|------------------------|
|              |                   |   |
| Date: May 9, 2011 | By:                    | /s/ W. Moorhead Vermilye |    |
|              |                   | W. Moorhead Vermilye |
|              |                   | Chief Executive Officer |

| Date: May 9, 2011 | By:    | /s/ Susan E. Leaverton                 |    |
|-------------------|--------|----------------------------------------|--------------|
|              |   | Susan E. Leaverton, CPA                |
|              |   | Treasurer/Principal Accounting Officer |

----

| Exhibit |         |                                                                                          |
|---------|--------------|-----------------------------------------------------------------------------------------------|
| Number  |         | Description                                                                                   |
|    |         |                                                                                          |
| 31.1    |         | Certifications of the CEO pursuant to Section 302 of the Sarbanes-Oxley Act (filed herewith). |
|    |         |                                                                                          |
| 31.2    |         | Certifications of the PAO pursuant to Section 302 of the Sarbanes-Oxley Act (filed herewith). |
|    |         |                                                                                          |
| 32      |    | Certification pursuant to Section 906 of the Sarbanes-Oxley Act (furnished herewith).         |

----