----

----

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

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

|   Virginia                 |   54-1829288      |
|---------------------------------|------------------------|
| (State or other jurisdiction of |  (I.R.S. Employer |
| incorporation or organization)  | Identification No.)    |

| 590 Peter Jefferson Parkway Charlottesville, Virginia | 22911      |
|-------------------------------------------------------|------------|
| (Address of principal executive offices)              | (Zip Code) |

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Table of Contents

| STELLARONE CORPORATION         |
|--------------------------------|
| INDEX                          |
| PART I - FINANCIAL INFORMATION |
|                           |   |   |
|                           |   |  Page No. |
| ITEM 1                         | Financial Statements: |   |
|                           |   |   |
|                           | Consolidated Balance Sheets | 3 |
|                           | Consolidated Statements of Income | 4 |
|                           | Consolidated Statements of Changes in Stockholders' Equity and Other Comprehensive Income | 5 |
|                           | Consolidated Statements of Cash Flows | 6 |
|                           | Notes to Consolidated Financial Statements | 7-19 |
|                           |   |   |
| ITEM 2                         | Management's Discussion and Analysis of Financial Condition and Results of Operations | 20-29 |
|                           |   |   |
| ITEM 3                         | Quantitative and Qualitative Disclosures About Market Risk | 29 |
|                           |   |   |
| ITEM 4                         | Controls and Procedures | 30 |
|                           |   |   |
| PART II - OTHER INFORMATION    |
|                           |   |   |
| ITEM 1                         | Legal Proceedings | 31 |
|                           |   |   |
| ITEM 1A                        | Risk Factors | 31 |
|                           |   |   |
| ITEM 2                         | Unregistered Sales of Equity Securities and Use of Proceeds | 31 |
| ITEM 3                         | Defaults Upon Senior Securities | 31 |
|                           |   |   |
| ITEM 4                         | Submission of Matters to a Vote of Security Holders | 31 |
|                           |   |   |
| ITEM 5                         | Other Information | 31 |
|                           |   |   |
| ITEM 6                         | Exhibits | 32 |

----

Table of Contents

| PART I – FINANCIAL INFORMATION                                                                                                                                 |   |        |      |   |         |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------|-----------|--------|--------------|--------|
| ITEM 1. Financial statements                                                                                                                                         |   |        |      |   |         |   |
|                                                                                                                                                                 |   |        |      |   |         |   |
| STELLARONE CORPORATION AND SUBSIDIARIES                                                                                                                              |   |
| CONSOLIDATED BALANCE SHEETS                                                                                                                                          |   |
| (In thousands)                                                                                                                                                       |   |
|                                                                                                                                                                 |   |        |      |   |         |   |
|                                                                                                                                                                 |   | MARCH 31,   |      |   | DECEMBER 31, |   |
|                                                                                                                                                                 |   | 2010        |      |   | 2009         |   |
|                                                                                                                                                                 |   | (unaudited) |      |   |         |   |
| Assets                                                                                                                                                               |   |        |      |   |         |   |
|   Cash and due from banks                                                                                                                                  |   | $           | 38,710    |   |         | $      | 52,120 |   |
|   Federal funds sold                                                                                                                                       |   |        | 59,643    |   |         |   | 44,244 |   |
|   Interest-bearing deposits in banks                                                                                                                       |   |        | 67,067    |   |         |   | 56,562 |   |
|     Cash and cash equivalents                                                                                                                    |   |        | 165,420   |   |         |   | 152,926 |   |
|   Investment securities (fair value: 2010, $380,269; 2009, $378,964)                                                                                       |   |        | 380,268   |   |         |   | 378,961 |   |
|   Mortgage loans held for sale                                                                                                                             |   |        | 29,355    |   |         |   | 44,165 |   |
|   Loans receivable, net of allowance for loan losses, 2010, $40,644; 2009, $40,172                                                                         |   |        | 2,121,351 |   |         |   | 2,146,335 |   |
|   Premises and equipment, net                                                                                                                              |   |        | 81,242    |   |         |   | 83,546 |   |
|   Accrued interest receivable                                                                                                                              |   |        | 9,857     |   |         |   | 9,459 |   |
|   Deferred income tax asset                                                                                                                                |   |        | 1,068     |   |         |   | 882 |   |
|   Core deposit intangibles, net                                                                                                                            |   |        | 7,900     |   |         |   | 8,408 |   |
|   Goodwill                                                                                                                                                 |   |        | 113,652   |   |         |   | 113,652 |   |
|   Bank owned life insurance                                                                                                                                |   |        | 30,519    |   |         |   | 30,196 |   |
|   Foreclosed assets                                                                                                                                        |   |        | 2,267     |   |         |   | 4,505 |   |
|   Other assets                                                                                                                                             |   |        | 59,718    |   |         |   | 60,066 |   |
|     Total assets                                                                                                                                 |   | $           | 3,002,617 |   |         | $      | 3,033,101 |   |
|                                                                                                                                                                 |   |        |      |   |         |   |   |   |
| Liabilities                                                                                                                                                          |   |        |      |   |         |   |   |   |
|   Deposits:                                                                                                                                                |   |        |      |   |         |   |   |   |
| Noninterest-bearing                                                                                                                                                  |   | $           | 298,682   |   |         | $      | 302,009 |   |
| Interest-bearing                                                                                                                                                     |   |        | 2,110,406 |   |         |   | 2,134,111 |   |
| Total deposits                                                                                                                                                       |   |        | 2,409,088 |   |         |   | 2,436,120 |   |
|   Short-term borrowings                                                                                                                                    |   |        | 952       |   |         |   | 783 |   |
|   Federal Home Loan Bank advances                                                                                                                          |   |        | 125,000   |   |         |   | 130,000 |   |
|   Subordinated debt                                                                                                                                        |   |        | 32,991    |   |         |   | 32,991 |   |
|   Accrued interest payable                                                                                                                                 |   |        | 3,221     |   |         |   | 3,626 |   |
|   Other liabilities                                                                                                                                        |   |        | 8,873     |   |         |   | 8,796 |   |
| Total liabilities                                                                                                                                                    |   |        | 2,580,125 |   |         |   | 2,612,316 |   |
|                                                                                                                                                                 |   |        |      |   |         |   |   |   |
| Stockholders' Equity                                                                                                                                                 |   |        |      |   |         |   |   |   |
|   Preferred stock; no par value; 5,000,000 shares authorized; no shares issued and outstanding;                                                            |   |        | -         |   |         |   | - |   |
|   Preferred stock; $1,000 per share liquidation preference; 30,000 shares issued and outstanding;                                                          |   |        | 28,486    |   |         |   | 28,398 |   |
|   Common stock; $1 par value; 35,000,000 shares authorized; 2010: 22,684,816 shares issued and outstanding; 2009: 22,661,125 shares issued and outstanding |   |        | 22,685    |   |         |   | 22,661 |   |
|   Additional paid-in capital                                                                                                                               |   |        | 269,241   |   |         |   | 268,965 |   |
|   Retained earnings                                                                                                                                        |   |        | 97,431    |   |         |   | 96,947 |   |
|   Accumulated other comprehensive income, net                                                                                                              |   |        | 4,649     |   |         |   | 3,814 |   |
|     Total stockholders' equity                                                                                                                   |   |        | 422,492   |   |         |   | 420,785 |   |
|     Total liabilities and stockholders' equity                                                                                                   |   | $           | 3,002,617 |   |         | $      | 3,033,101 |   |

----

Table of Contents

| STELLARONE CORPORATION AND SUBSIDIARIES                                                  |   |
|------------------------------------------------------------------------------------------|--------|
| CONSOLIDATED STATEMENTS OF INCOME                                                        |   |
| (In thousands, except per share data)                                                    |   |
|                                                                                     |   |   |   |   |   |   |
|                                                                                     |   | THREE MONTHS ENDED |   |
|                                                                                     |   | MARCH 31, |   |
|                                                                                     |   | 2010 |   |   | 2009 |   |
|                                                                                     |   | (unaudited) |   |   | (unaudited) |   |
| Interest and Dividend Income                                                             |   |   |   |   |   |   |
|   Loans, including fees                                                        |   | $ | 29,086 |   |   | $ | 32,492 |   |
|   Federal funds sold and deposits in other banks                               |   |   | 61 |   |   |   | 33 |   |
|   Investment securities:                                                       |   |   |   |   |   |   |   |   |
|     Taxable                                                          |   |   | 2,258 |   |   |   | 2,572 |   |
|     Tax-exempt                                                       |   |   | 1,047 |   |   |   | 848 |   |
|     Dividends                                                        |   |   | 29 |   |   |   | 33 |   |
|       Total interest income                                |   |   | 32,481 |   |   |   | 35,978 |   |
|                                                                                     |   |   |   |   |   |   |   |   |
| Interest Expense                                                                         |   |   |   |   |   |   |   |   |
|   Deposits                                                                     |   |   | 8,609 |   |   |   | 11,651 |   |
|   Federal funds repurchased and securities sold under agreements to repurchase |   |   | 6 |   |   |   | 3 |   |
|   Federal Home Loan Bank advances                                              |   |   | 1,110 |   |   |   | 1,569 |   |
|   Subordinated debt                                                            |   |   | 257 |   |   |   | 357 |   |
|       Total interest expense                               |   |   | 9,982 |   |   |   | 13,580 |   |
|   Net interest income                                                          |   |   | 22,499 |   |   |   | 22,398 |   |
|   Provision for loan losses                                                    |   |   | 6,700 |   |   |   | 7,750 |   |
|       Net interest income after provision for loan losses  |   |   | 15,799 |   |   |   | 14,648 |   |
|                                                                                     |   |   |   |   |   |   |   |   |
| Noninterest Income                                                                       |   |   |   |   |   |   |   |   |
|   Retail banking fees                                                          |   |   | 3,920 |   |   |   | 3,711 |   |
|   Commissions and fees from fiduciary activities                               |   |   | 834 |   |   |   | 758 |   |
|   Brokerage fee income                                                         |   |   | 359 |   |   |   | 253 |   |
|   Mortgage banking-related fees                                                |   |   | 1,963 |   |   |   | 1,424 |   |
|   Gain on sale of financial center                                             |   |   | 748 |   |   |   | - |   |
|   Gains on sale of premises and equipment                                      |   |   | 27 |   |   |   | 199 |   |
|   Gains on sale of securities available for sale                               |   |   | 302 |   |   |   | 2 |   |
|   Losses on sale of foreclosed assets                                          |   |   | (364 | ) |   |   | (265 | ) |
|   Income from bank owned life insurance                                        |   |   | 324 |   |   |   | 304 |   |
|   Other operating income                                                       |   |   | 701 |   |   |   | 744 |   |
|       Total noninterest income                             |   |   | 8,814 |   |   |   | 7,130 |   |
| Noninterest Expense                                                                      |   |   |   |   |   |   |   |   |
|   Compensation and employee benefits                                           |   |   | 11,310 |   |   |   | 10,526 |   |
|   Net occupancy                                                                |   |   | 2,179 |   |   |   | 2,091 |   |
|   Supplies and equipment                                                       |   |   | 2,178 |   |   |   | 1,962 |   |
|   Amortization of intangible assets                                            |   |   | 413 |   |   |   | 438 |   |
|   Marketing                                                                    |   |   | 153 |   |   |   | 240 |   |
|   State franchise taxes                                                        |   |   | 554 |   |   |   | 596 |   |
|   FDIC insurance                                                               |   |   | 1,109 |   |   |   | 1,105 |   |
|   Data processing                                                              |   |   | 543 |   |   |   | 1,036 |   |
|   Professional fees                                                            |   |   | 675 |   |   |   | 504 |   |
|   Telecommunications                                                           |   |   | 425 |   |   |   | 467 |   |
|   Other operating expenses                                                     |   |   | 3,008 |   |   |   | 3,259 |   |
|       Total noninterest expense                            |   |   | 22,547 |   |   |   | 22,224 |   |
|                                                                                     |   |   |   |   |   |   |   |   |
|       Income (loss) before income taxes                    |   |   | 2,066 |   |   |   | (446 | ) |
|   Income tax expense (benefit)                                                 |   |   | 212 |   |   |   | (592 | ) |
|       Net income                                           |   | $ | 1,854 |   |   | $ | 146 |   |
|   Dividends and accretion on preferred stock                                   |   |   | (458 | ) |   |   | (444 | ) |
|       Net income (loss) available to common shareholders   |   | $ | 1,396 |   |   | $ | (298 | ) |
|                                                                                     |   |   |   |   |   |   |   |   |
| Basic net income (loss) per common share available to common shareholders                |   | $ | 0.06 |   |   | $ | (0.01 | ) |
| Diluted net income (loss) per common share available to common shareholders              |   | $ | 0.06 |   |   | $ | (0.01 | ) |

----

Table of Contents

| STELLARONE CORPORATION AND SUBSIDIARIES                                                                                                                       |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY AND OTHER COMPREHENSIVE INCOME                                                               |   |
| FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009                                                                                                            |   |
| (In thousands, except per share data)                                                                                                                         |   |
| (unaudited)                                                                                                                                                   |   |
|                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   | Accumulated |   |   |   |   |   |   |   |
|                                                                                                                                                          |   |   |   |   |   |   |   | Additional |   |   |   |   |   | Other |   |   |   |   |   |   |   |
|                                                                                                                                                          |   | Preferred |   |   | Common |   |   | Paid-In |   |   | Retained |   |   | Comprehensive |   |   | Comprehensive |   |   |   |   |
|                                                                                                                                                          |   | Stock |   |   | Stock |   |   | Capital |   |   | Earnings |   |   | Income |   |   | Income |   |   | Total |   |
|                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, January 1, 2009                                                                                                                                      |   | $ | 28,121 |   |   | $ | 22,605 |   |   | $ | 268,293 |   |   | $ | 113,661 |   |   | $ | 876 |   |   |   |   |   | $ | 433,556 |   |
|  Comprehensive income:                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Net income                                                                                                                                       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 146 |   |   |   | - |   |   | $ | 146 |   |   |   | 146 |   |
|    Other comprehensive income, net of tax:                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Unrealized holding gains arising during the period        (net of tax, $612)               |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,135 |   |   |   | - |   |
|        Reclassification adjustment (net of tax, $1)                                                                             |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1 |   |   |   | - |   |
|        Other comprehensive income                                                                                               |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,136 |   |   |   | 1,136 |   |   |   | 1,136 |   |
|            Total comprehensive income                                                                            |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   | $ | 1,282 |   |   |   | - |   |
|   Cash dividends paid or accrued:                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         Common ($0.16 per share)                                                                                           |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (3,625 | ) |   |   | - |   |   |   |   |   |   |   | (3,625 | ) |
|         Preferred cumulative 5%                                                                                            |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (370 | ) |   |   | - |   |   |   |   |   |   |   | (370 | ) |
| Accretion on preferred stock discount                                                                                                                         |   |   | 74 |   |   |   | - |   |   |   | - |   |   |   | (74 | ) |   |   | - |   |   |   |   |   |   |   | - |   |
| Preferred stock issuance costs                                                                                                                                |   |   | (56 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   |   |   |   |   | (56 | ) |
|    Stock-based compensation expense (1,074 shares)                                                                                                  |   |   | - |   |   |   | 1 |   |   |   | 70 |   |   |   | - |   |   |   | - |   |   |   |   |   |   |   | 71 |   |
|    Exercise of stock options (24,499 shares)                                                                                                   |   |   | - |   |   |   | 25 |   |   |   | 214 |   |   |   | - |   |   |   | - |   |   |   |   |   |   |   | 239 |   |
| Balance, March 31, 2009                                                                                                                                       |   | $ | 28,139 |   |   | $ | 22,631 |   |   | $ | 268,577 |   |   | $ | 109,738 |   |   | $ | 2,012 |   |   |   |   |   |   | $ | 431,097 |   |
|                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, January 1, 2010                                                                                                                                      |   | $ | 28,398 |   |   | $ | 22,661 |   |   | $ | 268,965 |   |   | $ | 96,947 |   |   | $ | 3,814 |   |   |   |   |   |   | $ | 420,785 |   |
|  Comprehensive income:                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Net income                                                                                                                                  |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,854 |   |   |   | - |   |   | $ | 1,854 |   |   |   | 1,854 |   |
|         Other comprehensive income, net of tax:                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         Unrealized holding gains arising during the period         (net of tax of $409) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 761 |   |   |   | - |   |
|         Reclassification adjustment (net of tax of $106)                                                                   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 196 |   |   |   | - |   |
|         Change in post retirement liability (net of tax, $66)                                                              |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (122 | ) |   |   | - |   |
|     Other comprehensive income                                                                                                                 |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 835 |   |   |   | 835 |   |   |   | 835 |   |
| Total comprehensive loss                                                                                                                                      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   | $ | 2,689 |   |   |   | - |   |
| Cash dividends paid or accrued:                                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common ($0.04 per share)                                                                                                                                      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (912 | ) |   |   | - |   |   |   |   |   |   |   | (912 | ) |
| Preferred cumulative 5%                                                                                                                                       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (370 | ) |   |   | - |   |   |   |   |   |   |   | (370 | ) |
| Accretion on preferred stock discount                                                                                                                         |   |   | 88 |   |   |   | - |   |   |   | - |   |   |   | (88 | ) |   |   | - |   |   |   |   |   |   |   | - |   |
| Stock-based compensation expense (7,385 shares)                                                                                                               |   |   | - |   |   |   | 7 |   |   |   | 129 |   |   |   | - |   |   |   | - |   |   |   |   |   |   |   | 136 |   |
| Exercise of stock options (16,306 shares)                                                                                                                     |   |   | - |   |   |   | 17 |   |   |   | 147 |   |   |   | - |   |   |   | - |   |   |   |   |   |   |   | 164 |   |
| Balance, March 31, 2010                                                                                                                                       |   | $ | 28,486 |   |   | $ | 22,685 |   |   | $ | 269,241 |   |   | $ | 97,431 |   |   | $ | 4,649 |   |   |   |   |   |   | $ | 422,492 |   |

----

Table of Contents

| STELLARONE CORPORATION AND SUBSIDIARIES                                                               |   |
|-------------------------------------------------------------------------------------------------------|--------|
| CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                 |   |
| (In thousands)                                                                                        |   |
|                                                                                                  |   |   |   |   |   |   |
|                                                                                                  |   | THREE MONTHS ENDED |   |
|                                                                                                  |   | MARCH 31, |   |
|                                                                                                  |   | 2010 |   |   | 2009 |   |
|                                                                                                  |   |   |   |   |   |   |
| Cash Flows from Operating Activities                                                                  |   |   |   |   |   |   |
| Net income                                                                                            |   | $ | 1,854 |   |   | $ | 146 |   |
| Adjustments to reconcile net income to net cash used in operating activities:                         |   |   |   |   |   |   |   |   |
| Depreciation                                                                                          |   |   | 1,637 |   |   |   | 1,598 |   |
| Amortization of intangible assets                                                                     |   |   | 413 |   |   |   | 438 |   |
| Provision for loan losses                                                                             |   |   | 6,700 |   |   |   | 7,750 |   |
| Deferred tax benefit                                                                                  |   |   | (329 | ) |   |   | (1,451 | ) |
| Stock-based compensation expense                                                                      |   |   | 152 |   |   |   | 72 |   |
| Losses / impairments on foreclosed assets                                                             |   |   | 364 |   |   |   | 265 |   |
| Gain on sale of financial center                                                                      |   |   | (748 | ) |   |   | - |   |
| Gains on sale of premises and equipment                                                               |   |   | (27 | ) |   |   | (199 | ) |
| Gains on sale of securities available for sale                                                        |   |   | (302 | ) |   |   | (2 | ) |
| Mortgage banking-related fees                                                                         |   |   | (1,963 | ) |   |   | (1,424 | ) |
| Proceeds from sale of mortgage loans                                                                  |   |   | 121,047 |   |   |   | 105,602 |   |
| Origination of mortgage loans for sale                                                                |   |   | (104,273 | ) |   |   | (126,506 | ) |
| Amortization of securities premiums and accretion of discounts, net                                   |   |   | 341 |   |   |   | (680 | ) |
| Income on bank owned life insurance                                                                   |   |   | (324 | ) |   |   | (304 | ) |
| Changes in assets and liabilities:                                                                    |   |   |   |   |   |   |   |   |
| (Increase) decrease in accrued interest receivable                                                    |   |   | (398 | ) |   |   | 135 |   |
| (Increase) decrease in other assets                                                                   |   |   | (120 | ) |   |   | 438 |   |
| Decrease in accrued interest payable                                                                  |   |   | (379 | ) |   |   | (356 | ) |
| Decrease in other liabilities                                                                         |   |   | (104 | ) |   |   | (1,450 | ) |
|  Net cash provided (used) by operating activities                                                |   | $ | 23,541 |   |   | $ | (15,928 | ) |
|                                                                                                  |   |   |   |   |   |   |   |   |
| Cash Flows from Investing Activities                                                                  |   |   |   |   |   |   |   |   |
| Proceeds from maturities and principal payments of securities available for sale                      |   | $ | 17,431 |   |   | $ | 22,481 |   |
| Proceeds from sales and calls of securities available for sale                                        |   |   | 20,072 |   |   |   | 5,762 |   |
| Purchase of securities available for sale                                                             |   |   | (37,323 | ) |   |   | (23,264 | ) |
| Net decrease (increase) in loans                                                                      |   |   | 17,550 |   |   |   | (2,481 | ) |
| Proceeds from sale of premises and equipment                                                          |   |   | 19 |   |   |   | 641 |   |
| Purchase of premises and equipment                                                                    |   |   | (361 | ) |   |   | (796 | ) |
| Proceeds from sale of foreclosed assets                                                               |   |   | 2,885 |   |   |   | 754 |   |
| Cash paid in sale of financial center, net                                                            |   |   | (13,349 | ) |   |   | - |   |
| Net cash provided by investing activities                                                             |   | $ | 6,924 |   |   | $ | 3,097 |   |
|                                                                                                  |   |   |   |   |   |   |   |   |
| Cash Flows from Financing Activities                                                                  |   |   |   |   |   |   |   |   |
| Net increase in demand, money market and savings deposits                                             |   | $ | 21,839 |   |   | $ | 51,402 |   |
| Net (decrease) increase in certificates of deposit                                                    |   |   | (33,856 | ) |   |   | 11,948 |   |
| Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase |   |   | 169 |   |   |   | (222 | ) |
| Principal payments on Federal Home Loan Bank advances                                                 |   |   | (5,000 | ) |   |   | (17,617 | ) |
| Proceeds from exercise of stock options                                                               |   |   | 164 |   |   |   | 238 |   |
| Payment of preferred stock issuance costs                                                             |   |   | - |   |   |   | (56 | ) |
| Cash dividends paid                                                                                   |   |   | (1,287 | ) |   |   | (3,858 | ) |
|  Net cash (used) provided by financing activities                                                |   | $ | (17,971 | ) |   | $ | 41,835 |   |
|                                                                                                  |   |   |   |   |   |   |   |   |
|   Increase in cash and cash equivalents                                                     |   | $ | 12,494 |   |   | $ | 29,004 |   |
|                                                                                                  |   |   |   |   |   |   |   |   |
| Cash and Cash Equivalents                                                                             |   |   |   |   |   |   |   |   |
| Beginning                                                                                             |   |   | 152,926 |   |   |   | 115,529 |   |
|  Ending                                                                                          |   | $ | 165,420 |   |   | $ | 144,533 |   |
|                                                                                                  |   |   |   |   |   |   |   |   |
| Supplemental Schedule of Noncash Activities                                                           |   |   |   |   |   |   |   |   |
| Foreclosed assets acquired in settlement of loans                                                     |   | $ | 868 |   |   | $ | 598 |   |

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|   1. | Organization |
|-----------|--------------|

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Table of Contents

|   3. | Investment Securities |
|-----------|-----------------------|

|                                |   | March 31, 2010    |    |   | December 31, 2009 |   |
|-------------------------------------|--------|-------------------|---------|--------|-------------------|--------|
|                                |   |              |    |   | Gross             |   |   | Gross |   |   | Estimated |   |   |   |   |   | Gross |   |   | Gross |   |   | Estimated |   |
|                                |   | Amortized         |    |   | Unrealized        |   |   | Unrealized |   |   | Fair |   |   | Amortized |   |   | Unrealized |   |   | Unrealized |   |   | Fair |   |
|                                |   | Cost              |    |   | Gains             |   |   | (Losses) |   |   | Value |   |   | Cost |   |   | Gains |   |   | (Losses) |   |   | Value |   |
| Securities Held to Maturity:        |   |  (unaudited) |    |   |  (unaudited) |   |   |  (unaudited) |   |   |  (unaudited) |   |   |   |   |   |   |   |   |   |   |   |   |   |
| State and municipal                 |   | $                 | 425     |   |              | $      | 1 |   |   | $ | - |   |   | $ | 426 |   |   | $ | 426 |   |   | $ | 2 |   |   | $ | - |   |   | $ | 428 |   |
| Agency mortgage backed securities   |   |              | 1       |   |              |   | - |   |   |   | - |   |   |   | 1 |   |   |   | 21 |   |   |   | 1 |   |   |   | - |   |   |   | 22 |   |
| Total                               |   | $                 | 426     |   |              | $      | 1 |   |   | $ | - |   |   | $ | 427 |   |   | $ | 447 |   |   | $ | 3 |   |   | $ | - |   |   | $ | 450 |   |
|                                |   |              |    |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Securities Available for Sale:      |   |              |    |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U. S. Treasuries                    |   | $                 | 20,110  |   |              | $      | 40 |   |   | $ | - |   |   | $ | 20,150 |   |   | $ | 20,168 |   |   | $ | 35 |   |   | $ | - |   |   | $ | 20,203 |   |
| U. S. Government agencies           |   |              | 76,472  |   |              |   | 903 |   |   |   | (120 | ) |   |   | 77,255 |   |   |   | 62,612 |   |   |   | 823 |   |   |   | (20 | ) |   |   | 63,415 |   |
| State and municipals                |   |              | 105,518 |   |              |   | 4,181 |   |   |   | (121 | ) |   |   | 109,578 |   |   |   | 109,431 |   |   |   | 3,921 |   |   |   | (168 | ) |   |   | 113,184 |   |
| Corporate bonds                     |   |              | 6,552   |   |              |   | 433 |   |   |   | - |   |   |   | 6,985 |   |   |   | 6,560 |   |   |   | 374 |   |   |   | - |   |   |   | 6,934 |   |
| Collateralized mortgage obligations |   |              | 16,595  |   |              |   | 114 |   |   |   | (201 | ) |   |   | 16,508 |   |   |   | 13,172 |   |   |   | 117 |   |   |   | (263 | ) |   |   | 13,026 |   |
| Agency mortgage backed securities   |   |              | 143,105 |   |              |   | 3,938 |   |   |   | (298 | ) |   |   | 146,745 |   |   |   | 156,588 |   |   |   | 3,862 |   |   |   | (863 | ) |   |   | 159,587 |   |
| Certificates of deposit             |   |              | 694     |   |              |   | - |   |   |   | - |   |   |   | 694 |   |   |   | 685 |   |   |   | - |   |   |   | - |   |   |   | 685 |   |
| Equity securities                   |   |              | 1,512   |   |              |   | 432 |   |   |   | (28 | ) |   |   | 1,916 |   |   |   | 1,484 |   |   |   | 7 |   |   |   | (22 | ) |   |   | 1,469 |   |
| Other                               |   |              | 11      |   |              |   | - |   |   |   | - |   |   |   | 11 |   |   |   | 11 |   |   |   | - |   |   |   | - |   |   |   | 11 |   |
| Total                               |   | $                 | 370,569 |   |              | $      | 10,041 |   |   | $ | (768 | ) |   | $ | 379,842 |   |   | $ | 370,711 |   |   | $ | 9,139 |   |   | $ | (1,336 | ) |   | $ | 378,514 |   |

|                      |   | Three Months Ended |   |
|---------------------------|--------|--------------------|--------|
|                      |   | March 31,          |   |
|                      |   | 2010               |   |   | 2009 |   |
|                      |   |  (unaudited)  |   |   | (unaudited) |   |
| Proceeds from sales/calls |   | $                  | 20,072 |   |   | $ | 5,762 |   |
| Gross realized gains      |   |               | 310    |   |   |   | 2 |   |
| Gross realized losses     |   |               | (8     | ) |   |   | - |   |

|                                  |   | Less than 12 months |   |   | 12 months or more |   |   | Total             |   |
|---------------------------------------|--------|---------------------|--------|--------|-------------------|--------|--------|-------------------|--------|
| Description of Securities             |   | Estimated           |   |   | Unrealized        |   |   | Estimated         |   |   | Unrealized |   |   | Estimated |   |   | Unrealized |   |
|                                  |   | Fair Value          |   |   | Losses            |   |   | Fair Value        |   |   | Losses |   |   | Fair Value |   |   | Losses |   |
| Available for Sale                    |   |  (unaudited)   |   |   |  (unaudited) |   |   |  (unaudited) |   |   |  (unaudited) |   |   |  (unaudited) |   |   |  (unaudited) |   |
| U. S. Government Agencies             |   | $                   | 26,493 |   |              | $      | 120    |              |   | $ | - |   |   | $ | - |   |   | $ | 26,493 |   |   | $ | 120 |   |
| Agency mortgage backed securities     |   |                | 44,696 |   |              |   | 298    |              |   |   | - |   |   |   | - |   |   |   | 44,696 |   |   |   | 298 |   |
| State and municipals                  |   |                | 4,895  |   |              |   | 54     |              |   |   | 2,644 |   |   |   | 68 |   |   |   | 7,539 |   |   |   | 122 |   |
| Collateralized mortgage obligations   |   |                | 5,193  |   |              |   | 30     |              |   |   | 2,487 |   |   |   | 170 |   |   |   | 7,680 |   |   |   | 200 |   |
| Subtotal debt securities              |   |                | 81,277 |   |              |   | 502    |              |   |   | 5,131 |   |   |   | 238 |   |   |   | 86,408 |   |   |   | 740 |   |
| Equity securities                     |   |                | 99     |   |              |   | 28     |              |   |   | - |   |   |   | - |   |   |   | 99 |   |   |   | 28 |   |
| Total temporarily impaired securities |   | $                   | 81,376 |   |              | $      | 530    |              |   | $ | 5,131 |   |   | $ | 238 |   |   | $ | 86,507 |   |   | $ | 768 |   |

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|                                   |   | Held to Maturity  |   |   | Available for Sale |   |
|----------------------------------------|--------|-------------------|--------|--------|--------------------|--------|
|                                   |   | Amortized Cost    |   |   | Fair Value         |   |   | Amortized Cost |   |   | Fair Value |   |
|                                   |   |  (unaudited) |   |   |  (unaudited)  |   |   |  (unaudited) |   |   |  (unaudited) |   |
| Due in one year or less                |   | $                 | 425    |   |               | $      | 426 |   |   | $ | 41,489 |   |   | $ | 41,745 |   |
| Due after one year through five years  |   |              | -      |   |               |   | - |   |   |   | 101,771 |   |   |   | 104,402 |   |
| Due after five years through ten years |   |              | 1      |   |               |   | 1 |   |   |   | 71,869 |   |   |   | 74,309 |   |
| Due after ten years                    |   |              | -      |   |               |   | - |   |   |   | 153,917 |   |   |   | 157,459 |   |
| Equity securities                      |   |              | -      |   |               |   | - |   |   |   | 1,512 |   |   |   | 1,916 |   |
| Other                                  |   |              | -      |   |               |   | - |   |   |   | 11 |   |   |   | 11 |   |
| Total                                  |   | $                 | 426    |   |               | $      | 427 |   |   | $ | 370,569 |   |   | $ | 379,842 |   |

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Table of Contents

|   4. | Loans Receivable  |
|-----------|------------------------|

|                                         |   | March 31,   |      |   | December 31, |   |
|----------------------------------------------|--------|-------------|-----------|--------|--------------|--------|
|                                         |   | 2010        |      |   | 2009         |   |
|                                         |   | (unaudited) |      |   |         |   |
| Real estate loans:                           |   |        |      |   |         |   |
| Construction and land development            |   | $           | 285,442   |   |         | $      | 296,489 |   |
| Secured by 1-4 family residential            |   |        | 784,586   |   |         |   | 785,385 |   |
| Commercial and multifamily                   |   |        | 838,902   |   |         |   | 845,561 |   |
| Commercial, financial and agricultural loans |   |        | 209,514   |   |         |   | 211,903 |   |
| Consumer loans                               |   |        | 35,439    |   |         |   | 39,173 |   |
| All other loans                              |   |        | 7,201     |   |         |   | 7,027 |   |
| Total loans                                  |   |        | 2,161,084 |   |         |   | 2,185,538 |   |
| Deferred loan costs                          |   |        | 911       |   |         |   | 969 |   |
| Allowance for loan losses                    |   |        | (40,644   | )      |         |   | (40,172 | ) |
| Net loans                                    |   | $           | 2,121,351 |   |         | $      | 2,146,335 |   |

|   5. | Allowance for Loan Losses  |
|-----------|---------------------------------|

|                       |   | March 31,   |   |   | December 31, |   |    | March 31,   |   |
|----------------------------|--------|-------------|--------|--------|--------------|--------|---------|-------------|--------|
|                       |   | 2010        |   |   | 2009         |   |    | 2009        |   |
|                       |   | (unaudited) |   |   |         |   |    | (unaudited) |   |
|                       |   |        |   |   |         |   |    |        |   |
| Balance, beginning         |   | $           | 40,172 |   |         | $      | 30,464  |        |   | $ | 30,464 |   |
| Provisions for loan losses |   |        | 6,700  |   |         |   | 37,800  |        |   |   | 7,750 |   |
| Loans charged off          |   |        | (6,708 | )      |         |   | (30,947 | )           |   |   | (3,442 | ) |
| Loan recoveries            |   |        | 480    |   |         |   | 2,855   |        |   |   | 547 |   |
| Net loan charge-offs       |   |        | (6,228 | )      |         |   | (28,092 | )           |   |   | (2,895 | ) |
|                       |   |        |   |   |         |   |    |        |   |   |   |   |
| Balance, ending            |   | $           | 40,644 |   |         | $      | 40,172  |        |   | $ | 35,319 |   |

|                                                                             |   | March 31,   |   |   | December 31, |   |
|----------------------------------------------------------------------------------|--------|-------------|--------|--------|--------------|--------|
|                                                                             |   | 2010        |   |   | 2009         |   |
|                                                                             |   | (unaudited) |   |   |         |   |
|                                                                             |   |        |   |   |         |   |
| Impaired loans for which an allowance has been provided                          |   | $           | 54,444 |   |         | $      | 45,895 |   |
| Impaired loans for which an allowance has not been provided                      |   |        | 9,829  |   |         |   | 19,777 |   |
| Total impaired loans                                                             |   | $           | 64,273 |   |         | $      | 65,672 |   |
|                                                                             |   |        |   |   |         |   |   |   |
| Allowance provided for impaired loans, included in the allowance for loan losses |   | $           | 7,955  |   |         | $      | 8,357 |   |

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|                                                             |   | March 31,   |       |
|------------------------------------------------------------------|--------|-------------|------------|
|   (In thousands, except per share amounts)                  |   | 2010        |       |   | 2009 |   |
|                                                             |   | (unaudited) |       |   | (unaudited) |   |
|                                                             |   |        |       |   |   |   |
| Net income                                                       |   | $           | 1,854      |   |   | $ | 146 |   |
| Less:                                                            |   |        |       |   |   |   |   |   |
| Preferred stock dividends                                        |   |        | (370       | ) |   |   | (370 | ) |
| Accretion of preferred stock discount                            |   |        | (88        | ) |   |   | (74 | ) |
| Net income (loss) available to common shareholders (numerator)   |   | $           | 1,396      |   |   | $ | (298 | ) |
|                                                             |   |        |       |   |   |   |   |   |
| Earnings (loss) per common share                                 |   |        |       |   |   |   |   |   |
| Weighted average common shares outstanding (denominator)         |   |        | 22,674,490 |   |   |   | 22,619,426 |   |
| Earnings (loss) per common share                                 |   | $           | 0.06       |   |   | $ | (0.01 | ) |
|                                                             |   |        |       |   |   |   |   |   |
| Diluted earnings (loss) per common share                         |   |        |       |   |   |   |   |   |
| Weighted average common shares issued and outstanding            |   |        | 22,674,490 |   |   |   | 22,619,426 |   |
| Add:                                                             |   |        |       |   |   |   |   |   |
| Restricted stock                                                 |   |        | 43,942     |   |   |   | - |   |
| Incentive stock options                                          |   |        | 1,523      |   |   |   | - |   |
| Stock options                                                    |   |        | 9,711      |   |   |   | - |   |
| Diluted weighted average common shares outstanding (denominator) |   |        | 22,729,666 |   |   |   | 22,619,426 |   |
| Diluted earnings (loss) per common share                         |   | $           | 0.06       |   |   | $ | (0.01 | ) |

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|                         |   | 2010   |    |   | 2009     |   |
|------------------------------|--------|--------|---------|--------|----------|--------|
|                         |   |   |    |   | Weighted |   |   |   |   |   | Weighted |   |
|                         |   | Number |    |   | Average  |   |   | Number |   |   | Average |   |
|                         |   | of     |    |   | Exercise |   |   | of |   |   | Exercise |   |
|                         |   | Shares |    |   | Price    |   |   | Shares |   |   | Price |   |
|                         |   |   |    |   |     |   |   |   |   |   |   |   |
|  Outstanding, January 1 |   |   | 575,046 |   |     | $      | 18.93 |   |   |   | 614,198 |   |   | $ | 18.58 |   |
|  Granted                |   |   | -       |   |     |   | - |   |   |   | 17,392 |   |   |   | 12.78 |   |
|  Forfeited              |   |   | (317    | )      |     |   | 23.33 |   |   |   | - |   |   |   | - |   |
|  Expired                |   |   | -       |   |     |   | - |   |   |   | - |   |   |   | - |   |
|  Exercised              |   |   | (16,306 | )      |     |   | 9.73 |   |   |   | (24,499 | ) |   |   | 9.73 |   |
|  Outstanding, March 31, |   |   | 558,423 |   |     | $      | 19.20 |   |   |   | 607,091 |   |   | $ | 18.69 |   |
|                         |   |   |    |   |     |   |   |   |   |   |   |   |   |   |   |   |
|  Exercisable, March 31, |   |   | 462,391 |   |     |   |   |   |   |   | 473,798 |   |   |   |   |   |

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| Nonvested Shares             |   | Number of Shares |    |   | Weighted-Average Grant-Date Fair Value |   |   | (In thousands) Total Intrinsic Value |   |
|------------------------------|--------|------------------|---------|--------|--------------------------------------------------|--------|--------|--------------------------------------|--------|
|                         |   |             |    |   |                                             |   |   |                                 |   |
| Nonvested at January 1, 2010 |   |             | 70,936  |   |                                             | $      | 13.80  |                                 |   | $ | 707 |   |
| Granted                      |   |             | 83,984  |   |                                             |   | 10.66  |                                 |   |   |   |   |
| Vested & Exercised       |   |             | (7,385  | )      |                                             |   | 14.08  |                                 |   | $ | (78 | ) |
| Forfeited                    |   |             | (540    | )      |                                             |   | 14.37  |                                 |   |   |   |   |
| Nonvested at March 31, 2010  |   |             | 146,995 |   |                                             | $      | 11.99  |                                 |   | $ | 1,965 |   |

|                                        |   | Stock Options |   |   | Nonvested Restricted Stock |   |   | Total  |   |
|---------------------------------------------|--------|---------------|--------|--------|----------------------------|--------|--------|--------|--------|
|                                        |   |          |   |   |                       |   |   |   |   |
| For the remaining nine months of 2010       |   | $             | 48     |   |                       | $      | 318    |   |   | $ | 366 |   |
| For year ended December 31,  2011 |   |          | 64     |   |                       |   | 367    |   |   |   | 431 |   |
| For year ended December 31,  2012 |   |          | 64     |   |                       |   | 324    |   |   |   | 388 |   |
| For year ended December 31,  2013 |   |          | 22     |   |                       |   | 290    |   |   |   | 312 |   |
| For year ended December 31,  2014 |   |          | 1      |   |                       |   | 93     |   |   |   | 94 |   |
| For year ended December 31,  2015 |   |          | -      |   |                       |   | 7      |   |   |   | 7 |   |
| Total                                       |   | $             | 199    |   |                       | $      | 1,399  |   |   | $ | 1,598 |   |

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|                                     |   |   |    |   | Fair Value Measurements at |   |
|------------------------------------------|--------|--------|---------|--------|----------------------------|--------|
|                                     |   |   |    |   | March 31, 2010             |   |
|                                     |   |   |    |   | Using                      |   |
|                                     |   |   |    |   | Level 1                    |   |   | Level 2 |   |   | Level 3 |   |
|  (unaudited)                        |   | Total  |    |   | (Quoted Prices)            |   |   | (Significant Other Observable Inputs) |   |   | (Significant Unobservable Inputs) |   |
| Investment securities available-for-sale |   | $      | 379,842 |   |                       | $      | 22,077 |   |   | $ | 357,765 |   |   | $ | - |   |
|  Total assets at fair value         |   | $      | 379,842 |   |                       | $      | 22,077 |   |   | $ | 357,765 |   |   | $ | - |   |
|                                     |   |   |    |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Other liabilities (1)                    |   | $      | 2,890   |   |                       | $      | 2,890 |   |   | $ | - |   |   | $ | - |   |
| Total liabilities at fair value          |   | $      | 2,890   |   |                       | $      | 2,890 |   |   | $ | - |   |   | $ | - |   |

|                                     |   |   |    |   | Fair Value Measurements at |   |
|------------------------------------------|--------|--------|---------|--------|----------------------------|--------|
|                                     |   |   |    |   | December 31, 2009          |   |
|                                     |   |   |    |   | Using                      |   |
|                                     |   |   |    |   | Level 1                    |   |   | Level 2 |   |   | Level 3 |   |
|  (unaudited)                        |   | Total  |    |   | (Quoted Prices)            |   |   | (Significant Other Observable Inputs) |   |   | (Significant Unobservable Inputs) |   |
| Investment securities available-for-sale |   | $      | 378,514 |   |                       | $      | 21,682 |   |   | $ | 356,832 |   |   | $ | - |   |
|  Total assets at fair value         |   | $      | 378,514 |   |                       | $      | 21,682 |   |   | $ | 356,832 |   |   | $ | - |   |
|                                     |   |   |    |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Other liabilities (1)                    |   | $      | 2,882   |   |                       | $      | 2,882 |   |   | $ | - |   |   | $ | - |   |
| Total liabilities at fair value          |   | $      | 2,882   |   |                       | $      | 2,882 |   |   | $ | - |   |   | $ | - |   |

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|                               |   |   |   |   | Fair Value Measurements at |   |
|------------------------------------|--------|--------|--------|--------|----------------------------|--------|
|                               |   |   |   |   | March 31, 2010             |   |
|                               |   |   |   |   | Using                      |   |
|                               |   |   |   |   | Level 1                    |   |   | Level 2 |   |   | Level 3 |   |
|  (unaudited)                  |   | Total  |   |   | (Quoted Prices)            |   |   | (Significant Other Observable Inputs) |   |   | (Significant Unobservable Inputs) |   |
| Loans - impaired loans             |   | $      | 64,273 |   |                       | $      | - |   |   | $ | 20,862 |   |   | $ | 43,411 |   |
| Loans held for sale - mortgage     |   |   | 29,355 |   |                       |   | - |   |   |   | 29,355 |   |   |   | - |   |
| Loans held for sale - other assets |   |   | 608    |   |                       |   | - |   |   |   | - |   |   |   | 608 |   |
| Foreclosed assets                  |   |   | 2,267  |   |                       |   | - |   |   |   | - |   |   |   | 2,267 |   |
|  Total assets at fair value   |   | $      | 96,503 |   |                       | $      | - |   |   | $ | 50,217 |   |   | $ | 46,286 |   |
|                               |   |   |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities at fair value    |   | $      | -      |   |                       | $      | - |   |   | $ | - |   |   | $ | - |   |

|                               |   |   |    |   | Fair Value Measurements at |   |
|------------------------------------|--------|--------|---------|--------|----------------------------|--------|
|                               |   |   |    |   | December 31, 2009          |   |
|                               |   |   |    |   | Using                      |   |
|                               |   |   |    |   | Level 1                    |   |   | Level 2 |   |   | Level 3 |   |
|  (unaudited)                  |   | Total  |    |   | (Quoted Prices)            |   |   | (Significant Other Observable Inputs) |   |   | (Significant Unobservable Inputs) |   |
| Loans - impaired loans             |   | $      | 65,672  |   |                       | $      | - |   |   | $ | 22,182 |   |   | $ | 43,490 |   |
| Loans held for sale - mortgage     |   |   | 44,165  |   |                       |   | - |   |   |   | 44,165 |   |   |   | - |   |
| Loans held for sale - other assets |   |   | 936     |   |                       |   | - |   |   |   | - |   |   |   | 936 |   |
| Foreclosed assets                  |   |   | 4,505   |   |                       |   | - |   |   |   | - |   |   |   | 4,505 |   |
|  Total assets at fair value   |   | $      | 115,278 |   |                       | $      | - |   |   | $ | 66,347 |   |   | $ | 48,931 |   |
|                               |   |   |    |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities at fair value    |   | $      | -       |   |                       | $      | - |   |   | $ | - |   |   | $ | - |   |

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|                                                                       | March 31, 2010 |   |      | December 31, 2009 |   |
|----------------------------------------------------------------------------|----------------|--------|-----------|-------------------|--------|
|                                                                       | Carrying       |   |      | Estimated Fair    |   |   | Carrying |   |   | Estimated Fair |   |
|                                                                       | Amount         |   |      | Value             |   |   | Amount |   |   | Value |   |
| Financial assets:                                                          |           |   |      |              |   |   |   |   |   |   |   |   |
| Cash and cash equivalents                                                  |           | $      | 165,420   |              |   | $ | 165,420 |   |   | $ | 152,926 |   |   | $ | 152,926 |   |
| Investment securities                                                      |           |   | 380,268   |              |   |   | 380,269 |   |   |   | 378,961 |   |   |   | 378,964 |   |
| Mortgage loans held for sale                                               |           |   | 29,355    |              |   |   | 29,355 |   |   |   | 44,165 |   |   |   | 44,165 |   |
| Loans, net                                                                 |           |   | 2,121,351 |              |   |   | 1,915,540 |   |   |   | 2,146,335 |   |   |   | 1,917,338 |   |
| Accrued interest receivable                                                |           |   | 9,857     |              |   |   | 9,857 |   |   |   | 9,459 |   |   |   | 9,459 |   |
|                                                                       |           |   |      |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities:                                                     |           |   |      |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                   |           | $      | 2,409,088 |              |   | $ | 2,417,298 |   |   | $ | 2,436,120 |   |   | $ | 2,446,354 |   |
| Federal funds purchased and securities sold under agreements to repurchase |           |   | 952       |              |   |   | 952 |   |   |   | 783 |   |   |   | 783 |   |
| Federal Home Loan Bank advances                                            |           |   | 125,000   |              |   |   | 128,964 |   |   |   | 130,000 |   |   |   | 134,321 |   |
| Subordinated debt                                                          |           |   | 32,991    |              |   |   | 32,812 |   |   |   | 32,991 |   |   |   | 32,807 |   |
| Accrued interest payable                                                   |           |   | 3,221     |              |   |   | 3,221 |   |   |   | 3,626 |   |   |   | 3,626 |   |

|   9. | Restricted Investment in FHLB Stock |
|----------------|------------------------------------------|

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|  10. | New Authoritative Accounting Guidance |
|-----------|---------------------------------------|

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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|                                                                             |   | For the Three Months Ended March 31, |      |
|----------------------------------------------------------------------------------|--------|--------------------------------------|-----------|
|                                                                             |   | (unaudited)                          |      |
|                                                                             |   | 2010                                 |      |   | 2009 |   |
|                                                                             |   | Average                              |      |   | Interest |   |   | Average |   |   | Average |   |   | Interest |   |   | Average |   |
| Dollars in thousands                                                             |   | Balance                              |      |   | Inc/Exp |   |   | Rates |   |   | Balance |   |   | Inc/Exp |   |   | Rates |   |
|                                                                             |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets                                                                           |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans receivable, net                                                            |   | $                                    | 2,204,297 |   |   | $ | 29,137 |   |   |   | 5.36 | % |   | $ | 2,284,456 |   |   | $ | 32,599 |   |   |   | 5.79 | % |
| Investment securities                                                            |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                                          |   |                                 | 259,875   |   |   |   | 2,287 |   |   |   | 3.52 | % |   |   | 229,147 |   |   |   | 2,605 |   |   |   | 4.61 | % |
| Tax exempt                                                                       |   |                                 | 105,681   |   |   |   | 1,611 |   |   |   | 6.10 | % |   |   | 83,630 |   |   |   | 1,305 |   |   |   | 6.33 | % |
| Total investments                                                                |   |                                 | 365,556   |   |   |   | 3,898 |   |   |   | 4.27 | % |   |   | 312,777 |   |   |   | 3,910 |   |   |   | 5.07 | % |
|                                                                             |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest bearing deposits                                                        |   |                                 | 44,060    |   |   |   | 28 |   |   |   | 0.25 | % |   |   | 49,792 |   |   |   | 23 |   |   |   | 0.19 | % |
| Federal funds sold                                                               |   |                                 | 52,948    |   |   |   | 33 |   |   |   | 0.25 | % |   |   | 17,307 |   |   |   | 9 |   |   |   | 0.21 | % |
|                                                                             |   |                                 | 462,564   |   |   |   | 3,959 |   |   |   | 3.43 | % |   |   | 379,876 |   |   |   | 3,942 |   |   |   | 4.21 | % |
|                                                                             |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total earning assets                                                             |   |                                 | 2,666,861 |   |   | $ | 33,096 |   |   |   | 5.04 | % |   |   | 2,664,332 |   |   | $ | 36,541 |   |   |   | 5.56 | % |
|                                                                             |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total nonearning assets                                                          |   |                                 | 332,122   |   |   |   |   |   |   |   |   |   |   |   | 326,659 |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                                                     |   | $                                    | 2,998,983 |   |   |   |   |   |   |   |   |   |   | $ | 2,990,991 |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities and Stockholders' Equity                                             |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing deposits                                                        |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Interest checking                                        |   | $                                    | 558,797   |   |   | $ | 1,332 |   |   |   | 0.97 | % |   | $ | 516,475 |   |   | $ | 1,397 |   |   |   | 1.10 | % |
|     Money market                                             |   |                                 | 392,243   |   |   |   | 1,294 |   |   |   | 1.34 | % |   |   | 235,150 |   |   |   | 830 |   |   |   | 1.43 | % |
|     Savings                                                  |   |                                 | 200,064   |   |   |   | 450 |   |   |   | 0.91 | % |   |   | 188,399 |   |   |   | 410 |   |   |   | 0.88 | % |
|     Time deposits:                                           |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         Less than $100,000               |   |                                 | 643,709   |   |   |   | 3,577 |   |   |   | 2.25 | % |   |   | 762,657 |   |   |   | 6,060 |   |   |   | 3.22 | % |
|         $100,000 and more                |   |                                 | 312,297   |   |   |   | 1,956 |   |   |   | 2.54 | % |   |   | 324,093 |   |   |   | 2,954 |   |   |   | 3.70 | % |
| Total interest-bearing deposits                                                  |   |                                 | 2,107,110 |   |   |   | 8,609 |   |   |   | 1.66 | % |   |   | 2,026,774 |   |   |   | 11,651 |   |   |   | 2.33 | % |
|                                                                             |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal funds purchased and securities sold under agreements to repurchase       |   |                                 | 861       |   |   |   | 6 |   |   |   | 2.79 | % |   |   | 344 |   |   |   | 3 |   |   |   | 3.49 | % |
| Federal Home Loan Bank advances and other borrowings                             |   |                                 | 127,167   |   |   |   | 1,110 |   |   |   | 3.49 | % |   |   | 184,321 |   |   |   | 1,569 |   |   |   | 3.40 | % |
| Subordinated debt                                                                |   |                                 | 32,991    |   |   |   | 257 |   |   |   | 3.12 | % |   |   | 32,991 |   |   |   | 357 |   |   |   | 4.33 | % |
|                                                                             |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                                 | 161,019   |   |   |   | 1,373 |   |   |   | 3.41 | % |   |   | 217,656 |   |   |   | 1,929 |   |   |   | 3.54 | % |
|                                                                             |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Total interest-bearing liabilities                       |   |                                 | 2,268,129 |   |   |   | 9,982 |   |   |   | 1.78 | % |   |   | 2,244,430 |   |   |   | 13,580 |   |   |   | 2.45 | % |
|                                                                             |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Total noninterest-bearing liabilities                    |   |                                 | 308,594   |   |   |   |   |   |   |   |   |   |   |   | 313,799 |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities                                                                |   |                                 | 2,576,723 |   |   |   |   |   |   |   |   |   |   |   | 2,558,229 |   |   |   |   |   |   |   |   |   |
| Stockholders' equity                                                             |   |                                 | 422,260   |   |   |   |   |   |   |   |   |   |   |   | 432,762 |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders' equity                                       |   | $                                    | 2,998,983 |   |   |   |   |   |   |   |   |   |   | $ | 2,990,991 |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income (tax equivalent)                                             |   |                                 |      |   |   | $ | 23,114 |   |   |   |   |   |   |   |   |   |   | $ | 22,961 |   |   |   |   |   |
|     Average interest rate spread                             |   |                                 |      |   |   |   |   |   |   |   | 3.26 | % |   |   |   |   |   |   |   |   |   |   | 3.11 | % |
|     Interest expense as percentage of average earning assets |   |                                 |      |   |   |   |   |   |   |   | 1.52 | % |   |   |   |   |   |   |   |   |   |   | 2.07 | % |
|     Net interest margin                                      |   |                                 |      |   |   |   |   |   |   |   | 3.52 | % |   |   |   |   |   |   |   |   |   |   | 3.49 | % |

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|                                                                          |   | March 31,   |   |   | December 31, |   |   | March 31,   |   |
|-------------------------------------------------------------------------------|--------|-------------|--------|--------|--------------|--------|--------|-------------|--------|
|                                                                          |   | 2010        |   |   | 2009         |   |   | 2009        |   |
|                                                                          |   | (unaudited) |   |   |         |   |   | (unaudited) |   |
|                                                                          |   |        |   |   |         |   |   |        |   |
|  Non-accrual loans                                                       |   | $           | 57,343 |   |         | $      | 56,624 |        |   | $ | 66,432 |   |
|  Troubled debt restructurings                                            |   |        | 1,810  |   |         |   | 2,678  |        |   |   | 195 |   |
|  Foreclosed assets                                                       |   |        | 2,267  |   |         |   | 4,505  |        |   |   | 4,207 |   |
|  Loans held for sale                                                     |   |        | 608    |   |         |   | 936    |        |   |   | 279 |   |
|  Total non-performing assets                                             |   | $           | 62,028 |   |         | $      | 64,743 |        |   | $ | 71,113 |   |
|  Nonperforming assets to total assets                                    |   |        | 2.07   | %      |         |   | 2.18   | %           |   |   | 2.34 | % |
|  Nonperforming assets to loans and foreclosed property                   |   |        | 2.87   | %      |         |   | 3.03   | %           |   |   | 3.14 | % |
|  Allowance for loan losses as a percentage of loans receivable           |   |        | 1.88   | %      |         |   | 1.84   | %           |   |   | 1.56 | % |
|  Allowance for loan losses as a percentage of nonperforming assets       |   |        | 65.53  | %      |         |   | 62.05  | %           |   |   | 49.67 | % |
|  Annualized net charge-offs as a percentage of average loans receiveable |   |        | 1.13   | %      |         |   | 1.24   | %           |   |   | 0.51 | % |

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|                                                             |   | Corporation |      |   | Bank   |   |
|------------------------------------------------------------------|--------|-------------|-----------|--------|--------|--------|
| Tier 1 capital                                                   |   | $           | 330,218   |   |   | $      | 282,283 |   |
| Tier 2 capital                                                   |   |        | 30,504    |   |   |   | 30,177 |   |
| Total risk-based capital                                         |   |        | 360,722   |   |   |   | 312,460 |   |
| Total risk-weighted assets                                       |   |        | 2,415,414 |   |   |   | 2,398,479 |   |
| Average adjusted total assets                                    |   |        | 2,878,372 |   |   |   | 2,862,323 |   |
| Capital ratios:                                                  |   |        |      |   |   |   |   |   |
| Tier 1 risk-based capital ratio                                  |   |        | 13.67     | %      |   |   | 11.77 | % |
| Total risk-based capital ratio                                   |   |        | 14.93     | %      |   |   | 13.03 | % |
| Leverage ratio (Tier 1 capital to average adjusted total assets) |   |        | 11.47     | %      |   |   | 9.86 | % |
| Equity to assets ratio                                           |   |        | 14.08     | %      |   |   | 13.69 | % |
| Tangible common equity to assets ratio                           |   |        | 9.40      | %      |   |   | 9.99 | % |

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ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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ITEM 4 – CONTROLS AND PROCEDURES

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| ITEM 1. | LEGAL PROCEEDINGS. |
|---------|--------------------|

RISK FACTORS.

| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. |
|---------|--------------------------------------------------------------|

| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES. |
|---------|----------------------------------|

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

| ITEM 5. | OTHER INFORMATION. |
|---------|--------------------|

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EXHIBITS:

|   | Exhibit No. 2.1 | Agreement and Plan of Reorganization, dated as of July 26, 2007, between Virginia Financial Group, Inc. and FNB Corporation.  (incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K filed July 30, 2007. |
|--------|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Exhibit No. 3.1 | Articles of Incorporation StellarOne Corporation, as amended. (incorporated by reference to Exhibit 3.1 to Form 8-K filed on May 10, 2010) |
|--------|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------|

|   | Exhibit No. 3.2 | Bylaws of StellarOne Corporation, as amended and restated February 28, 2008. (incorporated by reference to Exhibit 3.2 to Current Report on Form 8-K filed on February 28, 2008) |
|--------|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Exhibit No. 4.1 | Warrant to purchase up to 302,623 shares of Common Stock (incorporated by reference to Exhibit 4.1 to Form 8K filed on December 23, 2008) |
|--------|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------|

|   | Exhibit No. 31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended. |
|--------|------------------|-------------------------------------------------------------------------------------------------------------------------|

|   | Exhibit No. 31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended. |
|--------|------------------|-------------------------------------------------------------------------------------------------------------------------|

|   | Exhibit No. 32 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|--------|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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