----

----

| 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 |
|                           |   |   |
| ITEM 1                         | Financial Statements (Unaudited): |   |
|                           | Consolidated Balance Sheets | 1 |
|                           | Consolidated Statements of Income | 2 |
|                           | Consolidated Statements of Changes in Stockholders' Equity & Comprehensive Income | 3 |
|                           | Consolidated Statements of Cash Flows | 4 |
|                           | Notes to Unaudited Consolidated Financial Statements | 5 |
|                           |   |   |
| ITEM 2                         | Management's Discussion and Analysis of Financial Condition and Results of Operations | 23 |
|                           |   |   |
| ITEM 3                         | Quantitative and Qualitative Disclosures About Market Risk | 33 |
|                           |   |   |
| ITEM 4                         | Controls and Procedures | 33 |
|                           |   |   |
| PART II - OTHER INFORMATION    |
|                           |   |   |
| ITEM 1                         | Legal Proceedings | 34 |
|                           |   |   |
| ITEM 1A                        | Risk Factors | 34 |
|                           |   |   |
| ITEM 2                         | Unregistered Sales of Equity Securities and Use of Proceeds | 34 |
|                           |   |   |
| ITEM 3                         | Defaults Upon Senior Securities | 34 |
|                           |   |   |
| ITEM 4                         | (Removed and Reserved) | 34 |
|                           |   |   |
| ITEM 5                         | Other Information | 34 |
|                           |   |   |
| ITEM 6                         | Exhibits | 35 |

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Table of Contents

ITEM 1. Financial statements (Unaudited)

| STELLARONE CORPORATION AND SUBSIDIARIES                                                                                                                               |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| CONSOLIDATED BALANCE SHEETS                                                                                                                                           |
| (In thousands)                                                                                                                                                        |
|                                                                                                                                                                  |   | March 31, |   |   | December 31, |   |
|                                                                                                                                                                  |   | 2011 |   |   | 2010 |   |
| Assets                                                                                                                                                                |   |   |   |   |   |   |
|   Cash and due from banks                                                                                                                                   |   | $ | 40,023 |   |   | $ | 35,144 |   |
|   Federal funds sold                                                                                                                                        |   |   | 32,943 |   |   |   | 55,643 |   |
|   Interest-bearing deposits in banks                                                                                                                        |   |   | 105,456 |   |   |   | 49,099 |   |
|     Cash and cash equivalents                                                                                                                     |   |   | 178,422 |   |   |   | 139,886 |   |
|   Investment securities available for sale, at fair value                                                                                                   |   |   | 380,078 |   |   |   | 381,231 |   |
|   Mortgage loans held for sale                                                                                                                              |   |   | 12,047 |   |   |   | 51,722 |   |
|   Loans receivable, net of allowance for loan losses, 2011, $37,519; 2010, $37,649                                                                          |   |   | 2,027,809 |   |   |   | 2,061,835 |   |
|   Premises and equipment, net                                                                                                                               |   |   | 77,893 |   |   |   | 79,033 |   |
|   Accrued interest receivable                                                                                                                               |   |   | 9,147 |   |   |   | 9,317 |   |
|   Deferred income tax asset                                                                                                                                 |   |   | 2,413 |   |   |   | 1,909 |   |
|   Core deposit intangibles, net                                                                                                                             |   |   | 6,249 |   |   |   | 6,662 |   |
|   Goodwill                                                                                                                                                  |   |   | 113,652 |   |   |   | 113,652 |   |
|   Bank owned life insurance                                                                                                                                 |   |   | 31,435 |   |   |   | 31,116 |   |
|   Foreclosed assets                                                                                                                                         |   |   | 9,036 |   |   |   | 10,894 |   |
|   Other assets                                                                                                                                              |   |   | 50,215 |   |   |   | 53,185 |   |
|     Total assets                                                                                                                                  |   | $ | 2,898,396 |   |   | $ | 2,940,442 |   |
|                                                                                                                                                                  |   |   |   |   |   |   |   |   |
| Liabilities                                                                                                                                                           |   |   |   |   |   |   |   |   |
|   Deposits:                                                                                                                                                 |   |   |   |   |   |   |   |   |
|   Noninterest-bearing                                                                                                                                       |   | $ | 307,847 |   |   | $ | 322,924 |   |
|   Interest-bearing                                                                                                                                          |   |   | 2,056,717 |   |   |   | 2,063,178 |   |
|     Total deposits                                                                                                                                |   |   | 2,364,564 |   |   |   | 2,386,102 |   |
|   Short-term borrowings                                                                                                                                     |   |   | 1,156 |   |   |   | 987 |   |
|   Federal Home Loan Bank advances                                                                                                                           |   |   | 60,000 |   |   |   | 85,000 |   |
|   Subordinated debt                                                                                                                                         |   |   | 32,991 |   |   |   | 32,991 |   |
|   Accrued interest payable                                                                                                                                  |   |   | 2,158 |   |   |   | 2,278 |   |
|   Other liabilities                                                                                                                                         |   |   | 8,658 |   |   |   | 6,647 |   |
| Total liabilities                                                                                                                                                     |   |   | 2,469,527 |   |   |   | 2,514,005 |   |
|                                                                                                                                                                  |   |   |   |   |   |   |   |   |
| 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;                                                           |   |   | 28,858 |   |   |   | 28,763 |   |
|   Common stock; $1 par value; 35,000,000 shares authorized; 2011: 22,775,733 shares issued and outstanding; 2010: 22,748,062 shares issued and outstanding. |   |   | 22,776 |   |   |   | 22,748 |   |
|   Additional paid-in capital                                                                                                                                |   |   | 270,396 |   |   |   | 270,047 |   |
|   Retained earnings                                                                                                                                         |   |   | 102,677 |   |   |   | 101,188 |   |
|   Accumulated other comprehensive income                                                                                                                    |   |   | 4,162 |   |   |   | 3,691 |   |
|     Total stockholders' equity                                                                                                                    |   |   | 428,869 |   |   |   | 426,437 |   |
|     Total liabilities and stockholders' equity                                                                                                    |   | $ | 2,898,396 |   |   | $ | 2,940,442 |   |

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Table of Contents

| STELLARONE CORPORATION AND SUBSIDIARIES                                                  |
|------------------------------------------------------------------------------------------|
| CONSOLIDATED INCOME STATEMENTS                                                           |
| (In thousands, except per share data)                                                    |
|                                                                                     |   | Three Months Ended March 31, |   |
|                                                                                     |   | 2011 |   |   | 2010 |   |
| Interest and Dividend Income                                                             |   |   |   |   |   |   |
|   Loans, including fees                                                        |   | $ | 27,264 |   |   | $ | 29,086 |   |
|   Federal funds sold and deposits in other banks                               |   |   | 68 |   |   |   | 61 |   |
|   Investment securities:                                                       |   |   |   |   |   |   |   |   |
|     Taxable                                                          |   |   | 1,721 |   |   |   | 2,258 |   |
|     Tax-exempt                                                       |   |   | 1,253 |   |   |   | 1,047 |   |
|     Dividends                                                        |   |   | - |   |   |   | 29 |   |
|       Total interest income                                |   |   | 30,306 |   |   |   | 32,481 |   |
|                                                                                     |   |   |   |   |   |   |   |   |
| Interest Expense                                                                         |   |   |   |   |   |   |   |   |
|   Deposits                                                                     |   |   | 5,533 |   |   |   | 8,609 |   |
|   Federal funds repurchased and securities sold under agreements to repurchase |   |   | 8 |   |   |   | 6 |   |
|   Federal Home Loan Bank advances                                              |   |   | 640 |   |   |   | 1,110 |   |
|   Subordinated debt                                                            |   |   | 262 |   |   |   | 257 |   |
|       Total interest expense                               |   |   | 6,443 |   |   |   | 9,982 |   |
|   Net interest income                                                          |   |   | 23,863 |   |   |   | 22,499 |   |
|   Provision for loan losses                                                    |   |   | 4,500 |   |   |   | 6,700 |   |
|       Net interest income after provision for loan losses  |   |   | 19,363 |   |   |   | 15,799 |   |
|                                                                                     |   |   |   |   |   |   |   |   |
| Noninterest Income                                                                       |   |   |   |   |   |   |   |   |
|   Retail banking fees                                                          |   |   | 3,556 |   |   |   | 3,920 |   |
|   Commissions and fees from fiduciary activities                               |   |   | 904 |   |   |   | 834 |   |
|   Brokerage fee income                                                         |   |   | 435 |   |   |   | 359 |   |
|   Mortgage banking-related fees                                                |   |   | 2,065 |   |   |   | 1,994 |   |
|   Losses on mortgage indemnifications and repurchases                          |   |   | (265 | ) |   |   | (133 | ) |
|   Gain on sale of financial center                                             |   |   | - |   |   |   | 748 |   |
|   Gains on sale of premises and equipment                                      |   |   | - |   |   |   | 27 |   |
|   Gains on sale of securities available for sale                               |   |   | 10 |   |   |   | 302 |   |
|   Losses on sale / impairment of foreclosed assets                             |   |   | (128 | ) |   |   | (231 | ) |
|   Income from bank owned life insurance                                        |   |   | 319 |   |   |   | 324 |   |
|   Other operating income                                                       |   |   | 774 |   |   |   | 673 |   |
|       Total noninterest income                             |   |   | 7,670 |   |   |   | 8,814 |   |
|                                                                                     |   |   |   |   |   |   |   |   |
| Non-interest Expense                                                                     |   |   |   |   |   |   |   |   |
|   Compensation and employee benefits                                           |   |   | 12,355 |   |   |   | 11,310 |   |
|   Net occupancy                                                                |   |   | 2,073 |   |   |   | 2,179 |   |
|   Supplies and equipment                                                       |   |   | 2,207 |   |   |   | 2,178 |   |
|   Amortization of intangible assets                                            |   |   | 413 |   |   |   | 413 |   |
|   Marketing                                                                    |   |   | 327 |   |   |   | 153 |   |
|   State franchise taxes                                                        |   |   | 598 |   |   |   | 554 |   |
|   FDIC insurance                                                               |   |   | 877 |   |   |   | 1,109 |   |
|   Data processing                                                              |   |   | 636 |   |   |   | 543 |   |
|   Professional fees                                                            |   |   | 633 |   |   |   | 675 |   |
|   Telecommunications                                                           |   |   | 376 |   |   |   | 425 |   |
|   Other operating expenses                                                     |   |   | 3,041 |   |   |   | 3,008 |   |
|       Total noninterest expense                            |   |   | 23,536 |   |   |   | 22,547 |   |
|                                                                                     |   |   |   |   |   |   |   |   |
|       Income before income taxes                           |   |   | 3,497 |   |   |   | 2,066 |   |
|   Income tax expense                                                           |   |   | 626 |   |   |   | 212 |   |
|       Net income                                           |   | $ | 2,871 |   |   | $ | 1,854 |   |
|   Dividends and accretion on preferred stock                                   |   |   | (465 | ) |   |   | (458 | ) |
|       Net income available to common shareholders          |   | $ | 2,406 |   |   | $ | 1,396 |   |
|                                                                                     |   |   |   |   |   |   |   |   |
| Basic net income per common share available to common shareholders                       |   | $ | 0.11 |   |   | $ | 0.06 |   |
|                                                                                     |   |   |   |   |   |   |   |   |
| Diluted net income per common share available to common shareholders                     |   | $ | 0.11 |   |   | $ | 0.06 |   |

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Table of Contents

| STELLARONE CORPORATION AND SUBSIDIARIES                                                                     |
|-------------------------------------------------------------------------------------------------------------|
| CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME                         |
| (In thousands)                                                                                              |
|                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   | Accumulated |   |   |   |   |   |   |   |
|                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   | Other |   |   |   |   |   |   |   |
|                                                                                                        |   |   |   |   |   |   |   | Additional |   |   |   |   |   | Compre- |   |   | Compre- |   |   |   |   |
|                                                                                                        |   | Preferred |   |   | Common |   |   | Paid-In |   |   | Retained |   |   | hensive |   |   | hensive |   |   |   |   |
|                                                                                                        |   | Stock |   |   | Stock |   |   | Capital |   |   | Earnings |   |   | Income |   |   | Income |   |   | Total |   |
| 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 income                                                                                  |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   | $ | 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 |   |   |   | 145 |   |   |   | - |   |   |   | - |   |   |   |   |   |   |   | 152 |   |
| Exercise of stock options (16,306 shares)                                                                   |   |   | - |   |   |   | 17 |   |   |   | 131 |   |   |   | - |   |   |   | - |   |   |   |   |   |   |   | 148 |   |
| Balance, March 31, 2010                                                                                     |   | $ | 28,486 |   |   | $ | 22,685 |   |   | $ | 269,241 |   |   | $ | 97,431 |   |   | $ | 4,649 |   |   |   |   |   |   | $ | 422,492 |   |
|                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, January 1, 2011                                                                                    |   | $ | 28,763 |   |   | $ | 22,748 |   |   | $ | 270,047 |   |   | $ | 101,188 |   |   | $ | 3,691 |   |   |   |   |   |   | $ | 426,437 |   |
| Comprehensive income:                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Net income                                                                                      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 2,871 |   |   |   | - |   |   | $ | 2,871 |   |   |   | 2,871 |   |
|     Other comprehensive income, net of tax:                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Unrealized holding gains arising during the period (net of tax of $288) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 535 |   |   |   | - |   |
|       Reclassification adjustment (net of tax of $4)                          |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (6 | ) |   |   | - |   |
|       Change in post retirement liability (net of tax, $42)                   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (78 | ) |   |   | - |   |
|       Change in cash flow hedge (net of tax, $11)                             |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 20 |   |   |   | - |   |
|       Other comprehensive income                                              |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 471 |   |   |   | 471 |   |   |   | 471 |   |
| Total comprehensive income                                                                                  |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   | $ | 3,342 |   |   |   | - |   |
| Cash dividends paid or accrued:                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | - |   |
| Common ($0.04 per share)                                                                                    |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (917 | ) |   |   | - |   |   |   |   |   |   |   | (917 | ) |
| Preferred cumulative 5%                                                                                     |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (370 | ) |   |   | - |   |   |   |   |   |   |   | (370 | ) |
| Accretion on preferred stock discount                                                                       |   |   | 95 |   |   |   | - |   |   |   | - |   |   |   | (95 | ) |   |   | - |   |   |   |   |   |   |   | - |   |
| Stock-based compensation expense (5,831 shares)                                                             |   |   | - |   |   |   | 6 |   |   |   | 159 |   |   |   | - |   |   |   | - |   |   |   |   |   |   |   | 165 |   |
| Exercise of stock options (21,840 shares)                                                                   |   |   | - |   |   |   | 22 |   |   |   | 190 |   |   |   | - |   |   |   | - |   |   |   |   |   |   |   | 212 |   |
| Balance, March 31, 2011                                                                                     |   | $ | 28,858 |   |   | $ | 22,776 |   |   | $ | 270,396 |   |   | $ | 102,677 |   |   | $ | 4,162 |   |   |   |   |   |   | $ | 428,869 |   |

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Table of Contents

| STELLARONE CORPORATION AND SUBSIDIARIES                                                    |
|--------------------------------------------------------------------------------------------|
| CONSOLIDATED STATEMENTS OF CASH FLOWS                                                      |
| (In thousands)                                                                             |
|                                                                                       |   | Three Months Ended March 31, |   |
|                                                                                       |   | 2011 |   |   | 2010 |   |
| Cash Flows from Operating Activities                                                       |   |   |   |   |   |   |
| Net income                                                                                 |   | $ | 2,871 |   |   | $ | 1,854 |   |
| Adjustments to reconcile net income to net cash provided by operating activities:          |   |   |   |   |   |   |   |   |
| Depreciation                                                                               |   |   | 1,680 |   |   |   | 1,637 |   |
| Amortization of intangible assets                                                          |   |   | 413 |   |   |   | 413 |   |
| Provision for loan losses                                                                  |   |   | 4,500 |   |   |   | 6,700 |   |
| Deferred tax benefit                                                                       |   |   | (843 | ) |   |   | (329 | ) |
| Stock-based compensation expense                                                           |   |   | 165 |   |   |   | 152 |   |
| Losses / impairments on foreclosed assets                                                  |   |   | 128 |   |   |   | 231 |   |
| Gains on sale of premises and equipment                                                    |   |   | - |   |   |   | (27 | ) |
| Gain on sale of financial center                                                           |   |   | - |   |   |   | (748 | ) |
| Gains on sale of securities available for sale                                             |   |   | (10 | ) |   |   | (302 | ) |
| Mortgage banking-related fees                                                              |   |   | (2,065 | ) |   |   | (1,994 | ) |
| Proceeds from sale of mortgage loans                                                       |   |   | 121,217 |   |   |   | 121,047 |   |
| Origination of mortgage loans for sale                                                     |   |   | (79,477 | ) |   |   | (104,273 | ) |
| Amortization of securities premiums and accretion of discounts, net                        |   |   | 272 |   |   |   | 341 |   |
| Income on bank owned life insurance                                                        |   |   | (319 | ) |   |   | (324 | ) |
| Changes in assets and liabilities:                                                         |   |   |   |   |   |   |   |   |
| Decrease (increase) in accrued interest receivable                                         |   |   | 170 |   |   |   | (398 | ) |
| Decrease (increase) in other assets                                                        |   |   | 3,192 |   |   |   | (120 | ) |
| Decrease in accrued interest payable                                                       |   |   | (2,278 | ) |   |   | (379 | ) |
| Increase (decrease) in other liabilities                                                   |   |   | 4,169 |   |   |   | 60 |   |
| Net cash provided by operating activities                                                  |   | $ | 53,785 |   |   | $ | 23,541 |   |
|                                                                                       |   |   |   |   |   |   |   |   |
| Cash Flows from Investing Activities                                                       |   |   |   |   |   |   |   |   |
| Proceeds from maturities and principal payments of securities available for sale           |   | $ | 23,858 |   |   | $ | 17,431 |   |
| Proceeds from sales and calls of securities available for sale                             |   |   | 10,483 |   |   |   | 20,072 |   |
| Purchase of securities available for sale                                                  |   |   | (32,634 | ) |   |   | (37,323 | ) |
| Net decrease in loans                                                                      |   |   | 28,313 |   |   |   | 17,550 |   |
| Proceeds from sale of premises and equipment                                               |   |   | - |   |   |   | 19 |   |
| Purchase of premises and equipment                                                         |   |   | (561 | ) |   |   | (361 | ) |
| Proceeds from sale of foreclosed assets                                                    |   |   | 2,736 |   |   |   | 2,885 |   |
| Cash paid in sale of financial center, net                                                 |   |   | - |   |   |   | (13,349 | ) |
| Net cash provided by investing activities                                                  |   | $ | 32,195 |   |   | $ | 6,924 |   |
|                                                                                       |   |   |   |   |   |   |   |   |
| Cash Flows from Financing Activities                                                       |   |   |   |   |   |   |   |   |
| Net (decrease) increase in demand, money market and savings deposits                       |   | $ | (13,047 | ) |   | $ | 21,839 |   |
| Net decrease in certificates of deposit                                                    |   |   | (8,491 | ) |   |   | (33,856 | ) |
| Net increase in federal funds purchased and securities sold under agreements to repurchase |   |   | 169 |   |   |   | 169 |   |
| Principal payments on Federal Home Loan Bank advances                                      |   |   | (25,000 | ) |   |   | (5,000 | ) |
| Proceeds from exercise of stock options                                                    |   |   | 212 |   |   |   | 164 |   |
| Cash dividends paid                                                                        |   |   | (1,287 | ) |   |   | (1,287 | ) |
|  Net cash used by financing activities                                                |   | $ | (47,444 | ) |   | $ | (17,971 | ) |
|                                                                                       |   |   |   |   |   |   |   |   |
|   Increase in cash and cash equivalents                                          |   | $ | 38,536 |   |   | $ | 12,494 |   |
|                                                                                       |   |   |   |   |   |   |   |   |
| Cash and Cash Equivalents                                                                  |   |   |   |   |   |   |   |   |
| Beginning                                                                                  |   |   | 139,886 |   |   |   | 152,926 |   |
| Ending                                                                                     |   | $ | 178,422 |   |   | $ | 165,420 |   |
| Supplemental Schedule of Noncash Activities                                                |   |   |   |   |   |   |   |   |
| Foreclosed assets acquired in settlement of loans                                          |   | $ | 1,213 |   |   | $ | 868 |   |

----

Table of Contents

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

| 2.   | Participation in U.S. Treasury Capital Purchase Program |
|----------------|---------------------------------------------------------|

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Table of Contents

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

|                                |   | March 31, 2011 |    |   | December 31, 2010 |   |
|-------------------------------------|--------|----------------|---------|--------|-------------------|--------|
|                                |   |           |    |   | Gross             |   |   | Gross |   |   |   |   |   |   |   |   | Gross |   |   | Gross |   |   |   |   |
|                                |   | Amortized      |    |   | Unrealized        |   |   | Unrealized |   |   | Fair |   |   | Amortized |   |   | Unrealized |   |   | Unrealized |   |   | Fair |   |
|                                |   | Cost           |    |   | Gains             |   |   | Losses |   |   | Value |   |   | Cost |   |   | Gains |   |   | Losses |   |   | Value |   |
| Securities Available for Sale:      |   |           |    |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U. S. Government agencies           |   | $              | 101,324 |   |              | $      | 1,034 |   |   | $ | (50 | ) |   | $ | 102,308 |   |   | $ | 101,864 |   |   | $ | 1,389 |   |   | $ | - |   |   | $ | 103,253 |   |
| State and municipals                |   |           | 134,242 |   |              |   | 4,166 |   |   |   | (200 | ) |   |   | 138,208 |   |   |   | 134,465 |   |   |   | 3,248 |   |   |   | (890 | ) |   |   | 136,823 |   |
| Corporate bonds                     |   |           | 6,518   |   |              |   | 340 |   |   |   | - |   |   |   | 6,858 |   |   |   | 6,527 |   |   |   | 377 |   |   |   | - |   |   |   | 6,904 |   |
| Collateralized mortgage obligations |   |           | 8,625   |   |              |   | 82 |   |   |   | (17 | ) |   |   | 8,690 |   |   |   | 9,294 |   |   |   | 203 |   |   |   | - |   |   |   | 9,497 |   |
| Agency mortgage backed securities   |   |           | 120,682 |   |              |   | 3,398 |   |   |   | (66 | ) |   |   | 124,014 |   |   |   | 119,595 |   |   |   | 3,587 |   |   |   | (43 | ) |   |   | 123,139 |   |
| Other                               |   |           | -       |   |              |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,615 |   |   |   | - |   |   |   | - |   |   |   | 1,615 |   |
| Total                               |   | $              | 371,391 |   |              | $      | 9,020 |   |   | $ | (333 | ) |   | $ | 380,078 |   |   | $ | 373,360 |   |   | $ | 8,804 |   |   | $ | (933 | ) |   | $ | 381,231 |   |

|                      |   | Three Months Ended |   |
|---------------------------|--------|--------------------|--------|
|                      |   | March 31,          |   |
|                      |   | 2011               |   |   | 2010 |   |
|                      |   |               |   |   |   |   |
| Proceeds from sales/calls |   | $                  | 10,483 |   |   | $ | 20,072 |   |
| Gross realized gains      |   |               | 10     |   |   |   | 310 |   |
| Gross realized losses     |   |               | -      |   |   |   | (8 | ) |

|                                  |   | Less than 12 months |   |   | 12 months or more |   |   | Total      |   |
|---------------------------------------|--------|---------------------|--------|--------|-------------------|--------|--------|------------|--------|
|                                  |   |                |   |   | Unrealized        |   |   |       |   |   | Unrealized |   |   |   |   |   | Unrealized |   |
|                                  |   | Fair Value          |   |   | Losses            |   |   | Fair Value |   |   | Losses |   |   | Fair Value |   |   | Losses |   |
| Securities Available for Sale         |   |                |   |   |              |   |   |       |   |   |   |   |   |   |   |   |   |   |
| U. S. Government Agencies             |   | $                   | 24,948 |   |              | $      | (50    | )          |   | $ | - |   |   | $ | - |   |   | $ | 24,948 |   |   | $ | (50 | ) |
| Agency mortgage backed securities     |   |                | 11,630 |   |              |   | (66    | )          |   |   | - |   |   |   | - |   |   |   | 11,630 |   |   |   | (66 | ) |
| State and municipals                  |   |                | 15,003 |   |              |   | (200   | )          |   |   | - |   |   |   | - |   |   |   | 15,003 |   |   |   | (200 | ) |
| Collateralized mortgage obligations   |   |                | 4,309  |   |              |   | (17    | )          |   |   | - |   |   |   | - |   |   |   | 4,309 |   |   |   | (17 | ) |
| Total temporarily impaired securities |   | $                   | 55,890 |   |              | $      | (333   | )          |   | $ | - |   |   | $ | - |   |   | $ | 55,890 |   |   | $ | (333 | ) |

|                                   |   | Available for Sale |    |
|----------------------------------------|--------|--------------------|---------|
|                                   |   | Amortized Cost     |    |   | Fair Value |   |
| Due in one year or less                |   | $                  | 31,082  |   |   | $ | 31,317 |   |
| Due after one year through five years  |   |               | 111,851 |   |   |   | 114,543 |   |
| Due after five years through ten years |   |               | 66,291  |   |   |   | 68,346 |   |
| Due after ten years                    |   |               | 162,167 |   |   |   | 165,872 |   |
| Total                                  |   | $                  | 371,391 |   |   | $ | 380,078 |   |

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Table of Contents

| 4. | Derivative Financial Instruments |
|----|----------------------------------|

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

|                                                                  |   | March 31, 2011 |      |   | December 31, 2010 |   |
|-----------------------------------------------------------------------|--------|----------------|-----------|--------|-------------------|--------|
| Construction and land development                                     |   | $              | 233,514   |   |              | $      | 237,632 |   |
| Commercial real estate:                                               |   |           |      |   |              |   |   |   |
| Commercial real estate                                                |   |           | 733,672   |   |              |   | 751,670 |   |
| Farmland                                                              |   |           | 17,651    |   |              |   | 17,561 |   |
| Multifamily, nonresidential and junior liens                          |   |           | 103,956   |   |              |   | 103,641 |   |
| Total commercial real estate                                          |   |           | 855,279   |   |              |   | 872,872 |   |
| Consumer real estate:                                                 |   |           |      |   |              |   |   |   |
| Home equity lines                                                     |   |           | 266,025   |   |              |   | 264,961 |   |
| Secured by 1-4 family residential, secured by first deeds of trust    |   |           | 456,286   |   |              |   | 457,243 |   |
| Secured by 1-4 family residential, secured by second deeds of trust   |   |           | 44,478    |   |              |   | 46,108 |   |
| Total consumer real estate                                            |   |           | 766,789   |   |              |   | 768,312 |   |
| Commercial and industrial loans (except those secured by real estate) |   |           | 181,650   |   |              |   | 177,020 |   |
| Consumer and other:                                                   |   |           |      |   |              |   |   |   |
| Consumer installment loans                                            |   |           | 24,809    |   |              |   | 28,703 |   |
| Deposit overdrafts                                                    |   |           | 1,008     |   |              |   | 1,396 |   |
| All other loans                                                       |   |           | 1,684     |   |              |   | 12,961 |   |
| Total consumer and other                                              |   |           | 27,501    |   |              |   | 43,060 |   |
| Total loans                                                           |   |           | 2,064,733 |   |              |   | 2,098,896 |   |
| Deferred loan costs                                                   |   |           | 596       |   |              |   | 588 |   |
| Allowance for loan losses                                             |   |           | (37,519   | )      |              |   | (37,649 | ) |
| Net loans                                                             |   | $              | 2,027,810 |   |              | $      | 2,061,835 |   |

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Table of Contents

|                                                                  |   | Nonaccrual     |   |   | Loans Past Due Over 90 Days Still Accruing |   |
|-----------------------------------------------------------------------|--------|----------------|--------|--------|--------------------------------------------|--------|
|                                                                  |   | March 31, 2011 |   |   | December 31, 2010                          |   |   | March 31, 2011 |   |   | December 31, 2010 |   |
| Construction and land development                                     |   | $              | 16,368 |   |                                       | $      | 15,443 |   |   | $ | - |   |   | $ | 937 |   |
| Commercial real estate                                                |   |           | 9,216  |   |                                       |   | 8,060 |   |   |   | - |   |   |   | 531 |   |
| Consumer real estate                                                  |   |           | 14,761 |   |                                       |   | 15,154 |   |   |   | 99 |   |   |   | - |   |
| Commercial and industrial loans (except those secured by real estate) |   |           | 2,809  |   |                                       |   | 4,277 |   |   |   | - |   |   |   | 423 |   |
| Consumer and other                                                    |   |           | 20     |   |                                       |   | 26 |   |   |   | 49 |   |   |   | 19 |   |
| Total                                                                 |   | $              | 43,174 |   |                                       | $      | 42,960 |   |   | $ | 148 |   |   | $ | 1,910 |   |

|                                                                  |   | 30-59 Days Past Due |   |   | 60-89 Days Past Due |   |   | Greater than 90 Days Past Due |   |   | Non-accrual |   |   | Total Past Due |   |   | Current |   |   | Total Loans |   |
|-----------------------------------------------------------------------|--------|---------------------|--------|--------|---------------------|--------|--------|-------------------------------|--------|--------|-------------|--------|--------|----------------|--------|--------|---------|--------|--------|-------------|--------|
| March 31, 2011                                                        |   |                |   |   |                |   |   |                          |   |   |        |   |   |           |   |   |    |   |   |        |   |
| Construction and land development                                     |   | $                   | 7,436  |   |                | $      | 1,659  |                          |   | $      | -           |   |   | $              | 16,368 |   |    | $      | 25,463 |        |   | $ | 208,051 |   |   | $ | 233,514 |   |
| Commercial real estate                                                |   |                | 6,656  |   |                |   | 7,990  |                          |   |   | -           |   |   |           | 9,216  |   |    |   | 23,862 |        |   |   | 831,417 |   |   |   | 855,279 |   |
| Consumer real estate                                                  |   |                | 12,856 |   |                |   | 2,688  |                          |   |   | 99          |   |   |           | 14,761 |   |    |   | 30,404 |        |   |   | 736,385 |   |   |   | 766,789 |   |
| Commercial and industrial loans (except those secured by real estate) |   |                | 1,446  |   |                |   | 631    |                          |   |   | -           |   |   |           | 2,809  |   |    |   | 4,886  |        |   |   | 176,764 |   |   |   | 181,650 |   |
| Consumer and other                                                    |   |                | 368    |   |                |   | 42     |                          |   |   | 49          |   |   |           | 20     |   |    |   | 479    |        |   |   | 27,022 |   |   |   | 27,501 |   |
| Total loans                                                           |   | $                   | 28,762 |   |                | $      | 13,010 |                          |   | $      | 148         |   |   | $              | 43,174 |   |    | $      | 85,094 |        |   | $ | 1,979,639 |   |   | $ | 2,064,733 |   |
|                                                                  |   |                |   |   |                |   |   |                          |   |   |        |   |   |           |   |   |    |   |   |        |   |   |   |   |   |   |   |   |
| December 31, 2010                                                     |   |                |   |   |                |   |   |                          |   |   |        |   |   |           |   |   |    |   |   |        |   |   |   |   |   |   |   |   |
| Construction and land development                                     |   | $                   | 7,467  |   |                | $      | 1,064  |                          |   | $      | 937         |   |   | $              | 15,443 |   |    | $      | 24,911 |        |   | $ | 212,721 |   |   | $ | 237,632 |   |
| Commercial real estate                                                |   |                | 7,586  |   |                |   | 4,685  |                          |   |   | 531         |   |   |           | 8,060  |   |    |   | 20,862 |        |   |   | 852,010 |   |   |   | 872,872 |   |
| Consumer real estate                                                  |   |                | 22,586 |   |                |   | 6,805  |                          |   |   | -           |   |   |           | 15,154 |   |    |   | 44,545 |        |   |   | 723,767 |   |   |   | 768,312 |   |
| Commercial and industrial loans (except those secured by real estate) |   |                | 791    |   |                |   | 1,139  |                          |   |   | 423         |   |   |           | 4,277  |   |    |   | 6,630  |        |   |   | 170,390 |   |   |   | 177,020 |   |
| Consumer and other                                                    |   |                | 513    |   |                |   | 147    |                          |   |   | 19          |   |   |           | 26     |   |    |   | 705    |        |   |   | 42,355 |   |   |   | 43,060 |   |
| Total loans                                                           |   | $                   | 38,943 |   |                | $      | 13,840 |                          |   | $      | 1,910       |   |   | $              | 42,960 |   |    | $      | 97,653 |        |   | $ | 2,001,243 |   |   | $ | 2,098,896 |   |

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Table of Contents

|                       |   | Three Months Ended March 31, 2011  |   |
|----------------------------|--------|-----------------------------------------|--------|
|                       |   | Construction and Land Development       |   |   | Commercial Real Estate |   |   | Consumer Real Estate |   |   | Commercial and Industrial (Except those Secured by Real Estate) |   |   | Consumer and Other |   |   | Total Loans |   |
| Balance, January 1, 2011   |   | $                                       | 11,037 |   |   | $ | 8,211 |   |   | $ | 10,864 |   |   | $ | 7,388 |   |   | $ | 149 |   |   | $ | 37,649 |   |
| Provisions for loan losses |   |                                    | 1,318  |   |   |   | 1,019 |   |   |   | 1,319 |   |   |   | 829 |   |   |   | 15 |   |   |   | 4,500 |   |
| Loans charged off          |   |                                    | (962   | ) |   |   | (1,353 | ) |   |   | (936 | ) |   |   | (1,622 | ) |   |   | (106 | ) |   |   | (4,979 | ) |
| Recoveries                 |   |                                    | 15     |   |   |   | 2 |   |   |   | 58 |   |   |   | 126 |   |   |   | 148 |   |   |   | 349 |   |
| Net charge-offs            |   |                                    | (947   | ) |   |   | (1,351 | ) |   |   | (878 | ) |   |   | (1,496 | ) |   |   | 42 |   |   |   | (4,630 | ) |
| Balance, March 31, 2011    |   | $                                       | 11,408 |   |   | $ | 7,879 |   |   | $ | 11,305 |   |   | $ | 6,721 |   |   | $ | 206 |   |   | $ | 37,519 |   |

|                       |   | Three Months Ended March 31, 2010  |   |
|----------------------------|--------|-----------------------------------------|--------|
|                       |   | Construction and Land Development       |   |   | Commercial Real Estate |   |   | Consumer Real Estate |   |   | Commercial and Industrial (Except those Secured by Real Estate) |   |   | Consumer and Other |   |   | Total Loans |   |
| Balance, January 1, 2010   |   | $                                       | 17,867 |   |   | $ | 4,210 |   |   | $ | 9,244 |   |   | $ | 7,655 |   |   | $ | 1,196 |   |   | $ | 40,172 |   |
| Provisions for loan losses |   |                                    | 2,819  |   |   |   | 995 |   |   |   | 1,596 |   |   |   | 1,191 |   |   |   | 99 |   |   |   | 6,700 |   |
| Loans charged off          |   |                                    | (3,241 | ) |   |   | (461 | ) |   |   | (2,109 | ) |   |   | (568 | ) |   |   | (330 | ) |   |   | (6,709 | ) |
| Recoveries                 |   |                                    | 22     |   |   |   | 6 |   |   |   | 66 |   |   |   | 107 |   |   |   | 280 |   |   |   | 481 |   |
| Net charge-offs            |   |                                    | (3,219 | ) |   |   | (455 | ) |   |   | (2,043 | ) |   |   | (461 | ) |   |   | (50 | ) |   |   | (6,228 | ) |
| Balance, March 31, 2010    |   | $                                       | 17,467 |   |   | $ | 4,750 |   |   | $ | 8,797 |   |   | $ | 8,385 |   |   | $ | 1,245 |   |   | $ | 40,644 |   |

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Table of Contents

|                                  |   | Construction and Land Development |    |   | Commercial Real Estate |   |    | Consumer Real Estate |   |   | Commercial and Industrial Loans (Except those Secured by Real Estate) |   |   | Consumer and Other |    |   | Total Loans |   |
|---------------------------------------|--------|-----------------------------------|---------|--------|------------------------|--------|---------|----------------------|--------|--------|-----------------------------------------------------------------------|--------|--------|--------------------|---------|--------|-------------|--------|
| March 31, 2011                        |   |                              |    |   |                   |   |    |                 |   |   |                                                                  |   |   |               |    |   |        |   |
| Allowance for loan losses:       |   |                              |    |   |                   |   |    |                 |   |   |                                                                  |   |   |               |    |   |        |   |
| Individually evaluated for impairment |   | $                                 | 2,418   |   |                   | $      | 731     |                 |   | $      | 319                                                                   |   |   | $                  | 1,399   |   |        | $      | - |   |   | $ | 4,867 |   |
| Collectively evaluated for impairment |   |                              | 8,990   |   |                   |   | 7,148   |                 |   |   | 10,986                                                                |   |   |               | 5,322   |   |        |   | 206 |   |   |   | 32,652 |   |
| Total ending allowance                |   | $                                 | 11,408  |   |                   | $      | 7,879   |                 |   | $      | 11,305                                                                |   |   | $                  | 6,721   |   |        | $      | 206 |   |   | $ | 37,519 |   |
|                                  |   |                              |    |   |                   |   |    |                 |   |   |                                                                  |   |   |               |    |   |        |   |   |   |   |   |   |   |
| Loans:                                |   |                              |    |   |                   |   |    |                 |   |   |                                                                  |   |   |               |    |   |        |   |   |   |   |   |   |   |
| Individually evaluated for impairment |   | $                                 | 12,983  |   |                   | $      | 9,291   |                 |   | $      | 3,881                                                                 |   |   | $                  | 4,421   |   |        | $      | - |   |   | $ | 30,576 |   |
| Collectively evaluated for impairment |   |                              | 220,531 |   |                   |   | 845,988 |                 |   |   | 762,908                                                               |   |   |               | 177,229 |   |        |   | 27,501 |   |   |   | 2,034,157 |   |
| Total loans                           |   | $                                 | 233,514 |   |                   | $      | 855,279 |                 |   | $      | 766,789                                                               |   |   | $                  | 181,650 |   |        | $      | 27,501 |   |   | $ | 2,064,733 |   |
|                                  |   |                              |    |   |                   |   |    |                 |   |   |                                                                  |   |   |               |    |   |        |   |   |   |   |   |   |   |
| December 31, 2010                     |   |                              |    |   |                   |   |    |                 |   |   |                                                                  |   |   |               |    |   |        |   |   |   |   |   |   |   |
| Allowance for loan losses:            |   |                              |    |   |                   |   |    |                 |   |   |                                                                  |   |   |               |    |   |        |   |   |   |   |   |   |   |
| Individually evaluated for impairment |   | $                                 | 1,607   |   |                   | $      | 886     |                 |   | $      | 364                                                                   |   |   | $                  | 2,667   |   |        | $      | - |   |   | $ | 5,524 |   |
| Collectively evaluated for impairment |   |                              | 9,430   |   |                   |   | 7,325   |                 |   |   | 10,500                                                                |   |   |               | 4,721   |   |        |   | 149 |   |   |   | 32,125 |   |
| Total ending allowance                |   | $                                 | 11,037  |   |                   | $      | 8,211   |                 |   | $      | 10,864                                                                |   |   | $                  | 7,388   |   |        | $      | 149 |   |   | $ | 37,649 |   |
|                                  |   |                              |    |   |                   |   |    |                 |   |   |                                                                  |   |   |               |    |   |        |   |   |   |   |   |   |   |
| Loans:                                |   |                              |    |   |                   |   |    |                 |   |   |                                                                  |   |   |               |    |   |        |   |   |   |   |   |   |   |
| Individually evaluated for impairment |   | $                                 | 13,538  |   |                   | $      | 10,209  |                 |   | $      | 4,403                                                                 |   |   | $                  | 5,703   |   |        | $      | - |   |   | $ | 33,853 |   |
| Collectively evaluated for impairment |   |                              | 224,094 |   |                   |   | 862,663 |                 |   |   | 763,909                                                               |   |   |               | 171,317 |   |        |   | 43,060 |   |   |   | 2,065,043 |   |
| Total loans                           |   | $                                 | 237,632 |   |                   | $      | 872,872 |                 |   | $      | 768,312                                                               |   |   | $                  | 177,020 |   |        | $      | 43,060 |   |   | $ | 2,098,896 |   |

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Table of Contents

|                                                                  |   | Interest income recognized |   |   | Cash-basis interest income recognized |   |
|-----------------------------------------------------------------------|--------|----------------------------|--------|--------|---------------------------------------|--------|
| March 31, 2011                                                        |   |                       |   |   |                                  |   |
| Construction and land development                                     |   | $                          | 35     |   |                                  | $      | 45 |   |
| Commercial real estate                                                |   |                       | 79     |   |                                  |   | 87 |   |
| Consumer real estate                                                  |   |                       | 49     |   |                                  |   | 48 |   |
| Commercial and industrial loans (except those secured by real estate) |   |                       | 53     |   |                                  |   | 38 |   |
| Consumer and other                                                    |   |                       | -      |   |                                  |   | - |   |
| Total                                                                 |   | $                          | 216    |   |                                  | $      | 218 |   |
|                                                                  |   |                       |   |   |                                  |   |   |   |
| March 31, 2010                                                        |   |                       |   |   |                                  |   |   |   |
| Construction and land development                                     |   | $                          | -      |   |                                  | $      | - |   |
| Commercial real estate                                                |   |                       | 5      |   |                                  |   | 21 |   |
| Consumer real estate                                                  |   |                       | 2      |   |                                  |   | 3 |   |
| Commercial and industrial loans (except those secured by real estate) |   |                       | -      |   |                                  |   | - |   |
| Consumer and other                                                    |   |                       | -      |   |                                  |   | - |   |
| Total                                                                 |   | $                          | 7      |   |                                  | $      | 24 |   |

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Table of Contents

|                                                                  |   | Recorded investment |   |   | Unpaid contractual principal balance |   |   | Allocated allowance |   |   | Average recorded investment |   |
|-----------------------------------------------------------------------|--------|---------------------|--------|--------|--------------------------------------|--------|--------|---------------------|--------|--------|-----------------------------|--------|
| March 31, 2011                                                        |   |                |   |   |                                 |   |   |                |   |   |                        |   |
| Loans without a specific valuation allowance:                         |   |                |   |   |                                 |   |   |                |   |   |                        |   |
| Construction and land development                                     |   | $                   | 4,907  |   |                                 | $      | 5,175  |                |   | $      | -                           |   |   | $ | 4,161 |   |
| Commercial real estate                                                |   |                | 4,365  |   |                                 |   | 5,002  |                |   |   | -                           |   |   |   | 5,763 |   |
| Consumer real estate                                                  |   |                | 3,353  |   |                                 |   | 4,024  |                |   |   | -                           |   |   |   | 3,277 |   |
| Commercial and industrial loans (except those secured by real estate) |   |                | -      |   |                                 |   | -      |                |   |   | -                           |   |   |   | - |   |
| Consumer and other                                                    |   |                | -      |   |                                 |   | -      |                |   |   | -                           |   |   |   | - |   |
| Loans with a specific valuation allowance:                            |   |                |   |   |                                 |   |   |                |   |   |                        |   |   |   |   |   |
| Construction and land development                                     |   |                | 8,077  |   |                                 |   | 9,289  |                |   |   | 2,418                       |   |   |   | 9,101 |   |
| Commercial real estate                                                |   |                | 4,926  |   |                                 |   | 4,930  |                |   |   | 731                         |   |   |   | 3,988 |   |
| Consumer real estate                                                  |   |                | 527    |   |                                 |   | 536    |                |   |   | 319                         |   |   |   | 865 |   |
| Commercial and industrial loans (except those secured by real estate) |   |                | 4,421  |   |                                 |   | 6,986  |                |   |   | 1,399                       |   |   |   | 5,062 |   |
| Consumer and other                                                    |   |                | -      |   |                                 |   | -      |                |   |   |                        |   |   |   | - |   |
| Total                                                                 |   | $                   | 30,576 |   |                                 | $      | 35,942 |                |   | $      | 4,867                       |   |   | $ | 32,217 |   |

|                                                                  |   | Recorded investment |   |   | Unpaid contractual principal balance |   |   | Allocated allowance |   |   | Average recorded investment |   |
|-----------------------------------------------------------------------|--------|---------------------|--------|--------|--------------------------------------|--------|--------|---------------------|--------|--------|-----------------------------|--------|
| December 31, 2010                                                     |   |                |   |   |                                 |   |   |                |   |   |                        |   |
| Loans without a specific valuation allowance:                         |   |                |   |   |                                 |   |   |                |   |   |                        |   |
| Construction and land development                                     |   | $                   | 3,414  |   |                                 | $      | 3,420  |                |   | $      | -                           |   |   | $ | 7,091 |   |
| Commercial real estate                                                |   |                | 7,160  |   |                                 |   | 7,185  |                |   |   | -                           |   |   |   | 6,341 |   |
| Consumer real estate                                                  |   |                | 3,200  |   |                                 |   | 3,855  |                |   |   | -                           |   |   |   | 1,459 |   |
| Commercial and industrial loans (except those secured by real estate) |   |                | -      |   |                                 |   | -      |                |   |   | -                           |   |   |   | 880 |   |
| Consumer and other                                                    |   |                | -      |   |                                 |   | -      |                |   |   | -                           |   |   |   | - |   |
| Loans with a specific valuation allowance:                            |   |                |   |   |                                 |   |   |                |   |   |                        |   |   |   |   |   |
| Construction and land development                                     |   |                | 10,124 |   |                                 |   | 11,574 |                |   |   | 1,607                       |   |   |   | 13,126 |   |
| Commercial real estate                                                |   |                | 3,049  |   |                                 |   | 4,041  |                |   |   | 886                         |   |   |   | 3,095 |   |
| Consumer real estate                                                  |   |                | 1,203  |   |                                 |   | 1,216  |                |   |   | 364                         |   |   |   | 2,814 |   |
| Commercial and industrial loans (except those secured by real estate) |   |                | 5,703  |   |                                 |   | 7,008  |                |   |   | 2,667                       |   |   |   | 7,158 |   |
| Consumer and other                                                    |   |                | -      |   |                                 |   | -      |                |   |   | -                           |   |   |   | - |   |
| Total                                                                 |   | $                   | 33,853 |   |                                 | $      | 38,299 |                |   | $      | 5,524                       |   |   | $ | 41,964 |   |

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Table of Contents

| ·   | Risk Grade 1 – Prime Risk. Loss potential is rated as none or extremely low.  Loans fully secured by deposit accounts at the Company’s subsidiary bank will also be rated as Risk Grade 1. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Risk Grade 2 – Excellent Risk. Loss potential is demonstrably low.  Loans have liquid financial statements or are secured by marketable securities or other liquid collateral. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Risk Grade 3 – Good Risk. Loss potential is low. Asset quality and liquidity are considered good. Overall leverage and liquidity measures are better than the industry in which the borrower operates and they are stable. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Risk Grade 4 – Average Risk.  Loss potential is low, but evidence of risk exists. Margins and cash flow generally equal or exceed industry norm and policy guidelines, but some inconsistency may be evident. Asset quality is average with liquidity comparable to industry norms. Leverage may be slightly higher than the industry, but is stable. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Risk Grade 5 – Marginal Risk. Loss potential is variable, but there is potential for deterioration. Asset quality is marginally acceptable. Leverage may fluctuate and is above normal for the industry. Cash flow is marginally adequate. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Risk Grade 6 – Special Mention. Loss potential moderate if corrective action not taken.  Evidence of declining revenues or margins, inadequate cash flow, and possibly high leverage or tightening liquidity. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Risk Grade 7 – Substandard. Distinct possibility of loss to the bank.  Repayment ability of borrower is weak and the loan may have exhibited excessive overdue status, extension, or renewals. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Risk Grade 8 – Doubtful. Loss potential is extremely high.  Ability of the borrower to service the debt is weak, constant overdue status, loan has been placed on non-accrual status and no definitive repayment schedule exists. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Risk Grade 9 – Loss. Loans are considered fully uncollectible and charged off. |
|--------------------|--------------------------------------------------------------------------------------|

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Table of Contents

|                                                                  |   | Risk Grade |   |
|-----------------------------------------------------------------------|--------|------------|--------|
|                                                                  |   |       | 1      |   |   |   | 2 |   |   |   | 3 |   |   |   | 4 |   |   |   | 5 |   |   |   | 6 |   |   |   | 7 |   |   |   | 8 |   |   |   | 9 |   |
| March 31, 2011                                                        |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Construction and land development                                     |   | $          | -      |   |   | $ | 271 |   |   | $ | 2,231 |   |   | $ | 69,365 |   |   | $ | 35,717 |   |   | $ | 20,554 |   |   | $ | 55,096 |   |   | $ | 4,867 |   |   | $ | - |   |
| Commercial real estate                                                |   |       | -      |   |   |   | 1,892 |   |   |   | 92,942 |   |   |   | 439,310 |   |   |   | 202,119 |   |   |   | 29,188 |   |   |   | 90,055 |   |   |   | 983 |   |   |   | - |   |
| Consumer real estate                                                  |   |       | -      |   |   |   | 667 |   |   |   | 12,555 |   |   |   | 113,518 |   |   |   | 67,091 |   |   |   | 5,675 |   |   |   | 34,131 |   |   |   | 2,014 |   |   |   | - |   |
| Commercial and industrial loans (except those secured by real estate) |   |       | 1,032  |   |   |   | 4,508 |   |   |   | 30,322 |   |   |   | 97,917 |   |   |   | 26,688 |   |   |   | 9,088 |   |   |   | 9,674 |   |   |   | 1,352 |   |   |   | - |   |
| Consumer and other                                                    |   |       | -      |   |   |   | - |   |   |   | 1 |   |   |   | 923 |   |   |   | 81 |   |   |   | - |   |   |   | 58 |   |   |   | - |   |   |   | - |   |
| Total                                                                 |   | $          | 1,032  |   |   | $ | 7,338 |   |   | $ | 138,051 |   |   | $ | 721,033 |   |   | $ | 331,696 |   |   | $ | 64,505 |   |   | $ | 189,014 |   |   | $ | 9,216 |   |   | $ | - |   |

| December 31, 2010                                                     |   |   |   |   |   |   |   |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |    |
|-----------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|---------|
| Construction and land development                                     |   | $      | -      |   |   | $      | 275    |   |   | $      | 2,481   |   |   | $      | 79,613  |   |   | $      | 31,468  |   |   | $      | 12,588 |   |   | $      | 59,301  |   |   | $ | 4,464 |   |   | $ | - |   |
| Commercial real estate                                                |   |   | -      |   |   |   | 1,957  |   |   |   | 102,520 |   |   |   | 451,984 |   |   |   | 178,279 |   |   |   | 55,178 |   |   |   | 82,232  |   |   |   | 624 |   |   |   | 98 |   |
| Consumer real estate                                                  |   |   | -      |   |   |   | 991    |   |   |   | 12,533  |   |   |   | 121,066 |   |   |   | 53,867  |   |   |   | 11,627 |   |   |   | 28,238  |   |   |   | 1,301 |   |   |   | - |   |
| Commercial and industrial loans (except those secured by real estate) |   |   | 1,190  |   |   |   | 1,901  |   |   |   | 26,915  |   |   |   | 105,294 |   |   |   | 20,622  |   |   |   | 8,342  |   |   |   | 9,662   |   |   |   | 3,094 |   |   |   | - |   |
| Consumer and other                                                    |   |   | -      |   |   |   | 873    |   |   |   | 3,404   |   |   |   | 6,406   |   |   |   | 2,278   |   |   |   | -      |   |   |   | -       |   |   |   | - |   |   |   | - |   |
| Total                                                                 |   | $      | 1,190  |   |   | $      | 5,997  |   |   | $      | 147,853 |   |   | $      | 764,363 |   |   | $      | 286,514 |   |   | $      | 87,735 |   |   | $      | 179,433 |   |   | $ | 9,483 |   |   | $ | 98 |   |

|          |   |  Consumer real estate |    |   | Consumer and other |   |
|---------------|--------|----------------------------|---------|--------|--------------------|--------|
|          |   | March 31, 2011             |    |   | December 31, 2010  |   |   | March 31, 2011 |   |   | December 31, 2010 |   |
| Performing    |   | $                          | 568,713 |   |               | $      | 577,388 |   |   | $ | 26,304 |   |   | $ | 30,073 |   |
| Nonperforming |   |                       | 7,811   |   |               |   | 8,743 |   |   |   | 19 |   |   |   | 26 |   |
| Total         |   | $                          | 576,524 |   |               | $      | 586,131 |   |   | $ | 26,323 |   |   | $ | 30,099 |   |

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Table of Contents

|                                                                            |   | March 31, |       |
|---------------------------------------------------------------------------------|--------|-----------|------------|
|                                                                            |   | 2011      |       |   | 2010 |   |
| Earnings per common share                                                       |   |      |       |   |   |   |
|   Net income                                                          |   | $         | 2,871      |   |   | $ | 1,854 |   |
|   Preferred stock dividends and accretion                             |   |      | (465       | ) |   |   | (458 | ) |
|     Net income available to common shareholders             |   |      | 2,406      |   |   |   | 1,396 |   |
|   Weighted average common shares issued and outstanding               |   |      | 22,764,099 |   |   |   | 22,674,490 |   |
|   Earnings per common share                                           |   | $         | 0.11       |   |   | $ | 0.06 |   |
|                                                                            |   |      |       |   |   |   |   |   |
| Diluted earnings per common share                                               |   |      |       |   |   |   |   |   |
|   Weighted average common shares issued and outstanding               |   |      | 22,764,099 |   |   |   | 22,674,490 |   |
|       Restricted stock                            |   |      | 71,662     |   |   |   | 43,942 |   |
|       Incentive stock options                     |   |      | 1,615      |   |   |   | 1,523 |   |
|       Stock options                               |   |      | 10,057     |   |   |   | 9,711 |   |
|   Total diluted weighted average common shares issued and outstanding |   |      | 22,847,433 |   |   |   | 22,729,666 |   |
|   Diluted earnings per common share                                   |   | $         | 0.11       |   |   | $ | 0.06 |   |

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Table of Contents

|                                                        |   | 2011   |    |   | 2010     |   |
|-------------------------------------------------------------|--------|--------|---------|--------|----------|--------|
|                                                        |   |   |    |   | Weighted |   |   |   |   |   | Weighted |   |
|                                                        |   | Number |    |   | Average  |   |   | Number |   |   | Average |   |
|                                                        |   | of     |    |   | Exercise |   |   | of |   |   | Exercise |   |
|                                                        |   | Shares |    |   | Price    |   |   | Shares |   |   | Price |   |
|                                                        |   |   |    |   |     |   |   |   |   |   |   |   |
|  Outstanding at January 1,                             |   |   | 498,174 |   |     | $      | 19.98 |   |   |   | 575,046 |   |   | $ | 18.93 |   |
|    Forfeited                                 |   |   | (9,841  | )      |     |   | 19.04 |   |   |   | (317 | ) |   |   | 23.33 |   |
|    Expired                                   |   |   | (7,304  | )      |     |   | 19.90 |   |   |   | - |   |   |   | - |   |
|    Exercised                                 |   |   | (21,840 | )      |     |   | 9.71 |   |   |   | (16,306 | ) |   |   | 9.73 |   |
|      Outstanding at March 31,      |   |   | 459,189 |   |     | $      | 20.50 |   |   |   | 558,423 |   |   | $ | 19.20 |   |
|                                                        |   |   |    |   |     |   |   |   |   |   |   |   |   |   |   |   |
|      Exercisable at March 31, 2011 |   |   | 400,059 |   |     |   |   |   |   |   | 462,391 |   |   |   |   |   |

| Nonvested Shares             |   | Number of Shares |    |   | Weighted Average Grant-Date Fair Value |   |   | Total Intrinsic Value |   |
|------------------------------|--------|------------------|---------|--------|--------------------------------------------------|--------|--------|-----------------------|--------|
|                         |   |             |    |   |                                             |   |   | (in thousands)        |   |
|                         |   |             |    |   |                                             |   |   |                  |   |
| Nonvested at January 1, 2011 |   |             | 152,091 |   |                                             | $      | 12.21  |                  |   | $ | 2,211 |   |
| Granted                      |   |             | 54,152  |   |                                             |   | 14.23  |                  |   |   |   |   |
| Vested and exercised         |   |             | (5,832  | )      |                                             |   | 13.01  |                  |   | $ | 82 |   |
| Forfeited                    |   |             | (7,951  | )      |                                             |   | 12.57  |                  |   |   |   |   |
| Nonvested at March 31, 2011  |   |             | 192,460 |   |                                             | $      | 12.74  |                  |   | $ | 2,723 |   |

|                                        |   | Stock Options |   |   | Nonvested Restricted Stock |   |   | Total  |   |
|---------------------------------------------|--------|---------------|--------|--------|----------------------------|--------|--------|--------|--------|
|                                        |   |          |   |   |                       |   |   |   |   |
|  For the remaining nine months of 2011 |   | $             | 40     |   |                       | $      | 451    |   |   | $ | 491 |   |
|  For year ended December 31, 2012      |   |          | 54     |   |                       |   | 555    |   |   |   | 609 |   |
|  For year ended December 31, 2013      |   |          | 19     |   |                       |   | 496    |   |   |   | 515 |   |
|  For year ended December 31, 2014      |   |          | 1      |   |                       |   | 239    |   |   |   | 240 |   |
|  For year ended December 31, 2015      |   |          | -      |   |                       |   | 62     |   |   |   | 62 |   |
|  For year ended December 31, 2016      |   |          | -      |   |                       |   | 7      |   |   |   | 7 |   |
|       Total   |   | $             | 114    |   |                       | $      | 1,810  |   |   | $ | 1,924 |   |

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Table of Contents

----

Table of Contents

|                                                    |   |   |    |   | Fair Value Measurements at |   |
|---------------------------------------------------------|--------|--------|---------|--------|----------------------------|--------|
|                                                    |   |   |    |   | March 31, 2011             |   |
|                                                    |   |   |    |   | Using                      |   |
|                                                    |   |   |    |   | Level 1                    |   |   | Level 2 |   |   | Level 3 |   |
|                                                    |   | Total  |    |   | (Quoted Prices)            |   |   | (Significant Other Observable Inputs) |   |   | (Significant Unobservable Inputs) |   |
| Investment securities available-for-sale                |   |   |    |   |                       |   |   |   |   |   |   |   |
| U. S. Government agencies                               |   | $      | 102,308 |   |                       | $      | - |   |   | $ | 102,308 |   |   | $ | - |   |
| State and municipals                                    |   |   | 138,208 |   |                       |   | - |   |   |   | 138,208 |   |   |   | - |   |
| Corporate bonds                                         |   |   | 6,858   |   |                       |   | - |   |   |   | 6,858 |   |   |   | - |   |
| Collateralized mortgage obligations                     |   |   | 8,690   |   |                       |   | - |   |   |   | 8,690 |   |   |   | - |   |
| Mortgage backed securities                              |   |   | 124,014 |   |                       |   | - |   |   |   | 124,014 |   |   |   | - |   |
| Other assets                                            |   |   | 2,752   |   |                       |   | 2,752 |   |   |   | - |   |   |   | - |   |
| Cash flow hedge                                         |   |   | 128     |   |                       |   | - |   |   |   | 128 |   |   |   | - |   |
|     Total assets at fair value      |   | $      | 382,958 |   |                       | $      | 2,752 |   |   | $ | 380,206 |   |   | $ | - |   |
|                                                    |   |   |    |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Other liabilities 1                                     |   | $      | 2,752   |   |                       | $      | 2,752 |   |   | $ | - |   |   | $ | - |   |
|     Total liabilities at fair value |   | $      | 2,752   |   |                       | $      | 2,752 |   |   | $ | - |   |   | $ | - |   |

|                                                    |   |   |    |   | Fair Value Measurements at |   |
|---------------------------------------------------------|--------|--------|---------|--------|----------------------------|--------|
|                                                    |   |   |    |   | December 31, 2010          |   |
|                                                    |   |   |    |   | Using                      |   |
|                                                    |   |   |    |   | Level 1                    |   |   | Level 2 |   |   | Level 3 |   |
|                                                    |   | Total  |    |   | (Quoted Prices)            |   |   | (Significant Other Observable Inputs) |   |   | (Significant Unobservable Inputs) |   |
| Investment securities available-for-sale                |   |   |    |   |                       |   |   |   |   |   |   |   |
| U. S. Government agencies                               |   | $      | 103,253 |   |                       | $      | - |   |   | $ | 103,253 |   |   | $ | - |   |
| State and municipals                                    |   |   | 136,823 |   |                       |   | - |   |   |   | 136,823 |   |   |   | - |   |
| Corporate bonds                                         |   |   | 6,904   |   |                       |   | - |   |   |   | 6,904 |   |   |   | - |   |
| Collateralized mortgage obligations                     |   |   | 9,497   |   |                       |   | - |   |   |   | 9,497 |   |   |   | - |   |
| Mortgage backed securities                              |   |   | 123,139 |   |                       |   | - |   |   |   | 123,139 |   |   |   | - |   |
| Other                                                   |   |   | 4,335   |   |                       |   | 4,335 |   |   |   | - |   |   |   | - |   |
| Cash flow hedge                                         |   |   | 98      |   |                       |   | - |   |   |   | 98 |   |   |   | - |   |
|     Total assets at fair value      |   | $      | 384,049 |   |                       | $      | 4,335 |   |   | $ | 379,714 |   |   | $ | - |   |
|                                                    |   |   |    |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Other liabilities 1                                     |   |   | 2,720   |   |                       |   | 2,720 |   |   |   | - |   |   |   | - |   |
|     Total liabilities at fair value |   | $      | 2,720   |   |                       | $      | 2,720 |   |   | $ | - |   |   | $ | - |   |

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Table of Contents

|                                                     |   |   |   |   | Fair Value Measurements at |   |
|----------------------------------------------------------|--------|--------|--------|--------|----------------------------|--------|
|                                                     |   |   |   |   | March 31, 2011             |   |
|                                                     |   |   |   |   | Using                      |   |
|                                                     |   | Total  |   |   | Level 1                    |   |   | Level 2 |   |   | Level 3 |   |
|                                                     |   | Total  |   |   | (Quoted Prices)            |   |   | (Significant Other Observable Inputs) |   |   | (Significant Unobservable Inputs) |   |
|   Loans - impaired loans                       |   | $      | 61,611 |   |                       | $      | - |   |   | $ | 13,143 |   |   | $ | 48,468 |   |
|   Loans held for sale - mortgage               |   |   | 12,047 |   |                       |   | - |   |   |   | 12,047 |   |   |   | - |   |
|   Loans held for sale - other assets           |   |   | 301    |   |                       |   | - |   |   |   | - |   |   |   | 301 |   |
|   Foreclosed assets                            |   |   | 9,036  |   |                       |   | - |   |   |   | - |   |   |   | 9,036 |   |
|      Total assets at fair value |   | $      | 82,995 |   |                       | $      | - |   |   | $ | 25,190 |   |   | $ | 57,805 |   |

|                                                     |   |   |    |   | Fair Value Measurements at |   |
|----------------------------------------------------------|--------|--------|---------|--------|----------------------------|--------|
|                                                     |   |   |    |   | December 31, 2010          |   |
|                                                     |   |   |    |   | Using                      |   |
|                                                     |   | Total  |    |   | Level 1                    |   |   | Level 2 |   |   | Level 3 |   |
|                                                     |   | Total  |    |   | (Quoted Prices)            |   |   | (Significant Other Observable Inputs) |   |   | (Significant Unobservable Inputs) |   |
|   Loans - impaired loans                       |   | $      | 62,397  |   |                       | $      | - |   |   | $ | 15,121 |   |   | $ | 47,276 |   |
|   Loans held for sale - mortgage               |   |   | 51,722  |   |                       |   | - |   |   |   | 51,722 |   |   |   | - |   |
|   Loans held for sale - other assets           |   |   | 514     |   |                       |   | - |   |   |   | - |   |   |   | 514 |   |
|   Foreclosed assets                            |   |   | 10,894  |   |                       |   | - |   |   |   | - |   |   |   | 10,894 |   |
|      Total assets at fair value |   | $      | 125,527 |   |                       | $      | - |   |   | $ | 66,843 |   |   | $ | 58,684 |   |

----

Table of Contents

|                                                                       |   | March 31, 2011 |      |   | December 31, 2010 |   |
|----------------------------------------------------------------------------|--------|----------------|-----------|--------|-------------------|--------|
|                                                                       |   | Carrying       |      |   | Fair              |   |   | Carrying |   |   | Fair |   |
|                                                                       |   | Amount         |      |   | Value             |   |   | Amount |   |   | Value |   |
| Financial assets:                                                          |   |           |      |   |              |   |   |   |   |   |   |   |
| Cash and cash equivalents                                                  |   | $              | 178,422   |   |              |   | 178,422 |   |   | $ | 139,886 |   |   | $ | 139,886 |   |
| Investment securities                                                      |   |           | 380,078   |   |              |   | 380,078 |   |   |   | 381,231 |   |   |   | 381,231 |   |
| Mortgage loans held for sale                                               |   |           | 12,047    |   |              |   | 12,047 |   |   |   | 51,722 |   |   |   | 51,722 |   |
| Loans, net                                                                 |   |           | 2,027,809 |   |              |   | 1,841,876 |   |   |   | 2,061,835 |   |   |   | 1,794,267 |   |
| Accrued interest receivable                                                |   |           | 9,147     |   |              |   | 9,147 |   |   |   | 9,317 |   |   |   | 9,317 |   |
|                                                                       |   |           |      |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities:                                                     |   |           |      |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                   |   | $              | 2,364,564 |   |              | $      | 2,371,347 |   |   | $ | 2,386,102 |   |   | $ | 2,394,156 |   |
| Federal funds purchased and securities sold under agreements to repurchase |   |           | 1,156     |   |              |   | 1,156 |   |   |   | 987 |   |   |   | 987 |   |
| Federal Home Loan Bank advances                                            |   |           | 60,000    |   |              |   | 61,893 |   |   |   | 85,000 |   |   |   | 86,363 |   |
| Subordinated debt                                                          |   |           | 32,991    |   |              |   | 32,945 |   |   |   | 32,991 |   |   |   | 32,945 |   |
| Accrued interest payable                                                   |   |           | 2,158     |   |              |   | 2,158 |   |   |   | 2,278 |   |   |   | 2,278 |   |

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

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|   | 10. Segment Information |
|--------|-------------------------|

| ·   | Commercial Banking |
|--------------------|--------------------|

| ·   | Mortgage Banking |
|--------------------|------------------|

| ·   | Wealth Management |
|--------------------|-------------------|

| At and for the Three Months Ended March 31, 2011 (in thousands): |   |       |      |   |     |   |   |       |   |   |
|------------------------------------------------------------------|--------|------------|-----------|--------|----------|--------|--------|------------|--------|--------|
|                                                             |   |       |      |   |     |   |   |       |   |   |   |   |   |   |   |   |   |   |
|                                                             |   | Commercial |      |   | Mortgage |   |   | Wealth     |   |   |   |   |   | Intersegment |   |   |   |   |
|                                                             |   | Banking    |      |   | Banking  |   |   | Management |   |   | Other |   |   | Elimination |   |   | Consolidated |   |
| Net interest income                                              |   | $          | 23,879    |   |     | $      | 245    |       |   | $      | - |   |   | $ | (261 | ) |   | $ | - |   |   | $ | 23,863 |   |
| Provision for loan losses                                        |   |       | 4,500     |   |     |   | -      |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 4,500 |   |
| Noninterest income                                               |   |       | 5,644     |   |     |   | 1,875  |       |   |   | 1,339 |   |   |   | 26 |   |   |   | (1,214 | ) |   |   | 7,670 |   |
| Noninterest expense                                              |   |       | 21,555    |   |     |   | 1,906  |       |   |   | 1,093 |   |   |   | 196 |   |   |   | (1,214 | ) |   |   | 23,536 |   |
| Provision for income taxes                                       |   |       | 645       |   |     |   | 64     |       |   |   | 74 |   |   |   | (157 | ) |   |   | - |   |   |   | 626 |   |
| Net income (loss)                                                |   | $          | 2,823     |   |     | $      | 150    |       |   | $      | 172 |   |   | $ | (274 | ) |   | $ | - |   |   | $ | 2,871 |   |
|                                                             |   |       |      |   |     |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Assets                                                     |   | $          | 2,876,655 |   |     | $      | 12,613 |       |   | $      | 498 |   |   | $ | 465,231 |   |   | $ | (456,601 | ) |   | $ | 2,898,396 |   |
| Average Assets                                                   |   | $          | 2,875,903 |   |     | $      | 24,683 |       |   | $      | 166 |   |   | $ | 464,309 |   |   | $ | (454,819 | ) |   | $ | 2,910,242 |   |

| At and for the Three Months Ended March 31, 2010 (in thousands): |   |       |      |   |     |   |   |       |   |   |
|------------------------------------------------------------------|--------|------------|-----------|--------|----------|--------|--------|------------|--------|--------|
|                                                             |   |       |      |   |     |   |   |       |   |   |   |   |   |   |   |   |   |   |
|                                                             |   | Commercial |      |   | Mortgage |   |   | Wealth     |   |   |   |   |   | Intersegment |   |   |   |   |
|                                                             |   | Banking    |      |   | Banking  |   |   | Management |   |   | Other |   |   | Elimination |   |   | Consolidated |   |
| Net interest income                                              |   | $          | 22,401    |   |     | $      | 355    |       |   | $      | - |   |   | $ | (257 | ) |   | $ | - |   |   | $ | 22,499 |   |
| Provision for loan losses                                        |   |       | 6,700     |   |     |   | -      |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 6,700 |   |
| Noninterest income                                               |   |       | 6,603     |   |     |   | 1,881  |       |   |   | 1,192 |   |   |   | 212 |   |   |   | (1,073 | ) |   |   | 8,815 |   |
| Noninterest expense                                              |   |       | 20,369    |   |     |   | 1,764  |       |   |   | 987 |   |   |   | 501 |   |   |   | (1,073 | ) |   |   | 22,548 |   |
| Provision for income taxes                                       |   |       | 189       |   |     |   | 142    |       |   |   | 61 |   |   |   | (181 | ) |   |   | - |   |   |   | 211 |   |
| Net income (loss)                                                |   | $          | 1,746     |   |     | $      | 330    |       |   | $      | 144 |   |   | $ | (365 | ) |   | $ | - |   |   | $ | 1,855 |   |
|                                                             |   |       |      |   |     |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Assets                                                     |   | $          | 2,953,335 |   |     | $      | 30,829 |       |   | $      | 473 |   |   | $ | 459,417 |   |   | $ | (441,437 | ) |   | $ | 3,002,617 |   |
| Average Assets                                                   |   | $          | 2,948,033 |   |     | $      | 33,634 |       |   | $      | 197 |   |   | $ | 459,469 |   |   | $ | (442,350 | ) |   | $ | 2,998,983 |   |

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| 11.   | New Authoritative Accounting Guidance |
|-----------------|---------------------------------------|

| 12.   | Subsequent Events |
|-----------------|-------------------|

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

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| STELLARONE CORPORATION (NASDAQ: STEL)                                            |   |                                 |      |   |     |   |   |    |   |   |    |   |   |     |      |   |    |   |
|----------------------------------------------------------------------------------|--------|--------------------------------------|-----------|--------|----------|--------|--------|---------|--------|--------|---------|--------|--------|----------|-----------|--------|---------|--------|
| CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES (UNAUDITED)                      |   |                                 |      |   |     |   |   |    |   |   |    |   |   |     |      |   |
| THREE MONTHS ENDED MARCH 31, 2011 AND 2010                                       |   |                                 |      |   |     |   |   |    |   |   |    |   |   |     |      |   |    |   |
| (Dollars in thousands)                                                           |   |                                 |      |   |     |   |   |    |   |   |    |   |   |     |      |   |    |   |
|                                                                             |   |                                 |      |   |     |   |   |    |   |   |    |   |   |     |      |   |    |   |
|                                                                             |   |                                 |      |   |     |   |   |    |   |   |    |   |   |     |      |   |    |   |
|                                                                             |   | For the Three Months Ended March 31, |      |
|                                                                             |   | 2011                                 |      |   | 2010     |   |
|                                                                             |   | Average                              |      |   | Interest |   |   | Average |   |   | Average |   |   | Interest |      |   | Average |   |
|                                                                             |   | Balance                              |      |   | Inc/Exp  |   |   | Rates   |   |   | Balance |   |   | Inc/Exp  |      |   | Rates   |   |
| Assets                                                                           |   |                                 |      |   |     |   |   |    |   |   |    |   |   |     |      |   |    |   |
| Loans receivable, net (1)                                                        |   | $                                    | 2,104,031 |   |     | $      | 27,303 |    |   |   | 5.26    | %      |   | $        | 2,204,297 |   |    | $      | 29,137 |   |   |   | 5.36 | % |
| Investment securities                                                            |   |                                 |      |   |     |   |   |    |   |   |    |   |   |     |      |   |    |   |   |   |   |   |   |   |
| Taxable                                                                          |   |                                 | 229,709   |   |     |   | 1,720  |    |   |   | 3.00    | %      |   |     | 259,875   |   |    |   | 2,287 |   |   |   | 3.52 | % |
| Tax exempt (1)                                                                   |   |                                 | 129,318   |   |     |   | 1,928  |    |   |   | 5.96    | %      |   |     | 105,681   |   |    |   | 1,611 |   |   |   | 6.10 | % |
| Total investments                                                                |   |                                 | 359,027   |   |     |   | 3,648  |    |   |   | 4.06    | %      |   |     | 365,556   |   |    |   | 3,898 |   |   |   | 4.27 | % |
|                                                                             |   |                                 |      |   |     |   |   |    |   |   |    |   |   |     |      |   |    |   |   |   |   |   |   |   |
| Interest bearing deposits                                                        |   |                                 | 77,042    |   |     |   | 36     |    |   |   | 0.19    | %      |   |     | 44,060    |   |    |   | 28 |   |   |   | 0.25 | % |
| Federal funds sold                                                               |   |                                 | 51,390    |   |     |   | 32     |    |   |   | 0.25    | %      |   |     | 52,948    |   |    |   | 33 |   |   |   | 0.25 | % |
| Total other earning assets                                                       |   |                                 | 487,459   |   |     |   | 3,716  |    |   |   | 3.05    | %      |   |     | 462,564   |   |    |   | 3,959 |   |   |   | 3.43 | % |
|                                                                             |   |                                 |      |   |     |   |   |    |   |   |    |   |   |     |      |   |    |   |   |   |   |   |   |   |
| Total earning assets                                                             |   |                                 | 2,591,490 |   |     | $      | 31,019 |    |   |   | 4.85    | %      |   |     | 2,666,861 |   |    | $      | 33,096 |   |   |   | 5.04 | % |
|                                                                             |   |                                 |      |   |     |   |   |    |   |   |    |   |   |     |      |   |    |   |   |   |   |   |   |   |
| Total nonearning assets                                                          |   |                                 | 318,752   |   |     |   |   |    |   |   |    |   |   |     | 332,122   |   |    |   |   |   |   |   |   |   |
| Total assets                                                                     |   | $                                    | 2,910,242 |   |     |   |   |    |   |   |    |   |   | $        | 2,998,983 |   |    |   |   |   |   |   |   |   |
|                                                                             |   |                                 |      |   |     |   |   |    |   |   |    |   |   |     |      |   |    |   |   |   |   |   |   |   |
| Liabilities and Stockholders' Equity                                             |   |                                 |      |   |     |   |   |    |   |   |    |   |   |     |      |   |    |   |   |   |   |   |   |   |
| Interest-bearing deposits                                                        |   |                                 |      |   |     |   |   |    |   |   |    |   |   |     |      |   |    |   |   |   |   |   |   |   |
|     Interest checking                                        |   | $                                    | 559,393   |   |     | $      | 533    |    |   |   | 0.39    | %      |   | $        | 558,797   |   |    | $      | 1,332 |   |   |   | 0.97 | % |
|     Money market                                             |   |                                 | 420,202   |   |     |   | 1,041  |    |   |   | 1.00    | %      |   |     | 392,243   |   |    |   | 1,294 |   |   |   | 1.34 | % |
|     Savings                                                  |   |                                 | 268,854   |   |     |   | 468    |    |   |   | 0.71    | %      |   |     | 200,064   |   |    |   | 450 |   |   |   | 0.91 | % |
|     Time deposits:                                           |   |                                 |      |   |     |   |   |    |   |   |    |   |   |     |      |   |    |   |   |   |   |   |   |   |
|         Less than $100,000               |   |                                 | 542,760   |   |     |   | 2,243  |    |   |   | 1.68    | %      |   |     | 643,709   |   |    |   | 3,577 |   |   |   | 2.25 | % |
|         $100,000 and more                |   |                                 | 264,169   |   |     |   | 1,248  |    |   |   | 1.92    | %      |   |     | 312,297   |   |    |   | 1,956 |   |   |   | 2.54 | % |
| Total interest-bearing deposits                                                  |   |                                 | 2,055,378 |   |     |   | 5,533  |    |   |   | 1.09    | %      |   |     | 2,107,110 |   |    |   | 8,609 |   |   |   | 1.66 | % |
|                                                                             |   |                                 |      |   |     |   |   |    |   |   |    |   |   |     |      |   |    |   |   |   |   |   |   |   |
| Federal funds purchased and securities sold under agreements to repurchase       |   |                                 | 1,044     |   |     |   | 8      |    |   |   | 3.07    | %      |   |     | 861       |   |    |   | 6 |   |   |   | 2.79 | % |
| Federal Home Loan Bank advances and other borrowings                             |   |                                 | 80,000    |   |     |   | 640    |    |   |   | 3.20    | %      |   |     | 127,167   |   |    |   | 1,110 |   |   |   | 3.49 | % |
| Subordinated debt                                                                |   |                                 | 32,991    |   |     |   | 262    |    |   |   | 3.18    | %      |   |     | 32,991    |   |    |   | 257 |   |   |   | 3.12 | % |
| Total other interest-bearing liabilities                                         |   |                                 | 114,035   |   |     |   | 910    |    |   |   | 3.19    | %      |   |     | 161,019   |   |    |   | 1,373 |   |   |   | 3.41 | % |
|                                                                             |   |                                 |      |   |     |   |   |    |   |   |    |   |   |     |      |   |    |   |   |   |   |   |   |   |
|     Total interest-bearing liabilities                       |   |                                 | 2,169,413 |   |     |   | 6,443  |    |   |   | 1.20    | %      |   |     | 2,268,129 |   |    |   | 9,982 |   |   |   | 1.78 | % |
|                                                                             |   |                                 |      |   |     |   |   |    |   |   |    |   |   |     |      |   |    |   |   |   |   |   |   |   |
|     Total noninterest-bearing liabilities                    |   |                                 | 312,666   |   |     |   |   |    |   |   |    |   |   |     | 308,594   |   |    |   |   |   |   |   |   |   |
|                                                                             |   |                                 |      |   |     |   |   |    |   |   |    |   |   |     |      |   |    |   |   |   |   |   |   |   |
| Total liabilities                                                                |   |                                 | 2,482,079 |   |     |   |   |    |   |   |    |   |   |     | 2,576,723 |   |    |   |   |   |   |   |   |   |
| Stockholders' equity                                                             |   |                                 | 427,732   |   |     |   |   |    |   |   |    |   |   |     | 422,260   |   |    |   |   |   |   |   |   |   |
|                                                                             |   |                                 |      |   |     |   |   |    |   |   |    |   |   |     |      |   |    |   |   |   |   |   |   |   |
| Total liabilities and stockholders' equity                                       |   | $                                    | 2,909,811 |   |     |   |   |    |   |   |    |   |   | $        | 2,998,983 |   |    |   |   |   |   |   |   |   |
|                                                                             |   |                                 |      |   |     |   |   |    |   |   |    |   |   |     |      |   |    |   |   |   |   |   |   |   |
|                                                                             |   |                                 |      |   |     |   |   |    |   |   |    |   |   |     |      |   |    |   |   |   |   |   |   |   |
| Net interest income (tax equivalent)                                             |   |                                 |      |   |     | $      | 24,576 |    |   |   |    |   |   |     |      |   |    | $      | 23,114 |   |   |   |   |   |
|     Average interest rate spread                             |   |                                 |      |   |     |   |   |    |   |   | 3.65    | %      |   |     |      |   |    |   |   |   |   |   | 3.26 | % |
|     Interest expense as percentage of average earning assets |   |                                 |      |   |     |   |   |    |   |   | 1.01    | %      |   |     |      |   |    |   |   |   |   |   | 1.52 | % |
|     Net interest margin                                      |   |                                 |      |   |     |   |   |    |   |   | 3.85    | %      |   |     |      |   |    |   |   |   |   |   | 3.52 | % |

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|                                                                  |   | March 31, |   |   | December 31, |   |
|-----------------------------------------------------------------------|--------|-----------|--------|--------|--------------|--------|
|                                                                  |   | 2011      |   |   | 2010         |   |
| Performing restructurings:                                            |   |      |   |   |         |   |
| Construction and land development                                     |   | $         | 5,160  |   |         | $      | 5,163 |   |
| Commercial real estate                                                |   |      | 6,474  |   |         |   | 6,680 |   |
| Consumer real estate                                                  |   |      | 26,097 |   |         |   | 24,674 |   |
| Commercial and industrial loans (except those secured by real estate) |   |      | 3,604  |   |         |   | 3,181 |   |
| Consumer and other                                                    |   |      | -      |   |         |   | - |   |
| Total performing restructurings                                       |   | $         | 41,335 |   |         | $      | 39,698 |   |
|                                                                  |   |      |   |   |         |   |   |   |
| Nonperforming restructurings:                                         |   |      |   |   |         |   |   |   |
| Construction and land development                                     |   | $         | 456    |   |         | $      | 300 |   |
| Commercial real estate                                                |   |      | 97     |   |         |   | - |   |
| Consumer real estate                                                  |   |      | 3,525  |   |         |   | 3,208 |   |
| Commercial and industrial loans (except those secured by real estate) |   |      | -      |   |         |   | - |   |
| Consumer and other                                                    |   |      | -      |   |         |   | - |   |
| Total performing restructurings                                       |   | $         | 4,078  |   |         | $      | 3,508 |   |

|                                                                  |   | March 31, 2011    |      |
|-----------------------------------------------------------------------|--------|-------------------|-----------|
|                                                                  |   | Loans Outstanding |      |   | Nonaccrual Loans |   |   | Nonaccrual Loans to Loans Outstanding |   |
| Construction and land development                                     |   | $                 | 233,514   |   |   | $ | 16,368 |   |   |   | 6.17 | % |
| Commercial real estate                                                |   |              | 855,279   |   |   |   | 9,216 |   |   |   | 1.08 | % |
| Consumer real estate                                                  |   |              | 766,789   |   |   |   | 14,761 |   |   |   | 2.22 | % |
| Commercial and industrial loans (except those secured by real estate) |   |              | 181,650   |   |   |   | 2,809 |   |   |   | 1.55 | % |
| Consumer and other                                                    |   |              | 27,501    |   |   |   | 20 |   |   |   | 0.07 | % |
| Total loans                                                           |   | $                 | 2,064,732 |   |   | $ | 43,174 |   |   |   | 2.11 | % |

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|                                                                   |   | March 31, 2011 |   |   | December 31, 2010 |   |   | March 31, 2010 |   |
|------------------------------------------------------------------------|--------|----------------|--------|--------|-------------------|--------|--------|----------------|--------|
| Non-accrual loans                                                      |   | $              | 39,096 |   |              | $      | 39,966 |           |   | $ | 57,951 |   |
| Troubled debt restructurings                                           |   |           | 4,078  |   |              |   | 3,508  |           |   |   | 1,810 |   |
| Foreclosed assets                                                      |   |           | 9,036  |   |              |   | 10,894 |           |   |   | 2,267 |   |
| Total non-performing assets                                            |   | $              | 52,210 |   |              | $      | 54,368 |           |   | $ | 62,028 |   |
| Nonperforming assets to total assets                                   |   |           | 1.80   | %      |              |   | 1.85   | %              |   |   | 2.07 | % |
| Nonperforming assets to loans and foreclosed property                  |   |           | 2.52   | %      |              |   | 2.58   | %              |   |   | 2.87 | % |
| Allowance for loan losses as a percentage of loans receivable          |   |           | 1.82   | %      |              |   | 1.79   | %              |   |   | 1.88 | % |
| Allowance for loan losses as a percentage of nonperforming loans       |   |           | 86.90  | %      |              |   | 87.60  | %              |   |   | 65.53 | % |
| Annualized net charge-offs as a percentage of average loans receivable |   |           | 0.88   | %      |              |   | 1.43   | %              |   |   | 1.13 | % |

|                                                                               |   | Corporation |      |   | Bank   |   |
|------------------------------------------------------------------------------------|--------|-------------|-----------|--------|--------|--------|
| Tier 1 capital                                                                     |   |        | 337,501   |   |   |   | 317,774 |   |
| Tier 2 capital                                                                     |   |        | 28,464    |   |   |   | 28,372 |   |
| Total risk-based capital                                                           |   |        | 365,965   |   |   |   | 346,146 |   |
| Total risk-weighted assets                                                         |   |        | 2,268,096 |   |   |   | 2,260,574 |   |
| Average adjusted total assets                                                      |   |        | 2,790,119 |   |   |   | 2,783,728 |   |
| Capital ratios:                                                                    |   |        |      |   |   |   |   |   |
|    Tier 1 risk-based capital ratio                                  |   |        | 14.88     | %      |   |   | 14.06 | % |
|    Total risk-based capital ratio                                   |   |        | 16.14     | %      |   |   | 15.31 | % |
|    Leverage ratio (Tier 1 capital to average adjusted total assets) |   |        | 12.10     | %      |   |   | 11.42 | % |
|    Equity to assets ratio                                           |   |        | 14.80     | %      |   |   | 15.24 | % |
|    Tangible common equity to assets ratio                           |   |        | 10.08     | %      |   |   | 10.06 | % |

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ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 4 – CONTROLS AND PROCEDURES

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

| ITEM 1a. | RISK FACTORS. |
|----------|---------------|

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

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

| ITEM 4. | (REMOVED AND RESERVED) |
|---------|------------------------|

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

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ITEM 6.  

|   | 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 May 28, 2010) |
|--------|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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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