----

----

| 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) |

----

| STELLARONE CORPORATION         |
|--------------------------------|
| INDEX                          |
| PART I - FINANCIAL INFORMATION |
|                           |   |   Page No. |
| ITEM 1                         | Financial Statements: |   |
|                           |   |   |
|                           | Consolidated Balance Sheets | 3 |
|                           | Consolidated Statements of Operations | 4-5 |
|                           | Consolidated Statements of Changes in Stockholders' Equity and Other Comprehensive Income (Loss) | 6 |
|                           | Consolidated Statements of Cash Flows | 7 |
|                           | Notes to Consolidated Financial Statements | 8-22 |
|                           |   |   |
| ITEM 2                         | Management's Discussion and Analysis of Financial Condition and Results of Operations | 23-35 |
|                           |   |   |
| ITEM 3                         | Quantitative and Qualitative Disclosures About Market Risk | 35 |
|                           |   |   |
| ITEM 4                         | Controls and Procedures | 36 |
|                           |   |   |
| PART II - OTHER INFORMATION    |
|                           |   |   |
| ITEM 1                         | Legal Proceedings | 37 |
|                           |   |   |
| ITEM 1A                        | Risk Factors | 37 |
|                           |   |   |
| ITEM 2                         | Unregistered Sales of Equity Securities and Use of Proceeds | 37 |
|                           |   |   |
| ITEM 3                         | Defaults Upon Senior Securities | 37 |
|                           |   |   |
| ITEM 4                         | (Removed and Reserved) | 37 |
|                           |   |   |
| ITEM 5                         | Other Information | 37 |
|                           |   |   |
| ITEM 6                         | Exhibits |  38  |

----

Table of Contents

| PART I – FINANCIAL INFORMATION                                                                                                                                 |   |        |      |   |         |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------|-----------|--------|--------------|--------|
| ITEM 1. Financial statements                                                                                                                                         |   |        |      |   |         |   |
|                                                                                                                                                                 |   |        |      |   |         |   |
| STELLARONE CORPORATION AND SUBSIDIARIES                                                                                                                              |   |
| CONSOLIDATED BALANCE SHEETS                                                                                                                                          |   |
| (In thousands)                                                                                                                                                       |   |
|                                                                                                                                                                 |   |        |      |   |         |   |
|                                                                                                                                                                 |   | JUNE 30,    |      |   | DECEMBER 31, |   |
|                                                                                                                                                                 |   | 2010        |      |   | 2009         |   |
|                                                                                                                                                                 |   | (unaudited) |      |   |         |   |
| Assets                                                                                                                                                               |   |        |      |   |         |   |
|   Cash and due from banks                                                                                                                                  |   | $           | 41,241    |   |         | $      | 52,120 |   |
|   Federal funds sold                                                                                                                                       |   |        | 46,143    |   |         |   | 44,244 |   |
|   Interest-bearing deposits in banks                                                                                                                       |   |        | 38,896    |   |         |   | 56,562 |   |
|     Cash and cash equivalents                                                                                                                    |   |        | 126,280   |   |         |   | 152,926 |   |
|   Investment securities (fair value: 2010, $413,141; 2009, $378,964)                                                                                       |   |        | 413,141   |   |         |   | 378,961 |   |
|   Mortgage loans held for sale                                                                                                                             |   |        | 42,265    |   |         |   | 44,165 |   |
|   Loans receivable, net of allowance for loan losses, 2010, $41,525; 2009, $40,172                                                                         |   |        | 2,087,418 |   |         |   | 2,146,335 |   |
|   Premises and equipment, net                                                                                                                              |   |        | 80,129    |   |         |   | 83,546 |   |
|   Accrued interest receivable                                                                                                                              |   |        | 9,427     |   |         |   | 9,459 |   |
|   Deferred income tax asset                                                                                                                                |   |        | 135       |   |         |   | 882 |   |
|   Core deposit intangibles, net                                                                                                                            |   |        | 7,487     |   |         |   | 8,408 |   |
|   Goodwill                                                                                                                                                 |   |        | 113,652   |   |         |   | 113,652 |   |
|   Bank owned life insurance                                                                                                                                |   |        | 30,846    |   |         |   | 30,196 |   |
|   Foreclosed assets                                                                                                                                        |   |        | 5,953     |   |         |   | 4,505 |   |
|   Other assets                                                                                                                                             |   |        | 71,052    |   |         |   | 60,066 |   |
|     Total assets                                                                                                                                 |   | $           | 2,987,785 |   |         | $      | 3,033,101 |   |
|                                                                                                                                                                 |   |        |      |   |         |   |   |   |
| Liabilities                                                                                                                                                          |   |        |      |   |         |   |   |   |
|   Deposits:                                                                                                                                                |   |        |      |   |         |   |   |   |
|   Noninterest-bearing                                                                                                                                      |   | $           | 303,409   |   |         | $      | 302,009 |   |
|   Interest-bearing                                                                                                                                         |   |        | 2,084,087 |   |         |   | 2,134,111 |   |
|     Total deposits                                                                                                                               |   |        | 2,387,496 |   |         |   | 2,436,120 |   |
|   Short-term borrowings                                                                                                                                    |   |        | 1,040     |   |         |   | 783 |   |
|   Federal Home Loan Bank advances                                                                                                                          |   |        | 120,000   |   |         |   | 130,000 |   |
|   Subordinated debt                                                                                                                                        |   |        | 32,991    |   |         |   | 32,991 |   |
|   Accrued interest payable                                                                                                                                 |   |        | 2,760     |   |         |   | 3,626 |   |
|   Other liabilities                                                                                                                                        |   |        | 18,058    |   |         |   | 8,796 |   |
| Total liabilities                                                                                                                                                    |   |        | 2,562,345 |   |         |   | 2,612,316 |   |
|                                                                                                                                                                 |   |        |      |   |         |   |   |   |
| Stockholders' Equity                                                                                                                                                 |   |        |      |   |         |   |   |   |
|   Preferred stock; no par value; 5,000,000 shares authorized;  no shares issued and outstanding;                                                 |   |        | -         |   |         |   | - |   |
|   Preferred stock; $1,000 per share liquidation preference; 30,000 shares issued and outstanding;                                                          |   |        | 28,577    |   |         |   | 28,398 |   |
|   Common stock; $1 par value; 35,000,000 shares authorized; 2010: 22,742,034 shares issued and outstanding; 2009: 22,661,125 shares issued and outstanding |   |        | 22,742    |   |         |   | 22,661 |   |
|   Additional paid-in capital                                                                                                                               |   |        | 269,630   |   |         |   | 268,965 |   |
|   Retained earnings                                                                                                                                        |   |        | 97,606    |   |         |   | 96,947 |   |
|   Accumulated other comprehensive income, net                                                                                                              |   |        | 6,885     |   |         |   | 3,814 |   |
|     Total stockholders' equity                                                                                                                   |   |        | 425,440   |   |         |   | 420,785 |   |
|     Total liabilities and stockholders' equity                                                                                                   |   | $           | 2,987,785 |   |         | $      | 3,033,101 |   |

----

Table of Contents

| STELLARONE CORPORATION AND SUBSIDIARIES                                                  |   |
|------------------------------------------------------------------------------------------|--------|
| CONSOLIDATED STATEMENTS OF OPERATIONS                                                    |   |
| (In thousands, except per share data)                                                    |   |
|                                                                                     |   |   |   |   |   |   |
|                                                                                     |   | THREE MONTHS ENDED |   |
|                                                                                     |   | JUNE 30, |   |
|                                                                                     |   | 2010 |   |   | 2009 |   |
|                                                                                     |   | (unaudited) |   |   | (unaudited) |   |
| Interest and Dividend Income                                                             |   |   |   |   |   |   |
|   Loans, including fees                                                        |   | $ | 28,850 |   |   | $ | 31,694 |   |
|   Federal funds sold and deposits in other banks                               |   |   | 70 |   |   |   | 52 |   |
|   Investment securities:                                                       |   |   |   |   |   |   |   |   |
|     Taxable                                                          |   |   | 2,170 |   |   |   | 2,416 |   |
|     Tax-exempt                                                       |   |   | 1,029 |   |   |   | 972 |   |
|     Dividends                                                        |   |   | 31 |   |   |   | 56 |   |
|       Total interest income                                |   |   | 32,150 |   |   |   | 35,190 |   |
|                                                                                     |   |   |   |   |   |   |   |   |
| Interest Expense                                                                         |   |   |   |   |   |   |   |   |
|   Deposits                                                                     |   |   | 7,603 |   |   |   | 11,360 |   |
|   Federal funds repurchased and securities sold under agreements to repurchase |   |   | 7 |   |   |   | 3 |   |
|   Federal Home Loan Bank advances                                              |   |   | 1,059 |   |   |   | 1,558 |   |
|   Subordinated debt                                                            |   |   | 263 |   |   |   | 338 |   |
|       Total interest expense                               |   |   | 8,932 |   |   |   | 13,259 |   |
|   Net interest income                                                          |   |   | 23,218 |   |   |   | 21,931 |   |
|   Provision for loan losses                                                    |   |   | 7,350 |   |   |   | 6,500 |   |
|       Net interest income after provision for loan losses  |   |   | 15,868 |   |   |   | 15,431 |   |
|                                                                                     |   |   |   |   |   |   |   |   |
| Noninterest Income                                                                       |   |   |   |   |   |   |   |   |
|   Retail banking fees                                                          |   |   | 4,294 |   |   |   | 4,113 |   |
|   Commissions and fees from fiduciary activities                               |   |   | 845 |   |   |   | 744 |   |
|   Brokerage fee income                                                         |   |   | 426 |   |   |   | 245 |   |
|   Mortgage banking-related fees                                                |   |   | 2,054 |   |   |   | 2,083 |   |
|   Losses on mortgage indemnifications and repurchases                          |   |   | (539 | ) |   |   | - |   |
|   Losses on sale of premises and equipment                                     |   |   | - |   |   |   | (289 | ) |
|   Gains on sale of securities available for sale                               |   |   | 19 |   |   |   | 11 |   |
|   Losses / impairments on foreclosed assets                                    |   |   | (140 | ) |   |   | (355 | ) |
|   Income from bank owned life insurance                                        |   |   | 327 |   |   |   | 331 |   |
|   Other operating income                                                       |   |   | 1,094 |   |   |   | 932 |   |
|       Total noninterest income                             |   |   | 8,380 |   |   |   | 7,815 |   |
| Non-interest Expense                                                                     |   |   |   |   |   |   |   |   |
|   Compensation and employee benefits                                           |   |   | 11,096 |   |   |   | 10,836 |   |
|   Net occupancy                                                                |   |   | 2,040 |   |   |   | 2,163 |   |
|   Supplies and equipment                                                       |   |   | 2,152 |   |   |   | 2,265 |   |
|   Amortization of intangible assets                                            |   |   | 413 |   |   |   | 434 |   |
|   Marketing                                                                    |   |   | 319 |   |   |   | 388 |   |
|   State franchise taxes                                                        |   |   | 554 |   |   |   | 574 |   |
|   FDIC insurance                                                               |   |   | 1,322 |   |   |   | 2,088 |   |
|   Data processing                                                              |   |   | 565 |   |   |   | 645 |   |
|   Professional fees                                                            |   |   | 741 |   |   |   | 489 |   |
|   Telecommunications                                                           |   |   | 420 |   |   |   | 477 |   |
|   Other operating expenses                                                     |   |   | 3,169 |   |   |   | 3,698 |   |
|       Total noninterest expense                            |   |   | 22,791 |   |   |   | 24,057 |   |
|                                                                                     |   |   |   |   |   |   |   |   |
|       Income (loss) before income taxes                    |   |   | 1,457 |   |   |   | (811 | ) |
|   Income tax benefit                                                           |   |   | (96 | ) |   |   | (485 | ) |
|       Net income (loss)                                    |   | $ | 1,553 |   |   | $ | (326 | ) |
|   Dividends and accretion on preferred stock                                   |   |   | (465 | ) |   |   | (459 | ) |
|       Net income (loss) available to common shareholders   |   | $ | 1,088 |   |   | $ | (785 | ) |
|                                                                                     |   |   |   |   |   |   |   |   |
| Basic net income (loss) per common share available to common shareholders                |   | $ | 0.05 |   |   | $ | (0.03 | ) |
| Diluted net income (loss) per common share available to common shareholders              |   | $ | 0.05 |   |   | $ | (0.03 | ) |

----

Table of Contents

| STELLARONE CORPORATION AND SUBSIDIARIES                                                  |   |
|------------------------------------------------------------------------------------------|--------|
| CONSOLIDATED STATEMENTS OF OPERATIONS                                                    |   |
| (In thousands, except per share data)                                                    |   |
|                                                                                     |   |   |   |   |   |   |
|                                                                                     |   | SIX MONTHS ENDED |   |
|                                                                                     |   | JUNE 30, |   |
|                                                                                     |   | 2010 |   |   | 2009 |   |
|                                                                                     |   | (unaudited) |   |   | (unaudited) |   |
| Interest and Dividend Income                                                             |   |   |   |   |   |   |
|   Loans, including fees                                                        |   | $ | 57,936 |   |   | $ | 64,186 |   |
|   Federal funds sold and deposits in other banks                               |   |   | 131 |   |   |   | 84 |   |
|   Investment securities:                                                       |   |   |   |   |   |   |   |   |
|     Taxable                                                          |   |   | 4,428 |   |   |   | 4,988 |   |
|     Tax-exempt                                                       |   |   | 2,076 |   |   |   | 1,820 |   |
|     Dividends                                                        |   |   | 60 |   |   |   | 91 |   |
|       Total interest income                                |   |   | 64,631 |   |   |   | 71,169 |   |
|                                                                                     |   |   |   |   |   |   |   |   |
| Interest Expense                                                                         |   |   |   |   |   |   |   |   |
|   Deposits                                                                     |   |   | 16,210 |   |   |   | 23,011 |   |
|   Federal funds repurchased and securities sold under agreements to repurchase |   |   | 13 |   |   |   | 7 |   |
|   Federal Home Loan Bank advances                                              |   |   | 2,169 |   |   |   | 3,121 |   |
|   Subordinated debt                                                            |   |   | 522 |   |   |   | 700 |   |
|       Total interest expense                               |   |   | 18,914 |   |   |   | 26,839 |   |
|   Net interest income                                                          |   |   | 45,717 |   |   |   | 44,330 |   |
|   Provision for loan losses                                                    |   |   | 14,050 |   |   |   | 14,250 |   |
|       Net interest income after provision for loan losses  |   |   | 31,667 |   |   |   | 30,080 |   |
|                                                                                     |   |   |   |   |   |   |   |   |
| Noninterest Income                                                                       |   |   |   |   |   |   |   |   |
|   Retail banking fees                                                          |   |   | 8,214 |   |   |   | 7,824 |   |
|   Commissions and fees from fiduciary activities                               |   |   | 1,678 |   |   |   | 1,502 |   |
|   Brokerage fee income                                                         |   |   | 785 |   |   |   | 498 |   |
|   Mortgage banking-related fees                                                |   |   | 4,016 |   |   |   | 3,507 |   |
|   Losses on mortgage indemnifications and repurchases                          |   |   | (682 | ) |   |   | - |   |
|   Gain on sale of financial center                                             |   |   | 748 |   |   |   | - |   |
|   Gains (losses) on sale of premises and equipment                             |   |   | 27 |   |   |   | (90 | ) |
|   Gains on sale of securities available for sale                               |   |   | 321 |   |   |   | 13 |   |
|   Losses / impairments on foreclosed assets                                    |   |   | (361 | ) |   |   | (620 | ) |
|   Income from bank owned life insurance                                        |   |   | 651 |   |   |   | 635 |   |
|   Other operating income                                                       |   |   | 1,798 |   |   |   | 1,674 |   |
|       Total noninterest income                             |   |   | 17,195 |   |   |   | 14,943 |   |
| Non-interest Expense                                                                     |   |   |   |   |   |   |   |   |
|   Compensation and employee benefits                                           |   |   | 22,406 |   |   |   | 21,362 |   |
|   Net occupancy                                                                |   |   | 4,219 |   |   |   | 4,254 |   |
|   Supplies and equipment                                                       |   |   | 4,330 |   |   |   | 4,406 |   |
|   Amortization of intangible assets                                            |   |   | 825 |   |   |   | 872 |   |
|   Marketing                                                                    |   |   | 473 |   |   |   | 628 |   |
|   State franchise taxes                                                        |   |   | 1,108 |   |   |   | 1,170 |   |
|   FDIC insurance                                                               |   |   | 2,432 |   |   |   | 3,193 |   |
|   Data processing                                                              |   |   | 1,108 |   |   |   | 1,502 |   |
|   Professional fees                                                            |   |   | 1,416 |   |   |   | 993 |   |
|   Telecommunications                                                           |   |   | 846 |   |   |   | 944 |   |
|   Other operating expenses                                                     |   |   | 6,175 |   |   |   | 6,956 |   |
|       Total noninterest expense                            |   |   | 45,338 |   |   |   | 46,280 |   |
|                                                                                     |   |   |   |   |   |   |   |   |
|       Income (loss) before income taxes                    |   |   | 3,524 |   |   |   | (1,257 | ) |
|   Income tax expense (benefit)                                                 |   |   | 116 |   |   |   | (1,077 | ) |
|       Net income (loss)                                    |   | $ | 3,408 |   |   | $ | (180 | ) |
|   Dividends and accretion on preferred stock                                   |   |   | (923 | ) |   |   | (903 | ) |
|       Net income (loss) available to common shareholders   |   | $ | 2,485 |   |   | $ | (1,083 | ) |
|                                                                                     |   |   |   |   |   |   |   |   |
| Basic net income (loss) per common share available to common shareholders                |   | $ | 0.11 |   |   | $ | (0.05 | ) |
| Diluted net income (loss) per common share available to common shareholders              |   | $ | 0.11 |   |   | $ | (0.05 | ) |

----

Table of Contents

| STELLARONE CORPORATION AND SUBSIDIARIES                                                                      |   |
|--------------------------------------------------------------------------------------------------------------|--------|
| CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY AND OTHER COMPREHENSIVE INCOME (LOSS)  |   |
| FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009                                                              |   |
| (In thousands, except per share data)                                                                        |   |
| (unaudited)                                                                                                  |   |
|                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   | Accumlated |   |   |   |   |   |   |   |
|                                                                                                         |   |   |   |   |   |   |   | Additional |   |   |   |   |   | Other |   |   | Comprehensive |   |   |   |   |
|                                                                                                         |   | Preferred |   |   | Common |   |   | Paid-In |   |   | Retained |   |   | Comprehensive |   |   | (Loss) |   |   |   |   |
|                                                                                                         |   | Stock |   |   | Stock |   |   | Capital |   |   | Earnings |   |   | Income |   |   | Income |   |   | Total |   |
|                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, January 1, 2009                                                                                     |   | $ | 28,121 |   |   | $ | 22,605 |   |   | $ | 268,293 |   |   | $ | 113,661 |   |   | $ | 876 |   |   |   |   |   | $ | 433,556 |   |
| Comprehensive loss:                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Net loss                                                                                         |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (180 | ) |   |   | - |   |   | $ | (180 | ) |   |   | (180 | ) |
|     Other comprehensive loss, net of tax:                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Unrealized holding gains arising during the period   (net of tax, $1) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (2 | ) |   |   | - |   |
|     Reclassification adjustment (net of tax, $5)                                         |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (8 | ) |   |   | - |   |
|     Other comprehensive loss                                                             |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (10 | ) |   |   | (10 | ) |   |   | (10 | ) |
|         Total comprehensive loss                                     |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   | $ | (190 | ) |   |   | - |   |
| Cash dividends paid or accrued:                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common ($0.20 per share)                                                                                     |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (4,533 | ) |   |   | - |   |   |   |   |   |   |   | (4,533 | ) |
|     Preferred cumulative 5%                                                              |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (744 | ) |   |   | - |   |   |   |   |   |   |   | (744 | ) |
| Accretion on preferred stock discount                                                                        |   |   | 159 |   |   |   | - |   |   |   | - |   |   |   | (159 | ) |   |   | - |   |   |   |   |   |   |   | - |   |
| Preferred stock issuance costs                                                                               |   |   | (56 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   |   |   |   |   | (56 | ) |
| Stock-based compensation expense (18,894 shares)                                                             |   |   | - |   |   |   | 19 |   |   |   | 145 |   |   |   | - |   |   |   | - |   |   |   |   |   |   |   | 164 |   |
| Exercise of stock options (28,835 shares)                                                                    |   |   | - |   |   |   | 29 |   |   |   | 252 |   |   |   | - |   |   |   | - |   |   |   |   |   |   |   | 281 |   |
| Balance, June 30, 2009                                                                                       |   | $ | 28,224 |   |   | $ | 22,653 |   |   | $ | 268,690 |   |   | $ | 108,045 |   |   | $ | 866 |   |   |   |   |   |   | $ | 428,478 |   |
|                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, January 1, 2010                                                                                     |   | $ | 28,398 |   |   | $ | 22,661 |   |   | $ | 268,965 |   |   | $ | 96,947 |   |   | $ | 3,814 |   |   |   |   |   |   | $ | 420,785 |   |
| Comprehensive income:                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Net income                                                                                       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 3,408 |   |   |   | - |   |   | $ | 3,408 |   |   |   | 3,408 |   |
|     Other comprehensive income, net of tax:                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Unrealized holding gains arising during the period   (net of tax, $1,607)  |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 2,984 |   |   |   | - |   |
|     Reclassification adjustment (net of tax, $112)                                       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 209 |   |   |   | - |   |
|     Change in post retirement liability (net of tax, $66)                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (122 | ) |   |   | - |   |
|     Other comprehensive income                                                           |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 3,071 |   |   |   | 3,071 |   |   |   | 3,071 |   |
| Total comprehensive income                                                                                   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   | $ | 6,479 |   |   |   | - |   |
| Cash dividends paid or accrued:                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common ($0.08 per share)                                                                                     |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (1,826 | ) |   |   | - |   |   |   |   |   |   |   | (1,826 | ) |
| Preferred cumulative 5%                                                                                      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (744 | ) |   |   | - |   |   |   |   |   |   |   | (744 | ) |
| Accretion on preferred stock discount                                                                        |   |   | 179 |   |   |   | - |   |   |   | - |   |   |   | (179 | ) |   |   | - |   |   |   |   |   |   |   | - |   |
| Stock-based compensation expense (25,459 shares)                                                             |   |   | - |   |   |   | 26 |   |   |   | 220 |   |   |   | - |   |   |   | - |   |   |   |   |   |   |   | 246 |   |
| Exercise of stock options (55,450 shares)                                                                    |   |   | - |   |   |   | 55 |   |   |   | 445 |   |   |   | - |   |   |   | - |   |   |   |   |   |   |   | 500 |   |
| Balance, June 30, 2010                                                                                       |   | $ | 28,577 |   |   | $ | 22,742 |   |   | $ | 269,630 |   |   | $ | 97,606 |   |   | $ | 6,885 |   |   |   |   |   |   | $ | 425,440 |   |

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Table of Contents

| STELLARONE CORPORATION AND SUBSIDIARIES                                                               |   |
|-------------------------------------------------------------------------------------------------------|--------|
| CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                 |   |
| (In thousands)                                                                                        |   |
| (unaudited)                                                                                           |   |
|                                                                                                  |   | SIX MONTHS ENDED |   |
|                                                                                                  |   | JUNE 30, |   |
|                                                                                                  |   | 2010 |   |   | 2009 |   |
|                                                                                                  |   |   |   |   |   |   |
| Cash Flows from Operating Activities                                                                  |   |   |   |   |   |   |
| Net income (loss)                                                                                     |   | $ | 3,408 |   |   | $ | (180 | ) |
| Adjustments to reconcile net income to net cash used in operating activities:                         |   |   |   |   |   |   |   |   |
| Depreciation                                                                                          |   |   | 3,268 |   |   |   | 3,246 |   |
| Amortization of intangible assets                                                                     |   |   | 825 |   |   |   | 872 |   |
| Provision for loan losses                                                                             |   |   | 14,050 |   |   |   | 14,250 |   |
| Deferred tax benefit                                                                                  |   |   | (600 | ) |   |   | (2,071 | ) |
| Stock-based compensation expense                                                                      |   |   | 277 |   |   |   | 259 |   |
| Losses / impairments on foreclosed assets                                                             |   |   | 361 |   |   |   | 620 |   |
| Losses on mortgage indemnifications and repurchases                                                   |   |   | 682 |   |   |   | - |   |
| Gain on sale of financial center                                                                      |   |   | (748 | ) |   |   | - |   |
| (Gains) losses on sale of premises and equipment                                                      |   |   | (27 | ) |   |   | 90 |   |
| Gains on sale of securities available for sale                                                        |   |   | (321 | ) |   |   | (13 | ) |
| Mortgage banking-related fees                                                                         |   |   | (4,016 | ) |   |   | (3,507 | ) |
| Proceeds from sale of mortgage loans                                                                  |   |   | 229,457 |   |   |   | 290,014 |   |
| Origination of mortgage loans for sale                                                                |   |   | (223,541 | ) |   |   | (321,889 | ) |
| Amortization of securities premiums and accretion of discounts, net                                   |   |   | 857 |   |   |   | (1,072 | ) |
| Income on bank owned life insurance                                                                   |   |   | (651 | ) |   |   | (635 | ) |
| Changes in assets and liabilities:                                                                    |   |   |   |   |   |   |   |   |
| Decrease in accrued interest receivable                                                               |   |   | 32 |   |   |   | 308 |   |
| Increase in other assets                                                                              |   |   | (11,962 | ) |   |   | (231 | ) |
| Decrease in accrued interest payable                                                                  |   |   | (840 | ) |   |   | (677 | ) |
| Increase (decrease) in other liabilities                                                              |   |   | 9,080 |   |   |   | (1,073 | ) |
|  Net cash provided (used) by operating activities                                                |   | $ | 19,591 |   |   | $ | (21,689 | ) |
|                                                                                                  |   |   |   |   |   |   |   |   |
| Cash Flows from Investing Activities                                                                  |   |   |   |   |   |   |   |   |
| Proceeds from maturities and principal payments of securities available for sale                      |   | $ | 29,773 |   |   | $ | 46,739 |   |
| Proceeds from sales and calls of securities available for sale                                        |   |   | 23,444 |   |   |   | 19,306 |   |
| Purchase of securities available for sale                                                             |   |   | (82,779 | ) |   |   | (92,354 | ) |
| Net decrease in loans                                                                                 |   |   | 39,020 |   |   |   | 14,144 |   |
| Proceeds from sale of premises and equipment                                                          |   |   | 26 |   |   |   | 637 |   |
| Purchase of premises and equipment                                                                    |   |   | (1,047 | ) |   |   | (2,589 | ) |
| Proceeds from sale of foreclosed assets                                                               |   |   | 4,102 |   |   |   | 1,120 |   |
| Cash paid in sale of financial center, net                                                            |   |   | (13,349 | ) |   |   | - |   |
| Net cash used by investing activities                                                                 |   | $ | (810 | ) |   | $ | (12,997 | ) |
|                                                                                                  |   |   |   |   |   |   |   |   |
| Cash Flows from Financing Activities                                                                  |   |   |   |   |   |   |   |   |
| Net increase in demand, money market and savings deposits                                             |   | $ | 45,971 |   |   | $ | 122,561 |   |
| Net (decrease) increase in certificates of deposit                                                    |   |   | (79,579 | ) |   |   | 3,799 |   |
| Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase |   |   | 257 |   |   |   | (196 | ) |
| Principal payments on Federal Home Loan Bank advances                                                 |   |   | (10,000 | ) |   |   | (17,700 | ) |
| Proceeds from exercise of stock options                                                               |   |   | 500 |   |   |   | 280 |   |
| Payment of preferred stock issuance costs                                                             |   |   | - |   |   |   | (56 | ) |
| Cash dividends paid                                                                                   |   |   | (2,576 | ) |   |   | (5,141 | ) |
|  Net cash (used) provided by financing activities                                                |   | $ | (45,427 | ) |   | $ | 103,547 |   |
|                                                                                                  |   |   |   |   |   |   |   |   |
|  (Decrease) increase in cash and cash equivalents                                                |   | $ | (26,646 | ) |   | $ | 68,861 |   |
|                                                                                                  |   |   |   |   |   |   |   |   |
| Cash and Cash Equivalents                                                                             |   |   |   |   |   |   |   |   |
|      Beginning                                                                         |   |   | 152,926 |   |   |   | 115,529 |   |
|   Ending                                                                                         |   | $ | 126,280 |   |   | $ | 184,390 |   |
|                                                                                                  |   |   |   |   |   |   |   |   |
| Supplemental Schedule of Noncash Activities                                                           |   |   |   |   |   |   |   |   |
| Foreclosed assets acquired in settlement of loans                                                     |   | $ | 5,982 |   |   | $ | 1,234 |   |

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Table of Contents

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

----

Table of Contents

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

|                                |   | June 30, 2010 |    |   | December 31, 2009 |   |
|-------------------------------------|--------|---------------|---------|--------|-------------------|--------|
|                                |   |          |    |   | Gross             |   |   | Gross |   |   | Estimated |   |   |   |   |   | Gross |   |   | Gross |   |   | Estimated |   |
|                                |   | Amortized     |    |   | Unrealized        |   |   | Unrealized |   |   | Fair |   |   | Amortized |   |   | Unrealized |   |   | Unrealized |   |   | Fair |   |
|                                |   | Cost          |    |   | Gains             |   |   | (Losses) |   |   | Value |   |   | Cost |   |   | Gains |   |   | (Losses) |   |   | Value |   |
|                                |   | (unaudited)   |    |   | (unaudited)       |   |   | (unaudited) |   |   | (unaudited) |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Securities Held to Maturity:        |   |          |    |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| State and municipal                 |   | $             | -       |   |              | $      | - |   |   | $ | - |   |   | $ | - |   |   | $ | 426 |   |   | $ | 2 |   |   | $ | - |   |   | $ | 428 |   |
| Mortgage backed securities          |   |          | -       |   |              |   | - |   |   |   | - |   |   |   | - |   |   |   | 21 |   |   |   | 1 |   |   |   | - |   |   |   | 22 |   |
| Total                               |   | $             | -       |   |              | $      | - |   |   | $ | - |   |   | $ | - |   |   | $ | 447 |   |   | $ | 3 |   |   | $ | - |   |   | $ | 450 |   |
|                                |   |          |    |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Securities Available for Sale:      |   |          |    |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U. S. Treasuries                    |   | $             | 20,052  |   |              | $      | 27 |   |   | $ | - |   |   | $ | 20,079 |   |   | $ | 20,168 |   |   | $ | 35 |   |   | $ | - |   |   | $ | 20,203 |   |
| U. S. Government agencies           |   |          | 96,536  |   |              |   | 1,568 |   |   |   | - |   |   |   | 98,104 |   |   |   | 62,612 |   |   |   | 823 |   |   |   | (20 | ) |   |   | 63,415 |   |
| State and municipals                |   |          | 117,096 |   |              |   | 4,494 |   |   |   | (346 | ) |   |   | 121,244 |   |   |   | 109,431 |   |   |   | 3,921 |   |   |   | (168 | ) |   |   | 113,184 |   |
| Corporate bonds                     |   |          | 6,544   |   |              |   | 386 |   |   |   | - |   |   |   | 6,930 |   |   |   | 6,560 |   |   |   | 374 |   |   |   | - |   |   |   | 6,934 |   |
| Collateralized mortgage obligations |   |          | 15,147  |   |              |   | 313 |   |   |   | (124 | ) |   |   | 15,336 |   |   |   | 13,172 |   |   |   | 117 |   |   |   | (263 | ) |   |   | 13,026 |   |
| Mortgage backed securities          |   |          | 143,499 |   |              |   | 6,077 |   |   |   | - |   |   |   | 149,576 |   |   |   | 156,588 |   |   |   | 3,862 |   |   |   | (863 | ) |   |   | 159,587 |   |
| Certificates of deposit             |   |          | -       |   |              |   | - |   |   |   | - |   |   |   | - |   |   |   | 685 |   |   |   | - |   |   |   | - |   |   |   | 685 |   |
| Equity securities                   |   |          | 1,541   |   |              |   | 347 |   |   |   | (27 | ) |   |   | 1,861 |   |   |   | 1,484 |   |   |   | 7 |   |   |   | (22 | ) |   |   | 1,469 |   |
| Other                               |   |          | 11      |   |              |   | - |   |   |   | - |   |   |   | 11 |   |   |   | 11 |   |   |   | - |   |   |   | - |   |   |   | 11 |   |
| Total                               |   | $             | 400,426 |   |              | $      | 13,212 |   |   | $ | (497 | ) |   | $ | 413,141 |   |   | $ | 370,711 |   |   | $ | 9,139 |   |   | $ | (1,336 | ) |   | $ | 378,514 |   |

|                      |   | Three Months Ended |   |   | Six Months Ended |   |
|---------------------------|--------|--------------------|--------|--------|------------------|--------|
|                      |   | June 30,           |   |   | June 30,         |   |
|                      |   | 2010               |   |   | 2009             |   |   | 2010 |   |   | 2009 |   |
|                      |   | (unaudited)        |   |   | (unaudited)      |   |   | (unaudited) |   |   | (unaudited) |   |
|                      |   |               |   |   |             |   |   |   |   |   |   |   |
| Proceeds from sales/calls |   |               | 3,373  |   |             |   | 13,516 |   |   |   | 23,444 |   |   |   | 19,306 |   |
| Gross realized gains      |   |               | 19     |   |             |   | 11 |   |   |   | 329 |   |   |   | 13 |   |
| Gross realized losses     |   |               | -      |   |             |   | - |   |   |   | (8 | ) |   |   | - |   |
| Impairment losses         |   |               | -      |   |             |   | - |   |   |   | - |   |   |   | - |   |

|                                |   | Less than 12 months |   |   | 12 months or more |   |   | Total       |   |
|-------------------------------------|--------|---------------------|--------|--------|-------------------|--------|--------|-------------|--------|
| Description of Securities           |   | Estimated           |   |   | Unrealized        |   |   | Estimated   |   |   | Unrealized |   |   | Estimated |   |   | Unrealized |   |
|                                |   | Fair Value          |   |   | Losses            |   |   | Fair Value  |   |   | Losses |   |   | Fair Value |   |   | Losses |   |
|                                |   | (unaudited)         |   |   | (unaudited)       |   |   | (unaudited) |   |   | (unaudited) |   |   | (unaudited) |   |   | (unaudited) |   |
| Available for Sale                  |   |                |   |   |              |   |   |        |   |   |   |   |   |   |   |   |   |   |
| U. S. Government Agencies           |   | $                   | -      |   |              | $      | -      |        |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| Mortgage backed securities          |   |                | 438    |   |              |   | 1      |        |   |   | - |   |   |   | - |   |   |   | 438 |   |   |   | 1 |   |
| State and municipals                |   |                | 10,557 |   |              |   | 304    |        |   |   | 3,365 |   |   |   | 41 |   |   |   | 13,922 |   |   |   | 345 |   |
| Collateralized mortgage obligations |   |                | -      |   |              |   | -      |        |   |   | 2,392 |   |   |   | 124 |   |   |   | 2,392 |   |   |   | 124 |   |
| Subtotal debt securities            |   |                | 10,995 |   |              |   | 305    |        |   |   | 5,757 |   |   |   | 165 |   |   |   | 16,752 |   |   |   | 470 |   |
| Equity securities                   |   |                | 162    |   |              |   | 27     |        |   |   | - |   |   |   | - |   |   |   | 162 |   |   |   | 27 |   |
| Total                               |   | $                   | 11,157 |   |              | $      | 332    |        |   | $ | 5,757 |   |   | $ | 165 |   |   | $ | 16,914 |   |   | $ | 497 |   |

----

Table of Contents

|                                   |   | Available for Sale |    |
|----------------------------------------|--------|--------------------|---------|
|                                   |   | Amortized Cost     |    |   | Fair Value |   |
|                                   |   | (unaudited)        |    |   | (unaudited) |   |
| Due in one year or less                |   | $                  | 41,294  |   |   | $ | 41,468 |   |
| Due after one year through five years  |   |               | 120,273 |   |   |   | 123,591 |   |
| Due after five years through ten years |   |               | 71,253  |   |   |   | 74,252 |   |
| Due after ten years                    |   |               | 166,054 |   |   |   | 171,958 |   |
| Equity securities                      |   |               | 1,541   |   |   |   | 1,861 |   |
| Other                                  |   |               | 11      |   |   |   | 11 |   |
| Total                                  |   | $                  | 400,426 |   |   | $ | 413,141 |   |

----

Table of Contents

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

|                                         |   | June 30,    |      |   | December 31, |   |
|----------------------------------------------|--------|-------------|-----------|--------|--------------|--------|
|                                         |   | 2010        |      |   | 2009         |   |
|                                         |   | (unaudited) |      |   |         |   |
| Real estate loans:                           |   |        |      |   |         |   |
| Construction and land development            |   | $           | 278,438   |   |         | $      | 296,489 |   |
| Secured by 1-4 family residential            |   |        | 779,488   |   |         |   | 785,385 |   |
| Commercial and multifamily                   |   |        | 834,068   |   |         |   | 845,561 |   |
| Commercial, financial and agricultural loans |   |        | 193,644   |   |         |   | 211,903 |   |
| Consumer loans                               |   |        | 35,236    |   |         |   | 39,173 |   |
| All other loans                              |   |        | 7,129     |   |         |   | 7,027 |   |
| Total loans                                  |   |        | 2,128,003 |   |         |   | 2,185,538 |   |
| Deferred loan costs                          |   |        | 940       |   |         |   | 969 |   |
| Allowance for loan losses                    |   |        | (41,525   | )      |         |   | (40,172 | ) |
| Net loans                                    |   | $           | 2,087,418 |   |         | $      | 2,146,335 |   |

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

|                       |   | June 30,    |    |   | December 31, |   |    | June 30,    |   |
|----------------------------|--------|-------------|---------|--------|--------------|--------|---------|-------------|--------|
|                       |   | 2010        |    |   | 2009         |   |    | 2009        |   |
|                       |   | (unaudited) |    |   |         |   |    | (unaudited) |   |
|                       |   |        |    |   |         |   |    |        |   |
| Balance, beginning         |   | $           | 40,172  |   |         | $      | 30,464  |        |   | $ | 30,464 |   |
| Provisions for loan losses |   |        | 14,050  |   |         |   | 37,800  |        |   |   | 14,250 |   |
| Loans charged off          |   |        | (13,862 | )      |         |   | (30,947 | )           |   |   | (11,225 | ) |
| Loan recoveries            |   |        | 1,165   |   |         |   | 2,855   |        |   |   | 1,434 |   |
| Net loan charge-offs       |   |        | (12,697 | )      |         |   | (28,092 | )           |   |   | (9,791 | ) |
|                       |   |        |    |   |         |   |    |        |   |   |   |   |
| Balance, ending            |   | $           | 41,525  |   |         | $      | 40,172  |        |   | $ | 34,923 |   |

|                                                                             |   | June 30,    |   |   | December 31, |   |
|----------------------------------------------------------------------------------|--------|-------------|--------|--------|--------------|--------|
|                                                                             |   | 2010        |   |   | 2009         |   |
|                                                                             |   | (unaudited) |   |   |         |   |
|                                                                             |   |        |   |   |         |   |
| Impaired loans for which an allowance has been provided                          |   | $           | 46,216 |   |         | $      | 45,895 |   |
| Impaired loans for which an allowance has not been provided                      |   |        | 28,924 |   |         |   | 19,777 |   |
| Total impaired loans                                                             |   | $           | 75,140 |   |         | $      | 65,672 |   |
|                                                                             |   |        |   |   |         |   |   |   |
| Allowance provided for impaired loans, included in the allowance for loan losses |   | $           | 9,073  |   |         | $      | 8,357 |   |

----

Table of Contents

|                                                           |   | June 30,    |   |   | June 30,    |   |
|----------------------------------------------------------------|--------|-------------|--------|--------|-------------|--------|
| (In thousands, except per share amounts)                       |   | 2010        |   |   | 2009        |   |
|                                                           |   | (unaudited) |   |   | (unaudited) |   |
|                                                           |   |        |   |   |        |   |
| Net income (loss)                                              |   | $           | 1,553  |   |        | $      | (326 | ) |
| Less:                                                          |   |        |   |   |        |   |   |   |
| Preferred stock dividends                                      |   |        | (374   | )      |        |   | (374 | ) |
| Accretion of preferred stock discount                          |   |        | (91    | )      |        |   | (85 | ) |
| Net income (loss) available to common shareholders (numerator) |   | $           | 1,088  |   |        | $      | (785 | ) |

| Earnings (loss) per common share                         |   |   |       |   |   |   |
|----------------------------------------------------------|--------|--------|------------|--------|--------|--------|
| Weighted average common shares outstanding (denominator) |   |   | 22,716,350 |   |   |   | 22,641,114 |   |
| Earnings (loss) per common share                         |   | $      | 0.05       |   |   | $      | (0.03 | ) |

| Diluted earnings (loss) per common share                         |   |   |       |   |   |   |
|------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
| Weighted average common shares issued and outstanding            |   |   | 22,716,350 |   |   |   | 22,641,114 |   |
| Add:                                                             |   |   |       |   |   |   |   |   |
| Restricted stock                                                 |   |   | 53,374     |   |   |   | - |   |
| Incentive stock options                                          |   |   | 3,220      |   |   |   | - |   |
| Stock options                                                    |   |   | 12,567     |   |   |   | - |   |
| Diluted weighted average common shares outstanding (denominator) |   |   | 22,785,511 |   |   |   | 22,641,114 |   |
| Diluted earnings (loss) per common share                         |   | $      | 0.05       |   |   | $      | (0.03 | ) |

----

Table of Contents

|                                                           |   | June 30,    |   |   | June 30,    |   |
|----------------------------------------------------------------|--------|-------------|--------|--------|-------------|--------|
| (In thousands, except per share amounts)                       |   | 2010        |   |   | 2009        |   |
|                                                           |   | (unaudited) |   |   | (unaudited) |   |
|                                                           |   |        |   |   |        |   |
| Net income (loss)                                              |   | $           | 3,408  |   |        | $      | (180 | ) |
| Less:                                                          |   |        |   |   |        |   |   |   |
| Preferred stock dividends                                      |   |        | (744   | )      |        |   | (744 | ) |
| Accretion of preferred stock discount                          |   |        | (179   | )      |        |   | (159 | ) |
| Net income (loss) available to common shareholders (numerator) |   | $           | 2,485  |   |        | $      | (1,083 | ) |

| Earnings (loss) per common share                         |   |   |       |   |   |   |
|----------------------------------------------------------|--------|--------|------------|--------|--------|--------|
| Weighted average common shares outstanding (denominator) |   |   | 22,695,536 |   |   |   | 22,630,323 |   |
| Earnings (loss) per common share                         |   | $      | 0.11       |   |   | $      | (0.05 | ) |

| Diluted earnings (loss) per common share                         |   |   |       |   |   |   |
|------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
| Weighted average common shares issued and outstanding            |   |   | 22,695,536 |   |   |   | 22,630,323 |   |
| Add:                                                             |   |   |       |   |   |   |   |   |
| Restricted stock                                                 |   |   | 48,195     |   |   |   | - |   |
| Incentive stock options                                          |   |   | 2,513      |   |   |   | - |   |
| Stock options                                                    |   |   | 12,160     |   |   |   | - |   |
| Diluted weighted average common shares outstanding (denominator) |   |   | 22,758,404 |   |   |   | 22,630,323 |   |
| Diluted earnings (loss) per common share                         |   | $      | 0.11       |   |   | $      | (0.05 | ) |

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|                         |   | 2010   |    |   | 2009     |   |
|------------------------------|--------|--------|---------|--------|----------|--------|
|                         |   |   |    |   | Weighted |   |   |   |   |   | Weighted |   |
|                         |   | Number |    |   | Average  |   |   | Number |   |   | Average |   |
|                         |   | of     |    |   | Exercise |   |   | of |   |   | Exercise |   |
|                         |   | Shares |    |   | Price    |   |   | Shares |   |   | Price |   |
|                         |   |   |    |   |     |   |   |   |   |   |   |   |
|  Outstanding, January 1 |   |   | 575,046 |   |     | $      | 18.93 |   |   |   | 614,198 |   |   | $ | 18.58 |   |
|  Granted                |   |   | -       |   |     |   | - |   |   |   | 17,392 |   |   |   | 12.78 |   |
|  Forfeited              |   |   | (2,383  | )      |     |   | 13.17 |   |   |   | (4,880 | ) |   |   | - |   |
|  Expired                |   |   | (6,892  | )      |     |   | - |   |   |   | - |   |   |   | - |   |
|  Exercised              |   |   | (55,450 | )      |     |   | 22.68 |   |   |   | (28,835 | ) |   |   | 9.73 |   |
|  Outstanding, June 30,  |   |   | 510,321 |   |     | $      | 19.90 |   |   |   | 597,875 |   |   | $ | 18.69 |   |
|                         |   |   |    |   |     |   |   |   |   |   |   |   |   |   |   |   |
|  Exercisable, June 30,  |   |   | 433,706 |   |     |   |   |   |   |   | 482,947 |   |   |   |   |   |

| Nonvested Shares             |   | Number of Shares |    |   | Weighted-Average Grant-Date Fair Value |   |   | (In thousands) Total Intrinsic Value |   |
|------------------------------|--------|------------------|---------|--------|--------------------------------------------------|--------|--------|------------------------------------------------|--------|
|                         |   |             |    |   |                                             |   |   |                                           |   |
| Nonvested at January 1, 2010 |   |             | 70,936  |   |                                             | $      | 13.80  |                                           |   | $ | 707 |   |
| Granted                      |   |             | 100,959 |   |                                             |   | 8.87   |                                           |   |   |   |   |
| Vested & Exercised       |   |             | (25,459 | )      |                                             |   | 13.14  |                                           |   | $ | (346 | ) |
| Forfeited                    |   |             | (2,880  | )      |                                             |   | 13.29  |                                           |   |   |   |   |
| Nonvested at June 30, 2010   |   |             | 143,556 |   |                                             | $      | 10.46  |                                           |   | $ | 1,833 |   |

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|                                        |   | Stock Options |   |   | Nonvested Restricted Stock |   |   | Total  |   |
|---------------------------------------------|--------|---------------|--------|--------|----------------------------|--------|--------|--------|--------|
|                                        |   |          |   |   |                       |   |   |   |   |
| For the remaining six months of 2010        |   | $             | 31     |   |                       | $      | 196    |   |   | $ | 227 |   |
| For year ended December 31,  2011 |   |          | 63     |   |                       |   | 359    |   |   |   | 422 |   |
| For year ended December 31,  2012 |   |          | 63     |   |                       |   | 321    |   |   |   | 384 |   |
| For year ended December 31,  2013 |   |          | 21     |   |                       |   | 287    |   |   |   | 308 |   |
| For year ended December 31,  2014 |   |          | 1      |   |                       |   | 93     |   |   |   | 94 |   |
| For year ended December 31,  2015 |   |          | -      |   |                       |   | 7      |   |   |   | 7 |   |
| Total                                       |   | $             | 179    |   |                       | $      | 1,263  |   |   | $ | 1,442 |   |

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|                                     |   |   |    |   | Fair Value Measurements at |   |
|------------------------------------------|--------|--------|---------|--------|----------------------------|--------|
|                                     |   |   |    |   | June 30, 2010              |   |
|                                     |   |   |    |   | Using                      |   |
|                                     |   |   |    |   | Level 1                    |   |   | Level 2 |   |   | Level 3 |   |
|  (unaudited)                        |   | Total  |    |   | (Quoted Prices)            |   |   | (Significant Other Observable Inputs) |   |   | (Significant Unobservable Inputs) |   |
| Investment securities available-for-sale |   | $      | 413,141 |   |                       | $      | 21,951 |   |   | $ | 391,190 |   |   | $ | - |   |
|  Total assets at fair value         |   | $      | 413,141 |   |                       | $      | 21,951 |   |   | $ | 391,190 |   |   | $ | - |   |
|                                     |   |   |    |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Other liabilities(1)                     |   | $      | 2,815   |   |                       | $      | 2,815 |   |   | $ | - |   |   | $ | - |   |
| Total liabilities at fair value          |   | $      | 2,815   |   |                       | $      | 2,815 |   |   | $ | - |   |   | $ | - |   |

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

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|                               |   |   |    |   | Fair Value Measurements at |   |
|------------------------------------|--------|--------|---------|--------|----------------------------|--------|
|                               |   |   |    |   | June 30, 2010              |   |
|                               |   |   |    |   | Using                      |   |
|                               |   |   |    |   | Level 1                    |   |   | Level 2 |   |   | Level 3 |   |
|  (unaudited)                  |   | Total  |    |   | (Quoted Prices)            |   |   | (Significant Other Observable Inputs) |   |   | (Significant Unobservable Inputs) |   |
| Loans - impaired loans             |   | $      | 75,140  |   |                       | $      | - |   |   | $ | 32,768 |   |   | $ | 42,372 |   |
| Loans held for sale - mortgage     |   |   | 42,265  |   |                       |   | - |   |   |   | 42,265 |   |   |   | - |   |
| Loans held for sale - other assets |   |   | 527     |   |                       |   | - |   |   |   | - |   |   |   | 527 |   |
| Foreclosed assets                  |   |   | 5,953   |   |                       |   | - |   |   |   | - |   |   |   | 5,953 |   |
|  Total assets at fair value   |   | $      | 123,885 |   |                       | $      | - |   |   | $ | 75,033 |   |   | $ | 48,852 |   |
|                               |   |   |    |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities at fair value    |   | $      | -       |   |                       | $      | - |   |   | $ | - |   |   | $ | - |   |

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

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|                                                                                  | June 30, 2010 |   |      | December 31, 2009 |   |
|---------------------------------------------------------------------------------------|---------------|--------|-----------|-------------------|--------|
|                                                                                  | Carrying      |   |      | Estimated Fair    |   |   | Carrying |   |   | Estimated Fair |   |
|                                                                                  | Amount        |   |      | Value             |   |   | Amount |   |   | Value |   |
| Financial assets:                                                                     |          |   |      |              |   |   |   |   |   |   |   |   |
| Cash and cash equivalents                                                             |          | $      | 126,280   |              |   | $ | 126,280 |   |   | $ | 152,926 |   |   | $ | 152,926 |   |
| Investment securities                                                                 |          |   | 413,141   |              |   |   | 413,141 |   |   |   | 378,961 |   |   |   | 378,964 |   |
| Mortgage loans held for sale                                                          |          |   | 42,265    |              |   |   | 42,265 |   |   |   | 44,165 |   |   |   | 44,165 |   |
| Loans, net                                                                            |          |   | 2,087,418 |              |   |   | 1,870,795 |   |   |   | 2,146,335 |   |   |   | 1,917,338 |   |
| Accrued interest receivable                                                           |          |   | 9,427     |              |   |   | 9,427 |   |   |   | 9,459 |   |   |   | 9,459 |   |
|                                                                                  |          |   |      |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities:                                                                |          |   |      |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                              |          | $      | 2,387,496 |              |   | $ | 2,397,225 |   |   | $ | 2,436,120 |   |   | $ | 2,446,354 |   |
| Federal funds purchased and  securities sold under agreements to repurchase |          |   | 1,040     |              |   |   | 1,040 |   |   |   | 783 |   |   |   | 783 |   |
| Federal Home Loan Bank advances                                                       |          |   | 120,000   |              |   |   | 122,320 |   |   |   | 130,000 |   |   |   | 134,321 |   |
| Subordinated debt                                                                     |          |   | 32,991    |              |   |   | 32,938 |   |   |   | 32,991 |   |   |   | 32,807 |   |
| Accrued interest payable                                                              |          |   | 2,760     |              |   |   | 2,760 |   |   |   | 3,626 |   |   |   | 3,626 |   |

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

| At and for the Three Months Ended June 30, 2010 (In thousands): |   |       |      |   |     |   |   |       |   |   |   |   |   |         |     |   |         |   |
|-----------------------------------------------------------------|--------|------------|-----------|--------|----------|--------|--------|------------|--------|--------|--------|--------|--------|--------------|----------|--------|--------------|--------|
|                                                            |   | Commercial |      |   | Mortgage |   |   | Wealth     |   |   |   |   |   | Intersegment |     |   |         |   |
|                                                            |   | Bank       |      |   | Banking  |   |   | Management |   |   | Other  |   |   | Elimination  |     |   | Consolidated |   |
| Net interest income                                             |   | $          | 23,152    |   |     | $      | 330    |       |   | $      | -      |   |   | $            | (264     | )      |         | $      | - |   |   | $ | 23,218 |   |
| Provision for loan losses                                       |   |       | 7,350     |   |     |   | -      |       |   |   | -      |   |   |         | -        |   |         |   | - |   |   |   | 7,350 |   |
| Noninterest income                                              |   |       | 6,413     |   |     |   | 1,532  |       |   |   | 1,271  |   |   |         | 212      |   |         |   | (1,048 | ) |   |   | 8,380 |   |
| Noninterest expense                                             |   |       | 20,681    |   |     |   | 1,674  |       |   |   | 961    |   |   |         | 523      |   |         |   | (1,048 | ) |   |   | 22,791 |   |
| Provision for income taxes                                      |   |       | 14        |   |     |   | 56     |       |   |   | 93     |   |   |         | (259     | )      |         |   | - |   |   |   | (96 | ) |
| Net income (loss)                                               |   | $          | 1,520     |   |     | $      | 132    |       |   | $      | 217    |   |   | $            | (316     | )      |         | $      | - |   |   | $ | 1,553 |   |
|                                                            |   |       |      |   |     |   |   |       |   |   |   |   |   |         |     |   |         |   |   |   |   |   |   |   |
| Total Assets                                                    |   | $          | 2,925,753 |   |     | $      | 43,564 |       |   | $      | 668    |   |   | $            | 462,512  |   |         | $      | (444,712 | ) |   | $ | 2,987,785 |   |
| Average Assets                                                  |   | $          | 2,935,076 |   |     | $      | 31,839 |       |   | $      | 325    |   |   | $            | (278,686 | )      |         | $      | 296,400 |   |   | $ | 2,984,954 |   |

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| At and for the Three Months Ended June 30, 2009 (In thousands): |   |       |      |   |     |   |   |       |   |   |
|-----------------------------------------------------------------|--------|------------|-----------|--------|----------|--------|--------|------------|--------|--------|
|                                                            |   | Commercial |      |   | Mortgage |   |   | Wealth     |   |   |   |   |   | Intersegment |   |   |   |   |
|                                                            |   | Bank       |      |   | Banking  |   |   | Management |   |   | Other |   |   | Elimination |   |   | Consolidated |   |
| Net interest income                                             |   | $          | 21,793    |   |     | $      | 476    |       |   | $      | - |   |   | $ | (338 | ) |   | $ | - |   |   | $ | 21,931 |   |
| Provision for loan losses                                       |   |       | 6,500     |   |     |   | -      |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 6,500 |   |
| Noninterest income                                              |   |       | 5,648     |   |     |   | 2,085  |       |   |   | 989 |   |   |   | 144 |   |   |   | (1,051 | ) |   |   | 7,815 |   |
| Noninterest expense                                             |   |       | 21,725    |   |     |   | 1,922  |       |   |   | 928 |   |   |   | 533 |   |   |   | (1,051 | ) |   |   | 24,057 |   |
| Provision for income taxes                                      |   |       | (825      | )      |     |   | 192    |       |   |   | 18 |   |   |   | 130 |   |   |   | - |   |   |   | (485 | ) |
| Net income (loss)                                               |   | $          | 41        |   |     | $      | 447    |       |   | $      | 43 |   |   | $ | (857 | ) |   | $ | - |   |   | $ | (326 | ) |
|                                                            |   |       |      |   |     |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Assets                                                    |   | $          | 2,980,953 |   |     | $      | 53,023 |       |   | $      | 594 |   |   | $ | 464,882 |   |   | $ | (403,765 | ) |   | $ | 3,095,687 |   |
| Average Assets                                                  |   | $          | 2,945,702 |   |     | $      | 46,323 |       |   | $      | 461 |   |   | $ | 466,355 |   |   | $ | (406,035 | ) |   | $ | 3,052,806 |   |

| At and for the Six Months Ended June 30, 2010 (In thousands): |   |       |      |   |     |   |   |       |   |   |
|---------------------------------------------------------------|--------|------------|-----------|--------|----------|--------|--------|------------|--------|--------|
|                                                          |   | Commercial |      |   | Mortgage |   |   | Wealth     |   |   |   |   |   | Intersegment |   |   |   |   |
|                                                          |   | Bank       |      |   | Banking  |   |   | Management |   |   | Other |   |   | Elimination |   |   | Consolidated |   |
| Net interest income                                           |   | $          | 45,534    |   |     | $      | 704    |       |   | $      | - |   |   | $ | (521 | ) |   | $ | - |   |   | $ | 45,717 |   |
| Provision for loan losses                                     |   |       | 14,050    |   |     |   | -      |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 14,050 |   |
| Noninterest income                                            |   |       | 13,017    |   |     |   | 3,412  |       |   |   | 2,463 |   |   |   | 424 |   |   |   | (2,121 | ) |   |   | 17,195 |   |
| Noninterest expense                                           |   |       | 41,051    |   |     |   | 3,437  |       |   |   | 1,948 |   |   |   | 1,023 |   |   |   | (2,121 | ) |   |   | 45,338 |   |
| Provision for income taxes                                    |   |       | 196       |   |     |   | 204    |       |   |   | 155 |   |   |   | (439 | ) |   |   | - |   |   |   | 116 |   |
| Net income (loss)                                             |   | $          | 3,254     |   |     | $      | 475    |       |   | $      | 360 |   |   | $ | (681 | ) |   | $ | - |   |   | $ | 3,408 |   |
|                                                          |   |       |      |   |     |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average Assets                                                |   | $          | 2,941,435 |   |     | $      | 32,731 |       |   | $      | 346 |   |   | $ | 386,390 |   |   | $ | (368,974 | ) |   | $ | 2,991,928 |   |

| At and for the Six Months Ended June 30, 2009 (In thousands): |   |       |      |   |     |   |   |       |   |   |
|---------------------------------------------------------------|--------|------------|-----------|--------|----------|--------|--------|------------|--------|--------|
|                                                          |   | Commercial |      |   | Mortgage |   |   | Wealth     |   |   |   |   |   | Intersegment |   |   |   |   |
|                                                          |   | Bank       |      |   | Banking  |   |   | Management |   |   | Other |   |   | Elimination |   |   | Consolidated |   |
| Net interest income                                           |   | $          | 44,227    |   |     | $      | 798    |       |   | $      | - |   |   | $ | (695 | ) |   | $ | - |   |   | $ | 44,330 |   |
| Provision for loan losses                                     |   |       | 14,250    |   |     |   | -      |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 14,250 |   |
| Noninterest income                                            |   |       | 11,170    |   |     |   | 3,509  |       |   |   | 1,999 |   |   |   | 366 |   |   |   | (2,101 | ) |   |   | 14,943 |   |
| Noninterest expense                                           |   |       | 42,323    |   |     |   | 3,417  |       |   |   | 1,861 |   |   |   | 780 |   |   |   | (2,101 | ) |   |   | 46,280 |   |
| Provision for income taxes                                    |   |       | (1,373    | )      |     |   | 267    |       |   |   | 41 |   |   |   | (12 | ) |   |   | - |   |   |   | (1,077 | ) |
| Net income (loss)                                             |   | $          | 197       |   |     | $      | 623    |       |   | $      | 97 |   |   | $ | (1,097 | ) |   | $ | - |   |   | $ | (180 | ) |
|                                                          |   |       |      |   |     |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average Assets                                                |   | $          | 2,923,623 |   |     | $      | 38,028 |       |   | $      | 511 |   |   | $ | 467,555 |   |   | $ | (407,753 | ) |   | $ | 3,021,964 |   |

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

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

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|                                                                             |   | For the Three Months Ended June 30, |      |
|----------------------------------------------------------------------------------|--------|-------------------------------------|-----------|
|                                                                             |   | (unaudited)                         |      |
|                                                                             |   | 2010                                |      |   | 2009 |   |
|                                                                             |   | Average                             |      |   | Interest |   |   | Average |   |   | Average |   |   | Interest |   |   | Average |   |
| Dollars in thousands                                                             |   | Balance                             |      |   | Inc/Exp |   |   | Rates |   |   | Balance |   |   | Inc/Exp |   |   | Rates |   |
|                                                                             |   |                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets                                                                           |   |                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans receivable, net                                                            |   | $                                   | 2,168,536 |   |   | $ | 28,901 |   |   |   | 5.35 | % |   | $ | 2,291,735 |   |   | $ | 31,801 |   |   |   | 5.57 | % |
| Investment securities                                                            |   |                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                                          |   |                                | 268,782   |   |   |   | 2,201 |   |   |   | 3.24 | % |   |   | 230,102 |   |   |   | 2,472 |   |   |   | 4.25 | % |
| Tax exempt (1)                                                                   |   |                                | 104,139   |   |   |   | 1,583 |   |   |   | 6.01 | % |   |   | 97,122 |   |   |   | 1,496 |   |   |   | 6.09 | % |
| Total investments                                                                |   |                                | 372,921   |   |   |   | 3,784 |   |   |   | 4.01 | % |   |   | 327,224 |   |   |   | 3,968 |   |   |   | 4.80 | % |
|                                                                             |   |                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest bearing deposits                                                        |   |                                | 60,854    |   |   |   | 30 |   |   |   | 0.20 | % |   |   | 51,966 |   |   |   | 21 |   |   |   | 0.16 | % |
| Federal funds sold                                                               |   |                                | 61,986    |   |   |   | 40 |   |   |   | 0.26 | % |   |   | 58,560 |   |   |   | 31 |   |   |   | 0.21 | % |
|                                                                             |   |                                | 495,761   |   |   |   | 3,854 |   |   |   | 3.07 | % |   |   | 437,750 |   |   |   | 4,020 |   |   |   | 3.64 | % |
|                                                                             |   |                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total earning assets                                                             |   |                                | 2,664,297 |   |   | $ | 32,755 |   |   |   | 4.93 | % |   |   | 2,729,485 |   |   | $ | 35,821 |   |   |   | 5.26 | % |
|                                                                             |   |                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total nonearning assets                                                          |   |                                | 320,657   |   |   |   |   |   |   |   |   |   |   |   | 323,321 |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                                                     |   | $                                   | 2,984,954 |   |   |   |   |   |   |   |   |   |   | $ | 3,052,806 |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities and Stockholders' Equity                                             |   |                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing deposits                                                        |   |                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Interest checking                                        |   | $                                   | 571,920   |   |   | $ | 902 |   |   |   | 0.63 | % |   | $ | 524,408 |   |   | $ | 1,255 |   |   |   | 0.96 | % |
|     Money market                                             |   |                                | 389,863   |   |   |   | 1,120 |   |   |   | 1.15 | % |   |   | 275,534 |   |   |   | 1,047 |   |   |   | 1.52 | % |
|     Savings                                                  |   |                                | 224,076   |   |   |   | 482 |   |   |   | 0.86 | % |   |   | 191,788 |   |   |   | 420 |   |   |   | 0.88 | % |
|     Time deposits:                                           |   |                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         Less than $100,000               |   |                                | 615,084   |   |   |   | 3,311 |   |   |   | 2.16 | % |   |   | 794,180 |   |   |   | 5,926 |   |   |   | 2.99 | % |
|         $100,000 and more                |   |                                | 290,634   |   |   |   | 1,788 |   |   |   | 2.47 | % |   |   | 305,297 |   |   |   | 2,712 |   |   |   | 3.56 | % |
| Total interest-bearing deposits                                                  |   |                                | 2,091,577 |   |   |   | 7,603 |   |   |   | 1.46 | % |   |   | 2,091,207 |   |   |   | 11,360 |   |   |   | 2.18 | % |
|                                                                             |   |                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal funds purchased and securities sold under agreements to repurchase       |   |                                | 950       |   |   |   | 7 |   |   |   | 2.91 | % |   |   | 464 |   |   |   | 3 |   |   |   | 2.56 | % |
| Federal Home Loan Bank advances and other borrowings                             |   |                                | 122,913   |   |   |   | 1,059 |   |   |   | 3.41 | % |   |   | 170,067 |   |   |   | 1,553 |   |   |   | 3.61 | % |
| Subordinated debt                                                                |   |                                | 32,991    |   |   |   | 263 |   |   |   | 3.15 | % |   |   | 32,991 |   |   |   | 343 |   |   |   | 4.11 | % |
|                                                                             |   |                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                                | 156,854   |   |   |   | 1,329 |   |   |   | 3.35 | % |   |   | 203,522 |   |   |   | 1,899 |   |   |   | 3.69 | % |
|                                                                             |   |                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Total interest-bearing liabilities                       |   |                                | 2,248,431 |   |   |   | 8,932 |   |   |   | 1.59 | % |   |   | 2,294,729 |   |   |   | 13,259 |   |   |   | 2.31 | % |
|                                                                             |   |                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Total noninterest-bearing liabilities                    |   |                                | 311,480   |   |   |   |   |   |   |   |   |   |   |   | 328,374 |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities                                                                |   |                                | 2,559,911 |   |   |   |   |   |   |   |   |   |   |   | 2,623,103 |   |   |   |   |   |   |   |   |   |
| Stockholders' equity                                                             |   |                                | 425,043   |   |   |   |   |   |   |   |   |   |   |   | 429,703 |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders' equity                                       |   | $                                   | 2,984,954 |   |   |   |   |   |   |   |   |   |   | $ | 3,052,806 |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income (tax equivalent)                                             |   |                                |      |   |   | $ | 23,823 |   |   |   |   |   |   |   |   |   |   | $ | 22,562 |   |   |   |   |   |
|     Average interest rate spread                             |   |                                |      |   |   |   |   |   |   |   | 3.34 | % |   |   |   |   |   |   |   |   |   |   | 2.95 | % |
|     Interest expense as percentage of average earning assets |   |                                |      |   |   |   |   |   |   |   | 1.34 | % |   |   |   |   |   |   |   |   |   |   | 1.95 | % |
|     Net interest margin                                      |   |                                |      |   |   |   |   |   |   |   | 3.59 | % |   |   |   |   |   |   |   |   |   |   | 3.31 | % |

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|                                                                             |   | For the Six Months Ended June 30, |      |
|----------------------------------------------------------------------------------|--------|-----------------------------------|-----------|
|                                                                             |   | (unaudited)                       |      |
|                                                                             |   | 2010                              |      |   | 2009 |   |
|                                                                             |   | Average                           |      |   | Interest |   |   | Average |   |   | Average |   |   | Interest |   |   | Average |   |
| Dollars in thousands                                                             |   | Balance                           |      |   | Inc/Exp |   |   | Rates |   |   | Balance |   |   | Inc/Exp |   |   | Rates |   |
|                                                                             |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets                                                                           |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans receivable, net                                                            |   | $                                 | 2,186,318 |   |   | $ | 58,038 |   |   |   | 5.35 | % |   | $ | 2,288,118 |   |   | $ | 64,400 |   |   |   | 5.68 | % |
| Investment securities                                                            |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                                          |   |                              | 264,353   |   |   |   | 4,488 |   |   |   | 3.38 | % |   |   | 228,873 |   |   |   | 5,078 |   |   |   | 4.41 | % |
| Tax exempt (1)                                                                   |   |                              | 104,906   |   |   |   | 3,194 |   |   |   | 6.06 | % |   |   | 90,414 |   |   |   | 2,801 |   |   |   | 6.16 | % |
| Total investments                                                                |   |                              | 369,259   |   |   |   | 7,682 |   |   |   | 4.14 | % |   |   | 319,287 |   |   |   | 7,879 |   |   |   | 4.91 | % |
|                                                                             |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest bearing deposits                                                        |   |                              | 52,503    |   |   |   | 58 |   |   |   | 0.22 | % |   |   | 50,885 |   |   |   | 40 |   |   |   | 0.16 | % |
| Federal funds sold                                                               |   |                              | 57,492    |   |   |   | 73 |   |   |   | 0.25 | % |   |   | 38,046 |   |   |   | 44 |   |   |   | 0.23 | % |
|                                                                             |   |                              | 479,254   |   |   |   | 7,813 |   |   |   | 3.24 | % |   |   | 408,218 |   |   |   | 7,963 |   |   |   | 3.88 | % |
|                                                                             |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total earning assets                                                             |   |                              | 2,665,572 |   |   | $ | 65,851 |   |   |   | 4.98 | % |   |   | 2,696,336 |   |   | $ | 72,363 |   |   |   | 5.41 | % |
|                                                                             |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total nonearning assets                                                          |   |                              | 326,356   |   |   |   |   |   |   |   |   |   |   |   | 325,628 |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                                                     |   | $                                 | 2,991,928 |   |   |   |   |   |   |   |   |   |   | $ | 3,021,964 |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities and Stockholders' Equity                                             |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing deposits                                                        |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Interest checking                                        |   | $                                 | 565,395   |   |   | $ | 2,234 |   |   |   | 0.80 | % |   | $ | 520,463 |   |   | $ | 2,652 |   |   |   | 1.03 | % |
|     Money market                                             |   |                              | 391,046   |   |   |   | 2,414 |   |   |   | 1.24 | % |   |   | 255,453 |   |   |   | 1,877 |   |   |   | 1.48 | % |
|     Savings                                                  |   |                              | 212,136   |   |   |   | 931 |   |   |   | 0.89 | % |   |   | 190,103 |   |   |   | 830 |   |   |   | 0.88 | % |
|     Time deposits:                                           |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         Less than $100,000               |   |                              | 629,318   |   |   |   | 6,887 |   |   |   | 2.21 | % |   |   | 778,506 |   |   |   | 11,986 |   |   |   | 3.10 | % |
|         $100,000 and more                |   |                              | 301,406   |   |   |   | 3,744 |   |   |   | 2.50 | % |   |   | 314,643 |   |   |   | 5,666 |   |   |   | 3.63 | % |
| Total interest-bearing deposits                                                  |   |                              | 2,099,301 |   |   |   | 16,210 |   |   |   | 1.56 | % |   |   | 2,059,168 |   |   |   | 23,011 |   |   |   | 2.25 | % |
|                                                                             |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal funds purchased and securities sold under agreements to repurchase       |   |                              | 906       |   |   |   | 13 |   |   |   | 2.85 | % |   |   | 405 |   |   |   | 7 |   |   |   | 3.44 | % |
| Federal Home Loan Bank advances and other borrowings                             |   |                              | 125,028   |   |   |   | 2,169 |   |   |   | 3.45 | % |   |   | 177,155 |   |   |   | 3,121 |   |   |   | 3.50 | % |
| Subordinated debt                                                                |   |                              | 32,991    |   |   |   | 522 |   |   |   | 3.15 | % |   |   | 32,991 |   |   |   | 700 |   |   |   | 4.22 | % |
|                                                                             |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                              | 158,925   |   |   |   | 2,704 |   |   |   | 3.38 | % |   |   | 210,551 |   |   |   | 3,828 |   |   |   | 3.62 | % |
|                                                                             |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Total interest-bearing liabilities                       |   |                              | 2,258,226 |   |   |   | 18,914 |   |   |   | 1.69 | % |   |   | 2,269,719 |   |   |   | 26,839 |   |   |   | 2.38 | % |
|                                                                             |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Total noninterest-bearing liabilities                    |   |                              | 310,043   |   |   |   |   |   |   |   |   |   |   |   | 321,013 |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities                                                                |   |                              | 2,568,269 |   |   |   |   |   |   |   |   |   |   |   | 2,590,732 |   |   |   |   |   |   |   |   |   |
| Stockholders' equity                                                             |   |                              | 423,659   |   |   |   |   |   |   |   |   |   |   |   | 431,232 |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders' equity                                       |   | $                                 | 2,991,928 |   |   |   |   |   |   |   |   |   |   | $ | 3,021,964 |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income (tax equivalent)                                             |   |                              |      |   |   | $ | 46,937 |   |   |   |   |   |   |   |   |   |   | $ | 45,524 |   |   |   |   |   |
|     Average interest rate spread                             |   |                              |      |   |   |   |   |   |   |   | 3.29 | % |   |   |   |   |   |   |   |   |   |   | 3.03 | % |
|     Interest expense as percentage of average earning assets |   |                              |      |   |   |   |   |   |   |   | 1.43 | % |   |   |   |   |   |   |   |   |   |   | 2.01 | % |
|     Net interest margin                                      |   |                              |      |   |   |   |   |   |   |   | 3.55 | % |   |   |   |   |   |   |   |   |   |   | 3.40 | % |

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|                                         |   | June 30,    |   |   | December 31, |   |
|----------------------------------------------|--------|-------------|--------|--------|--------------|--------|
|                                         |   | 2010        |   |   | 2009         |   |
|                                         |   | (unaudited) |   |   |         |   |
| Performing restructurings                    |   |        |   |   |         |   |
| Real estate loans:                           |   |        |   |   |         |   |
| Construction and land development            |   | $           | 5,050  |   |         | $      | 1,986 |   |
| Secured by 1-4 family residential            |   |        | 18,719 |   |         |   | 14,549 |   |
| Commercial and multifamily                   |   |        | 6,796  |   |         |   | 4,145 |   |
| Commercial, financial and agricultural loans |   |        | 3,353  |   |         |   | - |   |
| Total performing restructurings              |   |        | 33,918 |   |         |   | 20,680 |   |
|                                         |   |        |   |   |         |   |   |   |
| Nonperforming restructurings                 |   |        | 2,595  |   |         |   | 2,678 |   |
| Total restructurings                         |   | $           | 36,513 |   |         | $      | 23,358 |   |

|                                                                          |   | June 30,    |   |   | December 31, |   |   | June 30,    |   |
|-------------------------------------------------------------------------------|--------|-------------|--------|--------|--------------|--------|--------|-------------|--------|
|                                                                          |   | 2010        |   |   | 2009         |   |   | 2009        |   |
|                                                                          |   | (unaudited) |   |   |         |   |   | (unaudited) |   |
|                                                                          |   |        |   |   |         |   |   |        |   |
|  Non-accrual loans                                                       |   | $           | 61,495 |   |         | $      | 56,624 |        |   | $ | 71,590 |   |
|  Troubled debt restructurings                                            |   |        | 2,595  |   |         |   | 2,678  |        |   |   | 1,405 |   |
|  Foreclosed assets                                                       |   |        | 5,953  |   |         |   | 4,505  |        |   |   | 4,121 |   |
|  Loans held for sale                                                     |   |        | 527    |   |         |   | 936    |        |   |   | - |   |
|  Total non-performing assets                                             |   | $           | 70,570 |   |         | $      | 64,743 |        |   | $ | 77,116 |   |
|  Nonperforming assets to total assets                                    |   |        | 2.36   | %      |         |   | 2.18   | %           |   |   | 2.49 | % |
|  Nonperforming assets to loans and foreclosed property                   |   |        | 3.31   | %      |         |   | 3.03   | %           |   |   | 3.44 | % |
|  Allowance for loan losses as a percentage of loans receivable           |   |        | 1.95   | %      |         |   | 1.84   | %           |   |   | 1.56 | % |
|  Allowance for loan losses as a percentage of nonperforming assets       |   |        | 58.84  | %      |         |   | 62.05  | %           |   |   | 45.29 | % |
|  Annualized net charge-offs as a percentage of average loans receiveable |   |        | 1.19   | %      |         |   | 1.24   | %           |   |   | 1.20 | % |

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|                                                             |   | Corporation |      |   | Bank   |   |
|------------------------------------------------------------------|--------|-------------|-----------|--------|--------|--------|
| Tier 1 capital                                                   |   | $           | 333,104   |   |   | $      | 285,258 |   |
| Tier 2 capital                                                   |   |        | 30,020    |   |   |   | 29,835 |   |
| Total risk-based capital                                         |   |        | 363,124   |   |   |   | 315,093 |   |
| Total risk-weighted assets                                       |   |        | 2,378,448 |   |   |   | 2,361,507 |   |
| Average adjusted total assets                                    |   |        | 2,866,492 |   |   |   | 2,848,867 |   |
| Capital ratios:                                                  |   |        |      |   |   |   |   |   |
| Tier 1 risk-based capital ratio                                  |   |        | 14.01     | %      |   |   | 12.08 | % |
| Total risk-based capital ratio                                   |   |        | 15.27     | %      |   |   | 13.34 | % |
| Leverage ratio (Tier 1 capital to average adjusted total assets) |   |        | 11.62     | %      |   |   | 10.01 | % |
| Equity to assets ratio                                           |   |        | 14.13     | %      |   |   | 13.76 | % |
| Tangible common equity to assets ratio                           |   |        | 9.62      | %      |   |   | 10.20 | % |

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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ITEM 4 – CONTROLS AND PROCEDURES

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

RISK FACTORS.

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

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

(REMOVED AND RESERVED)

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

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 EXHIBITS:

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

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

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