|   | [X] | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
|--------|-----|-----------------------------------------------------------------------------------------|

|   | [ ] | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
|--------|-----|------------------------------------------------------------------------------------------|

| Delaware                                                       | 54-2069979                             |
|----------------------------------------------------------------|----------------------------------------|
| (State or other jurisdiction of incorporation or organization) | (I.R.S. EmployerIdentification Number) |
|                                                           |                                   |
| 519 South New Hope Road, Gastonia, NC                          | 28054                                  |
| (Address of principal executive offices)                       | (Zip code)                             |

----

|                                                                                                                  | Page   |
|-----------------------------------------------------------------------------------------------------------------------|--------|
| Part I.  Financial Information                                                                              |   |
|                                                                                                                  |   |
| Item 1.   Financial Statements (unaudited)                                                                  |   |
|                                                                                                                  |   |
| Consolidated Statements of Financial Condition at June 30, 2011 and December 31, 2010                                 | 1      |
|                                                                                                                  |   |
| Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2011 and 2010                       | 2      |
|                                                                                                                  |   |
| Consolidated Statements of Shareholders’ Equity for the Six Months Ended June 30, 2011 and 2010                 | 3      |
|                                                                                                                  |   |
| Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2011 and 2010                                 | 4      |
|                                                                                                                  |   |
| Notes to Consolidated Financial Statements                                                                            | 5      |
|                                                                                                                  |   |
| Item 2.  Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations | 23     |
|                                                                                                                  |   |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk                                               | 32     |
|                                                                                                                  |   |
| Item 4.  Controls and Procedures                                                                            | 32     |
|                                                                                                                  |   |
| Part II.  Other Information                                                                                 |   |
|                                                                                                                  |   |
| Item 1.  Legal Proceedings                                                                                  | 33     |
|                                                                                                                  |   |
| Item 1A.  Risk Factors                                                                                      | 33     |
|                                                                                                                  |   |
| Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds                                        | 33     |
|                                                                                                                  |   |
| Item 6.  Exhibits                                                                                           | 33     |
|                                                                                                                  |   |
| Signatures                                                                                                            |   |
|                                                                                                                  |   |
| Certifications                                                                                                        |   |

----

Item 

CONSOLIDATED 

|                                                                                                                                                                                                                           |   | June 30, 2011 |      |   | December 31, 2010* |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------|-----------|--------|--------------------|--------|
| (Dollars in thousands, except share and per share data)                                                                                                                                                                        |   | (unaudited)   |      |   |               |   |
|                                                                                                                                                                                                                           |   |          |      |   |               |   |
| ASSETS                                                                                                                                                                                                                         |   |          |      |   |               |   |
| Cash and cash equivalents:                                                                                                                                                                                                     |   |          |      |   |               |   |
|       Cash and noninterest-bearing deposits                                                                                                                                                      |   | $             | 10,868    |   |               | $      | 15,110 |   |
|       Interest-earning deposits                                                                                                                                                                  |   |          | 78,469    |   |               |   | 105,789 |   |
|          Cash and cash equivalents                                                                                                                                                |   |          | 89,337    |   |               |   | 120,899 |   |
| Investment securities available for sale, at fair value (amortized cost of $76,080 and $74,335 at June 30, 2011 and December 31, 2010, respectively) $76,080 and $74,335 at June 30, 2011 and December 31, 2010, respectively) |   |          | 76,930    |   |               |   | 74,308 |   |
| Investment securities held to maturity, at amortized cost (fair value of $81,003 and $37,638 at June 30, 2011 and December 31, 2010, respectively)                                                                             |   |          | 79,398    |   |               |   | 37,278 |   |
| Federal Home Loan Bank stock, at cost                                                                                                                                                                                          |   |          | 5,635     |   |               |   | 5,715 |   |
| Presold loans in process of settlement                                                                                                                                                                                         |   |          | 2,109     |   |               |   | 4,034 |   |
| Loans:                                                                                                                                                                                                                         |   |          |      |   |               |   |   |   |
|       Covered by FDIC loss-share agreements                                                                                                                                                      |   |          | 177,047   |   |               |   | 147,576 |   |
|       Not covered by FDIC loss-share agreements                                                                                                                                                  |   |          | 573,603   |   |               |   | 588,934 |   |
|       Allowance for loan losses                                                                                                                                                                  |   |          | (12,742   | )      |               |   | (11,924 | ) |
|          Loans, net                                                                                                                                                               |   |          | 737,908   |   |               |   | 724,586 |   |
| Other real estate owned                                                                                                                                                                                                        |   |          | 24,803    |   |               |   | 14,652 |   |
| Premises and equipment, net                                                                                                                                                                                                    |   |          | 25,233    |   |               |   | 23,785 |   |
| FDIC loss share receivable                                                                                                                                                                                                     |   |          | 43,424    |   |               |   | 24,848 |   |
| Accrued interest receivable                                                                                                                                                                                                    |   |          | 3,076     |   |               |   | 3,001 |   |
| Bank-owned life insurance                                                                                                                                                                                                      |   |          | 18,654    |   |               |   | 18,230 |   |
| Intangible assets                                                                                                                                                                                                              |   |          | 1,636     |   |               |   | 1,690 |   |
| Other assets                                                                                                                                                                                                                   |   |          | 9,850     |   |               |   | 11,461 |   |
|           Total assets                                                                                                                                                       |   | $             | 1,117,993 |   |               | $      | 1,064,487 |   |
|                                                                                                                                                                                                                           |   |          |      |   |               |   |   |   |
| LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                                                                                           |   |          |      |   |               |   |   |   |
| Deposits                                                                                                                                                                                                                       |   | $             | 904,578   |   |               | $      | 850,456 |   |
| Securities sold under repurchase agreements                                                                                                                                                                                    |   |          | 11,890    |   |               |   | 9,432 |   |
| Borrowed money                                                                                                                                                                                                                 |   |          | 96,121    |   |               |   | 101,246 |   |
| Other liabilities                                                                                                                                                                                                              |   |          | 10,633    |   |               |   | 9,910 |   |
|        Total liabilities                                                                                                                                                                    |   |          | 1,023,222 |   |               |   | 971,044 |   |
|                                                                                                                                                                                                                           |   |          |      |   |               |   |   |   |
| Shareholders' Equity                                                                                                                                                                                                           |   |          |      |   |               |   |   |   |
| Preferred stock, $0.01 par value, Authorized: 1,000,000 shares; Issued and outstanding: 20,500 shares                                                                                                                          |   |          | 20,713    |   |               |   | 20,672 |   |
| Common stock, $0.01 par value, Authorized: 20,000,000 shares; Issued: 11,561,464 shares; Outstanding: 11,506,324 shares at June 30, 2011, and 11,508,750 shares at December 31, 2010                                           |   |          | 124       |   |               |   | 124 |   |
| Additional paid-in-capital                                                                                                                                                                                                     |   |          | 63,125    |   |               |   | 63,000 |   |
| Retained earnings, substantially restricted                                                                                                                                                                                    |   |          | 10,287    |   |               |   | 9,663 |   |
| Accumulated other comprehensive income (loss)                                                                                                                                                                                  |   |          | 522       |   |               |   | (16 | ) |
|        Total shareholders' equity                                                                                                                                                           |   |          | 94,771    |   |               |   | 93,443 |   |
|           Total liabilities and shareholders' equity                                                                                                                         |   | $             | 1,117,993 |   |               | $      | 1,064,487 |   |

----

CONSOLIDATED 

|                                                |   | Three Months Ended |   |   | Six Months Ended |   |
|-----------------------------------------------------|--------|--------------------|--------|--------|------------------|--------|
|                                                |   | June 30, 2011      |   |   | June 30, 2010    |   |   | June 30, 2011 |   |   | June 30, 2010 |   |
| (Dollars in thousands, except per share data)       |   |               |   |   |             |   |   |   |   |   |
|                                                |   |               |   |   |             |   |   |   |   |   |   |   |
| Interest Income:                                    |   |               |   |   |             |   |   |   |   |   |   |   |
| Interest and fees on loans                          |   | $                  | 10,329 |   |             | $      | 11,231 |   |   | $ | 19,790 |   |   | $ | 19,485 |   |
| Investment securities:                              |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Taxable interest income                             |   |               | 983    |   |             |   | 676 |   |   |   | 1,776 |   |   |   | 1,294 |   |
| Tax-exempt interest income                          |   |               | 69     |   |             |   | 188 |   |   |   | 137 |   |   |   | 378 |   |
| Other interest income                               |   |               | 38     |   |             |   | 99 |   |   |   | 103 |   |   |   | 149 |   |
| Total interest income                               |   |               | 11,419 |   |             |   | 12,194 |   |   |   | 21,806 |   |   |   | 21,306 |   |
| Interest Expense:                                   |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                            |   |               | 1,981  |   |             |   | 2,904 |   |   |   | 3,982 |   |   |   | 5,169 |   |
| Repurchase agreements                               |   |               | 19     |   |             |   | 29 |   |   |   | 37 |   |   |   | 57 |   |
| Borrowed money                                      |   |               | 826    |   |             |   | 1,150 |   |   |   | 1,661 |   |   |   | 2,251 |   |
| Total interest expense                              |   |               | 2,826  |   |             |   | 4,083 |   |   |   | 5,680 |   |   |   | 7,477 |   |
|                                                |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income                                 |   |               | 8,593  |   |             |   | 8,111 |   |   |   | 16,126 |   |   |   | 13,829 |   |
| Provision for loan losses                           |   |               | 1,700  |   |             |   | 3,000 |   |   |   | 4,700 |   |   |   | 6,050 |   |
| Net interest income after provision for loan losses |   |               | 6,893  |   |             |   | 5,111 |   |   |   | 11,426 |   |   |   | 7,779 |   |
| Noninterest Income:                                 |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Service charges on deposit accounts                 |   |               | 1,046  |   |             |   | 971 |   |   |   | 2,004 |   |   |   | 1,761 |   |
| Mortgage banking income                             |   |               | 254    |   |             |   | 357 |   |   |   | 491 |   |   |   | 567 |   |
| Commissions on sales of financial products          |   |               | 69     |   |             |   | 188 |   |   |   | 136 |   |   |   | 306 |   |
| Income from bank-owned life insurance               |   |               | 214    |   |             |   | 243 |   |   |   | 397 |   |   |   | 432 |   |
| Gain from acquisition                               |   |               | 4,418  |   |             |   | 605 |   |   |   | 4,163 |   |   |   | 19,338 |   |
| Gain on sale of investments, available for sale     |   |               | 1      |   |             |   | 10 |   |   |   | 1 |   |   |   | 44 |   |
| Loss on sale of other assets                        |   |               | (338   | )      |             |   | (203 | ) |   |   | (326 | ) |   |   | (266 | ) |
| Other income                                        |   |               | 222    |   |             |   | 244 |   |   |   | 500 |   |   |   | 418 |   |
| Total noninterest income                            |   |               | 5,886  |   |             |   | 2,415 |   |   |   | 7,366 |   |   |   | 22,600 |   |
| Noninterest Expense:                                |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Compensation and benefits                           |   |               | 3,806  |   |             |   | 3,649 |   |   |   | 7,454 |   |   |   | 6,295 |   |
| Occupancy and equipment                             |   |               | 873    |   |             |   | 1,039 |   |   |   | 1,701 |   |   |   | 1,722 |   |
| Loan collection and other expenses                  |   |               | 204    |   |             |   | 162 |   |   |   | 494 |   |   |   | 291 |   |
| Advertising and business development                |   |               | 71     |   |             |   | 95 |   |   |   | 125 |   |   |   | 150 |   |
| Professional services                               |   |               | 249    |   |             |   | 231 |   |   |   | 502 |   |   |   | 467 |   |
| Data processing and other technology                |   |               | 282    |   |             |   | 239 |   |   |   | 522 |   |   |   | 331 |   |
| Deposit insurance                                   |   |               | 361    |   |             |   | 354 |   |   |   | 695 |   |   |   | 614 |   |
| Amortization of intangible assets                   |   |               | 136    |   |             |   | 154 |   |   |   | 275 |   |   |   | 218 |   |
| Other real estate owned valuation adjustments       |   |               | 1,476  |   |             |   | 209 |   |   |   | 1,984 |   |   |   | 694 |   |
| Other real estate owned expenses                    |   |               | 596    |   |             |   | 202 |   |   |   | 597 |   |   |   | 352 |   |
| Acquisition and integration expenses                |   |               | 566    |   |             |   | 94 |   |   |   | 611 |   |   |   | 882 |   |
| Other expenses                                      |   |               | 650    |   |             |   | 851 |   |   |   | 1,985 |   |   |   | 1,619 |   |
| Total noninterest expense                           |   |               | 9,270  |   |             |   | 7,279 |   |   |   | 16,945 |   |   |   | 13,635 |   |
|                                                |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Income before income tax expense (benefit)          |   |               | 3,509  |   |             |   | 247 |   |   |   | 1,847 |   |   |   | 16,744 |   |
| Income tax expense (benefit)                        |   |               | 1,213  |   |             |   | (108 | ) |   |   | 442 |   |   |   | 6,093 |   |
| Net income                                          |   |               | 2,296  |   |             |   | 355 |   |   |   | 1,405 |   |   |   | 10,651 |   |
| Dividends on preferred stock                        |   |               | 256    |   |             |   | 257 |   |   |   | 512 |   |   |   | 513 |   |
|                                                |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Net income available to common shareholders         |   | $                  | 2,040  |   |             | $      | 98 |   |   | $ | 893 |   |   | $ | 10,138 |   |
|                                                |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Earnings per common share - basic                   |   | $                  | 0.18   |   |             | $      | 0.01 |   |   | $ | 0.08 |   |   | $ | 1.20 |   |
| Earnings per common share - diluted                 |   |               | 0.18   |   |             |   | 0.01 |   |   |   | 0.08 |   |   |   | 1.20 |   |

----

CONSOLIDATED 

|                                                                                       |   |      |   |   |   |   |   |       |   |   | Retained      |   |   | Accumulated   |   |   |          |   |
|--------------------------------------------------------------------------------------------|--------|-----------|--------|--------|--------|--------|--------|------------|--------|--------|---------------|--------|--------|---------------|--------|--------|---------------|--------|
|                                                                                       |   |      |   |   |   |   |   | Additional |   |   | Earnings,     |   |   | Other         |   |   | Total         |   |
|                                                                                       |   | Preferred |   |   | Common |   |   | Paid-in    |   |   | Substantially |   |   | Comprehensive |   |   | Shareholders' |   |
|                                                                                       |   | Stock     |   |   | Stock  |   |   | Capital    |   |   | Restricted    |   |   | Income (Loss) |   |   | Equity        |   |
| (Dollars in thousands, except share data)                                                  |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |
|                                                                                       |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |
|  Balances, December 31, 2009                                                          |   | $         | 20,589 |   |   | $      | 91     |       |   | $      | 48,528        |   |   | $             | 3,411  |   |          | $      | (297 | ) |   | $ | 72,322 |   |
|                                                                                       |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |   |   |   |   |   |   |
|  Comprehensive results:                                                               |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |   |   |   |   |   |   |
|       Net income                                             |   |      | -      |   |   |   | -      |       |   |   | -             |   |   |          | 10,651 |   |          |   | - |   |   |   | 10,651 |   |
|      Other comprehensive results, net of tax                      |   |      | -      |   |   |   | -      |       |   |   | -             |   |   |          | -      |   |          |   | 323 |   |   |   | 323 |   |
|  Issuance of 1,490,400 shares of common stock                                         |   |      | -      |   |   |   | 15     |       |   |   | 5,745         |   |   |          | -      |   |          |   | - |   |   |   | 5,760 |   |
|  Issuance of 8,280 shares of preferred stock                                          |   |      | 8,280  |   |   |   | -      |       |   |   | -             |   |   |          | -      |   |          |   | - |   |   |   | 8,280 |   |
|  Conversion of of 8,280 shares of preferred stock to 1,839,999 shares of common stock |   |      | (8,280 | )      |   |   | 18     |       |   |   | 8,262         |   |   |          | -      |   |          |   | - |   |   |   | - |   |
|  Accretion of discount on preferred stock                                             |   |      | 41     |   |   |   | -      |       |   |   | -             |   |   |          | (41    | )      |          |   | - |   |   |   | - |   |
|  Allocation from shares purchased with loan to ESOP                                   |   |      | -      |   |   |   | -      |       |   |   | 92            |   |   |          | -      |   |          |   | - |   |   |   | 92 |   |
|  Vesting of Recognition and Retention Plan ("RRP")                                    |   |      | -      |   |   |   | -      |       |   |   | 181           |   |   |          | -      |   |          |   | - |   |   |   | 181 |   |
|  Stock-based compensation                                                             |   |      | -      |   |   |   | -      |       |   |   | 49            |   |   |          | -      |   |          |   | - |   |   |   | 49 |   |
|  Cash dividends on preferred stock                                                    |   |      | -      |   |   |   | -      |       |   |   | -             |   |   |          | (513   | )      |          |   | - |   |   |   | (513 | ) |
|  Cash dividends on common stock ($0.08)                                               |   |      | -      |   |   |   | -      |       |   |   | -             |   |   |          | (734   | )      |          |   | - |   |   |   | (734 | ) |
|                                                                                       |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |   |   |   |   | - |   |
|  Balances, June 30, 2010                                                              |   | $         | 20,630 |   |   | $      | 124    |       |   | $      | 62,857        |   |   | $             | 12,774 |   |          | $      | 26 |   |   | $ | 96,411 |   |
|                                                                                       |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |   |   |   |   |   |   |
|                                                                                       |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |   |   |   |   |   |   |
|                                                                                       |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |   |   |   |   |   |   |
|  Balances, December 31, 2010                                                          |   | $         | 20,672 |   |   | $      | 124    |       |   | $      | 63,000        |   |   | $             | 9,663  |   |          | $      | (16 | ) |   | $ | 93,443 |   |
|                                                                                       |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |   |   |   |   |   |   |
|  Comprehensive results:                                                               |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |   |   |   |   |   |   |
|       Net income                                             |   |      | -      |   |   |   | -      |       |   |   | -             |   |   |          | 1,405  |   |          |   | - |   |   |   | 1,405 |   |
|      Other comprehensive results, net of tax                      |   |      | -      |   |   |   | -      |       |   |   | -             |   |   |          | -      |   |          |   | 538 |   |   |   | 538 |   |
|  Accretion of discount on preferred stock                                             |   |      | 41     |   |   |   | -      |       |   |   | -             |   |   |          | (41    | )      |          |   | - |   |   |   | - |   |
|  Allocation from shares purchased with loan to ESOP                                   |   |      | -      |   |   |   | -      |       |   |   | 22            |   |   |          | -      |   |          |   | - |   |   |   | 22 |   |
|  Vesting of RRP                                                                       |   |      | -      |   |   |   | -      |       |   |   | 50            |   |   |          | -      |   |          |   | - |   |   |   | 50 |   |
|  Stock-based compensation                                                             |   |      | -      |   |   |   | -      |       |   |   | 53            |   |   |          | -      |   |          |   | - |   |   |   | 53 |   |
|  Cash dividends on preferred stock                                                    |   |      | -      |   |   |   | -      |       |   |   | -             |   |   |          | (512   | )      |          |   | - |   |   |   | (512 | ) |
|  Cash dividends on common stock ($0.02)                                               |   |      | -      |   |   |   | -      |       |   |   | -             |   |   |          | (228   | )      |          |   | - |   |   |   | (228 | ) |
|                                                                                       |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |   |   |   |   | - |   |
|  Balances, June 30, 2011                                                              |   | $         | 20,713 |   |   | $      | 124    |       |   | $      | 63,125        |   |   | $             | 10,287 |   |          | $      | 522 |   |   | $ | 94,771 |   |

----

CONSOLIDATED 

|                                                                                    |   | Six Months Ended |    |
|-----------------------------------------------------------------------------------------|--------|------------------|---------|
|                                                                                    |   | June 30, 2011    |    |   | June 30, 2010 |   |
|  (Dollars in thousands)                                                            |   |             |    |   |   |   |
|                                                                                    |   |             |    |   |   |   |
|  Cash flows from operating activities:                                             |   |             |    |   |   |   |
| Net income                                                                              |   | $                | 1,405   |   |   | $ | 10,651 |   |
| Adjustments to reconcile net income to net cash provided by operating activities:       |   |             |    |   |   |
|  Provision for loan losses                                                         |   |             | 4,700   |   |   |   | 6,050 |   |
|  Depreciation of premises and equipment                                            |   |             | 645     |   |   |   | 520 |   |
|  Deferred income tax expense (benefit)                                             |   |             | (304    | ) |   |   | 2,359 |   |
|  Gain on acquisition                                                               |   |             | (4,163  | ) |   |   | (19,338 | ) |
|  Gain on sale of investment securities available for sale                          |   |             | (1      | ) |   |   | (44 | ) |
|  Loss on sale of other assets                                                      |   |             | 326     |   |   |   | 266 |   |
|  Valuation adjustment on other real estate owned                                   |   |             | 1,984   |   |   |   | 694 |   |
|  Net purchase accounting adjustments                                               |   |             | 5,828   |   |   |   | 471 |   |
|  Net (increase) decrease in loans available for sale                               |   |             | 1,925   |   |   |   | (2,529 | ) |
|  Deferred loan origination fees                                                    |   |             | 101     |   |   |   | 11 |   |
|  Amortization of intangible assets                                                 |   |             | 275     |   |   |   | 218 |   |
|  Allocation of shares to the ESOP                                                  |   |             | 22      |   |   |   | 92 |   |
|  Stock-based compensation expense                                                  |   |             | 53      |   |   |   | 49 |   |
|  Vesting of shares issued for the RRP                                              |   |             | 50      |   |   |   | 181 |   |
|  Decrease in accrued interest receivable                                           |   |             | 223     |   |   |   | 204 |   |
|  (Increase) decrease in other assets                                               |   |             | 14,956  |   |   |   | (5,200 | ) |
|  Increase (decrease) in other liabilities                                          |   |             | (1,178  | ) |   |   | 1,308 |   |
|  Net cash provided by (used in) operating activities                               |   |             | 26,847  |   |   |   | (4,037 | ) |
|                                                                                    |   |             |    |   |   |   |   |   |
|  Cash flows from investing activities:                                             |   |             |    |   |   |   |   |   |
|  Net decrease in loans made to customers                                           |   |             | 14,840  |   |   |   | 13,778 |   |
|  Proceeds from sales of investment securities available for sale                   |   |             | 2,351   |   |   |   | 22,057 |   |
|  Proceeds from sales of other real estate owned                                    |   |             | 4,420   |   |   |   | 2,252 |   |
|  Proceeds from maturities/issuer calls of investment securities available for sale |   |             | 5,607   |   |   |   | 7,800 |   |
|  Proceeds from maturities/issuer calls of investment securities held to maturity   |   |             | 6,594   |   |   |   | 18,995 |   |
|  Purchases of investment securities available for sale                             |   |             | -       |   |   |   | (27,790 | ) |
|  Purchases of investment securities held to maturity                               |   |             | (48,714 | ) |   |   | (12,492 | ) |
|  Net cash received in acquisition                                                  |   |             | 7,912   |   |   |   | 95,058 |   |
|  Redemption of FHLB stock                                                          |   |             | 507     |   |   |   | - |   |
|  Purchases of premises and equipment                                               |   |             | (2,056  | ) |   |   | (332 | ) |
|  Net cash provided by (used in) investment activities                              |   |             | (8,539  | ) |   |   | 119,326 |   |
|                                                                                    |   |             |    |   |   |   |   |   |
|  Cash flows from financing activities:                                             |   |             |    |   |   |   |   |   |
|  Net decrease in deposits                                                          |   |             | (42,602 | ) |   |   | (48,039 | ) |
|  Dividends paid to common stockholders                                             |   |             | (228    | ) |   |   | (734 | ) |
|  Dividends paid to preferred stockholders                                          |   |             | (512    | ) |   |   | (513 | ) |
|  Issuance of common stock                                                          |   |             | -       |   |   |   | 14,040 |   |
|  Net decrease in borrowed money and repurchase agreements                          |   |             | (6,882  | ) |   |   | (23,566 | ) |
|  Increase in advances from borrowers for insurance and taxes                       |   |             | 354     |   |   |   | 289 |   |
|  Net cash used in financing activities                                             |   |             | (49,870 | ) |   |   | (58,523 | ) |
|                                                                                    |   |             |    |   |   |   |   |   |
|  Net increase (decrease) in cash and cash equivalents                              |   |             | (31,562 | ) |   |   | 56,766 |   |
|  Cash and cash equivalents at beginning of year                                    |   |             | 120,899 |   |   |   | 53,180 |   |
|  Cash and cash equivalents at end of year                                          |   | $                | 89,337  |   |   | $ | 109,946 |   |
|                                                                                    |   |             |    |   |   |   |   |   |
|  Supplemental non-cash investing activity:                                         |   |             |    |   |   |   |   |   |
|  Foreclosed loans transferred to other real estate owned                           |   | $                | 10,469  |   |   | $ | 6,860 |   |

----

NOTES 

----

----

|                                                                           |   | Three Months                                     |       |   | Six Months    |   |
|--------------------------------------------------------------------------------|--------|--------------------------------------------------|------------|--------|---------------|--------|
|                                                                           |   | Ended June 30                                    |       |   | Ended June 30 |   |
|                                                                           |   | 2011                                             |       |   | 2010          |   |   | 2011 |   |   | 2010 |   |
|                                                                           |   | (Dollars in thousands, except per share amounts) |       |
|                                                                           |   |                                             |       |   |          |   |   |   |   |   |   |   |
| Net income available to common shareholders                                    |   | $                                                | 2,040      |   |          | $      | 98 |   |   | $ | 893 |   |   | $ | 10,138 |   |
| Weighted average number of shares outstanding                                  |   |                                             | 11,455,642 |   |          |   | 9,077,042 |   |   |   | 11,451,619 |   |   |   | 8,435,494 |   |
|                                                                           |   |                                             |       |   |          |   |   |   |   |   |   |   |   |   |   |   |
| Basic earnings per share                                                       |   | $                                                | 0.18       |   |          | $      | 0.01 |   |   | $ | 0.08 |   |   | $ | 1.20 |   |
|                                                                           |   |                                             |       |   |          |   |   |   |   |   |   |   |   |   |   |   |
| Net income available to common shareholders                                    |   | $                                                | 2,040      |   |          | $      | 98 |   |   | $ | 893 |   |   | $ | 10,138 |   |
| Weighted average number of shares outstanding                                  |   |                                             | 11,455,642 |   |          |   | 9,077,042 |   |   |   | 11,451,619 |   |   |   | 8,435,494 |   |
| Incremental shares from assumed exercise of stock options and restricted stock |   |                                             | -          |   |          |   | - |   |   |   | - |   |   |   | - |   |
| Weighted average number of shares outstanding - diluted                        |   |                                             | 11,455,642 |   |          |   | 9,077,042 |   |   |   | 11,451,619 |   |   |   | 8,435,494 |   |
|                                                                           |   |                                             |       |   |          |   |   |   |   |   |   |   |   |   |   |   |
| Diluted earnings per share                                                     |   | $                                                | 0.18       |   |          | $      | 0.01 |   |   | $ | 0.08 |   |   | $ | 1.20 |   |

----

|                                                       |   | Three Months           |   |   | Six Months             |   |
|------------------------------------------------------------|--------|------------------------|--------|--------|------------------------|--------|
|                                                       |   | Ended June 30          |   |   | Ended June 30          |   |
|                                                       |   | 2011                   |   |   | 2010                   |   |   | 2011 |   |   | 2010 |   |
|                                                       |   | (Dollars in thousands) |   |   | (Dollars in thousands) |   |
|                                                       |   |                   |   |   |                   |   |   |   |   |   |   |   |
| Net income                                                 |   | $                      | 2,296  |   |                   | $      | 355 |   |   | $ | 1,405 |   |   | $ | 10,651 |   |
|                                                       |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive income:                                |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Investment securities, available for sale:                 |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized holding gains arising during period             |   |                   | 827    |   |                   |   | 317 |   |   |   | 876 |   |   |   | 570 |   |
| Tax expense                                                |   |                   | (319   | )      |                   |   | (122 | ) |   |   | (338 | ) |   |   | (220 | ) |
| Reclassification for realized gains included in net income |   |                   | (1     | )      |                   |   | (10 | ) |   |   | (1 | ) |   |   | (44 | ) |
| Tax benefit                                                |   |                   | 0      |   |                   |   | 4 |   |   |   | 0 |   |   |   | 17 |   |
| Other comprehensive income                                 |   |                   | 508    |   |                   |   | 189 |   |   |   | 538 |   |   |   | 323 |   |
| Total comprehensive income                                 |   | $                      | 2,804  |   |                   | $      | 544 |   |   | $ | 1,943 |   |   | $ | 10,974 |   |

----

|                               |   |                   |    |   | Gross      |   |   | Gross      |   |   |       |   |
|------------------------------------|--------|------------------------|---------|--------|------------|--------|--------|------------|--------|--------|------------|--------|
|                               |   | Amortized              |    |   | Unrealized |   |   | Unrealized |   |   |       |   |
|                               |   | Cost                   |    |   | Gains      |   |   | Losses     |   |   | Fair Value |   |
|                               |   | (Dollars in thousands) |    |
| June 30, 2011                      |   |                   |    |   |       |   |   |       |   |   |       |   |
| Available for sale:                |   |                   |    |   |       |   |   |       |   |   |       |   |
| U.S. Government Agency obligations |   | $                      | 17,226  |   |       | $      | 97     |       |   | $      | -          |   |   | $ | 17,323 |   |
| Municipal bonds                    |   |                   | 11,422  |   |       |   | 102    |       |   |   | 9          |   |   |   | 11,515 |   |
| Mortgage-backed securities         |   |                   | 44,147  |   |       |   | 502    |       |   |   | 1          |   |   |   | 44,648 |   |
| SBA securities                     |   |                   | 1,339   |   |       |   | 44     |       |   |   | -          |   |   |   | 1,383 |   |
| Other securities                   |   |                   | 1,946   |   |       |   | 203    |       |   |   | 88         |   |   |   | 2,061 |   |
| Subtotal                           |   |                   | 76,080  |   |       |   | 948    |       |   |   | 98         |   |   |   | 76,930 |   |
|                               |   |                   |    |   |       |   |   |       |   |   |       |   |   |   |   |   |
| Held to maturity:                  |   |                   |    |   |       |   |   |       |   |   |       |   |   |   |   |   |
| U.S. Treasury obligations          |   |                   | 9,964   |   |       |   | 50     |       |   |   | -          |   |   |   | 10,014 |   |
| U.S. Government Agency obligations |   |                   | 6,998   |   |       |   | 27     |       |   |   | -          |   |   |   | 7,025 |   |
| Mortgage-backed securities         |   |                   | 58,436  |   |       |   | 1,565  |       |   |   | -          |   |   |   | 60,001 |   |
| Other securities                   |   |                   | 4,000   |   |       |   | 10     |       |   |   | 47         |   |   |   | 3,963 |   |
| Subtotal                           |   |                   | 79,398  |   |       |   | 1,652  |       |   |   | 47         |   |   |   | 81,003 |   |
|                               |   |                   |    |   |       |   |   |       |   |   |       |   |   |   |   |   |
| Total                              |   | $                      | 155,478 |   |       | $      | 2,600  |       |   | $      | 145        |   |   | $ | 157,933 |   |
|                               |   |                   |    |   |       |   |   |       |   |   |       |   |   |   |   |   |
|                               |   |                   |    |   |       |   |   |       |   |   |       |   |   |   |   |   |
|                               |   |                   |    |   |       | Gross  |   |       | Gross  |   |       |   |   |   |
|                               |   | Amortized              |    |   | Unrealized |   |   | Unrealized |   |   |       |   |   |
|                               |   | Cost                   |    |   | Gains      |   |   | Losses     |   |   | Fair Value |   |
|                               |   | (Dollars in thousands) |    |
| December 31, 2010                  |   |                   |    |   |       |   |   |       |   |   |       |   |   |   |   |   |
| Available for sale:                |   |                   |    |   |       |   |   |       |   |   |       |   |   |   |   |   |
| U.S. Government Agency obligations |   | $                      | 19,297  |   |       | $      | 23     |       |   | $      | 122        |   |   | $ | 19,198 |   |
| Municipal bonds                    |   |                   | 11,602  |   |       |   | 40     |       |   |   | 128        |   |   |   | 11,514 |   |
| Mortgage-backed securities         |   |                   | 40,655  |   |       |   | 293    |       |   |   | 175        |   |   |   | 40,773 |   |
| Other securities                   |   |                   | 2,781   |   |       |   | 110    |       |   |   | 68         |   |   |   | 2,823 |   |
| Subtotal                           |   |                   | 74,335  |   |       |   | 466    |       |   |   | 493        |   |   |   | 74,308 |   |
|                               |   |                   |    |   |       |   |   |       |   |   |       |   |   |   |   |   |
| Held to maturity:                  |   |                   |    |   |       |   |   |       |   |   |       |   |   |   |   |   |
| U.S. Treasury obligations          |   |                   | 9,955   |   |       |   | -      |       |   |   | 38         |   |   |   | 9,917 |   |
| U.S. Government Agency obligations |   |                   | 8,509   |   |       |   | 4      |       |   |   | 129        |   |   |   | 8,384 |   |
| Mortgage-backed securities         |   |                   | 14,814  |   |       |   | 641    |       |   |   | 37         |   |   |   | 15,418 |   |
| Other securities                   |   |                   | 4,000   |   |       |   | -      |       |   |   | 81         |   |   |   | 3,919 |   |
| Subtotal                           |   |                   | 37,278  |   |       |   | 645    |       |   |   | 285        |   |   |   | 37,638 |   |
|                               |   |                   |    |   |       |   |   |       |   |   |       |   |   |   |   |   |
| Total                              |   | $                      | 111,613 |   |       | $      | 1,111  |       |   | $      | 778        |   |   | $ | 111,946 |   |

----

|                          |   | Less than 12 months    |   | 12 months or more |              |   | Total  |   |
|-------------------------------|--------|------------------------|--------|-------------------|-------------------|--------|--------|--------|
|                          |   | Fair                   |   |              | Unrealized        |   |   | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
|                          |   | Value                  |   |              | Loss              |   |   | Value  |   |   | Loss |   |   | Value |   |   | Loss |   |
|                          |   | (Dollars in thousands) |   |
| June 30, 2011                 |   |                   |   |              |              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available for sale:           |   |                   |   |              |              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Municipals bonds              |   | $                      | 1,017  |              |              | $      | 9      |   |   | $ | - |   |   | $ | - |   |   | $ | 1,017 |   |   | $ | 9 |   |
| Mortgage-backed securities    |   |                   | 707    |              |              |   | 1      |   |   |   | 99 |   |   |   | - |   |   |   | 806 |   |   |   | 1 |   |
| Other securities              |   |                   | 415    |              |              |   | 18     |   |   |   | 74 |   |   |   | 70 |   |   |   | 489 |   |   |   | 88 |   |
|                          |   |                   |   |              |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Subtotal    |   |                   | 2,139  |              |              |   | 28     |   |   |   | 173 |   |   |   | 70 |   |   |   | 2,312 |   |   |   | 98 |   |
|                          |   |                   |   |              |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Held to maturity:             |   |                   |   |              |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Other securities        |   | $                      | 2,953  |              |              | $      | 47     |   |   | $ | - |   |   | $ | - |   |   | $ | 2,953 |   |   | $ | 47 |   |
|                          |   |                   |   |              |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Subtotal    |   |                   | 2,953  |              |              |   | 47     |   |   |   | - |   |   |   | - |   |   |   | 2,953 |   |   |   | 47 |   |
|                          |   |                   |   |              |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                         |   | $                      | 5,092  |              |              | $      | 75     |   |   | $ | 173 |   |   | $ | 70 |   |   | $ | 5,265 |   |   | $ | 145 |   |
|                          |   |                   |   |              |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                          |   | Less than 12 months    |   |              | 12 months or more |   |   | Total  |   |
|                          |   | Fair                   |   |              | Unrealized        |   |   | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
|                          |   | Value                  |   |              | Loss              |   |   | Value  |   |   | Loss |   |   | Value |   |   | Loss |   |
|                          |   | (Dollars in thousands) |   |
| December 31, 2010             |   |                   |   |              |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available for sale:           |   |                   |   |              |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Govt. Agency obligations |   | $                      | 18,113 |              |              | $      | 122    |   |   | $ | - |   |   | $ | - |   |   | $ | 18,113 |   |   | $ | 122 |   |
| Municipals bonds              |   |                   | 8,376  |              |              |   | 128    |   |   |   | - |   |   |   | - |   |   |   | 8,376 |   |   |   | 128 |   |
| Mortgage-backed securities    |   |                   | 9,395  |              |              |   | 174    |   |   |   | 108 |   |   |   | 1 |   |   |   | 9,503 |   |   |   | 175 |   |
| Other securities              |   |                   | -      |              |              |   | -      |   |   |   | 104 |   |   |   | 68 |   |   |   | 104 |   |   |   | 68 |   |
|                          |   |                   |   |              |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Subtotal    |   |                   | 35,884 |              |              |   | 424    |   |   |   | 212 |   |   |   | 69 |   |   |   | 36,096 |   |   |   | 493 |   |
|                          |   |                   |   |              |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Held to maturity:             |   |                   |   |              |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Treasury obligations     |   | $                      | 9,917  |              |              | $      | 38     |   |   | $ | - |   |   | $ | - |   |   | $ | 9,917 |   |   | $ | 38 |   |
| U.S. Govt. Agency obligations |   |                   | 5,881  |              |              |   | 129    |   |   |   | - |   |   |   | - |   |   |   | 5,881 |   |   |   | 129 |   |
| Mortgage-backed securities    |   |                   | 3,049  |              |              |   | 37     |   |   |   | - |   |   |   | - |   |   |   | 3,049 |   |   |   | 37 |   |
| Other securities              |   |                   | 3,919  |              |              |   | 81     |   |   |   | - |   |   |   | - |   |   |   | 3,919 |   |   |   | 81 |   |
|                          |   |                   |   |              |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Subtotal    |   |                   | 22,766 |              |              |   | 285    |   |   |   | - |   |   |   | - |   |   |   | 22,766 |   |   |   | 285 |   |
|                          |   |                   |   |              |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                         |   | $                      | 58,650 |              |              | $      | 709    |   |   | $ | 212 |   |   | $ | 69 |   |   | $ | 58,862 |   |   | $ | 778 |   |

----

----

|                           |   | June 30, 2011          |    |   | December 31, 2010 |   |
|--------------------------------|--------|------------------------|---------|--------|-------------------|--------|
|                           |   | Amount                 |    |   | % of Total Loans  |   |   | Amount |   |   | % of Total Loans |   |
|                           |   | (Dollars in thousands) |    |
|                           |   |                   |    |   |              |   |   |   |   |   |   |   |
| Real estate:                   |   |                   |    |   |              |   |   |   |   |   |   |   |
| One-to-four family residential |   | $                      | 152,111 |   |              |   | 20 | % |   | $ | 133,769 |   |   |   | 18 | % |
| Multifamily residential        |   |                   | 22,093  |   |              |   | 3 | % |   |   | 23,435 |   |   |   | 3 | % |
| Construction                   |   |                   | 21,768  |   |              |   | 3 | % |   |   | 20,421 |   |   |   | 3 | % |
| Commercial land                |   |                   | 43,253  |   |              |   | 6 | % |   |   | 51,432 |   |   |   | 7 | % |
| Residential development        |   |                   | 30,138  |   |              |   | 4 | % |   |   | 31,008 |   |   |   | 4 | % |
| Other commercial real estate   |   |                   | 303,345 |   |              |   | 41 | % |   |   | 297,117 |   |   |   | 40 | % |
| Consumer real estate           |   |                   | 115,659 |   |              |   | 15 | % |   |   | 118,021 |   |   |   | 16 | % |
| Total real estate              |   |                   | 688,367 |   |              |   | 92 | % |   |   | 675,203 |   |   |   | 91 | % |
| Commercial business            |   |                   | 48,950  |   |              |   | 6 | % |   |   | 48,053 |   |   |   | 7 | % |
| Other consumer                 |   |                   | 13,333  |   |              |   | 2 | % |   |   | 13,254 |   |   |   | 2 | % |
| Total loans                    |   | $                      | 750,650 |   |              |   | 100 | % |   | $ | 736,510 |   |   |   | 100 | % |

----

| June 30, 2011                                         |   | Current                |    |   | 30 to 89 Days Past Due |   |   | 90+ Days Past Due (Still Accruing) |   |   | Nonaccrual |   |   | Total  |   |
|-------------------------------------------------------|--------|------------------------|---------|--------|------------------------|--------|--------|------------------------------------|--------|--------|------------|--------|--------|--------|--------|
|                                                  |   | (Dollars in thousands) |    |
|                                                  |   |                   |    |   |                   |   |   |                               |   |   |       |   |   |   |   |
| Not covered by FDIC loss-share agreements             |   |                   |    |   |                   |   |   |                               |   |   |       |   |   |   |   |
| Real estate:                                          |   |                   |    |   |                   |   |   |                               |   |   |       |   |   |   |   |
| One-to-four family residential                        |   | $                      | 107,775 |   |                   | $      | 512    |                               |   | $      | -          |   |   | $      | 1,406  |   |   | $ | 109,693 |   |
| Multifamily residential                               |   |                   | 18,955  |   |                   |   | -      |                               |   |   | -          |   |   |   | -      |   |   |   | 18,955 |   |
| Construction                                          |   |                   | 20,370  |   |                   |   | -      |                               |   |   | -          |   |   |   | -      |   |   |   | 20,370 |   |
| Commercial land                                       |   |                   | 26,800  |   |                   |   | 982    |                               |   |   | -          |   |   |   | 3,167  |   |   |   | 30,949 |   |
| Residential development                               |   |                   | 14,702  |   |                   |   | 1,450  |                               |   |   | -          |   |   |   | 5,155  |   |   |   | 21,307 |   |
| Other commercial real estate                          |   |                   | 213,220 |   |                   |   | 1,932  |                               |   |   | 225        |   |   |   | 10,081 |   |   |   | 225,458 |   |
| Consumer real estate                                  |   |                   | 101,243 |   |                   |   | 725    |                               |   |   | -          |   |   |   | 2,400  |   |   |   | 104,368 |   |
| Total real estate                                     |   |                   | 503,065 |   |                   |   | 5,601  |                               |   |   | 225        |   |   |   | 22,209 |   |   |   | 531,100 |   |
| Commercial business                                   |   |                   | 36,440  |   |                   |   | 7      |                               |   |   | 27         |   |   |   | 174    |   |   |   | 36,648 |   |
| Other consumer                                        |   |                   | 5,736   |   |                   |   | 79     |                               |   |   | -          |   |   |   | 40     |   |   |   | 5,855 |   |
| Total loans not covered by FDIC loss-share agreements |   | $                      | 545,241 |   |                   | $      | 5,687  |                               |   | $      | 252        |   |   | $      | 22,423 |   |   | $ | 573,603 |   |

| June 30, 2011                                     |   | Current                |    |   | 30 to 89 Days Past Due |   |   | 90+ Days Past Due (Still Accruing) |   |   | Nonaccrual |   |   | Total  |   |
|---------------------------------------------------|--------|------------------------|---------|--------|------------------------|--------|--------|------------------------------------|--------|--------|------------|--------|--------|--------|--------|
|                                              |   | (Dollars in thousands) |    |
|                                              |   |                   |    |   |                   |   |   |                               |   |   |       |   |   |   |   |
| Covered by FDIC loss-share agreements             |   |                   |    |   |                   |   |   |                               |   |   |       |   |   |   |   |
| Real estate:                                      |   |                   |    |   |                   |   |   |                               |   |   |       |   |   |   |   |
| One-to-four family residential                    |   | $                      | 28,260  |   |                   | $      | 4,483  |                               |   | $      | -          |   |   | $      | 9,675  |   |   | $ | 42,418 |   |
| Multifamily residential                           |   |                   | 2,922   |   |                   |   | -      |                               |   |   | -          |   |   |   | 216    |   |   |   | 3,138 |   |
| Construction                                      |   |                   | 1,399   |   |                   |   | -      |                               |   |   | -          |   |   |   | -      |   |   |   | 1,399 |   |
| Commercial land                                   |   |                   | 4,882   |   |                   |   | 964    |                               |   |   | -          |   |   |   | 6,458  |   |   |   | 12,304 |   |
| Residential development                           |   |                   | 1,295   |   |                   |   | 1,718  |                               |   |   | 80         |   |   |   | 5,738  |   |   |   | 8,831 |   |
| Other commercial real estate                      |   |                   | 62,278  |   |                   |   | 4,366  |                               |   |   | 148        |   |   |   | 11,095 |   |   |   | 77,887 |   |
| Consumer real estate                              |   |                   | 10,053  |   |                   |   | 757    |                               |   |   | -          |   |   |   | 481    |   |   |   | 11,291 |   |
| Total real estate                                 |   |                   | 111,089 |   |                   |   | 12,288 |                               |   |   | 228        |   |   |   | 33,663 |   |   |   | 157,268 |   |
| Commercial business                               |   |                   | 10,967  |   |                   |   | 296    |                               |   |   | 37         |   |   |   | 1,002  |   |   |   | 12,302 |   |
| Other consumer                                    |   |                   | 6,174   |   |                   |   | 403    |                               |   |   | 4          |   |   |   | 896    |   |   |   | 7,477 |   |
| Total loans covered by FDIC loss-share agreements |   | $                      | 128,230 |   |                   | $      | 12,987 |                               |   | $      | 269        |   |   | $      | 35,561 |   |   | $ | 177,047 |   |

----

| June 30, 2011                  |   | Current                |    |   | 30 to 89 Days Past Due |   |   | 90+ Days Past Due (Still Accruing) |   |   | Nonaccrual |   |   | Total  |   |
|--------------------------------|--------|------------------------|---------|--------|------------------------|--------|--------|------------------------------------|--------|--------|------------|--------|--------|--------|--------|
|                           |   | (Dollars in thousands) |    |
|                           |   |                   |    |   |                   |   |   |                               |   |   |       |   |   |   |   |
| Total loans                    |   |                   |    |   |                   |   |   |                               |   |   |       |   |   |   |   |
| Real estate:                   |   |                   |    |   |                   |   |   |                               |   |   |       |   |   |   |   |
| One-to-four family residential |   | $                      | 136,035 |   |                   | $      | 4,995  |                               |   | $      | -          |   |   | $      | 11,081 |   |   | $ | 152,111 |   |
| Multifamily residential        |   |                   | 21,877  |   |                   |   | -      |                               |   |   | -          |   |   |   | 216    |   |   |   | 22,093 |   |
| Construction                   |   |                   | 21,769  |   |                   |   | -      |                               |   |   | -          |   |   |   | -      |   |   |   | 21,769 |   |
| Commercial land                |   |                   | 31,682  |   |                   |   | 1,946  |                               |   |   | -          |   |   |   | 9,625  |   |   |   | 43,253 |   |
| Residential development        |   |                   | 15,997  |   |                   |   | 3,168  |                               |   |   | 80         |   |   |   | 10,893 |   |   |   | 30,138 |   |
| Other commercial real estate   |   |                   | 275,498 |   |                   |   | 6,298  |                               |   |   | 373        |   |   |   | 21,176 |   |   |   | 303,345 |   |
| Consumer real estate           |   |                   | 111,296 |   |                   |   | 1,482  |                               |   |   | -          |   |   |   | 2,881  |   |   |   | 115,659 |   |
| Total real estate              |   |                   | 614,154 |   |                   |   | 17,889 |                               |   |   | 453        |   |   |   | 55,872 |   |   |   | 688,368 |   |
| Commercial business            |   |                   | 47,407  |   |                   |   | 303    |                               |   |   | 64         |   |   |   | 1,176  |   |   |   | 48,950 |   |
| Other consumer                 |   |                   | 11,910  |   |                   |   | 482    |                               |   |   | 4          |   |   |   | 936    |   |   |   | 13,332 |   |
| Total loans                    |   | $                      | 673,471 |   |                   | $      | 18,674 |                               |   | $      | 521        |   |   | $      | 57,984 |   |   | $ | 750,650 |   |

| December 31, 2010                                     |   | Current                |    |   | 30 to 89 Days Past Due |   |   | 90+ Days Past Due (Still Accruing) |   |   | Nonaccrual |   |   | Total  |   |
|-------------------------------------------------------|--------|------------------------|---------|--------|------------------------|--------|--------|------------------------------------|--------|--------|------------|--------|--------|--------|--------|
|                                                  |   | (Dollars in thousands) |    |
|                                                  |   |                   |    |   |                   |   |   |                               |   |   |       |   |   |   |   |
| Not covered by FDIC loss-share agreements             |   |                   |    |   |                   |   |   |                               |   |   |       |   |   |   |   |
| Real estate:                                          |   |                   |    |   |                   |   |   |                               |   |   |       |   |   |   |   |
| One-to-four family residential                        |   | $                      | 97,851  |   |                   | $      | 1,299  |                               |   | $      | -          |   |   | $      | 1,864  |   |   | $ | 101,014 |   |
| Multifamily residential                               |   |                   | 20,674  |   |                   |   | -      |                               |   |   | -          |   |   |   | -      |   |   |   | 20,674 |   |
| Construction                                          |   |                   | 19,570  |   |                   |   | 630    |                               |   |   | -          |   |   |   | 14     |   |   |   | 20,214 |   |
| Land and development                                  |   |                   | 57,527  |   |                   |   | 2,801  |                               |   |   | 2,000      |   |   |   | 559    |   |   |   | 62,887 |   |
| Other commercial real estate                          |   |                   | 217,423 |   |                   |   | 7,899  |                               |   |   | -          |   |   |   | 9,161  |   |   |   | 234,483 |   |
| Consumer real estate                                  |   |                   | 105,634 |   |                   |   | 1,047  |                               |   |   | -          |   |   |   | 2,513  |   |   |   | 109,194 |   |
| Total real estate                                     |   |                   | 518,679 |   |                   |   | 13,676 |                               |   |   | 2,000      |   |   |   | 14,111 |   |   |   | 548,466 |   |
| Commercial business                                   |   |                   | 34,645  |   |                   |   | 61     |                               |   |   | -          |   |   |   | 287    |   |   |   | 34,993 |   |
| Other consumer                                        |   |                   | 5,409   |   |                   |   | 50     |                               |   |   | -          |   |   |   | 16     |   |   |   | 5,475 |   |
| Total loans not covered by FDIC loss-share agreements |   | $                      | 558,733 |   |                   | $      | 13,787 |                               |   | $      | 2,000      |   |   | $      | 14,414 |   |   | $ | 588,934 |   |

----

| December 31, 2010                                 |   | Current                |    |   | 30 to 89 Days Past Due |   |   | 90+ Days Past Due (Still Accruing) |   |   | Nonaccrual |   |   | Total  |   |
|---------------------------------------------------|--------|------------------------|---------|--------|------------------------|--------|--------|------------------------------------|--------|--------|------------|--------|--------|--------|--------|
|                                              |   | (Dollars in thousands) |    |
|                                              |   |                   |    |   |                   |   |   |                               |   |   |       |   |   |   |   |
| Covered by FDIC loss-share agreements             |   |                   |    |   |                   |   |   |                               |   |   |       |   |   |   |   |
| Real estate:                                      |   |                   |    |   |                   |   |   |                               |   |   |       |   |   |   |   |
| One-to-four family residential                    |   | $                      | 27,314  |   |                   | $      | 1,973  |                               |   | $      | -          |   |   | $      | 3,468  |   |   | $ | 32,755 |   |
| Multifamily residential                           |   |                   | 2,993   |   |                   |   | -      |                               |   |   | -          |   |   |   | -      |   |   |   | 2,993 |   |
| Construction                                      |   |                   | 158     |   |                   |   | -      |                               |   |   | -          |   |   |   | 49     |   |   |   | 207 |   |
| Land and development                              |   |                   | 19,385  |   |                   |   | 549    |                               |   |   | -          |   |   |   | 9,904  |   |   |   | 29,838 |   |
| Other commercial real estate                      |   |                   | 40,084  |   |                   |   | 2,090  |                               |   |   | 472        |   |   |   | 9,471  |   |   |   | 52,117 |   |
| Consumer real estate                              |   |                   | 8,526   |   |                   |   | 51     |                               |   |   | 37         |   |   |   | 213    |   |   |   | 8,827 |   |
| Total real estate                                 |   |                   | 98,460  |   |                   |   | 4,663  |                               |   |   | 509        |   |   |   | 23,105 |   |   |   | 126,737 |   |
| Commercial business                               |   |                   | 11,616  |   |                   |   | 376    |                               |   |   | 17         |   |   |   | 1,051  |   |   |   | 13,060 |   |
| Other consumer                                    |   |                   | 6,191   |   |                   |   | 728    |                               |   |   | -          |   |   |   | 860    |   |   |   | 7,779 |   |
| Total loans covered by FDIC loss-share agreements |   | $                      | 116,267 |   |                   | $      | 5,767  |                               |   | $      | 526        |   |   | $      | 25,016 |   |   | $ | 147,576 |   |

| December 31, 2010              |   | Current                |    |   | 30 to 89 Days Past Due |   |   | 90+ Days Past Due (Still Accruing) |   |   | Nonaccrual |   |   | Total  |   |
|--------------------------------|--------|------------------------|---------|--------|------------------------|--------|--------|------------------------------------|--------|--------|------------|--------|--------|--------|--------|
|                           |   | (Dollars in thousands) |    |
|                           |   |                   |    |   |                   |   |   |                               |   |   |       |   |   |   |   |
| Total loans                    |   |                   |    |   |                   |   |   |                               |   |   |       |   |   |   |   |
| Real estate:                   |   |                   |    |   |                   |   |   |                               |   |   |       |   |   |   |   |
| One-to-four family residential |   | $                      | 125,165 |   |                   | $      | 3,272  |                               |   | $      | -          |   |   | $      | 5,332  |   |   | $ | 133,769 |   |
| Multifamily residential        |   |                   | 23,667  |   |                   |   | -      |                               |   |   | -          |   |   |   | -      |   |   |   | 23,667 |   |
| Construction                   |   |                   | 19,728  |   |                   |   | 630    |                               |   |   | -          |   |   |   | 63     |   |   |   | 20,421 |   |
| Land and development           |   |                   | 76,912  |   |                   |   | 3,350  |                               |   |   | 2,000      |   |   |   | 10,463 |   |   |   | 92,725 |   |
| Other commercial real estate   |   |                   | 257,507 |   |                   |   | 9,989  |                               |   |   | 472        |   |   |   | 18,632 |   |   |   | 286,600 |   |
| Consumer real estate           |   |                   | 114,160 |   |                   |   | 1,098  |                               |   |   | 37         |   |   |   | 2,726  |   |   |   | 118,021 |   |
| Total real estate              |   |                   | 617,139 |   |                   |   | 18,339 |                               |   |   | 2,509      |   |   |   | 37,216 |   |   |   | 675,203 |   |
| Commercial business            |   |                   | 46,261  |   |                   |   | 437    |                               |   |   | 17         |   |   |   | 1,338  |   |   |   | 48,053 |   |
| Other consumer                 |   |                   | 11,600  |   |                   |   | 778    |                               |   |   | -          |   |   |   | 876    |   |   |   | 13,254 |   |
| Total loans                    |   | $                      | 675,000 |   |                   | $      | 19,554 |                               |   | $      | 2,526      |   |   | $      | 39,430 |   |   | $ | 736,510 |   |

----

|                            |   | Legal Balance          |   |   | Write-down |   |   | Book Balance |   |   | SpecificAllowance |   |
|---------------------------------|--------|------------------------|--------|--------|------------|--------|--------|--------------|--------|--------|-------------------|--------|
|                            |   | (Dollars in thousands) |   |   |       |   |   |
|                            |   |                   |   |   |       |   |   |         |   |   |              |   |   |
| Real estate:                    |   |                   |   |   |       |   |   |         |   |   |              |   |   |   |   |   |
| One-to-four family residential  |   | $                      | -      |   |       | $      | -      |         |   | $      | -                 |   |   | $ | - |   |
| Commercial land                 |   |                   | 2,732  |   |       |   | 1,084  |         |   |   | 1,648             |   |   |   | - |   |
| Residential development         |   |                   | 7,330  |   |       |   | 2,111  |         |   |   | 5,219             |   |   |   | - |   |
| Commercial real estate - office |   |                   | 6,459  |   |       |   | 831    |         |   |   | 5,628             |   |   |   | - |   |
| Commercial real estate - retail |   |                   | 2,494  |   |       |   | 2,170  |         |   |   | 324               |   |   |   | - |   |
| Commercial real estate - other  |   |                   | 2,118  |   |       |   | 888    |         |   |   | 1,230             |   |   |   | - |   |
| Consumer real estate            |   |                   | 204    |   |       |   | 169    |         |   |   | 35                |   |   |   |   |   |
| Commercial business             |   |                   | 128    |   |       |   | 128    |         |   |   | -                 |   |   |   | - |   |
| Total impaired loans            |   | $                      | 21,465 |   |       | $      | 7,381  |         |   | $      | 14,084            |   |   | $ | - |   |

|                            |   | Legal Balance          |   |   | Write-down |   |   | Book Balance |   |   | Specific Allowance |   |
|---------------------------------|--------|------------------------|--------|--------|------------|--------|--------|--------------|--------|--------|--------------------|--------|
|                            |   | (Dollars in thousands) |   |
|                            |   |                   |   |   |       |   |   |         |   |   |               |   |
| Real estate:                    |   |                   |   |   |       |   |   |         |   |   |               |   |
| One-to-four family residential  |   | $                      | 964    |   |       | $      | 200    |         |   | $      | 764                |   |   | $ | - |   |
| Commercial land                 |   |                   | 3,403  |   |       |   | 774    |         |   |   | 2,629              |   |   |   | - |   |
| Residential development         |   |                   | 7,579  |   |       |   | 1,388  |         |   |   | 6,191              |   |   |   | 416 |   |
| Commercial real estate - office |   |                   | 4,692  |   |       |   | 539    |         |   |   | 4,153              |   |   |   | - |   |
| Commercial real estate - retail |   |                   | 4,008  |   |       |   | 2,185  |         |   |   | 1,823              |   |   |   | - |   |
| Commercial real estate - other  |   |                   | 445    |   |       |   | 298    |         |   |   | 147                |   |   |   | - |   |
| Consumer real estate            |   |                   | 692    |   |       |   | 486    |         |   |   | 206                |   |   |   | - |   |
| Total impaired loans            |   | $                      | 21,783 |   |       | $      | 5,870  |         |   | $      | 15,913             |   |   | $ | 416 |   |

----

|                           |   |                   |    |   | Criticized Loans |   |   |        |   |
|--------------------------------|--------|------------------------|---------|--------|------------------|--------|--------|-------------|--------|
| June 30, 2011                  |   | Pass                   |    |   | Special Mention  |   |   | Substandard |   |   | Doubtful |   |   | Total |   |
|                           |   | (Dollars in thousands) |    |
|                           |   |                   |    |   |             |   |   |        |   |   |   |   |   |   |   |   |
| Real estate:                   |   |                   |    |   |             |   |   |        |   |   |   |   |   |   |   |   |
| One-to-four family residential |   | $                      | 149,837 |   |             | $      | 548    |        |   | $ | 1,726 |   |   | $ | - |   |   | $ | 152,111 |   |
| Multifamily residential        |   |                   | 21,825  |   |             |   | 268    |        |   |   | - |   |   |   | - |   |   |   | 22,093 |   |
| Construction                   |   |                   | 21,768  |   |             |   | -      |        |   |   | - |   |   |   | - |   |   |   | 21,768 |   |
| Commercial land                |   |                   | 34,199  |   |             |   | 4,891  |        |   |   | 4,163 |   |   |   | - |   |   |   | 43,253 |   |
| Residential development        |   |                   | 18,414  |   |             |   | 1,992  |        |   |   | 9,732 |   |   |   | - |   |   |   | 30,138 |   |
| Other commercial real estate   |   |                   | 270,118 |   |             |   | 10,652 |        |   |   | 22,575 |   |   |   | - |   |   |   | 303,345 |   |
| Consumer real estate           |   |                   | 111,980 |   |             |   | 789    |        |   |   | 2,890 |   |   |   | - |   |   |   | 115,659 |   |
| Total real estate              |   |                   | 628,141 |   |             |   | 19,140 |        |   |   | 41,086 |   |   |   | - |   |   |   | 688,367 |   |
| Commercial business            |   |                   | 48,299  |   |             |   | 288    |        |   |   | 363 |   |   |   | - |   |   |   | 48,950 |   |
| Other consumer                 |   |                   | 13,243  |   |             |   | 24     |        |   |   | 66 |   |   |   | - |   |   |   | 13,333 |   |
| Total loans                    |   | $                      | 689,683 |   |             | $      | 19,452 |        |   | $ | 41,515 |   |   | $ | - |   |   | $ | 750,650 |   |

|                           |   |                   |    |   | Criticized Loans |   |   |        |   |
|--------------------------------|--------|------------------------|---------|--------|------------------|--------|--------|-------------|--------|
| December 31, 2010              |   | Pass                   |    |   | Special Mention  |   |   | Substandard |   |   | Doubtful |   |   | Total |   |
|                           |   | (Dollars in thousands) |    |
|                           |   |                   |    |   |             |   |   |        |   |   |   |   |   |   |   |
| Real estate:                   |   |                   |    |   |             |   |   |        |   |   |   |   |   |   |   |
| One-to-four family residential |   | $                      | 131,072 |   |             | $      | 1,167  |        |   | $ | 1,530 |   |   | $ | - |   |   | $ | 133,769 |   |
| Multifamily residential        |   |                   | 23,394  |   |             |   | 273    |        |   |   | - |   |   |   | - |   |   |   | 23,667 |   |
| Construction                   |   |                   | 18,488  |   |             |   | 1,933  |        |   |   | - |   |   |   | - |   |   |   | 20,421 |   |
| Land and development           |   |                   | 66,104  |   |             |   | 10,533 |        |   |   | 16,012 |   |   |   | 75 |   |   |   | 92,724 |   |
| Other commercial real estate   |   |                   | 257,770 |   |             |   | 7,882  |        |   |   | 20,949 |   |   |   | - |   |   |   | 286,601 |   |
| Consumer real estate           |   |                   | 113,036 |   |             |   | 1,327  |        |   |   | 3,523 |   |   |   | 135 |   |   |   | 118,021 |   |
| Total real estate              |   |                   | 609,864 |   |             |   | 23,115 |        |   |   | 42,014 |   |   |   | 210 |   |   |   | 675,203 |   |
| Commercial business            |   |                   | 47,423  |   |             |   | 376    |        |   |   | 254 |   |   |   | - |   |   |   | 48,053 |   |
| Other consumer                 |   |                   | 11,200  |   |             |   | -      |        |   |   | 2,054 |   |   |   | - |   |   |   | 13,254 |   |
| Total loans                    |   | $                      | 668,487 |   |             | $      | 23,491 |        |   | $ | 44,322 |   |   | $ | 210 |   |   | $ | 736,510 |   |

----

|                           |   | Three Months           |   |   | Six Months             |   |
|--------------------------------|--------|------------------------|--------|--------|------------------------|--------|
|                           |   | Ended June 30          |   |   | Ended June 30          |   |
|                           |   | 2011                   |   |   | 2010                   |   |   | 2011 |   |   | 2010 |   |
|                           |   | (Dollars in thousands) |   |   | (Dollars in thousands) |   |
|                           |   |                   |   |   |                   |   |   |   |   |   |   |   |
| Balance - Beginning of period  |   | $                      | 12,006 |   |                   | $      | 9,230 |   |   | $ | 11,924 |   |   | $ | 9,189 |   |
| Charge-offs:                   |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| One-to-four family residential |   |                   | (312   | )      |                   |   | - |   |   |   | (1,137 | ) |   |   | (1 | ) |
| Construction                   |   |                   | (5     | )      |                   |   | (46 | ) |   |   | (41 | ) |   |   | (263 | ) |
| Commercial land                |   |                   | (291   | )      |                   |   | (118 | ) |   |   | (2,244 | ) |   |   | (526 | ) |
| Residential development        |   |                   | (386   | )      |                   |   | (1,146 | ) |   |   | (386 | ) |   |   | (1,146 | ) |
| Other commercial real estate   |   |                   | (256   | )      |                   |   | (439 | ) |   |   | (256 | ) |   |   | (2,417 | ) |
| Consumer real estate           |   |                   | (35    | )      |                   |   | (887 | ) |   |   | (91 | ) |   |   | (1,267 | ) |
| Commercial business            |   |                   | (35    | )      |                   |   | (12 | ) |   |   | (188 | ) |   |   | (60 | ) |
| Other consumer                 |   |                   | (5     | )      |                   |   | (15 | ) |   |   | (18 | ) |   |   | (42 | ) |
| Total charge-offs              |   |                   | (1,325 | )      |                   |   | (2,663 | ) |   |   | (4,361 | ) |   |   | (5,722 | ) |
| Recoveries:                    |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| One-to-four family residential |   |                   | 4      |   |                   |   | 2 |   |   |   | 7 |   |   |   | 3 |   |
| Construction                   |   |                   | 181    |   |                   |   | 33 |   |   |   | 231 |   |   |   | 48 |   |
| Residential development        |   |                   | 128    |   |                   |   | - |   |   |   | 128 |   |   |   | - |   |
| Other commercial real estate   |   |                   | 30     |   |                   |   | 180 |   |   |   | 14 |   |   |   | 180 |   |
| Consumer real estate           |   |                   | 2      |   |                   |   | - |   |   |   | 9 |   |   |   | 30 |   |
| Commercial business            |   |                   | 10     |   |                   |   | 1 |   |   |   | 13 |   |   |   | 1 |   |
| Other consumer                 |   |                   | 6      |   |                   |   | 13 |   |   |   | 77 |   |   |   | 17 |   |
| Total recoveries               |   |                   | 361    |   |                   |   | 229 |   |   |   | 479 |   |   |   | 279 |   |
| Provision for loan losses      |   |                   | 1,700  |   |                   |   | 3,000 |   |   |   | 4,700 |   |   |   | 6,050 |   |
| Balance - End of period        |   | $                      | 12,742 |   |                   | $      | 9,796 |   |   | $ | 12,742 |   |   | $ | 9,796 |   |

----

|                            |   | Allowance for loan losses             |   |
|---------------------------------|--------|---------------------------------------|--------|
|                            |   | Individually evaluated for impairment |   |   | Collectively evaluated for impairment |   |   | Total |   |
|                            |   | (Dollars in thousands)                |   |
|                            |   |                                  |   |   |   |   |   |   |   |
| Real estate:                    |   |                                  |   |   |   |   |   |   |   |
| One-to-four family residential  |   | $                                     | -      |   |   | $ | 500 |   |   | $ | 500 |   |
| Multifamily residential         |   |                                  | -      |   |   |   | 200 |   |   |   | 200 |   |
| Construction                    |   |                                  | -      |   |   |   | 400 |   |   |   | 400 |   |
| Commercial land                 |   |                                  | 750    |   |   |   | 600 |   |   |   | 1,350 |   |
| Residential development         |   |                                  | 500    |   |   |   | 1,000 |   |   |   | 1,500 |   |
| Other commercial real estate    |   |                                  | 600    |   |   |   | 3,692 |   |   |   | 4,292 |   |
| Consumer real estate            |   |                                  | -      |   |   |   | 1,500 |   |   |   | 1,500 |   |
| Total real estate               |   |                                  | 1,850  |   |   | $ | 7,892 |   |   | $ | 9,742 |   |
| Commercial business             |   |                                  | 250    |   |   |   | 2,250 |   |   |   | 2,500 |   |
| Other consumer                  |   |                                  | -      |   |   |   | 500 |   |   |   | 500 |   |
| Total allowance for loan losses |   | $                                     | 2,100  |   |   | $ | 10,642 |   |   | $ | 12,742 |   |

|                                                  |   | Recorded Investment                   |   |
|-------------------------------------------------------|--------|---------------------------------------|--------|
|                                                  |   | Individually evaluated for impairment |   |   | Collectively evaluated for impairment |   |   | Total |   |
|                                                  |   | (Dollars in thousands)                |   |
|                                                  |   |                                  |   |   |   |   |   |   |   |
| Real estate:                                          |   |                                  |   |   |   |   |   |   |   |
| One-to-four family residential                        |   | $                                     | -      |   |   | $ | 109,693 |   |   | $ | 109,693 |   |
| Multifamily residential                               |   |                                  | -      |   |   |   | 18,955 |   |   |   | 18,955 |   |
| Construction                                          |   |                                  | -      |   |   |   | 20,370 |   |   |   | 20,370 |   |
| Commercial land                                       |   |                                  | 2,732  |   |   |   | 28,217 |   |   |   | 30,949 |   |
| Residential development                               |   |                                  | 7,330  |   |   |   | 13,977 |   |   |   | 21,307 |   |
| Other commercial real estate                          |   |                                  | 11,071 |   |   |   | 214,387 |   |   |   | 225,458 |   |
| Consumer real estate                                  |   |                                  | 204    |   |   |   | 104,164 |   |   |   | 104,368 |   |
| Total real estate                                     |   |                                  | 21,337 |   |   |   | 509,763 |   |   | $ | 531,100 |   |
| Commercial business                                   |   |                                  | 128    |   |   |   | 36,520 |   |   |   | 36,648 |   |
| Other consumer                                        |   |                                  | -      |   |   |   | 5,855 |   |   |   | 5,855 |   |
| Total loans not covered by FDIC loss-share agreements |   | $                                     | 21,465 |   |   | $ | 552,138 |   |   | $ | 573,603 |   |

----

|                       |   | June 30, 2011          |    |   | December 31, 2010 |   |
|----------------------------|--------|------------------------|---------|--------|-------------------|--------|
|                       |   | (Dollars in thousands) |    |
|                       |   |                   |    |   |              |   |
| Noninterest-bearing demand |   | $                      | 82,304  |   |              | $      | 70,056 |   |
| Interest-bearing demand    |   |                   | 189,073 |   |              |   | 172,414 |   |
| Money market deposit       |   |                   | 160,068 |   |              |   | 142,538 |   |
| Savings                    |   |                   | 19,625  |   |              |   | 17,004 |   |
| Time deposits              |   |                   | 453,508 |   |              |   | 448,444 |   |
| Total deposits             |   | $                      | 904,578 |   |              | $      | 850,456 |   |

|                                   |   | June 30, 2011          |   |   | December 31, 2010 |   |
|----------------------------------------|--------|------------------------|--------|--------|-------------------|--------|
|                                   |   | (Dollars in thousands) |   |
|                                   |   |                   |   |   |              |   |
| Loan commitments                       |   |                   |   |   |              |   |
| Residential mortgage loans             |   | $                      | 19,259 |   |              | $      | 14,530 |   |
| Non-residential mortgage loans         |   |                   | 11,550 |   |              |   | 2,500 |   |
| Commercial loans                       |   |                   | -      |   |              |   | 731 |   |
| Consumer loans                         |   |                   | 2,991  |   |              |   | 765 |   |
| Total loan commitments                 |   | $                      | 33,800 |   |              | $      | 18,526 |   |
|                                   |   |                   |   |   |              |   |   |   |
| Unused lines of credit                 |   |                   |   |   |              |   |   |   |
| Commercial                             |   | $                      | 15,116 |   |              | $      | 13,000 |   |
| Consumer                               |   |                   | 72,882 |   |              |   | 73,655 |   |
| Total unused lines of credit           |   | $                      | 87,998 |   |              | $      | 86,655 |   |
|                                   |   |                   |   |   |              |   |   |   |
| Undisbursed Construction Loan Proceeds |   | $                      | 1,088  |   |              | $      | 524 |   |

----

| Beginning balance, January 1, 2011 |   | $      | 3,023  |   |
|------------------------------------|--------|--------|--------|--------|
| Total gains included in:           |   |   |   |   |
| Other comprehensive income         |   |   | 73     |   |
| Sales                              |   |   | (1,093 | )      |
| Transfers in                       |   |   | 258    |   |
| Ending balance,June 30, 2011       |   | $      | 2,261  |   |

----

|                                                   |   | Level 1                |   |   | Level 2 |   |   | Level 3 |   |   | Total  |   |
|--------------------------------------------------------|--------|------------------------|--------|--------|---------|--------|--------|---------|--------|--------|--------|--------|
|                                                   |   | (Dollars in thousands) |   |
| June 30, 2011                                          |   |                   |   |   |    |   |   |    |   |   |   |   |
| Investment securities, available for sale              |   | $                      | -      |   |    | $      | 74,669 |    |   | $      | 2,261  |   |   | $ | 76,930 |   |
| Investment securities, held for sale                   |   |                   | 9,964  |   |    |   | 69,434 |    |   |   | -      |   |   |   | 79,398 |   |
| Investment securities, rabbi trusts                    |   |                   | -      |   |    |   | 285    |    |   |   | -      |   |   |   | 285 |   |
|                                                   |   |                   |   |   |    |   |   |    |   |   |   |   |   |   |   |   |
| December 31, 2010                                      |   |                   |   |   |    |   |   |    |   |   |   |   |   |   |   |   |
| Investment securities, available for sale              |   | $                      | -      |   |    | $      | 71,285 |    |   | $      | 3,023  |   |   | $ | 74,308 |   |
| Investment securities, held for sale                   |   |                   | 9,955  |   |    |   | 27,323 |    |   |   | -      |   |   |   | 37,278 |   |
| Investment securities, rabbi trusts                    |   |                   | -      |   |    |   | 731    |    |   |   | -      |   |   |   | 731 |   |
|                                                   |   |                   |   |   |    |   |   |    |   |   |   |   |   |   |   |   |
| Assets Recorded at Fair Value on a Nonrecurring Basis: |   |                   |   |   |    |   |   |    |   |   |   |   |   |   |   |   |
|                                                   |   |                   |   |   |    |   |   |    |   |   |   |   |   |   |   |   |
| June 30, 2011                                          |   |                   |   |   |    |   |   |    |   |   |   |   |   |   |   |   |
| Presold loans in process of settlement                 |   | $                      | -      |   |    | $      | 2,109  |    |   | $      | -      |   |   | $ | 2,109 |   |
| Impaired loans                                         |   |                   | -      |   |    |   | -      |    |   |   | 14,084 |   |   |   | 14,084 |   |
| Other real estate owned                                |   |                   | -      |   |    |   | -      |    |   |   | 24,803 |   |   |   | 24,803 |   |
|                                                   |   |                   |   |   |    |   |   |    |   |   |   |   |   |   |   |   |
| December 31, 2010                                      |   |                   |   |   |    |   |   |    |   |   |   |   |   |   |   |   |
| Presold loans in process of settlement                 |   | $                      | -      |   |    | $      | 4,034  |    |   | $      | -      |   |   | $ | 4,034 |   |
| Impaired loans                                         |   |                   | -      |   |    |   | -      |    |   |   | 15,915 |   |   |   | 15,915 |   |
| Other real estate owned                                |   |                   | -      |   |    |   | -      |    |   |   | 14,652 |   |   |   | 14,652 |   |

----

----

|                                        |   | June 30, 2011          |    |   | December 31, 2010 |   |
|---------------------------------------------|--------|------------------------|---------|--------|-------------------|--------|
|                                        |   | Carrying               |    |   | Estimated         |   |   | Carrying |   |   | Estimated |   |
|                                        |   | Amount                 |    |   | Fair Value        |   |   | Amount |   |   | Fair Value |   |
|                                        |   | (Dollars in thousands) |    |
| Financial assets:                           |   |                   |    |   |              |   |   |   |   |   |   |   |
| Cash and due from banks                     |   | $                      | 10,868  |   |              | $      | 10,868 |   |   | $ | 15,110 |   |   | $ | 15,110 |   |
| Interest-earning bank balances              |   |                   | 78,469  |   |              |   | 78,469 |   |   |   | 105,789 |   |   |   | 105,789 |   |
| Investment securities                       |   |                   | 156,328 |   |              |   | 157,933 |   |   |   | 111,586 |   |   |   | 111,946 |   |
| Federal Home Loan Bank stock                |   |                   | 5,635   |   |              |   | 5,635 |   |   |   | 5,715 |   |   |   | 5,715 |   |
| Presold loans in process of settlement      |   |                   | 2,109   |   |              |   | 2,109 |   |   |   | 4,034 |   |   |   | 4,034 |   |
| Net loans receivable                        |   |                   | 750,650 |   |              |   | 765,411 |   |   |   | 736,510 |   |   |   | 751,219 |   |
| Accrued interest receivable                 |   |                   | 3,076   |   |              |   | 3,076 |   |   |   | 3,001 |   |   |   | 3,001 |   |
| Bank-owned life insurance                   |   |                   | 18,654  |   |              |   | 18,654 |   |   |   | 18,230 |   |   |   | 18,230 |   |
|                                        |   |                   |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities:                      |   |                   |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Demand deposits                             |   | $                      | 271,377 |   |              | $      | 271,377 |   |   | $ | 242,470 |   |   | $ | 242,470 |   |
| Money market accounts                       |   |                   | 160,068 |   |              |   | 160,068 |   |   |   | 142,538 |   |   |   | 142,538 |   |
| Savings                                     |   |                   | 19,625  |   |              |   | 19,625 |   |   |   | 17,004 |   |   |   | 17,004 |   |
| Time deposits                               |   |                   | 453,508 |   |              |   | 456,336 |   |   |   | 448,444 |   |   |   | 451,853 |   |
| Securities sold under repurchase agreements |   |                   | 11,890  |   |              |   | 11,890 |   |   |   | 9,432 |   |   |   | 9,432 |   |
| Borrowed money                              |   |                   | 96,121  |   |              |   | 104,520 |   |   |   | 101,246 |   |   |   | 109,092 |   |

----

ITEM 

----

----

| Quarterly Financial Highlights (unaudited)                           |   | At and For the Quarters Ended |       |
|----------------------------------------------------------------------|--------|-------------------------------|------------|
|                                                                 |   | 2011                          |       |   | 2010 |   |
|                                                                 |   | June 30                       |       |   | March 31 |   |   | December 31 |   |   | September 30 |   |   | June 30 |   |
| (Dollars in thousands, except per share data)                        |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                 |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Summary of Operations:                                               |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest income - taxable equivalent                                 |   | $                             | 11,488     |   |   | $ | 10,457 |   |   | $ | 11,055 |   |   | $ | 11,675 |   |   | $ | 12,308 |   |
| Interest expense                                                     |   |                          | 2,826      |   |   |   | 2,855 |   |   |   | 3,411 |   |   |   | 3,790 |   |   |   | 4,083 |   |
|    Net interest income - taxable equivalent           |   |                          | 8,662      |   |   |   | 7,602 |   |   |   | 7,644 |   |   |   | 7,885 |   |   |   | 8,225 |   |
| Less: Taxable-equivalent adjustment                                  |   |                          | 69         |   |   |   | 70 |   |   |   | 70 |   |   |   | 79 |   |   |   | 114 |   |
|    Net interest income                                |   |                          | 8,593      |   |   |   | 7,532 |   |   |   | 7,574 |   |   |   | 7,806 |   |   |   | 8,111 |   |
| Provision for loan losses                                            |   |                          | 1,700      |   |   |   | 3,000 |   |   |   | 5,000 |   |   |   | 3,000 |   |   |   | 3,000 |   |
| Net interest income after loan loss provision                        |   |                          | 6,893      |   |   |   | 4,532 |   |   |   | 2,574 |   |   |   | 4,806 |   |   |   | 5,111 |   |
| Noninterest income                                                   |   |                          | 5,886      |   |   |   | 1,478 |   |   |   | 2,274 |   |   |   | 2,290 |   |   |   | 2,415 |   |
| Noninterest expense                                                  |   |                          | 9,270      |   |   |   | 7,672 |   |   |   | 7,918 |   |   |   | 7,781 |   |   |   | 7,279 |   |
|    Net income (loss) before income taxes              |   |                          | 3,509      |   |   |   | (1,662 | ) |   |   | (3,070 | ) |   |   | (685 | ) |   |   | 247 |   |
| Income tax expense (benefit)                                         |   |                          | 1,213      |   |   |   | (771 | ) |   |   | (1,331 | ) |   |   | (413 | ) |   |   | (108 | ) |
|    Net income (loss)                                  |   |                          | 2,296      |   |   |   | (891 | ) |   |   | (1,739 | ) |   |   | (272 | ) |   |   | 355 |   |
| Dividends on preferred stock                                         |   |                          | 256        |   |   |   | 256 |   |   |   | 256 |   |   |   | 256 |   |   |   | 257 |   |
|    Net income (loss) available to common shareholders |   | $                             | 2,040      |   |   | $ | (1,147 | ) |   | $ | (1,995 | ) |   | $ | (528 | ) |   | $ | 98 |   |
|                                                                 |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Per Common Share Data:                                               |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income:                                                          |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Basic                                                    |   | $                             | 0.18       |   |   | $ | (0.10 | ) |   | $ | (0.18 | ) |   | $ | (0.05 | ) |   | $ | 0.01 |   |
|   Diluted                                                  |   |                          | 0.18       |   |   |   | (0.10 | ) |   |   | (0.18 | ) |   |   | (0.05 | ) |   |   | 0.01 |   |
| Weighted average shares outstanding:                                 |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Basic                                                    |   |                          | 11,455,642 |   |   |   | 11,491,734 |   |   |   | 11,173,174 |   |   |   | 10,844,386 |   |   |   | 9,077,042 |   |
|   Diluted                                                  |   |                          | 11,455,642 |   |   |   | 11,491,734 |   |   |   | 11,173,174 |   |   |   | 10,844,386 |   |   |   | 9,077,042 |   |
| End of period shares outstanding                                     |   |                          | 11,506,324 |   |   |   | 11,508,750 |   |   |   | 11,508,750 |   |   |   | 10,964,146 |   |   |   | 10,965,941 |   |
| Cash dividends declared                                              |   | $                             | 0.01       |   |   | $ | 0.01 |   |   | $ | 0.01 |   |   | $ | 0.04 |   |   | $ | 0.04 |   |
| Book value                                                           |   |                          | 6.44       |   |   |   | 6.22 |   |   |   | 6.32 |   |   |   | 6.86 |   |   |   | 6.91 |   |
| Tangible book value                                                  |   |                          | 6.29       |   |   |   | 6.09 |   |   |   | 6.17 |   |   |   | 6.70 |   |   |   | 6.73 |   |
|                                                                 |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selected Financial Performance Ratios (annualized):                  |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Return on average assets                                             |   |                          | 0.73       | % |   |   | -0.44 | % |   |   | -0.74 | % |   |   | -0.20 | % |   |   | 0.04 | % |
| Return on average common equity                                      |   |                          | 11.00      | % |   |   | -6.39 | % |   |   | -10.68 | % |   |   | -2.77 | % |   |   | 0.56 | % |
| Noninterest income to average total assets  (1)            |   |                          | 2.12       | % |   |   | 0.56 | % |   |   | 0.85 | % |   |   | 0.85 | % |   |   | 0.87 | % |
| Noninterest expense to average total assets (2)                      |   |                          | 3.34       | % |   |   | 2.91 | % |   |   | 2.95 | % |   |   | 2.88 | % |   |   | 2.63 | % |
| Efficiency ratio  (1) (2)                                  |   |                          | 63.72      | % |   |   | 84.49 | % |   |   | 79.83 | % |   |   | 76.47 | % |   |   | 68.41 | % |
|                                                                 |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selected End of Period Balances:                                     |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans, net                                                           |   | $                             | 750,650    |   |   | $ | 724,655 |   |   | $ | 736,510 |   |   | $ | 754,740 |   |   | $ | 776,234 |   |
| Investment securities                                                |   |                          | 156,328    |   |   |   | 154,006 |   |   |   | 111,586 |   |   |   | 87,255 |   |   |   | 97,678 |   |
| Total interest-earning assets                                        |   |                          | 931,156    |   |   |   | 886,872 |   |   |   | 914,456 |   |   |   | 937,278 |   |   |   | 927,757 |   |
| Total assets                                                         |   |                          | 1,117,993  |   |   |   | 1,041,444 |   |   |   | 1,064,487 |   |   |   | 1,087,558 |   |   |   | 1,077,431 |   |
| Deposits                                                             |   |                          | 904,578    |   |   |   | 832,803 |   |   |   | 850,456 |   |   |   | 865,786 |   |   |   | 853,526 |   |
| Shareholders' equity                                                 |   |                          | 94,771     |   |   |   | 92,276 |   |   |   | 93,443 |   |   |   | 95,682 |   |   |   | 96,410 |   |
|                                                                 |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selected Quarterly Average Balances:                                 |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans, net                                                           |   | $                             | 753,874    |   |   | $ | 726,346 |   |   | $ | 747,054 |   |   | $ | 767,381 |   |   | $ | 780,209 |   |
| Investment securities                                                |   |                          | 157,513    |   |   |   | 135,645 |   |   |   | 100,691 |   |   |   | 91,361 |   |   |   | 100,501 |   |
| Total interest-earning assets                                        |   |                          | 918,118    |   |   |   | 902,141 |   |   |   | 928,756 |   |   |   | 915,882 |   |   |   | 949,130 |   |
| Total assets                                                         |   |                          | 1,110,740  |   |   |   | 1,053,747 |   |   |   | 1,075,338 |   |   |   | 1,080,680 |   |   |   | 1,105,788 |   |
| Deposits                                                             |   |                          | 896,353    |   |   |   | 841,387 |   |   |   | 853,185 |   |   |   | 853,902 |   |   |   | 859,408 |   |
| Shareholders' equity                                                 |   |                          | 95,116     |   |   |   | 93,533 |   |   |   | 94,761 |   |   |   | 96,258 |   |   |   | 96,282 |   |

----

| Quarterly Financial Highlights (unaudited)                                                                |   | At and For the Quarters Ended |   |
|-----------------------------------------------------------------------------------------------------------|--------|-------------------------------|--------|
|                                                                                                      |   | 2011                          |   |   | 2010 |   |
|                                                                                                      |   | June 30                       |   |   | March 31 |   |   | December 31 |   |   | September 30 |   |   | June 30 |   |
| (Dollars in thousands, except per share data)                                                             |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                      |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Interest Margin (annualized):                                                                         |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Yield on earning assets                                                                                   |   |                          | 4.95   | % |   |   | 4.62 | % |   |   | 4.68 | % |   |   | 4.91 | % |   |   | 4.96 | % |
| Cost of funds                                                                                             |   |                          | 1.23   | % |   |   | 1.32 | % |   |   | 1.51 | % |   |   | 1.66 | % |   |   | 1.72 | % |
| Net Interest spread                                                                                       |   |                          | 3.72   | % |   |   | 3.30 | % |   |   | 3.17 | % |   |   | 3.25 | % |   |   | 3.24 | % |
| Net interest margin (taxable equivalent)                                                                  |   |                          | 3.78   | % |   |   | 3.42 | % |   |   | 3.25 | % |   |   | 3.42 | % |   |   | 3.48 | % |
|                                                                                                      |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Credit Quality Information and Ratios:                                                                    |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses - beginning of period                                                           |   | $                             | 12,006 |   |   | $ | 11,924 |   |   | $ | 10,752 |   |   | $ | 9,796 |   |   | $ | 9,230 |   |
| Add:  Provision for loan losses                                                                 |   |                          | 1,700  |   |   |   | 3,000 |   |   |   | 5,000 |   |   |   | 3,000 |   |   |   | 3,000 |   |
| Less:  Net charge-offs                                                                          |   |                          | 964    |   |   |   | 2,918 |   |   |   | 3,828 |   |   |   | 2,044 |   |   |   | 2,433 |   |
| Allowance for loan losses - end of period                                                                 |   |                          | 12,742 |   |   |   | 12,006 |   |   |   | 11,924 |   |   |   | 10,752 |   |   |   | 9,797 |   |
|                                                                                                      |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets not covered by FDIC loss-share agreements:                                                         |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Past due loans (30-89 days) accruing - non-covered                                                        |   | $                             | 5,687  |   |   | $ | 5,692 |   |   | $ | 13,787 |   |   | $ | 6,602 |   |   | $ | 10,145 |   |
| Past due loans (30-89 days) accruing - non-covered to total non-covered loans                             |   |                          | 0.99   | % |   |   | 0.97 | % |   |   | 2.34 | % |   |   | 1.11 | % |   |   | 1.68 | % |
|                                                                                                      |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nonperforming non-covered loans:                                                                          |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     One-to-four family residential                                                    |   |                          | 1,406  |   |   |   | 2,373 |   |   |   | 1,864 |   |   |   | 2,068 |   |   |   | 1,646 |   |
|     Construction                                                                      |   |                          | -      |   |   |   | 72 |   |   |   | 14 |   |   |   | 163 |   |   |   | 896 |   |
|     Commercial land                                                                   |   |                          | 3,167  |   |   |   | 4,653 |   |   |   | 4,360 |   |   |   | 5,034 |   |   |   | 3,252 |   |
|     Residential development                                                           |   |                          | 5,155  |   |   |   | 4,675 |   |   |   | 2,560 |   |   |   | 340 |   |   |   | 691 |   |
|     Other commercial real estate                                                      |   |                          | 10,306 |   |   |   | 9,636 |   |   |   | 4,800 |   |   |   | 9,566 |   |   |   | 4,127 |   |
|     Commercial business                                                               |   |                          | 201    |   |   |   | 309 |   |   |   | 287 |   |   |   | 720 |   |   |   | 742 |   |
|     Consumer                                                                          |   |                          | 2,440  |   |   |   | 2,639 |   |   |   | 2,529 |   |   |   | 1,930 |   |   |   | 1,652 |   |
| Total nonperforming non-covered loans                                                                     |   |                          | 22,675 |   |   |   | 24,357 |   |   |   | 16,414 |   |   |   | 19,821 |   |   |   | 13,006 |   |
| Other real estate owned/repossessed assets - non-covered                                                  |   |                          | 10,723 |   |   |   | 8,463 |   |   |   | 7,650 |   |   |   | 8,557 |   |   |   | 8,239 |   |
| Total nonperforming non-covered assets                                                                    |   |                          | 33,398 |   |   |   | 32,820 |   |   |   | 24,064 |   |   |   | 28,378 |   |   |   | 21,245 |   |
|                                                                                                      |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses to total non-covered loans                                                      |   |                          | 2.22   | % |   |   | 2.05 | % |   |   | 2.02 | % |   |   | 1.81 | % |   |   | 1.62 | % |
| Net charge-offs to average non-covered loans (annualized)                                                 |   |                          | 0.66   | % |   |   | 1.99 | % |   |   | 2.59 | % |   |   | 1.36 | % |   |   | 1.61 | % |
| Nonperforming non-covered loans to non-covered loans                                                      |   |                          | 3.95   | % |   |   | 4.15 | % |   |   | 2.79 | % |   |   | 3.33 | % |   |   | 2.15 | % |
| Nonperforming non-covered assets to total assets                                                          |   |                          | 2.99   | % |   |   | 3.15 | % |   |   | 2.26 | % |   |   | 2.61 | % |   |   | 1.97 | % |
| Nonperforming non-covered assets to total non-covered loans and other non-covered real estate owned/repos |   |                          | 5.72   | % |   |   | 5.51 | % |   |   | 4.03 | % |   |   | 4.71 | % |   |   | 3.46 | % |
|                                                                                                      |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets covered by FDIC loss-share agreements:                                                             |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Past due loans (30-89 days) accruing  (3)                                                       |   |                          | 12,987 |   |   |   | 7,006 |   |   |   | 5,767 |   |   |   | 8,701 |   |   |   | 5,257 |   |
| Past due loans (30-89 days) accruing to total covered loans                                               |   |                          | 7.34   | % |   |   | 5.09 | % |   |   | 3.91 | % |   |   | 5.43 | % |   |   | 3.07 | % |
|                                                                                                      |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total covered nonperforming loans (4)                                                                     |   |                          | 35,830 |   |   |   | 24,791 |   |   |   | 25,542 |   |   |   | 22,416 |   |   |   | 24,924 |   |
| Other covered nonperforming assets                                                                        |   |                          | 14,127 |   |   |   | 8,225 |   |   |   | 7,108 |   |   |   | 3,183 |   |   |   | 2,343 |   |
| Total covered nonperforming assets                                                                        |   |                          | 49,957 |   |   |   | 33,016 |   |   |   | 32,650 |   |   |   | 25,599 |   |   |   | 27,267 |   |
|                                                                                                      |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital Ratios:                                                                                           |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tangible common equity                                                                                    |   |                          | 6.49   | % |   |   | 6.73 | % |   |   | 6.69 | % |   |   | 6.74 | % |   |   | 6.86 | % |
| Total Risk-Based Capital (Bank only)                                                                      |   |                          | 17.29  | % |   |   | 16.70 | % |   |   | 16.80 | % |   |   | 16.83 | % |   |   | 16.78 | % |
| Tier 1 Risk-Based Capital (Bank only)                                                                     |   |                          | 16.03  | % |   |   | 15.44 | % |   |   | 15.54 | % |   |   | 15.58 | % |   |   | 15.52 | % |
| Tier 1 Leverage Capital (Bank only)                                                                       |   |                          | 9.42   | % |   |   | 9.89 | % |   |   | 9.74 | % |   |   | 9.58 | % |   |   | 9.74 | % |
|                                                                                                      |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| (1)    | Includes subsequent adjustments to the initial 1st quarter 2010 gain on acquisition of Bank of Hiawassee in the amounts of $605,000, $193,000, $148,000 and ($255,000) for the quarters ended June 30, 2010, September 30, 2010, December 31, 2010, and March 31, 2011, respectively. Also includes the $4.4 million gain on acquisition of New Horizons Bank for the quarter ended June 30, 2011. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                               |
| (2)    | Includes acquisition and integration expenses of $94,000, $141,000, $42,000, $45,000 and $566,000 for the quarters ended June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011, and June 30, 2011, respectively.                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                               |
| (3)    | The contractual balance of past due loans covered by  FDIC loss-share agreements totaled $6.4 million, $14.8 million, $7.0 million, $7.7 million and $13.7 million at June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011, and June 30, 2011, respectively.                                                                                                             |
|   |                                                                                                                                                                                                                                                                                                                                                                                               |
| (4)    | The contractual balance of nonperforming loans covered by  FDIC loss-share agreements totaled $35.4 million, $29.1 million, $31.2 million, $28.7 million and $39.3 million at June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011, and June 30, 2011, respectively.                                                                                                     |

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|                                            |   | Three Months Ended     |   |   |          |   |
|-------------------------------------------------|--------|------------------------|--------|--------|---------------|--------|
|                                            |   | June 30, 2011          |   |   | June 30, 2010 |   |   | Variance |   |
|                                            |   | (Dollars in thousands) |   |   |          |   |
| Noninterest income:                             |   |                   |   |   |          |   |   |   |   |
| Service charges on deposit accounts             |   | $                      | 1,046  |   |          | $      | 971 |   |   | $ | 75 |   |
| Mortgage banking income                         |   |                   | 254    |   |          |   | 357 |   |   |   | (103 | ) |
| Commissions on sales of financial products      |   |                   | 69     |   |          |   | 188 |   |   |   | (119 | ) |
| Income from bank-owned life insurance           |   |                   | 214    |   |          |   | 243 |   |   |   | (29 | ) |
| Gain from acquisition                           |   |                   | 4,418  |   |          |   | 605 |   |   |   | 3,813 |   |
| Gain on sale of investments, available for sale |   |                   | 1      |   |          |   | 10 |   |   |   | (9 | ) |
| Loss on sale of other assets                    |   |                   | (338   | )      |          |   | (203 | ) |   |   | (135 | ) |
| Other income                                    |   |                   | 222    |   |          |   | 244 |   |   |   | (22 | ) |
| Total noninterest income                        |   | $                      | 5,886  |   |          | $      | 2,415 |   |   | $ | 3,471 |   |

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|                                          |   | Three Months Ended     |   |   |          |   |
|-----------------------------------------------|--------|------------------------|--------|--------|---------------|--------|
|                                          |   | June 30, 2011          |   |   | June 30, 2010 |   |   | Variance |   |
|                                          |   | (Dollars in thousands) |   |
| Noninterest Expense:                          |   |                   |   |   |          |   |   |   |   |
| Compensation and benefits                     |   | $                      | 3,806  |   |          | $      | 3,649 |   |   | $ | 157 |   |
| Occupancy and equipment                       |   |                   | 873    |   |          |   | 1,039 |   |   |   | (166 | ) |
| Loan collection and other expenses            |   |                   | 204    |   |          |   | 162 |   |   |   | 42 |   |
| Advertising and business development          |   |                   | 71     |   |          |   | 95 |   |   |   | (24 | ) |
| Professional services                         |   |                   | 249    |   |          |   | 231 |   |   |   | 18 |   |
| Data processing and other technology          |   |                   | 282    |   |          |   | 239 |   |   |   | 43 |   |
| Deposit insurance                             |   |                   | 361    |   |          |   | 354 |   |   |   | 7 |   |
| Amortization of intangible assets             |   |                   | 136    |   |          |   | 154 |   |   |   | (18 | ) |
| Other real estate owned valuation adjustments |   |                   | 1,476  |   |          |   | 209 |   |   |   | 1,267 |   |
| Other real estate owned expenses              |   |                   | 596    |   |          |   | 202 |   |   |   | 394 |   |
| Acquisition and integration expenses          |   |                   | 566    |   |          |   | 94 |   |   |   | 472 |   |
| Other expenses                                |   |                   | 650    |   |          |   | 851 |   |   |   | (201 | ) |
| Total noninterest expense                     |   | $                      | 9,270  |   |          | $      | 7,279 |   |   | $ | 1,991 |   |

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|                                            |   | Six Months Ended       |   |   |          |   |
|-------------------------------------------------|--------|------------------------|--------|--------|---------------|--------|
|                                            |   | June 30, 2011          |   |   | June 30, 2010 |   |   | Variance |   |
|                                            |   | (Dollars in thousands) |   |
| Noninterest income:                             |   |                   |   |   |          |   |   |   |   |
| Service charges on deposit accounts             |   | $                      | 2,004  |   |          | $      | 1,761 |   |   | $ | 243 |   |
| Mortgage banking income                         |   |                   | 491    |   |          |   | 567 |   |   |   | (76 | ) |
| Commissions on sales of financial products      |   |                   | 136    |   |          |   | 306 |   |   |   | (170 | ) |
| Income from bank-owned life insurance           |   |                   | 397    |   |          |   | 432 |   |   |   | (35 | ) |
| Gain from acquisition                           |   |                   | 4,163  |   |          |   | 19,338 |   |   |   | (15,175 | ) |
| Gain on sale of investments, available for sale |   |                   | 1      |   |          |   | 44 |   |   |   | (43 | ) |
| Loss on sale of other assets                    |   |                   | (326   | )      |          |   | (266 | ) |   |   | (60 | ) |
| Other income                                    |   |                   | 500    |   |          |   | 418 |   |   |   | 82 |   |
| Total noninterest income                        |   | $                      | 7,366  |   |          | $      | 22,600 |   |   | $ | (15,234 | ) |

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|                                          |   | Six Months Ended       |   |   |          |   |
|-----------------------------------------------|--------|------------------------|--------|--------|---------------|--------|
|                                          |   | June 30, 2011          |   |   | June 30, 2010 |   |   | Variance |   |
|                                          |   | (Dollars in thousands) |   |
| Noninterest Expense:                          |   |                   |   |   |          |   |   |   |   |
| Compensation and benefits                     |   | $                      | 7,454  |   |          | $      | 6,295 |   |   | $ | 1,159 |   |
| Occupancy and equipment                       |   |                   | 1,701  |   |          |   | 1,722 |   |   |   | (21 | ) |
| Loan collection and other expenses            |   |                   | 494    |   |          |   | 291 |   |   |   | 203 |   |
| Advertising and business development          |   |                   | 125    |   |          |   | 150 |   |   |   | (25 | ) |
| Professional services                         |   |                   | 502    |   |          |   | 467 |   |   |   | 35 |   |
| Data processing and other technology          |   |                   | 522    |   |          |   | 331 |   |   |   | 191 |   |
| Deposit insurance                             |   |                   | 695    |   |          |   | 614 |   |   |   | 81 |   |
| Amortization of intangible assets             |   |                   | 275    |   |          |   | 218 |   |   |   | 57 |   |
| Other real estate owned valuation adjustments |   |                   | 1,984  |   |          |   | 694 |   |   |   | 1,290 |   |
| Other real estate owned expenses              |   |                   | 597    |   |          |   | 352 |   |   |   | 245 |   |
| Acquisition and integration expenses          |   |                   | 611    |   |          |   | 882 |   |   |   | (271 | ) |
| Other expenses                                |   |                   | 1,985  |   |          |   | 1,619 |   |   |   | 366 |   |
| Total noninterest expense                     |   | $                      | 16,945 |   |          | $      | 13,635 |   |   | $ | 3,310 |   |

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|                                               |   | Actual                 |    |   | Minimum Requirements to be Well Capitalized |   |
|----------------------------------------------------|--------|------------------------|---------|--------|---------------------------------------------|--------|
|                                               |   | Amount                 |    |   | Ratio                                       |   |   | Amount |   |   | Ratio |   |
|                                               |   | (Dollars in thousands) |    |
| Regulatory Capital Ratios:                         |   |                   |    |   |                                        |   |   |   |   |   |   |   |
| Total risk-based capital (to risk-weighted assets) |   | $                      | 113,360 |   |                                        |   | 17.29 | % |   | $ | 66,024 |   |   |   | 10.00 | % |
| Tier 1 capital (to risk-weighted assets)           |   |                   | 105,088 |   |                                        |   | 16.03 | % |   |   | 39,615 |   |   |   | 6.00 | % |
| Tier 1 capital (to adjusted total assets)          |   |                   | 105,088 |   |                                        |   | 9.42 | % |   |   | 55,761 |   |   |   | 5.00 | % |
| Tangible capital (to adjusted total assets)        |   |                   | 105,088 |   |                                        |   | 9.42 | % |   |   | 33,457 |   |   |   | 3.00 | % |

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SIGNATURES

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