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

----

| Large accelerated filer [  ] | Accelerated filer [  ]   |
|-----------------------------------|-------------------------------|
| Non-accelerated filer [  ]   | Smaller Reporting Company [x] |

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|                                                                                                                  |                                                                                                                       | Page   |
|-----------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------|--------|
| Part I.  FINANCIAL INFORMATION                                                                              |                                                                                                                       |
|                                                                                                                  |                                                                                                                       |   |
| Item 1.   Financial Statements (unaudited)                                                             |                                                                                                                       |
|                                                                                                                  |                                                                                                                       |   |
|                                                                                                                  | Condensed Consolidated Statements of Financial Condition at June 30, 2012 and December 31, 2011                            | 1      |
|                                                                                                                  |                                                                                                                       |   |
|                                                                                                                  | Condensed Consolidated Statements of Operations for the Three and Six months Ended June 30, 2012 and 2011                  | 2      |
|                                                                                                                  |                                                                                                                       |   |
|                                                                                                                  | Condensed Consolidated Statements of Comprehensive Income for the Three and Six months Ended June 30, 2012 and 2011        | 3      |
|                                                                                                                  |                                                                                                                       |   |
|                                                                                                                  | Condensed Consolidated Statements of Shareholders’ Equity for the Six months  Ended June 30, 2012 and 2011 | 4      |
|                                                                                                                  |                                                                                                                       |   |
|                                                                                                                  |  Condensed Consolidated Statements of Cash Flows for the Six months Ended June 30, 2012 and 2011                      | 5      |
|                                                                                                                  |                                                                                                                       |   |
|                                                                                                                  |  Notes to Condensed Consolidated Financial Statements                                                                 | 6      |
|                                                                                                                  |                                                                                                                       |   |
| Item 2.  Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations | 30                                                                                                                         |
|                                                                                                                  |                                                                                                                       |   |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk                                                    | 44                                                                                                                         |
|                                                                                                                  |                                                                                                                       |   |
| Item 4.  Controls and Procedures                                                                            | 45                                                                                                                         |
|                                                                                                                  |                                                                                                                       |   |
| Part II.  OTHER INFORMATION                                                                                 |                                                                                                                       |
|                                                                                                                  |                                                                                                                       |   |
| Item 1.  Legal Proceedings                                                                                  | 45                                                                                                                         |
|                                                                                                                  |                                                                                                                       |   |
| Item 1A.  Risk Factors                                                                                      | 45                                                                                                                         |
|                                                                                                                  |                                                                                                                       |   |
| Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds                                        | 45                                                                                                                         |
|                                                                                                                  |                                                                                                                       |   |
| Item 3.  Defaults Upon Senior Securities                                                                    | 45                                                                                                                         |
|                                                                                                                  |                                                                                                                       |   |
| Item 4.  Mine Safety Disclosures                                                                            | 45                                                                                                                         |
|                                                                                                                  |                                                                                                                       |   |
| Item 5.  Other Information                                                                                  | 45                                                                                                                         |
|                                                                                                                  |                                                                                                                       |   |
| Item 6.  Exhibits                                                                                           | 45                                                                                                                         |
|                                                                                                                  |                                                                                                                       |   |
| Signatures                                                                                                            |                                                                                                                       |
|                                                                                                                  |                                                                                                                       |   |
| Certifications                                                                                                        |                                                                                                                       |

----

Part 

Item 

CITIZENS 

|                                                                                                                                                           |   | June 30, 2012 |      |   | December 31, 2011 * |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------|-----------|--------|---------------------|--------|
| (Dollars in thousands, except share and per share data)                                                                                                        |   | (unaudited)   |      |   |                |   |
|                                                                                                                                                           |   |          |      |   |                |   |
| ASSETS                                                                                                                                                         |   |          |      |   |                |   |
| Cash and cash equivalents:                                                                                                                                     |   |          |      |   |                |   |
| Cash and due from banks                                                                                                                                        |   | $             | 11,839    |   |                | $      | 13,296 |   |
| Interest bearing deposits                                                                                                                                      |   |          | 116,985   |   |                |   | 75,048 |   |
| Cash and cash equivalents                                                                                                                                      |   |          | 128,824   |   |                |   | 88,344 |   |
| Investment securities available for sale, at fair value                                                                                                        |   |          | 18,358    |   |                |   | 52,136 |   |
| Investment securities held to maturity, at amortized cost                                                                                                      |   |          | 82,276    |   |                |   | 95,763 |   |
| Federal Home Loan Bank stock, at cost                                                                                                                          |   |          | 4,443     |   |                |   | 5,067 |   |
| Presold loans in process of settlement                                                                                                                         |   |          | 2,146     |   |                |   | 2,146 |   |
| Loans:                                                                                                                                                         |   |          |      |   |                |   |   |   |
| Covered by FDIC loss-share agreements                                                                                                                          |   |          | 128,874   |   |                |   | 159,688 |   |
| Not covered by FDIC loss-share agreements                                                                                                                      |   |          | 587,498   |   |                |   | 574,100 |   |
| Loans, net of deferred fees and costs                                                                                                                          |   |          | 716,372   |   |                |   | 733,788 |   |
| Allowance for loan losses                                                                                                                                      |   |          | (11,735   | )      |                |   | (11,713 | ) |
| Loans, net                                                                                                                                                     |   |          | 704,637   |   |                |   | 722,075 |   |
| Other real estate owned                                                                                                                                        |   |          | 21,405    |   |                |   | 17,571 |   |
| Premises and equipment, net                                                                                                                                    |   |          | 25,396    |   |                |   | 25,888 |   |
| FDIC loss share receivable                                                                                                                                     |   |          | 28,863    |   |                |   | 38,931 |   |
| Accrued interest receivable                                                                                                                                    |   |          | 1,840     |   |                |   | 2,773 |   |
| Bank-owned life insurance                                                                                                                                      |   |          | 18,723    |   |                |   | 18,978 |   |
| Intangible assets                                                                                                                                              |   |          | 1,141     |   |                |   | 1,373 |   |
| Other assets                                                                                                                                                   |   |          | 11,125    |   |                |   | 9,415 |   |
| Total assets                                                                                                                                                   |   | $             | 1,049,177 |   |                | $      | 1,080,460 |   |
|                                                                                                                                                           |   |          |      |   |                |   |   |   |
| LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                           |   |          |      |   |                |   |   |   |
| Deposits                                                                                                                                                       |   | $             | 852,764   |   |                | $      | 876,056 |   |
| Securities sold under repurchase agreements                                                                                                                    |   |          | 7,554     |   |                |   | 9,787 |   |
| Borrowed money                                                                                                                                                 |   |          | 76,706    |   |                |   | 78,688 |   |
| Subordinated debt                                                                                                                                              |   |          | 15,464    |   |                |   | 15,464 |   |
| Other liabilities                                                                                                                                              |   |          | 7,216     |   |                |   | 7,806 |   |
| Total liabilities                                                                                                                                              |   |          | 959,704   |   |                |   | 987,801 |   |
|                                                                                                                                                           |   |          |      |   |                |   |   |   |
| Shareholders' Equity                                                                                                                                           |   |          |      |   |                |   |   |   |
| Preferred stock, $0.01 par value, Authorized: 1,000,000 shares; Issued and outstanding: 20,500 shares                                                          |   |          | 20,500    |   |                |   | 20,500 |   |
| Common stock, $0.01 par value, Authorized: 20,000,000 shares; Issued: 11,561,464 shares; Outstanding: 11,506,324 shares at June 30, 2012 and December 31, 2011 |   |          | 124       |   |                |   | 124 |   |
| Additional paid-in-capital                                                                                                                                     |   |          | 64,209    |   |                |   | 63,888 |   |
| Retained earnings, substantially restricted                                                                                                                    |   |          | 4,647     |   |                |   | 7,854 |   |
| Accumulated other comprehensive income (loss)                                                                                                                  |   |          | (7        | )      |                |   | 293 |   |
| Total shareholders' equity                                                                                                                                     |   |          | 89,473    |   |                |   | 92,659 |   |
| Total liabilities and shareholders' equity                                                                                                                     |   | $             | 1,049,177 |   |                | $      | 1,080,460 |   |

----

CITIZENS 

|                                                |   | Three Months EndedJune 30, |   |   | Six Months EndedJune 30, |   |
|-----------------------------------------------------|--------|----------------------------|--------|--------|--------------------------|--------|
|                                                |   | 2012                       |   |   | 2011                     |   |   | 2012 |   |   | 2011 |   |
| (Dollars in thousands, except per share data)       |   |                       |   |   |                     |   |   |   |   |   |   |   |
|                                                |   |                       |   |   |                     |   |   |   |   |   |   |   |
| Interest Income                                     |   |                       |   |   |                     |   |   |   |   |   |   |   |
| Interest and fees on loans                          |   | $                          | 9,355  |   |                     | $      | 10,329 |   |   | $ | 19,002 |   |   | $ | 19,790 |   |
| Investment securities:                              |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Taxable interest income                             |   |                       | 606    |   |                     |   | 983 |   |   |   | 1,343 |   |   |   | 1,776 |   |
| Tax-exempt interest income                          |   |                       | 25     |   |                     |   | 69 |   |   |   | 62 |   |   |   | 137 |   |
| Other interest income                               |   |                       | 65     |   |                     |   | 38 |   |   |   | 114 |   |   |   | 103 |   |
| Total interest income                               |   |                       | 10,051 |   |                     |   | 11,419 |   |   |   | 20,521 |   |   |   | 21,806 |   |
| Interest Expense                                    |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                            |   |                       | 1,121  |   |                     |   | 1,981 |   |   |   | 2,357 |   |   |   | 3,982 |   |
| Repurchase agreements                               |   |                       | 7      |   |                     |   | 19 |   |   |   | 14 |   |   |   | 37 |   |
| Borrowed money                                      |   |                       | 680    |   |                     |   | 753 |   |   |   | 1,371 |   |   |   | 1,516 |   |
| Subordinated debt                                   |   |                       | 80     |   |                     |   | 73 |   |   |   | 163 |   |   |   | 145 |   |
| Total interest expense                              |   |                       | 1,888  |   |                     |   | 2,826 |   |   |   | 3,905 |   |   |   | 5,680 |   |
|                                                |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income                                 |   |                       | 8,163  |   |                     |   | 8,593 |   |   |   | 16,616 |   |   |   | 16,126 |   |
| Provision for loan losses                           |   |                       | 2,555  |   |                     |   | 1,700 |   |   |   | 8,855 |   |   |   | 4,700 |   |
| Net interest income after provision for loan losses |   |                       | 5,608  |   |                     |   | 6,893 |   |   |   | 7,761 |   |   |   | 11,426 |   |
| Noninterest Income                                  |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Service charges on deposit accounts                 |   |                       | 1,092  |   |                     |   | 1,046 |   |   |   | 2,147 |   |   |   | 2,004 |   |
| Mortgage banking income                             |   |                       | 393    |   |                     |   | 254 |   |   |   | 710 |   |   |   | 491 |   |
| Commissions on sales of financial products          |   |                       | 67     |   |                     |   | 69 |   |   |   | 153 |   |   |   | 136 |   |
| Income from bank-owned life insurance               |   |                       | 184    |   |                     |   | 214 |   |   |   | 368 |   |   |   | 397 |   |
| Gain (loss) from acquisition                        |   |                       | (175   | )      |                     |   | 4,418 |   |   |   | (175 | ) |   |   | 4,163 |   |
| Gain on sale of investments, available for sale     |   |                       | -      |   |                     |   | 1 |   |   |   | 664 |   |   |   | 1 |   |
| Gain (loss) on sale of other assets                 |   |                       | 85     |   |                     |   | (338 | ) |   |   | (53 | ) |   |   | (326 | ) |
| Other                                               |   |                       | 1,054  |   |                     |   | 222 |   |   |   | 1,608 |   |   |   | 500 |   |
| Total noninterest income                            |   |                       | 2,700  |   |                     |   | 5,886 |   |   |   | 5,422 |   |   |   | 7,366 |   |
| Noninterest Expense                                 |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Compensation and benefits                           |   |                       | 3,902  |   |                     |   | 3,806 |   |   |   | 7,748 |   |   |   | 7,454 |   |
| Occupancy and equipment                             |   |                       | 898    |   |                     |   | 873 |   |   |   | 1,806 |   |   |   | 1,701 |   |
| Data processing and other technology                |   |                       | 235    |   |                     |   | 296 |   |   |   | 491 |   |   |   | 530 |   |
| Professional services                               |   |                       | 308    |   |                     |   | 249 |   |   |   | 583 |   |   |   | 502 |   |
| Advertising and business development                |   |                       | 74     |   |                     |   | 71 |   |   |   | 142 |   |   |   | 125 |   |
| Loan collection and other expenses                  |   |                       | 864    |   |                     |   | 204 |   |   |   | 1,116 |   |   |   | 494 |   |
| Deposit insurance                                   |   |                       | (49    | )      |                     |   | 361 |   |   |   | 369 |   |   |   | 695 |   |
| Amortization of intangible assets                   |   |                       | 109    |   |                     |   | 136 |   |   |   | 231 |   |   |   | 275 |   |
| Office supplies                                     |   |                       | 53     |   |                     |   | 62 |   |   |   | 112 |   |   |   | 132 |   |
| Telephone and communications                        |   |                       | 107    |   |                     |   | 111 |   |   |   | 213 |   |   |   | 207 |   |
| Other real estate owned valuation adjustments       |   |                       | 1,784  |   |                     |   | 1,476 |   |   |   | 2,784 |   |   |   | 1,984 |   |
| Other real estate owned expenses                    |   |                       | 388    |   |                     |   | 596 |   |   |   | 858 |   |   |   | 597 |   |
| Acquisition and integration expenses                |   |                       | -      |   |                     |   | 566 |   |   |   | - |   |   |   | 611 |   |
| Other                                               |   |                       | 859    |   |                     |   | 463 |   |   |   | 1,767 |   |   |   | 1,638 |   |
| Total noninterest expense                           |   |                       | 9,532  |   |                     |   | 9,270 |   |   |   | 18,220 |   |   |   | 16,945 |   |
|                                                |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Income (Loss) before income tax expense (benefit)   |   |                       | (1,224 | )      |                     |   | 3,509 |   |   |   | (5,037 | ) |   |   | 1,847 |   |
| Income tax expense (benefit)                        |   |                       | (576   | )      |                     |   | 1,213 |   |   |   | (2,249 | ) |   |   | 442 |   |
| Net income (loss)                                   |   |                       | (648   | )      |                     |   | 2,296 |   |   |   | (2,788 | ) |   |   | 1,405 |   |
| Dividends on preferred stock                        |   |                       | 68     |   |                     |   | 256 |   |   |   | 190 |   |   |   | 512 |   |
|                                                |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) allocable to common shareholders  |   | $                          | (716   | )      |                     | $      | 2,040 |   |   | $ | (2,978 | ) |   | $ | 893 |   |
|                                                |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) per common share - basic          |   | $                          | (0.06  | )      |                     | $      | 0.18 |   |   | $ | (0.26 | ) |   | $ | 0.08 |   |
| Net income (loss) per common share - diluted        |   |                       | (0.06  | )      |                     |   | 0.18 |   |   |   | (0.26 | ) |   |   | 0.08 |   |

----

CITIZENS 

|                                                       |   | Three Months EndedJune 30, |   |   | Six Months EndedJune 30, |   |
|------------------------------------------------------------|--------|----------------------------|--------|--------|--------------------------|--------|
|                                                       |   | 2012                       |   |   | 2011                     |   |   | 2012 |   |   | 2011 |   |
|  (Dollars in thousands)                               |   |                       |   |   |                     |   |   |   |   |   |   |   |
|                                                       |   |                       |   |   |                     |   |   |   |   |   |   |   |
| Net income (loss)                                          |   | $                          | (648   | )      |                     | $      | 2,296 |   |   | $ | (2,788 | ) |   | $ | 1,405 |   |
|                                                       |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive income (loss):                         |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Investment securities, available for sale:                 |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized holding gains arising during period             |   |                       | 41     |   |                     |   | 827 |   |   |   | 175 |   |   |   | 876 |   |
| Tax expense                                                |   |                       | (16    | )      |                     |   | (319 | ) |   |   | (67 | ) |   |   | (338 | ) |
| Reclassification for realized gains included in net income |   |                       | -      |   |                     |   | (1 | ) |   |   | (664 | ) |   |   | (1 | ) |
| Tax benefit                                                |   |                       | -      |   |                     |   | - |   |   |   | 256 |   |   |   | - |   |
| Other comprehensive income (loss)                          |   |                       | 25     |   |                     |   | 507 |   |   |   | (300 | ) |   |   | 537 |   |
| Total comprehensive income (loss)                          |   | $                          | (623   | )      |                     | $      | 2,803 |   |   | $ | (3,088 | ) |   | $ | 1,942 |   |

----

CITIZENS 

|                                                      |   | PreferredStock |   |   | CommonStock |   |   | AdditionalPaid-inCapital |   |   | RetainedEarnings,SubstantiallyRestricted |   |   | AccumulatedOtherComprehensiveIncome (Loss) |   |   | TotalShareholders'Equity |   |
|-----------------------------------------------------------|--------|----------------|--------|--------|-------------|--------|--------|--------------------------|--------|--------|------------------------------------------|--------|--------|--------------------------------------------|--------|--------|--------------------------|--------|
| (Dollars in thousands)                                    |   |           |   |   |        |   |   |                     |   |   |                                     |   |   |                                       |   |   |                     |   |
|                                                      |   |           |   |   |        |   |   |                     |   |   |                                     |   |   |                                       |   |   |                     |   |
|  Balances, January 1, 2011                           |   | $              | 20,672 |   |        | $      | 124    |                     |   | $      | 63,000                                   |   |   | $                                          | 9,663  |   |                     | $      | (16 | ) |   | $ | 93,443 |   |
|                                                      |   |           |   |   |        |   |   |                     |   |   |                                     |   |   |                                       |   |   |                     |   |   |   |   |   |   |   |
|  Net income                                          |   |           | -      |   |        |   | -      |                     |   |   | -                                        |   |   |                                       | 1,405  |   |                     |   | - |   |   |   | 1,405 |   |
|  Other comprehensive income, 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 Recognition and Retention Plan ("RRP")   |   |           | -      |   |        |   | -      |                     |   |   | 50                                       |   |   |                                       | -      |   |                     |   | - |   |   |   | 50 |   |
|  Stock-based compensation                            |   |           | -      |   |        |   | -      |                     |   |   | 53                                       |   |   |                                       | -      |   |                     |   | - |   |   |   | 53 |   |
|  Cash dividends on preferred stock, net of accretion |   |           | -      |   |        |   | -      |                     |   |   | -                                        |   |   |                                       | (512   | )      |                     |   | - |   |   |   | (512 | ) |
|  Cash dividends on common stock                      |   |           | -      |   |        |   | -      |                     |   |   | -                                        |   |   |                                       | (228   | )      |                     |   | - |   |   |   | (228 | ) |
|                                                      |   |           |   |   |        |   |   |                     |   |   |                                     |   |   |                                       |   |   |                     |   |   |   |   |   | - |   |
|  Balances, June 30, 2011                             |   | $              | 20,713 |   |        | $      | 124    |                     |   | $      | 63,125                                   |   |   | $                                          | 10,287 |   |                     | $      | 522 |   |   | $ | 94,771 |   |
|                                                      |   |           |   |   |        |   |   |                     |   |   |                                     |   |   |                                       |   |   |                     |   |   |   |   |   |   |   |
|                                                      |   |           |   |   |        |   |   |                     |   |   |                                     |   |   |                                       |   |   |                     |   |   |   |   |   |   |   |
|                                                      |   |           |   |   |        |   |   |                     |   |   |                                     |   |   |                                       |   |   |                     |   |   |   |   |   |   |   |
|  Balances, January 1, 2012                           |   | $              | 20,500 |   |        | $      | 124    |                     |   | $      | 63,888                                   |   |   | $                                          | 7,854  |   |                     | $      | 293 |   |   | $ | 92,659 |   |
|                                                      |   |           |   |   |        |   |   |                     |   |   |                                     |   |   |                                       |   |   |                     |   |   |   |   |   |   |   |
|  Net loss                                            |   |           | -      |   |        |   | -      |                     |   |   | -                                        |   |   |                                       | (2,788 | )      |                     |   | - |   |   |   | (2,788 | ) |
|  Other comprehensive loss, net of tax                |   |           | -      |   |        |   | -      |                     |   |   | -                                        |   |   |                                       | -      |   |                     |   | (300 | ) |   |   | (300 | ) |
|  Allocation from shares purchased with loan to ESOP  |   |           | -      |   |        |   | -      |                     |   |   | 25                                       |   |   |                                       | -      |   |                     |   | - |   |   |   | 25 |   |
|  Vesting of RRP                                      |   |           | -      |   |        |   | -      |                     |   |   | 246                                      |   |   |                                       | -      |   |                     |   | - |   |   |   | 246 |   |
|  Stock-based compensation                            |   |           | -      |   |        |   | -      |                     |   |   | 50                                       |   |   |                                       | -      |   |                     |   | - |   |   |   | 50 |   |
|  Cash dividends on preferred stock                   |   |           | -      |   |        |   | -      |                     |   |   | -                                        |   |   |                                       | (190   | )      |                     |   | - |   |   |   | (190 | ) |
|  Cash dividends on common stock                      |   |           | -      |   |        |   | -      |                     |   |   | -                                        |   |   |                                       | (229   | )      |                     |   | - |   |   |   | (229 | ) |
|                                                      |   |           |   |   |        |   |   |                     |   |   |                                     |   |   |                                       |   |   |                     |   |   |   |   |   | - |   |
|  Balances, June 30, 2012                             |   | $              | 20,500 |   |        | $      | 124    |                     |   | $      | 64,209                                   |   |   | $                                          | 4,647  |   |                     | $      | (7 | ) |   | $ | 89,473 |   |

----

CITIZENS 

|                                                                                      |   | Six Months EndedJune 30, |    |
|-------------------------------------------------------------------------------------------|--------|--------------------------|---------|
|                                                                                      |   | 2012                     |    |   | 2011 |   |
|  (Dollars in thousands)                                                              |   |                     |    |   |   |   |
|                                                                                      |   |                     |    |   |   |   |
|  Cash flows from operating activities                                                |   |                     |    |   |   |   |
|  Net income (loss)                                                                   |   | $                        | (2,788  | ) |   | $ | 1,405 |   |
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |   |                     |    |   |   |   |   |   |
|  Provision for loan losses                                                           |   |                     | 8,855   |   |   |   | 4,700 |   |
|  Depreciation of premises and equipment                                              |   |                     | 649     |   |   |   | 645 |   |
|  Deferred income tax benefit                                                         |   |                     | (1,363  | ) |   |   | (304 | ) |
|  (Gain) loss on acquisition                                                          |   |                     | 175     |   |   |   | (4,163 | ) |
|  Gain on sale of investment securities available for sale                            |   |                     | (664    | ) |   |   | (1 | ) |
|  Loss on sale of other real estate owned and repossessed assets                      |   |                     | 53      |   |   |   | 326 |   |
|  Valuation adjustment on other real estate owned                                     |   |                     | 2,784   |   |   |   | 1,984 |   |
|  Net purchase accounting adjustments                                                 |   |                     | (13,072 | ) |   |   | 5,828 |   |
|  Net decrease in presold loans in process of settlement                              |   |                     | -       |   |   |   | 1,925 |   |
|  Deferred loan origination fees                                                      |   |                     | 117     |   |   |   | 101 |   |
|  Amortization of intangible assets                                                   |   |                     | 231     |   |   |   | 275 |   |
|  Allocation from shares purchased with loan to ESOP                                  |   |                     | 25      |   |   |   | 22 |   |
|  Stock-based compensation                                                            |   |                     | 50      |   |   |   | 53 |   |
|  Vesting of shares issued for the RRP                                                |   |                     | 246     |   |   |   | 50 |   |
|  Decrease in accrued interest receivable                                             |   |                     | 932     |   |   |   | 223 |   |
|  Decrease in other assets                                                            |   |                     | 2,972   |   |   |   | 14,956 |   |
|  Decrease in other liabilities                                                       |   |                     | (588    | ) |   |   | (1,178 | ) |
|  Net cash provided by (used in) operating activities                                 |   |                     | (1,386  | ) |   |   | 26,847 |   |
|                                                                                      |   |                     |    |   |   |   |   |   |
|  Cash flows from investing activities                                                |   |                     |    |   |   |   |   |   |
|  Net decrease in loans made to customers                                             |   |                     | 8,180   |   |   |   | 14,840 |   |
|  Proceeds from sales of investment securities available for sale                     |   |                     | 35,520  |   |   |   | 2,351 |   |
|  Proceeds from sales of other real estate owned                                      |   |                     | 6,705   |   |   |   | 4,420 |   |
|  Proceeds from maturities/issuer calls of investment securities available for sale   |   |                     | 13,745  |   |   |   | 5,607 |   |
|  Proceeds from maturities/issuer calls of investment securities held to maturity     |   |                     | 26,691  |   |   |   | 6,594 |   |
|  Purchases of investment securities available for sale                               |   |                     | (8,311  | ) |   |   | - |   |
|  Purchases of investment securities held to maturity                                 |   |                     | (13,204 | ) |   |   | (48,714 | ) |
|  Net cash received in acquisition                                                    |   |                     | -       |   |   |   | 7,912 |   |
|  Redemption of FHLB stock                                                            |   |                     | 624     |   |   |   | 507 |   |
|  Purchases of premises and equipment                                                 |   |                     | (157    | ) |   |   | (2,056 | ) |
|  Net cash provided by (used in) investment activities                                |   |                     | 69,793  |   |   |   | (8,539 | ) |
|                                                                                      |   |                     |    |   |   |   |   |   |
|  Cash flows from financing activities                                                |   |                     |    |   |   |   |   |   |
|  Net decrease in deposits                                                            |   |                     | (23,542 | ) |   |   | (42,602 | ) |
|  Dividends paid to common stockholders                                               |   |                     | (229    | ) |   |   | (228 | ) |
|  Dividends paid to preferred stockholders                                            |   |                     | (190    | ) |   |   | (512 | ) |
|  Net decrease in borrowed money and repurchase agreements                            |   |                     | (4,216  | ) |   |   | (6,882 | ) |
|  Increase in advances from borrowers for insurance and taxes                         |   |                     | 250     |   |   |   | 354 |   |
|  Net cash used in financing activities                                               |   |                     | (27,927 | ) |   |   | (49,870 | ) |
|                                                                                      |   |                     |    |   |   |   |   |   |
|  Net increase (decrease) in cash and cash equivalents                                |   |                     | 40,480  |   |   |   | (31,562 | ) |
|  Cash and cash equivalents at beginning of year                                      |   |                     | 88,344  |   |   |   | 120,899 |   |
|  Cash and cash equivalents at end of year                                            |   | $                        | 128,824 |   |   | $ | 89,337 |   |
|                                                                                      |   |                     |    |   |   |   |   |   |
|  Supplemental non-cash investing activity                                            |   |                     |    |   |   |   |   |   |
|  Loans transferred to other real estate owned                                        |   | $                        | 13,358  |   |   | $ | 10,469 |   |

----

CITIZENS 

----

|                                                                   |   | Three MonthsEnded June 30,                       |       |   | Six MonthsEnded June 30, |   |
|------------------------------------------------------------------------|--------|--------------------------------------------------|------------|--------|--------------------------|--------|
|                                                                   |   | 2012                                             |       |   | 2011                     |   |   | 2012 |   |   | 2011 |   |
|                                                                   |   | (Dollars in thousands, except per share amounts) |       |
|                                                                   |   |                                             |       |   |                     |   |   |   |   |   |   |   |
| Net income (loss) allocable to common shareholders                     |   | $                                                | (716       | )      |                     | $      | 2,040 |   |   | $ | (2,978 | ) |   | $ | 893 |   |
| Weighted average number of shares outstanding                          |   |                                             | 11,463,396 |   |                     |   | 11,455,642 |   |   |   | 11,460,110 |   |   |   | 11,451,619 |   |
| Basic net income (loss) per common share                               |   | $                                                | (0.06      | )      |                     | $      | 0.18 |   |   | $ | (0.26 | ) |   | $ | 0.08 |   |
|                                                                   |   |                                             |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) allocable to common shareholders                     |   | $                                                | (716       | )      |                     | $      | 2,040 |   |   | $ | (2,978 | ) |   | $ | 893 |   |
| Weighted average number of shares outstanding                          |   |                                             | 11,463,396 |   |                     |   | 11,455,642 |   |   |   | 11,460,110 |   |   |   | 11,451,619 |   |
| Incremental shares from assumed exercise of stock options and warrants |   |                                             | -          |   |                     |   | - |   |   |   | - |   |   |   | - |   |
| Weighted average number of shares outstanding - diluted                |   |                                             | 11,463,396 |   |                     |   | 11,455,642 |   |   |   | 11,460,110 |   |   |   | 11,451,619 |   |
| Diluted net income (loss) per common share                             |   | $                                                | (0.06      | )      |                     | $      | 0.18 |   |   | $ | (0.26 | ) |   | $ | 0.08 |   |

----

|                               |   | AmortizedCost          |    |   | GrossUnrealizedGains |   |   | GrossUnrealizedLosses |   |   | EstimatedFair Value |   |
|------------------------------------|--------|------------------------|---------|--------|----------------------|--------|--------|-----------------------|--------|--------|---------------------|--------|
|                               |   | (Dollars in thousands) |    |
| June 30, 2012                      |   |                   |    |   |                 |   |   |                  |   |   |                |   |
| Available for Sale:                |   |                   |    |   |                 |   |   |                  |   |   |                |   |
| Municipal bonds                    |   | $                      | 1,675   |   |                 | $      | 3      |                  |   | $      | -                   |   |   | $ | 1,678 |   |
| Mortgage-backed securities         |   |                   | 14,994  |   |                 |   | 74     |                  |   |   | 13                  |   |   |   | 15,055 |   |
| Other securities                   |   |                   | 1,701   |   |                 |   | 44     |                  |   |   | 120                 |   |   |   | 1,625 |   |
| Subtotal                           |   |                   | 18,370  |   |                 |   | 121    |                  |   |   | 133                 |   |   |   | 18,358 |   |
|                               |   |                   |    |   |                 |   |   |                  |   |   |                |   |   |   |   |   |
| Held to Maturity:                  |   |                   |    |   |                 |   |   |                  |   |   |                |   |   |   |   |   |
| U.S. Treasury obligations          |   |                   | 9,981   |   |                 |   | 38     |                  |   |   | 0                   |   |   |   | 10,019 |   |
| U.S. Government Agency obligations |   |                   | 13,996  |   |                 |   | 59     |                  |   |   | -                   |   |   |   | 14,055 |   |
| Municipal bonds                    |   |                   | 3,272   |   |                 |   | 91     |                  |   |   | -                   |   |   |   | 3,363 |   |
| Mortgage-backed securities         |   |                   | 45,992  |   |                 |   | 2,499  |                  |   |   | -                   |   |   |   | 48,491 |   |
| SBA securities                     |   |                   | 5,035   |   |                 |   | 70     |                  |   |   | -                   |   |   |   | 5,105 |   |
| Other securities                   |   |                   | 4,000   |   |                 |   | -      |                  |   |   | 186                 |   |   |   | 3,814 |   |
| Subtotal                           |   |                   | 82,276  |   |                 |   | 2,757  |                  |   |   | 186                 |   |   |   | 84,847 |   |
| Total investment securities        |   | $                      | 100,646 |   |                 | $      | 2,878  |                  |   | $      | 319                 |   |   | $ | 103,205 |   |
|                               |   |                   |    |   |                 |   |   |                  |   |   |                |   |   |   |   |   |
|                               |   |                   |    |   |                 |   |   |                  |   |   |                |   |   |   |   |   |
| December 31, 2011                  |   |                   |    |   |                 |   |   |                  |   |   |                |   |   |   |   |   |
| Available for Sale:                |   |                   |    |   |                 |   |   |                  |   |   |                |   |   |   |   |   |
| U.S. Government Agency obligations |   | $                      | 7,168   |   |                 | $      | 73     |                  |   | $      | -                   |   |   | $ | 7,241 |   |
| Municipal bonds                    |   |                   | 6,578   |   |                 |   | 133    |                  |   |   | -                   |   |   |   | 6,711 |   |
| Mortgage-backed securities         |   |                   | 35,170  |   |                 |   | 330    |                  |   |   | 8                   |   |   |   | 35,492 |   |
| SBA securities                     |   |                   | 1,255   |   |                 |   | 71     |                  |   |   | -                   |   |   |   | 1,326 |   |
| Other securities                   |   |                   | 1,488   |   |                 |   | 44     |                  |   |   | 166                 |   |   |   | 1,366 |   |
| Subtotal                           |   |                   | 51,659  |   |                 |   | 651    |                  |   |   | 174                 |   |   |   | 52,136 |   |
|                               |   |                   |    |   |                 |   |   |                  |   |   |                |   |   |   |   |   |
| Held to Maturity:                  |   |                   |    |   |                 |   |   |                  |   |   |                |   |   |   |   |   |
| U.S. Treasury obligations          |   |                   | 9,972   |   |                 |   | 61     |                  |   |   | -                   |   |   |   | 10,033 |   |
| U.S. Government Agency obligations |   |                   | 25,989  |   |                 |   | 74     |                  |   |   | 4                   |   |   |   | 26,059 |   |
| Municipal bonds                    |   |                   | 3,300   |   |                 |   | 99     |                  |   |   | -                   |   |   |   | 3,399 |   |
| Mortgage-backed securities         |   |                   | 52,502  |   |                 |   | 2,277  |                  |   |   | -                   |   |   |   | 54,779 |   |
| Other securities                   |   |                   | 4,000   |   |                 |   | -      |                  |   |   | 155                 |   |   |   | 3,845 |   |
| Subtotal                           |   |                   | 95,763  |   |                 |   | 2,511  |                  |   |   | 159                 |   |   |   | 98,115 |   |
| Total investment securities        |   | $                      | 147,422 |   |                 | $      | 3,162  |                  |   | $      | 333                 |   |   | $ | 150,251 |   |

----

|                                   |   | AmortizedCost          |   |   | Fair Value |   |
|----------------------------------------|--------|------------------------|--------|--------|------------|--------|
|                                   |   | (Dollars in thousands) |   |
|                                   |   |                   |   |   |       |   |
| Available for Sale:                    |   |                   |   |   |       |   |
|                                   |   |                   |   |   |       |   |
| Due in one year or less                |   | $                      | 3,181  |   |       | $      | 3,188 |   |
| Due after one year through five years  |   |                   | 4,365  |   |       |   | 4,384 |   |
| Due after five years through ten years |   |                   | 3,333  |   |       |   | 3,363 |   |
| Due after ten years                    |   |                   | 5,804  |   |       |   | 5,856 |   |
| Equities                               |   |                   | 1,687  |   |       |   | 1,567 |   |
| Total                                  |   | $                      | 18,370 |   |       | $      | 18,358 |   |
|                                   |   |                   |   |   |       |   |   |   |
| Held to Maturity:                      |   |                   |   |   |       |   |   |   |
|                                   |   |                   | -      |   |       |   | - |   |
| Due in one year or less                |   | $                      | 14,865 |   |       | $      | 15,170 |   |
| Due after one year through five years  |   |                   | 29,996 |   |       |   | 30,607 |   |
| Due after five years through ten years |   |                   | 25,350 |   |       |   | 25,733 |   |
| Due after ten years                    |   |                   | 12,065 |   |       |   | 13,337 |   |
| Total                                  |   | $                      | 82,276 |   |       | $      | 84,847 |   |

----

|                                  |   | Less Than 12 Months    |   |   | 12 Months or More |   |   | Total     |   |
|---------------------------------------|--------|------------------------|--------|--------|-------------------|--------|--------|-----------|--------|
|                                  |   | FairValue              |   |   | UnrealizedLosses  |   |   | FairValue |   |   | UnrealizedLosses |   |   | FairValue |   |   | UnrealizedLosses |   |
|                                  |   | (Dollars in thousands) |   |
| June 30, 2012                         |   |                   |   |   |              |   |   |      |   |   |   |   |   |   |   |   |   |   |
| Available for Sale:                   |   |                   |   |   |              |   |   |      |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities            |   | $                      | 3,493  |   |              | $      | 13     |      |   | $ | - |   |   | $ | - |   |   | $ | 3,493 |   |   | $ | 13 |   |
| Other securities                      |   |                   | -      |   |              |   | -      |      |   |   | 240 |   |   |   | 120 |   |   |   | 240 |   |   |   | 120 |   |
| Subtotal                              |   |                   | 3,493  |   |              |   | 13     |      |   |   | 240 |   |   |   | 120 |   |   |   | 3,733 |   |   |   | 133 |   |
|                                  |   |                   |   |   |              |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Held to Maturity:                     |   |                   |   |   |              |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other securities                      |   |                   | 896    |   |              |   | 104    |      |   |   | 2,918 |   |   |   | 82 |   |   |   | 3,814 |   |   |   | 186 |   |
| Subtotal                              |   |                   | 896    |   |              |   | 104    |      |   |   | 2,918 |   |   |   | 82 |   |   |   | 3,814 |   |   |   | 186 |   |
| Total temporarily impaired securities |   | $                      | 4,389  |   |              | $      | 117    |      |   | $ | 3,158 |   |   | $ | 202 |   |   | $ | 7,547 |   |   | $ | 319 |   |
|                                  |   |                   |   |   |              |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2011                     |   |                   |   |   |              |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available for Sale:                   |   |                   |   |   |              |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities            |   | $                      | 4,619  |   |              | $      | 8      |      |   | $ | 88 |   |   | $ | - |   |   | $ | 4,707 |   |   | $ | 8 |   |
| Other securities                      |   |                   | 165    |   |              |   | 93     |      |   |   | 29 |   |   |   | 73 |   |   |   | 194 |   |   |   | 166 |   |
| Subtotal                              |   |                   | 4,784  |   |              |   | 101    |      |   |   | 117 |   |   |   | 73 |   |   |   | 4,901 |   |   |   | 174 |   |
|                                  |   |                   |   |   |              |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Held to Maturity:                     |   |                   |   |   |              |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Government Agency obligations    |   |                   | 1,996  |   |              |   | 4      |      |   |   | - |   |   |   | - |   |   |   | 1,996 |   |   |   | 4 |   |
| Other securities                      |   |                   | 997    |   |              |   | 3      |      |   |   | 2,848 |   |   |   | 152 |   |   |   | 3,845 |   |   |   | 155 |   |
| Subtotal                              |   |                   | 2,993  |   |              |   | 7      |      |   |   | 2,848 |   |   |   | 152 |   |   |   | 5,841 |   |   |   | 159 |   |
|                                  |   |                   |   |   |              |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total temporarily impaired securities |   | $                      | 7,777  |   |              | $      | 108    |      |   | $ | 2,965 |   |   | $ | 225 |   |   | $ | 10,742 |   |   | $ | 333 |   |

----

----

|                                        |   | June 30, 2012                            |    |   | December 31, 2011                           |   |
|---------------------------------------------|--------|------------------------------------------|---------|--------|---------------------------------------------|--------|
|                                        |   | Loans Coveredby FDIC LossShareAgreements |    |   | Loans NotCovered byFDIC LossShareAgreements |   |   | Total |   |   | Loans Coveredby FDIC LossShareAgreements |   |   | Loans NotCovered byFDIC LossShareAgreements |   |   | Total |   |
|                                        |   | (Dollars in thousands)                   |    |
|                                        |   |                                     |    |   |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Real estate:                                |   |                                     |    |   |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| One-to-four family residential              |   | $                                        | 29,026  |   |                                        | $      | 114,321 |   |   | $ | 143,347 |   |   | $ | 34,641 |   |   | $ | 116,859 |   |   | $ | 151,500 |   |
| Multifamily residential                     |   |                                     | 2,882   |   |                                        |   | 17,074 |   |   |   | 19,956 |   |   |   | 2,926 |   |   |   | 16,759 |   |   |   | 19,685 |   |
| Construction                                |   |                                     | 33      |   |                                        |   | 27,114 |   |   |   | 27,147 |   |   |   | 1,255 |   |   |   | 19,602 |   |   |   | 20,857 |   |
| Commercial land                             |   |                                     | 8,782   |   |                                        |   | 22,885 |   |   |   | 31,667 |   |   |   | 13,670 |   |   |   | 28,122 |   |   |   | 41,792 |   |
| Residential development                     |   |                                     | 6,026   |   |                                        |   | 10,068 |   |   |   | 16,094 |   |   |   | 8,095 |   |   |   | 16,444 |   |   |   | 24,539 |   |
| Owner occupied commercial real estate       |   |                                     | 17,872  |   |                                        |   | 116,435 |   |   |   | 134,307 |   |   |   | 20,027 |   |   |   | 95,990 |   |   |   | 116,017 |   |
| Non-owner occupied commercial real estate   |   |                                     | 47,344  |   |                                        |   | 131,840 |   |   |   | 179,184 |   |   |   | 56,285 |   |   |   | 129,993 |   |   |   | 186,278 |   |
| Consumer real estate                        |   |                                     | 9,457   |   |                                        |   | 99,162 |   |   |   | 108,619 |   |   |   | 11,148 |   |   |   | 103,521 |   |   |   | 114,669 |   |
| Total real estate                           |   |                                     | 121,422 |   |                                        |   | 538,899 |   |   |   | 660,321 |   |   |   | 148,047 |   |   |   | 527,290 |   |   |   | 675,337 |   |
| Commercial business                         |   |                                     | 4,795   |   |                                        |   | 43,635 |   |   |   | 48,430 |   |   |   | 7,866 |   |   |   | 41,161 |   |   |   | 49,027 |   |
| Other consumer                              |   |                                     | 2,657   |   |                                        |   | 4,964 |   |   |   | 7,621 |   |   |   | 3,775 |   |   |   | 5,649 |   |   |   | 9,424 |   |
| Total loans, net of deferred fees and costs |   | $                                        | 128,874 |   |                                        | $      | 587,498 |   |   |   | 716,372 |   |   | $ | 159,688 |   |   | $ | 574,100 |   |   |   | 733,788 |   |
| Less: Allowance for loan losses             |   |                                     |    |   |                                        |   |   |   |   |   | 11,735 |   |   |   |   |   |   |   |   |   |   |   | 11,713 |   |
| Total loans, net                            |   |                                     |    |   |                                        |   |   |   |   | $ | 704,637 |   |   |   |   |   |   |   |   |   |   | $ | 722,075 |   |

----

| June 30, 2012                             |   | 30 - 59 DaysPast Due   |   | 60 - 89 DaysPast Due |   |   | 90 Days orMore PastDue andAccruing |   |   | Nonaccrual |   |   | Total PastDue |   |   | Current |   |   | Total Loans |   |   | RecordedInvestment 90Days or Moreand Accruing |    |
|-------------------------------------------|--------|------------------------|--------|----------------------|--------|--------|------------------------------------|--------|--------|------------|--------|--------|---------------|--------|--------|---------|--------|--------|-------------|--------|--------|-----------------------------------------------|---------|
|                                      |   | (Dollars in thousands) |   |
|                                      |   |                   |   |                 |   |   |                               |   |   |       |   |   |          |   |   |    |   |   |        |   |   |                                          |    |   |
| Not covered by FDIC loss-share agreements |   |                   |   |                 |   |   |                               |   |   |       |   |   |          |   |   |    |   |   |        |   |   |                                          |    |   |
| Real estate:                              |   |                   |   |                 |   |   |                               |   |   |       |   |   |          |   |   |    |   |   |        |   |   |                                          |    |   |
| One-to-four family residential            |   | $                      | 489    |                 |   | $      | 88                                 |   |   | $          | -      |   |          | $      | 4,230  |    |   | $      | 4,807       |   |   | $                                             | 109,514 |   |   | $ | 114,321 |   |   | $ | - |   |
| Multifamily residential                   |   |                   | -      |                 |   |   | -                                  |   |   |       | -      |   |          |   | -      |    |   |   | -           |   |   |                                          | 17,074  |   |   |   | 17,074 |   |   |   | - |   |
| Construction                              |   |                   | -      |                 |   |   | -                                  |   |   |       | -      |   |          |   | -      |    |   |   | -           |   |   |                                          | 27,114  |   |   |   | 27,114 |   |   |   | - |   |
| Commercial land                           |   |                   | -      |                 |   |   | -                                  |   |   |       | 151    |   |          |   | 3,018  |    |   |   | 3,169       |   |   |                                          | 19,716  |   |   |   | 22,885 |   |   |   | 154 |   |
| Residential development                   |   |                   | -      |                 |   |   | -                                  |   |   |       | -      |   |          |   | 3,000  |    |   |   | 3,000       |   |   |                                          | 7,068   |   |   |   | 10,068 |   |   |   | - |   |
| Other commercial real estate              |   |                   | 235    |                 |   |   | 682                                |   |   |       | -      |   |          |   | 8,489  |    |   |   | 9,406       |   |   |                                          | 238,869 |   |   |   | 248,275 |   |   |   | - |   |
| Consumer real estate                      |   |                   | 255    |                 |   |   | -                                  |   |   |       | -      |   |          |   | 961    |    |   |   | 1,216       |   |   |                                          | 97,946  |   |   |   | 99,162 |   |   |   | - |   |
| Total real estate                         |   |                   | 979    |                 |   |   | 770                                |   |   |       | 151    |   |          |   | 19,698 |    |   |   | 21,598      |   |   |                                          | 517,301 |   |   |   | 538,899 |   |   |   | 154 |   |
| Commercial business                       |   |                   | 24     |                 |   |   | -                                  |   |   |       | -      |   |          |   | 945    |    |   |   | 969         |   |   |                                          | 42,666  |   |   |   | 43,635 |   |   |   | - |   |
| Other consumer                            |   |                   | 32     |                 |   |   | 7                                  |   |   |       | -      |   |          |   | 15     |    |   |   | 54          |   |   |                                          | 4,910   |   |   |   | 4,964 |   |   |   | - |   |
| Total                                     |   | $                      | 1,035  |                 |   | $      | 777                                |   |   | $          | 151    |   |          | $      | 20,658 |    |   | $      | 22,621      |   |   | $                                             | 564,877 |   |   | $ | 587,498 |   |   | $ | 154 |   |
|                                      |   |                   |   |                 |   |   |                               |   |   |       |   |   |          |   |   |    |   |   |        |   |   |                                          |    |   |   |   |   |   |   |   |   |   |
|                                      |   |                   |   |                 |   |   |                               |   |   |       |   |   |          |   |   |    |   |   |        |   |   |                                          |    |   |   |   |   |   |   |   |   |   |
| Covered by FDIC loss-share agreements     |   |                   |   |                 |   |   |                               |   |   |       |   |   |          |   |   |    |   |   |        |   |   |                                          |    |   |   |   |   |   |   |   |   |   |
| Real estate:                              |   |                   |   |                 |   |   |                               |   |   |       |   |   |          |   |   |    |   |   |        |   |   |                                          |    |   |   |   |   |   |   |   |   |   |
| One-to-four family residential            |   | $                      | 759    |                 |   | $      | 135                                |   |   | $          | 61     |   |          | $      | 7,566  |    |   | $      | 8,521       |   |   | $                                             | 20,505  |   |   | $ | 29,026 |   |   | $ | 63 |   |
| Multifamily residential                   |   |                   | -      |                 |   |   | -                                  |   |   |       | -      |   |          |   | 380    |    |   |   | 380         |   |   |                                          | 2,502   |   |   |   | 2,882 |   |   |   | - |   |
| Construction                              |   |                   | -      |                 |   |   | -                                  |   |   |       | -      |   |          |   | -      |    |   |   | -           |   |   |                                          | 33      |   |   |   | 33 |   |   |   | - |   |
| Commercial land                           |   |                   | -      |                 |   |   | 106                                |   |   |       | -      |   |          |   | 3,944  |    |   |   | 4,050       |   |   |                                          | 4,732   |   |   |   | 8,782 |   |   |   | - |   |
| Residential development                   |   |                   | -      |                 |   |   | -                                  |   |   |       | -      |   |          |   | 3,759  |    |   |   | 3,759       |   |   |                                          | 2,267   |   |   |   | 6,026 |   |   |   | - |   |
| Other commercial real estate              |   |                   | 29     |                 |   |   | 206                                |   |   |       | -      |   |          |   | 17,785 |    |   |   | 18,020      |   |   |                                          | 47,196  |   |   |   | 65,216 |   |   |   | - |   |
| Consumer real estate                      |   |                   | 229    |                 |   |   | -                                  |   |   |       | -      |   |          |   | 967    |    |   |   | 1,196       |   |   |                                          | 8,261   |   |   |   | 9,457 |   |   |   | - |   |
| Total real estate                         |   |                   | 1,017  |                 |   |   | 447                                |   |   |       | 61     |   |          |   | 34,401 |    |   |   | 35,926      |   |   |                                          | 85,496  |   |   |   | 121,422 |   |   |   | 63 |   |
| Commercial business                       |   |                   | 8      |                 |   |   | -                                  |   |   |       | 163    |   |          |   | 1,422  |    |   |   | 1,593       |   |   |                                          | 3,202   |   |   |   | 4,795 |   |   |   | 169 |   |
| Other consumer                            |   |                   | 23     |                 |   |   | -                                  |   |   |       | -      |   |          |   | 413    |    |   |   | 436         |   |   |                                          | 2,221   |   |   |   | 2,657 |   |   |   | - |   |
| Total                                     |   | $                      | 1,048  |                 |   | $      | 447                                |   |   | $          | 224    |   |          | $      | 36,236 |    |   | $      | 37,955      |   |   | $                                             | 90,919  |   |   | $ | 128,874 |   |   | $ | 232 |   |
|                                      |   |                   |   |                 |   |   |                               |   |   |       |   |   |          |   |   |    |   |   |        |   |   |                                          |    |   |   |   |   |   |   |   |   |   |
|                                      |   |                   |   |                 |   |   |                               |   |   |       |   |   |          |   |   |    |   |   |        |   |   |                                          |    |   |   |   |   |   |   |   |   |   |
| Total at June 30, 2012                    |   |                   |   |                 |   |   |                               |   |   |       |   |   |          |   |   |    |   |   |        |   |   |                                          |    |   |   |   |   |   |   |   |   |   |
| Real estate:                              |   |                   |   |                 |   |   |                               |   |   |       |   |   |          |   |   |    |   |   |        |   |   |                                          |    |   |   |   |   |   |   |   |   |   |
| One-to-four family residential            |   | $                      | 1,248  |                 |   | $      | 223                                |   |   | $          | 61     |   |          | $      | 11,796 |    |   | $      | 13,328      |   |   | $                                             | 130,019 |   |   | $ | 143,347 |   |   | $ | 63 |   |
| Multifamily residential                   |   |                   | -      |                 |   |   | -                                  |   |   |       | -      |   |          |   | 380    |    |   |   | 380         |   |   |                                          | 19,576  |   |   |   | 19,956 |   |   |   | - |   |
| Construction                              |   |                   | -      |                 |   |   | -                                  |   |   |       | -      |   |          |   | -      |    |   |   | -           |   |   |                                          | 27,147  |   |   |   | 27,147 |   |   |   | - |   |
| Commercial land                           |   |                   | -      |                 |   |   | 106                                |   |   |       | 151    |   |          |   | 6,962  |    |   |   | 7,219       |   |   |                                          | 24,448  |   |   |   | 31,667 |   |   |   | 154 |   |
| Residential development                   |   |                   | -      |                 |   |   | -                                  |   |   |       | -      |   |          |   | 6,759  |    |   |   | 6,759       |   |   |                                          | 9,335   |   |   |   | 16,094 |   |   |   | - |   |
| Other commercial real estate              |   |                   | 264    |                 |   |   | 888                                |   |   |       | -      |   |          |   | 26,274 |    |   |   | 27,426      |   |   |                                          | 286,065 |   |   |   | 313,491 |   |   |   | - |   |
| Consumer real estate                      |   |                   | 484    |                 |   |   | -                                  |   |   |       | -      |   |          |   | 1,928  |    |   |   | 2,412       |   |   |                                          | 106,207 |   |   |   | 108,619 |   |   |   | - |   |
| Total real estate                         |   |                   | 1,996  |                 |   |   | 1,217                              |   |   |       | 212    |   |          |   | 54,099 |    |   |   | 57,524      |   |   |                                          | 602,797 |   |   |   | 660,321 |   |   |   | 217 |   |
| Commercial business                       |   |                   | 32     |                 |   |   | -                                  |   |   |       | 163    |   |          |   | 2,367  |    |   |   | 2,562       |   |   |                                          | 45,868  |   |   |   | 48,430 |   |   |   | 169 |   |
| Other consumer                            |   |                   | 55     |                 |   |   | 7                                  |   |   |       | -      |   |          |   | 428    |    |   |   | 490         |   |   |                                          | 7,131   |   |   |   | 7,621 |   |   |   | - |   |
| Total                                     |   | $                      | 2,083  |                 |   | $      | 1,224                              |   |   | $          | 375    |   |          | $      | 56,894 |    |   | $      | 60,576      |   |   | $                                             | 655,796 |   |   | $ | 716,372 |   |   | $ | 386 |   |

----

| December 31, 2011                         |   | 30 - 59 DaysPast Due   |   |   | 60 - 89 DaysPast Due |   |   | 90 Days orMore PastDue andAccruing |   |   | Nonaccrual |   |   | Total PastDue |   |   | Current |   |   | Total Loans |   |   | RecordedInvestment 90Days or Moreand Accruing |   |
|-------------------------------------------|--------|------------------------|--------|--------|----------------------|--------|--------|------------------------------------|--------|--------|------------|--------|--------|---------------|--------|--------|---------|--------|--------|-------------|--------|--------|-----------------------------------------------|--------|
|                                      |   | (Dollars in thousands) |   |
|                                      |   |                   |   |   |                 |   |   |                               |   |   |       |   |   |          |   |   |    |   |   |        |   |   |                                          |   |
| Not covered by FDIC loss-share agreements |   |                   |   |   |                 |   |   |                               |   |   |       |   |   |          |   |   |    |   |   |        |   |   |                                          |   |
| Real estate:                              |   |                   |   |   |                 |   |   |                               |   |   |       |   |   |          |   |   |    |   |   |        |   |   |                                          |   |
| One-to-four family residential            |   | $                      | 80     |   |                 | $      | 1,634  |                               |   | $      | -          |   |   | $             | 2,407  |   |    | $      | 4,121  |        |   | $      | 112,738                                       |   |   | $ | 116,859 |   |   | $ | - |   |
| Multifamily residential                   |   |                   | -      |   |                 |   | -      |                               |   |   | -          |   |   |          | -      |   |    |   | -      |        |   |   | 16,759                                        |   |   |   | 16,759 |   |   |   | - |   |
| Construction                              |   |                   | -      |   |                 |   | 93     |                               |   |   | -          |   |   |          | -      |   |    |   | 93     |        |   |   | 19,509                                        |   |   |   | 19,602 |   |   |   | - |   |
| Commercial land                           |   |                   | -      |   |                 |   | -      |                               |   |   | -          |   |   |          | 2,631  |   |    |   | 2,631  |        |   |   | 25,491                                        |   |   |   | 28,122 |   |   |   | - |   |
| Residential development                   |   |                   | -      |   |                 |   | -      |                               |   |   | -          |   |   |          | 6,474  |   |    |   | 6,474  |        |   |   | 9,970                                         |   |   |   | 16,444 |   |   |   | - |   |
| Other commercial real estate              |   |                   | 81     |   |                 |   | 1,873  |                               |   |   | -          |   |   |          | 4,173  |   |    |   | 6,127  |        |   |   | 219,856                                       |   |   |   | 225,983 |   |   |   | - |   |
| Consumer real estate                      |   |                   | 761    |   |                 |   | 388    |                               |   |   | 335        |   |   |          | 2,543  |   |    |   | 4,027  |        |   |   | 99,494                                        |   |   |   | 103,521 |   |   |   | 338 |   |
| Total real estate                         |   |                   | 922    |   |                 |   | 3,988  |                               |   |   | 335        |   |   |          | 18,228 |   |    |   | 23,473 |        |   |   | 503,817                                       |   |   |   | 527,290 |   |   |   | 338 |   |
| Commercial business                       |   |                   | 7      |   |                 |   | -      |                               |   |   | -          |   |   |          | 168    |   |    |   | 175    |        |   |   | 40,986                                        |   |   |   | 41,161 |   |   |   | - |   |
| Other consumer                            |   |                   | 13     |   |                 |   | 3      |                               |   |   | -          |   |   |          | 80     |   |    |   | 96     |        |   |   | 5,553                                         |   |   |   | 5,649 |   |   |   | - |   |
| Total                                     |   | $                      | 942    |   |                 | $      | 3,991  |                               |   | $      | 335        |   |   | $             | 18,476 |   |    | $      | 23,744 |        |   | $      | 550,356                                       |   |   | $ | 574,100 |   |   | $ | 338 |   |
|                                      |   |                   |   |   |                 |   |   |                               |   |   |       |   |   |          |   |   |    |   |   |        |   |   |                                          |   |   |   |   |   |   |   |   |   |
|                                      |   |                   |   |   |                 |   |   |                               |   |   |       |   |   |          |   |   |    |   |   |        |   |   |                                          |   |   |   |   |   |   |   |   |   |
| Covered by FDIC loss-share agreements     |   |                   |   |   |                 |   |   |                               |   |   |       |   |   |          |   |   |    |   |   |        |   |   |                                          |   |   |   |   |   |   |   |   |   |
| Real estate:                              |   |                   |   |   |                 |   |   |                               |   |   |       |   |   |          |   |   |    |   |   |        |   |   |                                          |   |   |   |   |   |   |   |   |   |
| One-to-four family residential            |   | $                      | 1,530  |   |                 | $      | 2,220  |                               |   | $      | 215        |   |   | $             | 8,441  |   |    | $      | 12,406 |        |   | $      | 22,235                                        |   |   | $ | 34,641 |   |   | $ | 219 |   |
| Multifamily residential                   |   |                   | -      |   |                 |   | -      |                               |   |   | -          |   |   |          | 216    |   |    |   | 216    |        |   |   | 2,710                                         |   |   |   | 2,926 |   |   |   | - |   |
| Construction                              |   |                   | -      |   |                 |   | -      |                               |   |   | -          |   |   |          | 1,191  |   |    |   | 1,191  |        |   |   | 64                                            |   |   |   | 1,255 |   |   |   | - |   |
| Commercial land                           |   |                   | 140    |   |                 |   | 11     |                               |   |   | 10         |   |   |          | 6,704  |   |    |   | 6,865  |        |   |   | 6,805                                         |   |   |   | 13,670 |   |   |   | 11 |   |
| Residential development                   |   |                   | -      |   |                 |   | -      |                               |   |   | -          |   |   |          | 4,578  |   |    |   | 4,578  |        |   |   | 3,517                                         |   |   |   | 8,095 |   |   |   | - |   |
| Other commercial real estate              |   |                   | 351    |   |                 |   | 466    |                               |   |   | 495        |   |   |          | 17,454 |   |    |   | 18,766 |        |   |   | 57,546                                        |   |   |   | 76,312 |   |   |   | 511 |   |
| Consumer real estate                      |   |                   | 236    |   |                 |   | 15     |                               |   |   | -          |   |   |          | 634    |   |    |   | 885    |        |   |   | 10,263                                        |   |   |   | 11,148 |   |   |   | - |   |
| Total real estate                         |   |                   | 2,257  |   |                 |   | 2,712  |                               |   |   | 720        |   |   |          | 39,218 |   |    |   | 44,907 |        |   |   | 103,140                                       |   |   |   | 148,047 |   |   |   | 741 |   |
| Commercial business                       |   |                   | 90     |   |                 |   | 39     |                               |   |   | 23         |   |   |          | 3,484  |   |    |   | 3,636  |        |   |   | 4,230                                         |   |   |   | 7,866 |   |   |   | 24 |   |
| Other consumer                            |   |                   | 141    |   |                 |   | 133    |                               |   |   | 57         |   |   |          | 554    |   |    |   | 885    |        |   |   | 2,890                                         |   |   |   | 3,775 |   |   |   | 58 |   |
| Total                                     |   | $                      | 2,488  |   |                 | $      | 2,884  |                               |   | $      | 800        |   |   | $             | 43,256 |   |    | $      | 49,428 |        |   | $      | 110,260                                       |   |   | $ | 159,688 |   |   | $ | 823 |   |
|                                      |   |                   |   |   |                 |   |   |                               |   |   |       |   |   |          |   |   |    |   |   |        |   |   |                                          |   |   |   |   |   |   |   |   |   |
|                                      |   |                   |   |   |                 |   |   |                               |   |   |       |   |   |          |   |   |    |   |   |        |   |   |                                          |   |   |   |   |   |   |   |   |   |
| Total at December 31, 2011                |   |                   |   |   |                 |   |   |                               |   |   |       |   |   |          |   |   |    |   |   |        |   |   |                                          |   |   |   |   |   |   |   |   |   |
| Real estate:                              |   |                   |   |   |                 |   |   |                               |   |   |       |   |   |          |   |   |    |   |   |        |   |   |                                          |   |   |   |   |   |   |   |   |   |
| One-to-four family residential            |   | $                      | 1,610  |   |                 | $      | 3,854  |                               |   | $      | 215        |   |   | $             | 10,848 |   |    | $      | 16,527 |        |   | $      | 134,973                                       |   |   | $ | 151,500 |   |   | $ | 219 |   |
| Multifamily residential                   |   |                   | -      |   |                 |   | -      |                               |   |   | -          |   |   |          | 216    |   |    |   | 216    |        |   |   | 19,469                                        |   |   |   | 19,685 |   |   |   | - |   |
| Construction                              |   |                   | -      |   |                 |   | 93     |                               |   |   | -          |   |   |          | 1,191  |   |    |   | 1,284  |        |   |   | 19,573                                        |   |   |   | 20,857 |   |   |   | - |   |
| Commercial land                           |   |                   | 140    |   |                 |   | 11     |                               |   |   | 10         |   |   |          | 9,335  |   |    |   | 9,496  |        |   |   | 32,296                                        |   |   |   | 41,792 |   |   |   | 11 |   |
| Residential development                   |   |                   | -      |   |                 |   | -      |                               |   |   | -          |   |   |          | 11,052 |   |    |   | 11,052 |        |   |   | 13,487                                        |   |   |   | 24,539 |   |   |   | - |   |
| Other commercial real estate              |   |                   | 432    |   |                 |   | 2,339  |                               |   |   | 495        |   |   |          | 21,627 |   |    |   | 24,893 |        |   |   | 277,402                                       |   |   |   | 302,295 |   |   |   | 511 |   |
| Consumer real estate                      |   |                   | 997    |   |                 |   | 403    |                               |   |   | 335        |   |   |          | 3,177  |   |    |   | 4,912  |        |   |   | 109,757                                       |   |   |   | 114,669 |   |   |   | 338 |   |
| Total real estate                         |   |                   | 3,179  |   |                 |   | 6,700  |                               |   |   | 1,055      |   |   |          | 57,446 |   |    |   | 68,380 |        |   |   | 606,957                                       |   |   |   | 675,337 |   |   |   | 1,079 |   |
| Commercial business                       |   |                   | 97     |   |                 |   | 39     |                               |   |   | 23         |   |   |          | 3,652  |   |    |   | 3,811  |        |   |   | 45,216                                        |   |   |   | 49,027 |   |   |   | 24 |   |
| Other consumer                            |   |                   | 154    |   |                 |   | 136    |                               |   |   | 57         |   |   |          | 634    |   |    |   | 981    |        |   |   | 8,443                                         |   |   |   | 9,424 |   |   |   | 58 |   |
| Total                                     |   | $                      | 3,430  |   |                 | $      | 6,875  |                               |   | $      | 1,135      |   |   | $             | 61,732 |   |    | $      | 73,172 |        |   | $      | 660,616                                       |   |   | $ | 733,788 |   |   | $ | 1,161 |   |

----

----

|                           |   | AccrualStatus          |   |   | Non-accrualStatus |   |   | TotalContracts |   |   | Total TDRs |   |
|--------------------------------|--------|------------------------|--------|--------|-------------------|--------|--------|----------------|--------|--------|------------|--------|
|                           |   | (Dollars in thousands) |   |   |              |   |   |           |   |
| June 30, 2012                  |   |                   |   |   |              |   |   |           |   |   |       |   |
|                           |   |                   |   |   |              |   |   |           |   |   |       |   |
| One-to-four family residential |   | $                      | 220    |   |              | $      | -      |           |   | $      | 2          |   |   | $ | 220 |   |
| Commercial land                |   |                   | 875    |   |              |   | 678    |           |   |   | 3          |   |   |   | 1,553 |   |
| Residential development        |   |                   | -      |   |              |   | 141    |           |   |   | 1          |   |   |   | 141 |   |
| Other commercial real estate   |   |                   | 4,450  |   |              |   | 4,936  |           |   |   | 23         |   |   |   | 9,386 |   |
| Commercial business            |   |                   | -      |   |              |   | 885    |           |   |   | 1          |   |   |   | 885 |   |
| Total                          |   | $                      | 5,545  |   |              | $      | 6,640  |           |   | $      | 30         |   |   | $ | 12,185 |   |
|                           |   |                   |   |   |              |   |   |           |   |   |       |   |   |   |   |   |
|                           |   |                   |   |   |              |   |   |           |   |   |       |   |   |   |   |   |
| December 31, 2011              |   |                   |   |   |              |   |   |           |   |   |       |   |   |   |   |   |
|                           |   |                   |   |   |              |   |   |           |   |   |       |   |   |   |   |   |
| One-to-four family residential |   | $                      | 12     |   |              | $      | -      |           |   |   | 1          |   |   | $ | 12 |   |
| Commercial land                |   |                   | 195    |   |              |   | 89     |           |   |   | 2          |   |   |   | 284 |   |
| Residential development        |   |                   | 633    |   |              |   | -      |           |   |   | 2          |   |   |   | 633 |   |
| Other commercial real estate   |   |                   | 6,955  |   |              |   | 1,159  |           |   |   | 24         |   |   |   | 8,114 |   |
| Total                          |   | $                      | 7,795  |   |              | $      | 1,248  |           |   | $      | 29         |   |   | $ | 9,043 |   |

|                        |   | Six Months EndedJune 30, 2012 |   |   | Six Months EndedJune 30, 2011                 |   |
|-----------------------------|--------|-------------------------------|--------|--------|-----------------------------------------------|--------|
|                        |   | TotalNumber ofContracts       |   |   | Pre-modificationOutstandingRecordedInvestment |   |   | Post-modificationOutstandingRecordedInvestment |   |   | TotalNumber ofContracts |   |   | Pre-modificationOutstandingRecordedInvestment |   |   | Post-modificationOutstandingRecordedInvestment |   |
|                        |   | (Dollars in thousands)        |   |
|                        |   |                          |   |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest only modification: |   |                          |   |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial real estate      |   |                          | 1      |   |                                          |   | 590 |   |   |   | 590 |   |   |   | 3 |   |   |   | 1,050 |   |   |   | 1,050 |   |
| Subtotal                    |   |                          | 1      |   |                                          | $      | 590 |   |   | $ | 590 |   |   |   | 3 |   |   | $ | 1,050 |   |   | $ | 1,050 |   |
|                        |   |                          |   |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Term modification:          |   |                          |   |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential real estate     |   |                          | 1      |   |                                          | $      | 208 |   |   | $ | 208 |   |   |   | - |   |   | $ | - |   |   | $ | - |   |
| Commercial business         |   |                          | -      |   |                                          |   | - |   |   |   | - |   |   |   | 3 |   |   |   | 598 |   |   |   | 598 |   |
| Subtotal                    |   |                          | 1      |   |                                          | $      | 208 |   |   | $ | 208 |   |   |   | 3 |   |   | $ | 598 |   |   | $ | 598 |   |
|                        |   |                          |   |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Debt reduction reduction:   |   |                          |   |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial land             |   |                          | 3      |   |                                          | $      | 4,576 |   |   | $ | 3,285 |   |   |   | - |   |   | $ | - |   |   | $ | - |   |
| Subtotal                    |   |                          | 3      |   |                                          | $      | 4,576 |   |   | $ | 3,285 |   |   |   | - |   |   | $ | - |   |   | $ | - |   |
|                        |   |                          |   |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                       |   |                          | 5      |   |                                          | $      | 5,374 |   |   | $ | 4,083 |   |   |   | 6 |   |   | $ | 1,648 |   |   | $ | 1,648 |   |

----

|                                        |   | June 30, 2012          |   |   | December 31, 2011      |   |
|---------------------------------------------|--------|------------------------|--------|--------|------------------------|--------|
|                                        |   | RecordedInvestment     |   |   | UnpaidPrincipalBalance |   |   | NetPrincipalBalance |   |   | RelatedAllowance |   |   | RecordedInvestment |   |   | UnpaidPrincipalBalance |   |   | NetPrincipalBalance |   |   | RelatedAllowance |   |
|                                        |   | (Dollars in thousands) |   |
|                                        |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| June 30, 2012                               |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| One-to-four family residential              |   | $                      | 4,696  |   |                   | $      | 5,143 |   |   | $ | 4,488 |   |   | $ | - |   |   | $ | 2,781 |   |   | $ | 2,739 |   |   | $ | 2,739 |   |   | $ | - |   |
| Commercial land                             |   |                   | 3,355  |   |                   |   | 4,343 |   |   |   | 3,194 |   |   |   | - |   |   |   | 3,062 |   |   |   | 4,523 |   |   |   | 2,826 |   |   |   | - |   |
| Residential development                     |   |                   | 3,679  |   |                   |   | 5,427 |   |   |   | 3,472 |   |   |   | - |   |   |   | 8,428 |   |   |   | 10,173 |   |   |   | 8,262 |   |   |   | - |   |
| Commercial real estate - office             |   |                   | 7,449  |   |                   |   | 8,584 |   |   |   | 7,375 |   |   |   | - |   |   |   | 6,322 |   |   |   | 7,573 |   |   |   | 6,305 |   |   |   | - |   |
| Commercial real estate - residential rental |   |                   | 2,288  |   |                   |   | 2,933 |   |   |   | 2,244 |   |   |   | - |   |   |   | 4,076 |   |   |   | 4,808 |   |   |   | 4,029 |   |   |   | - |   |
| Commercial real estate - owner-occupied     |   |                   | 2,721  |   |                   |   | 3,301 |   |   |   | 2,614 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Commercial real estate - other              |   |                   | 2,188  |   |                   |   | 2,585 |   |   |   | 2,168 |   |   |   | - |   |   |   | 2,426 |   |   |   | 2,945 |   |   |   | 2,323 |   |   |   | - |   |
| Consumer real estate                        |   |                   | 1,158  |   |                   |   | 1,968 |   |   |   | 1,047 |   |   |   | - |   |   |   | 2,689 |   |   |   | 2,801 |   |   |   | 2,630 |   |   |   | - |   |
| Commercial business                         |   |                   | 948    |   |                   |   | 945 |   |   |   | 945 |   |   |   | - |   |   |   | 169 |   |   |   | 169 |   |   |   | 169 |   |   |   | - |   |
| Other consumer                              |   |                   | 18     |   |                   |   | 18 |   |   |   | 18 |   |   |   | - |   |   |   | 89 |   |   |   | 90 |   |   |   | 89 |   |   |   | - |   |
| Total impaired loans                        |   | $                      | 28,500 |   |                   | $      | 35,247 |   |   | $ | 27,565 |   |   | $ | - |   |   | $ | 30,042 |   |   | $ | 35,821 |   |   | $ | 29,372 |   |   | $ | - |   |

----

|                           |   | Pass                   |    |   | SpecialMention |   |   | Substandard |   |   | Total  |   |
|--------------------------------|--------|------------------------|---------|--------|----------------|--------|--------|-------------|--------|--------|--------|--------|
|                           |   | (Dollars in thousands) |    |
| June 30, 2012                  |   |                   |    |   |           |   |   |        |   |   |   |   |
|                           |   |                   |    |   |           |   |   |        |   |   |   |   |
| Real estate:                   |   |                   |    |   |           |   |   |        |   |   |   |   |
| One-to-four family residential |   | $                      | 138,184 |   |           | $      | 483    |        |   | $      | 4,680  |   |   | $ | 143,347 |   |
| Multifamily residential        |   |                   | 18,901  |   |           |   | 1,055  |        |   |   | -      |   |   |   | 19,956 |   |
| Construction                   |   |                   | 27,147  |   |           |   | -      |        |   |   | -      |   |   |   | 27,147 |   |
| Commercial land                |   |                   | 25,296  |   |           |   | 720    |        |   |   | 5,651  |   |   |   | 31,667 |   |
| Residential development        |   |                   | 11,904  |   |           |   | -      |        |   |   | 4,190  |   |   |   | 16,094 |   |
| Owner occupied CRE             |   |                   | 126,414 |   |           |   | 4,988  |        |   |   | 2,905  |   |   |   | 134,307 |   |
| Other commercial real estate   |   |                   | 153,500 |   |           |   | 15,846 |        |   |   | 9,838  |   |   |   | 179,184 |   |
| Consumer land                  |   |                   | 15,479  |   |           |   | 200    |        |   |   | 516    |   |   |   | 16,195 |   |
| Home equity lines of credit    |   |                   | 89,853  |   |           |   | 1,294  |        |   |   | 1,277  |   |   |   | 92,424 |   |
| Total real estate              |   |                   | 606,678 |   |           |   | 24,586 |        |   |   | 29,057 |   |   |   | 660,321 |   |
| Commercial business            |   |                   | 47,138  |   |           |   | 244    |        |   |   | 1,048  |   |   |   | 48,430 |   |
| Other consumer                 |   |                   | 7,416   |   |           |   | 168    |        |   |   | 37     |   |   |   | 7,621 |   |
| Total loans                    |   | $                      | 661,232 |   |           | $      | 24,998 |        |   | $      | 30,142 |   |   | $ | 716,372 |   |
|                           |   |                   |    |   |           |   |   |        |   |   |   |   |   |   |   |   |
|                           |   |                   |    |   |           |   |   |        |   |   |   |   |   |   |   |   |
| December 31, 2011              |   |                   |    |   |           |   |   |        |   |   |   |   |   |   |   |   |
|                           |   |                   |    |   |           |   |   |        |   |   |   |   |   |   |   |   |
| Real estate:                   |   |                   |    |   |           |   |   |        |   |   |   |   |   |   |   |   |
| One-to-four family residential |   | $                      | 149,013 |   |           | $      | 562    |        |   | $      | 1,925  |   |   | $ | 151,500 |   |
| Multifamily residential        |   |                   | 19,685  |   |           |   | -      |        |   |   | -      |   |   |   | 19,685 |   |
| Construction                   |   |                   | 20,857  |   |           |   | -      |        |   |   | -      |   |   |   | 20,857 |   |
| Commercial land                |   |                   | 30,202  |   |           |   | 8,600  |        |   |   | 2,990  |   |   |   | 41,792 |   |
| Residential development        |   |                   | 15,806  |   |           |   | 1,037  |        |   |   | 7,696  |   |   |   | 24,539 |   |
| Other commercial real estate   |   |                   | 269,970 |   |           |   | 19,925 |        |   |   | 12,400 |   |   |   | 302,295 |   |
| Consumer land                  |   |                   | 17,356  |   |           |   | 458    |        |   |   | 1,560  |   |   |   | 19,374 |   |
| Home equity lines of credit    |   |                   | 92,752  |   |           |   | 790    |        |   |   | 1,753  |   |   |   | 95,295 |   |
| Total real estate              |   |                   | 615,641 |   |           |   | 31,372 |        |   |   | 28,324 |   |   |   | 675,337 |   |
| Commercial business            |   |                   | 48,477  |   |           |   | 254    |        |   |   | 296    |   |   |   | 49,027 |   |
| Other consumer                 |   |                   | 9,147   |   |           |   | 170    |        |   |   | 107    |   |   |   | 9,424 |   |
| Total loans                    |   | $                      | 673,265 |   |           | $      | 31,796 |        |   | $      | 28,727 |   |   | $ | 733,788 |   |

----

|   | 1)  | Quantitative Reserve Component. Quantitative reserves represent the current loss contingency estimate on pools of loans, which is an estimate of the amount for which it is probable that the Company will be unable to collect all amounts due on homogeneous groups of loans according to contractual terms should one or more events occur, excluding those loans specifically identified above. This component of the allowance for loan losses is based on the historical loss experience of the Company. This loss experience was collected by evaluating internal loss data. The historical loss rates are grouped by loan product type. The Company utilizes average historical losses over the prior eight quarters in evaluating this component for all loan types. |
|--------|----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2)  | Qualitative Reserve Component. Qualitative reserves represent an estimate of the amount for which it is probable that environmental or other relevant factors will cause the loss contingency estimate to differ from the Company’s historical loss experience or other assumptions. The Company considers portfolio trends; portfolio concentrations; economic and market trends; changes in lending practices; and other factors to evaluate the need for qualitative adjustments. |
|--------|----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                           |   | Three MonthsEnded June 30, |   |   | Six MonthsEnded June 30, |   |
|--------------------------------|--------|----------------------------|--------|--------|--------------------------|--------|
|                           |   | 2012                       |   |   | 2011                     |   |   | 2012 |   |   | 2011 |   |
|                           |   | (Dollars in thousands)     |   |
|                           |   |                       |   |   |                     |   |   |   |   |   |   |   |
| Balance - Beginning of period  |   | $                          | 11,583 |   |                     | $      | 12,006 |   |   | $ | 11,713 |   |   | $ | 11,924 |   |
| Charge-offs:                   |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| One-to-four family residential |   |                       | (518   | )      |                     |   | (312 | ) |   |   | (1,417 | ) |   |   | (1,137 | ) |
| Construction                   |   |                       | -      |   |                     |   | (5 | ) |   |   | - |   |   |   | (41 | ) |
| Commercial land                |   |                       | (101   | )      |                     |   | (291 | ) |   |   | (191 | ) |   |   | (2,244 | ) |
| Residential development        |   |                       | (313   | )      |                     |   | (386 | ) |   |   | (2,805 | ) |   |   | (386 | ) |
| Other commercial real estate   |   |                       | (938   | )      |                     |   | (256 | ) |   |   | (2,319 | ) |   |   | (256 | ) |
| Consumer real estate           |   |                       | (774   | )      |                     |   | (35 | ) |   |   | (2,504 | ) |   |   | (91 | ) |
| Commercial business            |   |                       | (227   | )      |                     |   | (35 | ) |   |   | (227 | ) |   |   | (188 | ) |
| Other consumer                 |   |                       | (22    | )      |                     |   | (5 | ) |   |   | (33 | ) |   |   | (18 | ) |
| Total charge-offs              |   |                       | (2,893 | )      |                     |   | (1,325 | ) |   |   | (9,496 | ) |   |   | (4,361 | ) |
| Recoveries:                    |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| One-to-four family residential |   |                       | 35     |   |                     |   | 4 |   |   |   | 68 |   |   |   | 7 |   |
| Multifamily residential        |   |                       | 4      |   |                     |   | - |   |   |   | 4 |   |   |   | - |   |
| Construction                   |   |                       | 2      |   |                     |   | 181 |   |   |   | - |   |   |   | 231 |   |
| Commercial land                |   |                       | 119    |   |                     |   | - |   |   |   | 119 |   |   |   | - |   |
| Residential development        |   |                       | 32     |   |                     |   | 128 |   |   |   | 89 |   |   |   | 128 |   |
| Other commercial real estate   |   |                       | 235    |   |                     |   | 30 |   |   |   | 314 |   |   |   | 14 |   |
| Consumer real estate           |   |                       | 59     |   |                     |   | 2 |   |   |   | 61 |   |   |   | 9 |   |
| Commercial business            |   |                       | 1      |   |                     |   | 10 |   |   |   | 3 |   |   |   | 13 |   |
| Other consumer                 |   |                       | 3      |   |                     |   | 6 |   |   |   | 5 |   |   |   | 77 |   |
| Total recoveries               |   |                       | 490    |   |                     |   | 361 |   |   |   | 663 |   |   |   | 479 |   |
| Provision for loan losses      |   |                       | 2,555  |   |                     |   | 1,700 |   |   |   | 8,855 |   |   |   | 4,700 |   |
| Balance - End of period        |   | $                          | 11,735 |   |                     | $      | 12,742 |   |   | $ | 11,735 |   |   | $ | 12,742 |   |

----

|                                        |   | One-to-fourfamilyresidential |    |   | Multifamilyresidential |   |   | Construction |   |   | Commercialland |   |   | Residentialdevelopment |   |   | Othercommercialreal estate |   |   | Consumerreal estate |   |   | Commercialbusiness |   |   | Otherconsumer |    |   | Total  |   |
|---------------------------------------------|--------|------------------------------|---------|--------|------------------------|--------|--------|--------------|--------|--------|----------------|--------|--------|------------------------|--------|--------|----------------------------|--------|--------|---------------------|--------|--------|--------------------|--------|--------|---------------|---------|--------|--------|--------|
|                                        |   | (Dollars in thousands)       |    |
| June 30, 2012                               |   |                         |    |   |                   |   |   |         |   |   |           |   |   |                   |   |   |                       |   |   |                |   |   |               |   |   |          |    |   |   |   |
| Allowance for loan losses                   |   |                         |    |   |                   |   |   |         |   |   |           |   |   |                   |   |   |                       |   |   |                |   |   |               |   |   |          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance - April 1, 2012                     |   | $                            | 534     |   |                   | $      | 150    |         |   | $      | 650            |   |   | $                      | 2,344  |   |                       | $      | 2,064  |                |   | $      | 1,927              |   |   | $             | 1,372   |   |   | $      | 2,002 |   |   | $ | 540 |   |   | $ | 11,583 |   |
| Charge-offs                                 |   |                         | (475    | )      |                   |   | -      |         |   |   | -              |   |   |                   | -      |   |                       |   | (232   | )                   |   |   | (688               | )      |   |          | (759    | )      |   |   | (217 | ) |   |   | (11 | ) |   |   | (2,382 | ) |
| Recoveries                                  |   |                         | 35      |   |                   |   | -      |         |   |   | 2              |   |   |                   | 119    |   |                       |   | 32     |                |   |   | 235                |   |   |          | 57      |   |   |   | 1 |   |   |   | 3 |   |   |   | 484 |   |
| Provision                                   |   |                         | 450     |   |                   |   | -      |         |   |   | -              |   |   |                   | -      |   |                       |   | 150    |                |   |   | 500                |   |   |          | 650     |   |   |   | 250 |   |   |   | 50 |   |   |   | 2,050 |   |
| Balance - June 30, 2012                     |   | $                            | 544     |   |                   | $      | 150    |         |   | $      | 652            |   |   | $                      | 2,463  |   |                       | $      | 2,014  |                |   | $      | 1,974              |   |   | $             | 1,320   |   |   | $      | 2,036 |   |   | $ | 582 |   |   | $ | 11,735 |   |
|                                        |   |                         |    |   |                   |   |   |         |   |   |           |   |   |                   |   |   |                       |   |   |                |   |   |               |   |   |          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans individually evaluated for impairment |   | $                            | -       |   |                   | $      | -      |         |   | $      | -              |   |   | $                      | -      |   |                       | $      | -      |                |   | $      | -                  |   |   | $             | -       |   |   | $      | - |   |   | $ | - |   |   | $ | - |   |
| Loans collectively evaluated for impairment |   | $                            | 544     |   |                   | $      | 150    |         |   | $      | 652            |   |   | $                      | 2,463  |   |                       | $      | 2,014  |                |   | $      | 1,974              |   |   | $             | 1,320   |   |   | $      | 2,036 |   |   | $ | 582 |   |   | $ | 11,735 |   |
|                                        |   |                         |    |   |                   |   |   |         |   |   |           |   |   |                   |   |   |                       |   |   |                |   |   |               |   |   |          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                       |   |                         |    |   |                   |   |   |         |   |   |           |   |   |                   |   |   |                       |   |   |                |   |   |               |   |   |          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans individually evaluated for impairment |   | $                            | 4,488   |   |                   | $      | -      |         |   | $      | -              |   |   | $                      | 3,194  |   |                       | $      | 3,472  |                |   | $      | 14,401             |   |   | $             | 1,047   |   |   | $      | 945 |   |   | $ | 18 |   |   | $ | 27,565 |   |
| Loans collectively evaluated for impairment |   |                         | 109,833 |   |                   |   | 17,074 |         |   |   | 27,114         |   |   |                   | 19,691 |   |                       |   | 6,596  |                |   |   | 233,874            |   |   |          | 98,115  |   |   |   | 42,690 |   |   |   | 4,946 |   |   |   | 559,933 |   |
| Total non-covered loans                     |   | $                            | 114,321 |   |                   | $      | 17,074 |         |   | $      | 27,114         |   |   | $                      | 22,885 |   |                       | $      | 10,068 |                |   | $      | 248,275            |   |   | $             | 99,162  |   |   | $      | 43,635 |   |   | $ | 4,964 |   |   | $ | 587,498 |   |
|                                        |   |                         |    |   |                   |   |   |         |   |   |           |   |   |                   |   |   |                       |   |   |                |   |   |               |   |   |          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                        |   |                         |    |   |                   |   |   |         |   |   |           |   |   |                   |   |   |                       |   |   |                |   |   |               |   |   |          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                        |   |                         |    |   |                   |   |   |         |   |   |           |   |   |                   |   |   |                       |   |   |                |   |   |               |   |   |          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| June 30, 2011                               |   |                         |    |   |                   |   |   |         |   |   |           |   |   |                   |   |   |                       |   |   |                |   |   |               |   |   |          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses                   |   |                         |    |   |                   |   |   |         |   |   |           |   |   |                   |   |   |                       |   |   |                |   |   |               |   |   |          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance - April 1, 2011                     |   | $                            | 528     |   |                   | $      | 200    |         |   | $      | 1,014          |   |   | $                      | 2,014  |   |                       | $      | 1,996  |                |   | $      | 1,645              |   |   | $             | 1,551   |   |   | $      | 2,500 |   |   | $ | 558 |   |   | $ | 12,006 |   |
| Charge-offs                                 |   |                         | (312    | )      |                   |   | -      |         |   |   | (5             | )      |   |                   | (291   | )      |                       |   | (386   | )                   |   |   | (256               | )      |   |          | (35     | )      |   |   | (35 | ) |   |   | (5 | ) |   |   | (1,325 | ) |
| Recoveries                                  |   |                         | 4       |   |                   |   | -      |         |   |   | 181            |   |   |                   | -      |   |                       |   | 128    |                |   |   | 30                 |   |   |          | 2       |   |   |   | 10 |   |   |   | 6 |   |   |   | 361 |   |
| Provision                                   |   |                         | 300     |   |                   |   | -      |         |   |   | -              |   |   |                   | 500    |   |                       |   | 300    |                |   |   | 500                |   |   |          | 50      |   |   |   | 50 |   |   |   | - |   |   |   | 1,700 |   |
| Balance - June 30, 2011                     |   | $                            | 520     |   |                   | $      | 200    |         |   | $      | 1,190          |   |   | $                      | 2,223  |   |                       | $      | 2,038  |                |   | $      | 1,919              |   |   | $             | 1,568   |   |   | $      | 2,525 |   |   | $ | 559 |   |   | $ | 12,742 |   |
|                                        |   |                         |    |   |                   |   |   |         |   |   |           |   |   |                   |   |   |                       |   |   |                |   |   |               |   |   |          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans individually evaluated for impairment |   | $                            | -       |   |                   | $      | -      |         |   | $      | -              |   |   | $                      | -      |   |                       | $      | -      |                |   | $      | -                  |   |   | $             | -       |   |   | $      | - |   |   | $ | - |   |   | $ | - |   |
| Loans collectively evaluated for impairment |   |                         | 520     |   |                   |   | 200    |         |   |   | 1,190          |   |   |                   | 2,223  |   |                       |   | 2,038  |                |   |   | 1,919              |   |   |          | 1,568   |   |   |   | 2,525 |   |   |   | 559 |   |   |   | 12,742 |   |
| Total                                       |   | $                            | 520     |   |                   | $      | 200    |         |   | $      | 1,190          |   |   | $                      | 2,223  |   |                       | $      | 2,038  |                |   | $      | 1,919              |   |   | $             | 1,568   |   |   | $      | 2,525 |   |   | $ | 559 |   |   | $ | 12,742 |   |
|                                        |   |                         |    |   |                   |   |   |         |   |   |           |   |   |                   |   |   |                       |   |   |                |   |   |               |   |   |          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2011                           |   |                         |    |   |                   |   |   |         |   |   |           |   |   |                   |   |   |                       |   |   |                |   |   |               |   |   |          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                       |   |                         |    |   |                   |   |   |         |   |   |           |   |   |                   |   |   |                       |   |   |                |   |   |               |   |   |          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans individually evaluated for impairment |   | $                            | 2,739   |   |                   | $      | -      |         |   | $      | -              |   |   | $                      | 2,826  |   |                       | $      | 8,262  |                |   | $      | 12,657             |   |   | $             | 2,630   |   |   | $      | 169 |   |   | $ | 89 |   |   | $ | 29,372 |   |
| Loans collectively evaluated for impairment |   |                         | 114,120 |   |                   |   | 16,759 |         |   |   | 19,602         |   |   |                   | 25,296 |   |                       |   | 8,182  |                |   |   | 213,326            |   |   |          | 100,891 |   |   |   | 40,992 |   |   |   | 5,560 |   |   |   | 544,728 |   |
| Total non-covered loans                     |   | $                            | 116,859 |   |                   | $      | 16,759 |         |   | $      | 19,602         |   |   | $                      | 28,122 |   |                       | $      | 16,444 |                |   | $      | 225,983            |   |   | $             | 103,521 |   |   | $      | 41,161 |   |   | $ | 5,649 |   |   | $ | 574,100 |   |

----

|                                        |   | One-to-fourfamilyresidential |    |   | Multifamilyresidential |   |   | Construction |   |   | Commercialland |   |   | Residentialdevelopment |   |   | Othercommercialreal estate |   |   | Consumerreal estate |   |   | Commercialbusiness |   |   | Otherconsumer |    |   | Total  |   |
|---------------------------------------------|--------|------------------------------|---------|--------|------------------------|--------|--------|--------------|--------|--------|----------------|--------|--------|------------------------|--------|--------|----------------------------|--------|--------|---------------------|--------|--------|--------------------|--------|--------|---------------|---------|--------|--------|--------|
|                                        |   | (Dollars in thousands)       |    |
| June 30, 2012                               |   |                         |    |   |                   |   |   |         |   |   |           |   |   |                   |   |   |                       |   |   |                |   |   |               |   |   |          |    |   |   |   |
| Allowance for loan losses                   |   |                         |    |   |                   |   |   |         |   |   |           |   |   |                   |   |   |                       |   |   |                |   |   |               |   |   |          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance - January 1, 2012                   |   | $                            | 500     |   |                   | $      | 150    |         |   | $      | 800            |   |   | $                      | 2,334  |   |                       | $      | 1,999  |                |   | $      | 1,830              |   |   | $             | 1,600   |   |   | $      | 2,000 |   |   | $ | 500 |   |   | $ | 11,713 |   |
| Charge-offs                                 |   |                         | (1,374  | )      |                   |   | -      |         |   |   | -              |   |   |                   | (90    | )      |                       |   | (2,724 | )                   |   |   | (2,069             | )      |   |          | (2,489  | )      |   |   | (217 | ) |   |   | (22 | ) |   |   | (8,985 | ) |
| Recoveries                                  |   |                         | 68      |   |                   |   | -      |         |   |   | -              |   |   |                   | 119    |   |                       |   | 89     |                |   |   | 314                |   |   |          | 59      |   |   |   | 3 |   |   |   | 5 |   |   |   | 657 |   |
| Provision                                   |   |                         | 1,350   |   |                   |   | -      |         |   |   | (150           | )      |   |                   | 100    |   |                       |   | 2,650  |                |   |   | 1,900              |   |   |          | 2,150   |   |   |   | 250 |   |   |   | 100 |   |   |   | 8,350 |   |
| Balance - June 30, 2012                     |   | $                            | 544     |   |                   | $      | 150    |         |   | $      | 650            |   |   | $                      | 2,463  |   |                       | $      | 2,014  |                |   | $      | 1,975              |   |   | $             | 1,320   |   |   | $      | 2,036 |   |   | $ | 583 |   |   | $ | 11,735 |   |
|                                        |   |                         |    |   |                   |   |   |         |   |   |           |   |   |                   |   |   |                       |   |   |                |   |   |               |   |   |          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans individually evaluated for impairment |   | $                            | -       |   |                   | $      | -      |         |   | $      | -              |   |   | $                      | -      |   |                       | $      | -      |                |   | $      | -                  |   |   | $             | -       |   |   | $      | - |   |   | $ | - |   |   | $ | - |   |
| Loans collectively evaluated for impairment |   | $                            | 544     |   |                   | $      | 150    |         |   | $      | 650            |   |   | $                      | 2,463  |   |                       | $      | 2,014  |                |   | $      | 1,975              |   |   | $             | 1,320   |   |   | $      | 2,036 |   |   | $ | 583 |   |   | $ | 11,735 |   |
|                                        |   |                         |    |   |                   |   |   |         |   |   |           |   |   |                   |   |   |                       |   |   |                |   |   |               |   |   |          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                       |   |                         |    |   |                   |   |   |         |   |   |           |   |   |                   |   |   |                       |   |   |                |   |   |               |   |   |          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans individually evaluated for impairment |   | $                            | 4,488   |   |                   | $      | -      |         |   | $      | -              |   |   | $                      | 3,194  |   |                       | $      | 3,472  |                |   | $      | 14,401             |   |   | $             | 1,047   |   |   | $      | 945 |   |   | $ | 18 |   |   | $ | 27,565 |   |
| Loans collectively evaluated for impairment |   |                         | 109,833 |   |                   |   | 17,074 |         |   |   | 27,114         |   |   |                   | 19,691 |   |                       |   | 6,596  |                |   |   | 233,874            |   |   |          | 98,115  |   |   |   | 42,690 |   |   |   | 4,946 |   |   |   | 559,933 |   |
| Total non-covered loans                     |   | $                            | 114,321 |   |                   | $      | 17,074 |         |   | $      | 27,114         |   |   | $                      | 22,885 |   |                       | $      | 10,068 |                |   | $      | 248,275            |   |   | $             | 99,162  |   |   | $      | 43,635 |   |   | $ | 4,964 |   |   | $ | 587,498 |   |
|                                        |   |                         |    |   |                   |   |   |         |   |   |           |   |   |                   |   |   |                       |   |   |                |   |   |               |   |   |          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                        |   |                         |    |   |                   |   |   |         |   |   |           |   |   |                   |   |   |                       |   |   |                |   |   |               |   |   |          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                        |   |                         |    |   |                   |   |   |         |   |   |           |   |   |                   |   |   |                       |   |   |                |   |   |               |   |   |          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| June 30, 2011                               |   |                         |    |   |                   |   |   |         |   |   |           |   |   |                   |   |   |                       |   |   |                |   |   |               |   |   |          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses                   |   |                         |    |   |                   |   |   |         |   |   |           |   |   |                   |   |   |                       |   |   |                |   |   |               |   |   |          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance - January 1, 2011                   |   | $                            | 500     |   |                   | $      | 200    |         |   | $      | 1,000          |   |   | $                      | 2,163  |   |                       | $      | 2,000  |                |   | $      | 1,561              |   |   | $             | 1,500   |   |   | $      | 2,500 |   |   | $ | 500 |   |   | $ | 11,924 |   |
| Charge-offs                                 |   |                         | (1,137  | )      |                   |   | -      |         |   |   | (41            | )      |   |                   | (2,244 | )      |                       |   | (386   | )                   |   |   | (256               | )      |   |          | (91     | )      |   |   | (188 | ) |   |   | (18 | ) |   |   | (4,361 | ) |
| Recoveries                                  |   |                         | 7       |   |                   |   | -      |         |   |   | 231            |   |   |                   | -      |   |                       |   | 128    |                |   |   | 14                 |   |   |          | 9       |   |   |   | 13 |   |   |   | 77 |   |   |   | 479 |   |
| Provision                                   |   |                         | 1,150   |   |                   |   | -      |         |   |   | -              |   |   |                   | 1,250  |   |                       |   | 1,350  |                |   |   | 600                |   |   |          | 150     |   |   |   | 200 |   |   |   | - |   |   |   | 4,700 |   |
| Balance - June 30, 2011                     |   | $                            | 520     |   |                   | $      | 200    |         |   | $      | 1,190          |   |   | $                      | 1,169  |   |                       | $      | 3,092  |                |   | $      | 1,919              |   |   | $             | 1,568   |   |   | $      | 2,525 |   |   | $ | 559 |   |   | $ | 12,742 |   |
|                                        |   |                         |    |   |                   |   |   |         |   |   |           |   |   |                   |   |   |                       |   |   |                |   |   |               |   |   |          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans individually evaluated for impairment |   | $                            | -       |   |                   | $      | -      |         |   | $      | -              |   |   | $                      | -      |   |                       | $      | -      |                |   | $      | -                  |   |   | $             | -       |   |   | $      | - |   |   | $ | - |   |   | $ | - |   |
| Loans collectively evaluated for impairment |   |                         | 520     |   |                   |   | 200    |         |   |   | 1,190          |   |   |                   | 1,169  |   |                       |   | 3,092  |                |   |   | 1,919              |   |   |          | 1,568   |   |   |   | 2,525 |   |   |   | 559 |   |   |   | 12,742 |   |
| Total                                       |   | $                            | 520     |   |                   | $      | 200    |         |   | $      | 1,190          |   |   | $                      | 1,169  |   |                       | $      | 3,092  |                |   | $      | 1,919              |   |   | $             | 1,568   |   |   | $      | 2,525 |   |   | $ | 559 |   |   | $ | 12,742 |   |
|                                        |   |                         |    |   |                   |   |   |         |   |   |           |   |   |                   |   |   |                       |   |   |                |   |   |               |   |   |          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2011                           |   |                         |    |   |                   |   |   |         |   |   |           |   |   |                   |   |   |                       |   |   |                |   |   |               |   |   |          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                       |   |                         |    |   |                   |   |   |         |   |   |           |   |   |                   |   |   |                       |   |   |                |   |   |               |   |   |          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans individually evaluated for impairment |   | $                            | 2,739   |   |                   | $      | -      |         |   | $      | -              |   |   | $                      | 2,826  |   |                       | $      | 8,262  |                |   | $      | 12,657             |   |   | $             | 2,630   |   |   | $      | 169 |   |   | $ | 89 |   |   | $ | 29,372 |   |
| Loans collectively evaluated for impairment |   |                         | 114,120 |   |                   |   | 16,759 |         |   |   | 19,602         |   |   |                   | 25,296 |   |                       |   | 8,182  |                |   |   | 213,326            |   |   |          | 100,891 |   |   |   | 40,992 |   |   |   | 5,560 |   |   |   | 544,728 |   |
| Total non-covered loans                     |   | $                            | 116,859 |   |                   | $      | 16,759 |         |   | $      | 19,602         |   |   | $                      | 28,122 |   |                       | $      | 16,444 |                |   | $      | 225,983            |   |   | $             | 103,521 |   |   | $      | 41,161 |   |   | $ | 5,649 |   |   | $ | 574,100 |   |

----

|                                                                |   | Three MonthsEnded June 30, |   |   | Six MonthsEnded June 30, |   |
|---------------------------------------------------------------------|--------|----------------------------|--------|--------|--------------------------|--------|
|                                                                |   | 2012                       |   |   | 2011                     |   |   | 2012 |   |   | 2011 |   |
|                                                                |   | (Dollars in thousands)     |   |
|                                                                |   |                       |   |   |                     |   |   |   |   |   |   |   |
| Balance at beginning of period                                      |   | $                          | 30,448 |   |                     | $      | 25,611 |   |   | $ | 38,931 |   |   | $ | 24,848 |   |
| Additional FDIC loss share receivable from acquisitions             |   |                       | -      |   |                     |   | 19,922 |   |   |   | - |   |   |   | 19,922 |   |
| Increase in expected losses on indemnified assets and other changes |   |                       | 5,959  |   |                     |   | 435 |   |   |   | 6,925 |   |   |   | 1,749 |   |
| Claimable net losses on OREO covered under loss share agreements    |   |                       | 774    |   |                     |   | 476 |   |   |   | 1,563 |   |   |   | 660 |   |
| Reimbursable expenses claimed                                       |   |                       | 483    |   |                     |   | 242 |   |   |   | 1,020 |   |   |   | 367 |   |
| Accretion of discounts and premiums, net                            |   |                       | 31     |   |                     |   | (287 | ) |   |   | (886 | ) |   |   | (1,004 | ) |
| Receipt of payments from FDIC                                       |   |                       | (8,832 | )      |                     |   | (2,975 | ) |   |   | (18,690 | ) |   |   | (3,118 | ) |
| Balance at end of period                                            |   | $                          | 28,863 |   |                     | $      | 43,424 |   |   | $ | 28,863 |   |   | $ | 43,424 |   |

|                       |   | June 30, 2012          |    |   | December 31, 2011 |   |
|----------------------------|--------|------------------------|---------|--------|-------------------|--------|
|                       |   | Amount                 |    |   | Average Rate      |   |   | Amount |   |   | Average Rate |   |
|                       |   | (Dollars in thousands) |    |
|                       |   |                   |    |   |              |   |   |   |   |   |   |   |
| Noninterest-bearing demand |   | $                      | 95,512  |   |              |   | 0.00 | % |   | $ | 88,077 |   |   |   | 0.00 | % |
| Interest-bearing demand    |   |                   | 199,867 |   |              |   | 0.20 | % |   |   | 199,390 |   |   |   | 0.41 | % |
| Money market deposit       |   |                   | 153,775 |   |              |   | 0.29 | % |   |   | 155,228 |   |   |   | 0.52 | % |
| Savings accounts           |   |                   | 23,945  |   |              |   | 0.16 | % |   |   | 20,542 |   |   |   | 0.17 | % |
| Time deposits              |   |                   | 379,665 |   |              |   | 0.97 | % |   |   | 412,819 |   |   |   | 1.26 | % |
| Total deposits             |   | $                      | 852,764 |   |              |   | 0.55 | % |   | $ | 876,056 |   |   |   | 0.81 | % |

----

|                                   |   | June 30, 2012          |    |   | December 31, 2011 |   |
|----------------------------------------|--------|------------------------|---------|--------|-------------------|--------|
|                                   |   | (Dollars in thousands) |    |
|                                   |   |                   |    |   |              |   |
| Loan commitments                       |   |                   |    |   |              |   |
| Residential mortgage loans             |   | $                      | 10,218  |   |              | $      | 24,484 |   |
| Total loan commitments                 |   | $                      | 10,218  |   |              | $      | 24,484 |   |
|                                   |   |                   |    |   |              |   |   |   |
| Unused lines of credit                 |   |                   |    |   |              |   |   |   |
| Residential construction               |   | $                      | 8,260   |   |              | $      | 7,390 |   |
| Commercial real estate                 |   |                   | 15,738  |   |              |   | 18,593 |   |
| Commercial business                    |   |                   | 10,962  |   |              |   | 9,558 |   |
| Consumer                               |   |                   | 74,525  |   |              |   | 74,930 |   |
| Total unused lines of credit           |   | $                      | 109,485 |   |              | $      | 110,471 |   |
|                                   |   |                   |    |   |              |   |   |   |
| Undisbursed Construction Loan Proceeds |   | $                      | 795     |   |              | $      | 1,200 |   |

----

----

|                                     |   | Fair Value Measurement Classification |   |   |    |   |
|------------------------------------------|--------|---------------------------------------|--------|--------|---------|--------|
|                                     |   | Level 1                               |   |   | Level 2 |   |   | Level 3 |   |   | Total |   |
|                                     |   | (Dollars in thousands)                |   |
| June 30, 2012                            |   |                                  |   |   |    |   |   |   |   |   |   |   |
| Investment Securities Available for Sale |   |                                  |   |   |    |   |   |   |   |   |   |   |
| Municipal bonds                          |   | $                                     | -      |   |    | $      | 1,478 |   |   | $ | 200 |   |   | $ | 1,678 |   |
| Mortgage-backed bonds                    |   |                                  | -      |   |    |   | 15,055 |   |   |   | - |   |   |   | 15,055 |   |
| Equity securities                        |   |                                  | -      |   |    |   | - |   |   |   | 1,625 |   |   |   | 1,625 |   |
| Total                                    |   | $                                     | -      |   |    | $      | 16,533 |   |   | $ | 1,825 |   |   | $ | 18,358 |   |
|                                     |   |                                  |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2011                        |   |                                  |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Investment Securities Available for Sale |   |                                  |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Government Agency obligations       |   | $                                     | -      |   |    | $      | 7,241 |   |   | $ | - |   |   | $ | 7,241 |   |
| Municipal bonds                          |   |                                  | -      |   |    |   | 6,511 |   |   |   | 200 |   |   |   | 6,711 |   |
| Mortgage-backed bonds                    |   |                                  | -      |   |    |   | 35,492 |   |   |   | - |   |   |   | 35,492 |   |
| SBA securities                           |   |                                  | -      |   |    |   | 1,326 |   |   |   | - |   |   |   | 1,326 |   |
| Equity securities                        |   |                                  | -      |   |    |   | - |   |   |   | 1,366 |   |   |   | 1,366 |   |
| Total                                    |   | $                                     | -      |   |    | $      | 50,570 |   |   | $ | 1,566 |   |   | $ | 52,136 |   |

|                         |   | Six Months EndedJune 30, |   |
|------------------------------|--------|--------------------------|--------|
|                         |   | 2012                     |   |   | 2011 |   |
|                         |   | (Dollars in thousands)   |   |
| Beginning balance, January 1 |   | $                        | 1,566  |   |   | $ | 3,023 |   |
| Total gains included in:     |   |                     |   |   |   |   |   |   |
| Other comprehensive income   |   |                     | 47     |   |   |   | 45 |   |
| Purchases                    |   |                     | 212    |   |   |   | - |   |
| Sales                        |   |                     | -      |   |   |   | (1,065 | ) |
| Transfers in                 |   |                     | -      |   |   |   | 258 |   |
| Ending balance, June 30      |   | $                        | 1,825  |   |   | $ | 2,261 |   |

----

----

|                                    |   | Fair Value Measurement Classification |   |   |    |   |
|-----------------------------------------|--------|---------------------------------------|--------|--------|---------|--------|
|                                    |   | Level 1                               |   |   | Level 2 |   |   | Level 3 |   |   | Total |   |
|                                    |   | (Dollars in thousands)                |   |
| June 30, 2012                           |   |                                  |   |   |    |   |   |   |   |   |   |   |
| Investment Securities Held to Maturity: |   |                                  |   |   |    |   |   |   |   |   |   |   |
| U.S. Treasury obligations               |   | $                                     | 10,019 |   |    | $      | - |   |   | $ | - |   |   | $ | 10,019 |   |
| U.S. Government Agency obligations      |   |                                  | -      |   |    |   | 14,055 |   |   |   | - |   |   |   | 14,055 |   |
| Municipal bonds                         |   |                                  | -      |   |    |   | 3,363 |   |   |   | - |   |   |   | 3,363 |   |
| Mortgage-backed bonds                   |   |                                  | -      |   |    |   | 48,491 |   |   |   | - |   |   |   | 48,491 |   |
| SBA securities                          |   |                                  | -      |   |    |   | 5,105 |   |   |   | - |   |   |   | 5,105 |   |
| Corporate bonds                         |   |                                  | -      |   |    |   | 3,814 |   |   |   | - |   |   |   | 3,814 |   |
| Presold loans in process of settlement  |   |                                  | -      |   |    |   | 2,146 |   |   |   | - |   |   |   | 2,146 |   |
| Impaired loans                          |   |                                  | -      |   |    |   | - |   |   |   | 27,565 |   |   |   | 27,565 |   |
| Other real estate owned                 |   |                                  | -      |   |    |   | - |   |   |   | 21,405 |   |   |   | 21,405 |   |
| Total                                   |   | $                                     | 10,019 |   |    | $      | 76,974 |   |   | $ | 48,970 |   |   | $ | 135,963 |   |
|                                    |   |                                  |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2011                       |   |                                  |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Investment Securities Held to Maturity: |   |                                  |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Treasury obligations               |   | $                                     | 10,033 |   |    | $      | - |   |   | $ | - |   |   | $ | 10,033 |   |
| U.S. Government Agency obligations      |   |                                  | -      |   |    |   | 26,059 |   |   |   | - |   |   |   | 26,059 |   |
| Municipal bonds                         |   |                                  | -      |   |    |   | 3,399 |   |   |   | - |   |   |   | 3,399 |   |
| Mortgage-backed bonds                   |   |                                  | -      |   |    |   | 54,779 |   |   |   | - |   |   |   | 54,779 |   |
| Corporate bonds                         |   |                                  | -      |   |    |   | 3,845 |   |   |   | - |   |   |   | 3,845 |   |
| Presold loans in process of settlement  |   |                                  | -      |   |    |   | 2,146 |   |   |   | - |   |   |   | 2,146 |   |
| Impaired loans                          |   |                                  | -      |   |    |   | - |   |   |   | 29,372 |   |   |   | 29,372 |   |
| Other real estate owned                 |   |                                  | -      |   |    |   | - |   |   |   | 17,571 |   |   |   | 17,571 |   |
| Total                                   |   | $                                     | 10,033 |   |    | $      | 90,228 |   |   | $ | 46,943 |   |   | $ | 147,204 |   |

----

----

|                                        |   | June 30, 2012          |    |   | December 31, 2011   |   |
|---------------------------------------------|--------|------------------------|---------|--------|---------------------|--------|
|                                        |   | CarryingAmount         |    |   | EstimatedFair Value |   |   | CarryingAmount |   |   | EstimatedFair Value |   |
|                                        |   | (Dollars in thousands) |    |
| Financial assets                            |   |                   |    |   |                |   |   |   |   |   |   |   |
| Cash and due from banks                     |   | $                      | 11,839  |   |                | $      | 11,839 |   |   | $ | 13,296 |   |   | $ | 13,296 |   |
| Interest bearing deposits                   |   |                   | 116,985 |   |                |   | 116,985 |   |   |   | 75,048 |   |   |   | 75,048 |   |
| Investment securities                       |   |                   | 100,634 |   |                |   | 103,205 |   |   |   | 147,899 |   |   |   | 150,251 |   |
| Federal Home Loan Bank stock                |   |                   | 4,443   |   |                |   | 4,443 |   |   |   | 5,067 |   |   |   | 5,067 |   |
| Presold loans in process of settlement      |   |                   | 2,146   |   |                |   | 2,146 |   |   |   | 2,146 |   |   |   | 2,146 |   |
| Loans, net                                  |   |                   | 704,637 |   |                |   | 714,077 |   |   |   | 722,075 |   |   |   | 735,685 |   |
| FDIC loss share receivable                  |   |                   | 28,863  |   |                |   | 28,863 |   |   |   | 38,931 |   |   |   | 38,931 |   |
| Accrued interest receivable                 |   |                   | 1,840   |   |                |   | 1,840 |   |   |   | 2,773 |   |   |   | 2,773 |   |
| Bank-owned life insurance                   |   |                   | 18,723  |   |                |   | 18,723 |   |   |   | 18,978 |   |   |   | 18,978 |   |
|                                        |   |                   |    |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities                       |   |                   |    |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Demand deposits                             |   | $                      | 295,379 |   |                | $      | 295,379 |   |   | $ | 287,466 |   |   | $ | 287,466 |   |
| Money market accounts                       |   |                   | 153,775 |   |                |   | 153,775 |   |   |   | 155,229 |   |   |   | 155,229 |   |
| Savings accounts                            |   |                   | 23,945  |   |                |   | 23,945 |   |   |   | 20,542 |   |   |   | 20,542 |   |
| Time deposits                               |   |                   | 379,665 |   |                |   | 381,475 |   |   |   | 412,819 |   |   |   | 415,145 |   |
| Securities sold under repurchase agreements |   |                   | 7,554   |   |                |   | 7,554 |   |   |   | 9,787 |   |   |   | 9,787 |   |
| Borrowed money                              |   |                   | 76,706  |   |                |   | 85,089 |   |   |   | 78,688 |   |   |   | 87,697 |   |
| Subordinated debt                           |   |                   | 15,464  |   |                |   | 7,732 |   |   |   | 15,464 |   |   |   | 7,732 |   |
| Accrued interest payable                    |   |                   | 695     |   |                |   | 695 |   |   |   | 981 |   |   |   | 981 |   |

----

ITEM 

----

----

| Quarterly Financial Highlights (unaudited)                |   | At and For the Quarters Ended |       |
|-----------------------------------------------------------|--------|-------------------------------|------------|
|                                                      |   | 2012                          |       |   | 2011 |   |
|                                                      |   | June 30                       |       |   | March 31 |   |   | December 31 |   |   | September 30 |   |   | June 30 |   |
| (Dollars in thousands, except share and per share data)   |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                      |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Summary of Operations:                                    |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest income - taxable equivalent                      |   | $                             | 10,098     |   |   | $ | 10,528 |   |   | $ | 11,089 |   |   | $ | 11,308 |   |   | $ | 11,488 |   |
| Interest expense                                          |   |                          | 1,888      |   |   |   | 2,016 |   |   |   | 2,304 |   |   |   | 2,554 |   |   |   | 2,826 |   |
| Net interest income - taxable equivalent                  |   |                          | 8,210      |   |   |   | 8,512 |   |   |   | 8,785 |   |   |   | 8,754 |   |   |   | 8,662 |   |
| Less: Taxable-equivalent adjustment                       |   |                          | 47         |   |   |   | 59 |   |   |   | 65 |   |   |   | 62 |   |   |   | 69 |   |
| Net interest income                                       |   |                          | 8,163      |   |   |   | 8,453 |   |   |   | 8,720 |   |   |   | 8,692 |   |   |   | 8,593 |   |
| Provision for loan losses                                 |   |                          | 2,555      |   |   |   | 6,300 |   |   |   | 4,635 |   |   |   | 1,350 |   |   |   | 1,700 |   |
| Net interest income after loan loss provision             |   |                          | 5,608      |   |   |   | 2,153 |   |   |   | 4,085 |   |   |   | 7,342 |   |   |   | 6,893 |   |
| Noninterest income                                        |   |                          | 2,700      |   |   |   | 2,719 |   |   |   | 1,985 |   |   |   | 1,990 |   |   |   | 5,886 |   |
| Noninterest expense                                       |   |                          | 9,532      |   |   |   | 8,684 |   |   |   | 8,779 |   |   |   | 8,931 |   |   |   | 9,270 |   |
| Net income (loss) before income taxes                     |   |                          | (1,224     | ) |   |   | (3,812 | ) |   |   | (2,709 | ) |   |   | 401 |   |   |   | 3,509 |   |
| Income tax expense (benefit)                              |   |                          | (576       | ) |   |   | (1,672 | ) |   |   | (1,172 | ) |   |   | 28 |   |   |   | 1,213 |   |
| Net income (loss)                                         |   |                          | (648       | ) |   |   | (2,140 | ) |   |   | (1,537 | ) |   |   | 373 |   |   |   | 2,296 |   |
| Dividends and accretion of discount on preferred stock    |   |                          | 68         |   |   |   | 122 |   |   |   | 767 |   |   |   | 247 |   |   |   | 256 |   |
| Net income (loss) allocable to common shareholders        |   | $                             | (716       | ) |   | $ | (2,262 | ) |   | $ | (2,304 | ) |   | $ | 126 |   |   | $ | 2,040 |   |
|                                                      |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Per Common Share Data:                                    |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss):                                        |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                     |   | $                             | (0.06      | ) |   | $ | (0.20 | ) |   | $ | (0.20 | ) |   | $ | 0.01 |   |   | $ | 0.18 |   |
| Diluted                                                   |   |                          | (0.06      | ) |   |   | (0.20 | ) |   |   | (0.20 | ) |   |   | 0.01 |   |   |   | 0.18 |   |
| Weighted average shares outstanding:                      |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                     |   |                          | 11,463,396 |   |   |   | 11,469,525 |   |   |   | 11,470,599 |   |   |   | 11,462,107 |   |   |   | 11,455,642 |   |
| Diluted                                                   |   |                          | 11,463,396 |   |   |   | 11,469,525 |   |   |   | 11,470,599 |   |   |   | 11,462,107 |   |   |   | 11,455,642 |   |
| End of period shares outstanding                          |   |                          | 11,506,324 |   |   |   | 11,506,324 |   |   |   | 11,506,324 |   |   |   | 11,506,324 |   |   |   | 11,506,324 |   |
| Cash dividends declared                                   |   | $                             | 0.01       |   |   | $ | 0.01 |   |   | $ | 0.01 |   |   | $ | 0.01 |   |   | $ | 0.01 |   |
| Book value                                                |   |                          | 5.99       |   |   |   | 6.04 |   |   |   | 6.27 |   |   |   | 6.44 |   |   |   | 6.44 |   |
| Tangible book value                                       |   |                          | 5.90       |   |   |   | 5.93 |   |   |   | 6.15 |   |   |   | 6.31 |   |   |   | 6.29 |   |
|                                                      |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selected Financial Performance Ratios (annualized):       |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Return on average assets                                  |   |                          | (0.27      | )% |   |   | (0.85 | )% |   |   | (0.85 | )% |   |   | 0.05 | % |   |   | 0.73 | % |
| Return on average common equity                           |   |                          | (4.17      | )% |   |   | (12.86 | )% |   |   | (12.45 | )% |   |   | 0.68 | % |   |   | 11.00 | % |
| Noninterest income to average total assets                |   |                          | 1.03       | % |   |   | 1.02 | % |   |   | 0.73 | % |   |   | 0.72 | % |   |   | 2.12 | % |
| Noninterest expense to average total assets               |   |                          | 3.62       | % |   |   | 3.25 | % |   |   | 3.24 | % |   |   | 3.23 | % |   |   | 3.34 | % |
| Efficiency ratio                                          |   |                          | 87.75      | % |   |   | 77.73 | % |   |   | 82.01 | % |   |   | 83.61 | % |   |   | 64.02 | % |
|                                                      |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating Earnings (Non-GAAP):                            |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) allocable to common shareholders        |   | $                             | (716       | ) |   | $ | (2,262 | ) |   | $ | (2,304 | ) |   | $ | 126 |   |   | $ | 2,040 |   |
| (Gain) loss on acquisition, net of tax                    |   |                          | 106        |   |   |   | - |   |   |   | (15 | ) |   |   | 29 |   |   |   | (2,695 | ) |
| Gain on sale of investments, net of tax                   |   |                          | -          |   |   |   | (405 | ) |   |   | - |   |   |   | (67 | ) |   |   | - |   |
| Other-than-temporary impairment on securities, net of tax |   |                          | -          |   |   |   | - |   |   |   | 22 |   |   |   | - |   |   |   | - |   |
| Acquisition and integration expenses, net of tax          |   |                          | -          |   |   |   | - |   |   |   | 584 |   |   |   | 86 |   |   |   | 345 |   |
| Net operating income (loss)                               |   | $                             | (610       | ) |   | $ | (2,667 | ) |   | $ | (1,713 | ) |   | $ | 174 |   |   | $ | (310 | ) |
|                                                      |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating net income (loss) per common share:             |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                     |   | $                             | (0.05      | ) |   | $ | (0.23 | ) |   | $ | (0.15 | ) |   | $ | 0.02 |   |   | $ | (0.03 | ) |
| Diluted                                                   |   |                          | (0.05      | ) |   |   | (0.23 | ) |   |   | (0.15 | ) |   |   | 0.02 |   |   |   | (0.03 | ) |
|                                                      |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Pre-tax, pre-credit earnings  (1)               |   | $                             | 3,612      |   |   | $ | 3,543 |   |   | $ | 3,545 |   |   | $ | 3,545 |   |   | $ | 3,902 |   |
|                                                      |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating return on average assets                        |   |                          | (0.23      | )% |   |   | (1.00 | )% |   |   | (0.63 | )% |   |   | 0.06 | % |   |   | (0.11 | )% |
| Operating return on average equity                        |   |                          | (3.55      | )% |   |   | (11.72 | )% |   |   | (7.29 | )% |   |   | 0.73 | % |   |   | (1.30 | )% |
| Operating efficiency ratio  (2)                 |   |                          | 66.68      | % |   |   | 68.13 | % |   |   | 69.52 | % |   |   | 67.52 | % |   |   | 65.92 | % |

----

| (1) | Calculated using net interest income plus noninterest income less noninterest expense adjusted for the following items: 1) gains or losses from acquisition or sale of investments or sale of other assets; 2) other-than-temporary impairment on securities; 3) amortization of intangible assets; 4) other real estate owned valuation adjustments and expenses; and 5) acquisition and integration expenses. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Calculated by dividing noninterest expense by net interest income plus noninterest income excluding the following items: 1) gains or losses from acquisition or sale of investments; 2) other-than-temporary impairment on securities; 3) other real estate owned valuation adjustments and expenses; and 4) acquisition and integration expenses.                                                              |

----

| Quarterly Financial Highlights (unaudited)                                              |   | At and For the Quarters Ended |    |
|-----------------------------------------------------------------------------------------|--------|-------------------------------|---------|
|                                                                                    |   | 2012                          |    |   | 2011 |   |
|                                                                                    |   | June 30                       |    |   | March 31 |   |   | December 31 |   |   | September 30 |   |   | June 30 |   |
| (Dollars in thousands, except per share data)                                           |   |                          |    |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                    |   |                          |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Credit Quality Information and Ratios:                                                  |   |                          |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses - beginning of period                                         |   | $                             | 11,583  |   |   | $ | 11,713 |   |   | $ | 12,956 |   |   | $ | 12,742 |   |   | $ | 12,006 |   |
| Add:  Provision for loan losses                                               |   |                          | 2,555   |   |   |   | 6,300 |   |   |   | 4,635 |   |   |   | 1,350 |   |   |   | 1,700 |   |
| Less:  Net charge-offs                                                        |   |                          | 2,403   |   |   |   | 6,430 |   |   |   | 5,878 |   |   |   | 1,136 |   |   |   | 964 |   |
| Allowance for loan losses - end of period                                               |   | $                             | 11,735  |   |   | $ | 11,583 |   |   | $ | 11,713 |   |   | $ | 12,956 |   |   | $ | 12,742 |   |
|                                                                                    |   |                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets not covered by FDIC loss-share agreements:                                       |   |                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Past due loans (30-89 days) accruing                                                    |   | $                             | 1,812   |   |   | $ | 5,362 |   |   | $ | 4,933 |   |   | $ | 4,479 |   |   | $ | 5,687 |   |
| Past due loans (30-89 days) to total non-covered loans                                  |   |                          | 0.31    | % |   |   | 0.92 | % |   |   | 0.86 | % |   |   | 0.77 | % |   |   | 0.99 | % |
|                                                                                    |   |                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nonperforming non-covered loans:                                                        |   |                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| One-to-four family residential                                                          |   | $                             | 4,230   |   |   | $ | 2,698 |   |   | $ | 2,407 |   |   | $ | 1,556 |   |   | $ | 1,406 |   |
| Construction                                                                            |   |                          | -       |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Commercial land                                                                         |   |                          | 3,169   |   |   |   | 3,852 |   |   |   | 2,631 |   |   |   | 3,176 |   |   |   | 3,167 |   |
| Residential development                                                                 |   |                          | 3,000   |   |   |   | 3,742 |   |   |   | 6,474 |   |   |   | 6,459 |   |   |   | 5,155 |   |
| Other commercial real estate                                                            |   |                          | 8,489   |   |   |   | 8,924 |   |   |   | 4,173 |   |   |   | 6,602 |   |   |   | 10,306 |   |
| Commercial business                                                                     |   |                          | 945     |   |   |   | 1,086 |   |   |   | 168 |   |   |   | 306 |   |   |   | 201 |   |
| Consumer                                                                                |   |                          | 976     |   |   |   | 1,750 |   |   |   | 2,958 |   |   |   | 2,426 |   |   |   | 2,440 |   |
| Total nonperforming non-covered loans                                                   |   |                          | 20,809  |   |   |   | 22,052 |   |   |   | 18,811 |   |   |   | 20,525 |   |   |   | 22,675 |   |
| Other nonperforming non-covered assets                                                  |   |                          | 11,504  |   |   |   | 11,987 |   |   |   | 8,936 |   |   |   | 8,208 |   |   |   | 10,723 |   |
| Total nonperforming non-covered assets                                                  |   | $                             | 32,313  |   |   | $ | 34,039 |   |   | $ | 27,747 |   |   | $ | 28,733 |   |   | $ | 33,398 |   |
|                                                                                    |   |                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses to total non-covered loans                                    |   |                          | 2.00    | % |   |   | 2.00 | % |   |   | 2.04 | % |   |   | 2.23 | % |   |   | 2.22 | % |
| Net charge-offs to average non-covered loans (annualized)                               |   |                          | 1.65    | % |   |   | 4.44 | % |   |   | 4.07 | % |   |   | 0.79 | % |   |   | 0.66 | % |
| Nonperforming non-covered loans to non-covered loans                                    |   |                          | 3.54    | % |   |   | 3.80 | % |   |   | 3.28 | % |   |   | 3.53 | % |   |   | 3.95 | % |
| Nonperforming non-covered assets to total assets                                        |   |                          | 3.08    | % |   |   | 3.17 | % |   |   | 2.57 | % |   |   | 2.61 | % |   |   | 2.99 | % |
| Nonperforming non-covered assets to total non-covered loans and other real estate owned |   |                          | 5.39    | % |   |   | 5.75 | % |   |   | 4.76 | % |   |   | 4.87 | % |   |   | 5.72 | % |
|                                                                                    |   |                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets covered by FDIC loss-share agreements:                                           |   |                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Past due loans (30-89 days) accruing (3)                                                |   | $                             | 1,495   |   |   | $ | 2,726 |   |   | $ | 5,372 |   |   | $ | 6,430 |   |   | $ | 12,987 |   |
| Past due loans (30-89 days) to total covered loans                                      |   |                          | 1.16    | % |   |   | 1.83 | % |   |   | 3.36 | % |   |   | 3.81 | % |   |   | 7.34 | % |
|                                                                                    |   |                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total covered nonperforming loans (4)                                                   |   | $                             | 36,460  |   |   | $ | 40,582 |   |   | $ | 44,056 |   |   | $ | 37,074 |   |   | $ | 35,830 |   |
| Other covered nonperforming assets                                                      |   |                          | 9,900   |   |   |   | 9,447 |   |   |   | 8,746 |   |   |   | 12,765 |   |   |   | 14,127 |   |
| Total covered nonperforming assets                                                      |   | $                             | 46,360  |   |   | $ | 50,029 |   |   | $ | 52,802 |   |   | $ | 49,839 |   |   | $ | 49,957 |   |
|                                                                                    |   |                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Classified Assets (5)                                                              |   |                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-covered classified loans                                                            |   | $                             | 30,142  |   |   | $ | 32,146 |   |   | $ | 28,727 |   |   | $ | 35,357 |   |   | $ | 41,515 |   |
| OREO and other nonperforming assets                                                     |   |                          | 11,504  |   |   |   | 11,987 |   |   |   | 8,936 |   |   |   | 8,208 |   |   |   | 10,723 |   |
| Total classified assets                                                                 |   | $                             | 41,646  |   |   | $ | 44,133 |   |   | $ | 37,663 |   |   | $ | 43,565 |   |   | $ | 52,238 |   |
|                                                                                    |   |                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier 1 capital                                                                          |   | $                             | 100,586 |   |   | $ | 100,774 |   |   | $ | 102,539 |   |   | $ | 104,487 |   |   | $ | 105,088 |   |
|                                                                                    |   |                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total classified assets to Tier 1 capital                                               |   |                          | 41.40   | % |   |   | 43.79 | % |   |   | 36.73 | % |   |   | 41.69 | % |   |   | 49.71 | % |

----

| (3) | The contractual balance of past due loans covered by  FDIC loss-share agreements totaled $13.7 million, $8.2 million, $7.0 million, $3.5 million and $1.9 million at June 30, 2011, September 30, 2011, December 31, 2011, March 31, 2012, and June 30, 2012, respectively.         |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (4) | The contractual balance of nonperforming loans covered by  FDIC loss-share agreements totaled $39.3 million $48.8 million, $55.4 million, $46.2 million and $41.4 million at June 30, 2011, September 30, 2011, December 31, 2011, March 31, 2012, and June 30, 2012, respectively. |
| (5) | Excludes loans and OREO covered by FDIC loss-share agreements.                                                                                                                                                                                                                                |

----

| Quarterly Financial Highlights (unaudited)      |   | At and For the Quarters Ended |      |
|-------------------------------------------------|--------|-------------------------------|-----------|
|                                            |   | 2012                          |      |   | 2011 |   |
|                                            |   | 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                         |   |                          | 4.63      | % |   |   | 4.75 | % |   |   | 4.81 | % |   |   | 4.84 | % |   |   | 4.95 | % |
| Cost of funds                                   |   |                          | 0.88      | % |   |   | 0.92 | % |   |   | 1.01 | % |   |   | 1.11 | % |   |   | 1.23 | % |
| Net interest rate spread                        |   |                          | 3.75      | % |   |   | 3.83 | % |   |   | 3.80 | % |   |   | 3.73 | % |   |   | 3.72 | % |
| Net interest margin (taxable equivalent)        |   |                          | 3.78      | % |   |   | 3.88 | % |   |   | 3.84 | % |   |   | 3.76 | % |   |   | 3.78 | % |
|                                            |   |                          |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selected End of Period Balances:                |   |                          |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans covered by FDIC loss-share agreements     |   | $                             | 128,874   |   |   | $ | 148,833 |   |   | $ | 159,688 |   |   | $ | 168,940 |   |   | $ | 177,047 |   |
| Loans not covered by FDIC loss-share agreements |   |                          | 587,498   |   |   |   | 579,692 |   |   |   | 574,100 |   |   |   | 582,065 |   |   |   | 573,603 |   |
| Total loans, net                                |   |                          | 716,372   |   |   |   | 728,525 |   |   |   | 733,788 |   |   |   | 751,005 |   |   |   | 750,650 |   |
| Investment securities                           |   |                          | 100,635   |   |   |   | 121,411 |   |   |   | 147,899 |   |   |   | 132,443 |   |   |   | 156,328 |   |
| Total interest-earning assets                   |   |                          | 872,256   |   |   |   | 890,456 |   |   |   | 895,003 |   |   |   | 913,910 |   |   |   | 927,463 |   |
| Total assets                                    |   |                          | 1,049,177 |   |   |   | 1,073,815 |   |   |   | 1,080,460 |   |   |   | 1,098,974 |   |   |   | 1,117,993 |   |
| Noninterest-bearing deposits                    |   |                          | 95,512    |   |   |   | 97,437 |   |   |   | 88,077 |   |   |   | 87,413 |   |   |   | 82,305 |   |
| Interest-bearing deposits                       |   |                          | 757,252   |   |   |   | 775,209 |   |   |   | 787,979 |   |   |   | 801,167 |   |   |   | 822,273 |   |
| Total deposits                                  |   |                          | 852,764   |   |   |   | 872,646 |   |   |   | 876,056 |   |   |   | 888,580 |   |   |   | 904,578 |   |
| Total borrowings and other debt                 |   |                          | 99,724    |   |   |   | 104,080 |   |   |   | 103,939 |   |   |   | 105,778 |   |   |   | 108,011 |   |
| Shareholders' equity                            |   |                          | 89,473    |   |   |   | 90,010 |   |   |   | 92,659 |   |   |   | 94,782 |   |   |   | 94,771 |   |
|                                            |   |                          |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selected Quarterly Average Balances:            |   |                          |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans covered by FDIC loss-share agreements     |   | $                             | 136,530   |   |   | $ | 154,344 |   |   | $ | 164,314 |   |   | $ | 173,755 |   |   | $ | 170,580 |   |
| Loans not covered by FDIC loss-share agreements |   |                          | 582,263   |   |   |   | 579,224 |   |   |   | 578,083 |   |   |   | 576,846 |   |   |   | 583,294 |   |
| Average loans, net                              |   |                          | 718,793   |   |   |   | 733,568 |   |   |   | 742,397 |   |   |   | 750,601 |   |   |   | 753,874 |   |
| Investment securities                           |   |                          | 109,559   |   |   |   | 128,086 |   |   |   | 140,846 |   |   |   | 146,017 |   |   |   | 157,513 |   |
| Average interest-earning assets                 |   |                          | 872,028   |   |   |   | 880,073 |   |   |   | 906,064 |   |   |   | 920,932 |   |   |   | 918,118 |   |
| Average total assets                            |   |                          | 1,053,263 |   |   |   | 1,069,651 |   |   |   | 1,084,313 |   |   |   | 1,107,687 |   |   |   | 1,110,740 |   |
| Noninterest-bearing deposits                    |   |                          | 93,126    |   |   |   | 90,024 |   |   |   | 87,770 |   |   |   | 84,001 |   |   |   | 81,617 |   |
| Interest-bearing deposits                       |   |                          | 763,442   |   |   |   | 777,621 |   |   |   | 789,233 |   |   |   | 810,469 |   |   |   | 814,736 |   |
| Average total deposits                          |   |                          | 856,568   |   |   |   | 867,645 |   |   |   | 877,003 |   |   |   | 894,470 |   |   |   | 896,353 |   |
| Average borrowings and other debt               |   |                          | 102,179   |   |   |   | 103,181 |   |   |   | 105,872 |   |   |   | 106,696 |   |   |   | 107,872 |   |
| Shareholders' equity                            |   |                          | 89,472    |   |   |   | 91,057 |   |   |   | 94,028 |   |   |   | 94,711 |   |   |   | 95,116 |   |
|                                            |   |                          |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital Ratios:                                 |   |                          |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total equity to total assets                    |   |                          | 8.53      | % |   |   | 8.38 | % |   |   | 8.58 | % |   |   | 8.62 | % |   |   | 8.48 | % |
| Tangible common equity to tangible assets       |   |                          | 6.47      | % |   |   | 6.36 | % |   |   | 6.56 | % |   |   | 6.61 | % |   |   | 6.49 | % |
| Total Risk-Based Capital (Bank only)            |   |                          | 15.59     | % |   |   | 15.50 | % |   |   | 15.60 | % |   |   | 17.32 | % |   |   | 17.29 | % |
| Tier 1 Risk-Based Capital (Bank only)           |   |                          | 14.33     | % |   |   | 14.25 | % |   |   | 14.35 | % |   |   | 16.06 | % |   |   | 16.03 | % |
| Tier 1 Leverage Capital (Bank only)             |   |                          | 9.62      | % |   |   | 9.42 | % |   |   | 9.44 | % |   |   | 9.53 | % |   |   | 9.42 | % |

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|                                            |   | Three Months EndedJune 30, |   |   |   |   |
|-------------------------------------------------|--------|----------------------------|--------|--------|--------|--------|
|                                            |   | 2012                       |   |   | 2011   |   |   | Variance |   |
|                                            |   | (Dollars in thousands)     |   |
| Noninterest income                              |   |                       |   |   |   |   |   |   |   |
| Service charges on deposit accounts             |   | $                          | 1,092  |   |   | $      | 1,046 |   |   | $ | 46 |   |
| Mortgage banking income                         |   |                       | 393    |   |   |   | 254 |   |   |   | 139 |   |
| Commissions on sales of financial products      |   |                       | 67     |   |   |   | 69 |   |   |   | (2 | ) |
| Income from bank-owned life insurance           |   |                       | 184    |   |   |   | 214 |   |   |   | (45 | ) |
| Gain (loss) from acquisition                    |   |                       | (175   | )      |   |   | 4,418 |   |   |   | (4,593 | ) |
| Gain on sale of investments, available for sale |   |                       | -      |   |   |   | 1 |   |   |   | (1 | ) |
| Gain (loss) on sale of other assets             |   |                       | 85     |   |   |   | (338 | ) |   |   | 423 |   |
| Other                                           |   |                       | 1,054  |   |   |   | 222 |   |   |   | 847 |   |
| Total noninterest income                        |   | $                          | 2,700  |   |   | $      | 5,886 |   |   | $ | (3,186 | ) |

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|                                          |   | Three Months EndedJune 30, |   |   |   |   |
|-----------------------------------------------|--------|----------------------------|--------|--------|--------|--------|
|                                          |   | 2012                       |   |   | 2011   |   |   | Variance |   |
|                                          |   | (Dollars in thousands)     |   |
| Noninterest Expense                           |   |                       |   |   |   |   |   |   |   |
| Compensation and benefits                     |   | $                          | 3,902  |   |   | $      | 3,806 |   |   | $ | 96 |   |
| Occupancy and equipment                       |   |                       | 898    |   |   |   | 873 |   |   |   | 25 |   |
| Data processing and other technology          |   |                       | 235    |   |   |   | 296 |   |   |   | (61 | ) |
| Professional services                         |   |                       | 308    |   |   |   | 249 |   |   |   | 59 |   |
| Advertising and business development          |   |                       | 74     |   |   |   | 71 |   |   |   | 3 |   |
| Loan collection and other expenses            |   |                       | 864    |   |   |   | 204 |   |   |   | 660 |   |
| Deposit insurance                             |   |                       | (49    | )      |   |   | 361 |   |   |   | (410 | ) |
| Amortization of intangible assets             |   |                       | 109    |   |   |   | 136 |   |   |   | (27 | ) |
| Office supplies                               |   |                       | 53     |   |   |   | 62 |   |   |   | (9 | ) |
| Telephone and communications                  |   |                       | 107    |   |   |   | 111 |   |   |   | (4 | ) |
| Other real estate owned valuation adjustments |   |                       | 1,784  |   |   |   | 1,476 |   |   |   | 308 |   |
| Other real estate owned expenses              |   |                       | 388    |   |   |   | 596 |   |   |   | (208 | ) |
| Acquisition and integration expenses          |   |                       | -      |   |   |   | 566 |   |   |   | (566 | ) |
| Other                                         |   |                       | 859    |   |   |   | 463 |   |   |   | 396 |   |
| Total noninterest expense                     |   | $                          | 9,532  |   |   | $      | 9,270 |   |   | $ | 262 |   |

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|                                            |   | Six Months EndedJune 30, |   |   |   |   |
|-------------------------------------------------|--------|--------------------------|--------|--------|--------|--------|
|                                            |   | 2012                     |   |   | 2011   |   |   | Variance |   |
|                                            |   | (Dollars in thousands)   |   |
| Noninterest income                              |   |                     |   |   |   |   |   |   |   |
| Service charges on deposit accounts             |   | $                        | 2,147  |   |   | $      | 2,004 |   |   | $ | 143 |   |
| Mortgage banking income                         |   |                     | 710    |   |   |   | 491 |   |   |   | 219 |   |
| Commissions on sales of financial products      |   |                     | 153    |   |   |   | 136 |   |   |   | 17 |   |
| Income from bank-owned life insurance           |   |                     | 368    |   |   |   | 397 |   |   |   | (59 | ) |
| Gain (loss) from acquisition                    |   |                     | (175   | )      |   |   | 4,163 |   |   |   | (4,338 | ) |
| Gain on sale of investments, available for sale |   |                     | 664    |   |   |   | 1 |   |   |   | 663 |   |
| Loss on sale of other assets                    |   |                     | (53    | )      |   |   | (326 | ) |   |   | 273 |   |
| Other                                           |   |                     | 1,608  |   |   |   | 500 |   |   |   | 1,138 |   |
| Total noninterest income                        |   | $                        | 5,422  |   |   | $      | 7,366 |   |   | $ | (1,944 | ) |

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|                                          |   | Six Months EndedJune 30, |   |   |   |   |
|-----------------------------------------------|--------|--------------------------|--------|--------|--------|--------|
|                                          |   | 2012                     |   |   | 2011   |   |   | Variance |   |
|                                          |   | (Dollars in thousands)   |   |
| Noninterest Expense                           |   |                     |   |   |   |   |   |   |   |
| Compensation and benefits                     |   | $                        | 7,748  |   |   | $      | 7,454 |   |   | $ | 294 |   |
| Occupancy and equipment                       |   |                     | 1,806  |   |   |   | 1,701 |   |   |   | 105 |   |
| Data processing and other technology          |   |                     | 491    |   |   |   | 530 |   |   |   | (39 | ) |
| Professional services                         |   |                     | 583    |   |   |   | 502 |   |   |   | 81 |   |
| Advertising and business development          |   |                     | 142    |   |   |   | 125 |   |   |   | 17 |   |
| Loan collection and other expenses            |   |                     | 1,116  |   |   |   | 494 |   |   |   | 622 |   |
| Deposit insurance                             |   |                     | 369    |   |   |   | 695 |   |   |   | (326 | ) |
| Amortization of intangible assets             |   |                     | 231    |   |   |   | 275 |   |   |   | (44 | ) |
| Office supplies                               |   |                     | 112    |   |   |   | 132 |   |   |   | (20 | ) |
| Telephone and communications                  |   |                     | 213    |   |   |   | 207 |   |   |   | 6 |   |
| Other real estate owned valuation adjustments |   |                     | 2,784  |   |   |   | 1,984 |   |   |   | 800 |   |
| Other real estate owned expenses              |   |                     | 858    |   |   |   | 597 |   |   |   | 261 |   |
| Acquisition and integration expenses          |   |                     | -      |   |   |   | 611 |   |   |   | (611 | ) |
| Other                                         |   |                     | 1,767  |   |   |   | 1,638 |   |   |   | 129 |   |
| Total noninterest expense                     |   | $                        | 18,220 |   |   | $      | 16,945 |   |   | $ | 1,275 |   |

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|                                               |   | Actual                 |    |   | Minimum Requirements tobe Well Capitalized |   |
|----------------------------------------------------|--------|------------------------|---------|--------|--------------------------------------------|--------|
|                                               |   | Amount                 |    |   | Ratio                                      |   |   | Amount |   |   | Ratio |   |
|                                               |   | (Dollars in thousands) |    |
| Regulatory Capital Ratios                          |   |                   |    |   |                                       |   |   |   |   |   |   |   |
| Total risk-based capital (to risk-weighted assets) |   | $                      | 109,394 |   |                                       |   | 15.59 | % |   | $ | 70,739 |   |   |   | 10.00 | % |
| Tier 1 capital (to risk-weighted assets)           |   |                   | 100,586 |   |                                       |   | 14.33 | % |   |   | 42,444 |   |   |   | 6.00 | % |
| Tier 1 capital (to adjusted total assets)          |   |                   | 100,586 |   |                                       |   | 9.62 | % |   |   | 53,514 |   |   |   | 5.00 | % |
| Tangible capital (to adjusted total assets)        |   |                   | 100,586 |   |                                       |   | 9.62 | % |   |   | 32,108 |   |   |   | 3.00 | % |

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SIGNATURES

|                  | Citizens South Banking Corporation |
|-----------------------|------------------------------------|
|                  |                               |   |
|                  |                               |   |
| Date: August 14, 2012 | By:                                | /s/ Kim S. Price |
|                  |                               | Kim S. PricePresident and Chief Executive Officer |
|                  |                               |   |
|                  |                               |   |
| Date: August 14, 2012 | By:                                | /s/ Gary F. Hoskins |
|                  |                               | Gary F. HoskinsExecutive Vice President, Chief Financial Officerand Treasurer |
|                  |                               |   |
|                  |                               |   |

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