|   |   |   |
|--------|--------|--------|

|   |   |   |
|--------|--------|--------|

| [ x ] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|-------|-----------------------------------------------------------------------------------------|

| [  ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|-----------|-------------------------------------------------------------------------------------------|

|   |   |   |
|--------|--------|--------|

|   |   |   |
|--------|--------|--------|

| Delaware                         |                                                       | 54-2069979             |
|---------------------------------------|------------------------------------------------------------|------------------------|
| (State or other jurisdiction of  |                                                       | (I.R.S. Employer       |
| incorporation or organization)        |                                                       | Identification Number) |
|                                  |  519 South New Hope Road, Gastonia, NC 28054          |                   |
|                                  | (Address of principal executive offices)                   |                   |
|                                  |                                                       |                   |
|                                  | (704) 868-5200                                             |                   |
|                                  | (Registrant’s telephone number, including area code) |                   |

|   |   |   |
|--------|--------|--------|

----

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

----

|   | Page |
|--------|------|

PART I.  FINANCIAL INFORMATION

| Item 1.                               | Financial Statements:                                                                                                     |     |
|---------------------------------------|---------------------------------------------------------------------------------------------------------------------------|----------|
|                                  |                                                                                                                      |     |
|                                  | Consolidated Statements of Financial Condition as of June 30, 2010 (unaudited) and December 31, 2009                      | 1        |
|                                  |                                                                                                                      |     |
|                                  | Consolidated Statements of Operations Three and Six  Months Ended June 30, 2010 and 2009 (unaudited)  | 2        |
|                                  |                                                                                                                      |     |
|                                  | Consolidated Statements of Stockholders’ Equity Six Months Ended June 30, 2010 and 2009 (unaudited)            | 3        |
|                                  |                                                                                                                      |     |
|                                  | Consolidated Statements of Cash Flows Six  Months Ended June 30, 2010 and 2009 (unaudited)                      | 4        |
|                                  |                                                                                                                      |     |
|                                  | Notes to Consolidated Financial Statements                                                                                | 5        |
|                                  |                                                                                                                      |     |
| Item 1A.                              | Risk Factors                                                                                                              | 16       |
|                                  |                                                                                                                      |     |
| Item 2.                               | Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations                        | 18       |
|                                  |                                                                                                                      |     |
| Item 3.                               | Quantitative and Qualitative Disclosures About Market Risk                                                      | 31       |
|                                  |                                                                                                                      |     |
| Item 4.                               | Controls and Procedures                                                                                                   | 31       |
|                                  |                                                                                                                      |     |
| PART II.  OTHER INFORMATION |                                                                                                                      |
|                                  |                                                                                                                      |     |
| Item 1.                               | Legal Proceedings                                                                                                         | 31       |
|                                  |                                                                                                                      |     |
| Item 2.                               | Unregistered Sales of Equity Securities and Use of Proceeds                                                               | 31       |
|                                  |                                                                                                                      |     |
| Item 3.                               | Defaults Upon Senior Securities                                                                                      | 32       |
|                                  |                                                                                                                      |     |
| Item 4.                               | {Reserved}                                                                                                                | 32       |
|                                  |                                                                                                                      |     |
| Item 5.                               | Other Information                                                                                                         |  32 |
|                                  |                                                                                                                      |     |
| Item 6.                               | Exhibits                                                                                                                  | 32       |

Signatures

----

Part 

Item 

| CITIZENS SOUTH BANKING CORPORATION                                                 |   |          |      |   |              |   |
|------------------------------------------------------------------------------------|--------|---------------|-----------|--------|-------------------|--------|
| CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION                                     |   |          |      |   |              |   |
|                                                                               |   |          |      |   |              |   |
|                                                                               |   | June 30, 2010 |      |   | December 31, 2009 |   |
| (Dollars in thousands)                                                             |   | (unaudited)   |      |   |              |   |
|                                                                               |   |          |      |   |              |   |
| Assets                                                                             |   |          |      |   |              |   |
| Cash and due from banks                                                            |   | $             | 8,223     |   |              | $      | 8,925 |   |
| Interest-earning bank balances                                                     |   |          | 101,723   |   |              |   | 44,255 |   |
|     Cash and cash equivalents                                  |   |          | 109,946   |   |              |   | 53,180 |   |
| Investment securities available for sale                                           |   |          | 71,802    |   |              |   | 50,990 |   |
| Investment securities held to maturity                                             |   |          | 25,876    |   |              |   | 32,380 |   |
| Loans, non-covered                                                                 |   |          | 605,232   |   |              |   | 610,201 |   |
| Loans, covered by FDIC loss-share                                                  |   |          | 171,002   |   |              |   | - |   |
| Allowance for loan losses                                                          |   |          | (9,796    | )      |              |   | (9,189 | ) |
|     Loans, net of deferred fees                                |   |          | 766,438   |   |              |   | 601,012 |   |
| Other real estate owned - non-covered                                              |   |          | 8,239     |   |              |   | 5,067 |   |
| Other real estate owned - covered by FDIC loss-share                               |   |          | 2,343     |   |              |   | - |   |
| Premises and equipment, net                                                        |   |          | 15,458    |   |              |   | 15,436 |   |
| FDIC loss-share receivable                                                         |   |          | 36,470    |   |              |   | - |   |
| Accrued interest receivable                                                        |   |          | 3,405     |   |              |   | 2,430 |   |
| Federal Home Loan Bank stock                                                       |   |          | 6,397     |   |              |   | 4,149 |   |
| Intangible assets                                                                  |   |          | 1,988     |   |              |   | 570 |   |
| Bank-owned life insurance                                                          |   |          | 17,930    |   |              |   | 17,522 |   |
| Other assets                                                                       |   |          | 11,139    |   |              |   | 8,796 |   |
|       Total assets                                   |   | $             | 1,077,431 |   |              | $      | 791,532 |   |
|                                                                               |   |          |      |   |              |   |   |   |
| Liabilities                                                                        |   |          |      |   |              |   |   |   |
| Deposits                                                                           |   | $             | 853,526   |   |              | $      | 609,345 |   |
| Borrowed money                                                                     |   |          | 89,386    |   |              |   | 82,165 |   |
| Subordinated debt                                                                  |   |          | 15,464    |   |              |   | 15,464 |   |
| Retail repurchase agreements                                                       |   |          | 9,765     |   |              |   | 8,970 |   |
| Other liabilities                                                                  |   |          | 12,879    |   |              |   | 3,266 |   |
|     Total liabilities                                          |   |          | 981,020   |   |              |   | 719,210 |   |
| Comitments and contingencies                                                       |   |          |      |   |              |   |   |   |
|                                                                               |   |          |      |   |              |   |   |   |
| Stockholders' Equity                                                               |   |          |      |   |              |   |   |   |
| Preferred stock, $0.01 par value, Authorized: 1,000,000 shares;                    |   |          |      |   |              |   |   |   |
|   Issued and outstanding: 20,500 shares at June 30, 2010 and             |   |          |      |   |              |   |   |   |
|   December 31, 2009, respectively                                        |   |          | 20,630    |   |              |   | 20,589 |   |
| Common stock, $0.01 par value, Authorized: 20,000,000 shares; 11,011,414           |   |          |      |   |              |   |   |   |
|   Issued: 11,011,414 and 9,062,727 shares at June 30, 2010 and           |   |          |      |   |              |   |   |   |
|   December 31, 2009, respectively, Outstanding: 10,965,941 and 7,526,854 |   |          |      |   |              |   |   |   |
|   shares at June 30, 2010 and December 31, 2009, respectively            |   |          | 124       |   |              |   | 91 |   |
| Additional paid-in-capital                                                         |   |          | 62,857    |   |              |   | 48,528 |   |
| Retained earnings, substantially restricted                                        |   |          | 12,774    |   |              |   | 3,411 |   |
| Accumulated other comprehensive income (loss)                                      |   |          | 26        |   |              |   | (297 | ) |
|     Total stockholders' equity                                 |   |          | 96,411    |   |              |   | 72,322 |   |
|     Total liabilities and stockholders' equity                 |   | $             | 1,077,431 |   |              | $      | 791,532 |   |
|                                                                               |   |          |      |   |              |   |   |   |
| See accompanying notes to consolidated financial statements.                       |   |          |      |   |              |   |   |   |

----

| CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)            |               |   |   |             |   |   |          |   |   |          |
|--------------------------------------------------------------|--------------------|--------|--------|------------------|--------|--------|---------------|--------|--------|---------------|
|                                                         |               |   |   |             |   |   |          |   |   |          |   |
|                                                         | Three Months Ended |   |   | Six Months Ended |   |
|                                                         | June 30, 2010      |   |   | June 30, 2009    |   |   | June 30, 2010 |   |   | June 30, 2009 |   |
| (Dollars in thousands, except per share data)                |               |   |   |             |   |   |          |   |   |          |   |
|                                                         |               |   |   |             |   |   |          |   |   |          |   |
| Interest Income:                                             |               |   |   |             |   |   |          |   |   |          |   |
| Loans                                                        | $                  | 11,143 |   |             | $      | 8,441  |          |   | $      | 19,354        |   |   | $ | 16,799 |   |
| Investment securities                                        |               | 864    |   |             |   | 1,224  |          |   |   | 1,672         |   |   |   | 2,547 |   |
| Interest-bearing deposits                                    |               | 99     |   |             |   | 13     |          |   |   | 149           |   |   |   | 18 |   |
| Total interest income                                        |               | 12,106 |   |             |   | 9,678  |          |   |   | 21,175        |   |   |   | 19,364 |   |
| Interest Expense:                                            |               |   |   |             |   |   |          |   |   |          |   |   |   |   |   |
| Deposits                                                     |               | 2,904  |   |             |   | 3,196  |          |   |   | 5,169         |   |   |   | 6,724 |   |
| Borrowed funds                                               |               | 1,179  |   |             |   | 1,150  |          |   |   | 2,308         |   |   |   | 2,324 |   |
| Total interest expense                                       |               | 4,083  |   |             |   | 4,346  |          |   |   | 7,477         |   |   |   | 9,048 |   |
|                                                         |               |   |   |             |   |   |          |   |   |          |   |   |   |   |   |
| Net interest income                                          |               | 8,023  |   |             |   | 5,332  |          |   |   | 13,698        |   |   |   | 10,316 |   |
| Provision for loan losses                                    |               | 3,000  |   |             |   | 1,950  |          |   |   | 6,050         |   |   |   | 2,850 |   |
| Net interest income after provision for loan losses          |               | 5,023  |   |             |   | 3,382  |          |   |   | 7,648         |   |   |   | 7,466 |   |
| Noninterest Income:                                          |               |   |   |             |   |   |          |   |   |          |   |   |   |   |   |
| Service charges on deposit accounts                          |               | 971    |   |             |   | 822    |          |   |   | 1,761         |   |   |   | 1,569 |   |
| Mortgage banking income                                      |               | 357    |   |             |   | 462    |          |   |   | 567           |   |   |   | 760 |   |
| Other loan fees                                              |               | 88     |   |             |   | 80     |          |   |   | 131           |   |   |   | 138 |   |
| Commissions on sales of financial products                   |               | 188    |   |             |   | 39     |          |   |   | 306           |   |   |   | 94 |   |
| Income from bank-owned life insurance                        |               | 243    |   |             |   | 182    |          |   |   | 432           |   |   |   | 368 |   |
| Gain from acquisition                                        |               | 605    |   |             |   | -      |          |   |   | 19,338        |   |   |   | - |   |
| Gain on sale of investments                                  |               | 10     |   |             |   | 308    |          |   |   | 44            |   |   |   | 308 |   |
| Loss on sale of other assets                                 |               | (203   | )      |             |   | (73    | )             |   |   | (266          | ) |   |   | (244 | ) |
| Other income                                                 |               | 244    |   |             |   | 196    |          |   |   | 418           |   |   |   | 272 |   |
| Total noninterest income                                     |               | 2,503  |   |             |   | 2,016  |          |   |   | 22,731        |   |   |   | 3,265 |   |
| Noninterest Expense:                                         |               |   |   |             |   |   |          |   |   |          |   |   |   |   |   |
| Compensation and benefits                                    |               | 3,652  |   |             |   | 2,526  |          |   |   | 6,295         |   |   |   | 5,018 |   |
| Occupancy and equipment expense                              |               | 1,039  |   |             |   | 652    |          |   |   | 1,722         |   |   |   | 1,326 |   |
| Advertising                                                  |               | 93     |   |             |   | 110    |          |   |   | 150           |   |   |   | 188 |   |
| Professional services                                        |               | 233    |   |             |   | 237    |          |   |   | 467           |   |   |   | 474 |   |
| Data processing                                              |               | 190    |   |             |   | 131    |          |   |   | 331           |   |   |   | 259 |   |
| Deposit insurance                                            |               | 354    |   |             |   | 491    |          |   |   | 614           |   |   |   | 593 |   |
| Amortization of intangible assets                            |               | 154    |   |             |   | 81     |          |   |   | 218           |   |   |   | 162 |   |
| Valuation adjustment on other real estate owned              |               | 210    |   |             |   | 50     |          |   |   | 694           |   |   |   | 175 |   |
| Impairment on investment securities                          |               | -      |   |             |   | 91     |          |   |   | -             |   |   |   | 214 |   |
| Acquisition and integration expenses                         |               | 94     |   |             |   | -      |          |   |   | 882           |   |   |   | - |   |
| Other expenses                                               |               | 1,260  |   |             |   | 870    |          |   |   | 2,262         |   |   |   | 1,767 |   |
| Total noninterest expense                                    |               | 7,279  |   |             |   | 5,239  |          |   |   | 13,635        |   |   |   | 10,176 |   |
|                                                         |               |   |   |             |   |   |          |   |   |          |   |   |   |   |   |
| Income before income tax expense (benefit)                   |               | 247    |   |             |   | 159    |          |   |   | 16,744        |   |   |   | 555 |   |
| Income tax expense (benefit)                                 |               | (108   | )      |             |   | (155   | )             |   |   | 6,093         |   |   |   | (216 | ) |
| Net income                                                   |               | 355    |   |             |   | 314    |          |   |   | 10,651        |   |   |   | 771 |   |
| Dividends on preferred stock                                 |               | 257    |   |             |   | 259    |          |   |   | 513           |   |   |   | 513 |   |
|                                                         |               |   |   |             |   |   |          |   |   |          |   |   |   |   |   |
| Net income available to common stockholders                  | $                  | 98     |   |             | $      | 55     |          |   | $      | 10,138        |   |   | $ | 258 |   |
|                                                         |               |   |   |             |   |   |          |   |   |          |   |   |   |   |   |
| Net income per common share:                                 |               |   |   |             |   |   |          |   |   |          |   |   |   |   |   |
| Basic                                                        | $                  | 0.01   |   |             | $      | 0.01   |          |   | $      | 1.20          |   |   | $ | 0.03 |   |
| Diluted                                                      |               | 0.01   |   |             |   | 0.01   |          |   |   | 1.20          |   |   |   | 0.03 |   |
|                                                         |               |   |   |             |   |   |          |   |   |          |   |   |   |   |   |
|                                                         |               |   |   |             |   |   |          |   |   |          |   |   |   |   |   |
| See accompanying notes to consolidated financial statements. |               |   |   |             |   |   |          |   |   |          |   |   |   |

----

CITIZENS 

|                                                                                                     |   |      |   |   |   |   |   |       |   |   | Retained      |   |   | Accumulated   |   |   |          |   |
|----------------------------------------------------------------------------------------------------------|--------|-----------|--------|--------|--------|--------|--------|------------|--------|--------|---------------|--------|--------|---------------|--------|--------|---------------|--------|
|                                                                                                     |   |      |   |   |   |   |   | Additional |   |   | Earnings      |   |   | Other         |   |   | Total         |   |
|                                                                                                     |   | Preferred |   |   | Common |   |   | Paid-in    |   |   | Substantially |   |   | Comprehensive |   |   | Stockholders' |   |
|                                                                                                     |   | Stock     |   |   | Stock  |   |   | Capital    |   |   | Restricted    |   |   | Income (Loss) |   |   | Equity        |   |
| (Dollars in thousands)                                                                                   |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |
|                                                                                                     |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |
|  Balances, January 1, 2009                                                                          |   | $         | 20,507 |   |   | $      | 91     |       |   | $      | 48,009        |   |   | $             | 36,088 |   |          | $      | 25 |   |   | $ | 104,720 |   |
|                                                                                                     |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |   |   |   |   |   |   |
|  Comprehensive results:                                                                             |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |   |   |   |   |   |   |
|     Net income                                                                       |   |      | -      |   |   |   | -      |       |   |   | -             |   |   |          | 258    |   |          |   | - |   |   |   | 258 |   |
|    Other comprehensive results, net of tax                                                |   |      | -      |   |   |   | -      |       |   |   | -             |   |   |          | -      |   |          |   | (200 | ) |   |   | (200 | ) |
|  Accretion of discount on preferred stock                                                           |   |      | 41     |   |   |   | -      |       |   |   | -             |   |   |          | (41    | )      |          |   | - |   |   |   | - |   |
|  Allocation from shares purchased with loan to ESOP                                                 |   |      | -      |   |   |   | -      |       |   |   | 91            |   |   |          | -      |   |          |   | - |   |   |   | 91 |   |
|  Vesting of Recognition and Retention Plan (RRP)                                                    |   |      | -      |   |   |   | -      |       |   |   | 171           |   |   |          | -      |   |          |   | - |   |   |   | 171 |   |
|  Stock-based compensation                                                                           |   |      | -      |   |   |   | -      |       |   |   | 53            |   |   |          | -      |   |          |   | - |   |   |   | 53 |   |
|  Stock options exercised                                                                            |   |      | -      |   |   |   | -      |       |   |   | 20            |   |   |          | (20    | )      |          |   | - |   |   |   | - |   |
|  Cash dividends paid ($0.125 per common share)                                                      |   |      | -      |   |   |   | -      |       |   |   | -             |   |   |          | (935   | )      |          |   | - |   |   |   | (935 | ) |
|                                                                                                     |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |   |   |   |   | - |   |
|  Balances, June 30, 2009                                                                            |   | $         | 20,548 |   |   | $      | 91     |       |   | $      | 48,344        |   |   | $             | 35,350 |   |          | $      | (175 | ) |   | $ | 104,158 |   |
|                                                                                                     |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |   |   |   |   |   |   |
|                                                                                                     |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |   |   |   |   |   |   |
|                                                                                                     |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |   |   |   |   |   |   |
|  Balances, January 1, 2010                                                                          |   | $         | 20,589 |   |   | $      | 91     |       |   | $      | 48,528        |   |   | $             | 3,411  |   |          | $      | (297 | ) |   | $ | 72,322 |   |
|                                                                                                     |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |   |   |   |   |   |   |
|  Comprehensive results:                                                                             |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |   |   |   |   |   |   |
|     Net income                                                                       |   |      | -      |   |   |   | -      |       |   |   | -             |   |   |          | 10,138 |   |          |   | - |   |   |   | 10,138 |   |
|    Other comprehensive results, net of tax                                                |   |      | -      |   |   |   | -      |       |   |   | -             |   |   |          | -      |   |          |   | 323 |   |   |   | 323 |   |
|  Issuance of 1,490,400 shares of common stock                                                       |   |      | -      |   |   |   | 15     |       |   |   | 5,745         |   |   |          | -      |   |          |   | - |   |   |   | 5,760 |   |
|  Issuance of 8,280 shares of preferred stock                                                        |   |      | 8,280  |   |   |   | -      |       |   |   | -             |   |   |          | -      |   |          |   | - |   |   |   | 8,280 |   |
|  Conversion of 8,280 shares of preferred stock to   1,839,999 shares of common stock |   |      | (8,280 | )      |   |   | 18     |       |   |   | 8,262         |   |   |          | -      |   |          |   | - |   |   |   | - |   |
|  Accretion of discount on preferred stock                                                           |   |      | 41     |   |   |   | -      |       |   |   | -             |   |   |          | (41    | )      |          |   | - |   |   |   | - |   |
|  Allocation from shares purchased with loan to ESOP                                                 |   |      | -      |   |   |   | -      |       |   |   | 92            |   |   |          | -      |   |          |   | - |   |   |   | 92 |   |
|  Vesting of Recognition and Retention Plan (RRP)                                                    |   |      | -      |   |   |   | -      |       |   |   | 181           |   |   |          | -      |   |          |   | - |   |   |   | 181 |   |
|  Stock-based compensation                                                                           |   |      | -      |   |   |   | -      |       |   |   | 49            |   |   |          | -      |   |          |   | - |   |   |   | 49 |   |
|  Cash dividends paid ($0.08 per common share)                                                       |   |      | -      |   |   |   | -      |       |   |   | -             |   |   |          | (734   | )      |          |   | - |   |   |   | (734 | ) |
|                                                                                                     |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |   |   |   |   | - |   |
|  Balances, June 30, 2010                                                                            |   | $         | 20,630 |   |   | $      | 124    |       |   | $      | 62,857        |   |   | $             | 12,774 |   |          | $      | 26 |   |   | $ | 96,411 |   |
|                                                                                                     |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |   |   |   |   |   |   |
|                                                                                                     |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |   |   |   |   |   |   |
|                                                                                                     |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |   |   |   |   |   |   |
| See accompanying notes to consolidated financial statements.                                             |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |

----

| CITIZENS SOUTH BANKING CORPORATION                                               |             |     |   |          |   |
|----------------------------------------------------------------------------------|------------------|----------|--------|---------------|--------|
| CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)                                |             |     |   |          |   |
|                                                                             | Six Months Ended |     |
|                                                                             | June 30, 2010    |     |   | June 30, 2009 |   |
|  (Dollars in thousands)                                                     |             |     |   |          |   |
|                                                                             |             |     |   |          |   |
|  Cash flows from operating activities:                                      |             |     |   |          |   |
|  Net income                                                                 | $                | 10,138   |   |          | $      | 258 |   |
|  Reconciliation of net income to net cash provided by operating activities: |             |     |   |          |   |   |   |
|  Provision for loan losses                                                  |             | 6,050    |   |          |   | 2,850 |   |
|  Depreciation of premises and equipment                                     |             | 520      |   |          |   | 537 |   |
|  Impairment of securities                                                   |             | -        |   |          |   | 214 |   |
|  Deferred income tax expense                                                |             | 2,359    |   |          |   | 137 |   |
|  Gain on sale of investment securities available-for-sale                   |             | (44      | )      |          |   | (308 | ) |
|  Loss on sale of other real estate owned                                    |             | 266      |   |          |   | 244 |   |
|  Gain on acquisition                                                        |             | (19,338  | )      |          |   | - |   |
|  Valuation adjustment on other real estate owned                            |             | 694      |   |          |   | 175 |   |
|  Net purchase accounting adjustments - discount accretion                   |             | 471      |   |          |   | - |   |
|  Deferred loan origination fees                                             |             | 11       |   |          |   | 7 |   |
|  Amortization of intangible assets                                          |             | 218      |   |          |   | 162 |   |
|  Allocation of shares to the ESOP                                           |             | 92       |   |          |   | 91 |   |
|  Stock-based compensation expense                                           |             | 49       |   |          |   | 53 |   |
|  Vesting of shares issued for the RRP                                       |             | 181      |   |          |   | 171 |   |
|  (Increase) decrease in accrued interest receivable                         |             | (974     | )      |          |   | 94 |   |
|  (Increase) decrease in other assets                                        |             | 5,045    |   |          |   | (2,101 | ) |
|  Increase (decrease) in other liabilities                                   |             | 884      |   |          |   | (1,233 | ) |
|  Net cash provided by operating activities                                  |             | 6,622    |   |          |   | 1,351 |   |
|                                                                             |             |     |   |          |   |   |   |
|  Cash flows from investing activities:                                      |             |     |   |          |   |   |   |
|  Net increase in loans                                                      |             | (218,659 | )      |          |   | (5,473 | ) |
|  Proceeds from sales of securities available for sale                       |             | 22,056   |   |          |   | 21,566 |   |
|  Proceeds from sales of premises and equipment                              |             | -        |   |          |   | 6 |   |
|  Proceeds from sales of other real estate owned                             |             | 2,252    |   |          |   | 1,552 |   |
|  Proceeds from maturities/issuer calls of securities available for sale     |             | 7,800    |   |          |   | 11,523 |   |
|  Proceeds from maturities/issuer calls of securities held to maturity       |             | 18,995   |   |          |   | 11 |   |
|  Purchases of securities available for sale                                 |             | (50,099  | )      |          |   | (16,518 | ) |
|  Purchases of securities held to maturity                                   |             | (12,492  | )      |          |   | (5,085 | ) |
|  Net cash received in acquisition                                           |             | 19,638   |   |          |   | - |   |
|  (Purchases) sales of FHLB stock                                            |             | (2,248   | )      |          |   | 644 |   |
|  Purchases of premises and equipment                                        |             | (540     | )      |          |   | (92 | ) |
|  Net cash provided by (used in) investment activities                       |             | (213,297 | )      |          |   | 8,134 |   |
|                                                                             |             |     |   |          |   |   |   |
|  Cash flows from financing activities:                                      |             |     |   |          |   |   |   |
|  Net increase in deposits                                                   |             | 243,413  |   |          |   | 34,746 |   |
|  Dividends paid to common stockholders                                      |             | (734     | )      |          |   | (935 | ) |
|  Issuance of common stock                                                   |             | 14,040   |   |          |   | - |   |
|  Proceeds from (repayment of) borrowed money                                |             | 6,433    |   |          |   | (14,144 | ) |
|  Increase in advances from borrowers for insurance and taxes                |             | 289      |   |          |   | 264 |   |
|  Net cash provided by financing activities                                  |             | 263,441  |   |          |   | 19,931 |   |
|                                                                             |             |     |   |          |   |   |   |
|  Net increase in cash and cash equivalents                                  |             | 56,766   |   |          |   | 29,416 |   |
|  Cash and cash equivalents at beginning of year                             |             | 53,180   |   |          |   | 10,057 |   |
|  Cash and cash equivalents at end of year                                   | $                | 109,946  |   |          | $      | 39,473 |   |
|                                                                             |             |     |   |          |   |   |   |
|  Supplemental non-cash investing activity:                                  |             |     |   |          |   |   |   |
|  Foreclosed loans transferred to other real estate owned                    | $                | 6,860    |   |          | $      | 1,688 |   |
|                                                                             |             |     |   |          |   |   |   |
| See accompanying notes to consolidated financial statements.                     |             |     |   |          |   |   |   |

----

CITIZENS 

----

----

|                                                                           |   |                                             |      |   |           |   |      |   |   |   |      |   |
|--------------------------------------------------------------------------------|--------|--------------------------------------------------|-----------|--------|----------------|--------|-----------|--------|--------|--------|-----------|--------|
|                                                                           |   | Three Months                                     |      |   | Six Months     |   |
|                                                                           |   | Ended June 30,                                   |      |   | Ended June 30, |   |
|                                                                           |   | 2010                                             |      |   | 2009           |   |      | 2010   |   |   | 2009      |   |
|                                                                           |   | (Dollars in thousands, except per share amounts) |      |
|                                                                           |   |                                             |      |   |           |   |      |   |   |   |      |   |
| Net income available to common stockholders                                    |   | $                                                | 98        |   |           | $      | 55        |   |   | $      | 10,138    |   |   | $ | 258 |   |
|                                                                           |   |                                             |      |   |           |   |      |   |   |   |      |   |   |   |   |   |
| Basic EPS                                                                      |   | $                                                | 0.01      |   |           | $      | 0.01      |   |   | $      | 1.20      |   |   | $ | 0.03 |   |
|                                                                           |   |                                             |      |   |           |   |      |   |   |   |      |   |   |   |   |   |
| Shares used in the computation of basic EPS:                                   |   |                                             |      |   |           |   |      |   |   |   |      |   |   |   |   |   |
| Weighted avg. number of shares outstanding                                     |   |                                             | 9,077,042 |   |           |   | 7,403,359 |   |   |   | 8,435,494 |   |   |   | 7,398,079 |   |
|                                                                           |   |                                             |      |   |           |   |      |   |   |   |      |   |   |   |   |   |
| Incremental shares from assumed exercise of stock options and restricted stock |   |                                             | -         |   |           |   | -         |   |   |   | -         |   |   |   | - |   |
| Weighted average number of shares   outstanding - diluted       |   |                                             | 9,077,042 |   |           |   | 7,403,359 |   |   |   | 8,435,494 |   |   |   | 7,398,079 |   |
|                                                                           |   |                                             |      |   |           |   |      |   |   |   |      |   |   |   |   |   |
| Diluted EPS                                                                    |   | $                                                | 0.01      |   |           | $      | 0.01      |   |   | $      | 1.20      |   |   | $ | 0.03 |   |

----

|                                                       |   | Six Months             |   |
|------------------------------------------------------------|--------|------------------------|--------|
|                                                       |   | Ended June 30,         |   |
|                                                       |   | 2010                   |   |   | 2009 |   |
|                                                       |   | (Dollars in thousands) |   |
|                                                       |   |                   |   |   |   |   |
| Net income available to common stockholders                |   | $                      | 10,138 |   |   | $ | 258 |   |
|                                                       |   |                   |   |   |   |   |   |   |
| Other comprehensive income (loss):                         |   |                   |   |   |   |   |   |   |
| Items of other comprehensive income, before tax            |   |                   |   |   |   |   |   |   |
| Unrealized (gains) losses arising during period            |   |                   | (482   | ) |   |   | 633 |   |
| Reclassification for realized gains included in net income |   |                   | (44    | ) |   |   | (308 | ) |
| Other comprehensive income (loss), before tax              |   |                   | (526   | ) |   |   | 325 |   |
| Tax (expense) benefit                                      |   |                   | 203    |   |   |   | (125 | ) |
| Other comprehensive income (loss)                          |   |                   | (323   | ) |   |   | 200 |   |
| Total comprehensive income                                 |   | $                      | 9,815  |   |   | $ | 458 |   |
|                                                       |   |                   |   |   |   |   |   |   |

----

|                               |   |                   |   |   | Gross      |   |   | Gross      |   |   |       |   |
|------------------------------------|--------|------------------------|--------|--------|------------|--------|--------|------------|--------|--------|------------|--------|
|                               |   | Amortized              |   |   | Unrealized |   |   | Unrealized |   |   | Estimated  |   |
|                               |   | Cost                   |   |   | Gains      |   |   | Losses     |   |   | Fair Value |   |
|                               |   | (Dollars in thousands) |   |
| June 30, 2010                      |   |                   |   |   |       |   |   |       |   |   |       |   |
| Available for sale:                |   |                   |   |   |       |   |   |       |   |   |       |   |
| U.S. Government Agency obligations |   | $                      | 6,073  |   |       | $      | 33     |       |   | $      | -          |   |   | $ | 6,106 |   |
| Municipal bonds                    |   |                   | 11,970 |   |       |   | 55     |       |   |   | 95         |   |   |   | 11,930 |   |
| Mortgage-backed securities         |   |                   | 50,551 |   |       |   | 495    |       |   |   | 21         |   |   |   | 51,025 |   |
| Other securities                   |   |                   | 3,166  |   |       |   | 109    |       |   |   | 534        |   |   |   | 2,741 |   |
| Subtotal                           |   |                   | 71,760 |   |       |   | 692    |       |   |   | 650        |   |   |   | 71,802 |   |
|                               |   |                   |   |   |       |   |   |       |   |   |       |   |   |   |   |   |
| Held to maturity:                  |   |                   |   |   |       |   |   |       |   |   |       |   |   |   |   |   |
| U.S. Government Agency obligations |   |                   | 17,479 |   |       |   | 140    |       |   |   | -          |   |   |   | 17,619 |   |
| Mortgage-backed securities         |   |                   | 8,397  |   |       |   | 625    |       |   |   | -          |   |   |   | 9,022 |   |
| Subtotal                           |   |                   | 25,876 |   |       |   | 765    |       |   |   | -          |   |   |   | 26,641 |   |
|                               |   |                   |   |   |       |   |   |       |   |   |       |   |   |   |   |   |
| Total at June 30, 2010             |   | $                      | 97,636 |   |       | $      | 1,457  |       |   | $      | 650        |   |   | $ | 98,443 |   |
|                               |   |                   |   |   |       |   |   |       |   |   |       |   |   |   |   |   |
|                               |   |                   |   |   |       |   |   |       |   |   |       |   |   |   |   |   |
|                               |   |                   |   |   |       | Gross  |   |       | Gross  |   |       |   |   |   |
|                               |   | Amortized              |   |   | Unrealized |   |   | Unrealized |   |   | Estimated  |   |
|                               |   | Cost                   |   |   | Gains      |   |   | Losses     |   |   | Fair Value |   |
|                               |   | (Dollars in thousands) |   |
| December 31, 2009                  |   |                   |   |   |       |   |   |       |   |   |       |   |   |   |   |   |
| Available for sale:                |   |                   |   |   |       |   |   |       |   |   |       |   |   |   |   |   |
| U.S. Government Agency obligations |   | $                      | 9,000  |   |       | $      | 32     |       |   | $      | 13         |   |   | $ | 9,019 |   |
| Municipal bonds                    |   |                   | 20,118 |   |       |   | 98     |       |   |   | 345        |   |   |   | 19,871 |   |
| Mortgage-backed securities         |   |                   | 19,258 |   |       |   | 216    |       |   |   | 115        |   |   |   | 19,359 |   |
| Other securities                   |   |                   | 3,098  |   |       |   | 141    |       |   |   | 498        |   |   |   | 2,741 |   |
| Subtotal                           |   |                   | 51,474 |   |       |   | 487    |       |   |   | 971        |   |   |   | 50,990 |   |
|                               |   |                   |   |   |       |   |   |       |   |   |       |   |   |   |   |   |
| Held to maturity:                  |   |                   |   |   |       |   |   |       |   |   |       |   |   |   |   |   |
| U.S. Government Agency obligations |   |                   | 26,464 |   |       |   | 84     |       |   |   | 305        |   |   |   | 26,243 |   |
| Mortgage-backed securities         |   |                   | 5,916  |   |       |   | 117    |       |   |   | -          |   |   |   | 6,033 |   |
| Subtotal                           |   |                   | 32,380 |   |       |   | 201    |       |   |   | 305        |   |   |   | 32,276 |   |
|                               |   |                   |   |   |       |   |   |       |   |   |       |   |   |   |   |   |
| Total at December 31, 2009         |   | $                      | 83,854 |   |       | $      | 688    |       |   | $      | 1,276      |   |   | $ | 83,266 |   |
|                               |   |                   |   |   |       |   |   |       |   |   |       |   |   |   |   |   |

----

|                                                                                              |   | June 30, 2010          |    |   | December 31, 2009 |   |
|---------------------------------------------------------------------------------------------------|--------|------------------------|---------|--------|-------------------|--------|
|                                                                                              |   | (Dollars in thousands) |    |
| Non-covered Loans:                                                                                |   |                   |    |   |              |   |
| One-to-four family residential                                                                    |   | $                      | 100,484 |   |              | $      | 90,666 |   |
| Construction                                                                                      |   |                   | 17,285  |   |              |   | 22,325 |   |
| Multi-family residential                                                                          |   |                   | 25,220  |   |              |   | 25,577 |   |
| Commercial real estate                                                                            |   |                   | 309,740 |   |              |   | 315,563 |   |
| Commercial business                                                                               |   |                   | 35,325  |   |              |   | 38,442 |   |
| Consumer                                                                                          |   |                   | 117,092 |   |              |   | 117,473 |   |
| Gross non-covered loans                                                                           |   |                   | 605,146 |   |              |   | 610,046 |   |
| Less:                                                                                             |   |                   |    |   |              |   |   |   |
| Deferred loan fees, net and other items                                                           |   |                   | (86     | )      |              |   | (155 | ) |
| Net non-covered loans                                                                             |   | $                      | 605,232 |   |              | $      | 610,201 |   |
|                                                                                              |   |                   |    |   |              |   |   |   |
| The following is a summary of non-covered construction loans outstanding at the respective dates: |   |
|                                                                                              |   |                   |    |   |              |   |   |   |
|                                                                                              |   | June 30, 2010          |    |   | December 31, 2009 |   |
|                                                                                              |   | (Dollars in thousands) |    |
| Construction loans:                                                                               |   |                   |    |   |              |   |   |   |
| One-to-four family residential owner-occupied                                                     |   | $                      | 597     |   |              | $      | 1,109 |   |
| One-to-four family residential speculative                                                        |   |                   | 7,026   |   |              |   | 10,911 |   |
| Commercial                                                                                        |   |                   | 9,662   |   |              |   | 10,305 |   |
| Total construction loans                                                                          |   | $                      | 17,285  |   |              | $      | 22,325 |   |
|                                                                                              |   |                   |    |   |              |   |   |   |
| The following is a summary of non-covered commercial real estate loans at the periods presented:  |   |
|                                                                                              |   |                   |    |   |              |   |   |   |
|                                                                                              |   | June 30, 2010          |    |   | December 31, 2009 |   |
|                                                                                              |   | (Dollars in thousands) |    |
| Commercial real estate loans:                                                                     |   |                   |    |   |              |   |   |   |
| Residential acquisition and development                                                           |   | $                      | 29,037  |   |              | $      | 35,694 |   |
| Commercial land                                                                                   |   |                   | 39,812  |   |              |   | 40,191 |   |
| Other commercial real estate                                                                      |   |                   | 240,891 |   |              |   | 239,678 |   |
| Total commercial real estate loans                                                                |   | $                      | 309,740 |   |              | $      | 315,563 |   |

----

|                          |                      |   | Three Months           |   |   | Six Months     |   |
|-------------------------------|---------------------------|--------|------------------------|--------|--------|----------------|--------|
|                          |                      |   | Ended June 30,         |   |   | Ended June 30, |   |
|                          |                      |   | 2010                   |   |   | 2009           |   |   | 2010 |   |   | 2009 |   |
|                          |                      |   | (Dollars in thousands) |   |
|                          |                      |   |                   |   |   |           |   |   |   |   |   |   |   |
| Balance - Beginning of period |                      | $      | 9,230                  |   |   | $              | 8,730  |   |   | $ | 9,189 |   |   | $ | 8,026 |   |
| Add:                          | Provision for loan losses |   |                   | 3,000  |   |           |   | 1,950 |   |   |   | 6,050 |   |   |   | 2,850 |   |
|                          | Loan recoveries           |   |                   | 238    |   |           |   | 1 |   |   |   | 288 |   |   |   | 142 |   |
| Less:                         | Loan charge-offs          |   |                   | 2,672  |   |           |   | 1,996 |   |   |   | 5,731 |   |   |   | 2,333 |   |
| Balance - End of period       |                      | $      | 9,796                  |   |   | $              | 8,685  |   |   | $ | 9,796 |   |   | $ | 8,685 |   |

----

|                                                 |   | June 30, 2010          |   |   | December 31, 2009 |   |
|------------------------------------------------------|--------|------------------------|--------|--------|-------------------|--------|
|                                                 |   | (Dollars in thousands) |   |
| Nonaccrual loans - non-covered                       |   | $                      | 11,694 |   |              | $      | 8,135 |   |
| Accruing non-covered loans past due 90 days or more  |   |                   | 1,312  |   |              |   | 3,855 |   |
| Non-covered nonperforming loans                      |   |                   | 13,006 |   |              |   | 11,990 |   |
| Nonaccrual loans - covered by FDIC loss-share        |   |                   | 24,924 |   |              |   | - |   |
| Total nonperforming loans                            |   |                   | 37,930 |   |              |   | 11,990 |   |
| Other real estate owned - non-covered                |   |                   | 8,239  |   |              |   | 5,067 |   |
| Other real estate owned - covered by FDIC loss-share |   |                   | 2,343  |   |              |   | - |   |
| Total nonperforming assets                           |   | $                      | 48,512 |   |              | $      | 17,057 |   |

|                                          |   | June 30, 2010          |   |   | December 31, 2009 |   |
|-----------------------------------------------|--------|------------------------|--------|--------|-------------------|--------|
|                                          |   | (Dollars in thousands) |   |
|                                          |   |                   |   |   |              |   |
|                                          |   | $                      | 1,646  |   |              | $      | 898 |   |
|                                          |   |                   | -      |   |              |   | - |   |
|                                          |   |                   |   |   |              |   |   |   |
| One-to-four family residential owner-occupied |   |                   | -      |   |              |   | - |   |
| One-to-four family residential speculative    |   |                   | 896    |   |              |   | 1,048 |   |
| Commercial                                    |   |                   | -      |   |              |   | - |   |
|                                          |   |                   |   |   |              |   |   |   |
| Residential acquisition and development       |   |                   | 691    |   |              |   | 3,419 |   |
| Commercial land                               |   |                   | 3,252  |   |              |   | 3,640 |   |
| Other commercial real estate                  |   |                   | 4,127  |   |              |   | 1,841 |   |
|                                          |   |                   | 742    |   |              |   | 140 |   |
|                                          |   |                   | 1,652  |   |              |   | 1,004 |   |
| Total nonperforming non-covered loans         |   | $                      | 13,006 |   |              | $      | 11,990 |   |

----

|                       |   | June 30, 2010          |    |   | December 31, 2009 |   |
|----------------------------|--------|------------------------|---------|--------|-------------------|--------|
|                       |   | (Dollars in thousands) |    |
|                       |   |                   |    |   |              |   |
| Noninterest-bearing demand |   | $                      | 69,272  |   |              | $      | 45,830 |   |
| Interest-bearing demand    |   |                   | 159,022 |   |              |   | 113,564 |   |
| Money market deposit       |   |                   | 143,034 |   |              |   | 118,687 |   |
| Savings                    |   |                   | 17,416  |   |              |   | 10,584 |   |
| Time deposits              |   |                   | 464,782 |   |              |   | 320,680 |   |
| Total deposits             |   | $                      | 853,526 |   |              | $      | 609,345 |   |
|                       |   |                   |    |   |              |   |   |   |

|                                   |   | June 30, 2010          |   |   | December 31, 2009 |   |
|----------------------------------------|--------|------------------------|--------|--------|-------------------|--------|
|                                   |   | (Dollars in thousands) |   |
|                                   |   |                   |   |   |              |   |
| Loan commitments                       |   |                   |   |   |              |   |
| Residential mortgage loans             |   | $                      | 17,481 |   |              | $      | 12,560 |   |
| Non-residential mortgage loans         |   |                   | 4,056  |   |              |   | 13,656 |   |
| Commercial loans                       |   |                   | 1,155  |   |              |   | 1,435 |   |
| Consumer loans                         |   |                   | 3,191  |   |              |   | 849 |   |
| Total loan commitments                 |   | $                      | 25,883 |   |              | $      | 28,500 |   |
|                                   |   |                   |   |   |              |   |   |   |
| Unused lines of credit                 |   |                   |   |   |              |   |   |   |
| Commercial                             |   |                   | 14,046 |   |              |   | 18,448 |   |
| Consumer                               |   |                   | 78,580 |   |              |   | 75,261 |   |
| Total unused lines of credit           |   | $                      | 92,626 |   |              | $      | 93,709 |   |
|                                   |   |                   |   |   |              |   |   |   |
| Undisbursed Construction Loan Proceeds |   | $                      | 980    |   |              | $      | 1,100 |   |

----

----

|                                                   |   | Level 1                      |   |   |   Level 2 |   |   |   Level 3 |   |   | Total  |   |
|--------------------------------------------------------|--------|------------------------------|--------|--------|----------------|--------|--------|----------------|--------|--------|--------|--------|
|                                                   |   |  (Dollars in thousands) |   |
| June 30, 2010                                          |   |                         |   |   |           |   |   |           |   |   |   |   |
| Investment securities, available-for-sale              |   | $                            | -      |   |           | $      | 68,861 |           |   | $      | 2,941  |   |   | $ | 71,802 |   |
|                                                   |   |                         |   |   |           |   |   |           |   |   |   |   |   |   |   |   |
| December 31, 2009                                      |   |                         |   |   |           |   |   |           |   |   |   |   |   |   |   |   |
| Investment securities, available-for-sale              |   | $                            | -      |   |           | $      | 48,049 |           |   | $      | 2,941  |   |   | $ | 50,990 |   |
|                                                   |   |                         |   |   |           |   |   |           |   |   |   |   |   |   |   |   |
| Assets Recorded at Fair Value on a Nonrecurring Basis: |   |                         |   |   |           |   |   |           |   |   |   |   |   |   |   |   |
|                                                   |   |                         |   |   |           |   |   |           |   |   |   |   |   |   |   |   |
| June 30, 2010                                          |   |                         |   |   |           |   |   |           |   |   |   |   |   |   |   |   |
| Impaired loans                                         |   | $                            | -      |   |           | $      | -      |           |   | $      | 16,012 |   |   | $ | 16,012 |   |
| Other real estate owned                                |   |                         | -      |   |           |   | -      |           |   |   | 10,582 |   |   |   | 10,582 |   |
|                                                   |   |                         |   |   |           |   |   |           |   |   |   |   |   |   |   |   |
| December 31, 2009                                      |   |                         |   |   |           |   |   |           |   |   |   |   |   |   |   |   |
| Impaired loans                                         |   | $                            | -      |   |           | $      | -      |           |   | $      | 20,678 |   |   | $ | 20,678 |   |
| Other real estate owned                                |   |                         | -      |   |           |   | -      |           |   |   | 5,067  |   |   |   | 5,067 |   |

----

|                                 |   | June 30, 2010          |    |   | December 31, 2009 |   |
|--------------------------------------|--------|------------------------|---------|--------|-------------------|--------|
|                                 |   | Carrying               |    |   | Estimated         |   |   | Carrying |   |   | Estimated |   |
|                                 |   | Amount                 |    |   | Fair Value        |   |   | Amount |   |   | Fair Value |   |
|                                 |   | (Dollars in thousands) |    |
| Financial assets:                    |   |                   |    |   |              |   |   |   |   |   |   |   |
| Cash and due from banks              |   | $                      | 8,223   |   |              | $      | 8,223 |   |   | $ | 8,925 |   |   | $ | 8,925 |   |
| Interest-earning bank balances       |   |                   | 101,723 |   |              |   | 101,723 |   |   |   | 44,255 |   |   |   | 44,255 |   |
| Investment securities                |   |                   | 97,678  |   |              |   | 98,443 |   |   |   | 83,370 |   |   |   | 83,266 |   |
| Loans                                |   |                   | 776,234 |   |              |   | 779,857 |   |   |   | 610,201 |   |   |   | 596,371 |   |
| Accrued interest receivable          |   |                   | 3,405   |   |              |   | 3,405 |   |   |   | 2,430 |   |   |   | 2,430 |   |
| Federal Home Loan Bank stock         |   |                   | 6,397   |   |              |   | 6,397 |   |   |   | 4,149 |   |   |   | 4,149 |   |
|                                 |   |                   |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities:               |   |                   |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                             |   |                   | 853,526 |   |              |   | 846,116 |   |   |   | 609,345 |   |   |   | 610,787 |   |
| Borrowed money and subordinated debt |   |                   | 104,850 |   |              |   | 114,670 |   |   |   | 97,629 |   |   |   | 93,039 |   |
| Retail repurchase agreements         |   |                   | 9,765   |   |              |   | 9,765 |   |   |   | 8,970 |   |   |   | 8,970 |   |

ITEM 

----

----

ITEM 

----

| Quarterly Financial Highlights (unaudited)                | 2010                          |       |   | 2009     |   |
|-----------------------------------------------------------|-------------------------------|------------|--------|----------|--------|
|                                                      | At and For the Quarters Ended |       |
|                                                      | June 30                       |       |   | March 31 |   |   | December 31 |   |   | September 30 |   |   | June 30 |   |
| (Dollars in thousands, except per share data)             |                          |       |   |     |   |   |   |   |   |   |   |   |   |   |
|                                                      |                          |       |   |     |   |   |   |   |   |   |   |   |   |   |
| Summary of Operations:                                    |                          |       |   |     |   |   |   |   |   |   |   |   |   |   |
| Interest income - taxable equivalent                      | $                             | 12,220     |   |     | $      | 9,167 |   |   | $ | 9,317 |   |   | $ | 9,620 |   |   | $ | 9,820 |   |
| Interest expense                                          |                          | 4,083      |   |     |   | 3,393 |   |   |   | 3,531 |   |   |   | 3,947 |   |   |   | 4,346 |   |
| Net interest income - taxable equivalent                  |                          | 8,137      |   |     |   | 5,774 |   |   |   | 5,786 |   |   |   | 5,673 |   |   |   | 5,474 |   |
| Less: Taxable-equivalent adjustment                       |                          | 114        |   |     |   | 98 |   |   |   | 106 |   |   |   | 139 |   |   |   | 142 |   |
| Net interest income                                       |                          | 8,023      |   |     |   | 5,676 |   |   |   | 5,680 |   |   |   | 5,534 |   |   |   | 5,332 |   |
| Provision for loan losses                                 |                          | 3,000      |   |     |   | 3,050 |   |   |   | 4,155 |   |   |   | 3,975 |   |   |   | 1,950 |   |
| Net interest income after loan loss provision             |                          | 5,023      |   |     |   | 2,626 |   |   |   | 1,525 |   |   |   | 1,559 |   |   |   | 3,382 |   |
| Noninterest income                                        |                          | 2,503      |   |     |   | 20,228 |   |   |   | 2,451 |   |   |   | 2,501 |   |   |   | 2,016 |   |
| Noninterest expense                                       |                          | 7,279      |   |     |   | 6,356 |   |   |   | 34,867 |   |   |   | 5,229 |   |   |   | 5,239 |   |
| Net income (loss) before income taxes                     |                          | 247        |   |     |   | 16,498 |   |   |   | (30,891 | ) |   |   | (1,169 | ) |   |   | 159 |   |
| Income tax expense (benefit)                              |                          | (108       | )      |     |   | 6,201 |   |   |   | (611 | ) |   |   | (672 | ) |   |   | (155 | ) |
| Net income (loss)                                         |                          | 355        |   |     |   | 10,297 |   |   |   | (30,280 | ) |   |   | (497 | ) |   |   | 314 |   |
| Dividends on preferred stock                              |                          | 257        |   |     |   | 257 |   |   |   | 259 |   |   |   | 262 |   |   |   | 259 |   |
| Net income (loss) available to common stockholders        | $                             | 98         |   |     | $      | 10,040 |   |   | $ | (30,539 | ) |   | $ | (759 | ) |   | $ | 55 |   |
|                                                      |                          |       |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Per Common Share Data:                                    |                          |       |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income:                                               |                          |       |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Basic                                         | $                             | 0.01       |   |     | $      | 1.29 |   |   | $ | (4.11 | ) |   | $ | (0.10 | ) |   | $ | 0.01 |   |
|   Diluted                                       |                          | 0.01       |   |     |   | 1.29 |   |   |   | (4.11 | ) |   |   | (0.10 | ) |   |   | 0.01 |   |
| Weighted average shares outstanding:                      |                          |       |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Basic                                         |                          | 9,077,042  |   |     |   | 7,786,819 |   |   |   | 7,426,992 |   |   |   | 7,419,206 |   |   |   | 7,404,218 |   |
|   Diluted                                       |                          | 9,077,042  |   |     |   | 7,786,819 |   |   |   | 7,426,992 |   |   |   | 7,419,206 |   |   |   | 7,404,218 |   |
| End of period shares outstanding                          |                          | 10,965,941 |   |     |   | 9,125,942 |   |   |   | 7,526,854 |   |   |   | 7,526,854 |   |   |   | 7,526,854 |   |
| Cash dividends declared                                   | $                             | 0.04       |   |     | $      | 0.04 |   |   | $ | 0.04 |   |   | $ | 0.04 |   |   | $ | 0.04 |   |
| Book value                                                |                          | 6.91       |   |     |   | 7.39 |   |   |   | 6.87 |   |   |   | 11.08 |   |   |   | 11.11 |   |
| Tangible book value                                       |                          | 6.73       |   |     |   | 7.16 |   |   |   | 6.80 |   |   |   | 7.06 |   |   |   | 7.07 |   |
|                                                      |                          |       |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| End of Period Balances:                                   |                          |       |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                              | $                             | 1,077,431  |   |     | $      | 1,132,652 |   |   | $ | 791,532 |   |   | $ | 820,608 |   |   | $ | 836,283 |   |
| Loans, net of deferred fees                               |                          | 776,234    |   |     |   | 787,643 |   |   |   | 610,201 |   |   |   | 616,793 |   |   |   | 629,962 |   |
| Investment securities                                     |                          | 97,678     |   |     |   | 100,161 |   |   |   | 83,369 |   |   |   | 90,174 |   |   |   | 97,452 |   |
| Interest-earning assets                                   |                          | 927,757    |   |     |   | 987,669 |   |   |   | 725,835 |   |   |   | 734,938 |   |   |   | 751,733 |   |
| Deposits                                                  |                          | 853,526    |   |     |   | 884,127 |   |   |   | 609,345 |   |   |   | 606,614 |   |   |   | 616,233 |   |
| Stockholders' equity                                      |                          | 96,410     |   |     |   | 96,390 |   |   |   | 72,322 |   |   |   | 103,990 |   |   |   | 104,158 |   |
|                                                      |                          |       |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Quarterly Average Balances:                               |                          |       |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                              | $                             | 1,105,788  |   |     | $      | 873,418 |   |   | $ | 823,608 |   |   | $ | 831,268 |   |   | $ | 841,169 |   |
| Loans, net of deferred fees                               |                          | 780,209    |   |     |   | 599,826 |   |   |   | 610,568 |   |   |   | 624,112 |   |   |   | 635,645 |   |
| Investment securities                                     |                          | 100,501    |   |     |   | 89,020 |   |   |   | 87,061 |   |   |   | 94,673 |   |   |   | 107,140 |   |
| Interest-earning assets                                   |                          | 949,130    |   |     |   | 732,124 |   |   |   | 736,134 |   |   |   | 741,974 |   |   |   | 751,381 |   |
| Deposits                                                  |                          | 859,408    |   |     |   | 614,007 |   |   |   | 605,608 |   |   |   | 609,243 |   |   |   | 616,926 |   |
| Stockholders' equity                                      |                          | 96,282     |   |     |   | 78,292 |   |   |   | 103,313 |   |   |   | 103,913 |   |   |   | 104,813 |   |
|                                                      |                          |       |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Financial Performance Ratios (annualized):                |                          |       |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Return on average assets                                  |                          | 0.04       | %      |     |   | 4.66 | % |   |   | -14.71 | % |   |   | -0.36 | % |   |   | 0.03 | % |
| Return on average common equity                           |                          | 0.56       | %      |     |   | 73.21 | % |   |   | -146.44 | % |   |   | -3.61 | % |   |   | 0.26 | % |
| Noninterest income to average total assets  (1) |                          | 0.91       | %      |     |   | 9.26 | % |   |   | 1.19 | % |   |   | 1.20 | % |   |   | 0.96 | % |
| Noninterest expense to average total assets (2)           |                          | 2.63       | %      |     |   | 2.91 | % |   |   | 16.93 | % |   |   | 2.52 | % |   |   | 2.49 | % |
| Efficiency ratio  (1) (2)                       |                          | 68.41      | %      |     |   | 24.44 | % |   |   | 423.30 | % |   |   | 63.97 | % |   |   | 69.95 | % |

----

| Quarterly Financial Highlights (unaudited)                                             |   | 2010                          |   |   | 2009     |   |
|----------------------------------------------------------------------------------------|--------|-------------------------------|--------|--------|----------|--------|
|                                                                                   |   | At and For the Quarters Ended |   |
|                                                                                   |   | 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                                                                |   |                          | 4.96   | %      |     |   | 5.02 | % |   |   | 4.98 | % |   |   | 5.13 | % |   |   | 5.26 | % |
| Cost of funds                                                                          |   |                          | 1.72   | %      |     |   | 2.01 | % |   |   | 2.09 | % |   |   | 2.30 | % |   |   | 2.54 | % |
| Net Interest spread                                                                    |   |                          | 3.24   | %      |     |   | 3.01 | % |   |   | 2.89 | % |   |   | 2.83 | % |   |   | 2.72 | % |
| Net interest margin (taxable equivalent)                                               |   |                          | 3.34   | %      |     |   | 3.20 | % |   |   | 3.12 | % |   |   | 3.03 | % |   |   | 2.92 | % |
|                                                                                   |   |                          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Credit Quality Information and Ratios:                                                 |   |                          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Past due loans (30-89 days) accruing - non-covered                                     |   | $                             | 10,145 |   |     | $      | 7,003 |   |   | $ | 10,224 |   |   | $ | 10,860 |   |   | $ | 9,706 |   |
| Past due loans - non-covered to total non-covered loans                                |   |                          | 1.68   | %      |     |   | 1.15 | % |   |   | 1.68 | % |   |   | 1.76 | % |   |   | 1.54 | % |
|                                                                                   |   |                          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Past due loans (30-89 days) accruing - covered by FDIC loss-share (3)                  |   | $                             | 5,257  |   |     | $      | 11,030 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Past due loans - covered to total covered loans                                        |   |                          | 3.07   | %      |     |   | 6.09 | % |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                                   |   |                          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses - beginning of period                                        |   | $                             | 9,230  |   |     | $      | 9,189 |   |   | $ | 9,499 |   |   | $ | 8,685 |   |   | $ | 8,730 |   |
| Add:  Provision for loan losses                                              |   |                          | 3,000  |   |     |   | 3,050 |   |   |   | 4,155 |   |   |   | 3,975 |   |   |   | 1,950 |   |
| Less:  Net charge-offs (NCOs)                                                |   |                          | 2,434  |   |     |   | 3,009 |   |   |   | 4,465 |   |   |   | 3,161 |   |   |   | 1,995 |   |
| Allowance for loan losses - end of period                                              |   |                          | 9,796  |   |     |   | 9,230 |   |   |   | 9,189 |   |   |   | 9,499 |   |   |   | 8,685 |   |
|                                                                                   |   |                          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses to total non-covered loans                                   |   |                          | 1.62   | %      |     |   | 1.52 | % |   |   | 1.51 | % |   |   | 1.54 | % |   |   | 1.38 | % |
| Net charge-offs to average non-covered loans (annualized)                              |   |                          | 1.61   | %      |     |   | 1.98 | % |   |   | 2.93 | % |   |   | 2.04 | % |   |   | 1.28 | % |
| Nonperforming non-covered loans to non-covered loans                                   |   |                          | 2.15   | %      |     |   | 2.26 | % |   |   | 1.96 | % |   |   | 1.73 | % |   |   | 1.64 | % |
| Nonperforming non-covered assets to total assets                                       |   |                          | 1.97   | %      |     |   | 1.69 | % |   |   | 2.15 | % |   |   | 1.72 | % |   |   | 1.49 | % |
| Nonperforming non-covered assets to total non-covered loansand other real estate owned |   |                          | 3.46   | %      |     |   | 3.12 | % |   |   | 2.77 | % |   |   | 2.28 | % |   |   | 1.97 | % |
|                                                                                   |   |                          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nonperforming Assets (NPAs):                                                           |   |                          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nonperforming loans:                                                                   |   |                          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-covered loans:                                                                     |   |                          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Residential                                                                |   | $                             | 1,646  |   |     | $      | 1,618 |   |   | $ | 898 |   |   | $ | 345 |   |   | $ | 432 |   |
|   Construction                                                               |   |                          | 896    |   |     |   | 443 |   |   |   | 1,048 |   |   |   | 1,554 |   |   |   | 1,335 |   |
|   Acquisition and development                                                |   |                          | 691    |   |     |   | 2,890 |   |   |   | 3,419 |   |   |   | 3,510 |   |   |   | 379 |   |
|   Commercial land                                                            |   |                          | 3,252  |   |     |   | 6,148 |   |   |   | 3,640 |   |   |   | 1,884 |   |   |   | 1,813 |   |
|   Other commercial real estate                                               |   |                          | 4,127  |   |     |   | 1,422 |   |   |   | 1,841 |   |   |   | 2,197 |   |   |   | 5,307 |   |
|   Commercial business                                                        |   |                          | 742    |   |     |   | 131 |   |   |   | 140 |   |   |   | - |   |   |   | 94 |   |
|   Consumer                                                                   |   |                          | 1,652  |   |     |   | 1,083 |   |   |   | 1,004 |   |   |   | 1,208 |   |   |   | 1,000 |   |
| Total non-covered nonperforming loans                                                  |   |                          | 13,006 |   |     |   | 13,735 |   |   |   | 11,990 |   |   |   | 10,698 |   |   |   | 10,360 |   |
| Total nonperforming loans covered by FDIC loss-share  (4)                    |   |                          | 24,924 |   |     |   | 15,846 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Other real estate owned - non-covered                                                  |   |                          | 8,239  |   |     |   | 5,386 |   |   |   | 5,067 |   |   |   | 3,444 |   |   |   | 2,111 |   |
| Other real estate owned - covered by FDIC loss share                                   |   |                          | 2,343  |   |     |   | 2,009 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total nonperforming assets                                                             |   | $                             | 48,512 |   |     | $      | 36,976 |   |   | $ | 17,057 |   |   | $ | 14,142 |   |   | $ | 12,471 |   |
|                                                                                   |   |                          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital Ratios:                                                                        |   |                          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tangible common equity                                                                 |   |                          | 6.86   | %      |     |   | 5.78 | % |   |   | 6.47 | % |   |   | 6.72 | % |   |   | 6.61 | % |
| Total Risk-Based Capital (Bank only)                                                   |   |                          | 16.78  | %      |     |   | 15.53 | % |   |   | 14.07 | % |   |   | 14.68 | % |   |   | 14.31 | % |
| Tier 1 Risk-Based Capital (Bank only)                                                  |   |                          | 15.52  | %      |     |   | 14.47 | % |   |   | 12.98 | % |   |   | 13.53 | % |   |   | 13.27 | % |
| Tier 1 Total Capital (Bank only)                                                       |   |                          | 9.74   | %      |     |   | 9.18 | % |   |   | 10.44 | % |   |   | 10.70 | % |   |   | 10.35 | % |
|                                                                                   |   |                          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| (1)  | Includes the gain on acquisition of Bank of Hiawassee of $605,000 for the quarter ended June 30, 2010 and $18.7 million for the quarterended March 31, 2010. |
|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)  | Includes the acquisition and integration expenses of $94,000 for the quarter ended June 30, 2010 and $787,000 for the quarter endedMarch 31, 2010 and $29.6 million impairment of goodwill for the quarter ended December 31, 2009. |
|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)  | The contractual balance of past due loans covered by  FDIC loss-share agreements totaled $6.4 million at June 30, 2010 and $13.8 millionat March 31, 2010. |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4)  | The contractual balance of nonperforming loans covered by  FDIC loss-share agreements totaled $35.4 million at June 30, 2010 and $29.0 millionat March 31, 2010. |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

----

|                                       |   | Three Months Ended     |   |   |          |   |
|--------------------------------------------|--------|------------------------|--------|--------|---------------|--------|
|                                       |   | June 30, 2010          |   |   | June 30, 2009 |   |   | Variance |   |
|                                       |   | (Dollars in thousands) |   |
| Noninterest income:                        |   |                   |   |   |          |   |   |   |   |
| Service charges on deposit accounts        |   | $                      | 971    |   |          | $      | 822 |   |   | $ | 149 |   |
| Mortgage banking income                    |   |                   | 357    |   |          |   | 462 |   |   |   | (105 | ) |
| Other loan fees                            |   |                   | 88     |   |          |   | 80 |   |   |   | 8 |   |
| Commissions on sales of financial products |   |                   | 188    |   |          |   | 39 |   |   |   | 149 |   |
| Income from bank-owned life insurance      |   |                   | 243    |   |          |   | 182 |   |   |   | 61 |   |
| Gain from acquisition                      |   |                   | 605    |   |          |   | - |   |   |   | 605 |   |
| Gain on sale of investments                |   |                   | 10     |   |          |   | 308 |   |   |   | (298 | ) |
| Loss on sale of other assets               |   |                   | (203   | )      |          |   | (73 | ) |   |   | (130 | ) |
| Other income                               |   |                   | 244    |   |          |   | 196 |   |   |   | 48 |   |
| Total noninterest income                   |   | $                      | 2,503  |   |          | $      | 2,016 |   |   | $ | 487 |   |

----

|                                            |   | Three Months Ended     |   |   |          |   |
|-------------------------------------------------|--------|------------------------|--------|--------|---------------|--------|
|                                            |   | June 30, 2010          |   |   | June 30, 2009 |   |   | Variance |   |
|                                            |   | (Dollars in thousands) |   |
| Noninterest Expense:                            |   |                   |   |   |          |   |   |   |   |
| Compensation and benefits                       |   | $                      | 3,652  |   |          | $      | 2,526 |   |   | $ | 1,126 |   |
| Occupancy and equipment expense                 |   |                   | 1,039  |   |          |   | 652 |   |   |   | 387 |   |
| Advertising                                     |   |                   | 93     |   |          |   | 110 |   |   |   | (17 | ) |
| Professional services                           |   |                   | 233    |   |          |   | 237 |   |   |   | (4 | ) |
| Data processing                                 |   |                   | 190    |   |          |   | 131 |   |   |   | 59 |   |
| Deposit insurance                               |   |                   | 354    |   |          |   | 491 |   |   |   | (137 | ) |
| Amortization of intangible assets               |   |                   | 154    |   |          |   | 81 |   |   |   | 73 |   |
| Valuation adjustment on other real estate owned |   |                   | 210    |   |          |   | 50 |   |   |   | 160 |   |
| Impairment on investment securities             |   |                   | -      |   |          |   | 91 |   |   |   | (91 | ) |
| Acquisition and integration expenses            |   |                   | 94     |   |          |   | - |   |   |   | 94 |   |
| Other expenses                                  |   |                   | 1,260  |   |          |   | 870 |   |   |   | 390 |   |
| Total noninterest expense                       |   | $                      | 7,279  |   |          | $      | 5,239 |   |   | $ | 2,040 |   |

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|                                       |   | Six Months Ended       |   |   |          |   |
|--------------------------------------------|--------|------------------------|--------|--------|---------------|--------|
|                                       |   | June 30, 2010          |   |   | June 30, 2009 |   |   | Variance |   |
|                                       |   | (Dollars in thousands) |   |
| Noninterest income:                        |   |                   |   |   |          |   |   |   |   |
| Service charges on deposit accounts        |   | $                      | 1,761  |   |          | $      | 1,569 |   |   | $ | 192 |   |
| Mortgage banking income                    |   |                   | 567    |   |          |   | 760 |   |   |   | (193 | ) |
| Other loan fees                            |   |                   | 131    |   |          |   | 138 |   |   |   | (7 | ) |
| Commissions on sales of financial products |   |                   | 306    |   |          |   | 94 |   |   |   | 212 |   |
| Income from bank-owned life insurance      |   |                   | 432    |   |          |   | 368 |   |   |   | 64 |   |
| Gain from acquisition                      |   |                   | 19,338 |   |          |   | - |   |   |   | 19,338 |   |
| Gain on sale of investments                |   |                   | 44     |   |          |   | 308 |   |   |   | (264 | ) |
| Loss on sale of other assets               |   |                   | (266   | )      |          |   | (244 | ) |   |   | (22 | ) |
| Other income                               |   |                   | 418    |   |          |   | 272 |   |   |   | 146 |   |
| Total noninterest income                   |   | $                      | 22,731 |   |          | $      | 3,265 |   |   | $ | 19,466 |   |

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|                                            |   | Six Months Ended       |   |   |          |   |
|-------------------------------------------------|--------|------------------------|--------|--------|---------------|--------|
|                                            |   | June 30, 2010          |   |   | June 30, 2009 |   |   | Variance |   |
|                                            |   | (Dollars in thousands) |   |
| Noninterest Expense:                            |   |                   |   |   |          |   |   |   |   |
| Compensation and benefits                       |   | $                      | 6,295  |   |          | $      | 5,018 |   |   | $ | 1,277 |   |
| Occupancy and equipment expense                 |   |                   | 1,722  |   |          |   | 1,326 |   |   |   | 396 |   |
| Advertising                                     |   |                   | 150    |   |          |   | 188 |   |   |   | (38 | ) |
| Professional services                           |   |                   | 467    |   |          |   | 474 |   |   |   | (7 | ) |
| Data processing                                 |   |                   | 331    |   |          |   | 259 |   |   |   | 72 |   |
| Deposit insurance                               |   |                   | 614    |   |          |   | 593 |   |   |   | 21 |   |
| Amortization of intangible assets               |   |                   | 218    |   |          |   | 162 |   |   |   | 56 |   |
| Valuation adjustment on other real estate owned |   |                   | 694    |   |          |   | 175 |   |   |   | 519 |   |
| Impairment on investment securities             |   |                   | -      |   |          |   | 214 |   |   |   | (214 | ) |
| Acquisition and integration expenses            |   |                   | 882    |   |          |   | - |   |   |   | 882 |   |
| Other expenses                                  |   |                   | 2,262  |   |          |   | 1,767 |   |   |   | 495 |   |
| Total noninterest expense                       |   | $                      | 13,635 |   |          | $      | 10,176 |   |   | $ | 3,459 |   |

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|                                               |   |                   |    |   |                |   |   | Minimum Requirements to |   |
|----------------------------------------------------|--------|------------------------|---------|--------|---------------------|--------|--------|-------------------------|--------|
|                                               |   | Actual                 |    |   | be Well Capitalized |   |
|                                               |   | Amount                 |    |   | Ratio               |   |   | Amount                  |   |   | Ratio |   |
|                                               |   | (Dollars in thousands) |    |
| Regulatory Capital Ratios:                         |   |                   |    |   |                |   |   |                    |   |   |   |   |
| Total risk-based capital (to risk-weighted assets) |   | $                      | 112,714 |   |                |   | 16.78  | %                       |   | $ | 67,181 |   |   |   | 10.00 | % |
| Tier 1 capital (to risk-weighted assets)           |   |                   | 104,294 |   |                |   | 15.52  | %                       |   |   | 40,309 |   |   |   | 6.00 | % |
| Tier 1 capital (to adjusted total assets)          |   |                   | 104,294 |   |                |   | 9.74   | %                       |   |   | 53,550 |   |   |   | 5.00 | % |
| Tangible capital (to adjusted total assets)        |   |                   | 104,294 |   |                |   | 9.74   | %                       |   |   | 32,130 |   |   |   | 3.00 | % |

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SIGNATURES