| x                                            | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934   |
|----------------------------------------------|-------------------------------------------------------------------------------------------|
|                                         |                                                                                      |
| For the quarterly period ended June 30, 2010 |
| or                                           |
|                                         |
| o                                            | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |

| AMERICAN RIVER BANKSHARES                              |
|--------------------------------------------------------|
| (Exact name of registrant as specified in its charter) |

| California                                                     |   | 68-0352144                           |
|----------------------------------------------------------------|--------|--------------------------------------|
| (State or other jurisdiction of incorporation or organization) |   | (I.R.S. Employer Identification No.) |
|                                                           |   |                                 |
| 3100 Zinfandel Drive, Suite 450, Rancho Cordova, California    |   | 95670                                |
| (Address of principal executive offices)                       |   | (Zip Code)                           |

| (916) 851-0123                                                                      |
|-------------------------------------------------------------------------------------|
| (Registrant’s telephone number, including area code)                          |
|                                                                                |
| Not Applicable                                                                      |
| (Former name, former address and former fiscal year, if changed since last report.) |

|   | Large accelerated filer o |                                          |   | Accelerated filer o              |   |
|--------|--------------------------------|-----------------------------------------------|--------|----------------------------------|--------|
|   | Non-accelerated filer x        | (Do not check if a smaller reporting company) |   | Smaller reporting company o |   |

----

|          |                                                                                                                            |   | Page   |
|---------------|---------------------------------------------------------------------------------------------------------------------------------|--------|--------|
|          |                                                                                                                            |   |   |   |
| Part I.       |                                                                                                                            |   |   |   |
|          |                                                                                                                            |   |   |   |
| Item 1.       | Financial Statements                                                                                                            |   | 3      |   |
| Item 2.       | Management’s Discussion and Analysis of Financial Condition and Results of Operations                                     |   | 19     |   |
| Item 3.       | Quantitative and Qualitative Disclosures About Market Risk                                                                      |   | 40     |   |
| Item 4.       | Controls and Procedures                                                                                                         |   | 41     |   |
| Item 4T.      | Controls and Procedures                                                                                                         |   | 41     |   |
|          |                                                                                                                            |   |   |   |
| Part II.      |                                                                                                                            |   |   |   |
|          |                                                                                                                            |   |   |   |
| Item 1.       | Legal Proceedings                                                                                                               |   | 42     |   |
| Item 1A.      | Risk Factors                                                                                                                    |   | 42     |   |
| Item 2.       | Unregistered Sales of Equity Securities and Use of Proceeds                                                                     |   | 42     |   |
| Item 3.       | Defaults Upon Senior Securities                                                                                                 |   | 43     |   |
| Item 4.       | (Reserved)                                                                                                                      |   | 43     |   |
| Item 5.       | Other Information                                                                                                               |   | 43     |   |
| Item 6.       | Exhibits                                                                                                                        |   | 43     |   |
|          |                                                                                                                            |   |   |   |
| Signatures    |                                                                                                                            | 48     |   |
|          |                                                                                                                            |   |   |   |
| Exhibit Index |                                                                                                                            | 49     |   |
|          |                                                                                                                            |   |   |   |
| 31.1          | Certifications of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                             |   | 50     |   |
| 31.2          | Certifications of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                         |   | 51     |   |
| 32.1          | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |   | 52     |   |

----

PART I-FINANCIAL INFORMATION

Item 1. Financial Statements.

| (dollars in thousands)                                                                                                                           |   | June 30, 2010 |    |   | December 31, 2009 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------|---------|--------|-------------------|--------|
|                                                                                                                                             |   |          |    |   |              |   |
| ASSETS                                                                                                                                           |   |          |    |   |              |   |
|                                                                                                                                             |   |          |    |   |              |   |
| Cash and due from banks                                                                                                                          |   | $             | 39,581  |   |              | $      | 58,493 |   |
| Investment securities:                                                                                                                           |   |          |    |   |              |   |   |   |
| Available-for-sale (amortized cost: 2010—$127,806; 2009—$96,305)                                                                     |   |          | 131,392 |   |              |   | 96,682 |   |
| Held-to-maturity (fair value: 2010—$8,893; 2009—$12,889)                                                                             |   |          | 8,445   |   |              |   | 12,331 |   |
| Loans and leases, less allowance for loan and lease losses of $7,441 at June 30, 2010 and $7,909 at December 31, 2009                            |   |          | 353,409 |   |              |   | 376,322 |   |
| Premises and equipment, net                                                                                                                      |   |          | 1,947   |   |              |   | 2,094 |   |
| Federal Home Loan Bank stock                                                                                                                     |   |          | 3,776   |   |              |   | 3,922 |   |
| Goodwill and other intangible assets                                                                                                             |   |          | 16,843  |   |              |   | 16,965 |   |
| Other real estate owned                                                                                                                          |   |          | 3,219   |   |              |   | 2,508 |   |
| Accrued interest receivable and other assets                                                                                                     |   |          | 20,431  |   |              |   | 25,101 |   |
|                                                                                                                                             |   | $             | 579,043 |   |              | $      | 594,418 |   |
|                                                                                                                                             |   |          |    |   |              |   |   |   |
| LIABILITIES AND SHAREHOLDERS’ EQUITY                                                                                                       |   |          |    |   |              |   |   |   |
|                                                                                                                                             |   |          |    |   |              |   |   |   |
| Deposits:                                                                                                                                        |   |          |    |   |              |   |   |   |
| Noninterest bearing                                                                                                                              |   | $             | 122,960 |   |              | $      | 118,328 |   |
| Interest-bearing                                                                                                                                 |   |          | 340,648 |   |              |   | 351,427 |   |
| Total deposits                                                                                                                                   |   |          | 463,608 |   |              |   | 469,755 |   |
|                                                                                                                                             |   |          |    |   |              |   |   |   |
| Short-term borrowings                                                                                                                            |   |          | 9,500   |   |              |   | 14,500 |   |
| Long-term borrowings                                                                                                                             |   |          | 12,000  |   |              |   | 17,000 |   |
| Accrued interest payable and other liabilities                                                                                                   |   |          | 4,190   |   |              |   | 5,818 |   |
|                                                                                                                                             |   |          |    |   |              |   |   |   |
| Total liabilities                                                                                                                                |   |          | 489,298 |   |              |   | 507,073 |   |
|                                                                                                                                             |   |          |    |   |              |   |   |   |
| Commitments and contingencies                                                                                                                    |   |          |    |   |              |   |   |   |
|                                                                                                                                             |   |          |    |   |              |   |   |   |
| Shareholders’ equity:                                                                                                                      |   |          |    |   |              |   |   |   |
| Preferred stock, no par value; 20,000,000 shares authorized; none outstanding                                                                    |   |          |    |   |              |   |   |   |
| Common stock, no par value; 20,000,000 shares authorized; issued and outstanding – 9,845,533 shares at June 30, 2010 and December 31, 2009 |   |          | 71,688  |   |              |   | 71,578 |   |
| Retained earnings                                                                                                                                |   |          | 15,905  |   |              |   | 15,545 |   |
| Accumulated other comprehensive income, net of taxes                                                                                             |   |          | 2,152   |   |              |   | 222 |   |
|                                                                                                                                             |   |          |    |   |              |   |   |   |
| Total shareholders’ equity                                                                                                                 |   |          | 89,745  |   |              |   | 87,345 |   |
|                                                                                                                                             |   | $             | 579,043 |   |              | $      | 594,418 |   |

----

| (dollars in thousands, except per share data)                 |   | Three months |    |   | Six months |   |
|---------------------------------------------------------------|--------|--------------|---------|--------|------------|--------|
| For the periods ended June 30,                                |   | 2010         |    |   | 2009       |   |   | 2010 |   |   | 2009 |   |
|                                                          |   |         |    |   |       |   |   |   |   |   |   |   |
| Interest income:                                              |   |         |    |   |       |   |   |   |   |   |   |   |
| Interest and fees on loans                                    |   | $            | 5,580   |   |       | $      | 6,364 |   |   | $ | 11,417 |   |   | $ | 13,082 |   |
| Interest on deposits in banks                                 |   |         | — |   |       |   | 20 |   |   |   | — |   |   |   | 53 |   |
| Interest and dividends on investment securities:              |   |         |    |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                       |   |         | 726     |   |       |   | 676 |   |   |   | 1,434 |   |   |   | 1,411 |   |
| Exempt from Federal income taxes                              |   |         | 162     |   |       |   | 256 |   |   |   | 331 |   |   |   | 521 |   |
| Dividends                                                     |   |         | 5       |   |       |   | 5 |   |   |   | 5 |   |   |   | 5 |   |
| Total interest income                                         |   |         | 6,473   |   |       |   | 7,321 |   |   |   | 13,187 |   |   |   | 15,072 |   |
| Interest expense:                                             |   |         |    |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Interest on deposits                                          |   |         | 761     |   |       |   | 998 |   |   |   | 1,559 |   |   |   | 2,079 |   |
| Interest on borrowings                                        |   |         | 130     |   |       |   | 305 |   |   |   | 274 |   |   |   | 636 |   |
| Total interest expense                                        |   |         | 891     |   |       |   | 1,303 |   |   |   | 1,833 |   |   |   | 2,715 |   |
|                                                          |   |         |    |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income                                           |   |         | 5,582   |   |       |   | 6,018 |   |   |   | 11,354 |   |   |   | 12,357 |   |
|                                                          |   |         |    |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Provision for loan and lease losses                           |   |         | 2,011   |   |       |   | 3,800 |   |   |   | 3,652 |   |   |   | 5,029 |   |
|                                                          |   |         |    |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income after provision for loan and lease losses |   |         | 3,571   |   |       |   | 2,218 |   |   |   | 7,702 |   |   |   | 7,328 |   |
|                                                          |   |         |    |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest income:                                           |   |         |    |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Service charges on deposit accounts                           |   |         | 232     |   |       |   | 251 |   |   |   | 465 |   |   |   | 493 |   |
| (Loss) gain sale of securities                                |   |         | (7      | )      |       |   | 160 |   |   |   | (5 | ) |   |   | 160 |   |
| Other noninterest income                                      |   |         | 235     |   |       |   | 238 |   |   |   | 461 |   |   |   | 506 |   |
| Total noninterest income                                      |   |         | 460     |   |       |   | 649 |   |   |   | 921 |   |   |   | 1,159 |   |
|                                                          |   |         |    |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest expense:                                          |   |         |    |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Salaries and employee benefits                                |   |         | 1,980   |   |       |   | 1,826 |   |   |   | 3,974 |   |   |   | 3,699 |   |
| Occupancy                                                     |   |         | 334     |   |       |   | 344 |   |   |   | 665 |   |   |   | 702 |   |
| Furniture and equipment                                       |   |         | 179     |   |       |   | 184 |   |   |   | 377 |   |   |   | 375 |   |
| Federal Deposit Insurance Corporation assessments             |   |         | 359     |   |       |   | 335 |   |   |   | 678 |   |   |   | 409 |   |
| Other expense                                                 |   |         | 1,203   |   |       |   | 1,550 |   |   |   | 2,546 |   |   |   | 2,655 |   |
| Total noninterest expense                                     |   |         | 4,055   |   |       |   | 4,239 |   |   |   | 8,240 |   |   |   | 7,840 |   |
|                                                          |   |         |    |   |       |   |   |   |   |   |   |   |   |   |   |   |
| (Loss) income before provision for income taxes               |   |         | (24     | )      |       |   | (1,372 | ) |   |   | 383 |   |   |   | 647 |   |
|                                                          |   |         |    |   |       |   |   |   |   |   |   |   |   |   |   |   |
| (Benefit from) provision for income taxes                     |   |         | (78     | )      |       |   | (668 | ) |   |   | 23 |   |   |   | 68 |   |
|                                                          |   |         |    |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                             |   | $            | 54      |   |       | $      | (704 | ) |   | $ | 360 |   |   | $ | 579 |   |
|                                                          |   |         |    |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Basic earnings (loss) per share                               |   | $            | 0.01    |   |       | $      | (0.12 | ) |   | $ | 0.04 |   |   | $ | 0.10 |   |
| Diluted earnings (loss) per share                             |   | $            | 0.01    |   |       | $      | (0.12 | ) |   | $ | 0.04 |   |   | $ | 0.10 |   |
|                                                          |   |         |    |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Cash dividends per share                                      |   | $            | 0.00    |   |       | $      | 0.14 |   |   | $ | 0.00 |   |   | $ | 0.29 |   |

----

|                                                                       |   |         |      |   |     |   |   |          |   |   | Accumulated         |   |   |          |   |   |   |   |
|----------------------------------------------------------------------------|--------|--------------|-----------|--------|----------|--------|--------|---------------|--------|--------|---------------------|--------|--------|---------------|--------|--------|--------|--------|
|                                                                       |   |         |      |   |     |   |   |          |   |   | Other               |   |   | Total         |   |   | Total  |   |
|                                                                       |   | Common Stock |      |   | Retained |   |   | Comprehensive |   |   | Shareholders’ |   |   | Comprehensive |   |
| (dollars in thousands)                                                     |   | Shares       |      |   | Amount   |   |   | Earnings      |   |   | Income              |   |   | Equity        |   |   | Income |   |
|                                                                       |   |         |      |   |     |   |   |          |   |   |                |   |   |          |   |   |   |   |   |   |   |   |   |
| Balance, January 1, 2009                                                   |   |         | 5,792,283 |   |     | $      | 47,433 |          |   | $      | 15,617              |   |   | $             | 397    |   |   | $      | 63,447 |   |   |   |   |
|                                                                       |   |         |      |   |     |   |   |          |   |   |                |   |   |          |   |   |   |   |   |   |   |   |   |
| Comprehensive income:                                                      |   |         |      |   |     |   |   |          |   |   |                |   |   |          |   |   |   |   |   |   |   |   |   |
| Net income                                                                 |   |         |      |   |     |   |   |          |   |   | 1,586               |   |   |          |   |   |   |   | 1,586 |   |   | $ | 1,586 |   |
| Other comprehensive (loss), net of tax:                                    |   |         |      |   |     |   |   |          |   |   |                |   |   |          |   |   |   |   |   |   |   |   |   |   |
| Net change in unrealized gains on available-for-sale investment securities |   |         |      |   |     |   |   |          |   |   |                |   |   |          | (175   | )      |   |   | (175 | ) |   |   | (175 | ) |
|                                                                       |   |         |      |   |     |   |   |          |   |   |                |   |   |          |   |   |   |   |   |   |   |   |   |   |
| Total comprehensive income                                                 |   |         |      |   |     |   |   |          |   |   |                |   |   |          |   |   |   |   |   |   |   | $ | 1,411 |   |
|                                                                       |   |         |      |   |     |   |   |          |   |   |                |   |   |          |   |   |   |   |   |   |   |   |   |   |
| Cash dividends ($0.29 per share)                                           |   |         |      |   |     |   |   |          |   |   | (1,658              | )      |   |          |   |   |   |   | (1,658 | ) |   |   |   |   |
| Stock options exercised and related tax benefit                            |   |         | 5,250     |   |     |   | 34     |          |   |   |                |   |   |          |   |   |   |   | 34 |   |   |   |   |   |
| Stock option compensation expense                                          |   |         |      |   |     |   | 210    |          |   |   |                |   |   |          |   |   |   |   | 210 |   |   |   |   |   |
| Issuance of new shares, net of costs                                       |   |         | 4,048,000 |   |     |   | 23,901 |          |   |   |                |   |   |          |   |   |   |   | 23,901 |   |   |   |   |   |
|                                                                       |   |         |      |   |     |   |   |          |   |   |                |   |   |          |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2009                                                 |   |         | 9,845,533 |   |     |   | 71,578 |          |   |   | 15,545              |   |   |          | 222    |   |   |   | 87,345 |   |   |   |   |   |
|                                                                       |   |         |      |   |     |   |   |          |   |   |                |   |   |          |   |   |   |   |   |   |   |   |   |   |
| Comprehensive income:                                                      |   |         |      |   |     |   |   |          |   |   |                |   |   |          |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                 |   |         |      |   |     |   |   |          |   |   | 360                 |   |   |          |   |   |   |   | 360 |   |   | $ | 360 |   |
| Other comprehensive income, net of tax:                                    |   |         |      |   |     |   |   |          |   |   |                |   |   |          |   |   |   |   |   |   |   |   |   |   |
| Net change in unrealized gains on available-for-sale investment securities |   |         |      |   |     |   |   |          |   |   |                |   |   |          | 1,930  |   |   |   | 1,930 |   |   |   | 1,930 |   |
|                                                                       |   |         |      |   |     |   |   |          |   |   |                |   |   |          |   |   |   |   |   |   |   |   |   |   |
| Total comprehensive income                                                 |   |         |      |   |     |   |   |          |   |   |                |   |   |          |   |   |   |   |   |   |   | $ | 2,290 |   |
|                                                                       |   |         |      |   |     |   |   |          |   |   |                |   |   |          |   |   |   |   |   |   |   |   |   |   |
| Stock option compensation expense                                          |   |         |      |   |     |   | 110    |          |   |   |                |   |   |          |   |   |   |   | 110 |   |   |   |   |   |
|                                                                       |   |         |      |   |     |   |   |          |   |   |                |   |   |          |   |   |   |   |   |   |   |   |   |   |
| Balance, June 30, 2010                                                     |   |         | 9,845,533 |   |     | $      | 71,688 |          |   | $      | 15,905              |   |   | $             | 2,152  |   |   | $      | 89,745 |   |   |   |   |   |

----

| (dollars in thousands)                                                            |   |   |    |   |   |   |
|-----------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| For the six months ended June 30,                                            |   | 2010   |    |   | 2009   |   |
|                                                                              |   |   |    |   |   |   |
| Cash flows from operating activities:                                             |   |   |    |   |   |   |
| Net income                                                                        |   | $      | 360     |   |   | $      | 579 |   |
| Adjustments to reconcile net income to net cash provided by operating activities: |   |   |    |   |   |   |   |   |
| Provision for loan and lease losses                                               |   |   | 3,652   |   |   |   | 5,029 |   |
| (Decrease) increase in deferred loan origination fees, net                        |   |   | (97     | )      |   |   | 24 |   |
| Depreciation and amortization                                                     |   |   | 420     |   |   |   | 418 |   |
| Loss (gain) on sale and call of investment securities                             |   |   | 5       |   |   |   | (160 | ) |
| Amortization of investment security premiums and discounts, net                   |   |   | 1,131   |   |   |   | 114 |   |
| Decrease in provision for accounts receivable servicing receivable losses         |   |   | (4      | )      |   |   | (36 | ) |
| Increase in cash surrender value of life insurance policies                       |   |   | (127    | )      |   |   | (116 | ) |
| Stock option compensation expense                                                 |   |   | 110     |   |   |   | 108 |   |
| Tax benefit from exercise of stock options                                        |   |   | — |   |   |   | (12 | ) |
| Loss on sale and write-down of other real estate owned                            |   |   | 405     |   |   |   | 301 |   |
| Decrease (increase) in accrued interest receivable and other assets               |   |   | 3,482   |   |   |   | (847 | ) |
| Decrease in accrued interest payable and other liabilities                        |   |   | (1,628  | )      |   |   | (1,493 | ) |
|                                                                              |   |   |    |   |   |   |   |   |
| Net cash provided by operating activities                                         |   |   | 7,709   |   |   |   | 3,909 |   |
|                                                                              |   |   |    |   |   |   |   |   |
| Cash flows from investing activities:                                             |   |   |    |   |   |   |   |   |
| Proceeds from the sale of available-for-sale investment securities                |   |   | 3,451   |   |   |   | 4,836 |   |
| Proceeds from matured and called available-for-sale investment securities         |   |   | 3,120   |   |   |   | 575 |   |
| Purchases of available-for-sale investment securities                             |   |   | (47,185 | )      |   |   | (13,351 | ) |
| Proceeds from principal repayments for available-for-sale investment securities   |   |   | 7,896   |   |   |   | 5,942 |   |
| Proceeds from principal repayments for held-to-maturity investment securities     |   |   | 3,967   |   |   |   | 6,463 |   |
| Net decrease in interest-bearing deposits in banks                                |   |   | — |   |   |   | 3,357 |   |
| Net decrease in loans                                                             |   |   | 16,740  |   |   |   | 5,675 |   |
| Proceeds from sale of other real estate                                           |   |   | 1,502   |   |   |   | 1,947 |   |
| Net decrease in accounts receivable servicing receivables                         |   |   | 40      |   |   |   | 1,192 |   |
| Purchases of equipment                                                            |   |   | (151    | )      |   |   | (334 | ) |
| Net decrease in FHLB stock                                                        |   |   | 146     |   |   |   | — |   |
|                                                                              |   |   |    |   |   |   |   |   |
| Net cash (used in) provided by investing activities                               |   |   | (10,474 | )      |   |   | 16,302 |   |

----

| (dollars in thousands)                                   |   |   |    |   |   |   |
|---------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| For the six months ended June 30,                        |   | 2010   |    |   | 2009   |   |
| Cash flows from financing activities:                         |   |   |    |   |   |   |
| Net increase in demand, interest-bearing and savings deposits |   | $      | 9,219   |   |   | $      | 10,774 |   |
| Net (decrease) increase in time deposits                      |   |   | (15,366 | )      |   |   | 1,774 |   |
| Net decrease in short-term borrowings                         |   |   | (5,000  | )      |   |   | (28,731 | ) |
| Net (decrease) increase in long-term borrowings               |   |   | (5,000  | )      |   |   | 7,500 |   |
| Payment of cash dividends                                     |   |   | — |   |   |   | (1,658 | ) |
| Exercise of stock options                                     |   |   | — |   |   |   | 22 |   |
| Tax benefit from exercise of stock options                    |   |   | — |   |   |   | 12 |   |
|                                                          |   |   |    |   |   |   |   |   |
| Net cash used in financing activities                         |   | $      | (16,147 | )      |   | $      | (10,307 | ) |
|                                                          |   |   |    |   |   |   |   |   |
| (Decrease) increase in cash and cash equivalents              |   |   | (18,912 | )      |   |   | 9,904 |   |
|                                                          |   |   |    |   |   |   |   |   |
| Cash and cash equivalents at beginning of year                |   |   | 58,493  |   |   |   | 15,170 |   |
|                                                          |   |   |    |   |   |   |   |   |
| Cash and cash equivalents at end of period                    |   | $      | 39,581  |   |   | $      | 25,074 |   |

----

----

| Options                        |   | Shares |    |   | Weighted Average Exercise Price |   |    | Weighted Average Remaining Contractual Term |   |      | Aggregate Intrinsic Value ($000) |   |
|--------------------------------|--------|--------|---------|--------|---------------------------------|--------|---------|---------------------------------------------|--------|-----------|----------------------------------|--------|
|                           |   |   |    |   |                            |   |    |                                        |   |      |                             |   |   |   |   |
| Outstanding at January 1, 2010 |   |   | 381,021 |   |                            | $      | 17.20   |                                        |   | 5.3 years |                             |   | $ | — |   |
| Granted                        |   |   | — |   |                            |   | — |                                        |   |      | —                          |   |   |   | — |   |
| Exercised                      |   |   | — |   |                            |   | — |                                        |   |      | —                          |   |   |   | — |   |
| Cancelled                      |   |   | (714    | )      |                            | $      | 22.59   |                                        |   |      | —                          |   |   |   | — |   |
| Outstanding at June 30, 2010   |   |   | 380,307 |   |                            | $      | 17.19   |                                        |   | 6.0 years |                             |   | $ | — |   |
|                           |   |   |    |   |                            |   |    |                                        |   |      |                             |   |   |   |   |
| Exercisable at June 30, 2010   |   |   | 254,052 |   |                            | $      | 18.16   |                                        |   | 5.2 years |                             |   | $ | — |   |

----

| Available-for-Sale                               |   |          |    |   |       |   |   |       |   |   |      |   |
|--------------------------------------------------|--------|---------------|---------|--------|------------|--------|--------|------------|--------|--------|-----------|--------|
|                                             |   | June 30, 2010 |    |
|                                             |   |          |    |   | Gross      |   |   | Gross      |   |   | Estimated |   |
|                                             |   | Amortized     |    |   | Unrealized |   |   | Unrealized |   |   | Fair      |   |
|                                             |   | Cost          |    |   | Gains      |   |   | Losses     |   |   | Value     |   |
| Debt securities:                                 |   |          |    |   |       |   |   |       |   |   |      |   |
| Mortgage-backed securities                       |   | $             | 110,911 |   |       | $      | 3,201  |       |   | $      | (68       | )      |   | $ | 114,044 |   |
| Obligations of states and political subdivisions |   |          | 16,817  |   |       |   | 470    |       |   |   | (18       | )      |   |   | 17,269 |   |
| Equity securities:                               |   |          |    |   |       |   |   |       |   |   |      |   |   |   |   |   |
| Corporate stock                                  |   |          | 78      |   |       |   | 8      |       |   |   | (7        | )      |   |   | 79 |   |
|                                             |   | $             | 127,806 |   |       | $      | 3,679  |       |   | $      | (93       | )      |   | $ | 131,392 |   |

----

|                                             |   | December 31, 2009 |   |
|--------------------------------------------------|--------|-------------------|--------|
|                                             |   |              |   |   | Gross |   |   | Gross |   |   | Estimated |   |
|                                             |   | Amortized         |   |   | Unrealized |   |   | Unrealized |   |   | Fair |   |
|                                             |   | Cost              |   |   | Gains |   |   | Losses |   |   | Value |   |
| Debt securities:                                 |   |              |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities                       |   | $                 | 75,823 |   |   | $ | 772 |   |   | $ | (586 | ) |   | $ | 76,009 |   |
| Obligations of states and political subdivisions |   |              | 20,400 |   |   |   | 347 |   |   |   | (160 | ) |   |   | 20,587 |   |
| Equity securities:                               |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporate stock                                  |   |              | 82     |   |   |   | 11 |   |   |   | (7 | ) |   |   | 86 |   |
|                                             |   | $                 | 96,305 |   |   | $ | 1,130 |   |   | $ | (753 | ) |   | $ | 96,682 |   |

| Held-to-Maturity           |   |                |   |   |       |   |   |        |   |   |      |   |
|----------------------------|--------|---------------------|--------|--------|------------|--------|--------|-------------|--------|--------|-----------|--------|
|                       |   | June 30, 2010  |   |
|                       |   |                |   |   | Gross      |   |   |  Gross |   |   | Estimated |   |
|                       |   | Amortized           |   |   | Unrealized |   |   | Unrealized  |   |   | Fair      |   |
|                       |   | Cost                |   |   | Gains      |   |   | Losses      |   |   | Value     |   |
| Debt securities:           |   |                |   |   |       |   |   |        |   |   |      |   |
| Mortgage-backed securities |   | $                   | 8,445  |   |       | $      | 448    |        |   | $      | —   |   |   | $ | 8,893 |   |

|                       |   | December 31, 2009 |   |
|----------------------------|--------|-------------------|--------|
|                       |   |              |   |   |   | Gross |   |   | Gross |   |   | Estimated |   |
|                       |   | Amortized         |   |   | Unrealized |   |   | Unrealized |   |   | Fair |   |
|                       |   | Cost              |   |   | Gains |   |   | Losses |   |   | Value |   |
| Debt securities:           |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities |   | $                 | 12,331 |   |   | $ | 558 |   |   | $ | — |   |   | $ | 12,889 |   |

----

|                                             |   | 2010                      |   |
|--------------------------------------------------|--------|---------------------------|--------|
|                                             |   |  Less than 12 Months |   |   |  12 Months or More |   |   | Total |   |
|                                             |   | Fair                      |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
|                                             |   | Value                     |   |   | Losses |   |   | Value |   |   | Losses |   |   | Value |   |   | Losses |   |
| Available-for-Sale                               |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                             |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Debt securities:                                 |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities                       |   | $                         | 9,580  |   |   | $ | (48 | ) |   | $ | 1,682 |   |   | $ | (20 | ) |   | $ | 11,262 |   |   | $ | (68 | ) |
| Obligations of states and political subdivisions |   |                      | 892    |   |   |   | (15 | ) |   |   | 292 |   |   |   | (3 | ) |   |   | 1,184 |   |   |   | (18 | ) |
| Corporate stock                                  |   |                      | 4      |   |   |   | (3 | ) |   |   | 5 |   |   |   | (4 | ) |   |   | 9 |   |   |   | (7 | ) |
|                                             |   | $                         | 10,476 |   |   | $ | (66 | ) |   | $ | 1,979 |   |   | $ | (27 | ) |   | $ |   12,455 |   |   | $ |   (93 | ) |

|                                             |   | 2009                      |   |
|--------------------------------------------------|--------|---------------------------|--------|
|                                             |   |  Less than 12 Months |   |   |  12 Months or More |   |   | Total |   |
|                                             |   | Fair                      |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
|                                             |   | Value                     |   |   | Losses |   |   | Value |   |   | Losses |   |   | Value |   |   | Losses |   |
| Available-for-Sale                               |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                             |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Debt securities:                                 |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities                       |   | $                         | 41,046 |   |   | $ | (527 | ) |   | $ | 2,752 |   |   | $ | (59 | ) |   | $ | 43,798 |   |   | $ | (586 | ) |
| Obligations of states and political subdivisions |   |                      | 4,081  |   |   |   | (80 | ) |   |   | 2,641 |   |   |   | (80 | ) |   |   | 6,722 |   |   |   | (160 | ) |
| Corporate stock                                  |   |                      | 5      |   |   |   | (3 | ) |   |   | 3 |   |   |   | (4 | ) |   |   | 8 |   |   |   | (7 | ) |
|                                             |   | $                         | 45,132 |   |   | $ | (610 | ) |   | $ | 5,396 |   |   | $ | (143 | ) |   | $ | 50,528 |   |   | $ | (753 | ) |

----

|                                                     |   | Available-for-Sale |    |   | Held-to-Maturity |   |
|----------------------------------------------------------|--------|--------------------|---------|--------|------------------|--------|
|                                                     |   |               |    |   | Estimated        |   |   |   |   |   | Estimated |   |
|                                                     |   | Amortized          |    |   | Fair             |   |   | Amortized |   |   | Fair |   |
|                                                     |   | Cost               |    |   | Value            |   |   | Cost |   |   | Value |   |
|                                                     |   |               |    |   |             |   |   |   |   |   |   |   |
| Within one year                                          |   | $                  | 771     |   |             | $      | 776 |   |   |   |   |   |   |   |
| After one year through five years                        |   |               | 7,058   |   |             |   | 7,252 |   |   |   |   |   |   |   |
| After five years through ten years                       |   |               | 4,416   |   |             |   | 4,576 |   |   |   |   |   |   |   |
| After ten years                                          |   |               | 4,572   |   |             |   | 4,665 |   |   |   |   |   |   |   |
|                                                     |   |               | 16,817  |   |             |   | 17,269 |   |   |   |   |   |   |   |
| Investment securities not due at a single maturity date: |   |               |    |   |             |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities                               |   |               | 110,911 |   |             |   | 114,044 |   |   | $ | 8,445 |   |   | $ | 8,893 |   |
| Corporate stock                                          |   |               | 78      |   |             |   | 79 |   |   |   |   |   |   |   |   |   |
|                                                     |   | $                  | 127,806 |   |             | $      | 131,392 |   |   | $ | 8,445 |   |   | $ | 8,893 |   |

----

| (in thousands)                                           |   | June 30, 2010 |    |   | December 31, 2009 |   |
|----------------------------------------------------------|--------|---------------|---------|--------|-------------------|--------|
|                                                     |   |          |    |   |              |   |
| Nonaccrual loans and leases that are current to terms    |   | $             | 2,284   |   |              | $      | 2,133 |   |
| Nonaccrual loans and leases that are past due            |   |          | 16,975  |   |              |   | 18,831 |   |
| Loans and leases past due 90 days and accruing interest  |   |          | — |   |              |   | — |   |
| Other real estate owned                                  |   |          | 3,219   |   |              |   | 2,508 |   |
| Total nonperforming assets                               |   | $             | 22,478  |   |              | $      | 23,472 |   |
|                                                     |   |          |    |   |              |   |   |   |
| Nonperforming loans and leases to total loans and leases |   |          | 5.34    | %      |              |   | 5.46 | % |
| Total nonperforming assets to total assets               |   |          | 3.88    | %      |              |   | 3.95 | % |

----

|                                            |   | June 30, 2010 |    |   | December 31, 2009 |   |
|-------------------------------------------------|--------|---------------|---------|--------|-------------------|--------|
|                                            |   |          |    |   | Estimated         |   |   |   |   |   | Estimated |   |
|                                            |   | Carrying      |    |   | Fair              |   |   | Carrying |   |   | Fair |   |
|                                            |   | Amount        |    |   | Value             |   |   | Amount |   |   | Value |   |
| Financial assets:                               |   |          |    |   |              |   |   |   |   |   |   |   |
|                                            |   |          |    |   |              |   |   |   |   |   |   |   |
| Cash and cash equivalents                       |   | $             | 39,581  |   |              | $      | 39,581 |   |   | $ | 58,493 |   |   | $ | 58,493 |   |
| Investment securities                           |   |          | 139,837 |   |              |   | 140,285 |   |   |   | 109,013 |   |   |   | 109,571 |   |
| Loans and leases, net                           |   |          | 353,409 |   |              |   | 347,883 |   |   |   | 376,322 |   |   |   | 370,057 |   |
| FHLB stock                                      |   |          | 3,776   |   |              |   | 3,776 |   |   |   | 3,922 |   |   |   | 3,922 |   |
| Accounts receivable servicing receivables       |   |          | — |   |              |   | — |   |   |   | 35 |   |   |   | 35 |   |
| Accrued interest receivable                     |   |          | 1,879   |   |              |   | 1,879 |   |   |   | 1,941 |   |   |   | 1,941 |   |
| Cash surrender value of life insurance policies |   |          | 10,869  |   |              |   | 10,869 |   |   |   | 10,742 |   |   |   | 10,742 |   |
|                                            |   |          |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities:                          |   |          |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
|                                            |   |          |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                        |   | $             | 463,608 |   |              | $      | 464,313 |   |   | $ | 469,755 |   |   | $ | 470,530 |   |
| Short-term borrowings                           |   |          | 9,500   |   |              |   | 9,500 |   |   |   | 14,500 |   |   |   | 14,500 |   |
| Long-term borrowings                            |   |          | 12,000  |   |              |   | 12,482 |   |   |   | 17,000 |   |   |   | 17,816 |   |
| Accrued interest payable                        |   |          | 326     |   |              |   | 326 |   |   |   | 344 |   |   |   | 344 |   |

----

----

|                                                     |   |       |    |   | Fair Value Measurements Using                                  |   |    |                             |   |
|----------------------------------------------------------|--------|------------|---------|--------|----------------------------------------------------------------|--------|---------|----------------------------------|--------|
|  Description(dollars in thousands)                  |   | Fair Value |    |   | Quoted Prices in Active Markets for Identical Assets (Level 1) |   |    | Other Observable Inputs(Level 2) |   |   | Significant UnobservableInputs (Level 3) |   |   | TotalLosses |   |
| June 30, 2010                                            |   |       |    |   |                                                           |   |    |                             |   |   |   |   |   |   |   |
| Assets and liabilities measured on a recurring basis:    |   |       |    |   |                                                           |   |    |                             |   |   |   |   |   |   |   |
| Available-for-sale securities                            |   | $          | 131,392 |   |                                                           | $      | 75      |                             |   | $ | 131,317 |   |   | $ | — |   |   |   | N/A |   |
|                                                     |   |       |    |   |                                                           |   |    |                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets and liabilities measured on a nonrecurring basis: |   |       |    |   |                                                           |   |    |                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Impaired loans                                           |   | $          | 17,854  |   |                                                           | $      | — |                             |   | $ | 16,210 |   |   | $ | 1,644 |   |   | $ | (2,144 | ) |
| Other real estate owned                                  |   |       | 3,219   |   |                                                           |   | — |                             |   |   | 3,219 |   |   |   | — |   |   |   | (405 | ) |
| Total                                                    |   | $          | 21,073  |   |                                                           | $      | — |                             |   | $ | 19,429 |   |   | $ | 1,644 |   |   | $ | (2,549 | ) |
|                                                     |   |
| December 31, 2009                                        |   |       |    |   |                                                           |   |    |                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets and liabilities measured on a recurring basis:    |   |       |    |   |                                                           |   |    |                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Available-for-sale securities                            |   | $          | 96,682  |   |                                                           | $      | 78      |                             |   | $ | 96,604 |   |   | $ | — |   |   |   | N/A |   |
|                                                     |   |       |    |   |                                                           |   |    |                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets and liabilities measured on a nonrecurring basis: |   |       |    |   |                                                           |   |    |                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Impaired loans                                           |   | $          | 18,461  |   |                                                           | $      | — |                             |   | $ | 16,081 |   |   | $ | 2,380 |   |   | $ | (3,633 | ) |
| Other real estate owned                                  |   |       | 2,508   |   |                                                           |   | — |                             |   |   | 2,508 |   |   |   | — |   |   |   | (1,089 | ) |
| Total                                                    |   | $          | 20,969  |   |                                                           | $      | — |                             |   | $ | 18,859 |   |   | $ | 2,380 |   |   | $ | (4,722 | ) |

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----

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

|   | ● | the duration of financial and economic volatility and decline and actions taken by the United States Congress and governmental agencies, including the United States Department of the Treasury, to deal with challenges to the U.S. financial system;                                                                                                    |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ● | the risks presented by a continued economic recession, which could adversely affect credit quality, collateral values, including real estate collateral, investment values, liquidity and loan originations and loan portfolio delinquency rates;                                                                                                         |
|   | ● | variances in the actual versus projected growth in assets and return on assets;                                                                                                                                                                                                                                                                           |
|   | ● | potential continued or increasing loan and lease losses;                                                                                                                                                                                                                                                                                                  |
|   | ● | potential increasing levels of expenses associated with resolving nonperforming assets as well as regulatory changes;                                                                                                                                                                                                                                     |
|   | ● | changes in the interest rate environment including interest rates charged on loans, earned on securities investments and paid on deposits and other borrowed funds;                                                                                                                                                                                       |
|   | ● | competitive effects;                                                                                                                                                                                                                                                                                                                                      |
|   | ● | potential declines in fee and other noninterest income earned associated with economic factors as well as regulatory changes;                                                                                                                                                                                                                             |
|   | ● | general economic conditions nationally, regionally, and within our operating markets could be less favorable than expected or could have a more direct and pronounced effect on us than expected and adversely affect our ability to continue internal growth at historical rates and maintain the quality of our earning assets;                         |
|   | ● | changes in the regulatory environment including government intervention in the U.S. financial system;                                                                                                                                                                                                                                                     |
|   | ● | changes in business conditions and inflation;                                                                                                                                                                                                                                                                                                             |
|   | ● | changes in securities markets, public debt markets, and other capital markets;                                                                                                                                                                                                                                                                            |
|   | ● | potential data processing and other operational systems failures or fraud;                                                                                                                                                                                                                                                                                |
|   | ● | potential continued decline in real estate values in our operating markets;                                                                                                                                                                                                                                                                               |
|   | ● | the effects of uncontrollable events such as terrorism, the threat of terrorism or the impact of the current military conflicts in Afghanistan and Iraq and the conduct of the war on terrorism by the United States and its allies, worsening financial and economic conditions, natural disasters, and disruption of power supplies and communications; |

----

|   | ● | changes in accounting standards, tax laws or regulations and interpretations of such standards, laws or regulations;                                                                                      |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ● | projected business increases following any future strategic expansion could be lower than expected;                                                                                                       |
|   | ● | the goodwill we have recorded in connection with acquisitions could become impaired, which may have an adverse impact on our earnings;                                                                    |
|   | ● | the reputation of the financial services industry could experience further deterioration, which could adversely affect our ability to access markets for funding and to acquire and retain customers; and |
|   | ● | the efficiencies we may expect to receive from any investments in personnel and infrastructure may not be realized.                                                                                       |

----

----

----

| Table One: Components of Net Income                                    |   |
|------------------------------------------------------------------------|--------|
|                                                                   |   | For the three monthsended June 30, |   |   | For the six monthsended June 30, |   |
| (dollars in thousands)                                                 |   | 2010 |   |   | 2009 |   |   | 2010 |   |   | 2009 |   |
|                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income*                                                   |   | $ | 5,635 |   |   | $ | 6,102 |   |   | $ | 11,464 |   |   | $ | 12,527 |   |
| Provision for loan and lease losses                                    |   |   | (2,011 | ) |   |   | (3,800 | ) |   |   | (3,652 | ) |   |   | (5,029 | ) |
| Noninterest income                                                     |   |   | 460 |   |   |   | 649 |   |   |   | 921 |   |   |   | 1,159 |   |
| Noninterest expense                                                    |   |   | (4,055 | ) |   |   | (4,239 | ) |   |   | (8,240 | ) |   |   | (7,840 | ) |
| Benefit (provision) for income taxes                                   |   |   | 78 |   |   |   | 668 |   |   |   | (23 | ) |   |   | (68 | ) |
| Tax equivalent adjustment                                              |   |   | (53 | ) |   |   | (84 | ) |   |   | (110 | ) |   |   | (170 | ) |
|                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                                      |   | $ | 54 |   |   | $ | (704 | ) |   | $ | 360 |   |   | $ | 579 |   |
|                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average total assets                                                   |   | $ | 584,511 |   |   | $ | 569,098 |   |   | $ | 584,428 |   |   | $ | 573,322 |   |
| Net income (loss) (annualized) as a percentage of average total assets |   |   | 0.04 | % |   |   | (0.50 | %) |   |   | 0.12 | % |   |   | 0.20 | % |

----

----

----

| Table Two: Analysis of Net Interest Margin on Earning Assets |   |
|--------------------------------------------------------------|--------|
| Three Months Ended June 30,                                  |   | 2010 |   |   | 2009  |   |
| (Taxable Equivalent Basis)(dollars in thousands)             |   | AvgBalance |   |   | Interest |   |   | AvgYield (4) |   |   | AvgBalance |   |   | Interest |   |   | AvgYield (4) |   |
|                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earning assets:                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans and leases (1)                                         |   | $ | 365,388 |   |   | $ | 5,580 |   |   | 6.13 | % |   | $ | 410,959 |   |   | $ | 6,364 |   |   | 6.21 | % |
| Taxable investment securities                                |   |   | 118,768 |   |   |   | 726 |   |   | 2.45 | % |   |   | 63,584 |   |   |   | 676 |   |   | 4.26 | % |
| Tax-exempt investment securities (2)                         |   |   | 15,793 |   |   |   | 215 |   |   | 5.46 | % |   |   | 25,450 |   |   |   | 339 |   |   | 5.34 | % |
| Corporate stock (2)                                          |   |   | 26 |   |   |   | 5 |   |   | 77.13 | % |   |   | 27 |   |   |   | 6 |   |   | 89.13 | % |
| Federal funds sold                                           |   |   | — |   |   |   | — |   |   | — |   |   |   | 6 |   |   |   | — |   |   | 0.00 | % |
| Investments in time deposits                                 |   |   | — |   |   |   | — |   |   | — |   |   |   | 2,429 |   |   |   | 20 |   |   | 3.30 | % |
| Total earning assets                                         |   |   | 499,975 |   |   |   | 6,526 |   |   | 5.24 | % |   |   | 502,455 |   |   |   | 7,405 |   |   | 5.91 | % |
| Cash & due from banks                                    |   |   | 49,838 |   |   |   |   |   |   |   |   |   |   | 34,679 |   |   |   |   |   |   |   |   |
| Other assets                                                 |   |   | 43,414 |   |   |   |   |   |   |   |   |   |   | 38,122 |   |   |   |   |   |   |   |   |
| Allowance for loan & lease losses                        |   |   | (8,716 | ) |   |   |   |   |   |   |   |   |   | (6,158 | ) |   |   |   |   |   |   |   |
|                                                         |   | $ | 584,511 |   |   |   |   |   |   |   |   |   | $ | 569,098 |   |   |   |   |   |   |   |   |
|                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities & Shareholders’ Equity                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest bearing liabilities:                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest checking and money market                           |   | $ | 181,892 |   |   |   | 343 |   |   | 0.76 | % |   | $ | 155,630 |   |   |   | 323 |   |   | 0.83 | % |
| Savings                                                      |   |   | 40,783 |   |   |   | 58 |   |   | 0.57 | % |   |   | 33,380 |   |   |   | 54 |   |   | 0.65 | % |
| Time deposits                                                |   |   | 124,612 |   |   |   | 360 |   |   | 1.16 | % |   |   | 139,844 |   |   |   | 621 |   |   | 1.78 | % |
| Other borrowings                                             |   |   | 21,775 |   |   |   | 130 |   |   | 2.39 | % |   |   | 54,213 |   |   |   | 305 |   |   | 2.26 | % |
| Total interest bearing liabilities                           |   |   | 369,062 |   |   |   | 891 |   |   | 0.97 | % |   |   | 383,067 |   |   |   | 1,303 |   |   | 1.36 | % |
| Noninterest bearing demand deposits                          |   |   | 121,803 |   |   |   |   |   |   |   |   |   |   | 116,091 |   |   |   |   |   |   |   |   |
| Other liabilities                                            |   |   | 4,743 |   |   |   |   |   |   |   |   |   |   | 5,842 |   |   |   |   |   |   |   |   |
| Total liabilities                                            |   |   | 495,608 |   |   |   |   |   |   |   |   |   |   | 505,000 |   |   |   |   |   |   |   |   |
| Shareholders’ equity                                   |   |   | 88,903 |   |   |   |   |   |   |   |   |   |   | 64,098 |   |   |   |   |   |   |   |   |
|                                                         |   | $ | 584,511 |   |   |   |   |   |   |   |   |   | $ | 569,098 |   |   |   |   |   |   |   |   |
| Net interest income & margin (3)                         |   |   |   |   |   | $ | 5,635 |   |   | 4.52 | % |   |   |   |   |   | $ | 6,102 |   |   | 4.87 | % |

| (1) | Loan interest includes loan fees of $3,000 and loan costs of $7,000, respectively, during three months ending June 30, 2010 and June 30, 2009. Average loan balances include non-performing loans.          |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Includes taxable-equivalent adjustments that primarily relate to income on certain securities that is exempt from federal income taxes. The effective federal statutory tax rate was 34% for 2010 and 2009. |
| (3) | Net interest margin is computed by dividing net interest income by total average earning assets.                                                                                                            |
| (4) | Average yield is calculated based on actual days in the quarter (91 days) and annualized to actual days in the year (365 days).                                                                             |

----

| Six Months Ended June 30,                        |   | 2010       |    |   | 2009     |   |
|--------------------------------------------------|--------|------------|---------|--------|----------|--------|
| (Taxable Equivalent Basis)(dollars in thousands) |   | AvgBalance |    |   | Interest |   |   | AvgYield (4) |   |   | AvgBalance |   |   | Interest |   |   | AvgYield (4) |   |
|                                             |   |       |    |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets                                           |   |       |    |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earning assets:                                  |   |       |    |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans and leases (1)                             |   | $          | 371,816 |   |     | $      | 11,417 |   |   | 6.19 | % |   | $ | 414,347 |   |   | $ | 13,082 |   |   | 6.37 | % |
| Taxable investment securities                    |   |       | 112,133 |   |     |   | 1,434 |   |   | 2.58 | % |   |   | 64,113 |   |   |   | 1,411 |   |   | 4.44 | % |
| Tax-exempt investment securities (2)             |   |       | 16,082  |   |     |   | 440 |   |   | 5.52 | % |   |   | 25,981 |   |   |   | 690 |   |   | 5.36 | % |
| Corporate stock (2)                              |   |       | 26      |   |     |   | 6 |   |   | 46.54 | % |   |   | 19 |   |   |   | 6 |   |   | 63.68 | % |
| Federal funds sold                               |   |       | — |   |     |   | — |   |   | 0.00 | % |   |   | 22 |   |   |   | — |   |   | 0.00 | % |
| Interest-bearing deposits in banks               |   |       | — |   |     |   | — |   |   | 0.00 | % |   |   | 2,943 |   |   |   | 53 |   |   | 3.63 | % |
| Total earning assets                             |   |       | 500,057 |   |     |   | 13,297 |   |   | 5.36 | % |   |   | 507,425 |   |   |   | 15,242 |   |   | 6.06 | % |
| Cash & due from banks                        |   |       | 48,398  |   |     |   |   |   |   |   |   |   |   | 29,843 |   |   |   |   |   |   |   |   |
| Other assets                                     |   |       | 44,482  |   |     |   |   |   |   |   |   |   |   | 42,037 |   |   |   |   |   |   |   |   |
| Allowance for loan & lease losses            |   |       | (8,509  | )      |     |   |   |   |   |   |   |   |   | (5,983 | ) |   |   |   |   |   |   |   |
|                                             |   | $          | 584,428 |   |     |   |   |   |   |   |   |   | $ | 573,322 |   |   |   |   |   |   |   |   |
|                                             |   |       |    |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities & Shareholders’ Equity     |   |       |    |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                    |   |       |    |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest checking and money market               |   | $          | 181,751 |   |     |   | 693 |   |   | 0.77 | % |   | $ | 153,033 |   |   |   | 641 |   |   | 0.84 | % |
| Savings                                          |   |       | 39,437  |   |     |   | 115 |   |   | 0.59 | % |   |   | 32,904 |   |   |   | 108 |   |   | 0.66 | % |
| Time deposits                                    |   |       | 126,480 |   |     |   | 751 |   |   | 1.20 | % |   |   | 136,767 |   |   |   | 1,330 |   |   | 1.96 | % |
| Other borrowings                                 |   |       | 22,633  |   |     |   | 274 |   |   | 2.44 | % |   |   | 65,865 |   |   |   | 636 |   |   | 1.95 | % |
| Total interest-bearing liabilities               |   |       | 370,301 |   |     |   | 1,833 |   |   | 1.00 | % |   |   | 388,569 |   |   |   | 2,715 |   |   | 1.41 | % |
| Noninterest-bearing demand deposits              |   |       | 119,998 |   |     |   |   |   |   |   |   |   |   | 114,844 |   |   |   |   |   |   |   |   |
| Other liabilities                                |   |       | 5,629   |   |     |   |   |   |   |   |   |   |   | 5,949 |   |   |   |   |   |   |   |   |
| Total liabilities                                |   |       | 495,928 |   |     |   |   |   |   |   |   |   |   | 509,362 |   |   |   |   |   |   |   |   |
| Shareholders’ equity                       |   |       | 88,500  |   |     |   |   |   |   |   |   |   |   | 63,960 |   |   |   |   |   |   |   |   |
|                                             |   | $          | 584,428 |   |     |   |   |   |   |   |   |   | $ | 573,322 |   |   |   |   |   |   |   |   |
| Net interest income & margin (3)             |   |       |    |   |     | $      | 11,464 |   |   | 4.62 | % |   |   |   |   |   | $ | 12,527 |   |   | 4.98 | % |

| (1) | Loan interest includes loan fees of $24,000 and $3,000, respectively, during the six months ending June 30, 2010 and June 30, 2009. Average loan balances include non-performing loans.                     |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Includes taxable-equivalent adjustments that primarily relate to income on certain securities that is exempt from federal income taxes. The effective federal statutory tax rate was 34% for 2010 and 2009. |
| (3) | Net interest margin is computed by dividing net interest income by total average earning assets.                                                                                                            |
| (4) | Average yield is calculated based on actual days in the period (181days) and annualized to actual days in the year (365 days).                                                                              |

----

| Table Three: Analysis of Volume and Rate Changes on Net Interest Income and Expenses |   |
|--------------------------------------------------------------------------------------|--------|
| Three Months Ended June 30, 2010 over 2009 (dollars in thousands)                    |   |
| Increase (decrease) due to change in:                                                |   |

|                                 |   | Volume |    |   | Rate (4) |   |       | Net Change |   |
|--------------------------------------|--------|--------|---------|--------|----------|--------|------------|------------|--------|
| Interest-earning assets:             |   |   |    |   |     |   |       |       |   |   |   |   |
| Net loans (1)(2)                     |   | $      | (706    | )      |     | $      | (78        | )          |   | $ | (784 | ) |
| Taxable investment securities        |   |   | 587     |   |     |   | (537       | )          |   |   | 50 |   |
| Tax exempt investment securities (3) |   |   | (129    | )      |     |   | 5          |       |   |   | (124 | ) |
| Corporate stock                      |   |   | — |   |     |   | (1         | )          |   |   | (1 | ) |
| Federal funds sold                   |   |   | — |   |     |   | —    |       |   |   | — |   |
| Interest-bearing deposits in banks   |   |   | (20     | )      |     |   | —    |       |   |   | (20 | ) |
| Total                                |   |   | (268    | )      |     |   | (611       | )          |   |   | (879 | ) |
| Interest-bearing liabilities:        |   |   |    |   |     |   |       |       |   |   |   |   |
| Interest checking and money market   |   |   | 55      |   |     |   | (35        | )          |   |   | 20 |   |
| Savings deposits                     |   |   | 12      |   |     |   | (8         | )          |   |   | 4 |   |
| Time deposits                        |   |   | (68     | )      |     |   | (193       | )          |   |   | (261 | ) |
| Other borrowings                     |   |   | (182    | )      |     |   | 7          |       |   |   | (175 | ) |
| Total                                |   |   | (183    | )      |     |   |  (229 | )          |   |   | (412 | ) |
| Interest differential                |   | $      | (85     | )      |     | $      | (382       | )          |   | $ | (467 | ) |

| Six Months Ended June 30, 2010 over 2009 (dollars in thousands) |   |
|-----------------------------------------------------------------|--------|
| Increase (decrease) due to change in:                           |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |   | Volume |   |   | Rate (4) |   |   | Net Change |   |
| Interest-earning assets:                                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loans (1)(2)                                                |   | $ | (1,343 | ) |   | $ | (322 | ) |   | $ | (1,665 | ) |
| Taxable investment securities                                   |   |   | 1,057 |   |   |   | (1,034 | ) |   |   | 23 |   |
| Tax exempt investment securities (3)                            |   |   | (263 | ) |   |   | 13 |   |   |   | (250 | ) |
| Corporate stock                                                 |   |   | 2 |   |   |   | (2 | ) |   |   | — |   |
| Federal funds sold                                              |   |   | — |   |   |   | — |   |   |   | — |   |
| Interest-bearing deposits in banks                              |   |   | (53 | ) |   |   | — |   |   |   | (53 | ) |
| Total                                                           |   |   | (600 | ) |   |   | (1,345 | ) |   |   | (1,945 | ) |
| Interest-bearing liabilities:                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest checking and money market                              |   |   | 120 |   |   |   | (68 | ) |   |   | 52 |   |
| Savings deposits                                                |   |   | 21 |   |   |   | (14 | ) |   |   | 7 |   |
| Time deposits                                                   |   |   | (100 | ) |   |   | (479 | ) |   |   | (579 | ) |
| Other borrowings                                                |   |   | (417 | ) |   |   | 55 |   |   |   | (362 | ) |
| Total                                                           |   |   | (376 | ) |   |   |  (506 | ) |   |   | (882 | ) |
| Interest differential                                           |   | $ | (224 | ) |   | $ | (839 | ) |   | $ | (1,063 | ) |

----

| (1) | The average balance of non-accruing loans is immaterial as a percentage of total loans and, as such, has been included in net loans.                                                                                                                                                                |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Loan fees of $3,000 and loan costs of $7,000, respectively, during the three months ending June 30, 2010 and June 30, 2009, and loan fees of $24,000 and $3,000, respectively, during the six months ending June 30, 2010 and June 30, 2009, have been included in the interest income computation. |
| (3) | Includes taxable-equivalent adjustments that primarily relate to income on certain securities that is exempt from federal income taxes. The effective federal statutory tax rate was 34% for 2010 and 2009.                                                                                         |
| (4) | The rate/volume variance has been included in the rate variance.                                                                                                                                                                                                                                    |

----

| Table Four: Components of Noninterest Income |   |
|----------------------------------------------|--------|
|                                         |   | Three Months Ended June 30, |   |   | Six MonthsEnded June 30, |   |
|                                         |   | 2010 |   |   | 2009 |   |   | 2010 |   |   | 2009 |   |
| Service charges on deposit accounts          |   | $ | 232 |   |   | $ | 251 |   |   | $ | 465 |   |   | $ | 493 |   |
| Gain (loss) on sale of securities            |   |   | (7 | ) |   |   | 160 |   |   |   | (5 | ) |   |   | 160 |   |
| Merchant fee income                          |   |   | 104 |   |   |   | 112 |   |   |   | 201 |   |   |   | 221 |   |
| Bank owned life insurance                    |   |   | 69 |   |   |   | 59 |   |   |   | 127 |   |   |   | 116 |   |
| Other                                        |   |   | 62 |   |   |   | 67 |   |   |   | 133 |   |   |   | 169 |   |
|  Total noninterest income               |   | $ | 460 |   |   | $ | 649 |   |   | $ | 921 |   |   | $ | 1,159 |   |

----

----

| Table Five: Investment Securities Composition    |   |
|--------------------------------------------------|--------|
| (dollars in thousands)                      |   |   |   |   |   |   |
|                                             |   |   |   |   |   |   |
| Available-for-sale (at fair value)               |   | June 30, 2010 |   |   | December 31, 2009 |   |
| Debt securities:                                 |   |   |   |   |   |   |
| Mortgage-backed securities                       |   | $ | 114,045 |   |   | $ | 76,009 |   |
| Obligations of states and political subdivisions |   |   | 17,269 |   |   |   | 20,587 |   |
| Corporate stock                                  |   |   | 78 |   |   |   | 86 |   |
| Total available-for-sale investment securities   |   | $ | 131,392 |   |   | $ | 96,682 |   |
| Held-to-maturity (at amortized cost)             |   |   |   |   |   |   |   |   |
| Debt securities:                                 |   |   |   |   |   |   |   |   |
| Mortgage-backed securities                       |   | $ | 8,445 |   |   | $ | 12,331 |   |
| Total held-to-maturity investment securities     |   | $ | 8,445 |   |   | $ | 12,331 |   |

----

| Table Six: Loan and Lease Portfolio Composition |   |
|-------------------------------------------------|--------|
| (dollars in thousands)                          |   | June 30, 2010 |   |   | December 31, 2009 |   |   | Change in |   |   | Percentage |   |
|                                            |   | $ |   |   | % |   |   | $ |   |   | % |   |   | dollars |   |   | change |   |
|                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                      |   | $ | 61,819 |   |   |   | 17 | % |   | $ | 72,621 |   |   |   | 19 | % |   | $ | (10,802 | ) |   |   | (14.9 | %) |
| Real estate                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                      |   |   | 216,451 |   |   |   | 60 | % |   |   | 223,685 |   |   |   | 58 | % |   |   | (7,234 | ) |   |   | (3.2 | %) |
| Multi-family                                    |   |   | 8,164 |   |   |   | 2 | % |   |   | 8,476 |   |   |   | 2 | % |   |   | (312 | ) |   |   | (3.7 | %) |
| Construction                                    |   |   | 20,733 |   |   |   | 6 | % |   |   | 27,482 |   |   |   | 7 | % |   |   | (6,749 | ) |   |   | (24.6 | %) |
| Residential                                     |   |   | 29,879 |   |   |   | 8 | % |   |   | 26,922 |   |   |   | 7 | % |   |   | 2,957 |   |   |   | 11.0 | % |
| Lease financing receivable                      |   |   | 3,253 |   |   |   | 1 | % |   |   | 3,920 |   |   |   | 1 | % |   |   | (667 | ) |   |   | (17.0 | %) |
| Agriculture                                     |   |   | 7,259 |   |   |   | 2 | % |   |   | 7,472 |   |   |   | 2 | % |   |   | (213 | ) |   |   | (2.9 | %) |
| Consumer                                        |   |   | 13,795 |   |   |   | 4 | % |   |   | 14,253 |   |   |   | 4 | % |   |   | (458 | ) |   |   | (3.2 | %) |
| Total loans and leases                          |   |   | 361,353 |   |   |   | 100 | % |   |   | 384,831 |   |   |   | 100 | % |   |   | (23,478 | ) |   |   | (6.1 | %) |
| Deferred loan and lease fees, net               |   |   | (503 | ) |   |   |   |   |   |   | (600 | ) |   |   |   |   |   |   | 97 |   |   |   |   |   |
| Allowance for loan and lease losses             |   |   | (7,441 | ) |   |   |   |   |   |   | (7,909 | ) |   |   |   |   |   |   | 468 |   |   |   |   |   |
| Total net loans and leases                      |   | $ | 353,409 |   |   |   |   |   |   | $ | 376,322 |   |   |   |   |   |   | $ | (22,913 | ) |   |   | (6.1 | %) |

----

----

----

| Table Seven: Nonperforming Loans and Leases |   |
|---------------------------------------------|--------|
| (dollars in thousands)                      |   | June 30, 2010 |   |   | December 31, 2009 |   |
| Past due 90 days or more and still accruing |   |   |   |
| Commercial                                  |   | $ | — |   |   | $ | — |   |
| Real estate                                 |   |   | — |   |   |   | — |   |
| Lease financing receivable                  |   |   | — |   |   |   | — |   |
| Consumer and other                          |   |   | — |   |   |   | — |   |
| Nonaccrual                                  |   |   |   |   |   |   |   |   |
| Commercial                                  |   |   | 3,282 |   |   |   | 6,143 |   |
| Real estate                                 |   |   | 15,651 |   |   |   | 14,048 |   |
| Lease financing receivable                  |   |   | 36 |   |   |   | 55 |   |
| Consumer and other                          |   |   | 290 |   |   |   | 718 |   |
| Total nonperforming loans and leases        |   | $ | 19,259 |   |   | $ | 20,964 |   |

----

----

| Table Eight: Allowance for Loan and Lease Losses                                                      |   |
|-------------------------------------------------------------------------------------------------------|--------|
|                                                                                                  |   | Three MonthsEnded June 30, |   |   | Six MonthsEnded June 30, |   |
| (dollars in thousands)                                                                                |   | 2010 |   |   | 2009 |   |   | 2010 |   |   | 2009 |   |
|                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Average loans and leases outstanding                                                                  |   | $ | 365,338 |   |   | $ | 410,959 |   |   | $ | 371,816 |   |   | $ | 414,347 |   |
|                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan and lease losses at beginning of period                                            |   | $ | 8,380 |   |   | $ | 5,839 |   |   | $ | 7,909 |   |   | $ | 5,918 |   |
|                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans and leases charged off:                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                                                                            |   |   | (699 | ) |   |   | (655 | ) |   |   | (1,698 | ) |   |   | (665 | ) |
| Real estate                                                                                           |   |   | (2,198 | ) |   |   | (1,203 | ) |   |   | (2,350 | ) |   |   | (2,496 | ) |
| Lease financing receivable                                                                            |   |   | — |   |   |   | (15 | ) |   |   | — |   |   |   | (15 | ) |
| Consumer                                                                                              |   |   | (73 | ) |   |   | (23 | ) |   |   | (172 | ) |   |   | (30 | ) |
| Total                                                                                                 |   |   | (2,970 | ) |   |   | (1,896 | ) |   |   | (4,219 | ) |   |   | (3,206 | ) |
| Recoveries of loans and leases previously charged off:                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                                                                            |   |   | — |   |   |   | 13 |   |   |   | 63 |   |   |   | 13 |   |
| Real estate                                                                                           |   |   | 20 |   |   |   | 1 |   |   |   | 36 |   |   |   | 1 |   |
| Lease financing receivable                                                                            |   |   | — |   |   |   | 1 |   |   |   | — |   |   |   | 3 |   |
| Consumer                                                                                              |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Total                                                                                                 |   |   | 20 |   |   |   | 15 |   |   |   | 99 |   |   |   | 17 |   |
| Net loans and leases charged off                                                                      |   |   | (2,950 | ) |   |   | (1,881 | ) |   |   | (4,120 | ) |   |   | (3,189 | ) |
| Additions to allowance charged to operating expenses                                                  |   |   | 2,011 |   |   |   | 3,800 |   |   |   | 3,652 |   |   |   | 5,029 |   |
| Allowance for loan and lease losses at end of period                                                  |   | $ | 7,441 |   |   | $ | 7,758 |   |   | $ | 7,441 |   |   | $ | 7,758 |   |
| Ratio of net charge-offs to average loans and Leases outstanding (annualized)                         |   |   | 3.24 | % |   |   | 1.84 | % |   |   | 2.23 | % |   |   | 1.55 | % |
| Provision of allowance for loan and lease losses to average loans and leases outstanding (annualized) |   |   | 2.21 | % |   |   | 3.71 | % |   |   | 1.98 | % |   |   | 2.45 | % |
| Allowance for loan and lease losses to loans and leases net of deferred fees at end of period         |   |   | 2.06 | % |   |   | 1.91 | % |   |   | 2.06 | % |   |   | 1.91 | % |

----

| Table Nine: Other Borrowed Funds |
|----------------------------------|
| (dollars in thousands)           |

|                   |   | June 30, 2010 |   |   | December 31, 2009 |   |
|------------------------|--------|---------------|--------|--------|-------------------|--------|
|                   |   | Amount        |   |   | Rate              |   |   | Amount |   |   | Rate |   |
| Short-term borrowings: |   |          |   |   |              |   |   |   |   |   |   |   |
| FHLB advances          |   | $             | 9,500  |   |              |   | 2.10 | % |   | $ | 14,500 |   |   |   | 2.84 | % |
| Long-term borrowings:  |   |          |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| FHLB advances          |   | $             | 12,000 |   |              |   | 2.63 | % |   | $ | 17,000 |   |   |   | 2.40 | % |

|          |   | Short-term   |   |   | Long-term    |   |
|---------------|--------|--------------|--------|--------|--------------|--------|
| Amount        |   | $            | 9,500  |   |         | $      | 12,000 |   |
| Maturity      |   | 2010 to 2011 |   |   | 2011 to 2014 |   |
| Average rates |   |         | 2.10   | %      |         |   | 2.63 | % |

----

| Table Ten: Capital Ratios       |
|---------------------------------|
| Capital to Risk-Adjusted Assets |   | At June 30, 2010 |   | At December 31, 2009 |   | Minimum RegulatoryCapital Requirements |
| Leverage ratio                  |   | 12.5 | % |   | 12.4 | % |   | 4.00 | % |
| Tier 1 Risk-Based Capital       |   | 18.4 | % |   | 17.1 | % |   | 4.00 | % |
| Total Risk-Based Capital        |   | 19.6 | % |   | 18.4 | % |   | 8.00 | % |

----

----

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

----

| Table Eleven: Interest Rate Risk Simulation of Net Interest as of June 30, 2010 and December 31, 2009 |   |
|-------------------------------------------------------------------------------------------------------|--------|
| (dollars in thousands)                                                                                |   | $ Change in NIIfrom Current12 Month HorizonJune 30, 2010 |   |   | $ Change in NIIfrom Current12 Month HorizonDecember 31, 2009 |   |
| Variation from a constant rate scenario                                                               |   |   |   |   |   |   |
| +200bp                                                                                                |   | $ | 242 |   |   | $ | (10 | ) |
| - 200bp                                                                                               |   | $ | (1,348 | ) |   | $ | (432 | ) |

Item 4. Controls and Procedures.

Item 4T. Controls and Procedures.

----

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

Item 1A. Risk Factors.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

|                                  |   | (a)                                         |   | (b)                                   |   | (c)                                                                                         |   | (d)                                                                                                                     |
|---------------------------------------|--------|---------------------------------------------|--------|---------------------------------------|--------|---------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------|
|   Period                         |   | Total Number of Shares (or Units) Purchased |   | Average Price Paid Per Share(or Unit) |   | Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs |   | Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under the Plans or Programs |
| Month #1April 1 throughApril 30, 2010 |   | None                                        |   | N/A                                   |   | None                                                                                        |   | None                                                                                                                    |
| Month #2May 1 throughMay 31, 2010     |   | None                                        |   | N/A                                   |   | None                                                                                        |   | None                                                                                                                    |
| Month #3June 1 throughJune 30, 2010   |   | None                                        |   | N/A                                   |   | None                                                                                        |   | None                                                                                                                    |
| Total                                 |   | None                                        |   | N/A                                   |   | None                                                                                        |   |                                                                                                                    |

----

Item 3. Defaults Upon Senior Securities.

Item 4. (Reserved).

Item 5. Other Information.

Item 6. Exhibits.

|   | ExhibitNumber |   | Document Description                                                                                                                                                                                                                                                                                                                                                                                                                  |
|--------|---------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | (2.1)         |   | Agreement and Plan of Reorganization and Merger by and among the Registrant, ARH Interim National Bank and North Coast Bank, N.A., dated as of March 1, 2000 (included as Annex A). **                                                                                                                                                                                                                                                |
|   |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | (2.2)         |   | Agreement and Plan of Reorganization and Merger by and among the Registrant, American River Bank and Bank of Amador, dated as of July 8, 2004 (included as Annex A). ***                                                                                                                                                                                                                                                              |
|   |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | (3.1)         |   | Articles of Incorporation, as amended, incorporated by reference from Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2009, filed with the Commission on August 13, 2009.                                                                                                                                                                                                           |
|   |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | (3.2)         |   | Bylaws, as amended, incorporated by reference from Exhibit 3.2 to the Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2008, filed with the Commission on August 8, 2008.                                                                                                                                                                                                                               |
|   |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | (4.1)         |   | Specimen of the Registrant’s common stock certificate, incorporated by reference from Exhibit 4.1 to the Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2004, filed with the Commission on August 11, 2004.                                                                                                                                                                                     |
|   |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | (10.1)        |   | Lease agreement between American River Bank and Spieker Properties, L.P., a California limited partnership, dated April 1, 2000, related to 1545 River Park Drive, Suite 107, Sacramento, California. **                                                                                                                                                                                                                              |
|   |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | (10.2)        |   | Lease agreement between American River Bank and Bradshaw Plaza, Associates, Inc. dated November 27, 2006, related to 9750 Business Park Drive, Sacramento, California incorporated by reference from Exhibit 99.1 to the Registrant’s Report on Form 8-K, filed with the Commission on November 28, 2006.                                                                                                                       |
|   |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | (10.3)        |   | Lease agreement between American River Bank and Marjorie Wood Taylor, Trustee of the Marjorie Wood-Taylor Trust, dated April 5, 1984, and addendum thereto dated July 16, 1997, related to 10123 Fair Oaks Boulevard, Fair Oaks, California (**) and Amendment No. 2 thereto dated May 14, 2009, incorporated by reference from Exhibit 99.1 to the Registrant’s Report on Form 8-K, filed with the Commission on May 15, 2009. |
|   |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | (10.4)        |   | Lease agreement between American River Bank and LUM YIP KEE, Limited (formerly Sandalwood Land Company) dated August 28, 1996, related to 2240 Douglas Boulevard, Suite 100, Roseville, California (**) and Amendment No. 1 thereto dated July 28, 2006, incorporated by reference from Exhibit 99.1 to the Registrant’s Report on Form 8-K, filed with the Commission on July 31, 2006.                                        |

----

|   | *(10.5)  |   | Registrant’s Deferred Compensation Plan, incorporated by reference from Exhibit 99.2 to the Registrant’s Report on Form 8-K, filed with the Commission on May 30, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--------|----------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | *(10.6)  |   | Registrant’s Deferred Fee Plan, incorporated by reference from Exhibit 99.1 to the Registrant’s Report on Form 8-K, filed with the Commission on May 30, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | (10.7)   |   | Lease agreement between American River Bank and 520 Capitol Mall, Inc., dated August 19, 2003, related to 520 Capitol Mall, Suite 100, Sacramento, California, incorporated by reference from Exhibit 10.29 to the Registrant’s Quarterly Report on Form 10-Q for the period ended September 30, 2003, filed with the Commission on November 7, 2003 and the First Amendment thereto dated April 21, 2004, incorporated by reference from Exhibit 10.37 to the Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2004, filed with the Commission on August 11, 2004. |
|   |     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | *(10.8)  |   | Employment Agreement between Registrant and David T. Taber dated June 2, 2006, incorporated by reference from Exhibit 99.3 to the Registrant’s Report on Form 8-K, filed with the Commission on May 30, 2006.                                                                                                                                                                                                                                                                                                                                                                                     |
|   |     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | *(10.9)  |   | Salary Continuation Agreement, as amended on February 21, 2008, between American River Bank and Mitchell A. Derenzo, incorporated by reference from Exhibit 99.3 to the Registrant’s Report on Form 8-K, filed with the Commission on February 22, 2008.                                                                                                                                                                                                                                                                                                                                          |
|   |     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | *(10.10) |   | Salary Continuation Agreement, as amended on February 21, 2008, between the Registrant and David T. Taber, incorporated by reference from Exhibit 99.1 to the Registrant’s Report on Form 8-K, filed with the Commission on February 22, 2008.                                                                                                                                                                                                                                                                                                                                                    |
|   |     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | *(10.11) |   | Salary Continuation Agreement, as amended on February 21, 2008, between American River Bank and Douglas E. Tow, incorporated by reference from Exhibit 99.2 to the Registrant’s Report on Form 8-K, filed with the Commission on February 22, 2008.                                                                                                                                                                                                                                                                                                                                               |
|   |     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | *(10.12) |   | Registrant’s 2000 Stock Option Plan with forms of Nonqualified Stock Option Agreement and Incentive Stock Option Agreement. **                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | *(10.13) |   | Registrant’s 401(k) Plan dated December 23, 2008, incorporated by reference from Exhibit 99.1 to the Report on Form 8-K, filed with the Commission on December 24, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | (10.14)  |   | Lease agreement between Bank of Amador and the United States Postal Service, dated April 24, 2001, related to 424 Sutter Street, Jackson, California (***) and the First Amendment thereto, dated June 5, 2006, incorporated by reference from Exhibit 99.1 to the Registrant’s Report on Form 8-K, filed with the Commission on June 6, 2006.                                                                                                                                                                                                                                                    |
|   |     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | *(10.15) |   | Salary Continuation Agreement, as amended on February 21, 2008, between Bank of Amador, a division of American River Bank, and Larry D. Standing and related Endorsement Split Dollar Agreement, incorporated by reference from Exhibit 99.4 to the Registrant’s Report on Form 8-K, filed with the Commission on February 22, 2008.                                                                                                                                                                                                                                                              |
|   |     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | *(10.16) |   | Director Retirement Agreement, as amended on February 21, 2008, between Bank of Amador, a division of American River Bank, and Larry D. Standing, incorporated by reference from Exhibit 99.5 to the Registrant’s Report on Form 8-K, filed with the Commission on February 22, 2008.                                                                                                                                                                                                                                                                                                             |

----

|   | (10.17)  |   | Item Processing Agreement between American River Bank and Fidelity Information Services, Inc., dated April 22, 2005, incorporated by reference from Exhibit 99.1 to the Registrant’s Report on Form 8-K, filed with the Commission on April 27, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------|----------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | (10.18)  |   | Lease agreement between Registrant and One Capital Center, a California limited partnership, dated May 17, 2005, related to 3100 Zinfandel Drive, Rancho Cordova, California, incorporated by reference from Exhibit 99.1 to the Registrant’s Report on Form 8-K, filed with the Commission on May 18, 2005 and the First Amendment thereto dated April 23, 2010, incorporated by reference from Exhibit 99.1 to the Registrant’s Form 8-K, filed with the Commission on April 23, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | (10.19)  |   | Managed Services Agreement between American River Bankshares and ProNet Solutions, Inc., dated June 16, 2009, incorporated by reference from Exhibit 99.1 to the Registrant’s Report on Form 8-K, filed with the Commission on June 18, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | *(10.20) |   | American River Bankshares 2005 Executive Incentive Plan, incorporated by reference from Exhibit 99.1 to the Registrant’s Report on Form 8-K, filed with the Commission on October 27, 2005; the First Amendment thereto, incorporated by reference from Exhibit 99.1 to the Registrant’s Report on Form 8-K, filed with the Commission on March 17, 2006; the Second Amendment thereto, incorporated by reference from Exhibit 99.1 to the Registrant’s Report on Form 8-K, filed with the Commission on March 23, 2007; the Third Amendment thereto, incorporated by reference from Exhibit 99.1 to the Registrant’s Report on Form 8-K, filed with the Commission on February 22, 2008, the Fourth Amendment thereto, incorporated by reference from the Registrant’s Report on Form 8-K, filed with the Commission on March 20, 2009, and the Fifth Amendment thereto, incorporated by reference from the Registrant’s Report on Form 8-K, filed with the Commission on March 18, 2010. |
|   |     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | *(10.21) |   | American River Bankshares Director Emeritus Program, incorporated by reference from Exhibit 10.33 to the Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2006, filed with the Commission on August 8, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | *(10.22) |   | Employment Agreement dated September 20, 2006, between American River Bankshares and Mitchell A. Derenzo, incorporated by reference from Exhibit 99.1 to the Registrant’s Report on Form 8-K, filed with the Commission on September 20, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | *(10.23) |   | Employment Agreement dated September 20, 2006, between American River Bankshares and Douglas E. Tow, incorporated by reference from Exhibit 99.2 to the Registrant’s Report on Form 8-K, filed with the Commission on September 20, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | *(10.24) |   | Employment Agreement dated September 20, 2006, between American River Bankshares and Kevin B. Bender, incorporated by reference from Exhibit 99.3 to the Registrant’s Report on Form 8-K, filed with the Commission on September 20, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | *(10.25) |   | Employment Agreement dated September 20, 2006, between American River Bank and Raymond F. Byrne, incorporated by reference from Exhibit 99.5 to the Registrant’s Report on Form 8-K, filed with the Commission on September 20, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | *(10.26) |   | Salary Continuation Agreement, as amended on February 21, 2008, between American River Bank and Kevin B. Bender, incorporated by reference from Exhibit 99.6 to the Registrant’s Report on Form 8-K, filed with the Commission on February 22, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |

----

|   | *(10.27) |   | Salary Continuation Agreement, as amended on February 21, 2008, between American River Bank and Raymond F. Byrne, incorporated by reference from Exhibit 99.7 to the Registrant’s Report on Form 8-K, filed with the Commission on February 22, 2008.                                                                                                                                                                                                                                                                                                     |
|--------|----------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | (10.28)  |   | Lease agreement dated May 23, 2007 between Bank of Amador, a division of American River Bank, and Joseph Bellamy, Trustee of the Joseph T. Bellamy 2005 Trust, related to 26395 Buckhorn Ridge Road, Pioneer, California, incorporated by reference from Exhibit 99.1 to the Registrant’s Report on Form 8-K, filed with the Commission on May 24, 2007 and the First Amendment thereto, dated October 15, 2007, incorporated by reference from Exhibit 99.1 to the Registrant’s Report on Form 8-K, filed with the Commission on October 16, 2007. |
|   |     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | (10.29)  |   | Sublease agreement dated December 23, 2008, between North Coast Bank, a division of American River Bank, and Chicago Title Company, a California Corporation; and lease agreement dated December 23, 2008, between North Coast Bank, a division of American River Bank, and 90 E Street LLC, related to 90 E Street, Santa Rosa, California, incorporated by reference from Exhibit 99.2 and 99.3 to the Registrant’s Report on Form 8-K, filed with the Commission on December 24, 2008.                                                                 |
|   |     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | (10.30)  |   | Customer Service Agreement dated January 4, 2010, between American River Bankshares and TriNet HR Corporation, incorporated by reference from Exhibit 99.1 to the Registrant’s Report on Form 8-K, filed with the Commission on January 5, 2010.                                                                                                                                                                                                                                                                                                          |
|   |     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | *(10.31) |   | Form of Indemnification Agreement entered into on January 20, 2010, between American River Bankshares and its Directors and certain named executive officers, incorporated by reference from Exhibit 99.1 to the Registrant’s Report on Form 8-K, filed with the Commission on January 22, 2010.                                                                                                                                                                                                                                                          |
|   |     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | *(10.32) |   | Form of Indemnification Agreement entered into on January 20, 2010, between American River Bank and its Directors and certain named executive officers, incorporated by reference from Exhibit 99.2 to the Registrant’s Report on Form 8-K, filed with the Commission on January 22, 2010.                                                                                                                                                                                                                                                                |
|   |     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | *(10.33) |   | Registrant’s 2010 Equity Incentive Plan, incorporated by reference from the Registrant’s Definitive Proxy Statement for its 2010 Annual Meeting of Shareholders, filed with the Commission on April 9, 2010.                                                                                                                                                                                                                                                                                                                                        |
|   |     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | (14.1)   |   | Registrant’s Code of Ethics, incorporated by reference from Exhibit 14.1 to the Registrant’s Annual Report on Form 10-K for the period ended December 31, 2003, filed with the Commission on March 19, 2004.                                                                                                                                                                                                                                                                                                                                        |
|   |     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | (21.1)   |   | The Registrant’s only subsidiaries are American River Bank, a California banking corporation, and American River Financial, a California corporation.                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | (31.1)   |   | Certifications of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | (31.2)   |   | Certifications of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | (32.1)   |   | Certification of Registrant by its Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                               |

----

|   |   |   | *Denotes management contracts, compensatory plans or arrangements.                                                                                      |
|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |                                                                                                                                                    |
|   |   |   | **Incorporated by reference to Registrant’s Registration Statement on Form S-4 (No. 333-36326) filed with the Commission on May 5, 2000.          |
|   |   |   |                                                                                                                                                    |
|   |   |   | ***Incorporated by reference to Registrant’s Registration Statement on Form S-4 (No. 333-119085) filed with the Commission on September 17, 2004. |

----

SIGNATURES

|           |   | AMERICAN RIVER BANKSHARES |
|----------------|--------|---------------------------|
|           |   |                      |   |
| August 9, 2010 |   | By:                       | /s/ DAVID T. TABER |
|           |   |                      | David T. Taber |
|           |   |                      | President and Chief Executive Officer |
|           |   |                      |   |
|           |   | AMERICAN RIVER BANKSHARES |
|           |   |                      |   |
| August 9, 2010 |   | By:                       | /s/ MITCHELL A. DERENZO |
|           |   |                      | Mitchell A. Derenzo |
|           |   |                      | Executive Vice President and |
|           |   |                      | Chief Financial Officer |
|           |   |                      | (Principal Financial and Accounting Officer) |

----

EXHIBIT INDEX

| Exhibit Number |   | Description                                                                                                                                                      |   | Page   |
|----------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
| 31.1           |   | Certifications of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                             |   | 50     |
|           |   |                                                                                                                                                             |   |   |
| 31.2           |   | Certifications of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                             |   | 51     |
|           |   |                                                                                                                                                             |   |   |
| 32.1           |   | Certification of American River Bankshares by its Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |   | 52     |

----