----

----

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

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

|                                                   | BEACON FEDERAL BANCORP, INC. |   |
|--------------------------------------------------------|------------------------------|--------|
| (Exact name of registrant as specified in its charter) |

| Maryland                        |   |                                 | 26-0706826 |   |   |
|---------------------------------|--------|--------------------------------------|------------|--------|--------|
| (State or other jurisdiction of |   | (I.R.S. Employer Identification No.) |       |
| incorporation or organization)  |   |                                 |       |

| 6611 Manlius Center Road, East Syracuse, New York |   | 13057      |   |
|---------------------------------------------------|--------|------------|--------|
| (Address of principal executive office)           |   | (Zip Code) |

| Class                                    |   | Outstanding August 3, 2010 |
|-----------------------------------------------|--------|----------------------------|
| Common Stock, par value $0.01 per share  |   | 6,485,770                  |

----

|                                                                                                            |                                                                           |   |     |   |
|-----------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------|--------|----------|--------|
|                                                                                                            |                                                                           |   | PAGE NO. |
|                                                                                                            |                                                                           |   |     |   |
| PART I – FINANCIAL INFORMATION                                                                            |                                                                           |   |     |
|                                                                                                            |                                                                           |   |     |   |
| Item 1.   Financial Statements                                                                        |                                                                           | 3      |     |
|                                                                                                            |                                                                           |   |     |   |
|                                                                                                            | Consolidated Balance Sheets                                                    |   | 3        |   |
|                                                                                                            |                                                                           |   |     |   |
|                                                                                                            | Consolidated Statements of Operations                                          |   | 4        |   |
|                                                                                                            |                                                                           |   |     |   |
|                                                                                                            | Consolidated Statements of Stockholders’ Equity and Comprehensive Income |   | 5        |   |
|                                                                                                            |                                                                           |   |     |   |
|                                                                                                            | Consolidated Statements of Cash Flows                                          |   | 6        |   |
|                                                                                                            |                                                                           |   |     |   |
|                                                                                                            | Notes to Consolidated Financial Statements                                     |   | 8        |   |
|                                                                                                            |                                                                           |   |     |   |
| Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations |                                                                           | 27     |     |
|                                                                                                            |                                                                           |   |     |   |
| Item 3.   Quantitative and Qualitative Disclosures About Market Risk                                  |                                                                           | 40     |     |
|                                                                                                            |                                                                           |   |     |   |
| Item 4.   Controls and Procedures                                                                     |                                                                           | 40     |     |
|                                                                                                            |                                                                           |   |     |   |
| PART II – OTHER INFORMATION                                                                               |                                                                           |   |     |
|                                                                                                            |                                                                           |   |     |   |
| Item 1.   Legal Proceedings                                                                           |                                                                           | 41     |     |
|                                                                                                            |                                                                           |   |     |   |
| Item 1A.   Risk Factors                                                                               |                                                                           | 41     |     |
|                                                                                                            |                                                                           |   |     |   |
| Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds                                 |                                                                           | 41     |     |
|                                                                                                            |                                                                           |   |     |   |
| Item 3.   Defaults Upon Senior Securities                                                             |                                                                           | 41     |     |
|                                                                                                            |                                                                           |   |     |   |
| Item 4.   Other Information                                                                           |                                                                           | 41     |     |
|                                                                                                            |                                                                           |   |     |   |
| Item 5.   Exhibits                                                                                    |                                                                           | 41     |     |
|                                                                                                            |                                                                           |   |     |   |
| Signatures                                                                                                      |                                                                           | 43     |     |
|                                                                                                            |                                                                           |   |     |   |
| Certifications                                                                                                  |                                                                           |   |     |

----

|                                                                                                                                                |   | June 30,    |      |   | December 31, |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------|-----------|--------|--------------|--------|
|                                                                                                                                                |   | 2010        |      |   | 2009         |   |
|                                                                                                                                                |   | (Unaudited) |      |
| ASSETS                                                                                                                                              |   |        |      |   |         |   |   |   |
|                                                                                                                                                |   |        |      |   |         |   |   |   |
| Cash and cash equivalents - cash and due from financial institutions                                                                                |   | $           | 22,003    |   |         | $      | 12,993 |   |
| Interest-bearing deposits in other financial institutions                                                                                           |   |        | 100       |   |         |   | 170 |   |
| Securities available for sale                                                                                                                       |   |        | 167,633   |   |         |   | 167,238 |   |
| Securities held to maturity (fair value of $12,769 and $14,500, respectively)                                                                       |   |        | 12,564    |   |         |   | 14,561 |   |
| Loans held for sale                                                                                                                                 |   |        | 2,371     |   |         |   | 940 |   |
| Loans, net of allowance for loan losses of $18,068 and $15,631, respectively                                                                        |   |        | 813,846   |   |         |   | 816,061 |   |
| Federal Home Loan Bank (“FHLB”) of New York stock                                                                                       |   |        | 11,297    |   |         |   | 11,487 |   |
| Premises and equipment, net                                                                                                                         |   |        | 12,311    |   |         |   | 12,604 |   |
| Accrued interest receivable                                                                                                                         |   |        | 3,520     |   |         |   | 3,888 |   |
| Foreclosed and repossessed assets                                                                                                                   |   |        | 740       |   |         |   | 797 |   |
| Bank-owned life insurance (“BOLI”)                                                                                                      |   |        | 10,532    |   |         |   | 10,488 |   |
| Other assets                                                                                                                                        |   |        | 14,856    |   |         |   | 15,670 |   |
|       Total assets                                                                                                    |   | $           | 1,071,773 |   |         | $      | 1,066,897 |   |
|                                                                                                                                                |   |        |      |   |         |   |   |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                          |   |        |      |   |         |   |   |   |
|                                                                                                                                                |   |        |      |   |         |   |   |   |
| Deposits                                                                                                                                            |   | $           | 694,736   |   |         | $      | 693,297 |   |
| Federal Home Loan Bank advances                                                                                                                     |   |        | 188,902   |   |         |   | 191,094 |   |
| Securities sold under agreement to repurchase                                                                                                       |   |        | 70,000    |   |         |   | 70,000 |   |
| Accrued interest payable and other liabilities                                                                                                      |   |        | 4,070     |   |         |   | 3,511 |   |
| Capital lease obligation                                                                                                                            |   |        | 7,737     |   |         |   | 7,736 |   |
|       Total liabilities                                                                                               |   |        | 965,445   |   |         |   | 965,638 |   |
| Commitments and contingencies (Note 9)                                                                                                              |   |        |      |   |         |   |   |   |
| Preferred stock, $.01 par value, 50,000,000 shares authorized; none issued or outstanding                                                      |   |        |      |   |         |   |   |   |
| Common stock, $.01 par value, 100,000,000 shares authorized; 7,653,565 shares issued; 6,520,937 and 6,533,378 shares outstanding, respectively |   |        | 74        |   |         |   | 74 |   |
| Additional paid-in capital                                                                                                                          |   |        | 73,546    |   |         |   | 73,156 |   |
| Retained earnings-substantially restricted                                                                                                          |   |        | 49,193    |   |         |   | 47,021 |   |
| Unearned Employee Stock Ownership Plan (“ESOP”) shares                                                                                  |   |        | (3,641    | )      |         |   | (3,997 | ) |
| Accumulated other comprehensive loss, net                                                                                                           |   |        | (3,201    | )      |         |   | (5,462 | ) |
| Treasury stock, 1,132,628 and 1,120,187 shares at cost, respectively                                                                                |   |        | (9,643    | )      |         |   | (9,533 | ) |
|       Total stockholders’ equity                                                                                |   |        | 106,328   |   |         |   | 101,259 |   |
|       Total liabilities and stockholders’ equity                                                                |   | $           | 1,071,773 |   |         | $      | 1,066,897 |   |

----

|                                                                                 |   | Three Months Ended |   |   | Six Months Ended |   |
|--------------------------------------------------------------------------------------|--------|--------------------|--------|--------|------------------|--------|
|                                                                                 |   | June 30,           |   |   | June 30,         |   |
|                                                                                 |   | 2010               |   |   | 2009             |   |   | 2010 |   |   | 2009 |   |
| Interest and dividend income:                                                        |   | (Unaudited)        |   |   | (Unaudited)      |   |
| Loans, including fees                                                                |   | $                  | 11,451 |   |             | $      | 11,385 |   |   | $ | 23,063 |   |   | $ | 22,727 |   |
| Securities                                                                           |   |               | 1,928  |   |             |   | 2,079 |   |   |   | 3,895 |   |   |   | 4,434 |   |
| FHLB stock                                                                           |   |               | 120    |   |             |   | 177 |   |   |   | 287 |   |   |   | 276 |   |
| Federal funds sold and other                                                         |   |               | 5      |   |             |   | 12 |   |   |   | 10 |   |   |   | 28 |   |
| Total interest income                                                                |   |               | 13,504 |   |             |   | 13,653 |   |   |   | 27,255 |   |   |   | 27,465 |   |
| Interest expense:                                                                    |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                             |   |               | 2,877  |   |             |   | 3,925 |   |   |   | 6,055 |   |   |   | 8,172 |   |
| FHLB advances                                                                        |   |               | 2,023  |   |             |   | 2,236 |   |   |   | 3,999 |   |   |   | 4,530 |   |
| Securities sold under agreement to repurchase                                        |   |               | 675    |   |             |   | 549 |   |   |   | 1,343 |   |   |   | 1,092 |   |
| Lease obligation                                                                     |   |               | 196    |   |             |   | - |   |   |   | 392 |   |   |   | - |   |
| Total interest expense                                                               |   |               | 5,771  |   |             |   | 6,710 |   |   |   | 11,789 |   |   |   | 13,794 |   |
| Net interest income                                                                  |   |               | 7,733  |   |             |   | 6,943 |   |   |   | 15,466 |   |   |   | 13,671 |   |
| Provision for loan losses                                                            |   |               | 1,500  |   |             |   | 1,900 |   |   |   | 3,280 |   |   |   | 4,470 |   |
| Net interest income after provision for loan losses                             |   |               | 6,233  |   |             |   | 5,043 |   |   |   | 12,186 |   |   |   | 9,201 |   |
| Noninterest income:                                                                  |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Service charges                                                                      |   |               | 806    |   |             |   | 697 |   |   |   | 1,602 |   |   |   | 1,427 |   |
| Commission and fee income                                                            |   |               | 149    |   |             |   | 147 |   |   |   | 316 |   |   |   | 287 |   |
| Change in cash surrender value of BOLI                                               |   |               | 31     |   |             |   | 37 |   |   |   | 44 |   |   |   | 69 |   |
| Gain on sale of loans                                                                |   |               | 101    |   |             |   | 224 |   |   |   | 214 |   |   |   | 387 |   |
| Other-than-temporary impairment (OTTI) credit loss on securities                     |   |               | (125   | )      |             |   | (538 | ) |   |   | (382 | ) |   |   | (962 | ) |
| Other                                                                                |   |               | 322    |   |             |   | 248 |   |   |   | 607 |   |   |   | 407 |   |
| Total noninterest income                                                             |   |               | 1,284  |   |             |   | 815 |   |   |   | 2,401 |   |   |   | 1,615 |   |
| Noninterest expense:                                                                 |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Salaries and employee benefits                                                       |   |               | 2,676  |   |             |   | 2,255 |   |   |   | 5,298 |   |   |   | 4,606 |   |
| Occupancy and equipment                                                              |   |               | 592    |   |             |   | 367 |   |   |   | 1,184 |   |   |   | 694 |   |
| Advertising and marketing                                                            |   |               | 93     |   |             |   | 96 |   |   |   | 204 |   |   |   | 217 |   |
| Telephone, delivery and postage                                                      |   |               | 174    |   |             |   | 163 |   |   |   | 354 |   |   |   | 355 |   |
| Supplies                                                                             |   |               | 57     |   |             |   | 65 |   |   |   | 105 |   |   |   | 131 |   |
| Audit and examination                                                                |   |               | 233    |   |             |   | 169 |   |   |   | 433 |   |   |   | 291 |   |
| FDIC premium expense                                                                 |   |               | 299    |   |             |   | 847 |   |   |   | 617 |   |   |   | 1,010 |   |
| Other                                                                                |   |               | 1,003  |   |             |   | 800 |   |   |   | 1,945 |   |   |   | 1,749 |   |
| Total noninterest expense                                                            |   |               | 5,127  |   |             |   | 4,762 |   |   |   | 10,140 |   |   |   | 9,053 |   |
| Income before income taxes                                                           |   |               | 2,390  |   |             |   | 1,096 |   |   |   | 4,447 |   |   |   | 1,763 |   |
| Income tax expense                                                                   |   |               | 906    |   |             |   | 402 |   |   |   | 1,669 |   |   |   | 633 |   |
| Net income                                                                           |   | $                  | 1,484  |   |             | $      | 694 |   |   | $ | 2,778 |   |   | $ | 1,130 |   |
| Basic and diluted earnings per share                                                 |   | $                  | 0.24   |   |             | $      | 0.11 |   |   | $ | 0.45 |   |   | $ | 0.17 |   |
|                                                                                 |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| OTTI credit loss on securities:                                                      |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Total OTTI loss on securities                                                        |   | $                  | 155    |   |             | $      | 538 |   |   | $ | 426 |   |   | $ | 982 |   |
| Portion of OTTI loss recognized in other comprehensive loss before income taxes |   |               | (30    | )      |             |   | - |   |   |   | (44 | ) |   |   | (20 | ) |
| OTTI credit loss on securities                                                       |   | $                  | 125    |   |             | $      | 538 |   |   | $ | 382 |   |   | $ | 962 |   |
|                                                                                 |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| See accompanying notes to consolidated financial statements.                         |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                                                                                                                         |   | Three Months Ended |    |   | Six Months Ended |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|---------|--------|------------------|--------|
|                                                                                                                                                         |   | June 30,           |    |   | June 30,         |   |
|                                                                                                                                                         |   | 2010               |    |   | 2009             |   |   | 2010 |   |   | 2009 |   |
|                                                                                                                                                         |   | (Unaudited)        |    |   | (Unaudited)      |   |
| Common Stock                                                                                                                                                 |   | $                  | 74      |   |             | $      | 74 |   |   | $ | 74 |   |   | $ | 74 |   |
|                                                                                                                                                         |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Additional paid-in capital:                                                                                                                                  |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Balance at beginning of period                                                                                                                               |   |               | 73,345  |   |             |   | 72,363 |   |   |   | 73,156 |   |   |   | 72,160 |   |
| Earned ESOP shares                                                                                                                                           |   |               | (16     | )      |             |   | (18 | ) |   |   | (34 | ) |   |   | (55 | ) |
| Amortization of stock-based compensation expense                                                                                                             |   |               | 217     |   |             |   | 301 |   |   |   | 424 |   |   |   | 541 |   |
| Balance at end of period                                                                                                                                     |   |               | 73,546  |   |             |   | 72,646 |   |   |   | 73,546 |   |   |   | 72,646 |   |
|                                                                                                                                                         |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Retained earnings:                                                                                                                                           |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Balance at beginning of period                                                                                                                               |   |               | 48,012  |   |             |   | 44,863 |   |   |   | 47,021 |   |   |   | 44,701 |   |
| Net income                                                                                                                                                   |   |               | 1,484   |   |             |   | 694 |   |   |   | 2,778 |   |   |   | 1,130 |   |
| Cash dividends, $.05, $.05, $.10 and $.09 per share, respectively                                                                                            |   |               | (303    | )      |             |   | (315 | ) |   |   | (606 | ) |   |   | (589 | ) |
| Balance at end of period                                                                                                                                     |   |               | 49,193  |   |             |   | 45,242 |   |   |   | 49,193 |   |   |   | 45,242 |   |
|                                                                                                                                                         |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Unearned ESOP shares:                                                                                                                                        |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Balance at beginning of period                                                                                                                               |   |               | (3,819  | )      |             |   | (4,535 | ) |   |   | (3,997 | ) |   |   | (4,733 | ) |
| Earned ESOP shares                                                                                                                                           |   |               | 178     |   |             |   | 148 |   |   |   | 356 |   |   |   | 346 |   |
| Balance at end of period                                                                                                                                     |   |               | (3,641  | )      |             |   | (4,387 | ) |   |   | (3,641 | ) |   |   | (4,387 | ) |
|                                                                                                                                                         |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Accumulated other comprehensive loss, net:                                                                                                                   |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Balance at beginning of period                                                                                                                               |   |               | (4,108  | )      |             |   | (10,146 | ) |   |   | (5,462 | ) |   |   | (10,117 | ) |
| Net change in unrealized gains (losses) on available for sale securities, net of taxes of $617, $627, $1,524 and $615 respectively                           |   |               | 925     |   |             |   | 940 |   |   |   | 2,287 |   |   |   | 923 |   |
| OTTI non-credit related loss on securities for which a portion of the OTTI has been recognized in income, net of taxes of $12, $17 and $8, respectively |   |               | (18     | )      |             |   | - |   |   |   | (26 | ) |   |   | (12 | ) |
| Balance at end of period                                                                                                                                     |   |               | (3,201  | )      |             |   | (9,206 | ) |   |   | (3,201 | ) |   |   | (9,206 | ) |
| Treasury stock:                                                                                                                                              |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Balance at beginning of period                                                                                                                               |   |               | (9,533  | )      |             |   | (3,042 | ) |   |   | (9,533 | ) |   |   | - |   |
| Repurchase of 12,441 shares of common stock                                                                                                                  |   |               | (110    | )      |             |   | (4,272 | ) |   |   | (110 | ) |   |   | (7,314 | ) |
| Balance at end of period                                                                                                                                     |   |               | (9,643  | )      |             |   | (7,314 | ) |   |   | (9,643 | ) |   |   | (7,314 | ) |
| Total stockholders’ equity                                                                                                                             |   | $                  | 106,328 |   |             | $      | 97,055 |   |   | $ | 106,328 |   |   | $ | 97,055 |   |
|                                                                                                                                                         |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive income:                                                                                                                                        |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                                                                                                   |   | $                  | 1,484   |   |             | $      | 694 |   |   | $ | 2,778 |   |   | $ | 1,130 |   |
| Net change in unrealized gains (losses) on available for sale securities, net of taxes of $617, $627, $1,524 and $615 respectively                      |   |               | 925     |   |             |   | 940 |   |   |   | 2,287 |   |   |   | 923 |   |
| OTTI non-credit related loss on securities for which a portion of the OTTI has been recognized in income, net of taxes of $12, $17 and $8, respectively |   |               | (18     | )      |             |   | - |   |   |   | (26 | ) |   |   | (12 | ) |
| Comprehensive income                                                                                                                                         |   | $                  | 2,391   |   |             | $      | 1,634 |   |   | $ | 5,039 |   |   | $ | 2,041 |   |
|                                                                                                                                                         |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| See accompanying notes to consolidated financial statements.                                                                                                 |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                                                   |   | Six Months Ended |    |
|----------------------------------------------------------------------------------------|--------|------------------|---------|
|                                                                                   |   | June 30,         |    |
|                                                                                   |   | 2010             |    |   | 2009 |   |
|                                                                                   |   | (Unaudited)      |    |
| Cash flows from operating activities:                                                  |   |             |    |   |   |   |   |   |
| Net income                                                                             |   | $                | 2,778   |   |   | $ | 1,130 |   |
| Adjustments to reconcile net income to net cash provided by operating activities: |   |             |    |   |   |   |   |   |
| Provision for loan losses                                                              |   |             | 3,280   |   |   |   | 4,470 |   |
| Change in fair value of servicing assets                                               |   |             | 210     |   |   |   | 34 |   |
| Depreciation and amortization                                                          |   |             | 697     |   |   |   | 294 |   |
| ESOP expense                                                                           |   |             | 322     |   |   |   | 291 |   |
| Amortization of stock-based compensation expense                                       |   |             | 424     |   |   |   | 541 |   |
| Amortization of net deferred loan costs                                                |   |             | 1,263   |   |   |   | 1,268 |   |
| Net amortization of premiums and discounts on securities                               |   |             | 186     |   |   |   | (1 | ) |
| Gain on sale of loans                                                                  |   |             | (214    | ) |   |   | (387 | ) |
| Other-than-temporary impairment loss on securities                                     |   |             | 382     |   |   |   | 962 |   |
| Originations of loans held for sale                                                    |   |             | (17,931 | ) |   |   | (53,864 | ) |
| Proceeds from loans held for sale                                                      |   |             | 16,714  |   |   |   | 52,463 |   |
| Proceeds from sale of trading account assets                                           |   |             | -       |   |   |   | 23,337 |   |
| Increase in cash surrender value of BOLI                                               |   |             | (44     | ) |   |   | (69 | ) |
| Net change in:                                                                         |   |             |    |   |   |   |   |   |
| Accrued interest receivable                                                            |   |             | 368     |   |   |   | 301 |   |
| Other assets                                                                           |   |             | (902    | ) |   |   | (587 | ) |
| Accrued interest payable and other liabilities                                         |   |             | 560     |   |   |   | 15 |   |
| Net cash provided by operating activities                                              |   |             | 8,093   |   |   |   | 30,198 |   |
| Cash flows from investing activities:                                                  |   |             |    |   |   |   |   |   |
| Purchase of FHLB stock                                                                 |   |             | (943    | ) |   |   | (464 | ) |
| Redemption of FHLB stock                                                               |   |             | 1,133   |   |   |   | 1,092 |   |
| Securities held to maturity:                                                           |   |             |    |   |   |   |   |   |
| Maturities, prepayments and calls                                                      |   |             | 1,979   |   |   |   | 4,933 |   |
| Securities available for sale:                                                         |   |             |    |   |   |   |   |   |
| Purchases                                                                              |   |             | (35,735 | ) |   |   | (25,989 | ) |
| Proceeds from maturity or call                                                         |   |             | 38,557  |   |   |   | 21,354 |   |
| Maturities of interest-bearing deposits                                                |   |             | 70      |   |   |   | - |   |
| Loan originations and payments, net                                                    |   |             | (2,592  | ) |   |   | (37,544 | ) |
| Purchase of premises and equipment                                                     |   |             | (404    | ) |   |   | (1,410 | ) |
| Proceeds from sale of foreclosed and repossessed assets                                |   |             | 321     |   |   |   | 427 |   |
| Net cash provided by (used for) investing activities                                   |   |             | 2,386   |   |   |   | (37,601 | ) |

----

|                                                                  |   | Six Months Ended |    |
|-----------------------------------------------------------------------|--------|------------------|---------|
|                                                                  |   | June 30,         |    |
|                                                                  |   | 2010             |    |   | 2009 |   |
|                                                                  |   | (Unaudited)      |    |
| Cash flows from financing activities:                                 |   |             |    |   |   |   |   |   |
| Net change in deposits                                                |   | $                | 1,439   |   |   | $ | 32,043 |   |
| Proceeds from FHLB advances                                           |   |             | 31,100  |   |   |   | - |   |
| Repayment of FHLB advances                                            |   |             | (33,292 | ) |   |   | (10,000 | ) |
| Cash dividends                                                        |   |             | (606    | ) |   |   | (589 | ) |
| Repurchase of common stock                                            |   |             | (110    | ) |   |   | (7,314 | ) |
| Net cash (used for) provided by financing activities                  |   |             | (1,469  | ) |   |   | 14,140 |   |
| Net change in cash and cash equivalents                               |   |             | 9,010   |   |   |   | 6,737 |   |
| Cash and cash equivalents at beginning of period                      |   |             | 12,993  |   |   |   | 18,297 |   |
| Cash and cash equivalents at end of period                            |   | $                | 22,003  |   |   | $ | 25,034 |   |
| Supplemental cash flow information:                                   |   |             |    |   |   |   |   |   |
| Interest paid                                                         |   | $                | 11,770  |   |   | $ | 14,359 |   |
| Income taxes paid                                                     |   | $                | 2,874   |   |   | $ | 2,189 |   |
| Real estate and repossessions acquired in settlement of loans         |   | $                | 295     |   |   | $ | 393 |   |
| Supplemental schedule of non-cash investing and financing activities: |   |             |    |   |   |   |   |   |
| Building acquired with capital lease obligation                       |   | $                | -       |   |   | $ | 7,800 |   |
|                                                                  |   |             |    |   |   |   |   |   |
| See accompanying notes to consolidated financial statements.          |   |             |    |   |   |   |   |   |

----

----

----

----

|                                                                           |   | Three Months Ended |   |   | Six Months Ended |   |
|--------------------------------------------------------------------------------|--------|--------------------|--------|--------|------------------|--------|
|                                                                           |   | June 30,           |   |   | June 30,         |   |
|                                                                           |   | 2010               |   |   | 2009             |   |   | 2010 |   |   | 2009 |   |
|                                                                           |   |               |   |   |             |   |   |   |   |   |   |   |
| Basic earnings per share:                                                      |   |               |   |   |             |   |   |   |   |   |   |   |
|                                                                           |   |               |   |   |             |   |   |   |   |   |   |   |
| Net income                                                                     |   | $                  | 1,484  |   |             | $      | 694 |   |   | $ | 2,778 |   |   | $ | 1,130 |   |
| Less dividends paid:                                                           |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Common stock                                                                   |   |               | 295    |   |             |   | 302 |   |   |   | 590 |   |   |   | 565 |   |
| Participating securities                                                       |   |               | 8      |   |             |   | 13 |   |   |   | 16 |   |   |   | 24 |   |
|                                                                           |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Undistributed earnings                                                         |   | $                  | 1,181  |   |             | $      | 379 |   |   | $ | 2,172 |   |   | $ | 541 |   |
|                                                                           |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Weighted-average basic shares outstanding                                      |   |               | 5,998  |   |             |   | 6,178 |   |   |   | 5,992 |   |   |   | 6,497 |   |
| Add: weighted-average participating securities outstanding                     |   |               | 155    |   |             |   | 266 |   |   |   | 155 |   |   |   | 266 |   |
| Total weighted-average basic shares and participating securities outstanding   |   |               | 6,153  |   |             |   | 6,444 |   |   |   | 6,147 |   |   |   | 6,763 |   |
|                                                                           |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Distributed earnings per share                                                 |   | $                  | 0.05   |   |             | $      | 0.05 |   |   | $ | 0.10 |   |   | $ | 0.09 |   |
| Undistributed earnings per share                                               |   |               | 0.19   |   |             |   | 0.06 |   |   |   | 0.35 |   |   |   | 0.08 |   |
| Net income per share                                                           |   | $                  | 0.24   |   |             | $      | 0.11 |   |   | $ | 0.45 |   |   | $ | 0.17 |   |
|                                                                           |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Diluted earnings per share:                                                    |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
|                                                                           |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Undistributed earnings                                                         |   | $                  | 1,181  |   |             | $      | 379 |   |   | $ | 2,172 |   |   | $ | 541 |   |
|                                                                           |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Total weighted-average basic shares and participating securities outstanding   |   |               | 6,153  |   |             |   | 6,444 |   |   |   | 6,147 |   |   |   | 6,763 |   |
| Add: Dilutive stock options                                                    |   |               | 6      |   |             |   | - |   |   |   | 1 |   |   |   | - |   |
| Total weighted-average diluted shares and participating securities outstanding |   |               | 6,159  |   |             |   | 6,444 |   |   |   | 6,148 |   |   |   | 6,763 |   |
|                                                                           |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Distributed earnings per share                                                 |   | $                  | 0.05   |   |             | $      | 0.05 |   |   | $ | 0.10 |   |   | $ | 0.09 |   |
| Undistributed earnings per share                                               |   |               | 0.19   |   |             |   | 0.06 |   |   |   | 0.35 |   |   |   | 0.08 |   |
| Net income per share                                                           |   | $                  | 0.24   |   |             | $      | 0.11 |   |   | $ | 0.45 |   |   | $ | 0.17 |   |
|                                                                           |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Anti-dilutive option shares                                                    |   |               | -      |   |             |   | 40,320 |   |   |   | - |   |   |   | 43,878 |   |

----

|                                                                   |   |      |    |   | Gross      |   |   | Gross      |   |   |    |   |
|------------------------------------------------------------------------|--------|-----------|---------|--------|------------|--------|--------|------------|--------|--------|---------|--------|
|                                                                   |   | Amortized |    |   | Unrealized |   |   | Unrealized |   |   | Fair    |   |
| June 30, 2010                                                          |   | Cost      |    |   | Gains      |   |   | Losses     |   |   | Value   |   |
|                                                                   |   |      |    |   |       |   |   |       |   |   |    |   |
| Held to maturity:                                                      |   |      |    |   |       |   |   |       |   |   |    |   |
| Debt securities:                                                       |   |      |    |   |       |   |   |       |   |   |    |   |
| Mortgage-backed securities - Residential                               |   | $         | 4,201   |   |       | $      | 151    |       |   | $      | (5      | )      |   | $ | 4,347 |   |
| Collateralized mortgage obligations - Private issuer                   |   |      | 5,725   |   |       |   | 14     |       |   |   | (144    | )      |   |   | 5,595 |   |
| Collateralized mortgage obligations - Government sponsored enterprises |   |      | 2,638   |   |       |   | 189    |       |   |   | -       |   |   |   | 2,827 |   |
| Total                                                                  |   | $         | 12,564  |   |       | $      | 354    |       |   | $      | (149    | )      |   | $ | 12,769 |   |
|                                                                   |   |      |    |   |       |   |   |       |   |   |    |   |   |   |   |   |
| Available for sale:                                                    |   |      |    |   |       |   |   |       |   |   |    |   |   |   |   |   |
| Debt securities:                                                       |   |      |    |   |       |   |   |       |   |   |    |   |   |   |   |   |
| Treasuries                                                             |   | $         | 100     |   |       | $      | -      |       |   | $      | -       |   |   | $ | 100 |   |
| Agencies                                                               |   |      | 11,003  |   |       |   | 94     |       |   |   | -       |   |   |   | 11,097 |   |
| Pooled trust preferred securities                                      |   |      | 12,432  |   |       |   | -      |       |   |   | (6,654  | )      |   |   | 5,778 |   |
| Mortgage-backed securities - Residential                               |   |      | 38,064  |   |       |   | 2,159  |       |   |   | -       |   |   |   | 40,223 |   |
| Collateralized mortgage obligations - Private issuer                   |   |      | 20,343  |   |       |   | 159    |       |   |   | (4,017  | )      |   |   | 16,485 |   |
| Collateralized mortgage obligations - Government sponsored enterprises |   |      | 90,926  |   |       |   | 3,024  |       |   |   | -       |   |   |   | 93,950 |   |
| Total                                                                  |   | $         | 172,868 |   |       | $      | 5,436  |       |   | $      | (10,671 | )      |   | $ | 167,633 |   |

----

|                                                                   |   |      |    |   | Gross      |   |   | Gross      |   |   |    |   |
|------------------------------------------------------------------------|--------|-----------|---------|--------|------------|--------|--------|------------|--------|--------|---------|--------|
|                                                                   |   | Amortized |    |   | Unrealized |   |   | Unrealized |   |   | Fair    |   |
| December 31, 2009                                                      |   | Cost      |    |   | Gains      |   |   | Losses     |   |   | Value   |   |
|                                                                   |   |      |    |   |       |   |   |       |   |   |    |   |
| Held to maturity:                                                      |   |      |    |   |       |   |   |       |   |   |    |   |
| Debt securities:                                                       |   |      |    |   |       |   |   |       |   |   |    |   |
| Mortgage-backed securities - Residential                               |   | $         | 4,850   |   |       | $      | 116    |       |   | $      | -       |   |   | $ | 4,966 |   |
| Collateralized mortgage obligations - Private issuer                   |   |      | 6,652   |   |       |   | 5      |       |   |   | (323    | )      |   |   | 6,334 |   |
| Collateralized mortgage obligations - Government sponsored enterprises |   |      | 3,059   |   |       |   | 141    |       |   |   |    |   |   |   | 3,200 |   |
| Total                                                                  |   | $         | 14,561  |   |       | $      | 262    |       |   | $      | (323    | )      |   | $ | 14,500 |   |
|                                                                   |   |      |    |   |       |   |   |       |   |   |    |   |   |   |   |   |
| Available for sale:                                                    |   |      |    |   |       |   |   |       |   |   |    |   |   |   |   |   |
| Debt securities:                                                       |   |      |    |   |       |   |   |       |   |   |    |   |   |   |   |   |
| Treasuries                                                             |   | $         | 100     |   |       | $      | 1      |       |   | $      | -       |   |   | $ | 101 |   |
| Agencies                                                               |   |      | 26,002  |   |       |   | 21     |       |   |   | (51     | )      |   |   | 25,972 |   |
| Pooled trust preferred securities                                      |   |      | 12,755  |   |       |   | -      |       |   |   | (7,743  | )      |   |   | 5,012 |   |
| Mortgage-backed securities - Residential                               |   |      | 39,629  |   |       |   | 1,646  |       |   |   | (22     | )      |   |   | 41,253 |   |
| Collateralized mortgage obligations - Private issuer                   |   |      | 23,242  |   |       |   | 13     |       |   |   | (4,955  | )      |   |   | 18,300 |   |
| Collateralized mortgage obligations - Government sponsored enterprises |   |      | 74,512  |   |       |   | 2,164  |       |   |   | (76     | )      |   |   | 76,600 |   |
| Total                                                                  |   | $         | 176,240 |   |       | $      | 3,845  |       |   | $      | (12,847 | )      |   | $ | 167,238 |   |

|                                                                   |   | Held to Maturity |   |   | Available for Sale |   |
|------------------------------------------------------------------------|--------|------------------|--------|--------|--------------------|--------|
|                                                                   |   | Amortized        |   |   | Fair               |   |   | Amortized |   |   | Fair |   |
|                                                                   |   | Cost             |   |   | Value              |   |   | Cost |   |   | Value |   |
|                                                                   |   |             |   |   |               |   |   |   |   |   |   |   |
| Due within one year                                                    |   | $                | -      |   |               | $      | - |   |   | $ | 100 |   |   | $ | 100 |   |
| Due after one through five years                                       |   |             | -      |   |               |   | - |   |   |   | 6,005 |   |   |   | 6,089 |   |
| Due after five through ten years                                       |   |             | -      |   |               |   | - |   |   |   | 4,998 |   |   |   | 5,008 |   |
| Due after ten years                                                    |   |             | -      |   |               |   | - |   |   |   | 12,432 |   |   |   | 5,778 |   |
|                                                                   |   |             | -      |   |               |   | - |   |   |   | 23,535 |   |   |   | 16,975 |   |
| Mortgage-backed securities - Residential                               |   |             | 4,201  |   |               |   | 4,347 |   |   |   | 38,064 |   |   |   | 40,223 |   |
| Collateralized mortgage obligations - Private issuer                   |   |             | 5,725  |   |               |   | 5,595 |   |   |   | 20,343 |   |   |   | 16,485 |   |
| Collateralized mortgage obligations - Government sponsored enterprises |   |             | 2,638  |   |               |   | 2,827 |   |   |   | 90,926 |   |   |   | 93,950 |   |
|                                                                   |   | $                | 12,564 |   |               | $      | 12,769 |   |   | $ | 172,868 |   |   | $ | 167,633 |   |

----

|                                          |   | Less than 12 Months |   |   | 12 Months or Longer |   |   | Total  |   |
|-----------------------------------------------|--------|---------------------|--------|--------|---------------------|--------|--------|--------|--------|
|                                          |   | Fair                |   |   | Unrealized          |   |   | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
| June 30, 2010                                 |   | Value               |   |   | loss                |   |   | Value  |   |   | loss |   |   | Value |   |   | loss |   |
|                                          |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Pooled trust preferred securities        |   | $                   | -      |   |                | $      | -      |   |   | $ | 12,432 |   |   | $ | (6,654 | ) |   | $ | 12,432 |   |   | $ | (6,654 | ) |
| Mortgage backed securities - Residential |   |                | 1,012  |   |                |   | (5     | )      |   |   | - |   |   |   | - |   |   |   | 1,012 |   |   |   | (5 | ) |
| CMOs - Private issuer                         |   |                | -      |   |                |   | -      |   |   |   | 18,335 |   |   |   | (4,161 | ) |   |   | 18,335 |   |   |   | (4,161 | ) |
|                                          |   | $                   | 1,012  |   |                | $      | (5     | )      |   | $ | 30,767 |   |   | $ | (10,815 | ) |   | $ | 31,779 |   |   | $ | (10,820 | ) |
|                                          |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                          |   | Less than 12 Months |   |   | 12 Months or Longer |   |   | Total  |   |
|                                          |   | Fair                |   |   | Unrealized          |   |   | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
| December 31, 2009                             |   | Value               |   |   | loss                |   |   | Value  |   |   | loss |   |   | Value |   |   | loss |   |
|                                          |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Agencies                                      |   | $                   | 5,953  |   |                | $      | (51    | )      |   | $ | - |   |   | $ | - |   |   | $ | 5,953 |   |   | $ | (51 | ) |
| Pooled trust preferred securities        |   |                | -      |   |                |   | -      |   |   |   | 5,012 |   |   |   | (7,743 | ) |   |   | 5,012 |   |   |   | (7,743 | ) |
| Mortgage backed securities - Residential |   |                | 3,263  |   |                |   | (22    | )      |   |   | - |   |   |   | - |   |   |   | 3,263 |   |   |   | (22 | ) |
| CMOs - Private issuer                         |   |                | 574    |   |                |   | (3     | )      |   |   | 20,142 |   |   |   | (5,275 | ) |   |   | 20,716 |   |   |   | (5,278 | ) |
| CMOs - Government sponsored enterprises       |   |                | 9,801  |   |                |   | (76    | )      |   |   | - |   |   |   | - |   |   |   | 9,801 |   |   |   | (76 | ) |
|                                          |   | $                   | 19,591 |   |                | $      | (152   | )      |   | $ | 25,154 |   |   | $ | (13,018 | ) |   | $ | 44,745 |   |   | $ | (13,170 | ) |

----

|                                      |   |   |   |   |   |   |   | OTTI Credit Loss |   |   | Non-Credit   |   |
|-------------------------------------------|--------|--------|--------|--------|--------|--------|--------|------------------|--------|--------|--------------|--------|
|                                      |   |   |   |   | Fair   |   |   | June 30, 2010    |   |   | Loss in AOCL |   |
| Description/Rating                        |   | Number |   |   | Value  |   |   | QTD              |   |   | YTD          |   |   | June 30, 2010 |   |
| Trust preferred securities:               |   |   |   |   |   |   |   |             |   |   |         |   |   |   |   |
| Ba1                                       |   |   | 1      |   |   | $      | 900    |             |   | $      | 2            |   |   | $ | 6 |   |   | $ | 2,066 |   |
| Ca                                        |   |   | 1      |   |   |   | 204    |             |   |   | -            |   |   |   | 228 |   |   |   | 649 |   |
|                                      |   |   | 2      |   |   |   | 1,104  |             |   |   | 2            |   |   |   | 234 |   |   |   | 2,715 |   |
| Collateralized mortgage obligations: |   |   |   |   |   |   |   |             |   |   |         |   |   |   |   |   |   |   |   |   |
| Caa1                                      |   |   | 1      |   |   |   | 2,582  |             |   |   | 27           |   |   |   | 46 |   |   |   | 362 |   |
| Caa3                                      |   |   | 1      |   |   |   | 1,420  |             |   |   | 69           |   |   |   | 69 |   |   |   | 2,168 |   |
| CC                                        |   |   | 1      |   |   |   | 2,446  |             |   |   | 27           |   |   |   | 33 |   |   |   | 144 |   |
|                                      |   |   | 3      |   |   |   | 6,448  |             |   |   | 123          |   |   |   | 148 |   |   |   | 2,674 |   |
|                                      |   |   | 5      |   |   | $      | 7,552  |             |   | $      | 125          |   |   | $ | 382 |   |   | $ | 5,389 |   |

----

| Credit related impairments with a portion recognized in other comprehensive loss:                |   |   |   |
|------------------------------------------------------------------------------------------------------------|--------|--------|--------|
| Balance at January 1, 2010                                                                                 |   | $      | 3,293  |   |
| Credit related impairments on portions of OTTI previously recognized in other comprehensive loss |   |   | 382    |   |
| Balance at June 30, 2010                                                                                   |   | $      | 3,675  |   |

----

|                      |   | June 30, |    |   | December 31, |   |
|---------------------------|--------|----------|---------|--------|--------------|--------|
|                      |   | 2010     |    |   | 2009         |   |
|                      |   |     |    |   |         |   |
| Real estate:              |   |     |    |   |         |   |
| Residential, 1-4 family   |   | $        | 212,265 |   |         | $      | 219,863 |   |
| Multi-family              |   |     | 22,241  |   |         |   | 23,862 |   |
| Commercial                |   |     | 102,018 |   |         |   | 117,499 |   |
| Construction              |   |     | 18,786  |   |         |   | 19,392 |   |
| Consumer - secured        |   |     | 163,589 |   |         |   | 161,007 |   |
| Consumer - unsecured      |   |     | 7,464   |   |         |   | 7,182 |   |
| Home equity loans         |   |     | 165,322 |   |         |   | 176,988 |   |
| Commercial business loans |   |     | 135,463 |   |         |   | 101,022 |   |
|                      |   |     | 827,148 |   |         |   | 826,815 |   |
| Net deferred loan costs   |   |     | 4,766   |   |         |   | 4,877 |   |
| Allowance for loan losses |   |     | (18,068 | )      |         |   | (15,631 | ) |
|                      |   | $        | 813,846 |   |         | $      | 816,061 |   |

|                                                              |   | Three Months Ended |   |   | Six Months Ended |   |
|-------------------------------------------------------------------|--------|--------------------|--------|--------|------------------|--------|
|                                                              |   | June 30,           |   |   | June 30,         |   |
|                                                              |   | 2010               |   |   | 2009             |   |   | 2010 |   |   | 2009 |   |
|                                                              |   |               |   |   |             |   |
| Beginning balance                                                 |   | $                  | 17,148 |   |             | $      | 12,568 |   |   | $ | 15,631 |   |   | $ | 10,546 |   |
| Provision for loan losses                                         |   |               | 1,500  |   |             |   | 1,900 |   |   |   | 3,280 |   |   |   | 4,470 |   |
| Loans charged off                                                 |   |               | (691   | )      |             |   | (321 | ) |   |   | (1,058 | ) |   |   | (938 | ) |
| Recoveries                                                        |   |               | 111    |   |             |   | 114 |   |   |   | 215 |   |   |   | 183 |   |
| Ending balance                                                    |   | $                  | 18,068 |   |             | $      | 14,261 |   |   | $ | 18,068 |   |   | $ | 14,261 |   |
|                                                              |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Ratios:                                                           |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Annualized net charge-offs to average loans outstanding           |   |               | 0.28   | %      |             |   | 0.10 | % |   |   | 0.20 | % |   |   | 0.19 | % |
| Allowance for loan losses to nonperforming loans at end of period |   |               | 117.88 | %      |             |   | 104.98 | % |   |   | 117.88 | % |   |   | 104.98 | % |
| Allowance for loan losses to total loans at end of period         |   |               | 2.18   | %      |             |   | 1.76 | % |   |   | 2.18 | % |   |   | 1.76 | % |

----

|                                                                           |   | June 30, |   |   | December 31, |   |
|--------------------------------------------------------------------------------|--------|----------|--------|--------|--------------|--------|
|                                                                           |   | 2010     |   |   | 2009         |   |
|                                                                           |   |     |   |
| Nonaccrual loans                                                               |   | $        | 14,419 |   |         | $      | 12,061 |   |
| Loans past due over 90 days still accruing                                     |   |     | 909    |   |         |   | 827 |   |
| Total nonaccrual loans and loans past due over 90 days and still accruing |   |     | 15,328 |   |         |   | 12,888 |   |
| Foreclosed and repossessed assets                                              |   |     | 740    |   |         |   | 797 |   |
| Total nonperforming assets                                                     |   | $        | 16,068 |   |         | $      | 13,685 |   |
|                                                                           |   |     |   |   |         |   |   |   |
| Ratios:                                                                        |   |     |   |   |         |   |   |   |
| Nonperforming loans to total loans                                             |   |     | 1.85   | %      |         |   | 1.56 | % |
| Nonperforming assets to total assets                                           |   |     | 1.50   | %      |         |   | 1.28 | % |
|                                                                           |   |     |   |   |         |   |   |   |
| Impaired loans (in nonaccrual loans)                                           |   | $        | 12,526 |   |         | $      | 10,331 |   |
| Impaired loans (past due over 90 days on accrual)                              |   |     | 410    |   |         |   | 647 |   |
| Total impaired loans                                                           |   | $        | 12,936 |   |         | $      | 10,978 |   |
| Allowance for losses on impaired loans                                         |   | $        | 6,101  |   |         | $      | 4,103 |   |
| Impaired loans with no allowance                                               |   | $        | -      |   |         | $      | 27 |   |
| Average balance of impaired loans                                              |   | $        | 10,995 |   |         | $      | 5,102 |   |
| Interest income recognized                                                     |   | $        | 167    |   |         | $      | 197 |   |

|                                   |   | June 30, |    |   | December 31, |   |
|----------------------------------------|--------|----------|---------|--------|--------------|--------|
|                                   |   | 2010     |    |   | 2009         |   |
|                                   |   |     |    |   |         |   |
| Noninterest-bearing checking           |   | $        | 39,933  |   |         | $      | 32,292 |   |
| Interest-bearing checking accounts     |   |     | 47,598  |   |         |   | 51,824 |   |
| Savings accounts                       |   |     | 84,987  |   |         |   | 59,868 |   |
| Money market accounts                  |   |     | 164,242 |   |         |   | 155,740 |   |
| Certificates of deposit                |   |     | 357,976 |   |         |   | 393,573 |   |
|     Total deposits |   | $        | 694,736 |   |         | $      | 693,297 |   |

----

|                            |   | June 30, 2010 |        |   | December 31, 2009 |   |
|---------------------------------|--------|---------------|-------------|--------|-------------------|--------|
|                            |   | Fixed         |        |   | Variable          |   |   | Fixed |   |   | Variable |   |
|                            |   | Rate          |        |   | Rate              |   |   | Rate |   |   | Rate |   |
| Commitments to make loans       |   | $             | 44,988      |   |              | $      | 31,284 |   |   | $ | 23,785 |   |   | $ | 20,362 |   |
| Unused lines of credit          |   | $             | 3,434       |   |              | $      | 60,337 |   |   | $ | 6,985 |   |   | $ | 55,367 |   |
| Range of fixed-rate commitments |   |          | 3.25%-15.00 | %      |              |   | - |   |   |   | 3.25%-15.00 | % |   |   | - |   |

----

|                                                    |   | June 30, 2010 |   |   | December 31, 2009 |   |
|---------------------------------------------------------|--------|---------------|--------|--------|-------------------|--------|
|                                                    |   | Contract      |   |   | Fair              |   |   | Contract |   |   | Fair |   |
|                                                    |   | Amount        |   |   | Value             |   |   | Amount |   |   | Value |   |
| Standby letters of credit                               |   | $             | 1,041  |   |              | $      | - |   |   | $ | 1,041 |   |   | $ | - |   |
| Limited recourse obligations related to loans sold |   | $             | 1,664  |   |              | $      | - |   |   | $ | 1,665 |   |   | $ | - |   |

----

----

----

|                                                                |   |             |   |   |        |   |    |         |   |   |   |   |
|---------------------------------------------------------------------|--------|------------------|--------|--------|-------------|--------|---------|--------------|--------|--------|--------|--------|
|                                                                |   | Quoted Prices in |   |   | Significant |   |    |         |   |   |   |   |
|                                                                |   | Active Markets   |   |   | Other       |   |    | Significant  |   |   |   |   |
|                                                                |   | for Identical    |   |   | Observable  |   |    | Unobservable |   |   | Total  |   |
|                                                                |   | Assets           |   |   | Inputs      |   |    | Inputs       |   |   | Fair   |   |
|  Assets                                                        |   | (Level 1)        |   |   | (Level 2)   |   |    | (Level 3)    |   |   | Value  |   |
|                                                                |   |             |   |   |        |   |    |         |   |   |   |   |
| Available for sale securities:                                      |   |             |   |   |        |   |    |         |   |   |   |   |
| Debt securities:                                                    |   |             |   |   |        |   |    |         |   |   |   |   |
|   U.S. Treasury and agencies                              |   | $                | 100    |   |        | $      | 11,097  |         |   | $      | -      |   |   | $ | 11,197 |   |
|   Pooled trust preferred securities                       |   |             | -      |   |        |   | -       |         |   |   | 5,778  |   |   |   | 5,778 |   |
|   Mortgage-backed securities                              |   |             | -      |   |        |   | 40,223  |         |   |   | -      |   |   |   | 40,223 |   |
|   Collateralized mortgage obligations - Private issuer    |   |             | -      |   |        |   | 16,485  |         |   |   | -      |   |   |   | 16,485 |   |
|   Collateralized mortgage obligations - Government agency |   |             | -      |   |        |   | 93,950  |         |   |   | -      |   |   |   | 93,950 |   |
|                                                                |   | $                | 100    |   |        | $      | 161,755 |         |   | $      | 5,778  |   |   | $ | 167,633 |   |
|                                                                |   |             |   |   |        |   |    |         |   |   |   |   |   |   |   |   |
| Loans held for sale                                                 |   | $                | -      |   |        | $      | 2,371   |         |   | $      | -      |   |   | $ | 2,371 |   |
|                                                                |   |             |   |   |        |   |    |         |   |   |   |   |   |   |   |   |
| Mortgage servicing rights                                           |   | $                | -      |   |        | $      | 855     |         |   | $      | -      |   |   | $ | 855 |   |
|                                                                |   |             |   |   |        |   |    |         |   |   |   |   |   |   |   |   |
| Loan commitment derivatives                                         |   | $                | -      |   |        | $      | 167     |         |   | $      | -      |   |   | $ | 167 |   |
|                                                                |   |             |   |   |        |   |    |         |   |   |   |   |   |   |   |   |
| Liabilities                                                         |   |             |   |   |        |   |    |         |   |   |   |   |   |   |   |   |
|                                                                |   |             |   |   |        |   |    |         |   |   |   |   |   |   |   |   |
| Sales contract derivatives                                          |   | $                | -      |   |        | $      | 117     |         |   | $      | -      |   |   | $ | 117 |   |

----

|                                                                |   | Quoted Prices in |   |   | Significant |   |    |         |   |   |   |   |
|---------------------------------------------------------------------|--------|------------------|--------|--------|-------------|--------|---------|--------------|--------|--------|--------|--------|
|                                                                |   | Active Markets   |   |   | Other       |   |    | Significant  |   |   |   |   |
|                                                                |   | for Identical    |   |   | Observable  |   |    | Unobservable |   |   | Total  |   |
|                                                                |   | Assets           |   |   | Inputs      |   |    | Inputs       |   |   | Fair   |   |
|  Assets                                                        |   | (Level 1)        |   |   | (Level 2)   |   |    | (Level 3)    |   |   | Value  |   |
|                                                                |   |             |   |   |        |   |    |         |   |   |   |   |
| Securities available for sale:                                      |   |             |   |   |        |   |    |         |   |   |   |   |
| Debt securities:                                                    |   |             |   |   |        |   |    |         |   |   |   |   |
|   U.S. Treasury and agencies                              |   | $                | 101    |   |        | $      | 25,972  |         |   | $      | -      |   |   | $ | 26,073 |   |
|   Pooled trust preferred securities                       |   |             | -      |   |        |   | -       |         |   |   | 5,012  |   |   |   | 5,012 |   |
|   Mortgage-backed securities                              |   |             | -      |   |        |   | 41,253  |         |   |   | -      |   |   |   | 41,253 |   |
|   Collateralized mortgage obligations - Private issuer    |   |             | -      |   |        |   | 18,300  |         |   |   | -      |   |   |   | 18,300 |   |
|   Collateralized mortgage obligations - Government agency |   |             | -      |   |        |   | 76,600  |         |   |   | -      |   |   |   | 76,600 |   |
|                                                                |   | $                | 101    |   |        | $      | 162,125 |         |   | $      | 5,012  |   |   | $ | 167,238 |   |
|                                                                |   |             |   |   |        |   |    |         |   |   |   |   |   |   |   |   |
| Loans held for sale                                                 |   | $                | -      |   |        | $      | 940     |         |   | $      | -      |   |   | $ | 940 |   |
|                                                                |   |             |   |   |        |   |    |         |   |   |   |   |   |   |   |   |
| Mortgage servicing rights                                           |   | $                | -      |   |        | $      | 900     |         |   | $      | -      |   |   | $ | 900 |   |
|                                                                |   |             |   |   |        |   |    |         |   |   |   |   |   |   |   |   |
| Loan commitment derivatives                                         |   | $                | -      |   |        | $      | 79      |         |   | $      | -      |   |   | $ | 79 |   |
|                                                                |   |             |   |   |        |   |    |         |   |   |   |   |   |   |   |   |
| Liabilities                                                         |   |             |   |   |        |   |    |         |   |   |   |   |   |   |   |   |
|                                                                |   |             |   |   |        |   |    |         |   |   |   |   |   |   |   |   |
| Sales contract derivatives                                          |   | $                | -      |   |        | $      | 17      |         |   | $      | -      |   |   | $ | 17 |   |
|                                                                |   |             |   |   |        |   |    |         |   |   |   |   |   |   |   |   |

| Balance at January 1, 2010                                           |   | $      | 5,012  |   |
|----------------------------------------------------------------------|--------|--------|--------|--------|
| Transfers into Level 3                                               |   |   | -      |   |
| Capitalized interest                                                 |   |   | 44     |   |
| Principal paydowns                                                   |   |   | (135   | )      |
| Total gains or losses (realized/unrealized)                          |   |   |   |   |
|      Included in earnings                   |   |   | (234   | )      |
|      Included in other comprehensive income |   |   | 1,091  |   |
| Balance at June 30, 2010                                             |   | $      | 5,778  |   |

----

| Balance at January 1, 2010 |   | $      | 4,103 |   |
|----------------------------|--------|--------|-------|--------|
| Provision for loan losses  |   |   | 2,385 |   |
| Loans charged off          |   |   | (277  | )      |
| Recoveries                 |   |   | (110  | )      |
| Balance at June 30, 2010   |   | $      | 6,101 |   |

|                                                                  |   | June 30, |    |   | December 31, |   |
|-----------------------------------------------------------------------|--------|----------|---------|--------|--------------|--------|
|                                                                  |   | 2010     |    |   | 2009         |   |
|                                                                  |   | Carrying |    |   | Fair         |   |   | Carrying |   |   | Fair |   |
|                                                                  |   | Amount   |    |   | Value        |   |   | Amount |   |   | Value |   |
|                                                                  |   |     |    |   |         |   |   |   |   |   |   |   |
| Financial assets:                                                     |   |     |    |   |         |   |   |   |   |   |   |   |
|    Cash and cash equivalents                           |   | $        | 22,003  |   |         | $      | 22,003 |   |   | $ | 12,993 |   |   | $ | 12,993 |   |
|    Interest-bearing deposits                           |   |     | 100     |   |         |   | 100 |   |   |   | 170 |   |   |   | 170 |   |
|    Securities available for sale                       |   |     | 167,633 |   |         |   | 167,633 |   |   |   | 167,238 |   |   |   | 167,238 |   |
|    Securities held to maturity                         |   |     | 12,564  |   |         |   | 12,769 |   |   |   | 14,561 |   |   |   | 14,500 |   |
|    Loans held for sale                                 |   |     | 2,371   |   |         |   | 2,371 |   |   |   | 940 |   |   |   | 940 |   |
|    Loans, net                                          |   |     | 813,846 |   |         |   | 836,812 |   |   |   | 816,061 |   |   |   | 812,186 |   |
|    FHLB stock                                          |   |     | 11,297  |   |         |   | N/A |   |   |   | 11,487 |   |   |   | N/A |   |
|    Accrued interest receivable                         |   |     | 3,520   |   |         |   | 3,520 |   |   |   | 3,888 |   |   |   | 3,888 |   |
|                                                                  |   |     |    |   |         |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities:                                                |   |     |    |   |         |   |   |   |   |   |   |   |   |   |   |   |
|     Deposits                                      |   |     | 694,736 |   |         |   | 701,279 |   |   |   | 693,297 |   |   |   | 699,514 |   |
|     Federal Home Loan Bank advances               |   |     | 188,902 |   |         |   | 199,580 |   |   |   | 191,094 |   |   |   | 201,123 |   |
|     Securities sold under agreement to repurchase |   |     | 70,000  |   |         |   | 78,393 |   |   |   | 70,000 |   |   |   | 75,829 |   |
|     Accrued interest payable                      |   | $        | 1,562   |   |         | $      | 1,562 |   |   | $ | 1,522 |   |   | $ | 1,522 |   |

----

----

----

----

----

----

----

----

----

----

|                                                                                 |   |   | For the Three Months Ended June 30, |    |
|--------------------------------------------------------------------------------------|--------|--------|-------------------------------------|---------|
|                                                                                 |   |   | 2010                                |    |   | 2009 |   |
|                                                                                 |   |   | Average Outstanding Balance         |    |   | Interest Earned/Paid |   |   | Yield / Rate |   |   | Average Outstanding Balance |   |   | Interest Earned/Paid |   |   | Yield / Rate |   |
|                                                                                 |   |   | (Dollars in thousands)              |    |
| Interest-earning assets:                                                             |   |   |                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Loans                                                              |   |   | $                                   | 829,723 |   |   | $ | 11,451 |   |   |   | 5.54 | % |   | $ | 812,442 |   |   | $ | 11,385 |   |   |   | 5.62 | % |
|    Securities                                                         |   |   |                                | 183,225 |   |   |   | 1,928 |   |   |   | 4.22 |   |   |   | 154,342 |   |   |   | 2,079 |   |   |   | 5.40 |   |
|    FHLB stock                                                         |   |   | 11,367                              |    |   |   | 120 |   |   |   | 4.23 |   |   |   | 12,496 |   |   |   | 177 |   |   |   | 5.68 |   |
|    Interest-earning deposits                                          |   |   | 12,168                              |    |   |   | 5 |   |   |   | 0.16 |   |   |   | 27,633 |   |   |   | 12 |   |   |   | 0.17 |   |
|    Total interest-earning assets                                      |   |   | 1,036,483                           |    |   |   | 13,504 |   |   |   | 5.23 |   |   |   | 1,006,913 |   |   |   | 13,653 |   |   |   | 5.44 |   |
|    Noninterest-earning assets                                         |   |   | 29,626                              |    |   |   |   |   |   |   |   |   |   |   | 26,216 |   |   |   |   |   |   |   |   |   |
|         Total assets                         |   | $      | 1,066,109                           |    |   |   |   |   |   |   |   |   |   | $ | 1,033,129 |   |   |   |   |   |   |   |   |   |
|                                                                                 |   |   |                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                                        |   |   |                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Savings                                                            |   |   | $                                   | 70,716  |   |   | $ | 74 |   |   |   | 0.42 |   |   | $ | 60,851 |   |   | $ | 46 |   |   |   | 0.30 |   |
|    Money market accounts                                              |   |   | 177,770                             |    |   |   | 546 |   |   |   | 1.23 |   |   |   | 147,451 |   |   |   | 766 |   |   |   | 2.08 |   |
|    NOW accounts                                                       |   |   | 47,506                              |    |   |   | 77 |   |   |   | 0.65 |   |   |   | 53,826 |   |   |   | 189 |   |   |   | 1.41 |   |
|    Time accounts                                                      |   |   | 356,176                             |    |   |   | 2,180 |   |   |   | 2.45 |   |   |   | 357,594 |   |   |   | 2,924 |   |   |   | 3.28 |   |
|         Total deposits                       |   |   | 652,168                             |    |   |   | 2,877 |   |   |   | 1.77 |   |   |   | 619,722 |   |   |   | 3,925 |   |   |   | 2.54 |   |
|    FHLB advances                                                      |   |   | 189,148                             |    |   |   | 2,023 |   |   |   | 4.29 |   |   |   | 208,641 |   |   |   | 2,236 |   |   |   | 4.30 |   |
|    Reverse repurchase agreements                                      |   |   | 70,003                              |    |   |   | 675 |   |   |   | 3.87 |   |   |   | 70,000 |   |   |   | 549 |   |   |   | 3.15 |   |
|    Lease obligation                                                   |   |   | 7,737                               |    |   |   | 196 |   |   |   | 10.16 |   |   |   | - |   |   |   | - |   |   |   | - |   |
|         Total interest-bearing liabilities   |   |   | 919,056                             |    |   |   | 5,771 |   |   |   | 2.52 |   |   |   | 898,363 |   |   |   | 6,710 |   |   |   | 3.00 |   |
|                                                                                 |   |   |                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Noninterest-bearing deposits                                       |   |   | 38,331                              |    |   |   |   |   |   |   |   |   |   |   | 32,744 |   |   |   |   |   |   |   |   |   |
|    Other noninterest-bearing liabilities                              |   |   | 3,054                               |    |   |   |   |   |   |   |   |   |   |   | 6,503 |   |   |   |   |   |   |   |   |   |
|         Total liabilities                    |   |   | 960,441                             |    |   |   |   |   |   |   |   |   |   |   | 937,610 |   |   |   |   |   |   |   |   |   |
|    Stockholders’ equity                                         |   |   | 105,668                             |    |   |   |   |   |   |   |   |   |   |   | 95,519 |   |   |   |   |   |   |   |   |   |
|         Total liabilities and equity         |   | $      | 1,066,109                           |    |   |   |   |   |   |   |   |   |   | $ | 1,033,129 |   |   |   |   |   |   |   |   |   |
|                                                                                 |   |   |                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Net interest income                                                |   |   |                                |    |   | $ | 7,733 |   |   |   |   |   |   |   |   |   |   | $ | 6,943 |   |   |   |   |   |
|                                                                                 |   |   |                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Net interest rate spread                                           |   |   |                                |    |   |   |   |   |   |   | 2.71 | % |   |   |   |   |   |   |   |   |   |   | 2.44 | % |
|                                                                                 |   |   |                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Net interest-earning assets                                        |   | $      | 117,427                             |    |   |   |   |   |   |   |   |   |   | $ | 108,550 |   |   |   |   |   |   |   |   |   |
|                                                                                 |   |   |                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Net interest margin                                                |   |   |                                |    |   |   |   |   |   |   | 2.99 | % |   |   |   |   |   |   |   |   |   |   | 2.77 | % |
|                                                                                 |   |   |                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Average of interest-earning assets to interest-bearing liabilities |   |   |                                |    |   |   |   |   |   |   | 112.78 | % |   |   |   |   |   |   |   |   |   |   | 112.08 | % |

----

|                                                                                 |   |   | For the Six Months Ended June 30, |    |
|--------------------------------------------------------------------------------------|--------|--------|-----------------------------------|---------|
|                                                                                 |   |   | 2010                              |    |   | 2009 |   |
|                                                                                 |   |   | Average Outstanding Balance       |    |   | Interest Earned/Paid |   |   | Yield / Rate |   |   | Average Outstanding Balance |   |   | Interest Earned/Paid |   |   | Yield / Rate |   |
|                                                                                 |   |   | (Dollars in thousands)            |    |
| Interest-earning assets:                                                             |   |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Loans                                                              |   |   | $                                 | 832,822 |   |   | $ | 23,063 |   |   |   | 5.58 | % |   | $ | 804,576 |   |   | $ | 22,727 |   |   |   | 5.70 | % |
|    Securities                                                         |   |   |                              | 182,089 |   |   |   | 3,895 |   |   |   | 4.31 |   |   |   | 158,745 |   |   |   | 4,434 |   |   |   | 5.63 |   |
|    FHLB stock                                                         |   |   | 11,461                            |    |   |   | 287 |   |   |   | 5.05 |   |   |   | 12,772 |   |   |   | 276 |   |   |   | 4.36 |   |
|    Interest-earning deposits                                          |   |   | 10,305                            |    |   |   | 10 |   |   |   | 0.20 |   |   |   | 25,330 |   |   |   | 28 |   |   |   | 0.22 |   |
|    Total interest-earning assets                                      |   |   | 1,036,677                         |    |   |   | 27,255 |   |   |   | 5.30 |   |   |   | 1,001,423 |   |   |   | 27,465 |   |   |   | 5.53 |   |
|    Noninterest-earning assets                                         |   |   | 30,650                            |    |   |   |   |   |   |   |   |   |   |   | 27,273 |   |   |   |   |   |   |   |   |   |
|         Total assets                         |   | $      | 1,067,327                         |    |   |   |   |   |   |   |   |   |   | $ | 1,028,696 |   |   |   |   |   |   |   |   |   |
|                                                                                 |   |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                                        |   |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Savings                                                            |   |   | $                                 | 65,464  |   |   | $ | 120 |   |   |   | 0.37 |   |   | $ | 58,814 |   |   | $ | 104 |   |   |   | 0.36 |   |
|    Money market accounts                                              |   |   | 172,153                           |    |   |   | 1,104 |   |   |   | 1.29 |   |   |   | 147,927 |   |   |   | 1,671 |   |   |   | 2.28 |   |
|    NOW accounts                                                       |   |   | 48,193                            |    |   |   | 150 |   |   |   | 0.63 |   |   |   | 52,736 |   |   |   | 411 |   |   |   | 1.57 |   |
|    Time accounts                                                      |   |   | 370,500                           |    |   |   | 4,681 |   |   |   | 2.55 |   |   |   | 353,588 |   |   |   | 5,986 |   |   |   | 3.41 |   |
|         Total deposits                       |   |   | 656,310                           |    |   |   | 6,055 |   |   |   | 1.86 |   |   |   | 613,065 |   |   |   | 8,172 |   |   |   | 2.69 |   |
|    FHLB advances                                                      |   |   | 189,803                           |    |   |   | 3,999 |   |   |   | 4.25 |   |   |   | 211,990 |   |   |   | 4,530 |   |   |   | 4.31 |   |
|    Reverse repurchase agreements                                      |   |   | 70,001                            |    |   |   | 1,343 |   |   |   | 3.87 |   |   |   | 70,000 |   |   |   | 1,092 |   |   |   | 3.15 |   |
|    Lease obligation                                                   |   |   | 7,737                             |    |   |   | 392 |   |   |   | 10.22 |   |   |   | - |   |   |   | - |   |   |   | - |   |
|         Total interest-bearing liabilities   |   |   | 923,851                           |    |   |   | 11,789 |   |   |   | 2.57 |   |   |   | 895,055 |   |   |   | 13,794 |   |   |   | 3.11 |   |
|                                                                                 |   |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Noninterest-bearing deposits                                       |   |   | 35,882                            |    |   |   |   |   |   |   |   |   |   |   | 31,665 |   |   |   |   |   |   |   |   |   |
|    Other noninterest-bearing liabilities                              |   |   | 3,135                             |    |   |   |   |   |   |   |   |   |   |   | 2,717 |   |   |   |   |   |   |   |   |   |
|         Total liabilities                    |   |   | 962,868                           |    |   |   |   |   |   |   |   |   |   |   | 929,437 |   |   |   |   |   |   |   |   |   |
|    Stockholders’ equity                                         |   |   | 104,459                           |    |   |   |   |   |   |   |   |   |   |   | 99,259 |   |   |   |   |   |   |   |   |   |
|         Total liabilities and equity         |   | $      | 1,067,327                         |    |   |   |   |   |   |   |   |   |   | $ | 1,028,696 |   |   |   |   |   |   |   |   |   |
|                                                                                 |   |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Net interest income                                                |   |   |                              |    |   | $ | 15,466 |   |   |   |   |   |   |   |   |   |   | $ | 13,671 |   |   |   |   |   |
|                                                                                 |   |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Net interest rate spread                                           |   |   |                              |    |   |   |   |   |   |   | 2.73 | % |   |   |   |   |   |   |   |   |   |   | 2.42 | % |
|                                                                                 |   |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Net interest-earning assets                                        |   | $      | 112,826                           |    |   |   |   |   |   |   |   |   |   | $ | 106,368 |   |   |   |   |   |   |   |   |   |
|                                                                                 |   |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Net interest margin                                                |   |   |                              |    |   |   |   |   |   |   | 3.01 | % |   |   |   |   |   |   |   |   |   |   | 2.75 | % |
|                                                                                 |   |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Average of interest-earning assets to interest-bearing liabilities |   |   |                              |    |   |   |   |   |   |   | 112.21 | % |   |   |   |   |   |   |   |   |   |   | 111.88 | % |

----

----

|                                                |   |   |    |   |              |   |   |              |   |   |              |   |   |       |   |   |   |   |
|-----------------------------------------------------|--------|--------|---------|--------|-------------------|--------|--------|-------------------|--------|--------|-------------------|--------|--------|------------|--------|--------|--------|--------|
|                                                |   |   |    |   |              |   |   |              |   |   |              |   |   | To Be Well |   |
|                                                |   |   |    |   |              |   |   |              |   |   | Capitalized Under |   |
|                                                |   |   |    |   |              |   |   | For Capital       |   |   | Prompt Corrective |   |
|                                                |   | Actual |    |   | Adequacy Purposes |   |   | Action Provisions |   |
| June 30, 2010                                       |   |   | Amount  |   |              | Ratio  |   |              | Amount |   |              | Ratio  |   |       | Amount |   |   | Ratio  |   |
| Equity                                              |   | $      | 92,408  |   |              |   |   |              |   |   |              |   |   |       |   |   |   |   |   |
| Unrealized loss on AFS securities                   |   |   | 3,201   |   |              |   |   |              |   |   |              |   |   |       |   |   |   |   |   |
| Tier 1 (Core) Capital and Tangible Capital          |   |   | 95,609  |   |              |   | 8.88   | %                 |   | $      | 16,156            |   |   |       | 1.50   | %      |   |   |   |   |   |   |
| General valuation allowance  (1)          |   |   | 10,263  |   |              |   |   |              |   |   |              |   |   |       |   |   |   |   |   |   |   |   |
| Deduction for low-level recourse                    |   |   | (1,665  | )      |              |   |   |              |   |   |              |   |   |       |   |   |   |   |   |   |   |   |
| Total Capital to risk-weighted assets               |   | $      | 104,207 |   |              |   | 12.69  | %                 |   | $      | 65,684            |   |   |       | 8.00   | %      |   | $      | 82,105 |   |   |   | 10.00 | % |
| Tier 1 (Core) Capital to risk-weighted assets       |   | $      | 93,944  |   |              |   | 11.44  | %                 |   | $      | 32,842            |   |   |       | 4.00   | %      |   | $      | 49,263 |   |   |   | 6.00 | % |
| Tier 1 (Core) Capital to adjusted total assets |   | $      | 95,609  |   |              |   | 8.92   | %                 |   | $      | 43,082            |   |   |       | 4.00   | %      |   | $      | 53,853 |   |   |   | 5.00 | % |

----

|                                                |   |   |    |   |              |   |   |              |   |   |              |   |   | To Be Well        |   |
|-----------------------------------------------------|--------|--------|---------|--------|-------------------|--------|--------|-------------------|--------|--------|-------------------|--------|--------|-------------------|--------|
|                                                |   |   |    |   |              |   |   |              |   |   |              |   |   | Capitalized Under |   |
|                                                |   |   |    |   |              |   |   | For Capital       |   |   | Prompt Corrective |   |
|                                                |   | Actual |    |   | Adequacy Purposes |   |   | Action Provisions |   |
| December 31, 2009                                   |   |   | Amount  |   |              | Ratio  |   |              | Amount |   |              | Ratio  |   |              | Amount |   |   | Ratio |   |
| Equity                                              |   | $      | 86,597  |   |              |   |   |              |   |   |              |   |   |              |   |   |   |   |   |
| Unrealized loss on AFS securities                   |   |   | 5,462   |   |              |   |   |              |   |   |              |   |   |              |   |   |   |   |   |
| Tier 1 (Core) Capital and Tangible Capital          |   |   | 92,059  |   |              |   | 8.56   | %                 |   | $      | 16,140            |   |   |              | 1.50   | % |   |   |   |   |   |   |
| General valuation allowance  (1)          |   |   | 10,175  |   |              |   |   |              |   |   |              |   |   |              |   |   |   |   |   |   |   |   |
| Deduction for low-level recourse                    |   |   | (1,665  | )      |              |   |   |              |   |   |              |   |   |              |   |   |   |   |   |   |   |   |
| Total Capital to risk-weighted assets               |   | $      | 100,569 |   |              |   | 12.35  | %                 |   | $      | 65,121            |   |   |              | 8.00   | % |   | $ | 81,401 |   |   |   | 10.00 | % |
| Tier 1 (Core) Capital to risk-weighted assets       |   | $      | 90,394  |   |              |   | 11.10  | %                 |   | $      | 32,561            |   |   |              | 4.00   | % |   | $ | 48,841 |   |   |   | 6.00 | % |
| Tier 1 (Core) Capital to adjusted total assets |   | $      | 92,059  |   |              |   | 8.56   | %                 |   | $      | 43,041            |   |   |              | 4.00   | % |   | $ | 53,801 |   |   |   | 5.00 | % |

----

----

|                                 |   |         |   |   |          |   |   |              |   |   | (d)                 |   |
|--------------------------------------|--------|--------------|--------|--------|---------------|--------|--------|-------------------|--------|--------|---------------------|--------|
|                                 |   |         |   |   |          |   |   | (c)               |   |   | Maximum Number      |   |
|                                 |   |         |   |   |          |   |   | Total Number of   |   |   | (or Approximate     |   |
|                                 |   | (a)          |   |   | (b)           |   |   | Shares (or Units) |   |   | Dollar Value) of    |   |
|                                 |   | Total Number |   |   | Average Price |   |   | Purchased as      |   |   | Shares (or Units)   |   |
|                                 |   | of Shares    |   |   | Paid per      |   |   | Part of Publicly  |   |   | That May Yet Be     |   |
|                                 |   | (or Units)   |   |   | Share         |   |   | Announced Plans   |   |   | Purchased Under the |   |
| Period                               |   | Purchased    |   |   | (or Unit)     |   |   | or Programs       |   |   | Plans or Programs)  |   |
|                                 |   |         |   |   |          |   |   |              |   |   |                |   |
| April 1, 2010 through April 30, 2010 |   |         | -      |   |          | $      | -      |              |   |   | -                   |   |   |   | - |   |
| May 1, 2010 through May 31, 2010     |   |         | 5,325  |   |          | $      | 8.97   |              |   |   | 5,325               |   |   |   | 321,344 |   |
| June 1, 2010 through June 30, 2010   |   |         | 7,116  |   |          | $      | 8.83   |              |   |   | 7,116               |   |   |   | 314,228 |   |
|   Total                    |   |         | 12,441 |   |          | $      | 8.89   |              |   |   | 12,441              |   |   |   |   |   |

| (a)    | Exhibits.       |
|--------|-----------------|
|   |   3.1 | Articles of Incorporation of Beacon Federal Bancorp, Inc. (1) |
|   |   3.2 | Bylaws of Beacon Federal Bancorp, Inc. (1) |
|   |   4.0 | Form of Common Stock Certificate of Beacon Federal Bancorp, Inc. (1) |
|   | 10.1            | Form of Employee Stock Ownership Plan (1) |
|   | 10.2            | Employment Agreement with Ross J. Prossner (2) |
|   | 10.3            | Employment Agreement with J. David Hammond (2) |
|   | 10.4            | Employment Agreement with Darren T. Crossett (2) |
|   | 10.5            | Form of Change in Control Agreement (2) |
|   | 10.6            | Beacon Federal Excess Benefit Plan (3) |
|   | 10.7            | Beacon Federal Annual Cash Incentive Plan (1) |

----

|   | 10.8 | Beacon Federal Supplemental Executive Retirement Plan (4)                                                                  |
|--------|------|----------------------------------------------------------------------------------------------------------------------------|
|   | 10.9 | Beacon Federal 2008 Equity Incentive Plan (5)                                                                              |
|   | 21.0 | Subsidiaries of Registrant (1)                                                                                             |
|   | 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                         |
|   | 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                         |
|   | 32.0 | Statement of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |

| (1) | Incorporated by reference to the Registration Statement on Form S-1 of Beacon Federal Bancorp, Inc. (File No. 333-143522), originally filed with the Securities and Exchange Commission on June 5, 2007.                         |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Filed with the Securities and Exchange Commission on October 4, 2007 on Form 8K.                                                                                                                                                 |
| (3) | Filed with the Securities and Exchange Commission on October 31, 2008 on Form 8K.                                                                                                                                                |
| (4) | Filed with the Securities and Exchange Commission on December 28, 2007.                                                                                                                                                          |
| (5) | Incorporated by reference to Appendix A of the Company’s Definitive Proxy Statement for the Special Meeting of Stockholders (File No. 001-33713), as filed with the Securities and Exchange Commission on October 9, 2008. |

----

| BEACON FEDERAL BANCORP, INC. |
|------------------------------|
| (Registrant)                 |
|                         |   |   |   |
| DATE: August 6, 2010         | BY: | /s/ Ross J. Prossner |   |
|                         | Ross J. Prossner, President and Chief Executive Officer |   |
|                         |   |   |
|                         | BY:  | /s/ Lisa M. Jones |   |
|                         | Lisa M. Jones, Vice-President and Principal Financial and |   |
|                         | Accounting Officer |   |