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

| Large accelerated filer o | Accelerated filer o         |
|---------------------------|-----------------------------|
| Non-accelerated filer o   | Smaller Reporting Company x |

| Class                          | Outstanding at August 12, 2011 |
|--------------------------------|--------------------------------|
| Common Stock, par value $0.625 | 3,154,433                      |

----

|           | PART I - FINANCIAL INFORMATION                                   |   |   |   |
|----------------|------------------------------------------------------------------|--------|--------|--------|
|           |                                                             |   |   |   |
| ITEM 1.        | CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)                    |   | PAGE   |   |
|           |                                                             |   |   |   |
|           | Consolidated Balance Sheets at June 30, 2011                     |   |   |   |
|           | and December 31, 2010                                            |   |   | 3      |   |
|           |                                                             |   |   |   |   |
|           | Consolidated Statements of Income for the Three and Six          |   |   |   |   |
|           | Months Ended June 30, 2011 and 2010                              |   |   | 4      |   |
|           |                                                             |   |   |   |   |
|           | Consolidated Statement of Shareholders’ Equity for the Six |   |   |   |   |
|           | Months Ended June 30, 2011                                       |   |   | 5      |   |
|           |                                                             |   |   |   |   |
|           | Consolidated Statements of Cash Flows for the Six                |   |   |   |   |
|           | Months Ended June 30, 2011 and 2010                              |   |   | 6      |   |
|           |                                                             |   |   |   |   |
|           | Notes to Consolidated Financial Statements                       |   |   | 7      |   |
|           |                                                             |   |   |   |   |
| ITEM 2.        | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL                |   |   |   |   |
|           | CONDITION AND RESULTS OF OPERATIONS                              |   |   | 38     |   |
|           |                                                             |   |   |   |   |
| ITEM 3.        | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT                    |   |   |   |   |
|           | MARKET RISK                                                      |   |   | 69     |   |
|           |                                                             |   |   |   |   |
| ITEM 4.        | CONTROLS AND PROCEDURES                                          |   |   | 69     |   |
|           |                                                             |   |   |   |   |
|           | PART II - OTHER INFORMATION                                      |   |   |   |   |
|           |                                                             |   |   |   |   |
| ITEM 1.        | LEGAL PROCEEDINGS                                                |   |   | 70     |   |
|           |                                                             |   |   |   |   |
| ITEM 1A.       | RISK FACTORS                                                     |   |   | 70     |   |
|           |                                                             |   |   |   |   |
| ITEM 2.        | UNREGISTERED SALES OF EQUITY SECURITIES AND                      |   |   |   |   |
|           | USE OF PROCEEDS                                                  |   |   | 70     |   |
|           |                                                             |   |   |   |   |
| ITEM 3.        | DEFAULTS UPON SENIOR SECURITIES                                  |   |   | 70     |   |
|           |                                                             |   |   |   |   |
| ITEM 4.        | (REMOVED AND RESERVED)                                           |   |   | 70     |   |
|           |                                                             |   |   |   |   |
| ITEM 5.        | OTHER INFORMATION                                                |   |   | 70     |   |
|           |                                                             |   |   |   |   |
| ITEM 6.        | EXHIBITS                                                         |   |   | 71     |   |
|           |                                                             |   |   |   |   |
| SIGNATURES     |                                                             |   |   |   |
|           |                                                             |   |   |   |   |
| CERTIFICATIONS |                                                             |   | 72     |   |

----

|                                                         |   | (in thousands, except share data)(unaudited) |    |
|--------------------------------------------------------------|--------|----------------------------------------------|---------|
|                                                         |   | June 30,                                     |    |   | December 31, |   |
|                                                         |   | 2011                                         |    |   | 2010 |   |
| Assets                                                       |   |                                         |    |   |   |   |
| Cash and due from banks                                      |   | $                                            | 10,912  |   |   | $ | 8,498 |   |
| Interest-bearing deposits in banks                           |   |                                         | 6,270   |   |   |   | 6,414 |   |
| Total cash and cash equivalents                              |   |                                         | 17,182  |   |   |   | 14,912 |   |
|                                                         |   |                                         |    |   |   |   |   |   |
| Investment securities                                        |   |                                         |    |   |   |   |   |   |
| Available-for-sale (amortized cost $321,379 and $288,232)    |   |                                         | 326,094 |   |   |   | 290,564 |   |
| Held-to-maturity (fair value $1,905 and $2,729)              |   |                                         | 1,842   |   |   |   | 2,667 |   |
| Restricted investment in bank stocks                         |   |                                         | 1,965   |   |   |   | 2,176 |   |
| Loans held-for-sale                                          |   |                                         | 843     |   |   |   | 228 |   |
| Total loans, net of unearned costs                           |   |                                         | 475,710 |   |   |   | 482,182 |   |
| Allowance for loan losses                                    |   |                                         | (8,850  | ) |   |   | (8,955 | ) |
| Net loans                                                    |   |                                         | 466,860 |   |   |   | 473,227 |   |
| Bank-owned life insurance                                    |   |                                         | 9,536   |   |   |   | 9,439 |   |
| Premises and equipment, net                                  |   |                                         | 6,532   |   |   |   | 6,552 |   |
| Accrued interest receivable                                  |   |                                         | 2,867   |   |   |   | 2,988 |   |
| Other assets                                                 |   |                                         | 5,559   |   |   |   | 6,507 |   |
| Total assets                                                 |   | $                                            | 839,280 |   |   | $ | 809,260 |   |
|                                                         |   |                                         |    |   |   |   |   |   |
| Liabilities                                                  |   |                                         |    |   |   |   |   |   |
| Deposits                                                     |   |                                         |    |   |   |   |   |   |
| Demand, non-interest bearing                                 |   | $                                            | 65,542  |   |   | $ | 55,377 |   |
| Interest-bearing demand                                      |   |                                         | 136,161 |   |   |   | 132,500 |   |
| Money market                                                 |   |                                         | 68,274  |   |   |   | 78,802 |   |
| Savings                                                      |   |                                         | 155,715 |   |   |   | 118,066 |   |
| Time                                                         |   |                                         | 190,787 |   |   |   | 206,629 |   |
| Time of $100,000 or more                                     |   |                                         | 103,202 |   |   |   | 103,603 |   |
| Total deposits                                               |   |                                         | 719,681 |   |   |   | 694,977 |   |
| Short-term borrowings                                        |   |                                         | 30,553  |   |   |   | 29,786 |   |
| Long-term debt                                               |   |                                         | 20,303  |   |   |   | 20,308 |   |
| Accrued interest payable                                     |   |                                         | 787     |   |   |   | 1,089 |   |
| Other liabilities                                            |   |                                         | 1,762   |   |   |   | 2,010 |   |
| Total liabilities                                            |   |                                         | 773,086 |   |   |   | 748,170 |   |
|                                                         |   |                                         |    |   |   |   |   |   |
| Shareholders' Equity                                         |   |                                         |    |   |   |   |   |   |
| Common stock, par value $0.625 per share;                    |   |                                         |    |   |   |   |   |   |
| authorized 10,000,000 shares; 3,319,002 shares and 3,293,687 |   |                                         |    |   |   |   |   |   |
| shares issued; 3,154,433 and 3,129,118 shares outstanding    |   |                                         | 2,075   |   |   |   | 2,059 |   |
| Surplus                                                      |   |                                         | 11,251  |   |   |   | 10,811 |   |
| Retained earnings                                            |   |                                         | 52,232  |   |   |   | 49,157 |   |
| Accumulated other comprehensive income, net                  |   |                                         | 3,112   |   |   |   | 1,539 |   |
| Treasury stock, at cost; 164,569 shares                      |   |                                         | (2,476  | ) |   |   | (2,476 | ) |
| Total shareholders' equity                                   |   |                                         | 66,194  |   |   |   | 61,090 |   |
| Total liabilities and shareholders' equity                   |   | $                                            | 839,280 |   |   | $ | 809,260 |   |

----

|                                                                          |   | (in thousands, except share data)(unaudited) |   |
|-------------------------------------------------------------------------------|--------|----------------------------------------------|--------|
|                                                                          |   | Three MonthsEnded June 30,                   |   |   | Six MonthsEnded June 30, |   |
|                                                                          |
|                                                                          |   | 2011                                         |   |   | 2010 |   |   | 2011 |   |   | 2010 |   |
| Interest Income                                                               |   |                                         |   |   |   |   |   |   |   |   |   |   |
| Interest and fees on loans                                                    |   | $                                            | 6,693  |   |   | $ | 6,635 |   |   | $ | 13,407 |   |   | $ | 12,994 |   |
| Interest and dividends on investment securities:                              |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                                       |   |                                         | 1,819  |   |   |   | 1,815 |   |   |   | 3,534 |   |   |   | 3,689 |   |
| Tax-exempt                                                                    |   |                                         | 666    |   |   |   | 590 |   |   |   | 1,325 |   |   |   | 1,175 |   |
| Interest on interest-bearing balances and other interest income               |   |                                         | 10     |   |   |   | 9 |   |   |   | 17 |   |   |   | 19 |   |
| Total interest income                                                         |   |                                         | 9,188  |   |   |   | 9,049 |   |   |   | 18,283 |   |   |   | 17,877 |   |
|                                                                          |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest Expense                                                              |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest on deposits                                                          |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing demand                                                       |   |                                         | 206    |   |   |   | 245 |   |   |   | 396 |   |   |   | 467 |   |
| Money market                                                                  |   |                                         | 84     |   |   |   | 161 |   |   |   | 178 |   |   |   | 327 |   |
| Savings                                                                       |   |                                         | 300    |   |   |   | 180 |   |   |   | 582 |   |   |   | 321 |   |
| Time                                                                          |   |                                         | 748    |   |   |   | 1,122 |   |   |   | 1,584 |   |   |   | 2,394 |   |
| Time of $100,000 or more                                                      |   |                                         | 397    |   |   |   | 587 |   |   |   | 837 |   |   |   | 1,223 |   |
| Interest on short-term borrowings                                             |   |                                         | 58     |   |   |   | 67 |   |   |   | 113 |   |   |   | 120 |   |
| Interest on long-term debt                                                    |   |                                         | 244    |   |   |   | 252 |   |   |   | 485 |   |   |   | 566 |   |
| Total interest expense                                                        |   |                                         | 2,037  |   |   |   | 2,614 |   |   |   | 4,175 |   |   |   | 5,418 |   |
| Net interest income                                                           |   |                                         | 7,151  |   |   |   | 6,435 |   |   |   | 14,108 |   |   |   | 12,459 |   |
| Provision for loan losses                                                     |   |                                         | 450    |   |   |   | 700 |   |   |   | 1,100 |   |   |   | 1,400 |   |
| Net interest income after provision for loan losses                           |   |                                         | 6,701  |   |   |   | 5,735 |   |   |   | 13,008 |   |   |   | 11,059 |   |
|                                                                          |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-Interest Income                                                           |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total other-than-temporary impairment loss on investment securities           |   |                                         | -      |   |   |   | (68 | ) |   |   | - |   |   |   | (253 | ) |
| Less: Portion of loss recognized in other comprehensive income (before taxes) |   |                                         | -      |   |   |   | - |   |   |   | - |   |   |   | 27 |   |
| Net other-than temporary impairment losses on investment securities           |   |                                         | -      |   |   |   | (68 | ) |   |   | - |   |   |   | (226 | ) |
| Net gain on sale of investment securities                                     |   |                                         | 54     |   |   |   | 1 |   |   |   | 11 |   |   |   | 295 |   |
| Net (loss) gain on investment securities                                      |   |                                         | 54     |   |   |   | (67 | ) |   |   | 11 |   |   |   | 69 |   |
| Fees for services to customers                                                |   |                                         | 347    |   |   |   | 406 |   |   |   | 674 |   |   |   | 811 |   |
| ATM and debit card                                                            |   |                                         | 366    |   |   |   | 314 |   |   |   | 694 |   |   |   | 585 |   |
| Bank-owned life insurance                                                     |   |                                         | 80     |   |   |   | 68 |   |   |   | 190 |   |   |   | 132 |   |
| Merchant income                                                               |   |                                         | 82     |   |   |   | 75 |   |   |   | 144 |   |   |   | 132 |   |
| Net gain on sale of loans                                                     |   |                                         | 18     |   |   |   | 142 |   |   |   | 57 |   |   |   | 217 |   |
| Other                                                                         |   |                                         | 123    |   |   |   | 89 |   |   |   | 240 |   |   |   | 213 |   |
| Total non-interest income                                                     |   |                                         | 1,070  |   |   |   | 1,027 |   |   |   | 2,010 |   |   |   | 2,159 |   |
|                                                                          |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-Interest Expense                                                          |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Salaries and employee benefits                                                |   |                                         | 2,408  |   |   |   | 2,167 |   |   |   | 4,795 |   |   |   | 4,304 |   |
| Net occupancy                                                                 |   |                                         | 370    |   |   |   | 360 |   |   |   | 767 |   |   |   | 729 |   |
| Furniture and equipment                                                       |   |                                         | 320    |   |   |   | 288 |   |   |   | 623 |   |   |   | 570 |   |
| Marketing                                                                     |   |                                         | 206    |   |   |   | 199 |   |   |   | 381 |   |   |   | 360 |   |
| Third party services                                                          |   |                                         | 340    |   |   |   | 290 |   |   |   | 588 |   |   |   | 563 |   |
| Telephone, postage and supplies                                               |   |                                         | 158    |   |   |   | 142 |   |   |   | 306 |   |   |   | 299 |   |
| State taxes                                                                   |   |                                         | 150    |   |   |   | 139 |   |   |   | 300 |   |   |   | 279 |   |
| FDIC insurance premiums                                                       |   |                                         | 276    |   |   |   | 257 |   |   |   | 538 |   |   |   | 511 |   |
| Other                                                                         |   |                                         | 356    |   |   |   | 399 |   |   |   | 706 |   |   |   | 744 |   |
| Total non-interest expense                                                    |   |                                         | 4,584  |   |   |   | 4,241 |   |   |   | 9,004 |   |   |   | 8,359 |   |
| Income before income taxes                                                    |   |                                         | 3,187  |   |   |   | 2,521 |   |   |   | 6,014 |   |   |   | 4,859 |   |
| Provision for income taxes                                                    |   |                                         | 752    |   |   |   | 558 |   |   |   | 1,368 |   |   |   | 1,070 |   |
| Net Income                                                                    |   | $                                            | 2,435  |   |   | $ | 1,963 |   |   | $ | 4,646 |   |   | $ | 3,789 |   |
| Earnings Per Share - Basic                                                    |   | $                                            | 0.77   |   |   | $ | 0.63 |   |   | $ | 1.48 |   |   | $ | 1.22 |   |
| Earnings Per Share - Diluted                                                  |   | $                                            | 0.77   |   |   | $ | 0.63 |   |   | $ | 1.47 |   |   | $ | 1.22 |   |
| Cash Dividends Per Share                                                      |   | $                                            | 0.25   |   |   | $ | 0.24 |   |   | $ | 0.50 |   |   | $ | 0.48 |   |

----

|                                          |   |        |      |   |   |   |   |    |   |   |     |   |   | Accumulated   |   |   |     |   |   |   |   |
|-----------------------------------------------|--------|-------------|-----------|--------|--------|--------|--------|---------|--------|--------|----------|--------|--------|---------------|--------|--------|----------|--------|--------|--------|--------|
|                                          |   | Number of   |      |   |   |   |   |    |   |   |     |   |   | Other         |   |   |     |   |   |   |   |
| (in thousands, except share data)             |   | Shares      |      |   | Common |   |   |    |   |   | Retained |   |   | Comprehensive |   |   | Treasury |   |   |   |   |
| (unaudited)                                   |   | Outstanding |      |   | Stock  |   |   | Surplus |   |   | Earnings |   |   | Income        |   |   | Stock    |   |   | Total  |   |
| Balance, December 31, 2010                    |   |        | 3,129,118 |   |   | $      | 2,059  |    |   | $      | 10,811   |   |   | $             | 49,157 |   |     | $      | 1,539  |   |   | $ | (2,476 | ) |   | $ | 61,090 |   |
| Comprehensive income:                         |   |        |      |   |   |   |   |    |   |   |     |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                    |   |        | -         |   |   |   | -      |    |   |   | -        |   |   |          | 4,646  |   |     |   |   |   |   |   | - |   |   |   | 4,646 |   |
| Other comprehensive income                    |   |        | -         |   |   |   | -      |    |   |   | -        |   |   |          | -      |   |     |   | 1,573  |   |   |   | - |   |   |   | 1,573 |   |
| Total comprehensive income                    |   |        |      |   |   |   |   |    |   |   |     |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   | 6,219 |   |
| Cash dividends declared ($0.50 per share)     |   |        | -         |   |   |   | -      |    |   |   | -        |   |   |          | (1,571 | )      |     |   | -      |   |   |   | - |   |   |   | (1,571 | ) |
| Stock issued in connection with dividend      |   |        |      |   |   |   |   |    |   |   |     |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| reinvestment and stock purchase plan          |   |        | 15,835    |   |   |   | 10     |    |   |   | 341      |   |   |          | -      |   |     |   | -      |   |   |   | - |   |   |   | 351 |   |
| Stock issued for employee stock purchase plan |   |        | 1,971     |   |   |   | 1      |    |   |   | 35       |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   | 36 |   |
| Stock issued for options exercised            |   |        | 7,509     |   |   |   | 5      |    |   |   | 12       |   |   |          | -      |   |     |   | -      |   |   |   | - |   |   |   | 17 |   |
| Tax benefit of stock options exercised        |   |        | -         |   |   |   | -      |    |   |   | 23       |   |   |          | -      |   |     |   | -      |   |   |   | - |   |   |   | 23 |   |
| Stock-based compensation expense              |   |        | -         |   |   |   | -      |    |   |   | 29       |   |   |          | -      |   |     |   | -      |   |   |   | - |   |   |   | 29 |   |
| Balance, June 30, 2011                        |   |        | 3,154,433 |   |   | $      | 2,075  |    |   | $      | 11,251   |   |   | $             | 52,232 |   |     | $      | 3,112  |   |   | $ | (2,476 | ) |   | $ | 66,194 |   |

----

|                                                                              |   | (in thousands)(unaudited) |     |
|-----------------------------------------------------------------------------------|--------|---------------------------|----------|
| Six Months Ended June 30,                                                         |   | 2011                      |     |   | 2010 |   |
| Operating Activities                                                              |   |                      |     |   |   |   |
| Net income                                                                        |   | $                         | 4,646    |   |   | $ | 3,789 |   |
| Adjustments to reconcile net income to net cash provided by operating activities: |   |                      |     |   |   |   |   |   |
| Depreciation and amortization                                                     |   |                      | 398      |   |   |   | 400 |   |
| Provision for loan losses                                                         |   |                      | 1,100    |   |   |   | 1,400 |   |
| Net gains on investment securities available-for-sale                             |   |                      | (11      | ) |   |   | (69 | ) |
| Net loss on sale of repossessed assets                                            |   |                      | 3        |   |   |   | - |   |
| Net gain on sale of loans                                                         |   |                      | (57      | ) |   |   | (217 | ) |
| Loss on disposal of premises and equipment                                        |   |                      | -        |   |   |   | 1 |   |
| Proceeds from sales of residential mortgages held-for-sale                        |   |                      | 3,081    |   |   |   | 5,386 |   |
| Origination of residential mortgages held-for-sale                                |   |                      | (3,639   | ) |   |   | (5,012 | ) |
| Income on bank-owned life insurance                                               |   |                      | (190     | ) |   |   | (132 | ) |
| Stock-based compensation expense                                                  |   |                      | 29       |   |   |   | 25 |   |
| Deferred income tax provision (benefit)                                           |   |                      | 94       |   |   |   | (272 | ) |
| Net (decrease) increase in income taxes payable                                   |   |                      | (91      | ) |   |   | 191 |   |
| Net decrease in accrued interest receivable                                       |   |                      | 121      |   |   |   | 131 |   |
| Amortization of mortgage servicing rights and change in valuation allowance       |   |                      | 44       |   |   |   | 48 |   |
| Net amortization of premiums and discounts on investment securities               |   |                      | 623      |   |   |   | 416 |   |
| Net decrease in accrued interest payable                                          |   |                      | (302     | ) |   |   | (310 | ) |
| (Increase) decrease in other assets                                               |   |                      | (1       | ) |   |   | 808 |   |
| Decrease in other liabilities                                                     |   |                      | (248     | ) |   |   | (323 | ) |
| Net cash provided by operating activities                                         |   |                      | 5,600    |   |   |   | 6,260 |   |
| Investing Activities                                                              |   |                      |     |   |   |   |   |   |
| Proceeds from maturities and calls of investment securities                       |   |                      |     |   |   |   |   |   |
| available-for-sale                                                                |   |                      | 51,645   |   |   |   | 69,446 |   |
| held-to-maturity                                                                  |   |                      | 825      |   |   |   | 500 |   |
| Proceeds from the sale of investment securities                                   |   |                      |     |   |   |   |   |   |
| available-for-sale                                                                |   |                      | 23,434   |   |   |   | 2,476 |   |
| Purchases of investment securities                                                |   |                      |     |   |   |   |   |   |
| available-for-sale                                                                |   |                      | (108,838 | ) |   |   | (79,047 | ) |
| Proceeds from redemption of investment in restricted bank stock                   |   |                      | 211      |   |   |   | - |   |
| Net decrease (increase) in loans                                                  |   |                      | 5,237    |   |   |   | (25,969 | ) |
| Redemption of Bank Owned Life Insurance investment                                |   |                      | 95       |   |   |   | - |   |
| Net purchases of premises and equipment                                           |   |                      | (378     | ) |   |   | (364 | ) |
| Proceeds from sales of repossessed assets                                         |   |                      | 117      |   |   |   | 131 |   |
| Net cash used by investing activities                                             |   |                      | (27,652  | ) |   |   | (32,827 | ) |
| Financing Activities                                                              |   |                      |     |   |   |   |   |   |
| Net increase in non-interest bearing deposits                                     |   |                      | 10,165   |   |   |   | 5,305 |   |
| Net increase in interest-bearing deposits                                         |   |                      | 14,539   |   |   |   | 18,562 |   |
| Net increase in short-term borrowings                                             |   |                      | 767      |   |   |   | 5,626 |   |
| Repayments of long-term debt                                                      |   |                      | (5       | ) |   |   | (15,000 | ) |
| Tax benefit from exercise of stock options                                        |   |                      | 23       |   |   |   | - |   |
| Cash dividends paid, net of reinvestment                                          |   |                      | (1,449   | ) |   |   | (1,416 | ) |
| Proceeds from issuance of common stock                                            |   |                      | 282      |   |   |   | 172 |   |
| Net cash provided by financing activities                                         |   |                      | 24,322   |   |   |   | 13,249 |   |
| Increase (decrease) in cash and cash equivalents                                  |   |                      | 2,270    |   |   |   | (13,318 | ) |
| Cash and cash equivalents at beginning of year                                    |   |                      | 14,912   |   |   |   | 30,999 |   |
| Cash and cash equivalents at end of period                                        |   | $                         | 17,182   |   |   | $ | 17,681 |   |
| Supplemental Cash Flow Disclosures                                                |   |                      |     |   |   |   |   |   |
| Interest paid                                                                     |   | $                         | 4,477    |   |   | $ | 5,728 |   |
| Income taxes paid                                                                 |   |                      | 1,340    |   |   |   | 1,150 |   |
| Non-cash transactions                                                             |   |                      |     |   |   |   |   |   |
| Transfer of loans to repossessed assets or other real estate owned                |   |                      | 30       |   |   |   | 104 |   |

----

----

----

| Options granted         |   | 2011   |   |   | 2010   |   |
|-------------------------|--------|--------|--------|--------|--------|--------|
| Risk-free interest rate |   |   | 1.96   | %      |   |   | 2.32 | % |
| Dividend yield          |   |   | 5.02   |   |   |   | 5.28 |   |
| Volatility              |   |   | 29.83  |   |   |   | 27.50 |   |
| Expected life (years)   |   |   | 5.00   |   |   |   | 5.00 |   |

|                           |   |       |    |   |           |   | Weighted       |   |   |      |
|--------------------------------|--------|------------|---------|--------|----------------|--------|----------------|--------|--------|-----------|
|                           |   |       |    |   |           |   | average        |   |   |      |
|                           |   |       |    |   | Weighted       |   | remaining      |   |   | Aggregate |
|                           |   | Number     |    |   | average        |   | contractual    |   |   | intrinsic |
|                           |   | of options |    |   | exercise price |   | term (in yrs.) |   |   | value     |
| Outstanding at January 1, 2011 |   |       | 170,515 |   |           | $      | 21.60          |   |   |      |   |   |
| Exercised                      |   |       | (18,940 | )      |           |   | 14.12          |   |   |      |   |   |
| Forfeited                      |   |       | (14,800 | )      |           |   | 26.00          |   |   |      |   |   |
| Granted                        |   |       | 17,000  |   |           |   | 20.00          |   |   |      |   |   |
| Outstanding at June 30, 2011   |   |       | 153,775 |   |           | $      | 21.92          |   | 2.3    |      | $ | 484 |
| Exercisable at June 30, 2011   |   |       | 105,725 |   |           | $      | 23.55          |   | 2.0    |      | $ | 260 |

----

|                                                            |   | For the Three Months |      |   | For the Six Months |   |
|-----------------------------------------------------------------|--------|----------------------|-----------|--------|--------------------|--------|
|                                                            |   | Ended June 30,       |      |   | Ended June 30,     |   |
|                                                            |   | 2011                 |      |   | 2010               |   |   | 2011 |   |   | 2010 |   |
| Numerator for basic and diluted earnings per share - net income |   | $                    | 2,435     |   |               | $      | 1,963 |   |   | $ | 4,646 |   |   | $ | 3,789 |   |
| Denominator for basic earnings per share - weighted average     |   |                 |      |   |               |   |   |   |   |   |   |   |   |   |   |   |
| shares outstanding                                              |   |                 | 3,144,935 |   |               |   | 3,099,852 |   |   |   | 3,139,721 |   |   |   | 3,097,208 |   |
| Effect of dilutive securities - employee stock options          |   |                 | 16,826    |   |               |   | 13,615 |   |   |   | 13,920 |   |   |   | 10,475 |   |
| Denominator for diluted earnings per share - adjusted           |   |                 |      |   |               |   |   |   |   |   |   |   |   |   |   |   |
| weighted average shares outstanding                             |   |                 | 3,161,761 |   |               |   | 3,113,467 |   |   |   | 3,153,641 |   |   |   | 3,107,683 |   |
| Earnings per share-basic                                        |   | $                    | 0.77      |   |               | $      | 0.63 |   |   | $ | 1.48 |   |   | $ | 1.22 |   |
| Earnings per share-diluted                                      |   | $                    | 0.77      |   |               | $      | 0.63 |   |   | $ | 1.47 |   |   | $ | 1.22 |   |

|                                                               |   | June 30, |   |   | June 30, |   |
|--------------------------------------------------------------------|--------|----------|--------|--------|----------|--------|
| Three Months Ended                                                 |   | 2011     |   |   | 2010     |   |
| Unrealized holding gains arising during the period                 |   | $        | 2,522  |   |     | $      | 2,208 |   |
| Reclassification adjustment for gains included in net income       |   |     | (54    | )      |     |   | (1 | ) |
| Reclassification adjustment for OTTI losses included in net income |   |     | -      |   |     |   | 68 |   |
| Net unrealized gains                                               |   |     | 2,468  |   |     |   | 2,275 |   |
| Tax effect                                                         |   |     | (839   | )      |     |   | (774 | ) |
| Other comprehensive income, net of tax                             |   |     | 1,629  |   |     |   | 1,501 |   |
| Net income                                                         |   |     | 2,435  |   |     |   | 1,963 |   |
| Total comprehensive income                                         |   | $        | 4,064  |   |     | $      | 3,464 |   |

----

|                                                                             |   | June 30, |   |   | June 30, |   |
|----------------------------------------------------------------------------------|--------|----------|--------|--------|----------|--------|
| Six Months Ended                                                                 |   | 2011     |   |   | 2010     |   |
| Unrealized holding gains arising during the period                               |   | $        | 2,394  |   |     | $      | 3,326 |   |
| Unrealized losses related to factors other than credit arising during the period |   |     | -      |   |     |   | (27 | ) |
| Reclassification adjustment for gains included in net income                     |   |     | (11    | )      |     |   | (295 | ) |
| Reclassification adjustment for OTTI losses included in net income               |   |     | -      |   |     |   | 226 |   |
| Net unrealized gains                                                             |   |     | 2,383  |   |     |   | 3,230 |   |
| Tax effect                                                                       |   |     | (810   | )      |     |   | (1,098 | ) |
| Other comprehensive income, net of tax                                           |   |     | 1,573  |   |     |   | 2,132 |   |
| Net income                                                                       |   |     | 4,646  |   |     |   | 3,789 |   |
| Total comprehensive income                                                       |   | $        | 6,219  |   |     | $      | 5,921 |   |

|                                                                     |   |      |    |   | Gross      |   |   | Gross                     |   |   |   |   |
|--------------------------------------------------------------------------|--------|-----------|---------|--------|------------|--------|--------|---------------------------|--------|--------|--------|--------|
|                                                                     |   | Aggregate |    |   | unrealized |   |   | unrealized holding losses |   |   |   |   |
|                                                                     |   | fair      |    |   | holding    |   |   | Non-credit                |   |   |   |   |   | Amortized |   |
|                                                                     |   | value     |    |   | gains      |   |   | OTTI                      |   |   | Other  |   |   | cost |   |
| U.S. Government agency securities                                        |   | $         | 67,713  |   |       | $      | 334    |                      |   |   | -      |   |   | $ | 265 |   |   | $ | 67,644 |   |
| State and municipal securities                                           |   |      | 69,319  |   |       |   | 1,180  |                      |   |   | -      |   |   |   | 96 |   |   |   | 68,235 |   |
| U.S. Government agencies and sponsored enterprises (GSEs) - residential: |   |      |    |   |       |   |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities                                               |   |      | 108,291 |   |       |   | 2,848  |                      |   |   | -      |   |   |   | 139 |   |   |   | 105,582 |   |
| Collateralized mortgage obligations (CMOs)                               |   |      | 74,245  |   |       |   | 1,763  |                      |   |   | -      |   |   |   | 34 |   |   |   | 72,516 |   |
| Other debt securities                                                    |   |      | 2,472   |   |       |   | 60     |                      |   | $      | 1,164  |   |   |   | 514 |   |   |   | 4,090 |   |
| Equity securities                                                        |   |      | 4,054   |   |       |   | 813    |                      |   |   | -      |   |   |   | 71 |   |   |   | 3,312 |   |
| Total investment securities available-for-sale                           |   | $         | 326,094 |   |       | $      | 6,998  |                      |   | $      | 1,164  |   |   | $ | 1,119 |   |   | $ | 321,379 |   |

|                                                                     |   |      |    |   | Gross      |   |   | Gross                     |   |   |   |   |
|--------------------------------------------------------------------------|--------|-----------|---------|--------|------------|--------|--------|---------------------------|--------|--------|--------|--------|
|                                                                     |   | Aggregate |    |   | unrealized |   |   | unrealized holding losses |   |   |   |   |
|                                                                     |   | fair      |    |   | holding    |   |   | Non-credit                |   |   |   |   |   | Amortized |   |
|                                                                     |   | value     |    |   | gains      |   |   | OTTI                      |   |   | Other  |   |   | cost |   |
| U.S. Government agency securities                                        |   | $         | 66,448  |   |       | $      | 241    |                      |   |   | -      |   |   | $ | 869 |   |   | $ | 67,076 |   |
| State and municipal securities                                           |   |      | 63,588  |   |       |   | 675    |                      |   |   | -      |   |   |   | 514 |   |   |   | 63,427 |   |
| U.S. Government agencies and sponsored enterprises (GSEs) - residential: |   |      |    |   |       |   |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities                                               |   |      | 78,801  |   |       |   | 2,438  |                      |   |   | -      |   |   |   | 311 |   |   |   | 76,674 |   |
| Collateralized mortgage obligations (CMOs)                               |   |      | 75,573  |   |       |   | 1,890  |                      |   |   | -      |   |   |   | 137 |   |   |   | 73,820 |   |
| Other debt securities                                                    |   |      | 2,384   |   |       |   | 69     |                      |   | $      | 1,224  |   |   |   | 550 |   |   |   | 4,089 |   |
| Equity securities                                                        |   |      | 3,770   |   |       |   | 667    |                      |   |   | -      |   |   |   | 43 |   |   |   | 3,146 |   |
| Total investment securities available-for-sale                           |   | $         | 290,564 |   |       | $      | 5,980  |                      |   | $      | 1,224  |   |   | $ | 2,424 |   |   | $ | 288,232 |   |

----

|                                           |   | Aggregate  |    |   | Amortized |   |
|------------------------------------------------|--------|------------|---------|--------|-----------|--------|
|                                           |   | fair value |    |   | cost      |   |
| Due in one year or less                        |   | $          | 16,008  |   |      | $      | 15,519 |   |
| Due after one year through five years          |   |       | 199,693 |   |      |   | 195,441 |   |
| Due after five years through ten years         |   |       | 57,329  |   |      |   | 57,010 |   |
| Due after ten years                            |   |       | 49,010  |   |      |   | 50,097 |   |
| Equity securities                              |   |       | 4,054   |   |      |   | 3,312 |   |
| Total investment securities available-for-sale |   | $          | 326,094 |   |      | $      | 321,379 |   |

|              |   |     |   |   |     |   |   | Other-than- |   |   |      |   |
|-------------------|--------|----------|--------|--------|----------|--------|--------|-------------|--------|--------|-----------|--------|
|              |   | Gross    |   |   | Gross    |   |   | temporary   |   |   |      |   |
|              |   | realized |   |   | realized |   |   | impairment  |   |   | Net gains |   |
|              |   | gains    |   |   | losses   |   |   | losses      |   |   | (losses)  |   |
| Equity securities |   | $        | 141    |   |     | $      | -      |        |   | $      | -         |   |   | $ | 141 |   |
| Debt securities   |   |     | 248    |   |     |   | (378   | )           |   |   | -         |   |   |   | (130 | ) |
| Total             |   | $        | 389    |   |     | $      | (378   | )           |   | $      | -         |   |   | $ | 11 |   |

|              |   |     |   |   |     |   |   | Other-than- |   |   |      |   |
|-------------------|--------|----------|--------|--------|----------|--------|--------|-------------|--------|--------|-----------|--------|
|              |   | Gross    |   |   | Gross    |   |   | temporary   |   |   |      |   |
|              |   | realized |   |   | realized |   |   | impairment  |   |   | Net gains |   |
|              |   | gains    |   |   | losses   |   |   | losses      |   |   | (losses)  |   |
| Equity securities |   | $        | 287    |   |     | $      | -      |        |   | $      | -         |   |   | $ | 287 |   |
| Debt securities   |   |     | 10     |   |     |   | (2     | )           |   |   | (226      | )      |   |   | (218 | ) |
| Total             |   | $        | 297    |   |     | $      | (2     | )           |   | $      | (226      | )      |   | $ | 69 |   |

----

|                          |   | Three Months  |   |   | Six Months    |   |
|-------------------------------|--------|---------------|--------|--------|---------------|--------|
|                          |   | Ended         |   |   | Ended         |   |
|                          |   | June 30, 2011 |   |   | June 30, 2011 |   |
| Balance, beginning of period  |   | $             | 1,279  |   |          | $      | 1,279 |   |
| Additions:                    |   |          |   |   |          |   |   |   |
| Initial credit impairments    |   |          | -      |   |          |   | - |   |
| Subsequent credit impairments |   |          | -      |   |          |   | - |   |
| Balance, end of period        |   | $             | 1,279  |   |          | $      | 1,279 |   |

|                           |   | June 30, 2011 |   | December 31, 2010 |
|--------------------------------|--------|---------------|--------|-------------------|
|                           |   |          |   | Gross             |   | Gross |   |   |   |   |   | Gross |   | Gross |   |   |
|                           |   |          |   | unrealized        |   | unrealized |   | Aggregate |   |   |   | unrealized |   | unrealized |   | Aggregate |
|                           |   | Amortized     |   | holding           |   | holding |   | fair |   | Amortized |   | holding |   | holding |   | fair |
|                           |   | cost          |   | gains             |   | losses |   | value |   | cost |   | gains |   | losses |   | value |
| State and municipal securities |   | $ 1,842       |   | $ 63              |   | - |   | $ 1,905 |   | $ 2,667 |   | $ 62 |   | - |   | $ 2,729 |

----

|                                         |   | Aggregate  |   |   | Amortized |   |
|----------------------------------------------|--------|------------|--------|--------|-----------|--------|
|                                         |   | fair value |   |   | cost      |   |
| Due in one year or less                      |   |       | -      |   |      |   | - |   |
| Due after one year through five years        |   | $          | 247    |   |      | $      | 240 |   |
| Due after five years through ten years       |   |       | 1,658  |   |      |   | 1,602 |   |
| Due after ten years                          |   |       | -      |   |      |   | - |   |
| Total investment securities held-to-maturity |   | $          | 1,905  |   |      | $      | 1,842 |   |

|                           |   |       |   |   | Less than 12 months |   |   | 12 months or longer |   |   | Total  |   |
|--------------------------------|--------|------------|--------|--------|---------------------|--------|--------|---------------------|--------|--------|--------|--------|
|                           |   | No. of     |   |   | Fair                |   |   | Unrealized          |   |   | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
|                           |   | securities |   |   | value               |   |   | losses              |   |   | value  |   |   | losses |   |   | value |   |   | losses |   |
| U.S. Government agencies       |   |       | 18     |   |                | $      | 23,137 |                |   | $      | 265    |   |   |   | - |   |   |   | - |   |   | $ | 23,137 |   |   | $ | 265 |   |
| State and municipal securities |   |       | 22     |   |                |   | 10,339 |                |   |   | 96     |   |   |   | - |   |   |   | - |   |   |   | 10,339 |   |   |   | 96 |   |
| Mortgage-backed securities     |   |       | 24     |   |                |   | 28,883 |                |   |   | 139    |   |   |   | - |   |   |   | - |   |   |   | 28,883 |   |   |   | 139 |   |
| Collateralized mortgage        |   |       |   |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| obligations (CMOs)             |   |       | 6      |   |                |   | 6,802  |                |   |   | 34     |   |   |   | - |   |   |   | - |   |   |   | 6,802 |   |   |   | 34 |   |
| Other debt securities          |   |       | 7      |   |                |   | -      |                |   |   | -      |   |   | $ | 1,962 |   |   | $ | 1,678 |   |   |   | 1,962 |   |   |   | 1,678 |   |
| Equity                         |   |       | 4      |   |                |   | 408    |                |   |   | 66     |   |   |   | 117 |   |   |   | 5 |   |   |   | 525 |   |   |   | 71 |   |
| Total                          |   |       | 81     |   |                | $      | 69,569 |                |   | $      | 600    |   |   | $ | 2,079 |   |   | $ | 1,683 |   |   | $ | 71,648 |   |   | $ | 2,283 |   |

|                           |   |       |   |   | Less than 12 months |   |   | 12 months or longer |   |   | Total  |   |
|--------------------------------|--------|------------|--------|--------|---------------------|--------|--------|---------------------|--------|--------|--------|--------|
|                           |   | No. of     |   |   | Fair                |   |   | Unrealized          |   |   | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
|                           |   | securities |   |   | value               |   |   | losses              |   |   | value  |   |   | losses |   |   | value |   |   | losses |   |
| U.S. Government agencies       |   |       | 30     |   |                | $      | 40,179 |                |   | $      | 869    |   |   |   | - |   |   |   | - |   |   | $ | 40,179 |   |   | $ | 869 |   |
| State and municipal securities |   |       | 40     |   |                |   | 19,207 |                |   |   | 482    |   |   | $ | 468 |   |   | $ | 32 |   |   |   | 19,675 |   |   |   | 514 |   |
| Mortgage-backed securities     |   |       | 19     |   |                |   | 21,999 |                |   |   | 311    |   |   |   | - |   |   |   | - |   |   |   | 21,999 |   |   |   | 311 |   |
| Collateralized mortgage        |   |       |   |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| obligations (CMOs)             |   |       | 7      |   |                |   | 6,918  |                |   |   | 137    |   |   |   | - |   |   |   | - |   |   |   | 6,918 |   |   |   | 137 |   |
| Other debt securities          |   |       | 7      |   |                |   | -      |                |   |   | -      |   |   |   | 1,866 |   |   |   | 1,774 |   |   |   | 1,866 |   |   |   | 1,774 |   |
| Equity securities              |   |       | 5      |   |                |   | 740    |                |   |   | 43     |   |   |   | - |   |   |   | - |   |   |   | 740 |   |   |   | 43 |   |
| Total                          |   |       | 108    |   |                | $      | 89,043 |                |   | $      | 1,842  |   |   | $ | 2,334 |   |   | $ | 1,806 |   |   | $ | 91,377 |   |   | $ | 3,648 |   |

----

|        |   |       |   |   |   |   |   |   |   |      |   |   | Realized |   |   |       |   |   |    |    |   |       |   |   |       |      |   |          |       |   | Total         |   |
|-------------|--------|------------|--------|--------|--------|--------|--------|--------|--------|-----------|--------|--------|----------|--------|--------|------------|--------|--------|---------|---------|--------|------------|--------|--------|------------|-----------|--------|---------------|------------|--------|---------------|--------|
|        |   |       |   |   |   |   |   |   |   |      |   |   | OTTI     |   |   | Total      |   |   |    |    |   |       |   |   | Current    |      |   | Actual        |       |   | performing    |   |
|        |   |       |   |   |   |   |   |   |   |      |   |   | credit   |   |   | Recognized |   |   |    |    |   | Current    |   |   | number of  |      |   | deferrals and |       |   | collateral as |   |
|        |   |       |   |   |   |   |   |   |   |      |   |   | loss     |   |   | OTTI       |   |   | Moody's |    |   | number of  |   |   | performing |      |   | defaults as a |       |   | a % of        |   |
|        |   |       |   | Book   |   |   | Fair   |   |   | Unreal-   |   |   | (YTD     |   |   | Credit     |   |   | /Fitch  |    |   | performing |   |   | insurance  |      |   | % of total    |       |   | outstanding   |   |
| Deal        |   | Class      |   | value  |   |   | value  |   |   | ized loss |   |   |     | 2011   | )      |       | Loss   |   |    | ratings |   |       | banks  |   |       | companies |   |          | collateral |   |          | bonds  |   |
| PreTSL IV   |   | Mezzanine* |   | $      | 243    |   |   | $      | 213    |      |   | $      | (30      | )      |   | $          | -      |   |    | $       | (1     | )          |   | Ca/CCC |       |      |   | 4             |       |   |          | -      |   |   |   | 27.1 | % |   |   | 124.1 | % |
| PreTSL V    |   | Mezzanine* |   |   | -      |   |   |   | -      |      |   |   | -        |   |   |       | -      |   |    |    | (118   | )          |   | Ba3/D  |       |      |   | -             |       |   |          | -      |   |   |   | 100.0 | % |   |   | 11.6 | % |
| PreTSL VI   |   | Mezzanine* |   |   | 121    |   |   |   | 120    |      |   |   | (1       | )      |   |       | -      |   |    |    | (8     | )          |   | Ca/D   |       |      |   | 3             |       |   |          | -      |   |   |   | 73.6 | % |   |   | 62.1 | % |
| PreTSL XVII |   | Mezzanine  |   |   | 752    |   |   |   | 292    |      |   |   | (460     | )      |   |       | -      |   |    |    | (222   | )          |   | Ca/C   |       |      |   | 31            |       |   |          | 4      |   |   |   | 40.4 | % |   |   | 71.6 | % |
| PreTSL XIX  |   | Mezzanine  |   |   | 988    |   |   |   | 474    |      |   |   | (514     | )      |   |       | -      |   |    |    | -      |       |   |   | C/C        |      |   |          | 38         |   |          |   | 13 |   |   |   | 27.5 | % |   |   | 81.4 | % |
| PreTSL XXV  |   | Mezzanine  |   |   | 766    |   |   |   | 341    |      |   |   | (425     | )      |   |       | -      |   |    |    | (222   | )          |   |   | C/C        |      |   |          | 39         |   |          |   | 8 |   |   |   | 36.7 | % |   |   | 72.2 | % |
| PreTSL XXVI |   | Mezzanine  |   |   | 469    |   |   |   | 230    |      |   |   | (239     | )      |   |       | -      |   |    |    | (270   | )          |   |   | C/C        |      |   |          | 39         |   |          |   | 10 |   |   |   | 27.7 | % |   |   | 82.8 | % |
| PreTSL XXVI |   | Mezzanine  |   |   | 301    |   |   |   | 292    |      |   |   | (9       | )      |   |       | -      |   |    |    | (438   | )          |   |   | C/C        |      |   |          | 39         |   |          |   | 10 |   |   |   | 27.7 | % |   |   | 82.8 | % |
|        |   |       |   | $      | 3,640  |   |   | $      | 1,962  |      |   | $      | (1,678   | )      |   | $          | -      |   |    | $       | (1,279 | )          |   |   |       |      |   |          |       |   |          |   |   |   |   |   |   |   |   |   |   |   |

----

| ·   | Estimate of Future Cash Flows – Cash flows are constructed in an INTEX desktop valuation model. INTEX is a proprietary cash flow model recognized as the industry standard for analyzing all types of structured debt products. It includes each deal’s structural features updated with trustee information, including asset-by-asset detail, as it becomes available. The modeled cash flows are then used to determine if all the scheduled principal and interest payments of the investments will be returned. For purposes of the cash flow analysis, relatively modest rates of prepayment were forecasted (ranging from 0-2%). In addition to the base prepayment assumption, due to the recent enactment of the Dodd-Frank financial legislation additional prepayment analysis was performed. First, all fixed-rate trust preferred securities issued by banks with more than $15 billion in total assets at December 31, 2009 were identified. Next the holding companies’ approximate cost of long-term funding given their rating and marketplace interest rates were estimated. The following assumption was made; any holding company that could refinance for a cost savings of more than 2% will refinance and will do so on January 1, 2013, or July 1, 2015 for bank holding company subsidiaries of foreign banking organizations that have relied on Supervision and Regulation Letter SR-01-1. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Credit Analysis – A quarterly credit evaluation is performed for the companies comprising the collateral across the various pooled trust preferred securities. This credit evaluation considers all available evidence and focuses on capitalization, asset quality, profitability, liquidity, stock price performance, whether the institution has received TARP funding and whether the institution has shown the ability to raise capital. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Probability of Default – A near-term probability of default is determined for each issuer based on its financial condition and is used to calculate the expected impact of future deferrals and defaults on the expected cash flows. Each issuer in the collateral pool is assigned a near-term probability of default based on individual performance and financial characteristics. Various studies suggest that the rate of bank failures between 1934 and 2008 were approximately 0.36%. Thus, in addition to the specific bank default assumptions used for the near term, future defaults on the individual banks in the analysis are assumed at 0.75% for 2012 (approximately two times historical levels) and for 2013 and beyond the rate used is calculated based upon a comparison of key |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Severity of Loss – In addition to the probability of default discussed above, a severity of loss (projected recovery) is determined in all cases. In the current analysis, the severity of loss ranges from 0% to 100% depending on the estimated credit worthiness of the individual issuer, with a 95% severity of loss utilized for deferrals projected in 2012 and thereafter. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 1.   | Lending policies and procedures, including underwriting standards and collection, charge-off and recovery practices. Effect of external factors, such as legal and regulatory requirements. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | National, regional, and local economic and business conditions as well as the condition of various market segments, including the value of underlying collateral for collateral dependent loans. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | Nature and volume of the portfolio including growth. |
|----------------|------------------------------------------------------|

| 4.   | Experience, ability, and depth of lending management and staff. |
|----------------|-----------------------------------------------------------------|

| 5.   | Volume and severity of past due, classified and nonaccrual loans. |
|----------------|-------------------------------------------------------------------|

| 6.   | Quality of the Company’s loan review system, and the degree of oversight by the Company’s Board of Directors. |
|----------------|---------------------------------------------------------------------------------------------------------------------------|

| 7.   | Existence and effect of any concentrations of credit and changes in the level of such concentrations. |
|----------------|-------------------------------------------------------------------------------------------------------|

----

|                               |   | June 30, |    |   | December 31, |   |
|------------------------------------|--------|----------|---------|--------|--------------|--------|
|                               |   | 2011     |    |   | 2010         |   |
| Commercial:                        |   |     |    |   |         |   |
| Commercial and industrial          |   | $        | 90,719  |   |         | $      | 86,628 |   |
| Construction                       |   |     | 16,059  |   |         |   | 18,611 |   |
| Secured by commercial real estate  |   |     | 196,745 |   |         |   | 199,874 |   |
| Secured by residential real estate |   |     | 45,657  |   |         |   | 44,444 |   |
| State and political subdivisions   |   |     | 29,454  |   |         |   | 31,053 |   |
| Indirect lease financing           |   |     | 12,214  |   |         |   | 12,995 |   |
| Retail:                            |   |     |    |   |         |   |   |   |
| 1-4 family residential mortgages   |   |     | 23,174  |   |         |   | 23,127 |   |
| Home equity loans and lines        |   |     | 59,315  |   |         |   | 62,726 |   |
| Consumer                           |   |     | 2,398   |   |         |   | 2,751 |   |
| Total loans                        |   |     | 475,735 |   |         |   | 482,209 |   |
| Net unearned fees                  |   |     | (25     | )      |         |   | (27 | ) |
| Loans receivable                   |   | $        | 475,710 |   |         | $      | 482,182 |   |

----

----

|                               |   |   |    |   | Special |   |   |        |   |   |     |   |   |   |   |
|------------------------------------|--------|--------|---------|--------|---------|--------|--------|-------------|--------|--------|----------|--------|--------|--------|--------|
| June 30, 2011                      |   | Pass   |    |   | mention |   |   | Substandard |   |   | Doubtful |   |   | Total  |   |
| Commercial:                        |   |   |    |   |    |   |   |        |   |   |     |   |   |   |   |
| Commercial and industrial          |   | $      | 76,262  |   |    | $      | 1,872  |        |   | $      | 12,539   |   |   | $      | 46     |   |   | $ | 90,719 |   |
| Construction                       |   |   | 5,911   |   |    |   | 7,997  |        |   |   | 2,151    |   |   |   | -      |   |   |   | 16,059 |   |
| Secured by commercial real estate  |   |   | 148,750 |   |    |   | 9,738  |        |   |   | 37,806   |   |   |   | 451    |   |   |   | 196,745 |   |
| Secured by residential real estate |   |   | 40,939  |   |    |   | 896    |        |   |   | 3,822    |   |   |   | -      |   |   |   | 45,657 |   |
| State and political subdivisions   |   |   | 26,990  |   |    |   | 2,300  |        |   |   | 164      |   |   |   | -      |   |   |   | 29,454 |   |
| Indirect lease financing           |   |   | 11,752  |   |    |   | -      |        |   |   | 462      |   |   |   | -      |   |   |   | 12,214 |   |
|                               |   | $      | 310,604 |   |    | $      | 22,803 |        |   | $      | 56,944   |   |   | $      | 497    |   |   | $ | 390,848 |   |

|                               |   |   |    |   | Special |   |   |        |   |   |     |   |   |   |   |
|------------------------------------|--------|--------|---------|--------|---------|--------|--------|-------------|--------|--------|----------|--------|--------|--------|--------|
| December 31, 2010                  |   | Pass   |    |   | mention |   |   | Substandard |   |   | Doubtful |   |   | Total  |   |
| Commercial:                        |   |   |    |   |    |   |   |        |   |   |     |   |   |   |   |
| Commercial and industrial          |   | $      | 74,315  |   |    | $      | 1,378  |        |   | $      | 10,878   |   |   | $      | 57     |   |   | $ | 86,628 |   |
| Construction                       |   |   | 9,888   |   |    |   | 5,993  |        |   |   | 2,730    |   |   |   | -      |   |   |   | 18,611 |   |
| Secured by commercial real estate  |   |   | 154,697 |   |    |   | 6,537  |        |   |   | 37,942   |   |   |   | 698    |   |   |   | 199,874 |   |
| Secured by residential real estate |   |   | 39,823  |   |    |   | 1,038  |        |   |   | 3,583    |   |   |   | -      |   |   |   | 44,444 |   |
| State and political subdivisions   |   |   | 28,649  |   |    |   | 2,338  |        |   |   | 66       |   |   |   | -      |   |   |   | 31,053 |   |
| Indirect lease financing           |   |   | 12,460  |   |    |   | -      |        |   |   | 535      |   |   |   | -      |   |   |   | 12,995 |   |
|                               |   | $      | 319,832 |   |    | $      | 17,284 |        |   | $      | 55,734   |   |   | $      | 755    |   |   | $ | 393,605 |   |

----

|                             |   |       |   |   | Non-       |   |   |   |   |
|----------------------------------|--------|------------|--------|--------|------------|--------|--------|--------|--------|
| June 30, 2011                    |   | Performing |   |   | performing |   |   | Total  |   |
| Retail:                          |   |       |   |   |       |   |   |   |   |
| 1-4 family residential mortgages |   | $          | 22,621 |   |       | $      | 553    |   |   | $ | 23,174 |   |
| Home equity loans and lines      |   |       | 59,125 |   |       |   | 190    |   |   |   | 59,315 |   |
| Consumer                         |   |       | 2,398  |   |       |   | -      |   |   |   | 2,398 |   |
|                             |   | $          | 84,144 |   |       | $      | 743    |   |   | $ | 84,887 |   |

|                             |   |       |   |   | Non-       |   |   |   |   |
|----------------------------------|--------|------------|--------|--------|------------|--------|--------|--------|--------|
| December 31, 2010                |   | Performing |   |   | performing |   |   | Total  |   |
| Retail:                          |   |       |   |   |       |   |   |   |   |
| 1-4 family residential mortgages |   | $          | 22,694 |   |       | $      | 433    |   |   | $ | 23,127 |   |
| Home equity loans and lines      |   |       | 62,581 |   |       |   | 145    |   |   |   | 62,726 |   |
| Consumer                         |   |       | 2,751  |   |       |   | -      |   |   |   | 2,751 |   |
|                             |   | $          | 88,026 |   |       | $      | 578    |   |   | $ | 88,604 |   |

|                               |   | 30-59 days |   |   | 60-89 days |   |   | >90 days |   |   | Total past |   |   |    |   |   | Total loans |   |
|------------------------------------|--------|------------|--------|--------|------------|--------|--------|-------------|--------|--------|------------|--------|--------|---------|--------|--------|-------------|--------|
| June 30, 2011                      |   | past due   |   |   | past due   |   |   | past due    |   |   | due loans  |   |   | Current |   |   | receivable  |   |
| Commercial:                        |   |       |   |   |       |   |   |        |   |   |       |   |   |    |   |   |        |   |
| Commercial and industrial          |   | $          | 99     |   |       | $      | -      |        |   | $      | 138        |   |   | $       | 237    |   |        | $      | 90,482 |   |   | $ | 90,719 |   |
| Construction                       |   |       | 1,455  |   |       |   | -      |        |   |   | 937        |   |   |    | 2,392  |   |        |   | 13,667 |   |   |   | 16,059 |   |
| Secured by commercial real estate  |   |       | 1,301  |   |       |   | 49     |        |   |   | 2,670      |   |   |    | 4,020  |   |        |   | 192,725 |   |   |   | 196,745 |   |
| Secured by residential real estate |   |       | 16     |   |       |   | 177    |        |   |   | -          |   |   |    | 193    |   |        |   | 45,464 |   |   |   | 45,657 |   |
| State and political subdivisions   |   |       | 106    |   |       |   | -      |        |   |   | 6          |   |   |    | 112    |   |        |   | 29,342 |   |   |   | 29,454 |   |
| Indirect lease financing           |   |       | 126    |   |       |   | 228    |        |   |   | 88         |   |   |    | 442    |   |        |   | 11,772 |   |   |   | 12,214 |   |
| Retail:                            |   |       |   |   |       |   |   |        |   |   |       |   |   |    |   |   |        |   |   |   |   |   |   |   |
| 1-4 family residential mortgages   |   |       | -      |   |       |   | 384    |        |   |   | -          |   |   |    | 384    |   |        |   | 22,790 |   |   |   | 23,174 |   |
| Home equity loans and lines        |   |       | 295    |   |       |   | 35     |        |   |   | 53         |   |   |    | 383    |   |        |   | 58,932 |   |   |   | 59,315 |   |
| Consumer                           |   |       | 5      |   |       |   | 8      |        |   |   | -          |   |   |    | 13     |   |        |   | 2,385 |   |   |   | 2,398 |   |
|                               |   | $          | 3,403  |   |       | $      | 881    |        |   | $      | 3,892      |   |   | $       | 8,176  |   |        | $      | 467,559 |   |   | $ | 475,735 |   |

----

| December 31, 2010                  |   | 30-59 days past due |   |   | 60-89 days past due |   |   | >90 days past due |   |   | Total past due loans |   |   | Current |   |   | Total loans receivable |   |
|------------------------------------|--------|---------------------|--------|--------|---------------------|--------|--------|----------------------|--------|--------|----------------------|--------|--------|---------|--------|--------|------------------------|--------|
| Commercial:                        |   |                |   |   |                |   |   |                 |   |   |                 |   |   |    |   |   |                   |   |
| Commercial and industrial          |   | $                   | 228    |   |                | $      | 66     |                 |   | $      | 197                  |   |   | $       | 491    |   |                   | $      | 86,137 |   |   | $ | 86,628 |   |
| Construction                       |   |                | 39     |   |                |   | -      |                 |   |   | 1,334                |   |   |    | 1,373  |   |                   |   | 17,238 |   |   |   | 18,611 |   |
| Secured by commercial real estate  |   |                | 527    |   |                |   | 4,517  |                 |   |   | 3,257                |   |   |    | 8,301  |   |                   |   | 191,573 |   |   |   | 199,874 |   |
| Secured by residential real estate |   |                | 857    |   |                |   | 125    |                 |   |   | 54                   |   |   |    | 1,036  |   |                   |   | 43,408 |   |   |   | 44,444 |   |
| State and political subdivisions   |   |                | -      |   |                |   | 8      |                 |   |   | 9                    |   |   |    | 17     |   |                   |   | 31,036 |   |   |   | 31,053 |   |
| Indirect lease financing           |   |                | 495    |   |                |   | 244    |                 |   |   | 72                   |   |   |    | 811    |   |                   |   | 12,184 |   |   |   | 12,995 |   |
| Retail:                            |   |                |   |   |                |   |   |                 |   |   |                 |   |   |    |   |   |                   |   |   |   |   |   |   |   |
| 1-4 family residential mortgages   |   |                | 668    |   |                |   | -      |                 |   |   | 433                  |   |   |    | 1,101  |   |                   |   | 22,026 |   |   |   | 23,127 |   |
| Home equity loans and lines        |   |                | 220    |   |                |   | 203    |                 |   |   | 29                   |   |   |    | 452    |   |                   |   | 62,274 |   |   |   | 62,726 |   |
| Consumer                           |   |                | 32     |   |                |   | -      |                 |   |   | -                    |   |   |    | 32     |   |                   |   | 2,719 |   |   |   | 2,751 |   |
|                               |   | $                   | 3,066  |   |                | $      | 5,163  |                 |   | $      | 5,385                |   |   | $       | 13,614 |   |                   | $      | 468,595 |   |   | $ | 482,209 |   |

| June 30, 2011                      |   | >90 days past due (still accruing) |   |   | Non-accrual |   |
|------------------------------------|--------|---------------------------------------|--------|--------|-------------|--------|
| Commercial:                        |   |                                  |   |   |        |   |
| Commercial and industrial          |   |                                  | -      |   |        | $      | 3,114 |   |
| Construction                       |   |                                  | -      |   |        |   | 937 |   |
| Secured by commercial real estate  |   |                                  | -      |   |        |   | 3,611 |   |
| Secured by residential real estate |   |                                  | -      |   |        |   | 836 |   |
| State and political subdivisions   |   |                                  | -      |   |        |   | 6 |   |
| Indirect lease financing           |   | $                                     | 10     |   |        |   | 208 |   |
| Retail:                            |   |                                  |   |   |        |   |   |   |
| 1-4 family residential mortgages   |   |                                  | -      |   |        |   | 553 |   |
| Home equity loans and lines        |   |                                  | -      |   |        |   | 190 |   |
| Consumer                           |   |                                  | -      |   |        |   | - |   |
|                               |   | $                                     | 10     |   |        | $      | 9,455 |   |

----

| December 31, 2010                  |   | >90 Days Past Due(still accruing) |   |   | Non-accrual |   |
|------------------------------------|--------|--------------------------------------|--------|--------|-------------|--------|
| Commercial:                        |   |                                 |   |   |        |   |
| Commercial and industrial          |   |                                 | -      |   |        | $      | 1,082 |   |
| Construction                       |   |                                 | -      |   |        |   | 1,334 |   |
| Secured by commercial real estate  |   | $                                    | 259    |   |        |   | 3,837 |   |
| Secured by residential real estate |   |                                 | -      |   |        |   | 97 |   |
| State and political subdivisions   |   |                                 | 9      |   |        |   | - |   |
| Indirect lease financing           |   |                                 | -      |   |        |   | 255 |   |
| Retail:                            |   |                                 |   |   |        |   |   |   |
| 1-4 family residential mortgages   |   |                                 | -      |   |        |   | 433 |   |
| Home equity loans and lines        |   |                                 | -      |   |        |   | 145 |   |
| Consumer                           |   |                                 | -      |   |        |   | - |   |
|                               |   | $                                    | 268    |   |        | $      | 7,183 |   |

|                           |   | For the Three Months |   |   | For the Six Months |   |
|--------------------------------|--------|----------------------|--------|--------|--------------------|--------|
|                           |   | Ended June 30,       |   |   | Ended June 30,     |   |
|                           |   | 2011                 |   |   | 2010               |   |   | 2011 |   |   | 2010 |   |
| Balance at beginning of period |   | $                    | 9,192  |   |               | $      | 6,357 |   |   | $ | 8,955 |   |   | $ | 6,217 |   |
| Charge-offs                    |   |                 | (815   | )      |               |   | (179 | ) |   |   | (1,240 | ) |   |   | (778 | ) |
| Recoveries                     |   |                 | 23     |   |               |   | 131 |   |   |   | 35 |   |   |   | 170 |   |
| Net charge-offs                |   |                 | (792   | )      |               |   | (48 | ) |   |   | (1,205 | ) |   |   | (608 | ) |
| Provision for loan losses      |   |                 | 450    |   |               |   | 700 |   |   |   | 1,100 |   |   |   | 1,400 |   |
| Balance at end of period       |   | $                    | 8,850  |   |               | $      | 7,009 |   |   | $ | 8,850 |   |   | $ | 7,009 |   |

| For the Three Months EndedJune 30, 2011 |   | Balance, beginning of period |   |   | Provision for (credit to) loan losses |   |   | Charge-offs |   |   | Recoveries |   |   | Balance, end of period |   |
|-----------------------------------------|--------|------------------------------|--------|--------|---------------------------------------|--------|--------|-------------|--------|--------|------------|--------|--------|------------------------|--------|
| Commercial:                             |   |                         |   |   |                                  |   |   |        |   |   |       |   |   |                   |   |
| Commercial and industrial               |   | $                            | 3,119  |   |                                  | $      | (276   | )           |   | $      | (24        | )      |   | $                      | 7      |   |   | $ | 2,826 |   |
| Construction                            |   |                         | 660    |   |                                  |   | 345    |        |   |   | (397       | )      |   |                   | -      |   |   |   | 608 |   |
| Secured by commercial real estate       |   |                         | 3,180  |   |                                  |   | 284    |        |   |   | (349       | )      |   |                   | 4      |   |   |   | 3,119 |   |
| Secured by residential real estate      |   |                         | 625    |   |                                  |   | 62     |        |   |   | -          |   |   |                   | -      |   |   |   | 687 |   |
| State and political subdivisions        |   |                         | 107    |   |                                  |   | 44     |        |   |   | -          |   |   |                   | -      |   |   |   | 151 |   |
| Indirect lease financing                |   |                         | 470    |   |                                  |   | (99    | )           |   |   | -          |   |   |                   | 5      |   |   |   | 376 |   |
| Retail:                                 |   |                         |   |   |                                  |   |   |        |   |   |       |   |   |                   |   |   |   |   |   |   |
| 1-4 family residential mortgages        |   |                         | 205    |   |                                  |   | 29     |        |   |   | -          |   |   |                   | -      |   |   |   | 234 |   |
| Home equity loans and lines             |   |                         | 605    |   |                                  |   | 52     |        |   |   | (43        | )      |   |                   | 2      |   |   |   | 616 |   |
| Consumer                                |   |                         | 27     |   |                                  |   | (11    | )           |   |   | (2         | )      |   |                   | 5      |   |   |   | 19 |   |
| Unallocated                             |   |                         | 194    |   |                                  |   | 20     |        |   |   | N/A        |   |   |                   | N/A    |   |   |   | 214 |   |
|                                    |   | $                            | 9,192  |   |                                  | $      | 450    |        |   | $      | (815       | )      |   | $                      | 23     |   |   | $ | 8,850 |   |

----

| For the Six Months EndedJune 30, 2011 |   | Balance, beginning of period |   |   | Provision for (credit to) loan losses |   |   | Charge-offs |   |   | Recoveries |   |   | Balance, end of period |   |
|---------------------------------------|--------|------------------------------|--------|--------|---------------------------------------|--------|--------|-------------|--------|--------|------------|--------|--------|------------------------|--------|
| Commercial:                           |   |                         |   |   |                                  |   |   |        |   |   |       |   |   |                   |   |
| Commercial and industrial             |   | $                            | 2,136  |   |                                  | $      | 769    |        |   | $      | (89        | )      |   | $                      | 10     |   |   | $ | 2,826 |   |
| Construction                          |   |                         | 633    |   |                                  |   | 372    |        |   |   | (397       | )      |   |                   | -      |   |   |   | 608 |   |
| Secured by commercial real estate     |   |                         | 3,875  |   |                                  |   | (119   | )           |   |   | (641       | )      |   |                   | 4      |   |   |   | 3,119 |   |
| Secured by residential real estate    |   |                         | 676    |   |                                  |   | 65     |        |   |   | (54        | )      |   |                   | -      |   |   |   | 687 |   |
| State and political subdivisions      |   |                         | 108    |   |                                  |   | 43     |        |   |   | -          |   |   |                   | -      |   |   |   | 151 |   |
| Indirect lease financing              |   |                         | 496    |   |                                  |   | (129   | )           |   |   | -          |   |   |                   | 9      |   |   |   | 376 |   |
| Retail:                               |   |                         |   |   |                                  |   |   |        |   |   |       |   |   |                   | -      |   |   |   |   |   |
| 1-4 family residential mortgages      |   |                         | 212    |   |                                  |   | 22     |        |   |   | -          |   |   |                   | -      |   |   |   | 234 |   |
| Home equity loans and lines           |   |                         | 646    |   |                                  |   | 20     |        |   |   | (53        | )      |   |                   | 3      |   |   |   | 616 |   |
| Consumer                              |   |                         | 32     |   |                                  |   | (16    | )           |   |   | (6         | )      |   |                   | 9      |   |   |   | 19 |   |
| Unallocated                           |   |                         | 141    |   |                                  |   | 73     |        |   |   | N/A        |   |   |                   | N/A    |   |   |   | 214 |   |
|                                  |   | $                            | 8,955  |   |                                  | $      | 1,100  |        |   | $      | (1,240     | )      |   | $                      | 35     |   |   | $ | 8,850 |   |

----

|                               |   | Allowance for Loan Losses |   |   | Loans Receivable                                               |   |
|------------------------------------|--------|---------------------------|--------|--------|----------------------------------------------------------------|--------|
| June 30, 2011                      |   | Balance                   |   |   | Balance related to loans individually evaluated for impairment |   |   | Balance related to loans collectively evaluated for impairment |   |   | Balance |   |   | Balance individually evaluated for impairment |   |   | Balance collectively evaluated for impairment |   |
| Commercial:                        |   |                      |   |   |                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial and industrial          |   | $                         | 2,826  |   |                                                           | $      | 1,633 |   |   | $ | 1,193 |   |   | $ | 90,719 |   |   | $ | 9,617 |   |   | $ | 81,102 |   |
| Construction                       |   |                      | 608    |   |                                                           |   | 236 |   |   |   | 372 |   |   |   | 16,059 |   |   |   | 2,151 |   |   |   | 13,908 |   |
| Secured by commercial real estate  |   |                      | 3,119  |   |                                                           |   | 277 |   |   |   | 2,842 |   |   |   | 196,745 |   |   |   | 16,474 |   |   |   | 180,271 |   |
| Secured by residential real estate |   |                      | 687    |   |                                                           |   | 251 |   |   |   | 436 |   |   |   | 45,657 |   |   |   | 2,810 |   |   |   | 42,847 |   |
| State and political subdivisions   |   |                      | 151    |   |                                                           |   | 3 |   |   |   | 148 |   |   |   | 29,454 |   |   |   | 6 |   |   |   | 29,448 |   |
| Indirect lease financing           |   |                      | 376    |   |                                                           |   | 56 |   |   |   | 320 |   |   |   | 12,214 |   |   |   | 222 |   |   |   | 11,992 |   |
| Retail:                            |   |                      |   |   |                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 1-4 family residential mortgages   |   |                      | 234    |   |                                                           |   | 79 |   |   |   | 155 |   |   |   | 23,174 |   |   |   | 169 |   |   |   | 23,005 |   |
| Home equity loans and lines        |   |                      | 616    |   |                                                           |   | 71 |   |   |   | 545 |   |   |   | 59,315 |   |   |   | 619 |   |   |   | 58,696 |   |
| Consumer                           |   |                      | 19     |   |                                                           |   | - |   |   |   | 19 |   |   |   | 2,398 |   |   |   | - |   |   |   | 2,398 |   |
| Unallocated                        |   |                      | 214    |   |                                                           |   | N/A |   |   |   | N/A |   |   |   | N/A |   |   |   | N/A |   |   |   | N/A |   |
|                               |   | $                         | 8,850  |   |                                                           | $      | 2,606 |   |   | $ | 6,030 |   |   | $ | 475,735 |   |   | $ | 32,068 |   |   | $ | 443,667 |   |

----

|                               |   | Allowance for Loan Losses |   |   | Loans Receivable                                               |   |
|------------------------------------|--------|---------------------------|--------|--------|----------------------------------------------------------------|--------|
| December 31, 2010                  |   | Balance                   |   |   | Balance related to loans individually evaluated for impairment |   |   | Balance related to loans collectively evaluated for impairment |   |   | Balance |   |   | Balance individually evaluated for impairment |   |   | Balance collectively evaluated for impairment |   |
| Commercial:                        |   |                      |   |   |                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial and industrial          |   | $                         | 2,136  |   |                                                           | $      | 878 |   |   | $ | 1,258 |   |   | $ | 86,628 |   |   | $ | 4,710 |   |   | $ | 81,918 |   |
| Construction                       |   |                      | 633    |   |                                                           |   | 370 |   |   |   | 263 |   |   |   | 18,611 |   |   |   | 2,650 |   |   |   | 15,961 |   |
| Secured by commercial real estate  |   |                      | 3,875  |   |                                                           |   | 687 |   |   |   | 3,188 |   |   |   | 199,874 |   |   |   | 9,213 |   |   |   | 190,661 |   |
| Secured by residential real estate |   |                      | 676    |   |                                                           |   | 179 |   |   |   | 497 |   |   |   | 44,444 |   |   |   | 2,624 |   |   |   | 41,820 |   |
| State and political subdivisions   |   |                      | 108    |   |                                                           |   | - |   |   |   | 108 |   |   |   | 31,053 |   |   |   | - |   |   |   | 31,053 |   |
| Indirect lease financing           |   |                      | 496    |   |                                                           |   | 64 |   |   |   | 432 |   |   |   | 12,995 |   |   |   | 275 |   |   |   | 12,720 |   |
| Retail:                            |   |                      |   |   |                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 1-4 family residential mortgages   |   |                      | 212    |   |                                                           |   | 41 |   |   |   | 171 |   |   |   | 23,127 |   |   |   | 606 |   |   |   | 22,521 |   |
| Home equity loans and lines        |   |                      | 646    |   |                                                           |   | 62 |   |   |   | 584 |   |   |   | 62,726 |   |   |   | 785 |   |   |   | 61,941 |   |
| Consumer                           |   |                      | 32     |   |                                                           |   | - |   |   |   | 32 |   |   |   | 2,751 |   |   |   | - |   |   |   | 2,751 |   |
| Unallocated                        |   |                      | 141    |   |                                                           |   | N/A |   |   |   | N/A |   |   |   | N/A |   |   |   | N/A |   |   |   | N/A |   |
|                               |   | $                         | 8,955  |   |                                                           | $      | 2,281 |   |   | $ | 6,533 |   |   | $ | 482,209 |   |   | $ | 20,863 |   |   | $ | 461,346 |   |

----

| June 30, 2011                        |   | Recorded investment (after charge-offs) |   |   | Unpaid principal balance |   |   | Related allowance |   |   | Average recorded investment |   |   | Interest income recognized |   |
|--------------------------------------|--------|-----------------------------------------|--------|--------|--------------------------|--------|--------|-------------------|--------|--------|-----------------------------|--------|--------|----------------------------|--------|
| With no specific allowance recorded: |   |                                    |   |   |                     |   |   |              |   |   |                        |   |   |                       |   |
| Commercial:                          |   |                                    |   |   |                     |   |   |              |   |   |                        |   |   |                       |   |
| Commercial and industrial            |   | $                                       | 6,659  |   |                     | $      | 6,678  |              |   | $      | -                           |   |   |                       |   |   |   |   |
| Construction                         |   |                                    | 1,214  |   |                     |   | 1,214  |              |   |   | -                           |   |   |                       |   |   |   |   |
| Secured by commercial real estate    |   |                                    | 14,303 |   |                     |   | 14,581 |              |   |   | -                           |   |   |                       |   |   |   |   |
| Secured by residential real estate   |   |                                    | 1,788  |   |                     |   | 1,794  |              |   |   | -                           |   |   |                       |   |   |   |   |
| State and political subdivisions     |   |                                    | -      |   |                     |   | -      |              |   |   | -                           |   |   |                       |   |   |   |   |
| Indirect lease financing             |   |                                    | 106    |   |                     |   | 135    |              |   |   | -                           |   |   |                       |   |   |   |   |
| Retail:                              |   |                                    |   |   |                     |   |   |              |   |   |                        |   |   |                       |   |   |   |   |
| 1-4 family residential mortgages     |   |                                    | -      |   |                     |   |   |              |   |   | -                           |   |   |                       |   |   |   |   |
| Home equity loans and lines          |   |                                    | 457    |   |                     |   | 460    |              |   |   | -                           |   |   |                       |   |   |   |   |
| Consumer                             |   |                                    | -      |   |                     |   |   |              |   |   | -                           |   |   |                       |   |   |   |   |
|                                 |   | $                                       | 24,527 |   |                     | $      | 24,862 |              |   | $      | -                           |   |   |                       |   |   |   |   |
|                                 |   |                                    |   |   |                     |   |   |              |   |   |                        |   |   |                       |   |   |   |   |
| With an allowance recorded:          |   |                                    |   |   |                     |   |   |              |   |   |                        |   |   |                       |   |   |   |   |
| Commercial:                          |   |                                    |   |   |                     |   |   |              |   |   |                        |   |   |                       |   |   |   |   |
| Commercial and industrial            |   | $                                       | 2,958  |   |                     | $      | 2,978  |              |   | $      | 1,633                       |   |   |                       |   |   |   |   |
| Construction                         |   |                                    | 937    |   |                     |   | 1,340  |              |   |   | 236                         |   |   |                       |   |   |   |   |
| Secured by commercial real estate    |   |                                    | 2,171  |   |                     |   | 2,432  |              |   |   | 277                         |   |   |                       |   |   |   |   |
| Secured by residential real estate   |   |                                    | 1,022  |   |                     |   | 1,024  |              |   |   | 251                         |   |   |                       |   |   |   |   |
| State and political subdivisions     |   |                                    | 6      |   |                     |   | 6      |              |   |   | 3                           |   |   |                       |   |   |   |   |
| Indirect lease financing             |   |                                    | 116    |   |                     |   | 124    |              |   |   | 56                          |   |   |                       |   |   |   |   |
| Retail:                              |   |                                    |   |   |                     |   |   |              |   |   |                        |   |   |                       |   |   |   |   |
| 1-4 family residential mortgages     |   |                                    | 169    |   |                     |   | 171    |              |   |   | 79                          |   |   |                       |   |   |   |   |
| Home equity loans and lines          |   |                                    | 162    |   |                     |   | 163    |              |   |   | 71                          |   |   |                       |   |   |   |   |
| Consumer                             |   |                                    | -      |   |                     |   |   |              |   |   | -                           |   |   |                       |   |   |   |   |
|                                 |   | $                                       | 7,541  |   |                     | $      | 8,238  |              |   | $      | 2,606                       |   |   |                       |   |   |   |   |
|                                 |   |                                    |   |   |                     |   |   |              |   |   |                        |   |   |                       |   |   |   |   |
| Total:                               |   |                                    |   |   |                     |   |   |              |   |   |                        |   |   |                       |   |   |   |   |
| Commercial:                          |   |                                    |   |   |                     |   |   |              |   |   |                        |   |   |                       |   |   |   |   |
| Commercial and industrial            |   | $                                       | 9,617  |   |                     | $      | 9,656  |              |   | $      | 1,633                       |   |   | $                          | 7,467  |   |   | $ | 156 |   |
| Construction                         |   |                                    | 2,151  |   |                     |   | 2,554  |              |   |   | 236                         |   |   |                       | 2,675  |   |   |   | 38 |   |
| Secured by commercial real estate    |   |                                    | 16,474 |   |                     |   | 17,013 |              |   |   | 277                         |   |   |                       | 11,411 |   |   |   | 256 |   |
| Secured by residential real estate   |   |                                    | 2,810  |   |                     |   | 2,818  |              |   |   | 251                         |   |   |                       | 2,026  |   |   |   | 51 |   |
| State and political subdivisions     |   |                                    | 6      |   |                     |   | 6      |              |   |   | 3                           |   |   |                       | -      |   |   |   | - |   |
| Indirect lease financing             |   |                                    | 222    |   |                     |   | 259    |              |   |   | 56                          |   |   |                       | 245    |   |   |   | 3 |   |
| Retail:                              |   |                                    |   |   |                     |   |   |              |   |   |                        |   |   |                       |   |   |   |   |   |   |
| 1-4 family residential mortgages     |   |                                    | 169    |   |                     |   | 171    |              |   |   | 79                          |   |   |                       | 465    |   |   |   | - |   |
| Home equity loans and lines          |   |                                    | 619    |   |                     |   | 623    |              |   |   | 71                          |   |   |                       | 1,379  |   |   |   | 37 |   |
| Consumer                             |   |                                    | -      |   |                     |   | -      |              |   |   | -                           |   |   |                       | -      |   |   |   | - |   |
|                                 |   | $                                       | 32,068 |   |                     | $      | 33,100 |              |   | $      | 2,606                       |   |   | $                          | 25,668 |   |   | $ | 541 |   |

----

| December 31, 2010                    |   | Recorded investment (after charge-offs) |   |   | Unpaid principal balance |   |   | Related allowance |   |
|--------------------------------------|--------|-----------------------------------------|--------|--------|--------------------------|--------|--------|-------------------|--------|
| With no specific allowance recorded: |   |                                    |   |   |                     |   |   |              |   |
| Commercial:                          |   |                                    |   |   |                     |   |   |              |   |
| Commercial and industrial            |   | $                                       | 3,218  |   |                     | $      | 3,225  |              |   | $ | - |   |
| Construction                         |   |                                    | 1,316  |   |                     |   | 1,316  |              |   |   | - |   |
| Secured by commercial real estate    |   |                                    | 5,495  |   |                     |   | 5,497  |              |   |   | - |   |
| Secured by residential real estate   |   |                                    | 1,558  |   |                     |   | 1,558  |              |   |   | - |   |
| State and political subdivisions     |   |                                    | -      |   |                     |   | -      |              |   |   | - |   |
| Indirect lease financing             |   |                                    | 55     |   |                     |   | 60     |              |   |   | - |   |
| Retail:                              |   |                                    |   |   |                     |   |   |              |   |   |   |   |
| 1-4 family residential mortgages     |   |                                    | 434    |   |                     |   | 436    |              |   |   | - |   |
| Home equity loans and lines          |   |                                    | 492    |   |                     |   | 492    |              |   |   | - |   |
| Consumer                             |   |                                    | -      |   |                     |   | -      |              |   |   | - |   |
|                                 |   | $                                       | 12,568 |   |                     | $      | 12,584 |              |   | $ | - |   |
|                                 |   |                                    |   |   |                     |   |   |              |   |   |   |   |
| With an allowance recorded:          |   |                                    |   |   |                     |   |   |              |   |   |   |   |
| Commercial:                          |   |                                    |   |   |                     |   |   |              |   |   |   |   |
| Commercial and industrial            |   | $                                       | 1,492  |   |                     | $      | 1,492  |              |   | $ | 878 |   |
| Construction                         |   |                                    | 1,334  |   |                     |   | 1,340  |              |   |   | 370 |   |
| Secured by commercial real estate    |   |                                    | 3,718  |   |                     |   | 3,821  |              |   |   | 687 |   |
| Secured by residential real estate   |   |                                    | 1,066  |   |                     |   | 1,066  |              |   |   | 179 |   |
| State and political subdivisions     |   |                                    | -      |   |                     |   | -      |              |   |   | - |   |
| Indirect lease financing             |   |                                    | 220    |   |                     |   | 239    |              |   |   | 64 |   |
| Retail:                              |   |                                    |   |   |                     |   |   |              |   |   |   |   |
| 1-4 family residential mortgages     |   |                                    | 172    |   |                     |   | 172    |              |   |   | 41 |   |
| Home equity loans and lines          |   |                                    | 293    |   |                     |   | 293    |              |   |   | 62 |   |
| Consumer                             |   |                                    | -      |   |                     |   | -      |              |   |   | - |   |
|                                 |   | $                                       | 8,295  |   |                     | $      | 8,423  |              |   | $ | 2,281 |   |
|                                 |   |                                    |   |   |                     |   |   |              |   |   |   |   |
| Total:                               |   |                                    |   |   |                     |   |   |              |   |   |   |   |
| Commercial:                          |   |                                    |   |   |                     |   |   |              |   |   |   |   |
| Commercial and industrial            |   | $                                       | 4,710  |   |                     | $      | 4,717  |              |   | $ | 878 |   |
| Construction                         |   |                                    | 2,650  |   |                     |   | 2,656  |              |   |   | 370 |   |
| Secured by commercial real estate    |   |                                    | 9,213  |   |                     |   | 9,318  |              |   |   | 687 |   |
| Secured by residential real estate   |   |                                    | 2,624  |   |                     |   | 2,624  |              |   |   | 179 |   |
| State and political subdivisions     |   |                                    | -      |   |                     |   | -      |              |   |   | - |   |
| Indirect lease financing             |   |                                    | 275    |   |                     |   | 299    |              |   |   | 64 |   |
| Retail:                              |   |                                    |   |   |                     |   |   |              |   |   |   |   |
| 1-4 family residential mortgages     |   |                                    | 606    |   |                     |   | 608    |              |   |   | 41 |   |
| Home equity loans and lines          |   |                                    | 785    |   |                     |   | 785    |              |   |   | 62 |   |
| Consumer                             |   |                                    | -      |   |                     |   | -      |              |   |   | - |   |
|                                 |   | $                                       | 20,863 |   |                     | $      | 21,007 |              |   | $ | 2,281 |   |

----

|   | Level 1: | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.                                        |
|--------|----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |     |                                                                                                                                                                             |
|   | Level 2: | Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.            |
|   |     |                                                                                                                                                                             |
|   | Level 3: | Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity). |

| June 30, 2011                                                                       |   | Quoted prices in active markets for identical assets (Level 1) |   |   | Significant other observable input (Level 2) |   |    | Significant unobservable inputs (Level 3) |   |   | Balance at end of period |   |
|-------------------------------------------------------------------------------------|--------|----------------------------------------------------------------|--------|--------|----------------------------------------------|--------|---------|-------------------------------------------|--------|--------|--------------------------|--------|
| Securities available-for-sale                                                       |   |                                                           |   |   |                                         |   |    |                                      |   |   |                     |   |
| U.S. Government agencies                                                            |   |                                                           | -      |   |                                         | $      | 67,713  |                                      |   |   | -                        |   |   | $ | 67,713 |   |
| State and municipal securities                                                      |   |                                                           | -      |   |                                         |   | 69,319  |                                      |   |   | -                        |   |   |   | 69,319 |   |
| U.S. Government agencies and sponsored enterprises (GSEs) - residential             |   |                                                           |   |   |                                         |   |    |                                      |   |   |                     |   |   |   |   |   |
|       Mortgage-backed securities                      |   |                                                           | -      |   |                                         |   | 108,291 |                                      |   |   | -                        |   |   |   | 108,291 |   |
|       Collateralized mortgage obligations (CMOs) |   |                                                           | -      |   |                                         |   | 74,245  |                                      |   |   | -                        |   |   |   | 74,245 |   |
| Other debt securities                                                               |   |                                                           | -      |   |                                         |   | 510     |                                      |   | $      | 1,962                    |   |   |   | 2,472 |   |
| Equity securities                                                                   |   | $                                                              | 4,054  |   |                                         |   | -       |                                      |   |   | -                        |   |   |   | 4,054 |   |
|      Total                                                 |   | $                                                              | 4,054  |   |                                         | $      | 320,078 |                                      |   | $      | 1,962                    |   |   | $ | 326,094 |   |

----

| December 31, 2010                                                                   |   | Quoted prices in active markets for identical assets (Level 1) |   |   | Significant other observable input (Level 2) |   |    | Significant unobservable inputs (Level 3) |   |   | Balance at end of period |   |
|-------------------------------------------------------------------------------------|--------|----------------------------------------------------------------|--------|--------|----------------------------------------------|--------|---------|-------------------------------------------|--------|--------|--------------------------|--------|
| Securities available-for-sale                                                       |   |                                                           |   |   |                                         |   |    |                                      |   |   |                     |   |
| U.S. Government agencies                                                            |   |                                                           | -      |   |                                         | $      | 66,448  |                                      |   |   | -                        |   |   | $ | 66,448 |   |
| State and municipal securities                                                      |   |                                                           | -      |   |                                         |   | 63,588  |                                      |   |   | -                        |   |   |   | 63,588 |   |
| U.S. Government agencies and sponsored enterprises (GSEs) - residential             |   |                                                           |   |   |                                         |   |    |                                      |   |   |                     |   |   |   |   |   |
|       Mortgage-backed securities                      |   |                                                           | -      |   |                                         |   | 78,801  |                                      |   |   | -                        |   |   |   | 78,801 |   |
|       Collateralized mortgage obligations (CMOs) |   |                                                           | -      |   |                                         |   | 75,573  |                                      |   |   | -                        |   |   |   | 75,573 |   |
| Other debt securities                                                               |   |                                                           | -      |   |                                         |   | 518     |                                      |   | $      | 1,866                    |   |   |   | 2,384 |   |
| Equity securities                                                                   |   | $                                                              | 3,770  |   |                                         |   | -       |                                      |   |   | -                        |   |   |   | 3,770 |   |
|      Total                                                 |   | $                                                              | 3,770  |   |                                         | $      | 284,928 |                                      |   | $      | 1,866                    |   |   | $ | 290,564 |   |

|                                        |   | Fair value measurements using   |   |
|---------------------------------------------|--------|---------------------------------|--------|
|                                        |   | significant unobservable inputs |   |
|                                        |   | (Level 3)                       |   |
| Balance, beginning of year                  |   | $                               | 1,866  |   |
| Settlements                                 |   |                            | -      |   |
| Total gains or losses (realized/unrealized) |   |                            | -      |   |
| Included in earnings                        |   |                            | -      |   |
| Included in other comprehensive income      |   |                            | 96     |   |
| Transfers in and/or out of Level 3          |   |                            | -      |   |
| Balance, June 30, 2011                      |   | $                               | 1,962  |   |

----

| ·   | The few observable transactions and market quotations that are available are not reliable for purposes of determining fair value at June 30, 2011; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | An income valuation approach technique (present value technique) that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs will be equally or more representative of fair value than the market approach valuation technique used at prior measurement dates; and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | PreTSLs will be classified within Level 3 of the fair value hierarchy because significant adjustments are required to determine fair value at the measurement date. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the time value of money |
|--------------------|-------------------------|

| ·   | the price for bearing uncertainty in cash flows |
|--------------------|-------------------------------------------------|

| ·   | other factors that would be considered by market participants |
|--------------------|---------------------------------------------------------------|

----

|                      |   | Quoted prices in active markets for identical assets (Level 1) |   |   | Significant other observable input (Level 2) |   |   | Significant unobservable inputs (Level 3) |   |   | Balance at end of period |   |
|---------------------------|--------|----------------------------------------------------------------|--------|--------|----------------------------------------------|--------|--------|-------------------------------------------|--------|--------|--------------------------|--------|
| June 30, 2011             |   |                                                           |   |   |                                         |   |   |                                      |   |   |                     |   |
| Mortgage servicing rights |   | $                                                              | -      |   |                                         | $      | -      |                                      |   | $      | 483                      |   |   | $ | 483 |   |
| Impaired loans            |   |                                                           | -      |   |                                         |   | -      |                                      |   |   | 4,935                    |   |   |   | 4,935 |   |
|                      |   |                                                           |   |   |                                         |   |   |                                      |   |   |                     |   |   |   |   |   |
| December 31, 2010         |   |                                                           |   |   |                                         |   |   |                                      |   |   |                     |   |   |   |   |   |
| Mortgage servicing rights |   | $                                                              | -      |   |                                         | $      | -      |                                      |   | $      | 504                      |   |   | $ | 504 |   |
| Impaired loans            |   |                                                           | -      |   |                                         |   | -      |                                      |   |   | 6,014                    |   |   |   | 6,014 |   |

----

----

|                                     |   | June 30, 2011 |    |   | December 31, 2010 |   |
|------------------------------------------|--------|---------------|---------|--------|-------------------|--------|
|                                     |   | Carrying      |    |   | Estimated         |   |   | Carrying |   |   | Estimated |   |
|                                     |   | amount        |    |   | fair value        |   |   | amount |   |   | fair value |   |
| Financial Assets                         |   |          |    |   |              |   |   |   |   |   |   |   |
| Cash and due from banks                  |   | $             | 10,912  |   |              | $      | 10,912 |   |   | $ | 8,498 |   |   | $ | 8,498 |   |
| Interest-bearing deposits in banks       |   |          | 6,270   |   |              |   | 6,270 |   |   |   | 6,414 |   |   |   | 6,414 |   |
| Investment securities available-for-sale |   |          | 326,094 |   |              |   | 326,094 |   |   |   | 290,564 |   |   |   | 290,564 |   |
| Investment securities held-to-maturity   |   |          | 1,842   |   |              |   | 1,905 |   |   |   | 2,667 |   |   |   | 2,729 |   |
| Restricted investment in bank stocks     |   |          | 1,965   |   |              |   | 1,965 |   |   |   | 2,176 |   |   |   | 2,176 |   |
| Loans held-for-sale                      |   |          | 843     |   |              |   | 867 |   |   |   | 228 |   |   |   | 228 |   |
| Net loans                                |   |          | 466,860 |   |              |   | 452,256 |   |   |   | 473,227 |   |   |   | 458,040 |   |
| Mortgage servicing rights                |   |          | 483     |   |              |   | 587 |   |   |   | 504 |   |   |   | 620 |   |
| Accrued interest receivable              |   |          | 2,867   |   |              |   | 2,867 |   |   |   | 2,988 |   |   |   | 2,988 |   |
|                                     |   |          |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Financial Liabilities                    |   |          |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Deposits with no stated maturities       |   |          | 425,692 |   |              |   | 425,692 |   |   |   | 384,745 |   |   |   | 384,745 |   |
| Deposits with stated maturities          |   |          | 293,989 |   |              |   | 295,680 |   |   |   | 310,232 |   |   |   | 312,016 |   |
| Short-term borrowings                    |   |          | 30,553  |   |              |   | 30,553 |   |   |   | 29,786 |   |   |   | 29,786 |   |
| Long-term debt                           |   |          | 20,303  |   |              |   | 21,355 |   |   |   | 20,308 |   |   |   | 21,666 |   |
| Accrued interest payable                 |   |          | 787     |   |              |   | 787 |   |   |   | 1,089 |   |   |   | 1,089 |   |

|                         |   | June 30, 2011 |    |   | December 31, 2010 |   |
|------------------------------|--------|---------------|---------|--------|-------------------|--------|
|                         |   | Notional      |    |   | Estimated         |   |   | Notional |   |   | Estimated |   |
|                         |   | amount        |    |   | fair value        |   |   | amount |   |   | fair value |   |
| Commitments to extend credit |   | $             | 108,717 |   |              | $      | - |   |   | $ | 103,012 |   |   | $ | - |   |
| Standby letters of credit    |   |          | 13,226  |   |              |   | - |   |   |   | 13,519 |   |   |   | - |   |

----

|                                                    |   | June 30, 2011 |    |   | December 31, 2010 |   |
|---------------------------------------------------------|--------|--------------------|---------|--------|------------------------|--------|
| Commitments to extend credit and unused lines of credit |   | $                  | 108,717 |   |                   | $      | 103,012 |   |
| Standby letters of credit                               |   |               | 13,226  |   |                   |   | 13,519 |   |
|                                                    |   | $                  | 121,943 |   |                   | $      | 116,531 |   |

----

|                                               |   | Capital Levels |   |
|----------------------------------------------------|--------|----------------|--------|
|                                               |   | Actual         |   |   | Adequately Capitalized |   |   | Well Capitalized |   |
| As of June 30, 2011                                |   | Amount         |   |   | Ratio |   |   | Amount |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
| Total Risk-Based Capital (to Risk Weighted Assets) |   |           |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                                       |   | $              | 70,587 |   |   |   | 12.34 | % |   | $ | 45,760 |   |   |   | 8.00 | % |   |   | N/A |   |   |   | N/A |   |
| Bank                                               |   |           | 66,296 |   |   |   | 11.67 | % |   |   | 45,448 |   |   |   | 8.00 | % |   | $ | 56,810 |   |   |   | 10.00 | % |
|                                               |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier I Capital (to Risk Weighted Assets)           |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                                       |   |           | 63,082 |   |   |   | 11.03 | % |   |   | 22,880 |   |   |   | 4.00 | % |   |   | N/A |   |   |   | N/A |   |
| Bank                                               |   |           | 59,173 |   |   |   | 10.42 | % |   |   | 22,724 |   |   |   | 4.00 | % |   |   | 34,086 |   |   |   | 6.00 | % |
|                                               |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier I Capital (to Average Assets)                 |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                                       |   |           | 63,082 |   |   |   | 7.63 | % |   |   | 33,076 |   |   |   | 4.00 | % |   |   | N/A |   |   |   | N/A |   |
| Bank                                               |   |           | 59,173 |   |   |   | 7.19 | % |   |   | 32,934 |   |   |   | 4.00 | % |   |   | 41,168 |   |   |   | 5.00 | % |

|                                               |   | Capital Levels |   |
|----------------------------------------------------|--------|----------------|--------|
|                                               |   | Actual         |   |   | Adequately Capitalized |   |   | Well Capitalized |   |
| As of December 31, 2010                            |   | Amount         |   |   | Ratio |   |   | Amount |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
| Total Risk-Based Capital (to Risk Weighted Assets) |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                                       |   | $              | 66,932 |   |   |   | 11.82 | % |   | $ | 45,289 |   |   |   | 8.00 | % |   |   | N/A |   |   |   | N/A |   |
| Bank                                               |   |           | 62,901 |   |   |   | 11.18 | % |   |   | 44,995 |   |   |   | 8.00 | % |   | $ | 56,243 |   |   |   | 10.00 | % |
|                                               |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier I Capital (to Risk Weighted Assets)           |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                                       |   |           | 59,551 |   |   |   | 10.52 | % |   |   | 22,644 |   |   |   | 4.00 | % |   |   | N/A |   |   |   | N/A |   |
| Bank                                               |   |           | 55,847 |   |   |   | 9.93 | % |   |   | 22,497 |   |   |   | 4.00 | % |   |   | 33,746 |   |   |   | 6.00 | % |
|                                               |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier I Capital (to Average Assets)                 |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                                       |   |           | 59,551 |   |   |   | 7.42 | % |   |   | 32,086 |   |   |   | 4.00 | % |   |   | N/A |   |   |   | N/A |   |
| Bank                                               |   |           | 55,847 |   |   |   | 6.99 | % |   |   | 31,947 |   |   |   | 4.00 | % |   |   | 39,934 |   |   |   | 5.00 | % |

----

| ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
|---------|---------------------------------------------------------------------------------------|

| ·   | Volatility in interest rates and shape of the yield curve; |
|--------------------|------------------------------------------------------------|

| ·   | Credit risk; |
|--------------------|--------------|

| ·   | Liquidity risk; |
|--------------------|-----------------|

| ·   | Operating, legal and regulatory risks; |
|--------------------|----------------------------------------|

| ·   | Economic, political and competitive forces affecting the Company’s line of business; |
|--------------------|--------------------------------------------------------------------------------------------|

| ·   | The risk that the Federal Deposit Insurance Corporation (FDIC) could levy additional insurance assessments on all insured institutions in order to replenish the Deposit Insurance Fund based on the level of bank failures in the future; and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The risk that the analysis of these risks and forces could be incorrect, and/or that the strategies developed to address them could be unsuccessful. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

----

----

----

| Three Months Ended                                                 |   | June 30, 2011        |    |   | June 30, 2010 |   |
|--------------------------------------------------------------------|--------|----------------------|---------|--------|---------------|--------|
|                                                               |   | Average Balance |    |   | Average Rate  |   |   | Interest |   |   | Average Balance |   |   | Average Rate |   |   | Interest |   |
| Assets                                                             |   |                 |    |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal funds sold                                                 |   | $                    | -       |   |          |   | 0.00 | % |   | $ | - |   |   | $ | - |   |   |   | 0.00 | % |   | $ | - |   |
| Investment securities:                                             |   |                 |    |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    U.S. Treasury                                    |   |                 | -       |   |          |   | 0.00 | % |   |   | - |   |   |   | 5,011 |   |   |   | 0.56 | % |   |   | 7 |   |
|    U.S. Government agencies                         |   |                 | 63,143  |   |          |   | 2.18 | % |   |   | 345 |   |   |   | 54,037 |   |   |   | 3.26 | % |   |   | 440 |   |
|    State and municipal                              |   |                 | 68,605  |   |          |   | 5.88 | % |   |   | 1,009 |   |   |   | 57,066 |   |   |   | 6.27 | % |   |   | 894 |   |
|    Mortgage-backed and CMOs                         |   |                 | 166,062 |   |          |   | 3.47 | % |   |   | 1,439 |   |   |   | 134,769 |   |   |   | 3.96 | % |   |   | 1,336 |   |
|    Other debt securities                            |   |                 | 4,090   |   |          |   | 1.20 | % |   |   | 12 |   |   |   | 4,360 |   |   |   | 1.13 | % |   |   | 12 |   |
|    Equities                                         |   |                 | 3,296   |   |          |   | 3.94 | % |   |   | 32 |   |   |   | 2,983 |   |   |   | 3.85 | % |   |   | 28 |   |
|      Total investment securities          |   |                 | 305,196 |   |          |   | 3.72 | % |   |   | 2,837 |   |   |   | 258,226 |   |   |   | 4.21 | % |   |   | 2,717 |   |
| Loans:                                                             |   |                 |    |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Commercial real estate                                 |   |                 | 261,979 |   |          |   | 5.95 | % |   |   | 3,883 |   |   |   | 251,140 |   |   |   | 5.90 | % |   |   | 3,692 |   |
|   Residential real estate                                |   |                 | 23,326  |   |          |   | 5.35 | % |   |   | 312 |   |   |   | 25,015 |   |   |   | 5.81 | % |   |   | 363 |   |
|   Home equity loans                                      |   |                 | 55,874  |   |          |   | 4.77 | % |   |   | 664 |   |   |   | 60,435 |   |   |   | 5.13 | % |   |   | 774 |   |
|   Commercial and industrial                              |   |                 | 89,173  |   |          |   | 5.12 | % |   |   | 1,138 |   |   |   | 81,661 |   |   |   | 5.23 | % |   |   | 1,066 |   |
|   Indirect lease financing                               |   |                 | 13,240  |   |          |   | 9.05 | % |   |   | 300 |   |   |   | 13,941 |   |   |   | 9.13 | % |   |   | 318 |   |
|   Consumer loans                                         |   |                 | 2,475   |   |          |   | 14.32 | % |   |   | 88 |   |   |   | 3,295 |   |   |   | 14.53 | % |   |   | 119 |   |
|   Tax-exempt loans                                       |   |                 | 31,084  |   |          |   | 6.01 | % |   |   | 466 |   |   |   | 30,613 |   |   |   | 6.01 | % |   |   | 459 |   |
|      Total loans, net of unearned income* |   |                 | 477,151 |   |          |   | 5.76 | % |   |   | 6,851 |   |   |   | 466,100 |   |   |   | 5.84 | % |   |   | 6,791 |   |
| Other earning assets                                               |   |                 | 17,161  |   |          |   | 0.23 | % |   |   | 10 |   |   |   | 16,159 |   |   |   | 0.23 | % |   |   | 9 |   |
|      Total earning assets                 |   |                 | 799,508 |   |          |   | 4.87 | % |   |   | 9,698 |   |   |   | 740,485 |   |   |   | 5.16 | % |   |   | 9,517 |   |
| Cash and due from banks                                            |   |                 | 10,121  |   |          |   |   |   |   |   |   |   |   |   | 9,866 |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses                                          |   |                 | (9,364  | )      |          |   |   |   |   |   |   |   |   |   | (6,702 | ) |   |   |   |   |   |   |   |   |
| Other assets                                                       |   |                 | 26,636  |   |          |   |   |   |   |   |   |   |   |   | 25,890 |   |   |   |   |   |   |   |   |   |
|      Total assets                         |   | $                    | 826,901 |   |          |   |   |   |   |   |   |   |   | $ | 769,539 |   |   |   |   |   |   |   |   |   |
|                                                               |   |                 |    |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities and Shareholders' Equity                               |   |                 |    |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing deposits:                                         |   |                 |    |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Interest-bearing demand                                |   | $                    | 88,396  |   |          |   | 0.51 | % |   |   | 112 |   |   | $ | 85,940 |   |   |   | 0.70 | % |   |   | 151 |   |
|   Municipals                                             |   |                 | 48,139  |   |          |   | 0.79 | % |   |   | 94 |   |   |   | 33,708 |   |   |   | 1.11 | % |   |   | 94 |   |
|   Money market                                           |   |                 | 69,354  |   |          |   | 0.48 | % |   |   | 84 |   |   |   | 77,608 |   |   |   | 0.83 | % |   |   | 161 |   |
|   Savings                                                |   |                 | 152,868 |   |          |   | 0.79 | % |   |   | 300 |   |   |   | 89,185 |   |   |   | 0.81 | % |   |   | 180 |   |
|   Time                                                   |   |                 | 192,612 |   |          |   | 1.56 | % |   |   | 748 |   |   |   | 212,906 |   |   |   | 2.12 | % |   |   | 1,122 |   |
|   Time of $100,000 or more                               |   |                 | 98,504  |   |          |   | 1.62 | % |   |   | 397 |   |   |   | 105,810 |   |   |   | 2.23 | % |   |   | 587 |   |
|      Total interest-bearing deposits      |   |                 | 649,873 |   |          |   | 1.07 | % |   |   | 1,735 |   |   |   | 605,157 |   |   |   | 1.52 | % |   |   | 2,295 |   |
| Short-term borrowings                                              |   |                 | 26,560  |   |          |   | 0.88 | % |   |   | 58 |   |   |   | 26,305 |   |   |   | 1.02 | % |   |   | 67 |   |
| Long-term debt                                                     |   |                 | 20,305  |   |          |   | 4.75 | % |   |   | 244 |   |   |   | 20,989 |   |   |   | 4.76 | % |   |   | 252 |   |
|      Total interest-bearing liabilities   |   |                 | 696,738 |   |          |   | 1.17 | % |   |   | 2,037 |   |   |   | 652,451 |   |   |   | 1.61 | % |   |   | 2,614 |   |
| Non-interest-bearing deposits                                      |   |                 | 64,755  |   |          |   |   |   |   |   |   |   |   |   | 56,891 |   |   |   |   |   |   |   |   |   |
| Other liabilities                                                  |   |                 | 2,877   |   |          |   |   |   |   |   |   |   |   |   | 3,292 |   |   |   |   |   |   |   |   |   |
| Shareholders' equity                                               |   |                 | 62,531  |   |          |   |   |   |   |   |   |   |   |   | 56,905 |   |   |   |   |   |   |   |   |   |
|     Total liabilities and                      |   |                 |    |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        shareholders' equity     |   | $                    | 826,901 |   |          |   |   |   |   |   |   |   |   | $ | 769,539 |   |   |   |   |   |   |   |   |   |
| Net interest rate spread                                           |   |                 |    |   |          |   | 3.70 | % |   |   |   |   |   |   |   |   |   |   | 3.55 | % |   |   |   |   |
| Margin/net interest income                                         |   |                 |    |   |          |   | 3.84 | % |   | $ | 7,661 |   |   |   |   |   |   |   | 3.74 | % |   | $ | 6,903 |   |

| * | Includes loans held-for-sale |
|---|------------------------------|

----

| Six Months Ended                                                   |   | June 30, 2011   |    |   | June 30, 2010 |   |
|--------------------------------------------------------------------|--------|-----------------|---------|--------|---------------|--------|
|                                                               |   | Average Balance |    |   | Average Rate  |   |   | Interest |   |   | Average Balance |   |   | Average Rate |   |   | Interest |   |
| Assets                                                             |   |            |    |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal funds sold                                                 |   | $               | -       |   |          |   | 0.00 | % |   | $ | - |   |   | $ | - |   |   |   | 0.00 | % |   | $ | - |   |
| Investment securities:                                             |   |            |    |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    U.S. Treasury                                    |   |            | -       |   |          |   | 0.00 | % |   |   | - |   |   |   | 5,018 |   |   |   | 0.57 | % |   |   | 14 |   |
|    U.S. Government agencies                         |   |            | 61,952  |   |          |   | 2.16 | % |   |   | 668 |   |   |   | 58,775 |   |   |   | 3.34 | % |   |   | 981 |   |
|    State and municipal                              |   |            | 67,919  |   |          |   | 5.91 | % |   |   | 2,008 |   |   |   | 56,486 |   |   |   | 6.31 | % |   |   | 1,781 |   |
|    Mortgage-backed and CMOs                         |   |            | 160,669 |   |          |   | 3.48 | % |   |   | 2,799 |   |   |   | 127,724 |   |   |   | 4.12 | % |   |   | 2,628 |   |
|    Other debt securities                            |   |            | 4,089   |   |          |   | 1.18 | % |   |   | 24 |   |   |   | 4,438 |   |   |   | 1.19 | % |   |   | 27 |   |
|    Equities                                         |   |            | 3,271   |   |          |   | 3.64 | % |   |   | 59 |   |   |   | 2,907 |   |   |   | 3.76 | % |   |   | 54 |   |
|      Total investment securities          |   |            | 297,900 |   |          |   | 3.73 | % |   |   | 5,558 |   |   |   | 255,348 |   |   |   | 4.30 | % |   |   | 5,485 |   |
| Loans:                                                             |   |            |    |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Commercial real estate                                 |   |            | 262,136 |   |          |   | 5.97 | % |   |   | 7,760 |   |   |   | 245,395 |   |   |   | 5.96 | % |   |   | 7,247 |   |
|   Residential real estate                                |   |            | 23,362  |   |          |   | 5.46 | % |   |   | 638 |   |   |   | 24,657 |   |   |   | 5.76 | % |   |   | 711 |   |
|   Home equity loans                                      |   |            | 56,385  |   |          |   | 4.80 | % |   |   | 1,342 |   |   |   | 61,078 |   |   |   | 5.11 | % |   |   | 1,547 |   |
|   Commercial and industrial                              |   |            | 87,479  |   |          |   | 5.21 | % |   |   | 2,261 |   |   |   | 80,935 |   |   |   | 5.21 | % |   |   | 2,089 |   |
|   Indirect lease financing                               |   |            | 13,449  |   |          |   | 8.95 | % |   |   | 601 |   |   |   | 13,949 |   |   |   | 8.79 | % |   |   | 613 |   |
|   Consumer loans                                         |   |            | 2,558   |   |          |   | 13.93 | % |   |   | 177 |   |   |   | 3,434 |   |   |   | 13.08 | % |   |   | 223 |   |
|   Tax-exempt loans                                       |   |            | 31,557  |   |          |   | 6.08 | % |   |   | 951 |   |   |   | 29,176 |   |   |   | 5.90 | % |   |   | 854 |   |
|      Total loans, net of unearned income* |   |            | 476,926 |   |          |   | 5.81 | % |   |   | 13,730 |   |   |   | 458,624 |   |   |   | 5.84 | % |   |   | 13,284 |   |
| Other earning assets                                               |   |            | 14,559  |   |          |   | 0.24 | % |   |   | 17 |   |   |   | 16,569 |   |   |   | 0.23 | % |   |   | 19 |   |
|      Total earning assets                 |   |            | 789,385 |   |          |   | 4.93 | % |   |   | 19,305 |   |   |   | 730,541 |   |   |   | 5.19 | % |   |   | 18,788 |   |
| Cash and due from banks                                            |   |            | 9,870   |   |          |   |   |   |   |   |   |   |   |   | 9,610 |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses                                          |   |            | (9,129  | )      |          |   |   |   |   |   |   |   |   |   | (6,476 | ) |   |   |   |   |   |   |   |   |
| Other assets                                                       |   |            | 26,526  |   |          |   |   |   |   |   |   |   |   |   | 25,923 |   |   |   |   |   |   |   |   |   |
|      Total assets                         |   | $               | 816,652 |   |          |   |   |   |   |   |   |   |   | $ | 759,598 |   |   |   |   |   |   |   |   |   |
|                                                               |   |            |    |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities and Shareholders' Equity                               |   |            |    |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing deposits:                                         |   |            |    |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Interest-bearing demand                                |   | $               | 87,881  |   |          |   | 0.52 | % |   |   | 225 |   |   | $ | 83,878 |   |   |   | 0.70 | % |   |   | 289 |   |
|   Municipals                                             |   |            | 44,022  |   |          |   | 0.79 | % |   |   | 171 |   |   |   | 34,010 |   |   |   | 1.05 | % |   |   | 178 |   |
|   Money market                                           |   |            | 71,457  |   |          |   | 0.50 | % |   |   | 178 |   |   |   | 74,905 |   |   |   | 0.88 | % |   |   | 327 |   |
|   Savings                                                |   |            | 144,827 |   |          |   | 0.81 | % |   |   | 582 |   |   |   | 81,904 |   |   |   | 0.79 | % |   |   | 321 |   |
|   Time                                                   |   |            | 196,207 |   |          |   | 1.63 | % |   |   | 1,584 |   |   |   | 215,061 |   |   |   | 2.24 | % |   |   | 2,394 |   |
|   Time of $100,000 or more                               |   |            | 98,984  |   |          |   | 1.70 | % |   |   | 837 |   |   |   | 106,212 |   |   |   | 2.32 | % |   |   | 1,223 |   |
|      Total interest-bearing deposits      |   |            | 643,378 |   |          |   | 1.12 | % |   |   | 3,577 |   |   |   | 595,970 |   |   |   | 1.60 | % |   |   | 4,732 |   |
| Short-term borrowings                                              |   |            | 25,826  |   |          |   | 0.88 | % |   |   | 113 |   |   |   | 24,457 |   |   |   | 0.99 | % |   |   | 120 |   |
| Long-term debt                                                     |   |            | 20,306  |   |          |   | 4.75 | % |   |   | 485 |   |   |   | 23,978 |   |   |   | 4.70 | % |   |   | 566 |   |
|      Total interest-bearing liabilities   |   |            | 689,510 |   |          |   | 1.22 | % |   |   | 4,175 |   |   |   | 644,405 |   |   |   | 1.70 | % |   |   | 5,418 |   |
| Non-interest-bearing deposits                                      |   |            | 62,424  |   |          |   |   |   |   |   |   |   |   |   | 55,508 |   |   |   |   |   |   |   |   |   |
| Other liabilities                                                  |   |            | 3,000   |   |          |   |   |   |   |   |   |   |   |   | 3,411 |   |   |   |   |   |   |   |   |   |
| Shareholders' equity                                               |   |            | 61,718  |   |          |   |   |   |   |   |   |   |   |   | 56,274 |   |   |   |   |   |   |   |   |   |
|     Total liabilities and                      |   |            |    |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        shareholders' equity     |   | $               | 816,652 |   |          |   |   |   |   |   |   |   |   | $ | 759,598 |   |   |   |   |   |   |   |   |   |
| Net interest rate spread                                           |   |            |    |   |          |   | 3.71 | % |   |   |   |   |   |   |   |   |   |   | 3.49 | % |   |   |   |   |
| Margin/net interest income                                         |   |            |    |   |          |   | 3.87 | % |   | $ | 15,130 |   |   |   |   |   |   |   | 3.69 | % |   | $ | 13,370 |   |

| * | Includes loans held-for-sale |
|---|------------------------------|

----

|                                                                         |   | Three Months EndedJune 30, 2011 comparedto June 30, 2010 |   |   | Six Months EndedJune 30, 2011 comparedto June 30, 2010 |   |
|------------------------------------------------------------------------------|--------|----------------------------------------------------------|--------|--------|--------------------------------------------------------|--------|
|                                                                         |   | Total                                                    |   |   | Due to change in:                                      |   |   | Total |   |   | Due to change in: |   |
|                                                                         |   | Change                                                   |   |   | Volume                                                 |   |   | Rate |   |   | Change |   |   | Volume |   |   | Rate |   |
| Interest income:                                                             |   |                                                     |   |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal funds sold                                                           |   | $                                                        | -      |   |                                                   | $      | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| Investment securities:                                                       |   |                                                     |   |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    U.S. Treasury                                              |   |                                                     | (7     | )      |                                                   |   | (7 | ) |   |   | - |   |   |   | (14 | ) |   |   | (14 | ) |   |   | - |   |
|    U.S. Government agencies                                   |   |                                                     | (95    | )      |                                                   |   | 74 |   |   |   | (169 | ) |   |   | (313 | ) |   |   | 53 |   |   |   | (366 | ) |
|    State and municipal                                        |   |                                                     | 115    |   |                                                   |   | 181 |   |   |   | (66 | ) |   |   | 227 |   |   |   | 361 |   |   |   | (134 | ) |
|    Mortgage-backed and CMOs                                   |   |                                                     | 103    |   |                                                   |   | 310 |   |   |   | (207 | ) |   |   | 171 |   |   |   | 678 |   |   |   | (507 | ) |
|    Other debt securities                                      |   |                                                     | -      |   |                                                   |   | (1 | ) |   |   | 1 |   |   |   | (3 | ) |   |   | (3 | ) |   |   | - |   |
|    Equities                                                   |   |                                                     | 4      |   |                                                   |   | 3 |   |   |   | 1 |   |   |   | 5 |   |   |   | 7 |   |   |   | (2 | ) |
| Loans:                                                                       |   |                                                     |   |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Commercial real estate                                           |   |                                                     | 191    |   |                                                   |   | 159 |   |   |   | 32 |   |   |   | 513 |   |   |   | 495 |   |   |   | 18 |   |
|   Residential real estate                                          |   |                                                     | (51    | )      |                                                   |   | (24 | ) |   |   | (27 | ) |   |   | (73 | ) |   |   | (37 | ) |   |   | (36 | ) |
|   Home equity loans                                                |   |                                                     | (110   | )      |                                                   |   | (59 | ) |   |   | (51 | ) |   |   | (205 | ) |   |   | (119 | ) |   |   | (86 | ) |
|   Commercial and industrial                                        |   |                                                     | 72     |   |                                                   |   | 97 |   |   |   | (25 | ) |   |   | 172 |   |   |   | 169 |   |   |   | 3 |   |
|   Indirect lease financing                                         |   |                                                     | (18    | )      |                                                   |   | (16 | ) |   |   | (2 | ) |   |   | (12 | ) |   |   | (22 | ) |   |   | 10 |   |
|   Consumer loans                                                   |   |                                                     | (31    | )      |                                                   |   | (30 | ) |   |   | (1 | ) |   |   | (46 | ) |   |   | (57 | ) |   |   | 11 |   |
|   Tax-exempt loans                                                 |   |                                                     | 7      |   |                                                   |   | 7 |   |   |   | - |   |   |   | 97 |   |   |   | 70 |   |   |   | 27 |   |
| Other earning assets                                                         |   |                                                     | 1      |   |                                                   |   | 1 |   |   |   | - |   |   |   | (2 | ) |   |   | (3 | ) |   |   | 1 |   |
|          Total interest income  |   |                                                     | 181    |   |                                                   |   | 695 |   |   |   | (514 | ) |   |   | 517 |   |   |   | 1,578 |   |   |   | (1,061 | ) |
| Interest expense:                                                            |   |                                                     |   |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing demand                                                      |   |                                                     | (39    | )      |                                                   |   | 4 |   |   |   | (43 | ) |   |   | (64 | ) |   |   | 14 |   |   |   | (78 | ) |
| Municipals                                                                   |   |                                                     | -      |   |                                                   |   | 39 |   |   |   | (39 | ) |   |   | (7 | ) |   |   | 51 |   |   |   | (58 | ) |
| Money market                                                                 |   |                                                     | (77    | )      |                                                   |   | (17 | ) |   |   | (60 | ) |   |   | (149 | ) |   |   | (14 | ) |   |   | (135 | ) |
| Savings                                                                      |   |                                                     | 120    |   |                                                   |   | 127 |   |   |   | (7 | ) |   |   | 261 |   |   |   | 245 |   |   |   | 16 |   |
| Time                                                                         |   |                                                     | (374   | )      |                                                   |   | (106 | ) |   |   | (268 | ) |   |   | (810 | ) |   |   | (210 | ) |   |   | (600 | ) |
| Time of $100,000 or more                                                     |   |                                                     | (190   | )      |                                                   |   | (40 | ) |   |   | (150 | ) |   |   | (386 | ) |   |   | (83 | ) |   |   | (303 | ) |
| Short-term borrowings                                                        |   |                                                     | (9     | )      |                                                   |   | - |   |   |   | (9 | ) |   |   | (7 | ) |   |   | 6 |   |   |   | (13 | ) |
| Long-term debt                                                               |   |                                                     | (8     | )      |                                                   |   | (7 | ) |   |   | (1 | ) |   |   | (81 | ) |   |   | (86 | ) |   |   | 5 |   |
|          Total interest expense |   |                                                     | (577   | )      |                                                   |   | - |   |   |   | (577 | ) |   |   | (1,243 | ) |   |   | (77 | ) |   |   | (1,166 | ) |
| Net interest income                                                          |   | $                                                        | 758    |   |                                                   | $      | 695 |   |   | $ | 63 |   |   | $ | 1,760 |   |   | $ | 1,655 |   |   | $ | 105 |   |

----

|                                           |   | For the Three Months Ended June 30, |   |   | For the Six Months Ended June 30, |   |
|------------------------------------------------|--------|------------------------------------------|--------|--------|---------------------------------------------|--------|
|                                           |   | 2011                                     |   |   | 2010                                        |   |   | 2011 |   |   | 2010 |   |
| Total interest income                          |   | $                                        | 9,188  |   |                                        | $      | 9,049 |   |   | $ | 18,283 |   |   | $ | 17,877 |   |
| Total interest expense                         |   |                                     | 2,037  |   |                                        |   | 2,614 |   |   |   | 4,175 |   |   |   | 5,418 |   |
| Net interest income                            |   |                                     | 7,151  |   |                                        |   | 6,435 |   |   |   | 14,108 |   |   |   | 12,459 |   |
| Tax-equivalent adjustment                      |   |                                     | 510    |   |                                        |   | 468 |   |   |   | 1,022 |   |   |   | 911 |   |
| Net interest income (fully taxable-equivalent) |   | $                                        | 7,661  |   |                                        | $      | 6,903 |   |   | $ | 15,130 |   |   | $ | 13,370 |   |

----

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|                                                                                  |   | 6/30/11 |   |   | 3/31/11 |   |   | 12/31/10 |   |   | 9/30/10 |   |   | 6/30/10 |   |
|---------------------------------------------------------------------------------------|--------|---------|--------|--------|---------|--------|--------|----------|--------|--------|---------|--------|--------|---------|--------|
| Non-performing loans                                                                  |   | $       | 11,882 |   |    | $      | 12,988 |     |   | $      | 9,872   |   |   | $       | 9,908  |   |   | $ | 7,748 |   |
| Non-performing loans to total loans                                                   |   |    | 2.49   | %      |    |   | 2.71   | %        |   |   | 2.05    | %      |   |    | 2.07   | % |   |   | 1.63 | % |
|                                                                                  |   |    |   |   |    |   |   |     |   |   |    |   |   |    |   |   |   |   |   |   |
| Delinquent loans (30-89 days past due), not included above                            |   | $       | 2,798  |   |    | $      | 3,133  |     |   | $      | 7,105   |   |   | $       | 5,729  |   |   | $ | 4,448 |   |
| Delinquent loans to total loans                                                       |   |    | 0.59   | %      |    |   | 0.65   | %        |   |   | 1.47    | %      |   |    | 1.20   | % |   |   | 0.94 | % |
|                                                                                  |   |    |   |   |    |   |   |     |   |   |    |   |   |    |   |   |   |   |   |   |
| Total delinquent and non-performing loans                                             |   | $       | 14,680 |   |    | $      | 16,121 |     |   | $      | 16,977  |   |   | $       | 15,637 |   |   | $ | 12,196 |   |
| Total delinquent and non-performing loans     to total loans |   |    | 3.08   | %      |    |   | 3.37   | %        |   |   | 3.52    | %      |   |    | 3.27   | % |   |   | 2.57 | % |
|                                                                                  |   |    |   |   |    |   |   |     |   |   |    |   |   |    |   |   |   |   |   |   |
| Non-performing assets                                                                 |   | $       | 13,844 |   |    | $      | 14,697 |     |   | $      | 11,634  |   |   | $       | 11,417 |   |   | $ | 9,327 |   |
| Non-performing assets to total assets                                                 |   |    | 1.65   | %      |    |   | 1.79   | %        |   |   | 1.44    | %      |   |    | 1.44   | % |   |   | 1.20 | % |

|                                                       |   | June 30, 2011 |    |   | December 31, 2010 |   |
|------------------------------------------------------------|--------|--------------------|---------|--------|-------------------|--------|
| Non-accrual loans                                          |   | $                  | 9,455   |   |              | $      | 7,183 |   |
| Loans past due 90 days or more and still accruing interest |   |               | 10      |   |              |   | 268 |   |
| Restructured loans (not included above)                    |   |               | 2,417   |   |              |   | 2,421 |   |
| Total non-performing loans                                 |   |               | 11,882  |   |              |   | 9,872 |   |
| Other real estate owned and repossessed assets             |   |               | -       |   |              |   | 90 |   |
| Non-accrual investment securities                          |   |               | 1,962   |   |              |   | 1,672 |   |
| Total non-performing assets                                |   | $                  | 13,844  |   |              | $      | 11,634 |   |
|                                                       |   |               |    |   |              |   |   |   |
| Average total loans (YTD)                                  |   | $                  | 476,926 |   |              | $      | 467,063 |   |
| Total loans, including loans held-for-sale                 |   |               | 476,553 |   |              |   | 482,410 |   |
| Allowance for loan losses                                  |   |               | 8,850   |   |              |   | 8,955 |   |
|                                                       |   |               |    |   |              |   |   |   |
| Allowance for loan losses to:                              |   |               |    |   |              |   |   |   |
| Non-performing loans                                       |   |               | 74.48   | %      |              |   | 90.72 | % |
| Total loans                                                |   |               | 1.86    | %      |              |   | 1.86 | % |
| Average total loans                                        |   |               | 1.86    | %      |              |   | 1.92 | % |
|                                                       |   |               |    |   |              |   |   |   |
| Non-performing loans to total loans                        |   |               | 2.49    | %      |              |   | 2.05 | % |
| Non-performing assets to total assets                      |   |               | 1.65    | %      |              |   | 1.44 | % |

----

|                             |   | For the Three Months Ended June 30, |   |   | For the Six Months Ended June 30, |   |
|----------------------------------|--------|-------------------------------------|--------|--------|----------------------------------------|--------|
|                             |   | 2011                                |   |   | 2010                                   |   |   | 2011 |   |   | 2010 |   |
| Net charge-offs                  |   | $                                   | 792    |   |                                   | $      | 48 |   |   | $ | 1,205 |   |   | $ | 608 |   |
|                             |   |                                |   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Net charge-offs (annualized) to: |   |                                |   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Total loans                      |   |                                | 0.67   | %      |                                   |   | 0.04 | % |   |   | 0.51 | % |   |   | 0.26 | % |
| Average total loans              |   |                                | 0.67   | %      |                                   |   | 0.04 | % |   |   | 0.51 | % |   |   | 0.27 | % |
| Allowance for loan losses        |   |                                | 35.89  | %      |                                   |   | 2.78 | % |   |   | 27.48 | % |   |   | 17.50 | % |

| Non-Interest Income Comparison                                  |   |
|-----------------------------------------------------------------|--------|
|                                                            |   | Three Months Ended June 30, |   |   | Change from Prior Year |   |   | Six Months Ended June 30, |   |   | Change from Prior Year |   |
|                                                            |   | 2011 |   |   | 2010 |   |   | Amount |   |   | Percent |   |   | 2011 |   |   | 2010 |   |   | Amount |   |   | Percent |   |
| Fees for services to customers                                  |   | $ | 347 |   |   | $ | 406 |   |   | $ | (59 | ) |   |   | -14.5 | % |   | $ | 674 |   |   | $ | 811 |   |   | $ | (137 | ) |   |   | -16.9 | % |
| ATM and debit card                                              |   |   | 366 |   |   |   | 314 |   |   |   | 52 |   |   |   | 16.6 | % |   |   | 694 |   |   |   | 585 |   |   |   | 109 |   |   |   | 18.6 | % |
| Bank-owned life insurance                                       |   |   | 80 |   |   |   | 68 |   |   |   | 12 |   |   |   | 17.6 | % |   |   | 190 |   |   |   | 132 |   |   |   | 58 |   |   |   | 43.9 | % |
| Merchant income                                                 |   |   | 82 |   |   |   | 75 |   |   |   | 7 |   |   |   | 9.3 | % |   |   | 144 |   |   |   | 132 |   |   |   | 12 |   |   |   | 9.1 | % |
| Net gain (loss) on investment    securities |   |   | 54 |   |   |   | (67 | ) |   |   | 121 |   |   |   | 180.6 | % |   |   | 11 |   |   |   | 69 |   |   |   | (58 | ) |   |   | -84.1 | % |
| Net gain on sale of loans                                       |   |   | 18 |   |   |   | 142 |   |   |   | (124 | ) |   |   | -87.3 | % |   |   | 57 |   |   |   | 217 |   |   |   | (160 | ) |   |   | -73.7 | % |
| Other                                                           |   |   | 123 |   |   |   | 89 |   |   |   | 34 |   |   |   | 38.2 | % |   |   | 240 |   |   |   | 213 |   |   |   | 27 |   |   |   | 12.7 | % |
| Total                                                           |   | $ | 1,070 |   |   | $ | 1,027 |   |   | $ | 43 |   |   |   | 4.2 | % |   | $ | 2,010 |   |   | $ | 2,159 |   |   | $ | (149 | ) |   |   | -6.9 | % |

----

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----

| Non-Interest Expense Comparison |
|---------------------------------|
|                            |
|                            |   | Three Months Ended |   |   | Change from |   |   | Six Months Ended |   |   | Change from |   |
|                            |   | June 30, |   |   | Prior Year |   |   | June 30, |   |   | Prior Year |   |
|                            |   | 2011 |   |   | 2010 |   |   | Amount |   |   | Percent |   |   | 2011 |   |   | 2010 |   |   | Amount |   |   | Percent |   |
| Salaries and employee benefits  |   | $ | 2,408 |   |   | $ | 2,167 |   |   | $ | 241 |   |   |   | 11.1 | % |   | $ | 4,795 |   |   | $ | 4,304 |   |   | $ | 491 |   |   |   | 11.4 | % |
| Net occupancy                   |   |   | 370 |   |   |   | 360 |   |   |   | 10 |   |   |   | 2.8 | % |   |   | 767 |   |   |   | 729 |   |   |   | 38 |   |   |   | 5.2 | % |
| Furniture and equipment         |   |   | 320 |   |   |   | 288 |   |   |   | 32 |   |   |   | 11.1 | % |   |   | 623 |   |   |   | 570 |   |   |   | 53 |   |   |   | 9.3 | % |
| Marketing                       |   |   | 206 |   |   |   | 199 |   |   |   | 7 |   |   |   | 3.5 | % |   |   | 381 |   |   |   | 360 |   |   |   | 21 |   |   |   | 5.8 | % |
| Third-party services            |   |   | 340 |   |   |   | 290 |   |   |   | 50 |   |   |   | 17.2 | % |   |   | 588 |   |   |   | 563 |   |   |   | 25 |   |   |   | 4.4 | % |
| Telephone, postage and supplies |   |   | 158 |   |   |   | 142 |   |   |   | 16 |   |   |   | 11.3 | % |   |   | 306 |   |   |   | 299 |   |   |   | 7 |   |   |   | 2.3 | % |
| State taxes                     |   |   | 150 |   |   |   | 139 |   |   |   | 11 |   |   |   | 7.9 | % |   |   | 300 |   |   |   | 279 |   |   |   | 21 |   |   |   | 7.5 | % |
| FDIC insurance premiums         |   |   | 276 |   |   |   | 257 |   |   |   | 19 |   |   |   | 7.4 | % |   |   | 538 |   |   |   | 511 |   |   |   | 27 |   |   |   | 5.3 | % |
| Other                           |   |   | 356 |   |   |   | 399 |   |   |   | (43 | ) |   |   | -10.8 | % |   |   | 706 |   |   |   | 744 |   |   |   | (38 | ) |   |   | -5.1 | % |
| Total                           |   | $ | 4,584 |   |   | $ | 4,241 |   |   | $ | 343 |   |   |   | 8.1 | % |   | $ | 9,004 |   |   | $ | 8,359 |   |   | $ | 645 |   |   |   | 7.7 | % |

----

| ·   | Consultant expense increased $24,000. During the second quarter of 2011 an executive search firm was used to hire a Chief Information and Technology officer. This was partially offset by expenses during the second quarter of 2010 related to the use of a consultant for leadership training. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Third party IT services increased $33,000 most of which relates to costs associated with the conversion to a new online and mobile banking system to be introduced in the fourth quarter of 2011. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Capital Analysis                               |   |         |    |   |             |   |
|------------------------------------------------|--------|--------------|---------|--------|------------------|--------|
|                                           |   | June 30,2011 |    |   | December 31,2010 |   |
| Tier I                                         |   |         |    |   |             |   |
| Shareholder's equity                           |   | $            | 66,194  |   |             | $      | 61,090 |   |
| Net unrealized securities gains                |   |         | (3,112  | )      |             |   | (1,539 | ) |
| Total Tier I risk-based capital                |   | $            | 63,082  |   |             | $      | 59,551 |   |
|                                           |   |         |    |   |             |   |   |   |
| Tier II                                        |   |         |    |   |             |   |   |   |
| Allowable portion: Allowance for loan losses   |   | $            | 7,171   |   |             | $      | 7,100 |   |
| Unrealized gains on equity securities          |   |         | 334     |   |             |   | 281 |   |
| Total risk-based capital                       |   | $            | 70,587  |   |             | $      | 66,932 |   |
| Risk-weighted assets                           |   | $            | 571,994 |   |             | $      | 566,109 |   |
| Average assets                                 |   | $            | 826,901 |   |             | $      | 802,144 |   |
|                                           |   |         |    |   |             |   |   |   |
| Capital Ratios                                 |   |         |    |   |             |   |   |   |
|                                           |   | June 30,2011 |    |   | December 31,2010 |   |
| Tier I capital/risk-weighted assets            |   |         | 11.03   | %      |             |   | 10.52 | % |
| Total risk-based capital/risk-weighted assets  |   |         | 12.34   | %      |             |   | 11.82 | % |
| Tier I capital/average assets (leverage ratio) |   |         | 7.63    | %      |             |   | 7.42 | % |

----

----

| Change in Interest Rates |   | Net Interest Income |   |   | Dollar Change |   |   | % Change |   |
|--------------------------|--------|---------------------|--------|--------|---------------|--------|--------|----------|--------|
| +300 Basis Points        |   | $                   | 28,777 |   |          | $      | (248   | )        |   |   | -0.9 | % |
| +200 Basis Points        |   |                | 29,045 |   |          |   | 20     |     |   |   | 0.1 |   |
| +100 Basis Points        |   |                | 29,216 |   |          |   | 191    |     |   |   | 0.7 |   |
| Flat Rate                |   |                | 29,025 |   |          |   | -      |     |   |   | - |   |
| -100 Basis Points        |   |                | 27,260 |   |          |   | (1,765 | )        |   |   | (6.1 | ) |

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| Period                               |   | Total Numberof SharesPurchased |   |   | AveragePrice Paidper Share |   |   | Total Number ofShares Purchased asPart of PubliclyAnnounced Plan |   |   | Maximum Numberof Shares that mayyet be PurchasedUnder the Plan |   |
|--------------------------------------|--------|--------------------------------|--------|--------|----------------------------|--------|--------|------------------------------------------------------------------|--------|--------|----------------------------------------------------------------|--------|
|                                 |   |                           |   |   |                       |   |   |                                                             |   |   |                                                           |   |
| April 1, 2011 through April 30, 2011 |   |                           | -      |   |                       |   | -      |                                                             |   |   | -                                                              |   |   |   | 42,117 |   |
| May 1, 2011 through May 31, 2011     |   |                           | -      |   |                       |   | -      |                                                             |   |   | -                                                              |   |   |   | 42,117 |   |
| June 1, 2011 through June 30, 2011   |   |                           | -      |   |                       |   | -      |                                                             |   |   | -                                                              |   |   |   | 42,117 |   |
| Total                                |   |                           | -      |   |                       |   | -      |                                                             |   |   | -                                                              |   |   |   | 42,117 |   |

| (1) | Transactions are reported as of settlement dates. |
|-----|---------------------------------------------------|

| (2) | QNB’s current stock repurchase plan was approved by its Board of Directors and announced on January 24, 2008 and subsequently increased on February 9, 2009. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | The total number of shares approved for repurchase under QNB’s current stock repurchase plan is 100,000. |
|-----|----------------------------------------------------------------------------------------------------------------|

| (4) | QNB’s current stock repurchase plan has no expiration date. |
|-----|-------------------------------------------------------------------|

| (5) | QNB has no stock repurchase plan that it has determined to terminate or under which it does not intend to make further purchases. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------|

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|   | Exhibit 3(i) | Articles of Incorporation of Registrant, as amended. (Incorporated by reference to Exhibit 3(i) of Registrants Form DEF 14-A filed with the Commission on April 15, 2005). |
|--------|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Exhibit 3(ii) | Bylaws of Registrant, as amended. (Incorporated by reference to Exhibit 3(ii) of Registrants Form 8-K filed with the Commission on January 23, 2006). |
|--------|---------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Exhibit 11 | Statement Re: Computation of Earnings Per Share. (Included in Part I, Item I, hereof.) |
|--------|------------|----------------------------------------------------------------------------------------|

|   | Exhibit 31.1 | Section 302 Certification of Chief Executive Officer |
|--------|--------------|------------------------------------------------------|

|   | Exhibit 31.2 | Section 302 Certification of Chief Financial Officer |
|--------|--------------|------------------------------------------------------|

|   | Exhibit 32.1 | Section 906 Certification of Chief Executive Officer |
|--------|--------------|------------------------------------------------------|

|   | Exhibit 32.2 | Section 906 Certification of Chief Financial Officer |
|--------|--------------|------------------------------------------------------|

| No.     |   | Description                                              |
|---------|--------|----------------------------------------------------------|
| 101.INS |   | XBRL Instance Document.*                                 |
| 101.SCH |   | XBRL Taxonomy Extension Schema Document.*                |
| 101.CAL |   | XBRL Taxonomy Extension Calculation Linkbase Document.*  |
| 101.LAB |   | XBRL Taxonomy Extension Label Linkbase Document.*        |
| 101.PRE |   | XBRL Taxonomy Extension Presentation Linkbase Document.* |
| 101.DEF |   | XBRL Taxonomy Extension Definitions Linkbase Document.*  |

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| * | These interactive data files are being furnished as part of this Quarterly Report, and, in accordance with Rule 402 of Regulation S-T, shall not be deemed filed for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under those sections. |
|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                       | QNB Corp. |                    |
|----------------------------|-----------|-------------------------|
|                       |      |                    |   |
| Date: August 15, 2011 | By:  | /s/ Thomas J. Bisko     |   |
|                       |      | Thomas J. Bisko         |   |
|                       |      | Chief Executive Officer |   |

| Date: August 15, 2011 | By:  | /s/ Bret H. Krevolin  |   |
|----------------------------|-----------|----------------------------|--------|
|                       |      | Bret H. Krevolin           |   |
|                       |      | Chief Financial Officer    |   |
|                       |      |                       |   |

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