| North Carolina                           |         | 56-2270620                           |
|------------------------------------------|--------------|--------------------------------------|
| (State or other jurisdiction of          |         | (I.R.S. Employer Identification No.) |
| incorporation or organization)           |         |                                 |
|                                     |         |                                 |
| 4605 Country Club Road                   |         |                                 |
| Winston-Salem, North Carolina            |         | 27104                                |
| (Address of principal executive offices) |    |  (Zip Code)                     |

| Title of each class                                    |         |                         | Exchange on which registered |
|-----------------------------------------------------------------------|--------------|------------------------------|---------------------------------------------|
| Common Stock, No Par Value                                            |         | The NASDAQ Stock Market, LLC |
| 7.95% Cumulative Trust Preferred Securities                           |         | The NASDAQ Stock Market, LLC |
| 7.95% Junior Subordinated Debentures                                  |         | The NASDAQ Stock Market, LLC |
| Guarantee with respect to 7.95% Cumulative Trust Preferred Securities |    | The NASDAQ Stock Market, LLC |

| Document                                                                                                                                          |         | Where Incorporated |
|---------------------------------------------------------------------------------------------------------------------------------------------------|--------------|-------------------------|
| Proxy Statement for the Annual Meeting of Shareholders to be held May 25, 2011 to be mailed to shareholders within 120 days of December 31, 2010. |    | Part III                |

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| Index    |   |                                                                                                                    |   | PAGE   |
|----------|--------|-------------------------------------------------------------------------------------------------------------------------|--------|--------|
|     |   |                                                                                                                    |   |   |
| PART I   |   |                                                                                                                    |   |   |
|     |   |                                                                                                                    |   |   |
| Item 1.  |   | Business                                                                                                                |   | 3      |
| Item 1A. |   | Risk Factors                                                                                                            |   | 15     |
| Item 1B. |   | Unresolved Staff Comments                                                                                               |   | 24     |
| Item 2.  |   | Properties                                                                                                              |   | 25     |
| Item 3.  |   | Legal Proceedings                                                                                                       |   | 26     |
| Item 4.  |   | Reserved                                                                                                                |   | 26     |
|     |   |                                                                                                                    |   |   |
| PART II  |   |                                                                                                                    |   |   |
|     |   |                                                                                                                    |   |   |
| Item 5.  |   | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |   | 27     |
| Item 6.  |   | Selected Financial Data                                                                                                 |   | 29     |
| Item 7.  |   | Management’s Discussion and Analysis of Financial Condition and Results of Operations                             |   | 31     |
| Item 7A. |   | Quantitative and Qualitative Disclosures About Market Risk                                                              |   | 66     |
| Item 8.  |   | Financial Statements and Supplementary Data                                                                             |   | 66     |
| Item 9.  |   | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                                    |   | 124    |
| Item 9A. |   | Controls and Procedures                                                                                                 |   | 124    |
| Item 9B. |   | Other Information                                                                                                       |   | 124    |
|     |   |                                                                                                                    |   |   |
| PART III |   |                                                                                                                    |   |   |
|     |   |                                                                                                                    |   |   |
| Item 10. |   | Directors, Executive Officers and Corporate Governance                                                                  |   | 125    |
| Item 11. |   | Executive Compensation                                                                                                  |   | 125    |
| Item 12. |   | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                          |   | 125    |
| Item 13. |   | Certain Relationships and Related Transactions, and Director Independence                                               |   | 125    |
| Item 14. |   | Principal Accountant Fees and Services                                                                                  |   | 125    |
|     |   |                                                                                                                    |   |   |
| PART IV  |   |                                                                                                                    |   |   |
|     |   |                                                                                                                    |   |   |
| Item 15. |   | Exhibits, Financial Statement Schedules                                                                                 |   | 126    |

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|   | · | Established a reputation for superior service to our customers and the communities in which we operate; |
|--------|--------|---------------------------------------------------------------------------------------------------------|

|   | · | Developed a full service financial institution operating in four of the fastest growing markets in North Carolina; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------|

|   | · | Maintained third position in deposit market share in our home base of Forsyth County and third position in the aggregate in markets where we have a presence; and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Acquired The Community Bank, Pilot Mountain, North Carolina, in January 2004, raising our assets at that time to over $1.0 billion and increasing the number of our banking offices. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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|   | · | Small and medium sized businesses, and the owners and managers of these entities; |
|--------|--------|-----------------------------------------------------------------------------------|

|   | · | Professional and middle managers of locally based companies; and |
|--------|--------|------------------------------------------------------------------|

|   | · | Individual consumers. |
|--------|--------|-----------------------|

|   | · | To maintain solid asset quality and remain well capitalized; |
|--------|--------|--------------------------------------------------------------|

|   | · | To provide community-oriented banking services by delivering a broad range of financial services to our customers through responsive service and communication; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | To form a partnership with our customers whereby our decision making and product offerings are geared toward their best long-term interests; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | To be recognized in our community as a long-term player with employees, stockholders and directors committed to that effort; and |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------|

|   | · | To be progressive in our adoption of new technology so that we can provide our customers access to products and services that meet their needs for convenience and efficiency. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | · | As of December 31, 2010, the Bank had reduced its risk exposure to adversely classified assets identified in the Bank’s most recent Report of Examination by an amount (17%) exceeding its scheduled reduction at its first measurement point (15% reduction within 180 days after the effective date of the Consent Order, which was February 16, 2011). |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | By December 31, 2010, the Bank had eliminated all assets classified as “loss” and the appropriate portions of those assets classified as “doubtful” in the Bank’s most recent Report of Examination. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Throughout the third and fourth quarters of 2010 and continuing into the first quarter of 2011, the Bank has taken a number of measures to strengthen its credit risk management, including the staffing of a Special Assets Group to resolve problem credits and formal Board oversight of the internal loan review function. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Balance sheet shrinkage through net loan run-off and reduction in brokered deposits; |
|--------|--------|--------------------------------------------------------------------------------------|

|   | · | Risk-weighted asset restructuring; |
|--------|--------|------------------------------------|

|   | · | Down streaming cash resources from parent holding company as capital contributions to the Bank; |
|--------|--------|-------------------------------------------------------------------------------------------------|

----

|   | · | Future profitability at the Bank; and |
|--------|--------|---------------------------------------|

|   | · | Raising additional capital. |
|--------|--------|-----------------------------|

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----

----

|   | · | Increase a bank’s assessment by up to 0.225% based on its risk profile if the bank has high levels of secured liabilities (if greater than 25% of domestic deposits), since those claims must be paid before depositors can make claims in the event of a failure; and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Increase a bank’s assessment by up to 0.10% if brokered deposits make up more than 10% of the institution’s domestic deposits.  For well managed and well capitalized institutions, this would only apply when accompanied by rapid asset growth. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Redefines the deposit insurance assessment base as average total assets minus average tangible equity; |
|--------|--------|--------------------------------------------------------------------------------------------------------|

|   | · | Makes adjustments to assessment rates for unsecured debt and brokered deposits; and |
|--------|--------|-------------------------------------------------------------------------------------|

|   | · | Adopts a new rate schedule. |
|--------|--------|-----------------------------|

----

|   | · | Improve our credit quality; |
|--------|--------|-----------------------------|

|   | · | Return to sustained profitability; |
|--------|--------|------------------------------------|

|   | · | Build our customer base focusing on profitable customer relationships; |
|--------|--------|------------------------------------------------------------------------|

|   | · | Attract sufficient core deposits to reduce our reliance on brokered deposits and borrowed funds and to fund our loan growth; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------|

|   | · | Attract and retain qualified bank management; and |
|--------|--------|---------------------------------------------------|

|   | · | Build sufficient regulatory capital. |
|--------|--------|--------------------------------------|

----

----

|   | · | Developers, builders or owners may fail to complete or develop projects; |
|--------|--------|--------------------------------------------------------------------------|

|   | · | Developers, builders, or owners may experience a decline in liquidity and secondary sources of repayment; |
|--------|--------|-----------------------------------------------------------------------------------------------------------|

|   | · | Municipalities may place moratoriums on building, utility connections or required certifications; |
|--------|--------|---------------------------------------------------------------------------------------------------|

|   | · | Developers may fail to sell the improved real estate; |
|--------|--------|-------------------------------------------------------|

|   | · | There may be construction delays and cost overruns; |
|--------|--------|-----------------------------------------------------|

|   | · | Loans with rising variable rates may experience increases in the borrower’s payments on the loan at a time when the borrower’s income is under stress; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Collateral may prove insufficient; |
|--------|--------|------------------------------------|

|   | · | Permanent financing may not be obtained in a timely manner; or |
|--------|--------|----------------------------------------------------------------|

|   | · | Economic conditions may negatively impact demand for our borrower’s product. |
|--------|--------|------------------------------------------------------------------------------------|

----

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|   | · | Desired investments; |
|--------|--------|----------------------|

|   | · | Loans we can make; |
|--------|--------|--------------------|

|   | · | The possible expansion of branch offices; and |
|--------|--------|-----------------------------------------------|

|   | · | Possible transactions with or acquisitions by other institutions. |
|--------|--------|-------------------------------------------------------------------|

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|                                                |   | ApproximateSquareFootage |   |   | YearEstablishedor Acquired |   | Owned orLeased |
|-----------------------------------------------------|--------|--------------------------|--------|--------|---------------------------------|--------|---------------------|
| Banking Offices:                                    |   |                     |   |   |                            |   |                |
|                                                |   |                     |   |   |                            |   |                |
| Asheville, North Carolina1751 Hendersonville Road   |   |                     | 9,821  |   |                            | 2009   |                | Owned |
|                                                |   |                     |   |   |                            |   |                |   |
| Clemmons, North Carolina6290 Towncenter Drive       |   |                     | 3,800  |   |                            | 2004   |                | Owned |
|                                                |   |                     |   |   |                            |   |                |   |
| Dobson, North Carolina201 West Kapp Street          |   |                     | 2,800  |   |                            | 1995   |                | Owned |
|                                                |   |                     |   |   |                            |   |                |   |
| Greensboro, North Carolina1505 Highwoods Blvd.      |   |                     | 9,800  |   |                            | 2005   |                | Owned |
|                                                |   |                     |   |   |                            |   |                |   |
| High Point, North Carolina2541 Eastchester Drive    |   |                     | 3,000  |   |                            | 2003   |                | Owned |
|                                                |   |                     |   |   |                            |   |                |   |
| Jonesville, North Carolina503 Winston Road          |   |                     | 2,500  |   |                            | 1995   |                | Owned |
|                                                |   |                     |   |   |                            |   |                |   |
| Kernersville, North Carolina1207 South Main Street  |   |                     | 8,300  |   |                            | 2002   |                | Owned |
|                                                |   |                     |   |   |                            |   |                |   |
| King, North Carolina105 Post Office Street          |   |                     | 4,000  |   |                            | 2004   |                | Owned |
|                                                |   |                     |   |   |                            |   |                |   |
| Madison, North Carolina619 Ayersville Road          |   |                     | 2,000  |   |                            | 1990   |                | Owned |
|                                                |   |                     |   |   |                            |   |                |   |
| Mooresville, North Carolina210 Knob Hill Road       |   |                     | 8,800  |   |                            | 2006   |                | Owned |
|                                                |   |                     |   |   |                            |   |                |   |
| Mount Airy, North Carolina                          |   |                     |   |   |                            |   |                |   |
| 255 East Independence Blvd.                         |   |                     | 10,345 |   |                            | 1999   |                | Owned |
| 2010 Community Drive                                |   |                     | 3,500  |   |                            | 1988   |                | Owned |
|                                                |   |                     |   |   |                            |   |                |   |
| Pilot Mountain, North Carolina616 South Key Street  |   |                     | 8,300  |   |                            | 1987   |                | Owned |
|                                                |   |                     |   |   |                            |   |                |   |
| Raleigh, North Carolina3100 Edwards Mill Road       |   |                     | 10,740 |   |                            | 2009   |                | Owned |
|                                                |   |                     |   |   |                            |   |                |   |
| Sandy Ridge, North Carolina4928 Highway 704 West    |   |                     | 1,250  |   |                            | 1989   |                | Owned |
|                                                |   |                     |   |   |                            |   |                |   |
| Union Grove, North Carolina1439 W. Memorial Highway |   |                     | 2,300  |   |                            | 1990   |                | Owned |
|                                                |   |                     |   |   |                            |   |                |   |
| Walnut Cove, North Carolina1072 North Main Street   |   |                     | 1,700  |   |                            | 1999   |                | Leased |

----

|                                                                                                                                      |   | Approximate |   | Year        |   |     |
|-------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------|--------|-------------|--------|----------|
|                                                                                                                                      |   | Square      |   | Established |   | Owned or |
|                                                                                                                                      |   | Footage     |   | or Acquired |   | Leased   |
| Banking Offices:                                                                                                                          |   |        |   |        |   |     |
| Winston Salem, North Carolina                                                                                                             |   |        |   |        |   |     |
| 4701 Country Club Road                                                                                                                    |   | 4,300       |   | 1996        |   | Leased   |
| 225 Hanes Mill Road                                                                                                                       |   | 2,800       |   | 2001        |   | Owned    |
| 3151 Peters Creek Parkway                                                                                                                 |   | 2,500       |   | 1998        |   | Leased   |
| 500 South Stratford Road                                                                                                                  |   | 5,980       |   | 2008        |   | Owned    |
|                                                                                                                                      |   |        |   |        |   |     |
| Yadkinville, North Carolina                                                                                                               |   |        |   |        |   |     |
| 532 East Main Street                                                                                                                      |   | 7,800       |   | 1998        |   | Owned    |
|                                                                                                                                      |   |        |   |        |   |     |
| Operations and Administrative Offices:                                                                                                    |   |        |   |        |   |     |
| Winston Salem, North Carolina                                                                                                             |   |        |   |        |   |     |
| 465 Shepherd Street                                                                                                                       |   | 47,114      |   | 2006        |   | Owned    |
| 100 Cambridge Plaza                    (1) |   | 7,028       |   | 2006        |   | Owned    |
| 104 Cambridge Plaza                    (1) |   | 7,028       |   | 2006        |   | Owned    |
| 108 Cambridge Plaza                    (1) |   | 7,028       |   | 2006        |   | Owned    |
| 112 Cambridge Plaza                    (1) |   | 7,988       |   | 2006        |   | Owned    |
| 4605 Country Club Road - Corporate                                                                                                        |   | 27,000      |   | 2003        |   | Owned    |
|                                                                                                                                      |   |        |   |        |   |     |
| Lending Offices:                                                                                                                          |   |        |   |        |   |     |
| Winston Salem, North Carolina                                                                                                             |   |        |   |        |   |     |
| 4625 Country Club Road                                                                                                                    |   | 3,200       |   | 1998        |   | Owned    |

----

|   |   |                        |   | Price  |   |   | DeclaredCashDividend perCommonShare |   |
|--------|--------|-----------------------------|--------|--------|--------|--------|------------------------------------------|--------|
|   |   |                        |   | SCMF   |   |   | SCMFO                                    |   |   |   |   |
| Year   |   | Quarterly Period            |   | High   |   |   | Low                                      |   |   | High |   |   | Low |   |   |   |   |
|   |   |                        |   |   |   |   |                                     |   |   |   |   |   |   |   |   |   |   |
| 2009   |   | First Quarter               |   | $      | 4.94   |   |                                     | $      | 2.46 |   |   | $ | 8.96 |   |   | $ | 6.01 |   |   | $ | 0.040 |   |
|   |   | Second Quarter              |   |   | 3.99   |   |                                     |   | 2.53 |   |   |   | 7.20 |   |   |   | 5.51 |   |   |   | - |   |
|   |   | Third Quarter               |   |   | 3.73   |   |                                     |   | 2.40 |   |   |   | 8.00 |   |   |   | 5.36 |   |   |   | - |   |
|   |   | Fourth Quarter              |   |   | 3.20   |   |                                     |   | 1.89 |   |   |   | 7.43 |   |   |   | 6.02 |   |   |   | - |   |
|   |   |                        |   |   |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 2010   |   | First Quarter               |   | $      | 2.85   |   |                                     | $      | 2.09 |   |   | $ | 8.00 |   |   | $ | 6.18 |   |   |   | - |   |
|   |   | Second Quarter              |   |   | 3.19   |   |                                     |   | 2.10 |   |   |   | 8.45 |   |   |   | 6.60 |   |   |   | - |   |
|   |   | Third Quarter               |   |   | 2.23   |   |                                     |   | 1.50 |   |   |   | 8.07 |   |   |   | 6.35 |   |   |   | - |   |
|   |   | Fourth Quarter              |   |   | 1.93   |   |                                     |   | 1.00 |   |   |   | 7.48 |   |   |   | 4.02 |   |   |   | - |   |
|   |   |                        |   |   |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 2011   |   | First Quarter               |   | $      | 2.55   |   |                                     | $      | 1.05 |   |   | $ | 6.98 |   |   | $ | 3.75 |   |   |   | - |   |
|   |   | (through February 28, 2011) |   |   |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|   | · | The Company is required to obtain the prior written approval of the Federal Reserve for the payment of all dividends, common and preferred, and for interest payments on trust preferred securities; and |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Under a Consent Order with the FDIC and the NCCOB, the Bank agreed not to make any distributions of interest or principal on subordinated debentures or declare or pay any dividends without the prior written approval of the regulators. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Period                               |   | Total Numberof SharesPurchased |      |   | Average PricePaid per Share |   |   | Total Number ofShares Purchased asPart of PubliclyAnnouncedPrograms |   |   | Maximum Number ofShares That May YetBe Purchased Underthe Programs |   |
|--------------------------------------|--------|--------------------------------|-----------|--------|-----------------------------|--------|--------|---------------------------------------------------------------------|--------|--------|--------------------------------------------------------------------|--------|
|                                 |   |                           |      |   |                        |   |   |                                                                |   |   |                                                               |   |
| October 1, 2010 to December 31, 2010 |   | None                           |      |   |                        |   |   |                                                                |   |   |                                                               | 41,927 |   |
| Total for quarter                    |   |                           | -         |   |                        | $      | -      |                                                                |   |   | -                                                                  |   |   |   |   |   |
|                                 |   |                           |      |   |                        |   |   |                                                                |   |   |                                                               |   |   |   |   |   |
| Total repurchases under all programs |   |                           | 1,858,073 |   |                        | $      | 6.99   |                                                                |   |   |                                                               |   |   |   |   |   |

----

|                                                      |   | At or For the Years Ended December 31,                  |       |
|-----------------------------------------------------------|--------|---------------------------------------------------------|------------|
|                                                      |   | 2010                                                    |       |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
|                                                      |   | (Dollars in thousands, except share and per share data) |       |
| Operating Data:                                           |   |                                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest income                                           |   | $                                                       | 80,638     |   |   | $ | 89,473 |   |   | $ | 96,742 |   |   | $ | 98,908 |   |   | $ | 85,520 |   |
| Interest expense                                          |   |                                                    | 28,279     |   |   |   | 37,726 |   |   |   | 49,282 |   |   |   | 55,141 |   |   |   | 44,798 |   |
| Net interest income                                       |   |                                                    | 52,359     |   |   |   | 51,747 |   |   |   | 47,460 |   |   |   | 43,767 |   |   |   | 40,722 |   |
| Provision for loan losses                                 |   |                                                    | 39,000     |   |   |   | 34,000 |   |   |   | 8,165 |   |   |   | 2,775 |   |   |   | 2,510 |   |
| Net interest income after provision for loan losses       |   |                                                    | 13,359     |   |   |   | 17,747 |   |   |   | 39,295 |   |   |   | 40,992 |   |   |   | 38,212 |   |
| Non-interest income                                       |   |                                                    | 15,606     |   |   |   | 12,906 |   |   |   | 11,341 |   |   |   | 11,329 |   |   |   | 3,678 |   |
| Non-interest expense                                      |   |                                                    | 47,768     |   |   |   | 100,498 |   |   |   | 42,148 |   |   |   | 40,898 |   |   |   | 35,802 |   |
| Income (loss) before income taxes                         |   |                                                    | (18,803    | ) |   |   | (69,845 | ) |   |   | 8,488 |   |   |   | 11,423 |   |   |   | 6,088 |   |
| Provision for income taxes (benefit)                      |   |                                                    | 4,318      |   |   |   | (6,686 | ) |   |   | 2,634 |   |   |   | 3,869 |   |   |   | 1,890 |   |
| Net income (loss)                                         |   |                                                    | (23,121    | ) |   |   | (63,159 | ) |   |   | 5,854 |   |   |   | 7,554 |   |   |   | 4,198 |   |
|                                                      |   |                                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Effective dividends on preferred stock                    |   |                                                    | 2,531      |   |   |   | 2,508 |   |   |   | 185 |   |   |   | - |   |   |   | - |   |
|                                                      |   |                                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) available to common shareholders        |   | $                                                       | (25,652    | ) |   | $ | (65,667 | ) |   | $ | 5,669 |   |   | $ | 7,554 |   |   | $ | 4,198 |   |
|                                                      |   |                                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Securities gains (losses) included in non-interest income |   | $                                                       | 3,531      |   |   | $ | 1,236 |   |   | $ | 98 |   |   | $ | - |   |   | $ | (4,156 | ) |
|                                                      |   |                                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Per Common Share Data:                                    |   |                                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                         |   |                                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                     |   | $                                                       | (1.53      | ) |   | $ | (3.91 | ) |   | $ | 0.33 |   |   | $ | 0.43 |   |   | $ | 0.24 |   |
| Diluted                                                   |   |                                                    | (1.53      | ) |   |   | (3.91 | ) |   |   | 0.33 |   |   |   | 0.43 |   |   |   | 0.24 |   |
| Cash dividends                                            |   |                                                    | -          |   |   |   | 0.040 |   |   |   | 0.160 |   |   |   | 0.155 |   |   |   | 0.135 |   |
| Book value                                                |   |                                                    | 2.99       |   |   |   | 4.77 |   |   |   | 8.77 |   |   |   | 8.18 |   |   |   | 7.83 |   |
| Weighted average shares                                   |   |                                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                     |   |                                                    | 16,811,439 |   |   |   | 16,787,938 |   |   |   | 17,363,395 |   |   |   | 17,559,352 |   |   |   | 17,566,315 |   |
| Diluted                                                   |   |                                                    | 16,811,439 |   |   |   | 16,787,938 |   |   |   | 17,398,318 |   |   |   | 17,624,399 |   |   |   | 17,757,436 |   |
|                                                      |   |                                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance Sheet Data:                                       |   |                                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                              |   |                                                    | 1,653,398  |   |   |   | 1,728,608 |   |   |   | 1,803,778 |   |   |   | 1,569,182 |   |   |   | 1,436,465 |   |
| Loans                                                     |   |                                                    | 1,130,076  |   |   |   | 1,230,275 |   |   |   | 1,314,811 |   |   |   | 1,188,438 |   |   |   | 1,033,411 |   |
| Allowance for loan losses                                 |   |                                                    | 29,580     |   |   |   | 29,638 |   |   |   | 18,851 |   |   |   | 14,258 |   |   |   | 13,040 |   |
| Deposits                                                  |   |                                                    | 1,348,419  |   |   |   | 1,314,070 |   |   |   | 1,233,112 |   |   |   | 1,045,237 |   |   |   | 1,024,582 |   |
| Short-term borrowings                                     |   |                                                    | 22,098     |   |   |   | 85,477 |   |   |   | 145,197 |   |   |   | 117,772 |   |   |   | 92,748 |   |
| Long-term borrowings                                      |   |                                                    | 182,686    |   |   |   | 199,103 |   |   |   | 228,016 |   |   |   | 254,633 |   |   |   | 172,549 |   |
| Stockholders’ equity                                |   |                                                    | 92,341     |   |   |   | 121,997 |   |   |   | 187,710 |   |   |   | 142,339 |   |   |   | 136,225 |   |
|                                                      |   |                                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital Ratios:                                           |   |                                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total risk-based capital                                  |   |                                                    | 11.75      | % |   |   | 12.92 | % |   |   | 13.80 | % |   |   | 11.44 | % |   |   | 11.40 | % |
| Tier 1 risk-based capital                                 |   |                                                    | 9.35       | % |   |   | 11.34 | % |   |   | 12.46 | % |   |   | 10.28 | % |   |   | 10.20 | % |
| Leverage ratio                                            |   |                                                    | 7.42       | % |   |   | 9.14 | % |   |   | 10.57 | % |   |   | 8.96 | % |   |   | 8.73 | % |
| Equity to assets ratio                                    |   |                                                    | 5.58       | % |   |   | 7.06 | % |   |   | 10.41 | % |   |   | 9.07 | % |   |   | 9.48 | % |

----

|                                                     | At or For the Years Ended December 31,                  |    |   |
|----------------------------------------------------------|---------------------------------------------------------|---------|--------|
|                                                     | 2010                                                    |    |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |   |
|                                                     | (Dollars in thousands, except share and per share data) |    |   |
| Selected Performance Ratios:                             |                                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Return on average assets                                 | -1.38                                                   | %       |   | -3.57 | % |   | 0.34 | % |   | 0.50 | % |   | 0.31 | % |   |
| Return on average equity                                 | NM                                                      |    |   | NM |   |   | 4.02 | % |   | 5.45 | % |   | 3.11 | % |   |
| Net interest spread (1)                                  | 3.19                                                    | %       |   | 2.95 | % |   | 2.75 | % |   | 2.81 | % |   | 2.92 | % |   |
| Net interest margin (2)                                  | 3.35                                                    | %       |   | 3.16 | % |   | 2.99 | % |   | 3.19 | % |   | 3.30 | % |   |
| Non-interest income as a percentage of total revenue (3) | 22.96                                                   | %       |   | 19.96 | % |   | 19.21 | % |   | 20.57 | % |   | 8.28 | % |   |
| Non-interest income as a percentage of average assets    | 0.93                                                    | %       |   | 0.73 | % |   | 0.65 | % |   | 0.75 | % |   | 0.27 | % |   |
| Non-interest expense to average assets  (6)    | 2.84                                                    | %       |   | 5.69 | % |   | 2.42 | % |   | 2.70 | % |   | 2.62 | % |   |
| Efficiency ratio (4) (6)                                 | 70.28                                                   | %       |   | 155.44 | % |   | 71.65 | % |   | 74.23 | % |   | 80.64 | % |   |
| Dividend payout ratio                                    | NA                                                      |    |   | NA |   |   | 48.48 | % |   | 36.05 | % |   | 35.80 | % |   |
|                                                     |                                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Asset Quality Ratios:                                    |                                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nonperforming loans to period-end loans                  | 8.08                                                    | %       |   | 3.07 | % |   | 1.10 | % |   | 0.17 | % |   | 0.26 | % |   |
| Allowance for loan losses to period-end loans            | 2.60                                                    | %       |   | 2.41 | % |   | 1.43 | % |   | 1.20 | % |   | 1.26 | % |   |
| Allowance for loan losses to nonperforming loans         | 0.32                                                    | X  |   | 0.79 | X  |   | 1.31 | X  |   | 6.95 | X  |   | 4.95 | X  |   |
| Nonperforming assets to total assets (5)                 | 6.60                                                    | %       |   | 3.32 | % |   | 1.12 | % |   | 0.18 | % |   | 0.25 | % |   |
| Net loan charge-offs to average loans outstanding        | 3.25                                                    | %       |   | 1.82 | % |   | 0.28 | % |   | 0.14 | % |   | 0.13 | % |   |
|                                                     |                                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other Data:                                              |                                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Number of banking offices                                | 22                                                      |    |   | 22 |   |   | 22 |   |   | 22 |   |   | 21 |   |   |
| Number of full-time equivalent employees                 | 301                                                     |    |   | 331 |   |   | 337 |   |   | 337 |   |   | 326 |   |   |

| (1) | Net interest spread is the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Net interest margin is net interest income divided by average interest-earning assets. |
|-----|----------------------------------------------------------------------------------------|

| (3)  | Total revenue consists of net interest income and non-interest income. |
|-----------|------------------------------------------------------------------------|

| (4)  | Efficiency ratio is non-interest expense divided by the sum of net interest income and non-interest income. |
|-----------|-------------------------------------------------------------------------------------------------------------|

| (5) | Nonperforming assets consist of non-accrual loans, restructured loans and real estate owned, where applicable. |
|-----|----------------------------------------------------------------------------------------------------------------|

| (6)  | Excluding the $49.5 million goodwill impairment charge in 2009, the ratio of non-interest expenses to average assets and the efficiency ratio would be 2.89% and 78.88%, respectively. |
|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

----

|                                                                                        |   | For the Years Ended December 31, |      |
|---------------------------------------------------------------------------------------------|--------|----------------------------------|-----------|
|                                                                                        |   | 2010                             |      |   | 2009 |   |   | 2008 |   |
|                                                                                        |   | Averagebalance                   |      |   | Interestearned/paid |   |   | Averageyield/cost |   |   | Averagebalance |   |   | Interestearned/paid |   |   | Averageyield/cost |   |   | Averagebalance |   |   | Interestearned/paid |   |   | Averageyield/cost |   |
|                                                                                        |   | (Dollars in thousands)           |      |
| Interest-earning assets:                                                                    |   |                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans (1)                                                                                   |   | $                                | 1,200,609 |   |   | $ | 68,384 |   |   |   | 5.70 | % |   | $ | 1,272,087 |   |   | $ | 74,548 |   |   |   | 5.86 | % |   | $ | 1,279,041 |   |   | $ | 82,125 |   |   |   | 6.42 | % |
| Investment securities available for sale                                                    |   |                             | 311,850   |   |   |   | 11,303 |   |   |   | 3.62 | % |   |   | 327,487 |   |   |   | 14,035 |   |   |   | 4.29 | % |   |   | 257,153 |   |   |   | 12,378 |   |   |   | 4.81 | % |
| Investment securities held to maturity                                                      |   |                             | 17,911    |   |   |   | 886 |   |   |   | 4.95 | % |   |   | 18,751 |   |   |   | 877 |   |   |   | 4.68 | % |   |   | 48,252 |   |   |   | 2,184 |   |   |   | 4.53 | % |
| Federal funds sold and  overnight deposits                                        |   |                             | 32,023    |   |   |   | 65 |   |   |   | 0.20 | % |   |   | 19,846 |   |   |   | 13 |   |   |   | 0.07 | % |   |   | 4,096 |   |   |   | 55 |   |   |   | 1.34 | % |
|                                                                                        |   |                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total interest-earning assets                                                               |   |                             | 1,562,393 |   |   |   | 80,638 |   |   |   | 5.16 | % |   |   | 1,638,171 |   |   |   | 89,473 |   |   |   | 5.46 | % |   |   | 1,588,542 |   |   |   | 96,742 |   |   |   | 6.09 | % |
| Other assets                                                                                |   |                             | 118,675   |   |   |   |   |   |   |   |   |   |   |   | 128,876 |   |   |   |   |   |   |   |   |   |   |   | 150,326 |   |   |   |   |   |   |   |   |   |
| Total assets                                                                                |   | $                                | 1,681,068 |   |   |   |   |   |   |   |   |   |   | $ | 1,767,047 |   |   |   |   |   |   |   |   |   |   | $ | 1,738,868 |   |   |   |   |   |   |   |   |   |
|                                                                                        |   |                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                                               |   |                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                                                                   |   |                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW and money market                                                                        |   | $                                | 601,122   |   |   | $ | 5,718 |   |   |   | 0.95 | % |   | $ | 466,667 |   |   | $ | 6,787 |   |   |   | 1.45 | % |   | $ | 510,357 |   |   | $ | 11,412 |   |   |   | 2.24 | % |
| Time deposits greater than $100,000                                                         |   |                             | 178,288   |   |   |   | 2,714 |   |   |   | 1.52 | % |   |   | 193,505 |   |   |   | 4,833 |   |   |   | 2.50 | % |   |   | 137,841 |   |   |   | 6,695 |   |   |   | 4.86 | % |
| Other time deposits                                                                         |   |                             | 403,694   |   |   |   | 10,067 |   |   |   | 2.49 | % |   |   | 486,721 |   |   |   | 14,798 |   |   |   | 3.04 | % |   |   | 428,950 |   |   |   | 16,541 |   |   |   | 3.86 | % |
| Borrowings                                                                                  |   |                             | 253,339   |   |   |   | 9,780 |   |   |   | 3.86 | % |   |   | 354,812 |   |   |   | 11,308 |   |   |   | 3.19 | % |   |   | 397,391 |   |   |   | 14,634 |   |   |   | 3.68 | % |
| Total interest-bearing liabilities                                                          |   |                             | 1,436,443 |   |   |   | 28,279 |   |   |   | 1.97 | % |   |   | 1,501,705 |   |   |   | 37,726 |   |   |   | 2.51 | % |   |   | 1,474,539 |   |   |   | 49,282 |   |   |   | 3.34 | % |
|                                                                                        |   |                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand deposits                                                                             |   |                             | 119,418   |   |   |   |   |   |   |   |   |   |   |   | 107,461 |   |   |   |   |   |   |   |   |   |   |   | 104,978 |   |   |   |   |   |   |   |   |   |
| Other liabilities                                                                           |   |                             | 9,245     |   |   |   |   |   |   |   |   |   |   |   | 10,229 |   |   |   |   |   |   |   |   |   |   |   | 13,597 |   |   |   |   |   |   |   |   |   |
| Stockholders' equity                                                                        |   |                             | 115,962   |   |   |   |   |   |   |   |   |   |   |   | 147,652 |   |   |   |   |   |   |   |   |   |   |   | 145,754 |   |   |   |   |   |   |   |   |   |
|                                                                                        |   |                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders' equity                                                  |   | $                                | 1,681,068 |   |   |   |   |   |   |   |   |   |   | $ | 1,767,047 |   |   |   |   |   |   |   |   |   |   | $ | 1,738,868 |   |   |   |   |   |   |   |   |   |
|                                                                                        |   |                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income and net interest spread                                                 |   |                             |      |   |   | $ | 52,359 |   |   |   | 3.19 | % |   |   |   |   |   | $ | 51,747 |   |   |   | 2.95 | % |   |   |   |   |   | $ | 47,460 |   |   |   | 2.75 | % |
|                                                                                        |   |                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest margin                                                                         |   |                             |      |   |   |   |   |   |   |   | 3.35 | % |   |   |   |   |   |   |   |   |   |   | 3.16 | % |   |   |   |   |   |   |   |   |   |   | 2.99 | % |
|                                                                                        |   |                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratio of average interest-earning  assets to average interest-bearing liabilities |   |                             |      |   |   |   | 108.77 | % |   |   |   |   |   |   |   |   |   |   | 109.09 | % |   |   |   |   |   |   |   |   |   |   | 107.73 | % |   |   |   |   |

----

|                                     |   | December 31, 2010 vs. 2009 |   |   | December 31, 2009 vs. 2008 |   |
|------------------------------------------|--------|----------------------------|--------|--------|----------------------------|--------|
|                                     |   | Increase (Decrease) Due to |   |   | Increase (Decrease) Due to |   |
|                                     |   | Volume                     |   |   | Rate                       |   |   | Total |   |   | Volume |   |   | Rate |   |   | Total |   |
|                                     |   | (Amounts in thousands)     |   |
| Interest income:                         |   |                       |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                    |   | $                          | (4,130 | )      |                       | $      | (2,034 | ) |   | $ | (6,164 | ) |   | $ | (427 | ) |   | $ | (7,150 | ) |   | $ | (7,577 | ) |
| Investment securities available for sale |   |                       | (618   | )      |                       |   | (2,114 | ) |   |   | (2,732 | ) |   |   | 3,200 |   |   |   | (1,543 | ) |   |   | 1,657 |   |
| Investment securities held to maturity   |   |                       | (40    | )      |                       |   | 49 |   |   |   | 9 |   |   |   | (1,358 | ) |   |   | 51 |   |   |   | (1,307 | ) |
| Federal funds sold                       |   |                       | 18     |   |                       |   | 34 |   |   |   | 52 |   |   |   | 111 |   |   |   | (153 | ) |   |   | (42 | ) |
|                                     |   |                       |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total interest income                    |   |                       | (4,770 | )      |                       |   | (4,065 | ) |   |   | (8,835 | ) |   |   | 1,526 |   |   |   | (8,795 | ) |   |   | (7,269 | ) |
|                                     |   |                       |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense:                        |   |                       |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                |   |                       |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW and money market                     |   |                       | 1,617  |   |                       |   | (2,686 | ) |   |   | (1,069 | ) |   |   | (119 | ) |   |   | (4,506 | ) |   |   | (4,625 | ) |
| Time deposits greater than $100,000      |   |                       | (306   | )      |                       |   | (1,813 | ) |   |   | (2,119 | ) |   |   | 2,047 |   |   |   | (3,909 | ) |   |   | (1,862 | ) |
| Other time deposits                      |   |                       | (2,297 | )      |                       |   | (2,434 | ) |   |   | (4,731 | ) |   |   | 1,992 |   |   |   | (3,735 | ) |   |   | (1,743 | ) |
| Borrowings                               |   |                       | (3,578 | )      |                       |   | 2,050 |   |   |   | (1,528 | ) |   |   | (2,900 | ) |   |   | (426 | ) |   |   | (3,326 | ) |
|                                     |   |                       |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total interest expense                   |   |                       | (4,564 | )      |                       |   | (4,883 | ) |   |   | (9,447 | ) |   |   | 1,020 |   |   |   | (12,576 | ) |   |   | (11,556 | ) |
|                                     |   |                       |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income increase (decrease)  |   | $                          | (206   | )      |                       | $      | 818 |   |   | $ | 612 |   |   | $ | 506 |   |   | $ | 3,781 |   |   | $ | 4,287 |   |

----

----

----

----

----

----

|                                                  |   | Payments Due by Period |      |
|-------------------------------------------------------|--------|------------------------|-----------|
|                                                  |   |                   |      |   | On Demand |   |   |   |   |   |   |   |   |   |   |
|                                                  |   |                   |      |   | or Within |   |   |   |   |   |   |   |   | After |   |
| Contractual Obligations                               |   | Total                  |      |   | 1 Year |   |   | 2 - 3 Years |   |   | 4 - 5 Years |   |   | 5 Years |   |
|                                                  |   | (In thousands)         |      |
| Short-term borrowings                                 |   | $                      | 22,098    |   |   | $ | 22,098 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| Long-term borrowings                                  |   |                   | 182,686   |   |   |   | - |   |   |   | 35,000 |   |   |   | 65,000 |   |   |   | 82,686 |   |
| Operating leases                                      |   |                   | 5,756     |   |   |   | 911 |   |   |   | 1,330 |   |   |   | 823 |   |   |   | 2,692 |   |
| Total contractual cash obligations excluding deposits |   |                   | 210,540   |   |   |   | 23,009 |   |   |   | 36,330 |   |   |   | 65,823 |   |   |   | 85,378 |   |
|                                                  |   |                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                              |   |                   | 1,348,419 |   |   |   | 995,717 |   |   |   | 245,909 |   |   |   | 32,253 |   |   |   | 74,540 |   |
|                                                  |   |                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total contractual cash obligations                    |   | $                      | 1,558,959 |   |   | $ | 1,018,726 |   |   | $ | 282,239 |   |   | $ | 98,076 |   |   | $ | 159,918 |   |

|                                                                                                              |   | Amount of Commitment Expiration Per Period |    |
|-------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|---------|
|                                                                                                              |   |                                       |    |   | Within |   |   |   |   |   |   |   |   | After |   |
| Other Commitments                                                                                                 |   | Total                                      |    |   | 1 Year |   |   | 2 - 3 Years |   |   | 4 - 5 Years |   |   | 5 Years |   |
|                                                                                                              |   | (In thousands)                             |    |
| Undisbursed portion of home equity credit lines collateralized primarily by junior liens on 1-4 family properties |   | $                                          | 93,896  |   |   | $ | 421 |   |   | $ | 4,768 |   |   | $ | 4,820 |   |   | $ | 83,887 |   |
| Other commitments and credit lines                                                                                |   |                                       | 95,911  |   |   |   | 84,849 |   |   |   | 3,956 |   |   |   | 1,886 |   |   |   | 5,220 |   |
| Undisbursed portion of construction loans                                                                         |   |                                       | 27,321  |   |   |   | 19,171 |   |   |   | 2,785 |   |   |   | 1,151 |   |   |   | 4,214 |   |
| Mortgage loan commitments                                                                                         |   |                                       | 7,022   |   |   |   | 7,022 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Other purchase commitments                                                                                        |   |                                       | 400     |   |   |   | 400 |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                                                              |   |                                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total other commitments                                                                                           |   | $                                          | 224,550 |   |   | $ | 111,863 |   |   | $ | 11,509 |   |   | $ | 7,857 |   |   | $ | 93,321 |   |

----

|                            |   | At December 31, 2010 |   |
|---------------------------------|--------|----------------------|--------|
|                            |   | Bank                 |   |   | Company |   |   | MinimumRequirement |   |   | Well CapitalizedRequirements |   |
|                            |   |                 |   |   |   |   |   |   |   |   |   |   |
| Total risk-based capital ratio  |   |                 | 11.14  | % |   |   | 11.75 | % |   |   | 8.00 | % |   |   | 10.00 | % |
| Tier 1 risk-based capital ratio |   |                 | 9.88   | % |   |   | 9.35 | % |   |   | 4.00 | % |   |   | 6.00 | % |
| Leverage ratio                  |   |                 | 7.83   | % |   |   | 7.42 | % |   |   | 4.00 | % |   |   | 5.00 | % |

----

----

----

|                                                                                 |                   | At December 31, 2010 |     |
|--------------------------------------------------------------------------------------|------------------------|----------------------|----------|
|                                                                                 |                   | 3 Months or Less     |     |   | Over 3 Months to 12 Months |   |   | Total Within 12 Months |   |   | Over 12 Months |   |   | Total |   |
|                                                                                 | (Dollars in thousands) |                 |
|                                                                                 |                   |                 |     |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning assets                                                              |                   |                 |     |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                                                                |                   | $                    | 145,220  |   |   | $ | 240,031 |   |   | $ | 385,251 |   |   | $ | 744,825 |   |   | $ | 1,130,076 |   |
| Investment securities available for sale                                             |                   |                 | -        |   |   |   | 3,267 |   |   |   | 3,267 |   |   |   | 307,386 |   |   |   | 310,653 |   |
| Investment securities held to maturity                                               |                   |                 | -        |   |   |   | 100 |   |   |   | 100 |   |   |   | 42,120 |   |   |   | 42,220 |   |
| Federal funds sold and other interest-bearing deposits                               |                   |                 | 49,587   |   |   |   | - |   |   |   | 49,587 |   |   |   | - |   |   |   | 49,587 |   |
|                                                                                 |                   |                 |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total interest-earning assets                                                        |                   | $                    | 194,807  |   |   | $ | 243,398 |   |   | $ | 438,205 |   |   | $ | 1,094,331 |   |   | $ | 1,532,537 |   |
|                                                                                 |                   |                 |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities                                                         |                   |                 |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                                                            |                   |                 |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Money market, NOW and savings deposits                                               |                   | $                    | 582,878  |   |   | $ | - |   |   | $ | 582,878 |   |   | $ | - |   |   | $ | 582,878 |   |
| Time deposits greater than $100,000                                                  |                   |                 | 50,044   |   |   |   | 49,929 |   |   |   | 99,973 |   |   |   | 107,168 |   |   |   | 207,141 |   |
| Other time deposits                                                                  |                   |                 | 125,479  |   |   |   | 77,272 |   |   |   | 202,751 |   |   |   | 245,534 |   |   |   | 448,285 |   |
| Borrowings                                                                           |                   |                 | 22,098   |   |   |   | - |   |   |   | 22,098 |   |   |   | 182,686 |   |   |   | 204,784 |   |
|                                                                                 |                   |                 |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total interest-bearing liabilities                                                   |                   | $                    | 780,499  |   |   | $ | 127,201 |   |   | $ | 907,700 |   |   | $ | 535,388 |   |   | $ | 1,443,088 |   |
|                                                                                 |                   |                 |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest sensitivity gap per period                                                  |                   | $                    | (585,692 | ) |   | $ | 116,197 |   |   | $ | (469,495 | ) |   | $ | 558,943 |   |   | $ | 89,449 |   |
|                                                                                 |                   |                 |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cumulative gap                                                                       |                   | $                    | (585,692 | ) |   | $ | (469,495 | ) |   | $ | (469,495 | ) |   | $ | 89,448 |   |   | $ | 89,449 |   |
|                                                                                 |                   |                 |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cumulative ratio of interest-sensitive assets to interest-sensitive liabilities |                   |                 | 24.96    | % |   |   | 48.28 | % |   |   | 48.28 | % |   |   | 106.20 | % |   |   | 106.20 | % |

----

|                                              |   | (Dollars in thousands) |    |   | Average |   |    | Estimated |   |
|---------------------------------------------------|--------|------------------------|---------|--------|---------|--------|---------|-----------|--------|
|                                              |   |                   |    |   |    |   |    |      |   |   |   |   |   |   |   |   | Beyond |   |   |   |   |   | Interest |   |   | Fair |   |
|                                              |   | 2011                   |    |   | 2012    |   |    | 2013      |   |   | 2014 |   |   | 2015 |   |   | Five Years |   |   | Total |   |   | Rate |   |   | Value |   |
|                                              |   |                   |    |   |    |   |    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| FINANCIAL ASSETS                                  |   |                   |    |   |    |   |    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal funds sold                                |   | $                      | 49,587  |   |    | $      | -       |      |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 49,587 |   |   |   | 0.20 | % |   | $ | 49,587 |   |
| Investment securities (1) (2)                     |   |                   | 5,253   |   |    |   | 1,554   |      |   |   | 864 |   |   |   | 1,488 |   |   |   | 4,017 |   |   |   | 339,698 |   |   |   | 352,873 |   |   |   | 3.52 | % |   |   | 350,834 |   |
| Loans (3)                                         |   |                   |    |   |    |   |    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fixed rate                                        |   |                   | 119,857 |   |    |   | 67,383  |      |   |   | 91,742 |   |   |   | 66,647 |   |   |   | 101,631 |   |   |   | 100,736 |   |   |   | 547,996 |   |   |   | 6.13 | % |   |   | 542,717 |   |
| Variable rate                                     |   |                   | 271,015 |   |    |   | 78,709  |      |   |   | 42,022 |   |   |   | 33,804 |   |   |   | 27,607 |   |   |   | 128,923 |   |   |   | 582,080 |   |   |   | 3.74 | % |   |   | 576,472 |   |
|                                              |   |                   |    |   |    |   |    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                             |   | $                      | 445,712 |   |    | $      | 147,646 |      |   | $ | 134,628 |   |   | $ | 101,939 |   |   | $ | 133,255 |   |   | $ | 569,357 |   |   | $ | 1,532,536 |   |   |   | 4.43 | % |   | $ | 1,519,610 |   |
|                                              |   |                   |    |   |    |   |    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| FINANCIAL LIABILITIES                             |   |                   |    |   |    |   |    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Money market, NOW and  savings deposits |   | $                      | 582,878 |   |    | $      | -       |      |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 582,878 |   |   |   | 0.69 | % |   | $ | 582,878 |   |
| Time deposits                                     |   |                   | 302,725 |   |    |   | 205,425 |      |   |   | 40,484 |   |   |   | 29,208 |   |   |   | 3,044 |   |   |   | 74,541 |   |   |   | 655,427 |   |   |   | 2.26 | % |   |   | 766,623 |   |
| Short-term borrowings                             |   |                   | 22,098  |   |    |   | -       |      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 22,098 |   |   |   | 1.36 | % |   |   | 22,098 |   |
| Long-term borrowings                              |   |                   | -       |   |    |   | 25,000  |      |   |   | 10,000 |   |   |   | 25,000 |   |   |   | 40,000 |   |   |   | 82,686 |   |   |   | 182,686 |   |   |   | 4.62 | % |   |   | 182,686 |   |
|                                              |   |                   |    |   |    |   |    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                             |   | $                      | 907,701 |   |    | $      | 230,425 |      |   | $ | 50,484 |   |   | $ | 54,208 |   |   | $ | 43,044 |   |   | $ | 157,227 |   |   | $ | 1,443,089 |   |   |   | 1.91 | % |   | $ | 1,554,285 |   |

| (1) | Yields on tax-exempt investments have been adjusted to a taxable equivalent basis using federal and state tax rates of 34% and 6.9%, respectively, less estimated disallowed interest expense. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Callable securities and borrowings with favorable market rates at December 31, 2010 are assumed to mature at their call dates for purposes of this table. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Includes non-accrual loans but not the allowance for loan losses. |
|-----|-------------------------------------------------------------------|

----

|                                                       |   | Year Ended December 31, 2010                                 |    |   | Year Ended December 31, 2009 |   |
|------------------------------------------------------------|--------|--------------------------------------------------------------|---------|--------|------------------------------|--------|
|                                                       |   | Fourth                                                       |    |   | Third                        |   |   | Second |   |   | First |   |   | Fourth |   |   | Third |   |   | Second |   |   | First |   |
|                                                       |   | Quarter                                                      |    |   | Quarter                      |   |   | Quarter |   |   | Quarter |   |   | Quarter |   |   | Quarter |   |   | Quarter |   |   | Quarter |   |
|                                                       |   |                                                         |    |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                       |   | (In thousands, except per share data and common stock price) |    |
|                                                       |   |                                                         |    |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest income                                            |   | $                                                            | 19,164  |   |                         | $      | 20,049 |   |   | $ | 20,439 |   |   | $ | 20,986 |   |   | $ | 22,092 |   |   | $ | 22,186 |   |   | $ | 22,451 |   |   | $ | 22,744 |   |
| Interest expense                                           |   |                                                         | 6,759   |   |                         |   | 6,773 |   |   |   | 7,007 |   |   |   | 7,739 |   |   |   | 8,701 |   |   |   | 8,868 |   |   |   | 9,872 |   |   |   | 10,285 |   |
|                                                       |   |                                                         |    |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income                                        |   |                                                         | 12,405  |   |                         |   | 13,276 |   |   |   | 13,432 |   |   |   | 13,247 |   |   |   | 13,391 |   |   |   | 13,318 |   |   |   | 12,579 |   |   |   | 12,459 |   |
| Provision for loan losses                                  |   |                                                         | 6,500   |   |                         |   | 17,000 |   |   |   | 5,500 |   |   |   | 10,000 |   |   |   | 18,000 |   |   |   | 6,000 |   |   |   | 6,000 |   |   |   | 4,000 |   |
|                                                       |   |                                                         |    |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income (loss) after provision for loan losses |   |                                                         | 5,905   |   |                         |   | (3,724 | ) |   |   | 7,932 |   |   |   | 3,247 |   |   |   | (4,609 | ) |   |   | 7,318 |   |   |   | 6,579 |   |   |   | 8,459 |   |
| Non-interest income                                        |   |                                                         | 4,200   |   |                         |   | 3,060 |   |   |   | 4,392 |   |   |   | 3,953 |   |   |   | 3,526 |   |   |   | 4,189 |   |   |   | 2,610 |   |   |   | 2,581 |   |
| Non-interest expense (1)                                   |   |                                                         | 12,608  |   |                         |   | 10,984 |   |   |   | 12,333 |   |   |   | 11,843 |   |   |   | 13,578 |   |   |   | 12,621 |   |   |   | 13,721 |   |   |   | 60,578 |   |
|                                                       |   |                                                         |    |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) before income taxes                          |   |                                                         | (2,503  | )      |                         |   | (11,648 | ) |   |   | (9 | ) |   |   | (4,643 | ) |   |   | (14,661 | ) |   |   | (1,114 | ) |   |   | (4,532 | ) |   |   | (49,538 | ) |
| Income taxes                                               |   |                                                         | 8,318   |   |                         |   | (3,698 | ) |   |   | (270 | ) |   |   | (32 | ) |   |   | (3,944 | ) |   |   | (683 | ) |   |   | (1,845 | ) |   |   | (214 | ) |
|                                                       |   |                                                         |    |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                          |   |                                                         | (10,821 | )      |                         |   | (7,950 | ) |   |   | 261 |   |   |   | (4,611 | ) |   |   | (10,717 | ) |   |   | (431 | ) |   |   | (2,687 | ) |   |   | (49,324 | ) |
|                                                       |   |                                                         |    |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Effective dividend on preferred stock                      |   |                                                         | 633     |   |                         |   | 633 |   |   |   | 632 |   |   |   | 633 |   |   |   | 627 |   |   |   | 621 |   |   |   | 633 |   |   |   | 627 |   |
|                                                       |   |                                                         |    |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) available to common shareholders         |   | $                                                            | (11,454 | )      |                         | $      | (8,583 | ) |   | $ | (371 | ) |   | $ | (5,244 | ) |   | $ | (11,344 | ) |   | $ | (1,052 | ) |   | $ | (3,320 | ) |   | $ | (49,951 | ) |
|                                                       |   |                                                         |    |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Per common share data:                                     |   |                                                         |    |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss):                                         |   |                                                         |    |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                      |   | $                                                            | (0.68   | )      |                         | $      | (0.51 | ) |   | $ | (0.02 | ) |   | $ | (0.31 | ) |   | $ | (0.68 | ) |   | $ | (0.06 | ) |   | $ | (0.20 | ) |   | $ | (2.98 | ) |
| Diluted                                                    |   |                                                         | (0.68   | )      |                         |   | (0.51 | ) |   |   | (0.02 | ) |   |   | (0.31 | ) |   |   | (0.68 | ) |   |   | (0.06 | ) |   |   | (0.20 | ) |   |   | (2.98 | ) |
|                                                       |   |                                                         |    |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common stock price:                                        |   |                                                         |    |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| High                                                       |   | $                                                            | 1.93    |   |                         | $      | 2.23 |   |   | $ | 3.19 |   |   | $ | 2.85 |   |   | $ | 3.20 |   |   | $ | 3.73 |   |   | $ | 3.99 |   |   | $ | 4.94 |   |
| Low                                                        |   |                                                         | 1.00    |   |                         |   | 1.50 |   |   |   | 2.10 |   |   |   | 2.09 |   |   |   | 1.89 |   |   |   | 2.40 |   |   |   | 2.53 |   |   |   | 2.46 |   |

| (1) | Includes $49.5 million in goodwill impairment charge recorded first quarter 2009. |
|-----|-----------------------------------------------------------------------------------|

----

|                                       |   | At December 31, |      |
|--------------------------------------------|--------|-----------------|-----------|
|                                       |   | 2010            |      |   | 2009 |   |   | 2008 |   |
|                                       |   |            |      |   | Percent |   |   |   |   |   | Percent |   |   |   |   |   | Percent |   |
|                                       |   | Amount          |      |   | of Total |   |   | Amount |   |   | of Total |   |   | Amount |   |   | of Total |   |
|                                       |   |            |      |
| Residential mortgage loans                 |   | $               | 341,401   |   |   |   | 30.2 | % |   | $ | 395,586 |   |   |   | 32.2 | % |   | $ | 393,360 |   |   |   | 29.9 | % |
| Commercial mortgage loans                  |   |            | 475,901   |   |   |   | 42.1 | % |   |   | 455,268 |   |   |   | 37.0 | % |   |   | 419,212 |   |   |   | 31.9 | % |
| Construction loans                         |   |            | 138,543   |   |   |   | 12.3 | % |   |   | 178,239 |   |   |   | 14.5 | % |   |   | 260,549 |   |   |   | 19.8 | % |
| Commercial and industrial loans            |   |            | 156,688   |   |   |   | 13.9 | % |   |   | 183,319 |   |   |   | 14.9 | % |   |   | 221,231 |   |   |   | 16.8 | % |
| Loans to individuals                       |   |            | 17,543    |   |   |   | 1.7 | % |   |   | 17,863 |   |   |   | 1.4 | % |   |   | 20,459 |   |   |   | 1.6 | % |
|                                       |   |            |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Subtotal                                   |   |            | 1,130,076 |   |   |   | 100.0 | % |   |   | 1,230,275 |   |   |   | 100.0 | % |   |   | 1,314,811 |   |   |   | 100.0 | % |
|                                       |   |            |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less:  Allowance for loan losses |   |            | (29,580   | ) |   |   |   |   |   |   | (29,638 | ) |   |   |   |   |   |   | (18,851 | ) |   |   |   |   |
|                                       |   |            |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loans                                  |   | $               | 1,100,496 |   |   |   |   |   |   | $ | 1,200,637 |   |   |   |   |   |   | $ | 1,295,960 |   |   |   |   |   |

|                                       |   | At December 31,        |      |
|--------------------------------------------|--------|------------------------|-----------|
|                                       |   | 2007                   |      |   | 2006 |   |
|                                       |   |                   |      |   | Percent |   |   |   |   |   | Percent |   |
|                                       |   | Amount                 |      |   | of Total |   |   | Amount |   |   | of Total |   |
|                                       |   | (Amounts in thousands) |      |
| Residential mortgage loans                 |   | $                      | 318,038   |   |   |   | 26.8 | % |   | $ | 258,885 |   |   |   | 25.1 | % |
| Commercial mortgage loans                  |   |                   | 390,948   |   |   |   | 32.9 | % |   |   | 359,987 |   |   |   | 35.0 | % |
| Construction loans                         |   |                   | 259,740   |   |   |   | 21.9 | % |   |   | 211,858 |   |   |   | 20.6 | % |
| Commercial and industrial loans            |   |                   | 197,851   |   |   |   | 16.6 | % |   |   | 177,706 |   |   |   | 17.3 | % |
| Loans to individuals                       |   |                   | 21,861    |   |   |   | 1.8 | % |   |   | 21,380 |   |   |   | 2.0 | % |
|                                       |   |                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Subtotal                                   |   |                   | 1,188,438 |   |   |   | 100.0 | % |   |   | 1,029,816 |   |   |   | 100.0 | % |
|                                       |   |                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less:  Allowance for loan losses |   |                   | (14,258   | ) |   |   |   |   |   |   | (13,040 | ) |   |   |   |   |
|                                       |   |                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loans                                  |   | $                      | 1,174,180 |   |   |   |   |   |   | $ | 1,016,776 |   |   |   |   |   |

----

|                                 |   | At December 31, 2010   |    |
|--------------------------------------|--------|------------------------|---------|
|                                 |   | Due within             |    |   | Due after one year |   |   | Due after |   |   |   |   |   |   |   |
|                                 |   | one year               |    |   | but within five years |   |   | five years |   |   | Total |   |
|                                 |   | Amount                 |    |   | Yield |   |   | Amount |   |   | Yield |   |   | Amount |   |   | Yield |   |   | Amount |   |   | Yield |   |
|                                 |   | (Amounts in thousands) |    |
| Residential mortgage loans           |   | $                      | 86,477  |   |   |   | 5.13 | % |   | $ | 81,417 |   |   |   | 6.39 | % |   | $ | 142,241 |   |   |   | 5.69 | % |   | $ | 310,135 |   |   |   | 5.72 | % |
| Commercial mortgage loans            |   |                   | 112,221 |   |   |   | 6.14 | % |   |   | 297,479 |   |   |   | 6.27 | % |   |   | 42,049 |   |   |   | 6.45 | % |   |   | 451,749 |   |   |   | 6.25 | % |
| Construction loans                   |   |                   | 72,018  |   |   |   | 5.71 | % |   |   | 31,020 |   |   |   | 5.50 | % |   |   | 9,249 |   |   |   | 5.36 | % |   |   | 112,287 |   |   |   | 5.63 | % |
| Commercial and industrial loans |   |                   | 85,957  |   |   |   | 5.40 | % |   |   | 52,800 |   |   |   | 6.10 | % |   |   | 7,894 |   |   |   | 5.33 | % |   |   | 146,651 |   |   |   | 5.65 | % |
| Loans to individuals                 |   |                   | 8,149   |   |   |   | 9.19 | % |   |   | 8,669 |   |   |   | 6.99 | % |   |   | 660 |   |   |   | 6.71 | % |   |   | 17,478 |   |   |   | 8.01 | % |
|                                 |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                |   |                   | 364,822 |   |   |   | 5.71 | % |   |   | 471,385 |   |   |   | 6.24 | % |   |   | 202,093 |   |   |   | 5.82 | % |   |   | 1,038,300 |   |   |   | 5.97 | % |
|                                 |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nonaccrual loans                     |   |                   | 20,429  |   |   |   |   |   |   |   | 66,214 |   |   |   |   |   |   |   | 5,133 |   |   |   |   |   |   |   | 91,776 |   |   |   |   |   |
|                                 |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans, gross                         |   | $                      | 385,251 |   |   |   |   |   |   | $ | 537,599 |   |   |   |   |   |   | $ | 207,226 |   |   |   |   |   |   | $ | 1,130,076 |   |   |   |   |   |

----

----

----

|                                                    |   | For the Years Ended December 31, |    |
|---------------------------------------------------------|--------|-----------------------------------------------------------|---------|
|                                                    |   | 2010                                                      |    |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
|                                                    |   | (Dollars in thousands)                                    |    |
|                                                    |   |                                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Nonaccrual loans                                        |   | $                                                         | 63,168  |   |   | $ | 35,535 |   |   | $ | 14,433 |   |   | $ | 2,052 |   |   | $ | 2,636 |   |
| Restructured loans - nonaccruing                        |   |                                                      | 28,609  |   |   |   | 2,197 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total nonperforming loans                               |   |                                                      | 91,777  |   |   |   | 37,732 |   |   |   | 14,433 |   |   |   | 2,052 |   |   |   | 2,636 |   |
|                                                    |   |                                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Foreclosed assets                                       |   |                                                      | 17,314  |   |   |   | 19,634 |   |   |   | 5,745 |   |   |   | 775 |   |   |   | 895 |   |
|                                                    |   |                                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total nonperforming assets                              |   | $                                                         | 109,091 |   |   | $ | 57,366 |   |   | $ | 20,178 |   |   | $ | 2,827 |   |   | $ | 3,531 |   |
|                                                    |   |                                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accruing loans past due 90 days or more                 |   | $                                                         | -       |   |   | $ | - |   |   | $ | - |   |   | $ | 8 |   |   | $ | - |   |
| Allowance for loan losses                               |   |                                                      | 29,580  |   |   |   | 29,638 |   |   |   | 18,851 |   |   |   | 14,258 |   |   |   | 13,040 |   |
| Nonperforming loans to period end loans                 |   |                                                      | 8.08    | % |   |   | 3.07 | % |   |   | 1.10 | % |   |   | 0.17 | % |   |   | 0.26 | % |
| Allowance for loan losses to period end loans           |   |                                                      | 2.60    | % |   |   | 2.41 | % |   |   | 1.43 | % |   |   | 1.20 | % |   |   | 1.26 | % |
| Allowance for loan losses to nonperforming loans        |   |                                                      | 32      | % |   |   | 79 | % |   |   | 131 | % |   |   | 695 | % |   |   | 495 | % |
| Nonperforming assets to total assets                    |   |                                                      | 6.60    | % |   |   | 3.32 | % |   |   | 1.12 | % |   |   | 0.18 | % |   |   | 0.25 | % |
|                                                    |   |                                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Restructured loans in accrual status not included above |   | $                                                         | 12,117  |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |

|                      |   | For the Years Ended December 31, |   |
|---------------------------|--------|-----------------------------------------------------------|--------|
| Nonperforming loans       |   | 2010                                                      |   |   | 2009 |   |
|                      |   | (Amounts in thousands)                                    |   |
|                      |   |                                                      |   |   |   |   |
| Construction              |   | $                                                         | 26,256 |   |   | $ | 11,789 |   |
| Commercial real estate    |   |                                                      | 22,086 |   |   |   | 11,922 |   |
| Commercial and industrial |   |                                                      | 10,642 |   |   |   | 3,586 |   |
| Residential lots          |   |                                                      | 19,192 |   |   |   | 7,643 |   |
| Consumer                  |   |                                                      | 13,601 |   |   |   | 2,792 |   |
| Total nonperforming loans |   | $                                                         | 91,777 |   |   | $ | 37,732 |   |

----

|                 |   | With Specific Allowance |   |   | No Specific Allowance |   |   |      |   |   |      |   |
|---------------------------|--------|-----------------------------------|--------|--------|---------------------------------|--------|--------|-----------|--------|--------|-----------|--------|
|                      |   | Unpaid                            |   |   |                            |   |   |      |   |   | Unpaid    |   |   |   |   |   | Total |   |   | Net |   |
|                      |   | Principal                         |   |   | Recorded                        |   |   | Specific  |   |   | Principal |   |   | Recorded |   |   | Recorded |   |   | of Specific |   |
|                      |   | Balance                           |   |   | Investment                      |   |   | Allowance |   |   | Balance   |   |   | Investment |   |   | Investment |   |   | Allowance |   |
|                      |   | (Amounts in thousands)            |   |
| Commercial real estate    |   | $                                 | 3,958  |   |                            | $      | 3,898  |      |   | $      | 775       |   |   | $ | 23,114 |   |   | $ | 17,353 |   |   | $ | 21,251 |   |   | $ | 20,476 |   |
| Commercial                |   |                              |   |   |                            |   |   |      |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial and industrial |   |                              | 990    |   |                            |   | 884    |      |   |   | 510       |   |   |   | 7,398 |   |   |   | 5,475 |   |   |   | 6,359 |   |   |   | 5,849 |   |
| Commercial line of credit |   |                              | 834    |   |                            |   | 808    |      |   |   | 583       |   |   |   | 2,530 |   |   |   | 2,425 |   |   |   | 3,233 |   |   |   | 2,650 |   |
| Residential real estate   |   |                              |   |   |                            |   |   |      |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential construction  |   |                              | 7,114  |   |                            |   | 7,000  |      |   |   | 860       |   |   |   | 23,230 |   |   |   | 18,676 |   |   |   | 25,676 |   |   |   | 24,816 |   |
| Residential lot loans     |   |                              | 10,484 |   |                            |   | 10,398 |      |   |   | 841       |   |   |   | 15,449 |   |   |   | 8,938 |   |   |   | 19,336 |   |   |   | 18,495 |   |
| Raw land                  |   |                              | 251    |   |                            |   | 250    |      |   |   | 53        |   |   |   | 3,989 |   |   |   | 1,712 |   |   |   | 1,962 |   |   |   | 1,909 |   |
| Home equity lines         |   |                              | 100    |   |                            |   | 99     |      |   |   | 91        |   |   |   | 457 |   |   |   | 334 |   |   |   | 433 |   |   |   | 342 |   |
| Consumer loans            |   |                              | 4,516  |   |                            |   | 4,492  |      |   |   | 1,417     |   |   |   | 5,904 |   |   |   | 4,380 |   |   |   | 8,872 |   |   |   | 7,455 |   |
|                      |   |                              |   |   |                            |   |   |      |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                     |   | $                                 | 28,247 |   |                            | $      | 27,829 |      |   | $      | 5,130     |   |   | $ | 82,071 |   |   | $ | 59,293 |   |   | $ | 87,122 |   |   | $ | 81,992 |   |

|                                                 |   | For the Years Ended December 31, |   |
|-----------------------------------------------------------|--------|-----------------------------------------------------------|--------|
| Foreclosed assets                                    |   | 2010                                                      |   |   | 2009 |   |
|                                                      |   | (Amounts in thousands)                                    |   |
| Residential construction, land development and other land |   | $                                                         | 13,719 |   |   | $ | 11,101 |   |
| Commercial construction                                   |   |                                                      | 1,196  |   |   |   | 2,206 |   |
| 1 - 4 family residential properties                       |   |                                                      | 991    |   |   |   | 4,272 |   |
| Nonfarm nonresidential properties                         |   |                                                      | 1,353  |   |   |   | 1,670 |   |
| Multi family properties                                   |   |                                                      | 50     |   |   |   | 160 |   |
| Repossessed equipment                                     |   |                                                      | 5      |   |   |   | 225 |   |
| Total foreclosed assets                                   |   | $                                                         | 17,314 |   |   | $ | 19,634 |   |

----

|                                      |   | For the Years Ended December 31, |   |
|-------------------------------------------|--------|-----------------------------------------------------------|--------|
|                                      |   | 2010                                                      |   |   | 2009 |   |   | 2008 |   |
|                                      |   |                                                      |   |   |   |   |   | (Amounts in millions) |   |   |   |   |   |   |   |
|                                      |   | $                                                         |   |   | % of Total |   |   | $ |   |   | % of Total |   |   | $ |   |   | % of Total |   |
|                                      |   |                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans delinquencies 30 - 89 days past due |   | $                                                         | 5.5    |   |   |   | 0.48 | % |   | $ | 7.2 |   |   |   | 0.58 | % |   | $ | 19.7 |   |   |   | 1.49 | % |
|                                      |   |                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans classified substandard or doubtful  |   | $                                                         | 219.9  |   |   |   | 19.36 | % |   | $ | 83.6 |   |   |   | 6.80 | % |   | $ | 34.1 |   |   |   | 2.59 | % |
|                                      |   |                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nonperforming loans                       |   | $                                                         | 91.8   |   |   |   | 8.08 | % |   | $ | 37.7 |   |   |   | 3.07 | % |   | $ | 14.4 |   |   |   | 1.10 | % |

|                     |   | December 31, |   |   | December 31,    |   |
|--------------------------|--------|-------------------|--------|--------|----------------------|--------|
|                     |   | 2010              |   |   | 2009                 |   |
|                     |   | $                 |   |   | % of Total |   |   | $ |   |   | % of Total |   |
|                     |   |              |   |   |                 |   |   |   |   |   |   |   |
| Special Mention          |   | $                 | 139.0  |   |                 |   | 12.3 | % |   | $ | 119.7 |   |   |   | 9.8 | % |
| Substandard and Doubtful |   |              | 219.9  |   |                 |   | 19.5 | % |   |   | 83.6 |   |   |   | 6.8 | % |
|                     |   | $                 | 358.9  |   |                 |   | 31.8 | % |   | $ | 203.3 |   |   |   | 16.6 | % |

----

|                      |   | Weighted        |   |   |                   |    |   |                 |   |
|---------------------------|--------|-----------------|--------|--------|------------------------|---------|--------|----------------------|--------|
|                      |   | Average         |   |   | Special                |    |   | Substandard and |   |
|                      |   | Risk Grade |   |   | Mention                |    |   | Doubtful             |   |
|                      |   |            |   |   | (Amounts in thousands) |    |
| Commercial real estate    |   | 4.88            |   |   | $                      | 54,923  |   |                 | $      | 91,567 |   |
| Commercial                |   |            |   |   |                   |    |   |                 |   |   |   |
| Commercial and industrial |   | 4.80            |   |   |                   | 13,294  |   |                 |   | 14,650 |   |
| Commercial line of credit |   | 4.52            |   |   |                   | 4,000   |   |                 |   | 6,384 |   |
| Residential real estate   |   |            |   |   |                   |    |   |                 |   |   |   |
| Residential construction  |   | 5.40            |   |   |                   | 35,543  |   |                 |   | 39,572 |   |
| Residential lots          |   | 6.06            |   |   |                   | 10,503  |   |                 |   | 35,924 |   |
| Raw land                  |   | 5.01            |   |   |                   | 209     |   |                 |   | 6,824 |   |
| Home equity lines         |   | 3.55            |   |   |                   | 3,024   |   |                 |   | 4,905 |   |
| Consumer                  |   | 4.15            |   |   |                   | 17,489  |   |                 |   | 20,087 |   |
|                      |   |            |   |   | $                      | 138,985 |   |                 | $      | 219,914 |   |

----

|   | · | Restructuring interest only loan payment terms to require principal repayments; |
|--------|--------|---------------------------------------------------------------------------------|

|   | · | Refining the allowance for loan losses methodology to weight current period loss experience more heavily; |
|--------|--------|-----------------------------------------------------------------------------------------------------------|

|   | · | Downgrading renewed and other higher risk loans to a substandard classification; |
|--------|--------|----------------------------------------------------------------------------------|

|   | · | Enhancing the internal controls surrounding troubled debt restructured (TDR) loan identification and monitoring; |
|--------|--------|------------------------------------------------------------------------------------------------------------------|

|   | · | Charging off weakened credits; |
|--------|--------|--------------------------------|

|   | · | Increasing the staffing resources of our Credit Administration function, including problem asset management and loan review; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------|

|   | · | Enhancing our internal and external loan review protocol; and |
|--------|--------|---------------------------------------------------------------|

|   | · | Increasing the general valuation allowance component of our allowance for loan losses. |
|--------|--------|----------------------------------------------------------------------------------------|

|                         |   | Commercial |   |   |       |   |   | Residential |   |   |    |   |   |     |   |   |   |   |
|------------------------------|--------|------------|--------|--------|------------|--------|--------|-------------|--------|--------|---------|--------|--------|----------|--------|--------|--------|--------|
|                         |   | Real       |   |   |       |   |   | Real        |   |   |    |   |   |     |   |   |   |   |
|                         |   | Estate     |   |   | Commercial |   |   | Estate      |   |   | HELOC   |   |   | Consumer |   |   | Total  |   |
|                         |   |       |   |   |       |   |   |        |   |   |    |   |   |     |   |   |   |   |
| Allowance for credit losses: |   |       |   |   |       |   |   |        |   |   |    |   |   |     |   |   |   |   |
|                         |   |       |   |   |       |   |   |        |   |   |    |   |   |     |   |   |   |   |
| Beginning balance            |   | $          | 9,356  |   |       | $      | 3,079  |        |   | $      | 13,272  |   |   | $        | 1,187  |   |   | $      | 2,744 |   |   | $ | 29,638 |   |
| Provision                    |   |       | 5,237  |   |       |   | 5,520  |        |   |   | 22,597  |   |   |     | 1,933  |   |   |   | 3,713 |   |   |   | 39,000 |   |
| Charge-offs                  |   |       | (8,200 | )      |       |   | (5,610 | )           |   |   | (23,944 | )      |   |     | (1,799 | )      |   |   | (2,935 | ) |   |   | (42,488 | ) |
| Recoveries                   |   |       | 310    |   |       |   | 1,165  |        |   |   | 1,609   |   |   |     | 172    |   |   |   | 174 |   |   |   | 3,430 |   |
| Ending balance               |   | $          | 6,703  |   |       | $      | 4,154  |        |   | $      | 13,534  |   |   | $        | 1,493  |   |   | $      | 3,696 |   |   | $ | 29,580 |   |

----

|                                                       |   | For the Years Ended December 31, |      |
|------------------------------------------------------------|--------|-----------------------------------------------------------|-----------|
|                                                       |   | 2010                                                      |      |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
|                                                       |   | (Dollars in thousands)                                    |      |
|                                                       |   |                                                      |      |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at beginning of period                             |   | $                                                         | 29,638    |   |   | $ | 18,851 |   |   | $ | 14,258 |   |   | $ | 13,040 |   |   | $ | 11,785 |   |
|                                                       |   |                                                      |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Charge-offs:                                               |   |                                                      |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential mortgage loans                                 |   |                                                      | 18,084    |   |   |   | 8,161 |   |   |   | 921 |   |   |   | 974 |   |   |   | 248 |   |
| Commercial mortgage loans                                  |   |                                                      | 10,439    |   |   |   | 1,753 |   |   |   | 165 |   |   |   | - |   |   |   | 68 |   |
| Construction loans                                         |   |                                                      | 7,865     |   |   |   | 7,757 |   |   |   | 1,452 |   |   |   | 140 |   |   |   | 130 |   |
| Commercial and industrial loans                            |   |                                                      | 5,573     |   |   |   | 5,719 |   |   |   | 702 |   |   |   | 239 |   |   |   | 508 |   |
| Loans to individuals                                       |   |                                                      | 528       |   |   |   | 1,243 |   |   |   | 594 |   |   |   | 541 |   |   |   | 600 |   |
| Total charge-offs                                          |   |                                                      | 42,489    |   |   |   | 24,633 |   |   |   | 3,834 |   |   |   | 1,894 |   |   |   | 1,554 |   |
|                                                       |   |                                                      |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Recoveries:                                                |   |                                                      |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential mortgage loans                                 |   |                                                      | 828       |   |   |   | 131 |   |   |   | 113 |   |   |   | 86 |   |   |   | 142 |   |
| Commercial mortgage loans                                  |   |                                                      | 311       |   |   |   | 1 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Construction loans                                         |   |                                                      | 994       |   |   |   | 182 |   |   |   | 4 |   |   |   | 7 |   |   |   | - |   |
| Commercial and industrial loans                            |   |                                                      | 1,157     |   |   |   | 971 |   |   |   | 28 |   |   |   | 63 |   |   |   | 36 |   |
| Loans to individuals                                       |   |                                                      | 141       |   |   |   | 135 |   |   |   | 117 |   |   |   | 181 |   |   |   | 121 |   |
| Total recoveries                                           |   |                                                      | 3,431     |   |   |   | 1,420 |   |   |   | 262 |   |   |   | 337 |   |   |   | 299 |   |
| Net charge-offs                                            |   |                                                      | (39,058   | ) |   |   | (23,213 | ) |   |   | (3,572 | ) |   |   | (1,557 | ) |   |   | (1,255 | ) |
| Provision for loan losses                                  |   |                                                      | 39,000    |   |   |   | 34,000 |   |   |   | 8,165 |   |   |   | 2,775 |   |   |   | 2,510 |   |
| Balance at end of period                                   |   | $                                                         | 29,580    |   |   | $ | 29,638 |   |   | $ | 18,851 |   |   | $ | 14,258 |   |   | $ | 13,040 |   |
| Total loans outstanding                                    |   | $                                                         | 1,136,076 |   |   | $ | 1,230,275 |   |   | $ | 1,314,811 |   |   | $ | 1,188,438 |   |   | $ | 1,029,816 |   |
| Average loans outstanding                                  |   | $                                                         | 1,200,609 |   |   | $ | 1,272,087 |   |   | $ | 1,279,041 |   |   | $ | 1,114,677 |   |   | $ | 958,001 |   |
| Allowance for loan losses to loans outstanding             |   |                                                      | 2.60      | % |   |   | 2.61 | % |   |   | 1.43 | % |   |   | 1.20 | % |   |   | 1.27 | % |
| Ratio of net loan charge-offs to average loans outstanding |   |                                                      | 3.25      | % |   |   | 1.82 | % |   |   | 0.28 | % |   |   | 0.14 | % |   |   | 0.13 | % |

|             |   | For the Years Ended December 31, |   |
|------------------|--------|-----------------------------------------------------------|--------|
|             |   | 2010                                                      |   |   | 2009 |   |   | 2008 |   |
|             |   | (Amounts in millions)                           |   |
|             |   | $                                                         |   |   | % |   |   | $ |   |   | % |   |   | $ |   |   | % |   |
| ALLL components: |   |                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Specific         |   | $                                                         | 5,129  |   |   |   | 17 | % |   | $ | 9,792 |   |   |   | 33 | % |   | $ | 2,792 |   |   |   | 15 | % |
| General          |   |                                                      | 24,451 |   |   |   | 83 | % |   |   | 19,846 |   |   |   | 67 | % |   |   | 16,059 |   |   |   | 85 | % |
| Total            |   | $                                                         | 29,580 |   |   |   | 100 | % |   | $ | 29,638 |   |   |   | 100 | % |   | $ | 18,851 |   |   |   | 100 | % |

----

|                      |   | At December 31, 2010 |   |
|---------------------------|--------|-------------------------------------|--------|
|                      |   |                                |   |   | % of |   |
| By Loan Class   |   | Amount                              |   |   | Total Loans |   |
|                      |   | (Amounts in thousands)    |   |
| Commercial real estate    |   | $                                   | 5,498  |   |   |   | 18.6 | % |
| Commercial                |   |                                |   |   |   |   |   |   |
| Commercial and industrial |   |                                | 2,226  |   |   |   | 7.5 | % |
| Commercial line of credit |   |                                | 1,928  |   |   |   | 6.5 | % |
| Residential real estate   |   |                                |   |   |   |   |   |   |
| Residential Construction  |   |                                | 7,451  |   |   |   | 25.2 | % |
| Residential lots          |   |                                | 5,576  |   |   |   | 18.9 | % |
| Raw land                  |   |                                | 507    |   |   |   | 1.7 | % |
| Home equity lines         |   |                                | 1,493  |   |   |   | 5.0 | % |
| Consumer                  |   |                                | 3,696  |   |   |   | 12.5 | % |
| Unallocated               |   |                                | 1,205  |   |   |   | 4.2 | % |
|                      |   | $                                   | 29,580 |   |   |   | 100.0 | % |

----

|                            |   | For the Years Ended December 31, |   |
|---------------------------------|--------|-----------------------------------------------------------|--------|
|                            |   | 2010                                                      |   |   | 2009 |   |   | 2008 |   |
|                            |   | Amount                                                    |   |   | % of TotalLoans (1) |   |   | Amount (3) |   |   | % of TotalLoans (1) |   |   | Amount |   |   | % of TotalLoans (1) |   |
|                            |   | (Dollars in thousands)                                    |   |
|                            |   |                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential mortgage loans      |   | $                                                         | 10,482 |   |   |   | 30.2 | % |   | $ | 9,503 |   |   |   | 32.2 | % |   | $ | 5,221 |   |   |   | 29.9 | % |
| Commercial mortgage loans       |   |                                                      | 6,045  |   |   |   | 42.1 | % |   |   | 5,782 |   |   |   | 37.0 | % |   |   | 3,670 |   |   |   | 31.9 | % |
| Construction loans              |   |                                                      | 7,467  |   |   |   | 12.3 | % |   |   | 8,629 |   |   |   | 14.5 | % |   |   | 4,428 |   |   |   | 19.8 | % |
| Commercial and industrial loans |   |                                                      | 3,933  |   |   |   | 13.9 | % |   |   | 5,203 |   |   |   | 14.9 | % |   |   | 3,524 |   |   |   | 16.9 | % |
| Loans to individuals            |   |                                                      | 530    |   |   |   | 1.5 | % |   |   | 421 |   |   |   | 1.4 | % |   |   | 1,058 |   |   |   | 1.5 | % |
| Other (2)                       |   |                                                      | 1,123  |   |   |   | - | % |   |   | 100 |   |   |   | - | % |   |   | 950 |   |   |   | - | % |
| Total                           |   | $                                                         | 29,580 |   |   |   | 100.0 | % |   | $ | 29,638 |   |   |   | 100.0 | % |   | $ | 18,851 |   |   |   | 100.0 | % |

|                            |   | At December 31, |   |
|---------------------------------|--------|---------------------------|--------|
|                            |   | 2007                      |   |   | 2006 |   |
|                            |   | Amount                    |   |   | % of TotalLoans (1) |   |   | Amount |   |   | % of TotalLoans (1) |   |
|                            |   | (Dollars in thousands)    |   |
|                            |   |                      |   |   |   |   |   |   |   |   |   |   |
| Residential mortgage loans      |   | $                         | 4,046  |   |   |   | 26.9 | % |   | $ | 1,771 |   |   |   | 25.4 | % |
| Commercial mortgage loans       |   |                      | 2,975  |   |   |   | 32.8 | % |   |   | 4,173 |   |   |   | 34.8 | % |
| Construction loans              |   |                      | 3,225  |   |   |   | 21.8 | % |   |   | 3,240 |   |   |   | 20.5 | % |
| Commercial and industrial loans |   |                      | 2,854  |   |   |   | 16.6 | % |   |   | 2,099 |   |   |   | 17.2 | % |
| Loans to individuals            |   |                      | 1,158  |   |   |   | 1.9 | % |   |   | 553 |   |   |   | 2.1 | % |
| Other                           |   |                      | -      |   |   |   | - | % |   |   | 1,204 |   |   |   | - | % |
| Total                           |   | $                         | 14,258 |   |   |   | 100.0 | % |   | $ | 13,040 |   |   |   | 100.0 | % |

| (1) | Represents total of all outstanding loans in each category as a percentage of total loans outstanding. |
|-----|--------------------------------------------------------------------------------------------------------|

| (2) | During 2007, the ALLL methodology was revised to comply with the Interagency Policy Statement on the ALLL. As a result the unallocated portion of the allowance decreased due to the methodology enhancements. During 2008, an unallocated segment was re-established as an additional qualitative factor due to the current economic environment presenting potential loss exposures in excess of our historical loss rates. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | The method of calculating the allowance was revised for 2009 and later years with greater emphasis placed on credit grade and loan categories. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                           |   | AmortizedCost          |    |   | GrossUnrealizedGains |   |   | GrossUnrealizedLosses |   |   | Fair Value |   |
|--------------------------------|--------|------------------------|---------|--------|----------------------|--------|--------|-----------------------|--------|--------|-----------------|--------|
|                           |   | (Amounts in thousands) |    |
| December 31, 2010              |   |                   |    |   |                 |   |   |                  |   |   |            |   |
| Securities available for sale: |   |                   |    |   |                 |   |   |                  |   |   |            |   |
| US government agencies         |   | $                      | 100,101 |   |                 | $      | 198    |                  |   | $      | 2,059           |   |   | $ | 98,240 |   |
| Mortgage-backed securities     |   |                   | 148,284 |   |                 |   | 2,349  |                  |   |   | 857             |   |   |   | 149,776 |   |
| Municipals                     |   |                   | 55,901  |   |                 |   | 404    |                  |   |   | 741             |   |   |   | 55,564 |   |
| Trust preferred securities     |   |                   | 4,252   |   |                 |   | 21     |                  |   |   | 1,179           |   |   |   | 3,094 |   |
| Common stocks and mutual funds |   |                   | 2,650   |   |                 |   | 353    |                  |   |   | -               |   |   |   | 3,003 |   |
| Other                          |   |                   | 1,000   |   |                 |   | -      |                  |   |   | 24              |   |   |   | 976 |   |
|                           |   | $                      | 312,188 |   |                 | $      | 3,325  |                  |   | $      | 4,860           |   |   | $ | 310,653 |   |
| Securities held to maturity:   |   |                   |    |   |                 |   |   |                  |   |   |            |   |   |   |   |   |
| Mortgage-backed securities     |   | $                      | 804     |   |                 | $      | 48     |                  |   | $      | -               |   |   | $ | 852 |   |
| Municipals                     |   |                   | 31,416  |   |                 |   | 104    |                  |   |   | 1,631           |   |   |   | 29,889 |   |
| Corporate bonds                |   |                   | 10,000  |   |                 |   | -      |                  |   |   | 560             |   |   |   | 9,440 |   |
|                           |   | $                      | 42,220  |   |                 | $      | 152    |                  |   | $      | 2,191           |   |   | $ | 40,181 |   |
| December 31, 2009              |   |                   |    |   |                 |   |   |                  |   |   |            |   |   |   |   |   |
| Securities available for sale: |   |                   |    |   |                 |   |   |                  |   |   |            |   |   |   |   |   |
| US government agencies         |   | $                      | 57,441  |   |                 | $      | 407    |                  |   | $      | 560             |   |   | $ | 57,288 |   |
| Mortgage-backed securities     |   |                   | 176,543 |   |                 |   | 5,813  |                  |   |   | 256             |   |   |   | 182,100 |   |
| Municipals                     |   |                   | 64,797  |   |                 |   | 1,564  |                  |   |   | 102             |   |   |   | 66,259 |   |
| Trust preferred securities     |   |                   | 4,252   |   |                 |   | -      |                  |   |   | 1,376           |   |   |   | 2,876 |   |
| Common stocks and mutual funds |   |                   | 3,418   |   |                 |   | 141    |                  |   |   | 295             |   |   |   | 3,264 |   |
| Other                          |   |                   | 1,000   |   |                 |   | -      |                  |   |   | 7               |   |   |   | 993 |   |
|                           |   | $                      | 307,451 |   |                 | $      | 7,925  |                  |   | $      | 2,596           |   |   | $ | 312,780 |   |
| Securities held to maturity:   |   |                   |    |   |                 |   |   |                  |   |   |            |   |   |   |   |   |
| US government agencies         |   | $                      | 2,500   |   |                 | $      | 35     |                  |   | $      | -               |   |   | $ | 2,535 |   |
| Mortgage-backed securities     |   |                   | 1,175   |   |                 |   | 44     |                  |   |   | -               |   |   |   | 1,219 |   |
| Municipals                     |   |                   | 7,244   |   |                 |   | 185    |                  |   |   | 3               |   |   |   | 7,426 |   |
|                           |   | $                      | 10,919  |   |                 | $      | 264    |                  |   | $      | 3               |   |   | $ | 11,180 |   |
| December 31, 2008              |   |                   |    |   |                 |   |   |                  |   |   |            |   |   |   |   |   |
| Securities available for sale: |   |                   |    |   |                 |   |   |                  |   |   |            |   |   |   |   |   |
| US government agencies         |   | $                      | 76,061  |   |                 | $      | 2,183  |                  |   | $      | 37              |   |   | $ | 78,207 |   |
| Mortgage-backed securities     |   |                   | 196,386 |   |                 |   | 4,268  |                  |   |   | 194             |   |   |   | 200,460 |   |
| Municipals                     |   |                   | 2,393   |   |                 |   | 19     |                  |   |   | 7               |   |   |   | 2,405 |   |
| Trust preferred securities     |   |                   | 4,250   |   |                 |   | 49     |                  |   |   | 232             |   |   |   | 4,067 |   |
| Common stocks and mutual funds |   |                   | 3,822   |   |                 |   | 4      |                  |   |   | 209             |   |   |   | 3,617 |   |
| Other                          |   |                   | 1,000   |   |                 |   | -      |                  |   |   | 290             |   |   |   | 710 |   |
|                           |   | $                      | 283,912 |   |                 | $      | 6,523  |                  |   | $      | 969             |   |   | $ | 289,466 |   |
| Securities held to maturity:   |   |                   |    |   |                 |   |   |                  |   |   |            |   |   |   |   |   |
| US government agencies         |   | $                      | 25,500  |   |                 | $      | 340    |                  |   | $      | -               |   |   | $ | 25,840 |   |
| Mortgage-backed securities     |   |                   | 1,792   |   |                 |   | 26     |                  |   |   | -               |   |   |   | 1,818 |   |
| Municipals                     |   |                   | 7,939   |   |                 |   | 149    |                  |   |   | 215             |   |   |   | 7,873 |   |
|                           |   | $                      | 35,231  |   |                 | $      | 515    |                  |   | $      | 215             |   |   | $ | 35,531 |   |

----

|                                |   | 2010                            |    |   |            |   |
|-------------------------------------|--------|---------------------------------|---------|--------|-----------------|--------|
|                                |   | Amortized Cost             |    |   | Fair Value |   |   | WeightedAverage Yield |   |
|                                |   | (Amount in thousands) |    |   | (1)             |   |
| Securities available for sale:      |   |                            |    |   |            |   |   |   |   |
| US government agencies              |   |                            |    |   |            |   |   |   |   |
| Due after five but within ten years |   | $                               | 51,779  |   |            | $      | 50,995 |   |   |   | 3.31 | % |
| Due after ten years                 |   |                            | 48,322  |   |            |   | 47,245 |   |   |   | 3.42 | % |
|                                |   |                            | 100,101 |   |            |   | 98,240 |   |   |   | 3.36 | % |
| Mortgage-backed securities          |   |                            |    |   |            |   |   |   |   |   |   |   |
| Due within one year                 |   |                            | 968     |   |            |   | 974 |   |   |   | 3.91 | % |
| Due after one but within five years |   |                            | 3,798   |   |            |   | 3,809 |   |   |   | 1.41 | % |
| Due after five but within ten years |   |                            | 38,965  |   |            |   | 40,577 |   |   |   | 4.20 | % |
| Due after ten years                 |   |                            | 104,553 |   |            |   | 104,416 |   |   |   | 2.64 | % |
|                                |   |                            | 148,284 |   |            |   | 149,776 |   |   |   | 3.03 | % |
| Municipals                          |   |                            |    |   |            |   |   |   |   |   |   |   |
| Due within one year                 |   |                            | 2,287   |   |            |   | 2,293 |   |   |   | 1.53 | % |
| Due after one but within five years |   |                            | 2,872   |   |            |   | 2,877 |   |   |   | 1.65 | % |
| Due after five but within ten years |   |                            | 13,181  |   |            |   | 13,266 |   |   |   | 2.98 | % |
| Due after ten years                 |   |                            | 37,561  |   |            |   | 37,128 |   |   |   | 4.55 | % |
|                                |   |                            | 55,901  |   |            |   | 55,564 |   |   |   | 3.90 | % |
| Trust preferred securities          |   |                            |    |   |            |   |   |   |   |   |   |   |
| Due after ten years                 |   |                            | 4,252   |   |            |   | 3,094 |   |   |   | 4.13 | % |
|                                |   |                            | 4,252   |   |            |   | 3,094 |   |   |   |   |   |
| Common stock and mututal funds      |   |                            |    |   |            |   |   |   |   |   |   |   |
| Due after ten years                 |   |                            | 2,650   |   |            |   | 3,003 |   |   |   | 2.00 | % |
|                                |   |                            | 2,650   |   |            |   | 3,003 |   |   |   |   |   |
| Other                               |   |                            |    |   |            |   |   |   |   |   |   |   |
| Due after one but within five years |   |                            | 1,000   |   |            |   | 976 |   |   |   | 1.28 | % |
|                                |   |                            | 1,000   |   |            |   | 976 |   |   |   |   |   |
| Total securities available for sale |   |                            |    |   |            |   |   |   |   |   |   |   |
| Due within one year                 |   |                            | 3,256   |   |            |   | 3,267 |   |   |   | 2.23 | % |
| Due after one but within five years |   |                            | 7,670   |   |            |   | 7,663 |   |   |   | 1.46 | % |
| Due after five but within ten years |   |                            | 103,925 |   |            |   | 104,838 |   |   |   | 3.60 | % |
| Due after ten years                 |   |                            | 197,338 |   |            |   | 194,885 |   |   |   | 3.21 | % |
|                                |   | $                               | 312,189 |   |            | $      | 310,652 |   |   |   | 3.29 | % |
| Securities held to maturity:        |   |                            |    |   |            |   |   |   |   |   |   |   |
| Mortgage-backed securities          |   |                            |    |   |            |   |   |   |   |   |   |   |
| Due after one but within five years |   | $                               | 435     |   |            | $      | 459 |   |   |   | 4.57 | % |
| Due after five but within ten years |   |                            | 34      |   |            |   | 37 |   |   |   | 6.39 | % |
| Due after ten years                 |   |                            | 335     |   |            |   | 356 |   |   |   | 5.45 | % |
|                                |   |                            | 804     |   |            |   | 852 |   |   |   | 5.02 | % |
| Municipals                          |   |                            |    |   |            |   |   |   |   |   |   |   |
| Due within one year                 |   |                            | 100     |   |            |   | 101 |   |   |   | 3.16 | % |
| Due after one but within five years |   |                            | 707     |   |            |   | 743 |   |   |   | 3.81 | % |
| Due after five but within ten years |   |                            | 3,196   |   |            |   | 3,239 |   |   |   | 4.35 | % |
| Due after ten years                 |   |                            | 27,413  |   |            |   | 25,806 |   |   |   | 4.73 | % |
|                                |   |                            | 31,416  |   |            |   | 29,889 |   |   |   | 4.67 | % |
| Other                               |   |                            |    |   |            |   |   |   |   |   |   |   |
| Due after one but within five years |   |                            | 10,000  |   |            |   | 9,440 |   |   |   | 6.42 | % |
|                                |   |                            | 10,000  |   |            |   | 9,440 |   |   |   |   |   |
| Total securities held to maturity   |   |                            |    |   |            |   |   |   |   |   |   |   |
| Due within one year                 |   |                            | 100     |   |            |   | 101 |   |   |   | 4.31 | % |
| Due after one but within five years |   |                            | 11,142  |   |            |   | 10,642 |   |   |   | 3.92 | % |
| Due after five but within ten years |   |                            | 3,230   |   |            |   | 3,276 |   |   |   | 0.59 | % |
| Due after ten years                 |   |                            | 27,748  |   |            |   | 26,162 |   |   |   | 4.74 | % |
|                                |   | $                               | 42,220  |   |            | $      | 40,181 |   |   |   | 5.09 | % |

----

----

----

|                                           |   | For the Years Ended December 31, |      |
|------------------------------------------------|--------|-----------------------------------------------------------|-----------|
|                                           |   | 2010                                                      |      |   | 2009 |   |   | 2008 |   |
|                                           |   | Average                                                   |      |   | Average |   |   | Average |   |   | Average |   |   | Average |   |   | Average |   |
|                                           |   | Amount                                                    |      |   | Rate |   |   | Amount |   |   | Rate |   |   | Amount |   |   | Rate |   |
|                                           |   | (Dollars in thousands)                                    |      |
|                                           |   |                                                      |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing NOW and money market accounts |   | $                                                         | 601,122   |   |   |   | 0.95 | % |   | $ | 466,667 |   |   |   | 1.45 | % |   | $ | 512,717 |   |   |   | 2.24 | % |
| Time deposits $100,000 or more                 |   |                                                      | 178,288   |   |   |   | 1.52 | % |   |   | 193,505 |   |   |   | 2.50 | % |   |   | 137,841 |   |   |   | 4.86 | % |
| Other time deposits                            |   |                                                      | 403,694   |   |   |   | 2.49 | % |   |   | 486,721 |   |   |   | 3.04 | % |   |   | 428,950 |   |   |   | 3.86 | % |
| Total interest-bearing deposits                |   |                                                      | 1,183,104 |   |   |   | 1.56 | % |   |   | 1,146,893 |   |   |   | 2.30 | % |   |   | 1,079,508 |   |   |   | 3.21 | % |
| Demand and other non-interest-bearing deposits |   |                                                      | 119,418   |   |   |   |   |   |   |   | 107,461 |   |   |   |   |   |   |   | 104,978 |   |   |   |   |   |
| Total average deposits                         |   | $                                                         | 1,302,522 |   |   |   | 1.42 | % |   | $ | 1,254,354 |   |   |   | 2.11 | % |   | $ | 1,184,486 |   |   |   | 2.93 | % |

|                   |   | At December 31, 2010 |    |
|------------------------|--------|-------------------------------------|---------|
|                   |   | CDs > $100,000         |    |   | Brokered CDs |   |   | CDARS |   |
|                   |   | (Amounts in thousands)              |    |
| Remaining Maturity     |   |                                |    |   |   |   |   |   |   |
| Less than three months |   | $                                   | 50,044  |   |   | $ | 20,000 |   |   | $ | 12,114 |   |
| Three to six months    |   |                                | 24,683  |   |   |   | - |   |   |   | 10,595 |   |
| Six to twelve months   |   |                                | 25,246  |   |   |   | 12,000 |   |   |   | 26,100 |   |
| Over twelve months     |   |                                | 107,168 |   |   |   | 153,784 |   |   |   | - |   |
| Total                  |   | $                                   | 207,141 |   |   | $ | 185,784 |   |   | $ | 48,809 |   |

|                        |   | 2010                             |    |   | 2009   |   |
|-----------------------------|--------|----------------------------------|---------|--------|--------|--------|
|                        |   | (Amounts in thousands) |    |
| Short-term borrowings       |   |                             |    |   |   |   |
| FHLB advances               |   | $                                | 16,250  |   |   | $      | 31,250 |   |
| Repurchase agreements       |   |                             | 4,808   |   |   |   | 14,861 |   |
| Other borrowed funds        |   |                             | 1,040   |   |   |   | 39,366 |   |
|                        |   | $                                | 22,098  |   |   | $      | 85,477 |   |
|                        |   |                             |    |   |   |   |   |   |
| Long-term borrowings        |   |                             |    |   |   |   |   |   |
| FHLB advances               |   | $                                | 56,809  |   |   | $      | 73,226 |   |
| Term repurchase agreements  |   |                             | 80,000  |   |   |   | 80,000 |   |
| Jr. subordinated debentures |   |                             | 45,877  |   |   |   | 45,877 |   |
|                        |   | $                                | 182,686 |   |   | $      | 199,103 |   |

----

| Long term borrowings |   | At December 31, 2010 |   |
|--------------------------------|--------|-------------------------------------|--------|
|                           |   | FHLB Advances                  |   |   | Term Repo |   |
| Years of maturity    |   | Interest Rate                  |   |   | Amount |   |   | Interest Rate |   |   | Amount |   |
|                           |   |                                |   |   | (In thousands) |   |   |   |   |   | (In thousands) |   |
|                           |   |                                |   |   |   |   |   |   |   |   |   |   |
| 2012                           |   |                                | 3.84   | % |   |   | 5,000 |   |   |   | 4.51 | % |   |   | 20,000 |   |
| 2013                           |   |                                | 3.46   | % |   |   | 10,000 |   |   |   | - |   |   |   | - |   |
| 2014                           |   |                                | 4.17   | % |   |   | 25,000 |   |   |   | - |   |   |   | - |   |
| 2015                           |   |                                | 2.97   | % |   |   | 10,000 |   |   |   | 3.70 | % |   |   | 30,000 |   |
| Thereafter                     |   |                                | 3.46   | % |   |   | 6,809 |   |   |   | 3.33 | % |   |   | 30,000 |   |
|                           |   |                                |   |   |   | $ | 56,809 |   |   |   |   |   |   | $ | 80,000 |   |

----

----

----

----

|                                                                                         |   | 2010                                                         |      |   | 2009   |   |
|---------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------|-----------|--------|--------|--------|
|                                                                                              |   | (Amounts in thousands, exceptshare data) |      |
| Assets                                                                                            |   |                                                         |      |   |   |   |
|                                                                                              |   |                                                         |      |   |   |   |
| Cash and due from banks                                                                           |   | $                                                            | 16,584    |   |   | $      | 30,184 |   |
| Federal funds sold and overnight deposits                                                         |   |                                                         | 49,587    |   |   |   | 31,269 |   |
| Investment securities (Note 3)                                                                    |   |                                                         |      |   |   |   |   |   |
| Available for sale, at fair value                                                                 |   |                                                         | 310,653   |   |   |   | 312,780 |   |
| Held to maturity, (fair value of $40,181 and $11,180 at December 31, 2010 and 2009, respectively) |   |                                                         | 42,220    |   |   |   | 10,919 |   |
| Federal Home Loan Bank stock                                                                      |   |                                                         | 8,750     |   |   |   | 9,794 |   |
|                                                                                              |   |                                                         |      |   |   |   |   |   |
| Loans held for sale                                                                               |   |                                                         | 5,991     |   |   |   | 3,025 |   |
|                                                                                              |   |                                                         |      |   |   |   |   |   |
| Loans (Note 4)                                                                                    |   |                                                         | 1,130,076 |   |   |   | 1,230,275 |   |
| Allowance for loan losses (Note 5)                                                                |   |                                                         | (29,580   | )      |   |   | (29,638 | ) |
| Net Loans                                                                                         |   |                                                         | 1,100,496 |   |   |   | 1,200,637 |   |
|                                                                                              |   |                                                         |      |   |   |   |   |   |
| Premises and equipment (Note 6)                                                                   |   |                                                         | 40,550    |   |   |   | 42,630 |   |
| Foreclosed assets (Note 4)                                                                        |   |                                                         | 17,314    |   |   |   | 19,634 |   |
| Other assets (Notes 7 and 14)                                                                     |   |                                                         | 61,253    |   |   |   | 67,736 |   |
| Total Assets                                                                                      |   | $                                                            | 1,653,398 |   |   | $      | 1,728,608 |   |
|                                                                                              |   |                                                         |      |   |   |   |   |   |
| Liabilities and Stockholders’ Equity                                                        |   |                                                         |      |   |   |   |   |   |
| Deposits                                                                                          |   |                                                         |      |   |   |   |   |   |
| Demand                                                                                            |   | $                                                            | 110,114   |   |   | $      | 118,372 |   |
| Money market and NOW                                                                              |   |                                                         | 541,949   |   |   |   | 567,435 |   |
| Savings                                                                                           |   |                                                         | 40,929    |   |   |   | 11,592 |   |
| Time (Note 8)                                                                                     |   |                                                         | 655,427   |   |   |   | 616,671 |   |
| Total Deposits                                                                                    |   |                                                         | 1,348,419 |   |   |   | 1,314,070 |   |
|                                                                                              |   |                                                         |      |   |   |   |   |   |
| Short-term borrowings (Note 9)                                                                    |   |                                                         | 22,098    |   |   |   | 85,477 |   |
| Long-term borrowings (Notes 9 and 10)                                                             |   |                                                         | 182,686   |   |   |   | 199,103 |   |
| Other liabilities (Note 12)                                                                       |   |                                                         | 7,854     |   |   |   | 7,961 |   |
|                                                                                              |   |                                                         |      |   |   |   |   |   |
| Total Liabilities                                                                                 |   |                                                         | 1,561,057 |   |   |   | 1,606,611 |   |
| Stockholders’ Equity (Notes 10, 11 and 16)                                                  |   |                                                         |      |   |   |   |   |   |
| Senior Cumulative Perpetual Preferred Stock (Series A),                                           |   |                                                         |      |   |   |   |   |   |
| no par value, 1,000,000 shares authorized; 42,750 shares                                          |   |                                                         |      |   |   |   |   |   |
| issued and outstanding at December 31, 2010 and 2009                                              |   |                                                         | 41,453    |   |   |   | 41,060 |   |
| Common stock, no par value, 30,000,000 shares authorized;                                         |   |                                                         |      |   |   |   |   |   |
| issued and outstanding 16,812,625 shares and 16,787,675                                           |   |                                                         |      |   |   |   |   |   |
| shares at December 31, 2010 and 2009, respectively                                                |   |                                                         | 119,408   |   |   |   | 119,282 |   |
| Retained earnings (accumulated deficit)                                                           |   |                                                         | (67,082   | )      |   |   | (41,430 | ) |
| Accumulated other comprehensive income (loss)                                                     |   |                                                         | (1,438    | )      |   |   | 3,085 |   |
| Total Stockholders’ Equity                                                                  |   |                                                         | 92,341    |   |   |   | 121,997 |   |
|                                                                                              |   |                                                         |      |   |   |   |   |   |
| Commitments and contingencies (Notes 13 and 18)                                                   |   |                                                         |      |   |   |   |   |   |
|                                                                                              |   |                                                         |      |   |   |   |   |   |
| Total Liabilities and Stockholders’ Equity                                                  |   | $                                                            | 1,653,398 |   |   | $      | 1,728,608 |   |

----

----

|                                            |   | 2010                                          |       |   | 2009   |   |       | 2008   |   |
|------------------------------------------------------|--------|-----------------------------------------------|------------|--------|--------|--------|------------|--------|--------|
|                                                 |   | (Amounts in thousands, except  |       |
|                                                 |   | share and per share data) |       |
| Interest Income                                      |   |                                          |       |   |   |   |       |   |   |
| Loans                                                |   | $                                             | 68,384     |   |   | $      | 74,548     |   |   | $ | 82,125 |   |
| Investment securities available for sale             |   |                                          | 11,303     |   |   |   | 14,035     |   |   |   | 12,378 |   |
| Investment securities held to maturity               |   |                                          | 886        |   |   |   | 877        |   |   |   | 2,184 |   |
| Federal funds sold  and overnight deposits |   |                                          | 65         |   |   |   | 13         |   |   |   | 55 |   |
| Total Interest Income                                |   |                                          | 80,638     |   |   |   | 89,473     |   |   |   | 96,742 |   |
|                                                 |   |                                          |       |   |   |   |       |   |   |   |   |   |
| Interest Expense                                     |   |                                          |       |   |   |   |       |   |   |   |   |   |
| Money market, savings, and NOW deposits              |   |                                          | 5,718      |   |   |   | 6,787      |   |   |   | 11,412 |   |
| Time deposits                                        |   |                                          | 12,781     |   |   |   | 19,631     |   |   |   | 23,236 |   |
| Short-term borrowings                                |   |                                          | 1,108      |   |   |   | 1,701      |   |   |   | 3,808 |   |
| Long-term borrowings                                 |   |                                          | 8,672      |   |   |   | 9,607      |   |   |   | 10,826 |   |
| Total Interest Expense                               |   |                                          | 28,279     |   |   |   | 37,726     |   |   |   | 49,282 |   |
| Net Interest Income                                  |   |                                          | 52,359     |   |   |   | 51,747     |   |   |   | 47,460 |   |
|                                                 |   |                                          |       |   |   |   |       |   |   |   |   |   |
| Provision for Loan Losses (Note 5)                   |   |                                          | 39,000     |   |   |   | 34,000     |   |   |   | 8,165 |   |
| Net Interest Income After Provision for Loan Losses  |   |                                          | 13,359     |   |   |   | 17,747     |   |   |   | 39,295 |   |
| Non-Interest Income                                  |   |                                          |       |   |   |   |       |   |   |   |   |   |
| Service charges and fees on deposit accounts         |   |                                          | 6,533      |   |   |   | 6,246      |   |   |   | 5,859 |   |
| Income from mortgage banking activities              |   |                                          | 2,182      |   |   |   | 2,104      |   |   |   | 1,294 |   |
| Investment brokerage and trust fees                  |   |                                          | 1,474      |   |   |   | 1,159      |   |   |   | 1,138 |   |
| Gain on sale of investment securities                |   |                                          | 3,531      |   |   |   | 1,236      |   |   |   | 98 |   |
| Net impairment loss recognized in earnings           |   |                                          | (186       | )      |   |   | (404       | )      |   |   | - |   |
| Other (Note 15)                                      |   |                                          | 2,072      |   |   |   | 2,565      |   |   |   | 2,952 |   |
| Total Non-Interest Income                            |   |                                          | 15,606     |   |   |   | 12,906     |   |   |   | 11,341 |   |
|                                                 |   |                                          |       |   |   |   |       |   |   |   |   |   |
| Non-Interest Expense                                 |   |                                          |       |   |   |   |       |   |   |   |   |   |
| Salaries and employee benefits                       |   |                                          | 20,926     |   |   |   | 22,502     |   |   |   | 22,038 |   |
| Occupancy and equipment                              |   |                                          | 7,428      |   |   |   | 7,903      |   |   |   | 7,679 |   |
| Goodwill impairment                                  |   |                                          | -          |   |   |   | 49,501     |   |   |   | - |   |
| Other (Note 15)                                      |   |                                          | 19,414     |   |   |   | 20,592     |   |   |   | 12,431 |   |
| Total Non-Interest Expense                           |   |                                          | 47,768     |   |   |   | 100,498    |   |   |   | 42,148 |   |
| Income (Loss) Before Income Taxes                    |   |                                          | (18,803    | )      |   |   | (69,845    | )      |   |   | 8,488 |   |
| Income Tax Expense (Benefit) (Note 14)               |   |                                          | 4,318      |   |   |   | (6,686     | )      |   |   | 2,634 |   |
| Net Income (loss)                                    |   |                                          | (23,121    | )      |   |   | (63,159    | )      |   |   | 5,854 |   |
| Effective dividends on preferred stock (Note 11)     |   |                                          | 2,531      |   |   |   | 2,508      |   |   |   | 185 |   |
| Net income (loss) available to common shareholders   |   | $                                             | (25,652    | )      |   | $      | (65,667    | )      |   | $ | 5,669 |   |
|                                                 |   |                                          |       |   |   |   |       |   |   |   |   |   |
| Net Income (loss) Per Common Share                   |   |                                          |       |   |   |   |       |   |   |   |   |   |
| Basic                                                |   | $                                             | (1.53      | )      |   | $      | (3.91      | )      |   | $ | 0.33 |   |
| Diluted                                              |   |                                          | (1.53      | )      |   |   | (3.91      | )      |   |   | 0.33 |   |
|                                                 |   |                                          |       |   |   |   |       |   |   |   |   |   |
| Weighted Average Common Shares Outstanding           |   |                                          |       |   |   |   |       |   |   |   |   |   |
| Basic                                                |   |                                          | 16,811,439 |   |   |   | 16,787,938 |   |   |   | 17,363,395 |   |
| Diluted                                              |   |                                          | 16,811,439 |   |   |   | 16,787,938 |   |   |   | 17,398,318 |   |

----

----

|                                                                   |   | 2010                             |    |   | 2009   |   |    | 2008   |   |
|------------------------------------------------------------------------|--------|----------------------------------|---------|--------|--------|--------|---------|--------|--------|
|                                                                   |   | (Amounts in thousands) |    |
|                                                                   |   |                             |    |   |   |   |    |   |   |
| Net income (loss)                                                      |   | $                                | (23,121 | )      |   | $      | (63,159 | )      |   | $ | 5,854 |   |
|                                                                   |   |                             |    |   |   |   |    |   |   |   |   |   |
| Other comprehensive income (loss):                                     |   |                             |    |   |   |   |    |   |   |   |   |   |
|                                                                   |   |                             |    |   |   |   |    |   |   |   |   |   |
| Securities available for sale:                                         |   |                             |    |   |   |   |    |   |   |   |   |   |
| Unrealized holding gains (loss) on available for sale securities       |   |                             | (3,519  | )      |   |   | 1,012   |   |   |   | 4,387 |   |
| Tax effect                                                             |   |                             | 1,357   |   |   |   | (390    | )      |   |   | (1,692 | ) |
| Reclassification of gains recognized in net income                     |   |                             | (3,531  | )      |   |   | (1,236  | )      |   |   | (98 | ) |
| Tax effect                                                             |   |                             | 1,361   |   |   |   | 476     |   |   |   | 38 |   |
| Reclassification of impairment on equity securities                    |   |                             | 186     |   |   |   | -       |   |   |   | - |   |
| Tax effect                                                             |   |                             | (72     | )      |   |   | -       |   |   |   | - |   |
| Net of tax amount                                                      |   |                             | (4,218  | )      |   |   | (138    | )      |   |   | 2,635 |   |
|                                                                   |   |                             |    |   |   |   |    |   |   |   |   |   |
| Cash flow hedging activities:                                          |   |                             |    |   |   |   |    |   |   |   |   |   |
| Unrealized holding gains (losses) on cash flow hedging activities      |   |                             | (738    | )      |   |   | 354     |   |   |   | (982 | ) |
| Tax effect                                                             |   |                             | 284     |   |   |   | (137    | )      |   |   | 343 |   |
| Loss due to counterparty default net of amortization                   |   |                             | -       |   |   |   | -       |   |   |   | 240 |   |
| Reclassification of gains recognized in net income (loss), net         |   |                             |    |   |   |   |    |   |   |   |   |   |
| Reclassified into income                                               |   |                             | 297     |   |   |   | 233     |   |   |   | 78 |   |
| Tax effect                                                             |   |                             | (115    | )      |   |   | (90     | )      |   |   | (29 | ) |
| Acquisition premium on interest rate cap contract, net of amortization |   |                             | (14     | )      |   |   | -       |   |   |   | - |   |
| Tax effect                                                             |   |                             | 6       |   |   |   | -       |   |   |   | - |   |
| Amortization of terminated floor contract                              |   |                             | -       |   |   |   | (373    | )      |   |   | - |   |
| Tax effect                                                             |   |                             | -       |   |   |   | 144     |   |   |   | - |   |
| Other                                                                  |   |                             | -       |   |   |   | 58      |   |   |   | - |   |
| Tax effect                                                             |   |                             | -       |   |   |   | (23     | )      |   |   | - |   |
| Net of tax amount                                                      |   |                             | (280    | )      |   |   | 166     |   |   |   | (350 | ) |
|                                                                   |   |                             |    |   |   |   |    |   |   |   |   |   |
| Net postretirement benefit plans adjustment                            |   |                             | (40     | )      |   |   | (14     | )      |   |   | (423 | ) |
| Tax effect                                                             |   |                             | 15      |   |   |   | 6       |   |   |   | 163 |   |
| Net of tax amount                                                      |   |                             | (25     | )      |   |   | (8      | )      |   |   | (260 | ) |
|                                                                   |   |                             |    |   |   |   |    |   |   |   |   |   |
| Total other comprehensive income (loss)                                |   |                             | (4,523  | )      |   |   | 20      |   |   |   | 2,025 |   |
|                                                                   |   |                             |    |   |   |   |    |   |   |   |   |   |
| Comprehensive income (loss)                                            |   | $                                | (27,644 | )      |   | $      | (63,139 | )      |   | $ | 7,879 |   |

----

----

|                                                   |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   | Accumulated        |   |    |   |   |
|-------------------------------------------------------------|--------|----------------------|--------|--------|-------------------|--------|--------|--------------------------------------------------------------------|--------|--------|---------------|--------|--------|---------------|---------|--------|--------------------|--------|---------|--------|--------|
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   | Retained      |    |   | Other              |   |    | Total  |   |
|                                                        |   | Preferred Stock |   |   | Common Stock |   |   | Earnings                                                           |   |   | Comprehensive |   |   | Stockholders' |    |
|                                                        |   | Shares               |   |   | Amount            |   |   | Shares                                                             |   |   | Amount        |   |   | (Deficit)     |    |   | Income (Loss) |   |    | Equity |   |
|                                                        |   |                 |   |   |              |   |   | (Amounts in thousands, except share data) |   |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |
| Balance at December 31, 2007                                |   |                 | -      |   |              | $      | -      |                                                               |   |   | 17,399,882    |   |   | $             | 119,101 |   |               | $      | 22,198  |   |   | $ | 1,040 |   |   | $ | 142,339 |   |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Net income                                                  |   |                 | -      |   |              |   | -      |                                                               |   |   | -             |   |   |          | -       |   |               |   | 5,854   |   |   |   | - |   |   |   | 5,854 |   |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Other comprehensive income, net of tax                      |   |                 | -      |   |              |   | -      |                                                               |   |   | -             |   |   |          | -       |   |               |   | -       |   |   |   | 2,025 |   |   |   | 2,025 |   |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Common shares repurchased                                   |   |                 | -      |   |              |   | -      |                                                               |   |   | (733,175      | )      |   |          | (2,700  | )      |               |   | -       |   |   |   | - |   |   |   | (2,700 | ) |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Stock options exercised including income tax benefit of $51 |   |                 | -      |   |              |   | -      |                                                               |   |   | 73,968        |   |   |          | 408     |   |               |   | -       |   |   |   | - |   |   |   | 408 |   |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Restricted stock issued                                     |   |                 | -      |   |              |   | -      |                                                               |   |   | 29,000        |   |   |          | 44      |   |               |   | -       |   |   |   | - |   |   |   | 44 |   |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Stock-based compensation                                    |   |                 | -      |   |              |   | -      |                                                               |   |   | -             |   |   |          | 111     |   |               |   | -       |   |   |   | - |   |   |   | 111 |   |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Cash dividends of $0.16 per share                           |   |                 | -      |   |              |   | -      |                                                               |   |   | -             |   |   |          | -       |   |               |   | (2,781  | )      |   |   | - |   |   |   | (2,781 | ) |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Cumulative effect of accounting method change          |   |                 | -      |   |              |   | -      |                                                               |   |   | -             |   |   |          | -       |   |               |   | (185    | )      |   |   | - |   |   |   | (185 | ) |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Preferred stock transaction:                                |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Issuance of preferred stock                                 |   |                 | 42,750 |   |              |   | 42,750 |                                                               |   |   | -             |   |   |          | -       |   |               |   | -       |   |   |   | - |   |   |   | 42,750 |   |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Discount on preferred stock                                 |   |                 | -      |   |              |   | (2,090 | )                                                                  |   |   | -             |   |   |          | 2,090   |   |               |   | -       |   |   |   | - |   |   |   | - |   |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Preferred stock accretion of discount                       |   |                 | -      |   |              |   | 30     |                                                               |   |   | -             |   |   |          | -       |   |               |   | (30     | )      |   |   | - |   |   |   | - |   |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Preferred stock dividend accrued                            |   |                 | -      |   |              |   | -      |                                                               |   |   | -             |   |   |          | -       |   |               |   | (155    | )      |   |   | - |   |   |   | (155 | ) |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Balance at December 31, 2008                                |   |                 | 42,750 |   |              |   | 40,690 |                                                               |   |   | 16,769,675    |   |   |          | 119,054 |   |               |   | 24,901  |   |   |   | 3,065 |   |   |   | 187,710 |   |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                           |   |                 | -      |   |              |   | -      |                                                               |   |   | -             |   |   |          | -       |   |               |   | (63,159 | )      |   |   | - |   |   |   | (63,159 | ) |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Other comprehensive income, net of tax                      |   |                 | -      |   |              |   | -      |                                                               |   |   | -             |   |   |          | -       |   |               |   | -       |   |   |   | 20 |   |   |   | 20 |   |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Restricted stock issued                                     |   |                 | -      |   |              |   | -      |                                                               |   |   | 18,000        |   |   |          | 63      |   |               |   | -       |   |   |   | - |   |   |   | 63 |   |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Stock-based compensation                                    |   |                 | -      |   |              |   | -      |                                                               |   |   | -             |   |   |          | 165     |   |               |   | -       |   |   |   | - |   |   |   | 165 |   |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Cash dividends of $0.04 per share                           |   |                 | -      |   |              |   | -      |                                                               |   |   | -             |   |   |          | -       |   |               |   | (664    | )      |   |   | - |   |   |   | (664 | ) |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Preferred stock transaction:                                |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Preferred stock dividends                                   |   |                 | -      |   |              |   | -      |                                                               |   |   | -             |   |   |          | -       |   |               |   | (2,138  | )      |   |   | - |   |   |   | (2,138 | ) |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Preferred stock accretion of discount                       |   |                 | -      |   |              |   | 370    |                                                               |   |   | -             |   |   |          | -       |   |               |   | (370    | )      |   |   | - |   |   |   | - |   |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Balance at December 31, 2009                                |   |                 | 42,750 |   |              | $      | 41,060 |                                                               |   |   | 16,787,675    |   |   | $             | 119,282 |   |               | $      | (41,430 | )      |   | $ | 3,085 |   |   | $ | 121,997 |   |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                           |   |                 | -      |   |              |   | -      |                                                               |   |   | -             |   |   |          | -       |   |               |   | (23,121 | )      |   |   | - |   |   |   | (23,121 | ) |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Other comprehensive income (loss), net of tax               |   |                 | -      |   |              |   | -      |                                                               |   |   | -             |   |   |          | -       |   |               |   | -       |   |   |   | (4,523 | ) |   |   | (4,523 | ) |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Stock options exercised including income tax benefit of $0  |   |                 | -      |   |              |   | -      |                                                               |   |   | 200           |   |   |          | -       |   |               |   | -       |   |   |   | - |   |   |   | - |   |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Restricted stock issued                                     |   |                 | -      |   |              |   | -      |                                                               |   |   | 24,750        |   |   |          | 74      |   |               |   | -       |   |   |   | - |   |   |   | 74 |   |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Stock-based compensation                                    |   |                 | -      |   |              |   | -      |                                                               |   |   | -             |   |   |          | 52      |   |               |   | -       |   |   |   | - |   |   |   | 52 |   |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Preferred stock transaction:                                |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Preferred stock dividends                                   |   |                 | -      |   |              |   | -      |                                                               |   |   | -             |   |   |          | -       |   |               |   | (2,138  | )      |   |   | - |   |   |   | (2,138 | ) |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Preferred stock accretion of discount                       |   |                 | -      |   |              |   | 393    |                                                               |   |   | -             |   |   |          | -       |   |               |   | (393    | )      |   |   | - |   |   |   | - |   |
|                                                        |   |                 |   |   |              |   |   |                                                               |   |   |          |   |   |          |    |   |               |   |    |   |   |   |   |   |   |   |   |   |
| Balance at December 31, 2010                                |   |                 | 42,750 |   |              | $      | 41,453 |                                                               |   |   | 16,812,625    |   |   | $             | 119,408 |   |               | $      | (67,082 | )      |   | $ | (1,438 | ) |   | $ | 92,341 |   |

----

----

|                                                                                     |   | 2010                             |     |   | 2009   |   |     | 2008   |   |
|------------------------------------------------------------------------------------------|--------|----------------------------------|----------|--------|--------|--------|----------|--------|--------|
|                                                                                     |   | (Amounts in thousands) |     |
|                                                                                     |   |                             |     |   |   |   |     |   |   |
| Cash Flows from Operating Activities                                                     |   |                             |     |   |   |   |     |   |   |
| Net income (loss)                                                                        |   | $                                | (23,121  | )      |   | $      | (63,159  | )      |   | $ | 5,854 |   |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |   |                             |     |   |   |   |     |   |   |   |   |   |
| Depreciation and amortization                                                            |   |                             | 4,389    |   |   |   | 4,131    |   |   |   | 3,817 |   |
| Provision for loan losses                                                                |   |                             | 39,000   |   |   |   | 34,000   |   |   |   | 8,165 |   |
| Net proceeds from sales of loans held for sale                                           |   |                             | 105,113  |   |   |   | 175,887  |   |   |   | 70,222 |   |
| Originations of loans held for sale                                                      |   |                             | (105,897 | )      |   |   | (176,492 | )      |   |   | (67,315 | ) |
| Gain from mortgage banking                                                               |   |                             | (2,182   | )      |   |   | (2,104   | )      |   |   | (1,294 | ) |
| Stock-based compensation                                                                 |   |                             | 126      |   |   |   | 228      |   |   |   | 155 |   |
| Net increase in cash surrender value of life insurance                                   |   |                             | (1,065   | )      |   |   | (1,101   | )      |   |   | (841 | ) |
| Realized gain on sales of available for sale securities                                  |   |                             | (3,531   | )      |   |   | (1,236   | )      |   |   | (98 | ) |
| Realized loss on impairment of investment securities available for sale                  |   |                             | 186      |   |   |   | -        |   |   |   | - |   |
| Realized loss of equity investment in Silverton Bank                                     |   |                             | -        |   |   |   | 404      |   |   |   | - |   |
| Realized (gain) loss on sale of premises and equipment                                   |   |                             | 24       |   |   |   | (57      | )      |   |   | 74 |   |
| (Gain) loss on economic hedges                                                           |   |                             | 532      |   |   |   | 826      |   |   |   | (934 | ) |
| Deferred income taxes                                                                    |   |                             | 9,710    |   |   |   | (5,836   | )      |   |   | (2,475 | ) |
| Realized (gain) loss on sale of foreclosed assets                                        |   |                             | (429     | )      |   |   | (196     | )      |   |   | 59 |   |
| OREO writedown                                                                           |   |                             | 3,092    |   |   |   | 2,493    |   |   |   | 99 |   |
| Goodwill impairment                                                                      |   |                             | -        |   |   |   | 49,501   |   |   |   | 291 |   |
| Change in assets and liabilities:                                                        |   |                             |     |   |   |   |     |   |   |   |   |   |
| Increase (decrease) in other assets                                                      |   |                             | 180      |   |   |   | (10,669  | )      |   |   | 1,706 |   |
| Increase (decrease) in other liabilities                                                 |   |                             | (638     | )      |   |   | (2,608   | )      |   |   | 926 |   |
| Total Adjustments                                                                        |   |                             | 48,610   |   |   |   | 67,171   |   |   |   | 12,557 |   |
| Net Cash Provided by Operating Activities                                                |   |                             | 25,489   |   |   |   | 4,012    |   |   |   | 18,411 |   |
| Cash Flows from Investing Activities                                                     |   |                             |     |   |   |   |     |   |   |   |   |   |
| (Increase) decrease in federal funds sold                                                |   |                             | (18,318  | )      |   |   | (29,089  | )      |   |   | 70 |   |
| Purchases of:                                                                            |   |                             |     |   |   |   |     |   |   |   |   |   |
| Available for sale investment securities                                                 |   |                             | (278,934 | )      |   |   | (215,169 | )      |   |   | (229,894 | ) |
| Held to maturity investment securities                                                   |   |                             | (36,632  | )      |   |   | -        |   |   |   | - |   |
| Proceeds from maturities and calls of:                                                   |   |                             |     |   |   |   |     |   |   |   |   |   |
| Available for sale investment securities                                                 |   |                             | 143,570  |   |   |   | 122,115  |   |   |   | 42,593 |   |
| Held to maturity investment securities                                                   |   |                             | 5,320    |   |   |   | 24,309   |   |   |   | 34,568 |   |
| Proceeds from sale of:                                                                   |   |                             |     |   |   |   |     |   |   |   |   |   |
| Available for sale investment securities                                                 |   |                             | 132,930  |   |   |   | 69,846   |   |   |   | 49,602 |   |
| Purchase of Federal Home Loan Bank stock                                                 |   |                             | -        |   |   |   | (421     | )      |   |   | (3,613 | ) |
| Proceeds from sales of Federal Home Loan Bank stock                                      |   |                             | 1,044    |   |   |   | 384      |   |   |   | 5,550 |   |
| Net (increase) decrease in loans                                                         |   |                             | 49,280   |   |   |   | 35,421   |   |   |   | (135,984 | ) |
| OREO capitalized cost                                                                    |   |                             | (103     | )      |   |   | (758     | )      |   |   | (43 | ) |
| Purchases of premises and equipment                                                      |   |                             | (1,154   | )      |   |   | (5,962   | )      |   |   | (4,599 | ) |
| Proceeds from disposal of premises and equipment                                         |   |                             | 92       |   |   |   | 59       |   |   |   | 8 |   |
| Proceeds from sale of foreclosed assets                                                  |   |                             | 11,401   |   |   |   | 10,699   |   |   |   | 1,047 |   |
| Purchase of bank-owned life insurance                                                    |   |                             | -        |   |   |   | -        |   |   |   | (10,000 | ) |
| Net Cash Provided by (Used in) Investing Activities                                      |   |                             | 8,496    |   |   |   | 11,434   |   |   |   | (250,695 | ) |

----

----

|                                                                |   | 2010                             |    |   | 2009   |   |    | 2008   |   |
|---------------------------------------------------------------------|--------|----------------------------------|---------|--------|--------|--------|---------|--------|--------|
|                                                                |   | (Amounts in thousands) |    |
| Cash Flows from Financing Activities                                |   |                             |    |   |   |   |    |   |   |
| Net increase (decrease) in demand deposits and transaction accounts |   |                             | (4,407  | )      |   |   | 119,579 |   |   |   | (27,523 | ) |
| Net increase (decrease) in time deposits                            |   |                             | 38,756  |   |   |   | (38,621 | )      |   |   | 215,398 |   |
| Net increase (decrease) in short-term borrowings                    |   |                             | (63,379 | )      |   |   | (59,720 | )      |   |   | 27,425 |   |
| Proceeds from long-term borrowings                                  |   |                             | -       |   |   |   | 16,250  |   |   |   | 50,000 |   |
| Repayment of long-term borrowings                                   |   |                             | (16,417 | )      |   |   | (45,163 | )      |   |   | (77,383 | ) |
| Net proceeds from issuance of preferred stock                       |   |                             | -       |   |   |   | -       |   |   |   | 42,750 |   |
| Net proceeds from exercise of stock options                         |   |                             | -       |   |   |   | -       |   |   |   | 408 |   |
| Cost of shares repurchased                                          |   |                             | -       |   |   |   | -       |   |   |   | (2,700 | ) |
| Preferred dividends paid                                            |   |                             | (2,138  | )      |   |   | (2,138  | )      |   |   | - |   |
| Cash dividends paid                                                 |   |                             | -       |   |   |   | (664    | )      |   |   | (2,781 | ) |
| Net Cash Provided by (Used in) Financing Activities                 |   |                             | (47,585 | )      |   |   | (10,477 | )      |   |   | 225,594 |   |
| Net Increase (decrease) in Cash and Cash Equivalents                |   |                             | (13,600 | )      |   |   | 4,969   |   |   |   | (6,690 | ) |
| Cash and Cash Equivalents, Beginning of Year                        |   |                             | 30,184  |   |   |   | 25,215  |   |   |   | 31,905 |   |
| Cash and Cash Equivalents, End of Year                              |   | $                                | 16,584  |   |   | $      | 30,184  |   |   | $ | 25,215 |   |

|                                                                           |   | 2010                             |   |   | 2009   |   |   | 2008   |   |
|--------------------------------------------------------------------------------|--------|----------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                                           |   | (Amounts in thousands) |   |
| Supplemental Disclosures of Cash Flow Information                              |   |                             |   |   |   |   |   |   |   |
| Interest paid on deposits and borrowed funds                                   |   | $                                | 28,818 |   |   | $      | 40,835 |   |   | $ | 46,370 |   |
| Income taxes paid                                                              |   |                             | 945    |   |   |   | 754    |   |   |   | 5,140 |   |
| Supplemental Schedule of Noncash Investing and Financing Activities            |   |                             |   |   |   |   |   |   |   |   |   |   |
| Transfer of loans to foreclosed assets                                         |   | $                                | 11,861 |   |   | $      | 25,902 |   |   | $ | 6,082 |   |
| Increase (decrease) in fair value of securities available for sale, net of tax |   |                             | (4,218 | )      |   |   | (138   | )      |   |   | 2,635 |   |
| Increase (decrease) in fair value of cash flow hedges, net of tax              |   |                             | (280   | )      |   |   | 166    |   |   |   | (350 | ) |
| Unrealized gain (loss) on fair value hedges                                    |   |                             | (379   | )      |   |   | 161    |   |   |   | 456 |   |

----

----

----

----

----

|                                                                                                                                |   | 2010   |       |   | 2009   |   |       | 2008   |   |
|-------------------------------------------------------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
| Weighted average number of common shares used in computing basic net income per common share                                        |   |   | 16,811,439 |   |   |   | 16,787,938 |   |   |   | 17,363,395 |   |
| Effect of dilutive stock options                                                                                                    |   |   | -          |   |   |   | -          |   |   |   | 34,923 |   |
| Weighted average number of common shares and dilutive potential common shares used in computing diluted net income per common share |   |   | 16,811,439 |   |   |   | 16,787,938 |   |   |   | 17,398,318 |   |

----

|                                                                          |   | 2010                             |   |   | 2009   |   |
|-------------------------------------------------------------------------------|--------|----------------------------------|--------|--------|--------|--------|
|                                                                          |   | (Amounts in thousands) |   |
| Unrealized holding gain  - investment securities available for sale |   | $                                | (1,535 | )      |   | $      | 5,329 |   |
| Deferred income taxes                                                         |   |                             | 592    |   |   |   | (2,054 | ) |
| Net unrealized holding gain - investment securities available for sale        |   |                             | (943   | )      |   |   | 3,275 |   |
| Unrealized holding gain (loss) - cash flow hedge instruments                  |   |                             | (333   | )      |   |   | 117 |   |
| Deferred income taxes                                                         |   |                             | 128    |   |   |   | (41 | ) |
| Net unrealized holding gain (loss) - cash flow hedge instruments              |   |                             | (205   | )      |   |   | 76 |   |
| Postretirement benefit plans adjustment                                       |   |                             | (473   | )      |   |   | (433 | ) |
| Deferred income taxes                                                         |   |                             | 183    |   |   |   | 167 |   |
| Net postretirement benefit plans adjustment                                   |   |                             | (290   | )      |   |   | (266 | ) |
| Total accumulated other comprehensive income                                  |   | $                                | (1,438 | )      |   | $      | 3,085 |   |

----

----

|   | · | Strengthen Board oversight of the management and operations of the Bank; |
|--------|--------|--------------------------------------------------------------------------|

|   | · | Comply with minimum capital requirements or 8% Tier 1 leverage capital and 11% total risk-based capital; |
|--------|--------|----------------------------------------------------------------------------------------------------------|

|   | · | Formulate and implement a plan to reduce the Bank’s risk exposure in assets classified “Substandard or Doubtful” in the FDIC’s most recent report of examination by 15% in 180 days, 35% in 360 days, 60% in 540 days and 75% in 720 days; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Within 90 days, implement effective lending and collection policies; |
|--------|--------|----------------------------------------------------------------------|

|   | · | Not pay cash dividends without the prior written approval of the FDIC and the Commissioner; and |
|--------|--------|-------------------------------------------------------------------------------------------------|

|   | · | Neither renew, rollover or accept any brokered deposits without obtaining a waiver from the FDIC. |
|--------|--------|---------------------------------------------------------------------------------------------------|

|   | · | As of December 31, 2010, the Bank had reduced its risk exposure to adversely classified assets identified in the Bank’s most recent Report of Examination by an amount (17%) exceeding its scheduled reduction at its first measurement point (15% reduction within 180 days after the effective date of the Consent Order, which was February 16, 2011). |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | By December 31, 2010, the Bank had eliminated all assets classified as “loss” and the appropriate portions of those assets classified as “doubtful” in the Bank’s most recent Report of Examination. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Throughout the third and fourth quarters of 2010 and continuing into the first quarter of 2011, the Bank has taken a number of measures to strengthen its credit risk management, including the staffing of a Special Assets Group to resolve problem credits and formal Board oversight of the internal loan review function. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (2) | REGULATORY MATTERS (Continued) |
|-----|--------------------------------|

----

|                           |   | 2010                            |    |
|--------------------------------|--------|---------------------------------|---------|
|                           |   | Amortized Cost             |    |   | Gross UnrealizedGains |   |   | Gross UnrealizedLosses |   |   | Fair Value |   |
|                           |   | (Amount in thousands) |    |
| Securities available for sale: |   |                            |    |   |   |   |   |   |   |   |   |   |
| US government agencies         |   | $                               | 100,101 |   |   | $ | 198 |   |   | $ | 2,059 |   |   | $ | 98,240 |   |
| Mortgage-backed securities     |   |                            | 148,284 |   |   |   | 2,349 |   |   |   | 857 |   |   |   | 149,776 |   |
| Municipals                     |   |                            | 55,901  |   |   |   | 404 |   |   |   | 741 |   |   |   | 55,564 |   |
| Trust preferred securities     |   |                            | 4,252   |   |   |   | 21 |   |   |   | 1,179 |   |   |   | 3,094 |   |
| Common stocks and mutual funds |   |                            | 2,650   |   |   |   | 353 |   |   |   | - |   |   |   | 3,003 |   |
| Other                          |   |                            | 1,000   |   |   |   | - |   |   |   | 24 |   |   |   | 976 |   |
|                           |   | $                               | 312,188 |   |   | $ | 3,325 |   |   | $ | 4,860 |   |   | $ | 310,653 |   |
| Securities held to maturity:   |   |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities     |   | $                               | 804     |   |   | $ | 48 |   |   | $ | - |   |   | $ | 852 |   |
| Municipals                     |   |                            | 31,416  |   |   |   | 104 |   |   |   | 1,631 |   |   |   | 29,889 |   |
| Corporate Bonds                |   |                            | 10,000  |   |   |   | - |   |   |   | 560 |   |   |   | 9,440 |   |
|                           |   | $                               | 42,220  |   |   | $ | 152 |   |   | $ | 2,191 |   |   | $ | 40,181 |   |

|                           |   | 2009                            |    |
|--------------------------------|--------|---------------------------------|---------|
|                           |   | Amortized Cost             |    |   | Gross UnrealizedGains |   |   | Gross UnrealizedLosses |   |   | Fair Value |   |
|                           |   | (Amount in thousands) |    |
| Securities available for sale: |   |                            |    |   |   |   |   |   |   |   |   |   |
| US government agencies         |   | $                               | 57,441  |   |   | $ | 407 |   |   | $ | 560 |   |   | $ | 57,288 |   |
| Mortgage-backed securities     |   |                            | 176,543 |   |   |   | 5,813 |   |   |   | 256 |   |   |   | 182,100 |   |
| Municipals                     |   |                            | 64,797  |   |   |   | 1,564 |   |   |   | 102 |   |   |   | 66,259 |   |
| Trust preferred securities     |   |                            | 4,252   |   |   |   | - |   |   |   | 1,376 |   |   |   | 2,876 |   |
| Common stocks and mutual finds |   |                            | 3,418   |   |   |   | 141 |   |   |   | 295 |   |   |   | 3,264 |   |
| Other                          |   |                            | 1,000   |   |   |   | - |   |   |   | 7 |   |   |   | 993 |   |
|                           |   | $                               | 307,451 |   |   | $ | 7,925 |   |   | $ | 2,596 |   |   | $ | 312,780 |   |
| Securities held to maturity:   |   |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| US government agencies         |   | $                               | 2,500   |   |   | $ | 35 |   |   | $ | - |   |   | $ | 2,535 |   |
| Mortgage-backed securities     |   |                            | 1,175   |   |   |   | 44 |   |   |   | - |   |   |   | 1,219 |   |
| Municipals                     |   |                            | 7,244   |   |   |   | 185 |   |   |   | 3 |   |   |   | 7,426 |   |
|                           |   | $                               | 10,919  |   |   | $ | 264 |   |   | $ | 3 |   |   | $ | 11,180 |   |

----

|                                  |   | 2010                               |    |
|---------------------------------------|--------|------------------------------------|---------|
|                                  |   | Less than 12 Months |    |   | 12 Months or More |   |   | Total |   |
|                                  |   | Fair Value                    |    |   | Unrealizedlosses |   |   | Fair Value |   |   | Unrealizedlosses |   |   | FairValue |   |   | Unrealizedlosses |   |
|                                  |   | (Amount in thousands)    |    |
| Securities available for sale:        |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| US government agencies                |   | $                                  | 75,252  |   |   | $ | 2,059 |   |   | $ | - |   |   | $ | - |   |   | $ | 75,252 |   |   | $ | 2,059 |   |
| Mortgage-backed securities            |   |                               | 70,050  |   |   |   | 857 |   |   |   | 121 |   |   |   | - |   |   |   | 70,171 |   |   |   | 857 |   |
| Municipals                            |   |                               | 31,513  |   |   |   | 737 |   |   |   | 719 |   |   |   | 4 |   |   |   | 32,232 |   |   |   | 741 |   |
| Trust preferred securities            |   |                               | -       |   |   |   | - |   |   |   | 2,071 |   |   |   | 1,179 |   |   |   | 2,071 |   |   |   | 1,179 |   |
| Other                                 |   |                               | 976     |   |   |   | 24 |   |   |   | - |   |   |   | - |   |   |   | 976 |   |   |   | 24 |   |
| Total temporarily impaired securities |   | $                                  | 177,791 |   |   | $ | 3,677 |   |   | $ | 2,911 |   |   | $ | 1,183 |   |   | $ | 180,702 |   |   | $ | 4,860 |   |
|                                  |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Securities held to maturity:          |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Municipals                            |   | $                                  | 22,507  |   |   | $ | 1,631 |   |   | $ | - |   |   | $ | - |   |   | $ | 22,507 |   |   | $ | 1,631 |   |
| Corporate bonds                       |   |                               | 9,440   |   |   |   | 560 |   |   |   | - |   |   |   | - |   |   |   | 9,440 |   |   |   | 560 |   |
|                                  |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total temporarily impaired securities |   | $                                  | 31,947  |   |   | $ | 2,191 |   |   | $ | - |   |   | $ | - |   |   | $ | 31,947 |   |   | $ | 2,191 |   |

|                                  |   | 2009                               |   |
|---------------------------------------|--------|------------------------------------|--------|
|                                  |   | Less than 12 Months |   |   | 12 Months or More |   |   | Total |   |
|                                  |   | Fair Value                    |   |   | Unrealizedlosses |   |   | Fair Value |   |   | Unrealizedlosses |   |   | FairValue |   |   | Unrealizedlosses |   |
|                                  |   | (Amount in thousands)    |   |
| Securities available for sale:        |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| US government agencies                |   | $                                  | 27,131 |   |   | $ | 560 |   |   | $ | - |   |   | $ | - |   |   | $ | 27,131 |   |   | $ | 560 |   |
| Mortgage-backed securities            |   |                               | 15,414 |   |   |   | 256 |   |   |   | - |   |   |   | - |   |   |   | 15,414 |   |   |   | 256 |   |
| Municipals                            |   |                               | 6,881  |   |   |   | 102 |   |   |   | - |   |   |   | - |   |   |   | 6,881 |   |   |   | 102 |   |
| Trust preferred securities            |   |                               | 1,770  |   |   |   | 1,230 |   |   |   | 1,106 |   |   |   | 146 |   |   |   | 2,876 |   |   |   | 1,376 |   |
| Common stocks and mutual funds        |   |                               | 69     |   |   |   | 198 |   |   |   | 403 |   |   |   | 97 |   |   |   | 472 |   |   |   | 295 |   |
| Other                                 |   |                               | 993    |   |   |   | 7 |   |   |   | - |   |   |   | - |   |   |   | 993 |   |   |   | 7 |   |
| Total temporarily impaired securities |   | $                                  | 52,258 |   |   | $ | 2,353 |   |   | $ | 1,509 |   |   | $ | 243 |   |   | $ | 53,767 |   |   | $ | 2,596 |   |
| Securities held to maturity:          |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Municipals                            |   | $                                  | 497    |   |   | $ | 3 |   |   | $ | - |   |   | $ | - |   |   | $ | 497 |   |   | $ | 3 |   |

----

|                                 |   | Securities Available for Sale |    |   | Securities Held to Maturity |   |
|--------------------------------------|--------|----------------------------------------------|---------|--------|--------------------------------------------|--------|
|                                 |   | AmortizedCost                                |    |   | Fair Value                            |   |   | AmortizedCost |   |   | Fair Value |   |
|                                 |   | (Amount in thousands)              |    |
| Due within one year                  |   | $                                            | 2,287   |   |                                       | $      | 2,293 |   |   | $ | 100 |   |   | $ | 101 |   |
| Due after one but through five years |   |                                         | 2,872   |   |                                       |   | 2,877 |   |   |   | 10,707 |   |   |   | 10,183 |   |
| Due after five but through ten years |   |                                         | 64,960  |   |                                       |   | 64,261 |   |   |   | 3,196 |   |   |   | 3,239 |   |
| Due after ten years                  |   |                                         | 85,883  |   |                                       |   | 84,373 |   |   |   | 27,413 |   |   |   | 25,806 |   |
| Mortgage-backed securities           |   |                                         | 148,284 |   |                                       |   | 149,776 |   |   |   | 804 |   |   |   | 852 |   |
| Trust preferred securities           |   |                                         | 4,252   |   |                                       |   | 3,094 |   |   |   | - |   |   |   | - |   |
| Common stocks and mutual funds       |   |                                         | 2,650   |   |                                       |   | 3,003 |   |   |   | - |   |   |   | - |   |
| Other                                |   |                                         | 1,000   |   |                                       |   | 976 |   |   |   | - |   |   |   | - |   |
|                                 |   | $                                            | 312,188 |   |                                       | $      | 310,653 |   |   | $ | 42,220 |   |   | $ | 40,181 |   |

----

|                            |   | 2010                             |      |   | 2009   |   |
|---------------------------------|--------|----------------------------------|-----------|--------|--------|--------|
|                            |   | (Amounts in thousands) |      |
| Residential mortgage loans      |   | $                                | 341,401   |   |   | $      | 395,586 |   |
| Commercial mortgage loans       |   |                             | 475,901   |   |   |   | 455,268 |   |
| Construction loans              |   |                             | 138,543   |   |   |   | 178,239 |   |
| Commercial and industrial loans |   |                             | 156,688   |   |   |   | 183,319 |   |
| Loans to individuals            |   |                             | 17,543    |   |   |   | 17,863 |   |
| Total                           |   | $                                | 1,130,076 |   |   | $      | 1,230,275 |   |

----

----

|                                                    |   | 2010                             |    |   | 2009   |   |
|---------------------------------------------------------|--------|----------------------------------|---------|--------|--------|--------|
|                                                    |   | (Amounts in thousands) |    |
| Nonaccrual loans                                        |   | $                                | 63,178  |   |   | $      | 35,535 |   |
| Restructured-nonaccruing                                |   |                             | 28,599  |   |   |   | 2,197 |   |
| Total nonperforming loans                               |   |                             | 91,777  |   |   |   | 37,732 |   |
| Foreclosed assets                                       |   |                             | 17,314  |   |   |   | 19,634 |   |
| Total nonperforming assets                              |   | $                                | 109,091 |   |   | $      | 57,366 |   |
| Restructured loans in accrual status not included above |   | $                                | 12,117  |   |   | $      | - |   |

|                      |   | NonaccrualLoans                  |   |   | ImpairedLoans |   |
|---------------------------|--------|----------------------------------|--------|--------|---------------|--------|
|                      |   | (Amounts in thousands) |   |
| Commercial real estate    |   | $                                | 22,085 |   |          | $      | 21,251 |   |
| Commercial and industrial |   |                             | 7,324  |   |          |   | 6,359 |   |
| Commercial line of credit |   |                             | 3,381  |   |          |   | 3,233 |   |
| Residential construction  |   |                             | 26,257 |   |          |   | 25,676 |   |
| Home equity lines         |   |                             | 1,031  |   |          |   | 433 |   |
| Residential lots          |   |                             | 19,192 |   |          |   | 19,336 |   |
| Raw land                  |   |                             | 1,963  |   |          |   | 1,962 |   |
| Consumer                  |   |                             | 10,544 |   |          |   | 8,872 |   |
| Total                     |   | $                                | 91,777 |   |          | $      | 87,122 |   |

----

|                                                  |   | Commercial |    |   |       |   |    | Residential |   |   |    |   |   |     |    |   |   |   |
|-------------------------------------------------------|--------|------------|---------|--------|------------|--------|---------|-------------|--------|--------|---------|--------|--------|----------|---------|--------|--------|--------|
|                                                  |   | Real       |    |   |       |   |    | Real        |   |   |    |   |   |     |    |   |   |   |
|                                                  |   | Estate     |    |   | Commercial |   |    | Estate      |   |   | HELOC   |   |   | Consumer |    |   | Total  |   |
| Ending balance: individually evaluated for impairment |   | $          | 21,252  |   |       | $      | 9,592   |        |   | $      | 46,974  |   |   | $        | 432     |   |   | $      | 8,872 |   |   | $ | 87,122 |   |
| Ending balance: collectively evaluated for impairment |   |       | 437,186 |   |       |   | 147,375 |        |   |   | 173,393 |   |   |     | 104,401 |   |   |   | 180,599 |   |   |   | 1,042,954 |   |
| Ending Balance                                        |   | $          | 458,438 |   |       | $      | 156,967 |        |   | $      | 220,367 |   |   | $        | 104,833 |   |   | $      | 189,471 |   |   | $ | 1,130,076 |   |

|                                |   | Unpaid    |    |   | Partial                |   |    |       |   |   |      |   |   | Average    |   |
|-------------------------------------|--------|-----------|---------|--------|------------------------|--------|---------|------------|--------|--------|-----------|--------|--------|------------|--------|
|                                |   | Principal |    |   | Charge Offs       |   |    | Recorded   |   |   | Related   |   |   | Recorded   |   |
|                                |   | Balance   |    |   | To Date           |   |    | Investment |   |   | Allowance |   |   | Investment |   |
|                                |   |      |    |   | (Amounts in thousands) |   |
| With no related allowance recorded: |   |      |    |   |                   |   |    |       |   |   |      |   |   |       |   |
| Commercial real estate              |   | $         | 23,114  |   |                   | $      | (5,761  | )          |   | $      | 17,353    |   |   | $          | -      |   |   | $ | 12,065 |   |
| Commercial                          |   |      |    |   |                   |   |    |       |   |   |      |   |   |       |   |   |   |   |   |   |
| Commercial and industrial           |   |      | 7,398   |   |                   |   | (1,923  | )          |   |   | 5,475     |   |   |       | -      |   |   |   | 5,593 |   |
| Commercial line of credit           |   |      | 2,530   |   |                   |   | (105    | )          |   |   | 2,425     |   |   |       | -      |   |   |   | 1,620 |   |
| Residential real estate             |   |      |    |   |                   |   |    |       |   |   |      |   |   |       |   |   |   |   |   |   |
| Residential construction            |   |      | 23,230  |   |                   |   | (4,554  | )          |   |   | 18,676    |   |   |       | -      |   |   |   | 14,254 |   |
| Residential lots                    |   |      | 15,449  |   |                   |   | (6,511  | )          |   |   | 8,938     |   |   |       | -      |   |   |   | 8,621 |   |
| Raw land                            |   |      | 3,989   |   |                   |   | (2,277  | )          |   |   | 1,712     |   |   |       | -      |   |   |   | 1,450 |   |
| Home equity lines                   |   |      | 457     |   |                   |   | (123    | )          |   |   | 334       |   |   |       | -      |   |   |   | 208 |   |
| Consumer                            |   |      | 5,904   |   |                   |   | (1,524  | )          |   |   | 4,380     |   |   |       | -      |   |   |   | 2,992 |   |
| Subtotal                            |   |      | 82,071  |   |                   |   | (22,778 | )          |   |   | 59,293    |   |   |       | -      |   |   |   | 46,803 |   |
|                                |   |      |    |   |                   |   |    |       |   |   |      |   |   |       |   |   |   |   |   |   |
| With an allowance recorded:         |   |      |    |   |                   |   |    |       |   |   |      |   |   |       |   |   |   |   |   |   |
| Commercial real estate              |   |      | 3,958   |   |                   |   | (60     | )          |   |   | 3,898     |   |   |       | 775    |   |   |   | 9,041 |   |
| Commercial                          |   |      |    |   |                   |   |    |       |   |   |      |   |   |       |   |   |   |   |   |   |
| Commercial and industrial           |   |      | 990     |   |                   |   | (106    | )          |   |   | 884       |   |   |       | 510    |   |   |   | 1,583 |   |
| Commercial line of credit           |   |      | 834     |   |                   |   | (26     | )          |   |   | 808       |   |   |       | 583    |   |   |   | 2,084 |   |
| Residential real estate             |   |      |    |   |                   |   |    |       |   |   |      |   |   |       |   |   |   |   |   |   |
| Residential construction            |   |      | 7,114   |   |                   |   | (114    | )          |   |   | 7,000     |   |   |       | 860    |   |   |   | 15,352 |   |
| Residential lots                    |   |      | 10,484  |   |                   |   | (86     | )          |   |   | 10,398    |   |   |       | 841    |   |   |   | 11,251 |   |
| Raw land                            |   |      | 251     |   |                   |   | (1      | )          |   |   | 250       |   |   |       | 53     |   |   |   | 251 |   |
| Home equity lines                   |   |      | 100     |   |                   |   | (1      | )          |   |   | 99        |   |   |       | 91     |   |   |   | 83 |   |
| Consumer                            |   |      | 4,516   |   |                   |   | (24     | )          |   |   | 4,492     |   |   |       | 1,417  |   |   |   | 1,755 |   |
| Subtotal                            |   |      | 28,247  |   |                   |   | (418    | )          |   |   | 27,829    |   |   |       | 5,130  |   |   |   | 41,400 |   |
|                                |   |      |    |   |                   |   |    |       |   |   |      |   |   |       |   |   |   |   |   |   |
| Summary                             |   |      |    |   |                   |   |    |       |   |   |      |   |   |       |   |   |   |   |   |   |
| Commercial real estate              |   |      | 27,072  |   |                   |   | (5,821  | )          |   |   | 21,251    |   |   |       | 775    |   |   |   | 21,106 |   |
| Commercial                          |   |      | 11,752  |   |                   |   | (2,160  | )          |   |   | 9,592     |   |   |       | 1,093  |   |   |   | 10,880 |   |
| Residential real estate             |   |      | 60,517  |   |                   |   | (13,543 | )          |   |   | 46,974    |   |   |       | 1,754  |   |   |   | 51,179 |   |
| Home equity lines                   |   |      | 557     |   |                   |   | (124    | )          |   |   | 433       |   |   |       | 91     |   |   |   | 291 |   |
| Consumer                            |   |      | 10,420  |   |                   |   | (1,548  | )          |   |   | 8,872     |   |   |       | 1,417  |   |   |   | 4,747 |   |
| Grand Totals                        |   | $         | 110,318 |   |                   | $      | (23,196 | )          |   | $      | 87,122    |   |   | $          | 5,130  |   |   | $ | 88,203 |   |

----

|                      |   | 30-59Days PastDue |   |   | 60-89Days PastDue |   |   | Greater than 90Days (1) |   |   | Total PastDue |   |   | Current |   |   | TotalFinancingReceivables |   |      | RecordedInvestment> 90 DaysandAccruing |   |
|---------------------------|--------|------------------------|--------|--------|------------------------|--------|--------|----------------------------------------|--------|--------|--------------------|--------|--------|---------|--------|--------|---------------------------|--------|-----------|-----------------------------------------------------|--------|
|                      |   | (Amounts in thousands) |   |
|                      |   |                   |   |
| Commercial real estate    |   | $                      | 43     |   |                   | $      | 114    |                                   |   | $      | 22,085             |   |   | $       | 22,242 |   |                      | $      | 433,463   |                                                |   | $ | 455,705 |   |   | $ | - |   |
| Commercial and industrial |   |                   | 53     |   |                   |   | 2      |                                   |   |   | 7,324              |   |   |    | 7,379  |   |                      |   | 84,928    |                                                |   |   | 92,307 |   |   |   |   |   |
| Commercial line of credit |   |                   | 103    |   |                   |   | 19     |                                   |   |   | 3,381              |   |   |    | 3,503  |   |                      |   | 61,157    |                                                |   |   | 64,660 |   |   |   | - |   |
| Residential construction  |   |                   | 92     |   |                   |   | 721    |                                   |   |   | 26,257             |   |   |    | 27,070 |   |                      |   | 110,574   |                                                |   |   | 137,644 |   |   |   | - |   |
| Home equity lines         |   |                   | 415    |   |                   |   | 222    |                                   |   |   | 1,031              |   |   |    | 1,668  |   |                      |   | 103,165   |                                                |   |   | 104,833 |   |   |   | - |   |
| Residential lots          |   |                   | 34     |   |                   |   | -      |                                   |   |   | 19,192             |   |   |    | 19,226 |   |                      |   | 43,326    |                                                |   |   | 62,552 |   |   |   | - |   |
| Raw land                  |   |                   | 24     |   |                   |   | -      |                                   |   |   | 1,963              |   |   |    | 1,987  |   |                      |   | 18,184    |                                                |   |   | 20,171 |   |   |   | - |   |
| Consumer                  |   |                   | 3,165  |   |                   |   | 468    |                                   |   |   | 10,544             |   |   |    | 14,177 |   |                      |   | 178,027   |                                                |   |   | 192,204 |   |   |   | - |   |
| Total                     |   | $                      | 3,929  |   |                   | $      | 1,546  |                                   |   | $      | 91,777             |   |   | $       | 97,252 |   |                      | $      | 1,032,824 |                                                |   | $ | 1,130,076 |   |   | $ | - |   |
| Percentage of total loans |   |                   | 0.35   | %      |                   |   | 0.14   | %                                      |   |   | 8.12               | %      |   |    | 8.61   | %      |                      |   | 91.39     | %                                                   |   |   |   |   |   |   |   |   |

|                         |   | 2010   |    |   | 2009   |   |    | 2008   |   |
|------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
| Balance at beginning of year |   | $      | 24,433  |   |   | $      | 25,585  |   |   | $ | 22,181 |   |
| Disbursements                |   |   | 11,032  |   |   |   | 13,110  |   |   |   | 23,937 |   |
| Repayments                   |   |   | (13,504 | )      |   |   | (14,262 | )      |   |   | (20,533 | ) |
| Balance at end of year       |   | $      | 21,961  |   |   | $      | 24,433  |   |   | $ | 25,585 |   |

----

|                         |   | 2010                             |    |   | 2009   |   |    | 2008   |   |
|------------------------------|--------|----------------------------------|---------|--------|--------|--------|---------|--------|--------|
|                         |   | (Amounts in thousands) |    |
| Balance at beginning of year |   | $                                | 29,638  |   |   | $      | 18,851  |   |   | $ | 14,258 |   |
| Provision for loan losses    |   |                             | 39,000  |   |   |   | 34,000  |   |   |   | 8,165 |   |
| Charge-offs                  |   |                             | (42,489 | )      |   |   | (24,633 | )      |   |   | (3,834 | ) |
| Recoveries                   |   |                             | 3,431   |   |   |   | 1,420   |   |   |   | 262 |   |
| Net charge-offs              |   |                             | (39,058 | )      |   |   | (23,213 | )      |   |   | (3,572 | ) |
| Balance at end of year       |   | $                                | 29,580  |   |   | $      | 29,638  |   |   | $ | 18,851 |   |

|                                                  |   | Commercial |   |   |       |   |   | Residential |   |   |    |   |   |     |   |   |   |   |
|-------------------------------------------------------|--------|------------|--------|--------|------------|--------|--------|-------------|--------|--------|---------|--------|--------|----------|--------|--------|--------|--------|
|                                                  |   | Real       |   |   |       |   |   | Real        |   |   |    |   |   |     |   |   |   |   |
|                                                  |   | Estate     |   |   | Commercial |   |   | Estate      |   |   | HELOC   |   |   | Consumer |   |   | Total  |   |
| Allowance for credit losses:                          |   |       |   |   |       |   |   |        |   |   |    |   |   |     |   |   |   |   |
| Beginning balance                                     |   | $          | 9,356  |   |       | $      | 3,079  |        |   | $      | 13,272  |   |   | $        | 1,187  |   |   | $      | 2,744 |   |   | $ | 29,638 |   |
| Provision                                             |   |       | 5,237  |   |       |   | 5,520  |        |   |   | 22,597  |   |   |     | 1,933  |   |   |   | 3,713 |   |   |   | 39,000 |   |
| Charge-offs                                           |   |       | (8,200 | )      |       |   | (5,610 | )           |   |   | (23,944 | )      |   |     | (1,799 | )      |   |   | (2,935 | ) |   |   | (42,488 | ) |
| Recoveries                                            |   |       | 310    |   |       |   | 1,165  |        |   |   | 1,609   |   |   |     | 172    |   |   |   | 174 |   |   |   | 3,430 |   |
| Ending balance                                        |   | $          | 6,703  |   |       | $      | 4,154  |        |   | $      | 13,534  |   |   | $        | 1,493  |   |   | $      | 3,696 |   |   | $ | 29,580 |   |
| Ending balance: individually evaluated for impairment |   | $          | 775    |   |       | $      | 1,093  |        |   | $      | 1,755   |   |   | $        | 91     |   |   | $      | 1,416 |   |   | $ | 5,130 |   |
| Ending balance: collectively evaluated for impairment |   | $          | 5,928  |   |       | $      | 3,061  |        |   | $      | 11,779  |   |   | $        | 1,402  |   |   | $      | 2,280 |   |   | $ | 24,450 |   |

|   | · | Grades 1, 2 and 3 – Better Than Average Risk – Borrowers assigned any one of these ratings would generally be characterized as representing better than average risk.  Access to alternate sources of traditional bank financing is evident; secondary repayment sources are sufficient to protect against the risk of principal or income loss. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Grade 4 – Average Risk – Borrowers assigned this rating would generally be characterized as representing average risk.  Access to alternate sources of traditional bank financing is evident; secondary repayment sources are sufficient to protect against the risk of principal or income loss.  Or, the risk attributable to a marginally sufficient primary repayment source is mitigated by liquid collateral in amounts which, discounted for normal fluctuations in market value, are sufficient to protect against the risk of principal or income loss. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | Grade 5 – Acceptable Risk/Watch – Loans where the borrower’s ability to repay from primary (intended) repayment source is not clearly sufficient to ensure performance as contracted; however, the loan is performing as contracted, secondary repayment sources are clearly sufficient to protect against the risk of principal or income loss, and the Bank can reasonably expect that the circumstances causing the repayment concern will be resolved.  Access to alternate financing sources exists, but may be limited to institutions specializing in higher risk financing. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Grade 6 – Special Mention – This would include “Other Assets Especially Mentioned” (OAEM).  OAEM are currently protected but potentially weak, they are characterized by: undue and unwarranted credit risk but not to the point of justifying a classification of substandard.  Potential weakness may weaken the asset or inadequately protect the Bank’s credit position at some future date if not corrected.  Evidence that the risk is increasing beyond that at which the loan originally would have been granted.  Loans, where adverse economic conditions that develop subsequent to the loan origination that do not jeopardize liquidation of the debt but do increase the level of risk, may also warrant this rating. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Grade 7 – Substandard – A substandard loan is inadequately protected by the current net worth and paying capacity of the obligor or by the value of the collateral pledged, if any.  There is a distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.  Loans in this category are characterized by deterioration in quality exhibited by any number of well-defined weaknesses requiring corrective action.  Examples include high debt to worth ratios, declining or negative earnings trends, declining or inadequate liquidity, improper loan structure and questionable repayment sources.  Near term improvement is questionable. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Grade 8 – Doubtful – Loans classified as doubtful have all the weaknesses inherent in loans classified substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values highly questionable and improbable.  Some loss of principal is expected, however, the amount of such loss cannot be fully determined at this time.  Factors such as equity injection, alternative financing, liquidation of assets or the pledging of additional collateral can impact the loan.  All loans in this category are to immediately be placed on non-accrual with all payments applied to principal until such time as the potential loss exposure is eliminated. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Grade 9 – Loss – Loans classified as loss are considered uncollectable and of such little value that there continuance as bankable assets is not warranted.  This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this worthless loan even though partial recovery may be affected in the future. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Commercial Credit Exposure                                           |   |
|--------------------------------------------------------------------------------|--------|
| Credit Risk Profile by Internally Assigned Grade |   |
|                                                                           |   | CommercialReal Estate |   |   | Commercialand Industrial |   |   | CommercialLines ofCredit |   |
|                                                                           |   | 2010 |   |   | 2010 |   |   | 2010 |   |
|                                                                           |   | (Amounts in thousands) |   |
| Acceptable Risk or Better                                                      |   | $ | 309,215 |   |   | $ | 64,362 |   |   | $ | 54,276 |   |
| Special Mention                                                                |   |   | 54,923 |   |   |   | 13,295 |   |   |   | 4,000 |   |
| Substandard                                                                    |   |   | 89,355 |   |   |   | 13,656 |   |   |   | 4,592 |   |
| Doubtful                                                                       |   |   | 2,212 |   |   |   | 994 |   |   |   | 1,792 |   |
| Total                                                                          |   | $ | 455,705 |   |   | $ | 92,307 |   |   | $ | 64,660 |   |

| Consumer Credit Exposure                                             |   |
|--------------------------------------------------------------------------------|--------|
| Credit Risk Profile by Internally Assigned Grade |   |
|                                                                           |   | ResidentialConstruction |   |   | Home EquityLines |   |   | Consumer |   |
|                                                                           |   | 2010 |   |   | 2010 |   |   | 2010 |   |
|                                                                           |   | (Amounts in thousands) |   |
| Acceptable Risk or Better                                                      |   | $ | 62,529 |   |   | $ | 96,904 |   |   | $ | 154,628 |   |
| Special mention                                                                |   |   | 35,543 |   |   |   | 3,024 |   |   |   | 17,489 |   |
| Substandard                                                                    |   |   | 39,572 |   |   |   | 4,905 |   |   |   | 20,087 |   |
| Total                                                                          |   | $ | 137,644 |   |   | $ | 104,833 |   |   | $ | 192,204 |   |

| Consumer Credit Exposure                                             |   |
|--------------------------------------------------------------------------------|--------|
| Credit Risk Profile by Internally Assigned Grade |   |
|                                                                           |   | ResidentialLots |   |   | Raw Land |   |
|                                                                           |   | 2010 |   |   | 2010 |   |
|                                                                           |   | (Amounts in thousands) |   |
| Acceptable Risk or Better                                                      |   | $ | 16,125 |   |   | $ | 13,138 |   |
| Special mention                                                                |   |   | 10,503 |   |   |   | 209 |   |
| Substandard                                                                    |   |   | 35,924 |   |   |   | 6,824 |   |
| Total                                                                          |   | $ | 62,552 |   |   | $ | 20,171 |   |

----

|                                 |   | 2010                             |    |   | 2009   |   |
|--------------------------------------|--------|----------------------------------|---------|--------|--------|--------|
|                                 |   | (Amounts in thousands) |    |
| Land                                 |   | $                                | 10,590  |   |   | $      | 10,693 |   |
| Buildings and leasehold improvements |   |                             | 35,545  |   |   |   | 35,274 |   |
| Furniture and equipment              |   |                             | 17,832  |   |   |   | 17,262 |   |
|                                 |   | $                                | 63,966  |   |   | $      | 63,229 |   |
| Less accumulated depreciation        |   |                             | (23,417 | )      |   |   | (20,599 | ) |
| Total                                |   | $                                | 40,550  |   |   | $      | 42,630 |   |

|                             |   | 2010                             |   |   | 2009   |   |
|----------------------------------|--------|----------------------------------|--------|--------|--------|--------|
|                             |   | (Amounts in thousands) |   |
| Goodwill, beginning of year      |   | $                                | -      |   |   | $      | 49,501 |   |
| Goodwill impairment              |   |                             | -      |   |   |   | (49,501 | ) |
| Goodwill, end of year            |   | $                                | -      |   |   | $      | - |   |
| Core deposit intangibles - gross |   | $                                | 2,177  |   |   | $      | 2,177 |   |
| Less accumulated amortization    |   |                             | 1,506  |   |   |   | 1,288 |   |
| Core deposit intangibles - net   |   | $                                | 671    |   |   | $      | 889 |   |

----

|                             |   | Estimated Amortization Expense |   |
|----------------------------------|--------|------------------------------------------|--------|
|                             |   | (Amounts in thousands)         |   |
| For the Years Ended December 31: |   |                                     |   |
| 2011                             |   | $                                        | 218    |   |
| 2012                             |   |                                     | 218    |   |
| 2013                             |   |                                     | 218    |   |
| 2014                             |   |                                     | 17     |   |
|                             |   | $                                        | 671    |   |

|       |   | $100,000                         |    |   | Under    |   |    |   |   |
|------------|--------|----------------------------------|---------|--------|----------|--------|---------|--------|--------|
|       |   | and Over                    |    |   | $100,000 |   |    | Total  |   |
|       |   | (Amounts in thousands) |    |
| 2011       |   | $                                | 99,973  |   |     | $      | 202,752 |   |   | $ | 302,725 |   |
| 2012       |   |                             | 88,555  |   |     |   | 116,870 |   |   |   | 205,425 |   |
| 2013       |   |                             | 13,059  |   |     |   | 27,425  |   |   |   | 40,484 |   |
| 2014       |   |                             | 4,190   |   |     |   | 25,018  |   |   |   | 29,208 |   |
| 2015       |   |                             | 1,364   |   |     |   | 1,680   |   |   |   | 3,044 |   |
| Thereafter |   |                             | -       |   |     |   | 74,541  |   |   |   | 74,541 |   |
| Total      |   | $                                | 207,141 |   |     | $      | 448,286 |   |   | $ | 655,427 |   |

|                   |   | At December 31, 2010 |    |
|------------------------|--------|-------------------------------------|---------|
|                   |   | Brokered CDs                   |    |   | CDARS |   |
|                   |   | (Amounts in thousands)    |    |
| Remaining Maturity     |   |                                |    |   |   |   |
| Less than three months |   | $                                   | 20,000  |   |   | $ | 12,114 |   |
| Three to six months    |   |                                | -       |   |   |   | 10,595 |   |
| Six to twelve months   |   |                                | 12,000  |   |   |   | 26,100 |   |
| Over twelve months     |   |                                | 153,784 |   |   |   | - |   |
| Total                  |   | $                                   | 185,784 |   |   | $ | 48,809 |   |

----

|                        |   | 2010                             |    |   | 2009   |   |
|-----------------------------|--------|----------------------------------|---------|--------|--------|--------|
|                        |   | (Amounts in thousands) |    |
| Short-term borrowings       |   |                             |    |   |   |   |
| FHLB advances               |   | $                                | 16,250  |   |   | $      | 31,250 |   |
| Repurchase agreements       |   |                             | 4,808   |   |   |   | 14,861 |   |
| Other borrowed funds        |   |                             | 1,040   |   |   |   | 39,366 |   |
|                        |   | $                                | 22,098  |   |   | $      | 85,477 |   |
|                        |   |                             |    |   |   |   |   |   |
| Long-term borrowings        |   |                             |    |   |   |   |   |   |
| FHLB advances               |   | $                                | 56,809  |   |   | $      | 73,226 |   |
| Term repurchase agreements  |   |                             | 80,000  |   |   |   | 80,000 |   |
| Jr. subordinated debentures |   |                             | 45,877  |   |   |   | 45,877 |   |
|                        |   | $                                | 182,686 |   |   | $      | 199,103 |   |

----

|        |   | FHLB                             |   |   | Term Repurchase |   |
|-------------|--------|----------------------------------|--------|--------|----------------------|--------|
|        |   | Advances                         |   |   | Agreements           |   |
|        |   | (Amounts in thousands) |   |
| Due in 2011 |   | $                                | 16,250 |   |                 | $      | - |   |
| Due in 2012 |   |                             | 5,000  |   |                 |   | 20,000 |   |
| Due in 2013 |   |                             | 10,000 |   |                 |   | - |   |
| Due in 2014 |   |                             | 25,000 |   |                 |   | - |   |
| Due in 2015 |   |                             | 10,000 |   |                 |   | 30,000 |   |
| Thereafter  |   |                             | 6,809  |   |                 |   | 30,000 |   |
|        |   | $                                | 73,059 |   |                 | $      | 80,000 |   |

----

----

| Risk-free interest rate   |   |     | 2.70   | % |
|---------------------------|--------|----------|--------|---|
| Expected life of warrants |   | 10 years |   |
| Expected dividend yield   |   |     | 4.57   | % |
| Expected volatility       |   |     | 33     | % |

----

----

|                                             |   | 2010                             |   |   | 2009   |   |   | 2008   |   |
|--------------------------------------------------|--------|----------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                             |   | (Amounts in thousands) |   |
| Change in Benefit Obligation                     |   |                             |   |   |   |   |   |   |   |
|                                             |   |                             |   |   |   |   |   |   |   |
| Beginning of year                                |   | $                                | 987    |   |   | $      | 890    |   |   | $ | 868 |   |
| Actuarial loss                                   |   |                             | 47     |   |   |   | 85     |   |   |   | 6 |   |
| Service cost                                     |   |                             | -      |   |   |   | -      |   |   |   | - |   |
| Interest cost                                    |   |                             | 56     |   |   |   | 56     |   |   |   | 56 |   |
| Settlement                                       |   |                             | -      |   |   |   | -      |   |   |   | - |   |
| Benefits paid                                    |   |                             | (45    | )      |   |   | (44    | )      |   |   | (40 | ) |
| End of year - Benefit obligations                |   | $                                | 1,045  |   |   | $      | 987    |   |   | $ | 890 |   |
|                                             |   |                             |   |   |   |   |   |   |   |   |   |   |
| Change in Fair Value of Plan Assets              |   |                             |   |   |   |   |   |   |   |   |   |   |
|                                             |   |                             |   |   |   |   |   |   |   |   |   |   |
| Beginning of year                                |   | $                                | 997    |   |   | $      | 873    |   |   | $ | 1,216 |   |
| Benefits paid                                    |   |                             | (45    | )      |   |   | (44    | )      |   |   | (40 | ) |
| Return on assets                                 |   |                             | 101    |   |   |   | 168    |   |   |   | (303 | ) |
| End of year - Fair value                         |   | $                                | 1,053  |   |   | $      | 997    |   |   | $ | 873 |   |
|                                             |   |                             |   |   |   |   |   |   |   |   |   |   |
| Amounts recognized in the consolidated statement |   |                             |   |   |   |   |   |   |   |   |   |   |
| of financial condition consist of:               |   |                             |   |   |   |   |   |   |   |   |   |   |
| Noncurrent Asset                                 |   | $                                | 8      |   |   | $      | 10     |   |   | $ | - |   |
| Noncurrent Liability                             |   |                             | -      |   |   |   | -      |   |   |   | (17 | ) |
| Funded status                                    |   | $                                | 8      |   |   | $      | 10     |   |   | $ | (17 | ) |

----

|                                                              |   | 2010                             |   |   | 2009   |   |   | 2008   |   |
|-------------------------------------------------------------------|--------|----------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                              |   | (Amounts in thousands) |   |
| Weighted average discount rate                                    |   |                             | 5.40   | %      |   |   | 5.80   | %      |   |   | 6.50 | % |
| Weighted average rate of increase in compensation level           |   |                             | N/A    |   |   |   | N/A    |   |   |   | N/A |   |
| Weighted average expected long-term rate of return on plan assets |   |                             | 7.50   | %      |   |   | 7.50   | %      |   |   | 7.50 | % |
|                                                              |   |                             |   |   |   |   |   |   |   |   |   |   |
| Components of Net Periodic Pension Cost (Benefit)                 |   |                             |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |                             |   |   |   |   |   |   |   |   |   |   |
| Service cost                                                      |   | $                                | -      |   |   | $      | -      |   |   | $ | - |   |
| Interest cost                                                     |   |                             | 56     |   |   |   | 56     |   |   |   | 56 |   |
| Expected return on plan assets                                    |   |                             | (73    | )      |   |   | (64    | )      |   |   | (90 | ) |
| Loss                                                              |   |                             | -      |   |   |   | -      |   |   |   | - |   |
| Amortization of prior service cost                                |   |                             | -      |   |   |   | -      |   |   |   | - |   |
| Amortiztion of net (gain) loss                                    |   |                             | 19     |   |   |   | 24     |   |   |   | - |   |
| Net periodic pension cost (benefit)                               |   | $                                | 2      |   |   | $      | 16     |   |   | $ | (34 | ) |

|                 |   | 2010   |   |   | 2009         |   |
|----------------------|--------|--------|--------|--------|--------------|--------|
|                 |   |   |   |   | Percent      |   |   |   |   |   | Percent |   |
|                 |   | Market |   |   | of Plan |   |   | Market |   |   | of Plan |   |
|                 |   | Value  |   |   | Assets       |   |   | Value |   |   | Assets |   |
| Cash and equivalents |   | $      | 2      |   |         |   | - |   |   | $ | 1 |   |   |   | - |   |
| Fixed income:        |   |   |   |   |         |   |   |   |   |   |   |   |   |   |   |   |
| Bond Funds           |   |   | 398    |   |         |   | 38 | % |   |   | 393 |   |   |   | 39 | % |
| Equity Securities:   |   |   |   |   |         |   |   |   |   |   |   |   |   |   |   |   |
| Mutual Funds         |   |   | 653    |   |         |   | 62 | % |   |   | 603 |   |   |   | 61 | % |
| Total                |   | $      | 1,053  |   |         |   | 100 | % |   | $ | 997 |   |   |   | 100 | % |

----

| U.S. equity                       |   |   | 56 | %      |
|-----------------------------------|--------|--------|----|--------|
| International blend               |   |   | 6  |   |
| Fixed income and cash equivalents |   |   | 38 |   |

| Year      |   | Pension Benefits |   |
|-----------|--------|-----------------------|--------|
| 2011      |   | $                     | 42     |   |
| 2012      |   |                  | 43     |   |
| 2013      |   |                  | 44     |   |
| 2014      |   |                  | 54     |   |
| 2015      |   |                  | 54     |   |
| 2016-2017 |   |                  | 284    |   |

----

----

|                   |   |                                       |    |   | Outstanding Options |   |    | Exercisable Options     |   |
|------------------------|--------|--------------------------------------------|---------|--------|--------------------------|--------|---------|------------------------------|--------|
|                   |   | SharesAvailable forFuture Grants |    |   | NumberOutstanding        |   |    | WeightedAverageExercisePrice |   |   | NumberOutstanding |   |   | WeightedAverageExercisePrice |   |
|                   |   |                                       |    |   |                     |   |    |                         |   |   |   |   |   |   |   |
| At December 31, 2009   |   |                                       | 525,711 |   |                     |   | 706,700 |                         |   | $ | 9.52 |   |   |   | 657,100 |   |   | $ | 9.69 |   |
|                   |   |                                       |    |   |                     |   |    |                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Options authorized     |   |                                       | -       |   |                     |   | -       |                         |   |   | - |   |   |   | - |   |   |   | - |   |
| Options granted/vested |   |                                       | -       |   |                     |   | -       |                         |   |   | - |   |   |   | - |   |   |   | - |   |
| Options exercised      |   |                                       | -       |   |                     |   | (200    | )                            |   |   | 2.67 |   |   |   | (200 | ) |   |   | 2.67 |   |
| Options forfeited      |   |                                       | 58,229  |   |                     |   | (58,229 | )                            |   |   | 9.81 |   |   |   | (30,229 | ) |   |   | 9.81 |   |
| Options expired        |   |                                       | 28,665  |   |                     |   | (28,665 | )                            |   |   | 7.88 |   |   |   | (28,665 | ) |   |   | 7.88 |   |
| At December 31, 2010   |   |                                       | 612,605 |   |                     |   | 619,606 |                         |   | $ | 9.57 |   |   |   | 598,006 |   |   | $ | 9.71 |   |

|                                    |   | Number of           |    |   | Number of           |   |
|-----------------------------------------|--------|--------------------------|---------|--------|--------------------------|--------|
| Range of Exercise Prices |   | Options Outstanding |    |   | Options Exercisable |   |
| $2.67 - $7.15                           |   |                     | 107,059 |   |                     |   | 91,659 |   |
| $7.16 - $10.10                          |   |                     | 238,547 |   |                     |   | 238,547 |   |
| $10.11 - $12.00                         |   |                     | 274,000 |   |                     |   | 267,800 |   |
| Outstanding at end of year              |   |                     | 619,606 |   |                     |   | 598,006 |   |

|                                             |   | 2010   |   |   | 2009   |    |   | 2008   |        |
|--------------------------------------------------|--------|--------|--------|--------|--------|---------|--------|--------|-------------|
|                                             |   |   |   |   |   |    |   |   |        |
| Estimated fair value of options granted          |   |   | N/A    |   |   | $       | 0.97   |   |        | $ | 0.99 |   |
|                                             |   |   |   |   |   |    |   |   |        |   |   |   |
| Assumptions in estimating average option values: |   |   |   |   |   |    |   |   |        |   |   |   |
| Risk-free interest rate                          |   |   | N/A    |   |   |    | 2.28   | %      |        |   | 2.45 | % |
| Dividend yield                                   |   |   | N/A    |   |   |    | 1.76   | %      |        |   | 4.56 | % |
| Volatility                                       |   |   | N/A    |   |   |    | 36     | %      |        |   | 29 | % |
| Expected life                                    |   |   | N/A    |   |   | 5 years |   |   | 5 - 7 years |   |

----

| 2011       |   | $      | 911   |   |
|------------|--------|--------|-------|--------|
| 2012       |   |   | 682   |   |
| 2013       |   |   | 648   |   |
| 2014       |   |   | 492   |   |
| 2015       |   |   | 331   |   |
| Thereafter |   |   | 2,692 |   |
|       |   | $      | 5,756 |   |

|         |   | 2010                             |   |   | 2009   |   |   | 2008   |   |
|--------------|--------|----------------------------------|--------|--------|--------|--------|--------|--------|--------|
|         |   | (Amounts in thousands) |   |
|         |   |                             |   |   |   |   |   |   |   |
| Office Space |   | $                                | 620    |   |   | $      | 730    |   |   | $ | 674 |   |
| Equipment    |   |                             | 365    |   |   |   | 444    |   |   |   | 560 |   |
|         |   | $                                | 985    |   |   | $      | 1,174  |   |   | $ | 1,234 |   |

----

|                                     |   | 2010                             |   |   | 2009   |   |   | 2008   |   |
|------------------------------------------|--------|----------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                     |   | (Amounts in thousands) |   |
| Current tax provision (benefit)          |   |                             |   |   |   |   |   |   |   |
| Federal                                  |   | $                                | (5,380 | )      |   | $      | (693   | )      |   | $ | 4,349 |   |
| State                                    |   |                             | (12    | )      |   |   | (157   | )      |   |   | 825 |   |
|                                     |   |                             | (5,392 | )      |   |   | (850   | )      |   |   | 5,174 |   |
| Deferred tax provision (benefit)         |   |                             |   |   |   |   |   |   |   |   |   |   |
| Federal                                  |   |                             | 8,497  |   |   |   | (4,760 | )      |   |   | (2,085 | ) |
| State                                    |   |                             | 1,213  |   |   |   | (1,076 | )      |   |   | (455 | ) |
|                                     |   |                             | 9,710  |   |   |   | (5,836 | )      |   |   | (2,540 | ) |
| Net provision (benefit) for income taxes |   | $                                | 4,318  |   |   | $      | (6,686 | )      |   | $ | 2,634 |   |

|                                       |   | 2010                   |   |   | 2009   |   |    | 2008   |   |
|--------------------------------------------|--------|------------------------|--------|--------|--------|--------|---------|--------|--------|
|                                       |   | (Amounts in thousands) |   |
| Tax computed at the statutory federal rate |   | $                      | (6,393 | )      |   | $      | (23,747 | )      |   | $ | 2,886 |   |
|                                       |   |                   |   |   |   |   |    |   |   |   |   |   |
| Increase (decrease) resulting from:        |   |                   |   |   |   |   |    |   |   |   |   |   |
| Goodwill impairment                        |   |                   | -      |   |   |   | 16,830  |   |   |   | - |   |
| Valuation allowance on deferred tax assets |   |                   | 12,600 |   |   |   | 2,000   |   |   |   | - |   |
| State income taxes, net of federal benefit |   |                   | 793    |   |   |   | (814    | )      |   |   | 244 |   |
| Tax exempt income                          |   |                   | (1,275 | )      |   |   | (1,071  | )      |   |   | (498 | ) |
| Other permanent differences                |   |                   | (1,407 | )      |   |   | 116     |   |   |   | 2 |   |
|                                       |   |                   | 10,711 |   |   |   | 17,061  |   |   |   | (252 | ) |
| Provision (benefit) for income taxes       |   | $                      | 4,318  |   |   | $      | (6,686  | )      |   | $ | 2,634 |   |

----

|                                   |   |         2010         |    |   |         2009         |   |
|----------------------------------------|--------|------------------------------------------------------------------------------------------------------|---------|--------|------------------------------------------------------------------------------------------------------|--------|
|                                   |   | (Amounts in thousands)                                                                     |    |
| Deferred tax assets relating to:       |   |                                                                                                 |    |   |                                                                                                 |   |
| Allowance for loan losses              |   | $                                                                                                    | 11,404  |   |                                                                                                 | $      | 11,427 |   |
| Net operating loss carry forward       |   |                                                                                                 | 2,994   |   |                                                                                                 |   | - |   |
| Deferred compensation                  |   |                                                                                                 | 1,613   |   |                                                                                                 |   | 1,466 |   |
| OREO writedowns                        |   |                                                                                                 | 1,228   |   |                                                                                                 |   | 828 |   |
| Accumulated other comprehensive income |   |                                                                                                 | 903     |   |                                                                                                 |   | - |   |
| Other                                  |   |                                                                                                 | 721     |   |                                                                                                 |   | 1,887 |   |
| Gross deferred tax assets              |   |                                                                                                 | 18,863  |   |                                                                                                 |   | 15,608 |   |
| Valuation allowance                    |   |                                                                                                 | (14,600 | )      |                                                                                                 |   | (2,000 | ) |
| Net total deferred tax assets          |   |                                                                                                 | 4,263   |   |                                                                                                 |   | 13,608 |   |
|                                   |   |                                                                                                 |    |   |                                                                                                 |   |   |   |
| Deferred tax liabilities relating to:  |   |                                                                                                 |    |   |                                                                                                 |   |   |   |
| Property and equipment                 |   |                                                                                                 | (333    | )      |                                                                                                 |   | (709 | ) |
| Loan fees and costs                    |   |                                                                                                 | (633    | )      |                                                                                                 |   | (627 | ) |
| Core deposit intangible                |   |                                                                                                 | (259    | )      |                                                                                                 |   | (326 | ) |
| Prepaid expenses                       |   |                                                                                                 | (390    | )      |                                                                                                 |   | (258 | ) |
| Derivative financial instruments       |   |                                                                                                 | -       |   |                                                                                                 |   | (233 | ) |
| Other                                  |   |                                                                                                 | (65     | )      |                                                                                                 |   | (65 | ) |
| Accumulated other comprehensive income |   |                                                                                                 | -       |   |                                                                                                 |   | (1,929 | ) |
| Total deferred tax liabilities         |   |                                                                                                 | (1,680  | )      |                                                                                                 |   | (4,147 | ) |
| Net recorded deferred tax asset        |   | $                                                                                                    | 2,583   |   |                                                                                                 | $      | 9,461 |   |

----

|                                                         |   | 2010                             |   |   | 2009   |   |
|--------------------------------------------------------------|--------|----------------------------------|--------|--------|--------|--------|
|                                                         |   | (Amounts in thousands) |   |
|                                                         |   |                             |   |   |   |   |
| Balance at January 1, 2010                                   |   | $                                | 162    |   |   | $      | 157 |   |
| Additions based on tax positions related to the current year |   |                             | 38     |   |   |   | 50 |   |
| Additions for tax positions of prior years                   |   |                             | -      |   |   |   | - |   |
| Reductions for tax positions of prior years                  |   |                             | (47    | )      |   |   | (45 | ) |
| Settlements                                                  |   |                             | -      |   |   |   | - |   |
| Balance at December 31, 2010                                 |   | $                                | 153    |   |   | $      | 162 |   |

|                                                   |   | 2010                             |   |   | 2009   |   |   | 2008   |   |
|--------------------------------------------------------|--------|----------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                   |   | (Amounts in thousands) |   |
|                                                   |   |                             |   |
| SBIC income and management fees                        |   | $                                | 631    |   |   | $      | 148    |   |   | $ | 60 |   |
| Increase in cash surrender value of life insurance     |   |                             | 1,079  |   |   |   | 1,116  |   |   |   | 855 |   |
| Gain (loss) and net cash settlement on economic hedges |   |                             | (532   | )      |   |   | 234    |   |   |   | 934 |   |
| Other                                                  |   |                             | 894    |   |   |   | 1,067  |   |   |   | 1,103 |   |
| Total                                                  |   | $                                | 2,072  |   |   | $      | 2,565  |   |   | $ | 2,952 |   |

|                                          |   | 2010                             |   |   | 2009   |   |   | 2008   |   |
|-----------------------------------------------|--------|----------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                          |   | (Amounts in thousands) |   |
| FDIC deposit insurance                        |   | $                                | 2,197  |   |   | $      | 3,098  |   |   | $ | 806 |   |
| Postage, printing and office supplies         |   |                             | 753    |   |   |   | 921    |   |   |   | 847 |   |
| Telephone and communication                   |   |                             | 880    |   |   |   | 927    |   |   |   | 954 |   |
| Advertising and promotion                     |   |                             | 925    |   |   |   | 1,103  |   |   |   | 1,164 |   |
| Data processing and other outsourced services |   |                             | 857    |   |   |   | 746    |   |   |   | 805 |   |
| Professional services                         |   |                             | 2,972  |   |   |   | 2,215  |   |   |   | 1,811 |   |
| Buyer incentive plan                          |   |                             | 413    |   |   |   | 1,320  |   |   |   | 10 |   |
| Loss on early extinguishment of debt          |   |                             | -      |   |   |   | 472    |   |   |   | - |   |
| (Gain) loss on sales of foreclosed assets     |   |                             | (429   | )      |   |   | (196   | )      |   |   | 59 |   |
| Expenses of managing foreclosed assets        |   |                             | 1,822  |   |   |   | 883    |   |   |   | - |   |
| Writedowns of foreclosed assets               |   |                             | 3,092  |   |   |   | 2,493  |   |   |   | 99 |   |
| Other                                         |   |                             | 5,932  |   |   |   | 6,610  |   |   |   | 5,876 |   |
| Total                                         |   | $                                | 19,414 |   |   | $      | 20,592 |   |   | $ | 12,431 |   |

----

|                                     |   | Actual                 |    |   | Minimum For CapitalAdequacy Purposes |   |   | Minimum To Be WellCapitalized UnderPrompt Corrective |   |
|------------------------------------------|--------|------------------------|---------|--------|-----------------------------------------------------|--------|--------|-------------------------------------------------------------------------------|--------|
|                                     |   | Amount                 |    |   | Ratio                                               |   |   | Amount                                                                        |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
|                                     |   | (Amounts in thousands) |    |
| As of December 31, 2010                  |   |                   |    |   |                                                |   |   |                                                                          |   |   |   |   |   |   |   |   |   |   |
|                                     |   |                   |    |   |                                                |   |   |                                                                          |   |   |   |   |   |   |   |   |   |   |
| Total Capital (to Risk-Weighted Assets)  |   | $                      | 147,983 |   |                                                |   | 11.14  | %                                                                             |   | $ | 107,000 |   |   |   | 8.00 | % |   | $ | 133,700 |   |   |   | 10.00 | % |
| Tier 1 Capital (to Risk-Weighted Assets) |   |                   | 131,217 |   |                                                |   | 9.88   | %                                                                             |   |   | 53,500 |   |   |   | 4.00 | % |   |   | 80,200 |   |   |   | 6.00 | % |
| Tier 1 Capital (to Average Assets)       |   |                   | 131,217 |   |                                                |   | 7.83   | %                                                                             |   |   | 67,000 |   |   |   | 4.00 | % |   |   | 83,800 |   |   |   | 5.00 | % |
|                                     |   |                   |    |   |                                                |   |   |                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| As of December 31, 2009                  |   |                   |    |   |                                                |   |   |                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                     |   |                   |    |   |                                                |   |   |                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Capital (to Risk-Weighted Assets)  |   | $                      | 162,977 |   |                                                |   | 11.63  | %                                                                             |   | $ | 112,200 |   |   |   | 8.00 | % |   | $ | 140,200 |   |   |   | 10.00 | % |
| Tier 1 Capital (to Risk-Weighted Assets) |   |                   | 145,403 |   |                                                |   | 10.37  | %                                                                             |   |   | 56,100 |   |   |   | 4.00 | % |   |   | 84,100 |   |   |   | 6.00 | % |
| Tier 1 Capital (to Average Assets)       |   |                   | 145,403 |   |                                                |   | 8.36   | %                                                                             |   |   | 69,600 |   |   |   | 4.00 | % |   |   | 87,000 |   |   |   | 5.00 | % |

|                            |   | At December 31, 2010 |    |   | At December 31, 2009 |   |
|---------------------------------|--------|-------------------------------------|---------|--------|-------------------------------------|--------|
|                            |   | Actual                              |    |   | Actual                              |   |
|                            |   | Amount                              |    |   | Ratio                               |   |   | Amount |   |   | Ratio |   |
|                            |   | (Amounts in thousands)    |    |
| Total risk-based capital ratio  |   | $                                   | 156,503 |   |                                |   | 11.75 | % |   | $ | 181,623 |   |   |   | 12.92 | % |
| Tier 1 risk-based capital ratio |   |                                | 124,615 |   |                                |   | 9.35 | % |   |   | 159,421 |   |   |   | 11.34 | % |
| Leverage ratio                  |   |                                | 124,615 |   |                                |   | 7.42 | % |   |   | 159,421 |   |   |   | 9.14 | % |

----

----

|                                                                                     |   | December 31, 2010      |   |   | December 31, 2009 |   |
|------------------------------------------------------------------------------------------|--------|----------------------------------|--------|--------|-----------------------------|--------|
|                                                                                     |   | Fair Value                  |   |   | NotionalAmount              |   |   | Fair Value |   |   | NotionalAmount |   |
|                                                                                     |   | (Amounts in thousands) |   |
| Fair value hedges                                                                        |   |                             |   |   |                        |   |   |   |   |   |   |   |
|                                                                                     |   |                             |   |   |                        |   |   |   |   |   |   |   |
| Interest rate swaps associated with deposit activities: Certificate of Deposit contracts |   | $                                | 392    |   |                        | $      | 75,000 |   |   | $ | 939 |   |   | $ | 65,000 |   |
|                                                                                     |   |                             |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Currency Exchange Contracts                                                              |   |                             | (679   | )      |                        |   | 10,000 |   |   |   | (847 | ) |   |   | 10,000 |   |
|                                                                                     |   |                             |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Cash flow hedges                                                                         |   |                             |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                     |   |                             |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Interest rate swaps associated with borrowing activities: Trust Preferred contracts      |   |                             | (468   | )      |                        |   | 10,000 |   |   |   | (402 | ) |   |   | 10,000 |   |
|                                                                                     |   |                             |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Interest rate cap contracts                                                              |   |                             | 113    |   |                        |   | 12,500 |   |   |   | 489 |   |   |   | 22,500 |   |
|                                                                                     |   |                             |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                     |   | $                                | (642   | )      |                        | $      | 107,500 |   |   | $ | 179 |   |   | $ | 107,500 |   |

----

|                                              |   | For the Year Ended December 31, 2010 |   |
|---------------------------------------------------|--------|--------------------------------------------------------------------|--------|
|                                              |   | Asset Derivatives                                             |   | Liability Derivatives |   |
|                                              |   | 2010                                                               |   | 2010 |   |
|                                              |   | Balance Sheet                                                 |   |   |   | Balance Sheet |   |   |   |
|                                              |   | Location                                                           |   | Fair Value |   | Location |   | Fair Value |   |
|                                              |   | (Amounts in thousands)                                   |   |
| Derivatives designated as hedging instruments     |   |                                                               |   |   |   |   |   |   |   |
| Interest rate options                             |   | Other Assets                                                       |   | $ | 113 |   |   |   |   |   |
| Interest rate contracts                           |   | Other Assets                                                       |   |   | 392 |       | Other Liabilities |   | $ | 468 |   |
|                                              |   |                                                               |   |   |   |   |   |   |   |   |   |
| Derivatives not designated as hedging instruments |   |                                                               |   |   |   |   |   |   |   |   |   |
| Interest rate contracts                           |   | Other Assets                                                       |   |   | - |   | Other Liabilities |   |   | 679 |   |
| Total derivatives                                 |   |                                                               |   | $ | 505 |   |   |   | $ | 1,147 |   |
| Net Derivative Asset (Liability)                  |   |                                                               |   |   |   |   |   |   | $ | (642 | ) |

|                                              |   | For the Year Ended December 31, 2009 |   |
|---------------------------------------------------|--------|--------------------------------------------------------------------|--------|
|                                              |   | Asset Derivatives                                             |   | Liability Derivatives |   |
|                                              |   | 2009                                                               |   | 2009 |   |
|                                              |   | Balance Sheet                                                 |   |   |   | Balance Sheet |   |   |   |
|                                              |   | Location                                                           |   | Fair Value |   | Location |   | Fair Value |   |
|                                              |   | (Amounts in thousands)                                   |   |
| Derivatives designated as hedging instruments     |   |                                                               |   |   |   |   |   |   |   |
| Interest rate options                             |   | Other Assets                                                       |   | $ | 489 |   |   |   |   |   |
| Interest rate contracts                           |   | Other Assets                                                       |   |   | 939 |   | Other Liabilities |   | $ | 402 |   |
|                                              |   |                                                               |   |   |   |   |   |   |   |   |   |
| Derivatives not designated as hedging instruments |   |                                                               |   |   |   |   |   |   |   |   |   |
| Interest rate contracts                           |   | Other Assets                                                       |   |   | - |   | Other Liabilities |   |   | 847 |   |
| Total derivatives                                 |   |                                                               |   | $ | 1,428 |   |   |   | $ | 1,249 |   |
| Net Derivative Asset (Liability)                  |   |                                                               |   |   |   |   |   |   | $ | 179 |   |

| For the Year Ended December 31, 2010 |   |
|--------------------------------------------------------------------|--------|
|                                                               |   |   |   | Location of Gain or |   | Amount of Gain or (Loss) |   |
|                                                               |   | Amount of Gain or (Loss) |   | (Loss) Reclassified from  |   | Reclassified from |   |
|                                                               |   | Recognized in OCI on |   | Accumulated OCI |   | Accumulated OCI into |   |
| Cash Flow Hedging                                        |   | Derivative (Effective |   | into Income |   | Income (Effective |   |
| Relationships                                                      |   | Portion) |   | (Effective Portion) |   | Portion) |   |
|                                                               |   |         (Amounts in thousands) |   |
|                                                               |   |   |   |   |   |   |   |   |   |
| Interest rate contracts                                            |   | $ | (738 | )   | Interest expense |   | $ | (283 | ) |

----

| For the Year Ended December 31, 2009 |                     |
|--------------------------------------------------------------------|--------------------------|
|                                                               |                     |   |   | Location of Gain or |   | Amount of Gain or (Loss) |   |
|                                                               |                     | Amount of Gain or (Loss) |   | (Loss) Reclassified from  |   | Reclassified from |   |
|                                                               |                     | Recognized in OCI on |   | Accumulated OCI |   | Accumulated OCI into |   |
| Cash Flow Hedging                                        |                     | Derivative (Effective |   | into Income |   | Income (Effective |   |
| Relationships                                                      |      | Portion) |   | (Effective Portion) |      | Portion) |   |
|                                                               |                     |        (Amounts in thousands) |   |
|                                                               |                     |   |   |   |   |   |   |   |   |
| Interest rate contracts                                            |                     | $ | 354 |      | Interest expense |   | $ | (233 | ) |

| For the Year Ended December 31, 2010 |                     |
|--------------------------------------------------------------------|--------------------------|
|                                                               |                     | Location of Gain or |   | Amount of Gain or (Loss) |   |
|                                                               |                     | (Loss) Recognized in |   | Recognized in Income on |   |
| Description                                                        |      | Income on Derivative |      | Derivative |   |
|                                                               |                     |   |   | (Amounts in thousands) |   |
| Interest rate contracts – Not                                |                     |   |   |   |   |
| designated as hedging instruments                                  |                     |   Other income (expense) |   | $ | (532 | ) |
|                                                               |                     |   |   |   |   |   |
| Interest Rate Contracts – Fair                               |                     |   |   |   |   |   |
| value hedging relationships                                        |                     | Interest income/(expense) |   | $ | 1,954 |   |

| For the Year Ended December 31, 2009 |                     |
|--------------------------------------------------------------------|--------------------------|
|                                                               |                     | Location of Gain or |   | Amount of Gain or (Loss) |   |
|                                                               |                     | (Loss) Recognized in |   | Recognized in Income on |   |
| Description                                                        |      | Income on Derivative |      | Derivative |   |
|                                                               |                     |   |   | (Amounts in thousands) |   |
| Interest rate contracts – Not            |                     |   |   |   |   |
| designated as hedging instruments                                  |                     |   Other income (expense) |   | $ | 234 |   |
|                                                               |                     |   |   |   |   |   |
| Interest Rate Contracts - Fair                                     |                     |   |   |   |   |   |
| value hedging relationships                                        |                     | Interest income/(expense) |   | $ | 1,499 |   |

----

----

|                                                                |   | 2010                   |    |   | 2009   |   |
|---------------------------------------------------------------------|--------|------------------------|---------|--------|--------|--------|
|                                                                |   | (Amounts in thousands) |    |
|                                                                |   |                   |    |   |   |   |
| Financial instruments whose contract amounts represent credit risk: |   |                   |    |   |   |   |
| Loan commitments and undisbursed lines of credit                    |   | $                      | 188,549 |   |   | $      | 221,853 |   |
| Undisbursed standby letters of credit                               |   |                   | 8,280   |   |   |   | 8,270 |   |
| Undisbursed portion of construction loans                           |   |                   | 27,321  |   |   |   | 54,435 |   |
|                                                                |   | $                      | 224,150 |   |   | $      | 284,558 |   |

----

----

|                                                   |   | 2010                             |      |   | 2009                     |   |
|--------------------------------------------------------|--------|----------------------------------|-----------|--------|--------------------------|--------|
|                                                   |   | Carryingamount                   |      |   | Estimatedfair value |   |   | Carryingamount |   |   | Estimatedfair value |   |
|                                                   |   | (Amounts in thousands) |      |
|                                                   |   |                             |      |   |                     |   |   |   |   |   |   |   |
| Financial assets:                                      |   |                             |      |   |                     |   |   |   |   |   |   |   |
| Cash and due from banks                                |   | $                                | 16,584    |   |                     | $      | 16,584 |   |   | $ | 30,184 |   |   | $ | 30,184 |   |
| Federal funds sold and other interest-bearing deposits |   |                             | 49,587    |   |                     |   | 49,587 |   |   |   | 31,269 |   |   |   | 31,269 |   |
| Investment securities available for sale               |   |                             | 310,653   |   |                     |   | 310,653 |   |   |   | 312,780 |   |   |   | 312,780 |   |
| Investment securities held to maturity                 |   |                             | 42,220    |   |                     |   | 40,181 |   |   |   | 10,919 |   |   |   | 11,180 |   |
|                                                   |   |                             |      |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                                  |   |                             | 1,100,496 |   |                     |   | 1,119,189 |   |   |   | 1,200,637 |   |   |   | 1,226,248 |   |
| Market risk/liquidity adjustment                       |   |                             | -         |   |                     |   | (50,272 | ) |   |   | - |   |   |   | (34,055 | ) |
| Net loans                                              |   |                             | 1,100,496 |   |                     |   | 1,068,917 |   |   |   | 1,200,637 |   |   |   | 1,192,193 |   |
|                                                   |   |                             |      |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Investment in life insurance                           |   |                             | 29,831    |   |                     |   | 29,831 |   |   |   | 28,766 |   |   |   | 28,766 |   |
| Accrued interest receivable                            |   |                             | 6,782     |   |                     |   | 6,782 |   |   |   | 7,403 |   |   |   | 7,403 |   |
|                                                   |   |                             |      |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities:                                 |   |                             |      |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                               |   |                             | 1,348,419 |   |                     |   | 1,349,501 |   |   |   | 1,314,070 |   |   |   | 1,334,468 |   |
| Short-term borrowings                                  |   |                             | 22,098    |   |                     |   | 22,098 |   |   |   | 85,477 |   |   |   | 85,827 |   |
| Long-term borrowings                                   |   |                             | 182,686   |   |                     |   | 163,527 |   |   |   | 199,103 |   |   |   | 203,987 |   |
| Accrued interest payable                               |   |                             | 2,779     |   |                     |   | 2,779 |   |   |   | 3,318 |   |   |   | 3,318 |   |
|                                                   |   |                             |      |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| On-balance sheet derivative financial instruments:     |   |                             |      |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Interest rate swap and option agreements:              |   |                             |      |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| (Assets) Liabilities, net                              |   |                             | 642       |   |                     |   | 642 |   |   |   | (179 | ) |   |   | (179 | ) |

|   | · | Level 1 – Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange.  Level 1 also includes US Treasury securities that are traded by dealers or brokers in active markets.  Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | Level 2 – Valuations for assets and liabilities traded in less active dealer or broker markets.  Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities.  Valuations are obtained from third party services for similar or comparable assets or liabilities. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Level 3 – Valuations for assets and liabilities that are derived from other valuation methodologies,  including option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or brokered traded transactions.  Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                           |   | December 31, 2010      |    |
|--------------------------------|--------|----------------------------------|---------|
|                           |   | Total                            |    |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
|                           |   | (Amounts in thousands) |    |
|                           |   |                             |    |   |   |   |   |   |   |   |   |   |
| Securities available for sale: |   |                             |    |   |   |   |   |   |   |   |   |   |
| U. S. government agencies      |   | $                                | 98,240  |   |   | $ | - |   |   | $ | 98,240 |   |   | $ | - |   |
| Mortgage-backed securities     |   |                             | 149,776 |   |   |   | - |   |   |   | 149,776 |   |   |   | - |   |
| Municipals                     |   |                             | 55,564  |   |   |   | - |   |   |   | 55,564 |   |   |   | - |   |
| Trust preferred securities     |   |                             | 3,094   |   |   |   | - |   |   |   | 3,094 |   |   |   | - |   |
| Common stocks and mutual funds |   |                             | 3,003   |   |   |   | - |   |   |   | - |   |   |   | 3,003 |   |
| Other                          |   |                             | 976     |   |   |   | - |   |   |   | 976 |   |   |   | - |   |
| Net Derivatives                |   |                             | (642    | ) |   |   | - |   |   |   | 37 |   |   |   | (679 | ) |

|                           |   | December 31, 2009      |    |
|--------------------------------|--------|----------------------------------|---------|
|                           |   | Total                            |    |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
|                           |   | (Amounts in thousands) |    |
|                           |   |                             |    |   |   |   |   |   |   |   |   |   |
| Securities available for sale: |   |                             |    |   |   |   |   |   |   |   |   |   |
| U. S. government agencies      |   | $                                | 57,288  |   |   | $ | - |   |   | $ | 57,288 |   |   | $ | - |   |
| Mortgage-backed securities     |   |                             | 182,100 |   |   |   | - |   |   |   | 182,100 |   |   |   | - |   |
| Municipals                     |   |                             | 66,259  |   |   |   | - |   |   |   | 66,259 |   |   |   | - |   |
| Trust preferred securities     |   |                             | 2,876   |   |   |   | - |   |   |   | 2,876 |   |   |   | - |   |
| Common stocks and mutual funds |   |                             | 3,264   |   |   |   | 472 |   |   |   | - |   |   |   | 2,792 |   |
| Other                          |   |                             | 993     |   |   |   | - |   |   |   | 993 |   |   |   | - |   |
| Net Derivatives                |   |                             | 179     |   |   |   | - |   |   |   | 1,026 |   |   |   | (847 | ) |

|                                           |   | Fair Value Measurements UsingSignificant Unobservable Inputs |   |
|------------------------------------------------|--------|--------------------------------------------------------------|--------|
|                                           |   | Securities                                                   |   |   |   |   |
|                                           |   | Available for sale                                           |   |   | Net Derivatives |   |
|                                           |   | (Dollars in Thousands)                                       |   |
| Beginning Balance January 1, 2010              |   | $                                                            | 2,792  |   |   | $ | (847 | ) |
| Total realized and unrealized gains or losses: |   |                                                         |   |   |   |   |   |   |
| Included in earnings                           |   |                                                         | -      |   |   |   | - |   |
| Included in other comprehensive income         |   |                                                         | 211    |   |   |   | 168 |   |
| Purchases, issuances and settlements           |   |                                                         | -      |   |   |   | - |   |
| Transfers in and/or out of Level 3             |   |                                                         | -      |   |   |   | - |   |
| Ending Balance                                 |   | $                                                            | 3,003  |   |   | $ | (679 | ) |

----

|              |   | December 31, 2010      |   |
|-------------------|--------|----------------------------------|--------|
|              |   | Total                            |   |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
|              |   | (Amounts in thousands) |   |
|              |   |                             |   |   |   |   |   |   |   |   |   |   |
| Impaired loans    |   | $                                | 22,699 |   |   | $ | - |   |   | $ | - |   |   | $ | 22,699 |   |
|              |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Foreclosed assets |   |                             | 17,314 |   |   |   | - |   |   |   | - |   |   |   | 17,314 |   |

|              |   | December 31, 2009      |   |
|-------------------|--------|----------------------------------|--------|
|              |   | Total                            |   |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
|              |   | (Amounts in thousands) |   |
|              |   |                             |   |   |   |   |   |   |   |   |   |   |
| Impaired loans    |   | $                                | 19,322 |   |   | $ | - |   |   | $ | - |   |   | $ | 19,322 |   |
|              |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Foreclosed assets |   |                             | 19,634 |   |   |   | - |   |   |   | - |   |   |   | 19,634 |   |

----

|                                          |   | 2010                             |    |   | 2009   |   |
|-----------------------------------------------|--------|----------------------------------|---------|--------|--------|--------|
|                                          |   | (Amounts in thousands) |    |
| Assets:                                       |   |                             |    |   |   |   |
| Cash and due from banks                       |   | $                                | 5,559   |   |   | $      | 54,286 |   |
| Investment in subsidiary                      |   |                             | 131,610 |   |   |   | 150,789 |   |
| Investment securities available for sale      |   |                             | 1,352   |   |   |   | 1,211 |   |
| Other assets                                  |   |                             | 1,035   |   |   |   | 1,253 |   |
| Total assets                                  |   | $                                | 139,556 |   |   | $      | 207,539 |   |
|                                          |   |                             |    |   |   |   |   |   |
| Liabilities:                                  |   |                             |    |   |   |   |   |   |
| Junior subordinated debentures                |   | $                                | 45,877  |   |   | $      | 45,877 |   |
| Other liabilities                             |   |                             | 1,338   |   |   |   | 39,665 |   |
| Total liabilities                             |   |                             | 47,215  |   |   |   | 85,542 |   |
|                                          |   |                             |    |   |   |   |   |   |
| Stockholders' equity                          |   |                             |    |   |   |   |   |   |
| Preferred stock                               |   |                             | 41,453  |   |   |   | 41,060 |   |
| Common stock                                  |   |                             | 119,408 |   |   |   | 119,282 |   |
| Retained earnings (accumulated deficit)       |   |                             | (67,082 | )      |   |   | (41,430 | ) |
| Accumulated other comprehensive income (loss) |   |                             | (1,438  | )      |   |   | 3,085 |   |
| Total stockholders' equity                    |   |                             | 92,341  |   |   |   | 121,997 |   |
| Total liablilites and stockholders' equity    |   | $                                | 139,556 |   |   | $      | 207,539 |   |

|                                               |   | 2010                             |    |   | 2009   |   |    | 2008   |   |
|----------------------------------------------------|--------|----------------------------------|---------|--------|--------|--------|---------|--------|--------|
|                                               |   | (Amounts in thousands) |    |
| Equity in income (loss) of subsidiaries            |   | $                                | (20,530 | )      |   | $      | (60,729 | )      |   | $ | 8,242 |   |
| Interest income                                    |   |                             | 301     |   |   |   | 433     |   |   |   | 58 |   |
| Other income                                       |   |                             | (220    | )      |   |   | 104     |   |   |   | 128 |   |
| Interest expense                                   |   |                             | (3,559  | )      |   |   | (3,723  | )      |   |   | (3,202 | ) |
| Other expense                                      |   |                             | (435    | )      |   |   | (485    | )      |   |   | (594 | ) |
| Income tax benefit                                 |   |                             | 1,322   |   |   |   | 1,241   |   |   |   | 1,222 |   |
| Net income (loss)                                  |   |                             | (23,121 | )      |   |   | (63,159 | )      |   |   | 5,854 |   |
| Effective dividend on preferred stock              |   |                             | 2,531   |   |   |   | 2,508   |   |   |   | 185 |   |
| Net income (loss) available to common shareholders |   | $                                | (25,652 | )      |   | $      | (65,667 | )      |   | $ | 5,669 |   |

----

|                                                           |   | 2010                             |    |   | 2009   |   |    | 2008   |   |
|----------------------------------------------------------------|--------|----------------------------------|---------|--------|--------|--------|---------|--------|--------|
|                                                           |   | (Amounts in thousands) |    |
| Operating activities:                                          |   |                             |    |   |   |   |    |   |   |
| Net income (loss)                                              |   | $                                | (23,121 | )      |   | $      | (63,159 | )      |   | $ | 5,854 |   |
| Equity in income (loss) of subsidiaries                        |   |                             | 20,530  |   |   |   | 60,729  |   |   |   | (8,242 | ) |
| Amortization of debt issuance costs                            |   |                             | 443     |   |   |   | 421     |   |   |   | 51 |   |
| Amortization of preferred stock warrants                       |   |                             | (393    | )      |   |   | (370    | )      |   |   | - |   |
| Realized loss on sale of available for sale securities         |   |                             | 35      |   |   |   | -       |   |   |   | - |   |
| Realized loss on impairment of  investment           |   |                             |    |   |   |   |    |   |   |   |   |   |
| securities available for sale                                  |   |                             | 186     |   |   |   | -       |   |   |   | - |   |
| (Increase) decrease in other assets                            |   |                             | 10      |   |   |   | (1      | )      |   |   | (23 | ) |
| Increase in other liabilities                                  |   |                             | -       |   |   |   | (2,307  | )      |   |   | (63 | ) |
| Net cash provided (used) by operating activities               |   |                             | (2,310  | )      |   |   | (4,687  | )      |   |   | (2,423 | ) |
|                                                           |   |                             |    |   |   |   |    |   |   |   |   |   |
| Investing activities:                                          |   |                             |    |   |   |   |    |   |   |   |   |   |
| Cash dividend from subsidiary                                  |   |                             | -       |   |   |   | -       |   |   |   | 1,500 |   |
| Investment in bank subsidiary                                  |   |                             | (6,000  | )      |   |   | (9,000  | )      |   |   | (15,000 | ) |
| Purchase of investments                                        |   |                             | -       |   |   |   | -       |   |   |   | (500 | ) |
| Proceeds from sale of available for sale investment securities |   |                             | 48      |   |   |   | -       |   |   |   | - |   |
| Net cash provided (used) by investing activities               |   |                             | (5,952  | )      |   |   | (9,000  | )      |   |   | (14,000 | ) |
|                                                           |   |                             |    |   |   |   |    |   |   |   |   |   |
| Financing activities:                                          |   |                             |    |   |   |   |    |   |   |   |   |   |
| Proceeds from issuance of preferred stock                      |   |                             | -       |   |   |   | -       |   |   |   | 42,750 |   |
| Increase (decrease) in short term debt                         |   |                             | (38,327 | )      |   |   | 39,366  |   |   |   | 2,360 |   |
| Net proceeds from issuance of common stock                     |   |                             | -       |   |   |   | -       |   |   |   | 408 |   |
| Cost of shares repurchased                                     |   |                             | -       |   |   |   | -       |   |   |   | (2,700 | ) |
| Dividends paid preferred stock                                 |   |                             | (2,138  | )      |   |   | (2,138  | )      |   |   | - |   |
| Dividends paid common shareholders                             |   |                             | -       |   |   |   | (664    | )      |   |   | (2,781 | ) |
| Net cash provided (used) by financing activities               |   |                             | (40,465 | )      |   |   | 36,564  |   |   |   | 40,037 |   |
|                                                           |   |                             |    |   |   |   |    |   |   |   |   |   |
| Net increase (decrease) in cash                                |   |                             | (48,727 | )      |   |   | 22,877  |   |   |   | 23,614 |   |
|                                                           |   |                             |    |   |   |   |    |   |   |   |   |   |
| Cash, beginning of year                                        |   |                             | 54,286  |   |   |   | 31,409  |   |   |   | 7,795 |   |
| Cash, end of year                                              |   | $                                | 5,559   |   |   | $      | 54,286  |   |   | $ | 31,409 |   |

----

----

----

| Equity Compensation Plan Information        |   |
|------------------------------------------------------------|--------|
| Plan Category                                         |   |   | Number of securities tobe issued upon exerciseof outstanding optionswarrants and rights |   |   | Weighted-averageexercise price ofoutstanding options,warrants and rights |   |   | Number of securitiesremaining available forfuture issuance under equitycompensation plans(excluding securitiesreflected in column (a)) |   |
|                                                       |   |   | (a) |   |   | (b) |   |   | (c) |   |
| Equity compensation plans approved by security holders     |   |   |   |   |   |   |   |   |   |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |
| Stock Option Plans                                         |   |   |   | 619,606 |   |   | $ | 9.57 |   |   |   | 612,605 |   |
| Employee Stock Purchase Plan                               |   |   |   | N/A |   |   |   | N/A |   |   |   | 823,670 |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Equity compensation plans not approved by security holders |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Restricted Stock Plan                                      |   |   |   | N/A |   |   |   | N/A |   |   |   | 210,750 |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                                      |   |   |   | 619,606 |   |   | $ | 9.57 |   |   |   | 1,647,025 |   |

----

| Financial Statements                                                                                                  |   | Form 10-K Page |
|-----------------------------------------------------------------------------------------------------------------------|--------|----------------|
|                                                                                                                  |   |           |
| Report of Independent Registered Public Accounting Firm                                                               |   | 67             |
|                                                                                                                  |   |           |
| Consolidated Statements of Financial Condition as of December 31, 2010 and 2009                                       |   | 68             |
|                                                                                                                  |   |           |
| Consolidated Statements of Operations for the years ended December 31, 2010, 2009 and 2008                            |   | 69             |
|                                                                                                                  |   |           |
| Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2010, 2009 and 2008           |   | 70             |
|                                                                                                                  |   |           |
| Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2010, 2009 and 2008 |   | 71             |
|                                                                                                                  |   |           |
| Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008                            |   | 72-73          |
|                                                                                                                  |   |           |
| Notes to Consolidated Financial Statements                                                                            |   | 74-123         |

| Exhibit No. |   | Description                                                                                                                                                                                                                                                                                               |
|------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Exhibit 3.1:     |   | Articles of Incorporation (incorporated by reference from Exhibit 3(i) to the Current Report on Form 8-K dated October 1, 2001)                                                                                                                                                                           |
| Exhibit 3.2:     |   | Bylaws (incorporated by reference from Exhibit 3.2 to the Quarterly Report on Form 10-Q for the quarter ended September 30, 2009)                                                                                                                                                                         |
| Exhibit 3.3:     |   | Amendment to Articles of Incorporation (incorporated by reference from Exhibit 3.3 to the Annual Report on Form 10-K for the year ended December 31, 2001 (“2001 Annual Report”))                                                                                                             |
| Exhibit 4.1:     |   | Specimen certificate for Common Stock of Southern Community Financial Corporation (incorporated by reference from Exhibit 4 to the Current Report on Form 8-K dated October 1, 2001)                                                                                                                      |
| Exhibit 4.2:     |   | Form of 7.95% Junior Subordinated Debenture (incorporated by reference from Exhibit 4.2 to the Registration Statement on Form S-3 dated September 26, 2003, Registration No. 333-109167 (the “S-3 Registration Statement”))                                                                   |
| Exhibit 4.3:     |   | Form of Certificate for 7.95% Trust Preferred Security of Southern Community Capital Trust II (incorporated by reference from Exhibit 4.6 to the S-3 Registration Statement)                                                                                                                              |
| Exhibit 10.1:    |   | 1997 Incentive Stock Option Plan of Southern Community Financial Corporation (incorporated by reference from Exhibit 10.1 to Amendment Number One to the Registration Statement on Form S-2 dated January 10, 2002, Registration Number 333-74084 (the “Amended S-2 Registration Statement”)) |
| Exhibit 10.2:    |   | 1997 Non-Statutory Stock Option Plan of Southern Community Financial Corporation (incorporated by reference from Exhibit 10.2 to the Amended S-2 Registration Statement)                                                                                                                                  |
| Exhibit 10.3:    |   | 2002 Incentive Stock Option Plan of Southern Community Financial Corporation (incorporated by reference from Exhibit 10.7 to the Annual Report on Form 10-K for the year ended December 31, 2003 (“2003 Annual Report”))                                                                      |
| Exhibit 10.4:    |   | 2002 Non-Statutory Stock Option Plan of Southern Community Financial Corporation (incorporated by reference from Exhibit 10.8 to the 2003 Annual Report)                                                                                                                                                  |
| Exhibit 10.5:    |   | Indenture with respect to the Company’s 7.95% Junior Subordinated Debentures (incorporated by reference from Exhibit 10.9 to the 2003 Annual Report)                                                                                                                                                |

----

| Exhibit 10.6:  |   | Amended and Restated Trust Agreement of Southern Community Capital Trust II (incorporated by reference from Exhibit 10.10 to the 2003 Annual Report)                                                                                        |
|----------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Exhibit 10.7:  |   | Guarantee Agreement for Southern Community Capital Trust II (incorporated by reference from Exhibit 10.11 to the 2003 Annual Report)                                                                                                        |
| Exhibit 10.8:  |   | Agreement as to Expenses and Liabilities with respect to Southern Community Capital Trust II (incorporated by reference from Exhibit 10.12 to the 2003 Annual Report)                                                                       |
| Exhibit 10.9:  |   | 2002 Employee Stock Purchase Plan (incorporated by reference from Exhibit 10.13 to the 2003 Annual Report)                                                                                                                                  |
| Exhibit 10.10: |   | The Community Bank Amended and Restated Stock Option Plan for Key Employees (incorporated by reference from Exhibit 4.2 to the Registration Statement on Form S-8 dated April 29, 2004, Registration Number 333-114997)                     |
| Exhibit 10.11: |   | 2001 Incentive Stock Option Plan of Southern Community Financial Corporation (incorporated by reference from Exhibit 4.2 to the Registration Statement on Form S-8 dated April 29, 2004, Registration Number 333-114993)                    |
| Exhibit 10.12: |   | 2001 Stock Option Plan for Directors of Southern Community Financial Corporation (incorporated by reference from Exhibit 4.2 to the Registration Statement on Form S-8 dated April 29, 2004, Registration Number 333-114991)                |
| Exhibit 10.13: |   | 2006 Nonstatutory Stock Option Plan of Southern Community Financial Corporation (incorporated by reference from Exhibit 4.2 to the Registration Statement on Form S-8 dated November 11, 2006, Registration Number 333-138601)              |
| Exhibit 10.14: |   | Employment Agreement with F. Scott Bauer (incorporated by reference from Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 (“2006 First Quarter Form 10-Q”))                               |
| Exhibit 10.15: |   | Employment Agreement with Jeff T. Clark (incorporated by reference from Exhibit 10.2 to the 2006 First Quarter Form 10-Q)                                                                                                                   |
| Exhibit 10.16: |   | Amended & Restated Salary Continuation Agreement of F. Scott Bauer (incorporated by reference from Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 (“2007 First Quarter Form 10-Q”)) |
| Exhibit 10.17: |   |  Amended & Restated Salary Continuation Agreement of Jeff T. Clark (incorporated by reference from Exhibit 10.2 to the 2007 First Quarter Form 10-Q)                                                                               |
| Exhibit 10.18: |   | Employment Agreement with James C. Monroe, Jr. (incorporated by reference to the Annual Report of Form 10-K for the year ended December 31, 2007)                                                                                           |
| Exhibit 10.19: |   | Amendment Number One to Employment Agreement with F. Scott Bauer (incorporated by reference from Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarter ended September 30, 2007 (“2007 Third Quarter Form 10-Q”))   |
| Exhibit 10.20: |   | Amendment Number One to Employment Agreement with Jeff T. Clark (incorporated by reference from Exhibit 10.2 to the 2007 Third Quarter Form 10-Q)                                                                                           |
| Exhibit 10.21: |   | Amendment Number One to Employment agreement with James C. Monroe, Jr. (incorporated by reference from Exhibit 10.3 to the 2007 Third Quarter Form 10-Q)                                                                                    |
| Exhibit 10.22: |   | Salary Continuation Agreement with James C. Monroe, Jr. (incorporated by reference from Exhibit 10.22 to the Annual Report on Form 10-K for the year ended December 31, 2007)                                                               |
| Exhibit 10.23: |   | Amendment Number One to Salary Continuation Agreement with James C. Monroe, Jr. (incorporated by reference from Exhibit 10.23 to the Annual Report on Form 10-K for the year ended December 31, 2007)                                       |
| Exhibit 10.24: |   | Addendum A to Split Dollar Agreement with F. Scott Bauer (incorporated by reference from Exhibit 10.24 to the Annual Report on Form 10-K for the year ended December 31, 2007)                                                              |
| Exhibit 10.25: |   | Addendum A to Split Dollar Agreement with Jeff T. Clark (incorporated by reference from Exhibit 10.25 to the Annual Report on Form 10-K for the year ended December 31, 2007)                                                               |
| Exhibit 10.26: |   | Employment Agreement with James Hastings (incorporated by reference from Exhibit 10.1 to the Current report on Form 8-K dated June 17, 2008)                                                                                                |
| Exhibit 10.27: |   | Salary Continuation Agreement with James Hastings (incorporated by reference from Exhibit 10.2 to the Current report on Form 8-K dated June 17, 2008)                                                                                       |

----

| Exhibit 10.28: |   | Waiver Agreement and Acknowledgement with F. Scott Bauer (incorporated by reference from Exhibit 10.28 to the Annual Report on Form 10-K for the year ended December 31, 2008 the “2008 Annual Report”)       |
|----------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Exhibit 10.29  |   | Waiver Agreement and Acknowledgement with Jeffrey T. Clark (incorporated by reference from Exhibit 10.29 to the 2008 Annual Report on Form 10-K for the year ended December 31, 2008)                                     |
| Exhibit 10.30  |   | Waiver Agreement and Acknowledgement with Robert L. Davis, Jr. (incorporated by reference from Exhibit 10.30 to the 2008 Annual Report on Form 10-K for the year ended December 31, 2008)                                 |
| Exhibit 10.31  |   | Waiver Agreement and Acknowledgement with James Hastings (incorporated by reference from Exhibit 10.31 to the 2008 Annual Report on Form 10-K for the year ended December 31, 2008)                                       |
| Exhibit 10.32  |   | Waiver Agreement and Acknowledgement with James C. Monroe, Jr. (incorporated by reference from Exhibit 10.32 to the 2008 Annual Report on Form 10-K for the year ended December 31, 2008)                                 |
| Exhibit 10.33: |   | Amendment Number Two to Employment Agreement with James C. Monroe, Jr. (incorporated by reference from Exhibit 10.33 to the 2008 Annual Report on Form 10-K for the year ended December 31, 2008)                         |
| Exhibit 10.34: |   | Amendment Number One to Amended and Restated Salary Continuation Agreement with F. Scott Bauer (incorporated by reference from Exhibit 10.34 to the 2008 Annual Report on Form 10-K for the year ended December 31, 2008) |
| Exhibit 10.35: |   | Amendment Number One to Amended and Restated Salary Continuation Agreement with Jeff T. Clark (incorporated by reference from Exhibit 10.35 to the 2008 Annual Report on Form 10-K for the year ended December 31, 2008)  |
| Exhibit 10.36: |   | Amendment Number One to Salary Continuation Agreement with James Hastings (incorporated by reference from Exhibit 10.36 to the 2008 Annual Report on Form 10-K for the year ended December 31, 2008)                      |
| Exhibit 10.37: |   | Amendment Number One to Employment Agreement with James Hastings (incorporated by reference from Exhibit 10.37 to the 2008 Annual Report on Form 10-K for the year ended December 31, 2008)                               |
| Exhibit 10.38: |   | Amendment Number Two to Employment Agreement with F. Scott Bauer (incorporated by reference from Exhibit 10.38 to the 2008 Annual Report on Form 10-K for the year ended December 31, 2008)                               |
| Exhibit 10.39: |   | Amendment Number Two to Employment Agreement with Jeff T. Clark (incorporated by reference from Exhibit 10.39 to the 2008 Annual Report on Form 10-K for the year ended December 31, 2008)                                |
| Exhibit 10.40: |   | Amendment Number One to Salary Continuation Agreement with Robert L. Davis (incorporated by reference from Exhibit 10.40 to the 2008 Annual Report on Form 10-K for the year ended December 31, 2008)                     |
| Exhibit 10.41: |   | Amendment Number Two to Employment Agreement with Robert L. Davis (incorporated by reference from Exhibit 10.41 to the 2008 Annual Report on Form 10-K for the year ended December 31, 2008)                              |
| Exhibit 10.42: |   | Amendment Number Two to Salary Continuation Agreement with James C. Monroe, Jr. (incorporated by reference from Exhibit 10.42 to the 2008 Annual Report on Form 10-K for the year ended December 31, 2008)                |
| Exhibit 10.43: |   | Amendment Number Three to Employment Agreement with James C. Monroe, Jr. (incorporated by reference from Exhibit 10.43 to the 2008 Annual Report on Form 10-K for the year ended December 31, 2008)                       |
| Exhibit 10.44: |   | Amendment Number Two to the Amended & Restated Salary Continuation Agreement with F. Scott Bauer                                                                                                                      |
| Exhibit 10.45: |   | Amendment Number Two to the Amended & Restated Salary Continuation Agreement with Jeff T. Clark                                                                                                                       |
| Exhibit 10.46: |   | Amendment Number Two to the Salary Continuation Agreement with James Hastings                                                                                                                                             |
| Exhibit 10.47: |   | Amendment Number Three to the Salary Continuation Agreement with James C. Monroe                                                                                                                                          |
| Exhibit 10.48: |   | Amendment Number Two to the Salary Continuation Agreement with Robert L. Davis                                                                                                                                            |

----

| Exhibit 10.49: |   | Stipulation to the Issuance of a Consent Order Dated February 16, 2011 by and between Southern Community Bank and Trust, the Federal Deposit Insurance Corporation and the North Carolina Commissioner of Banks (incorporated by reference from Exhibit 10.1 to the Current Report on Form 8-K dated February 14, 2011) |
|----------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Exhibit 10.50: |   | Consent Order dated February 16, 2011 by and between Southern Community Bank and Trust, the Federal Deposit Insurance Corporation and the North Carolina Commissioner of Banks (incorporated by reference from Exhibit 10.2 to the Current Report on Form 8-K dated February 14, 2011)                                  |
| Exhibit 21:    |   | Subsidiaries of the Registrant                                                                                                                                                                                                                                                                                          |
| Exhibit 23:    |   | Consent of Dixon Hughes PLLC                                                                                                                                                                                                                                                                                            |
| Exhibit 31.1:  |   | Rule 13a-14(a)/15d-14(a) Certification by Chief Executive Officer                                                                                                                                                                                                                                                       |
| Exhibit 31.2:  |   | Rule 13a-14(a)/15d-14(a) Certification by Chief Financial Officer                                                                                                                                                                                                                                                       |
| Exhibit 32:    |   | Section 1350 Certifications                                                                                                                                                                                                                                                                                             |
| Exhibit 99.1   |   | TARP Certification by Chief Executive Officer                                                                                                                                                                                                                                                                           |
| Exhibit 99.2   |   | TARP Certification by Chief Financial Officer                                                                                                                                                                                                                                                                           |

----

|                 | SOUTHERN COMMUNITY    |
|----------------------|-----------------------|
|                 | FINANCIAL CORPORATION |
|                 |                  |   |
| Date: March 24, 2011 | By:                   | /s/ F. Scott Bauer |
|                 |                  | F. Scott Bauer |
|                 |                  | Chairman and Chief Executive Officer |
|                 |                  | (principal executive officer) |

| SIGNATURE              |   | TITLE                                  |   | DATE           |
|------------------------|--------|----------------------------------------|--------|----------------|
|                   |   |                                   |   |           |
| /s/ F. Scott Bauer     |   | Chairman of the Board and Chief        |   |           |
| F. Scott Bauer         |   | Executive Officer (principal           |   | March 24, 2011 |
|                   |   | executive officer)                     |   |           |
|                   |   |                                   |   |           |
| /s/ James Hastings     |   | Executive Vice President and Chief     |   |           |
| James Hastings         |   | Financial Officer (principal financial |   |           |
|                   |   | and accounting officer)                |   | March 24, 2011 |
|                   |   |                                   |   |           |
| /s/ Edward T. Brown    |   | Director                               |   |           |
| Edward T. Brown        |   |                                   |   | March 24, 2011 |
|                   |   |                                   |   |           |
| /s/ James G. Chrysson  |   | Director                               |   |           |
| James G. Chrysson      |   |                                   |   | March 24, 2011 |
|                   |   |                                   |   |           |
| /s/ James O. Frye      |   | Director                               |   |           |
| James O. Frye          |   |                                   |   | March 24, 2011 |
|                   |   |                                   |   |           |
| /s/ Matthew G. Gallins |   | Director                               |   |           |
| Matthew G. Gallins     |   |                                   |   | March 24, 2011 |
|                   |   |                                   |   |           |
| /s/ Beverly H. Godfrey |   | Director                               |   |           |
| Beverly H. Godfrey     |   |                                   |   | March 24, 2011 |

----

| SIGNATURE                      |   | TITLE    |   | DATE           |
|--------------------------------|--------|----------|--------|----------------|
|                           |   |     |   |           |
| /s/ Lynn L. Lane               |   | Director |   |           |
| Lynn L. Lane                   |   |     |   | March 24, 2011 |
|                           |   |     |   |           |
| /s/ H. Lee Merritt, Jr.        |   | Director |   |           |
| H. Lee Merritt, Jr.            |   |     |   | March 24, 2011 |
|                           |   |     |   |           |
| /s/ Stephen L. Robertson       |   | Director |   |           |
| Stephen L. Robertson           |   |     |   | March 24, 2011 |
|                           |   |     |   |           |
| /s/ W. Samuel Smoak            |   | Director |   |           |
| W. Samuel Smoak                |   |     |   | March 24, 2011 |
|                           |   |     |   |           |
| /s/ William G. Ward, Sr., M.D. |   | Director |   |           |
| William G. Ward, Sr., M.D.     |   |     |   | March 24, 2011 |

----