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

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

| California                                                          | 68-0450397                                   |
|---------------------------------------------------------------------|----------------------------------------------|
| (State      or other jurisdiction of incorporation or organization) | (I.R.S.      Employer Identification Number) |

| 195      N. First Street, Dixon, California   | 95620           |
|-----------------------------------------------|-----------------|
| (Address      of principal executive offices) | (Zip      Code) |

| Yes  x | No   ̈ |
|------------------|----------------------|

| Large accelerated      filer    ̈ | Accelerated      filer  x |   Non-accelerated      filer   ̈ |   Smaller reporting      company  ̈ |
|------------------------------------------------------|-------------------------------------|----------------------------------------------------------|---------------------------------------------------|

| Yes   ̈ | No  x |
|-----------------------|-----------------|

----

|                                                      | Page   |
|-----------------------------------------------------------|--------|
|                                                      |   |
| PART      I:    FINANCIAL INFORMATION |   |
|                                                      |   |   |   |
| Item      1                                               |   | Financial      Statements |   |
|                                                      |   |   |   |
|                                                      |   | Unaudited      Condensed Consolidated Balance Sheets | 3 |
|                                                      |   |   |   |
|                                                      |   | Unaudited      Condensed Consolidated Statements of Income | 4 |
|                                                      |   |   |   |
|                                                      |   | Unaudited      Condensed Consolidated Statement of Stockholders’ Equity and Comprehensive      Income | 5 |
|                                                      |   |   |   |
|                                                      |   | Unaudited      Condensed Consolidated Statements of Cash Flows | 6 |
|                                                      |   |   |   |
|                                                      |   | Notes      to Unaudited Condensed Consolidated Financial Statements | 7 |
|                                                      |   |   |   |
| Item      2                                               |   | Management’s      Discussion and Analysis of Financial Condition and Results of      Operations | 18 |
|                                                      |   |   |   |
| Item      3                                               |   | Quantitative      and Qualitative Disclosures About Market Risk | 33 |
|                                                      |   |   |   |
| Item      4                                               |   | Controls      and Procedures | 33 |
|                                                      |   |   |   |
| PART      II:    OTHER INFORMATION    |   |
|                                                      |   |   |   |
| Item      1A                                              |   | Risk      Factors | 34 |
|                                                      |   |   |   |
| Item      2                                               |   | Unregistered      Sales of Equity Securities and Use of Proceeds | 36 |
|                                                      |   |   |   |
| Item      6                                               |   | Exhibits | 37 |
|                                                      |   |   |   |
| Signatures                                                | 37     |

----

|                                                                                                                                     |   | (UNAUDITED)             |    |   |              |   |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|---------|--------|-------------------|--------|
|                                                                                                                                     |   |                    |    |   |              |   |
|                                                                                                                                     |   | September 30,      2008 |    |   | December 31, 2007 |   |
| ASSETS                                                                                                                                   |   |                    |    |   |              |   |
| Cash      and due from banks                                                                                                             |   | $                       | 27,347  |   |              | $      | 52,090 |   |
| Federal      funds sold                                                                                                                  |   |                    | 12,595  |   |              |   | 46,940 |   |
| Investment      securities – available-for-sale                                                                                    |   |                    | 43,452  |   |              |   | 74,849 |   |
| Loans,      net of allowance for loan losses of                                                                                          |   |                    |    |   |              |   |   |   |
| $13,438      at September 30, 2008 and $10,876 at December 31, 2007                                                                      |   |                    | 528,707 |   |              |   | 497,971 |   |
| Loans      held-for-sale                                                                                                                 |   |                    | 1,615   |   |              |   | 1,343 |   |
| Stock      in Federal Home Loan Bank and other equity      securities,    at cost                                    |   |                    | 2,290   |   |              |   | 2,199 |   |
| Premises      and equipment, net                                                                                                         |   |                    | 9,035   |   |              |   | 7,872 |   |
| Other      Real Estate Owned                                                                                                             |   |                    | 4,725   |   |              |   | 879 |   |
| Accrued      interest receivable and other assets                                                                                        |   |                    | 27,757  |   |              |   | 25,752 |   |
|        TOTAL ASSETS                                                                              |   | $                       | 657,523 |   |              | $      | 709,895 |   |
|                                                                                                                                     |   |                    |    |   |              |   |   |   |
| LIABILITIES      AND STOCKHOLDERS' EQUITY                                                                                                |   |                    |    |   |              |   |   |   |
| Liabilities                                                                                                                              |   |                    |    |   |              |   |   |   |
|                                                                                                                                     |   |                    |    |   |              |   |   |   |
| Deposits                                                                                                                                 |   |                    |    |   |              |   |   |   |
| Demand      deposits                                                                                                                     |   | $                       | 161,562 |   |              | $      | 193,258 |   |
| Interest-bearing      transaction deposits                                                                                               |   |                    | 121,395 |   |              |   | 135,381 |   |
| Savings      and MMDA's                                                                                                                  |   |                    | 163,632 |   |              |   | 178,137 |   |
| Time,      under $100,000                                                                                                                |   |                    | 53,439  |   |              |   | 46,411 |   |
| Time,      $100,000 and over                                                                                                             |   |                    | 59,194  |   |              |   | 69,484 |   |
|        Total deposits                                                                            |   |                    | 559,222 |   |              |   | 622,671 |   |
| FHLB      Advances and other borrowings                                                                                                  |   |                    | 30,577  |   |              |   | 15,832 |   |
| Accrued      interest payable and other liabilities                                                                                      |   |                    | 5,860   |   |              |   | 7,417 |   |
|        TOTAL LIABILITIES                                                                         |   |                    | 595,659 |   |              |   | 645,920 |   |
|                                                                                                                                     |   |                    |    |   |              |   |   |   |
| Stockholders'      equity                                                                                                                |   |                    |    |   |              |   |   |   |
| Common      stock, no par value; 16,000,000 shares authorized;                                                                           |   |                    |    |   |              |   |   |   |
| 8,577,689      shares issued and outstanding at September 30, 2008 and 8,169,772 shares      issued and outstanding at December 31, 2007 |   |                    | 58,631  |   |              |   | 50,956 |   |
| Additional      paid in capital                                                                                                          |   |                    | 977     |   |              |   | 977 |   |
| Retained      earnings                                                                                                                   |   |                    | 3,568   |   |              |   | 12,209 |   |
| Accumulated      other comprehensive loss                                                                                                |   |                    | (1,312  | )      |              |   | (167 | ) |
|        TOTAL STOCKHOLDERS' EQUITY                                                           |   |                    | 61,864  |   |              |   | 63,975 |   |
|                                                                                                                                     |   |                    |    |   |              |   |   |   |
|        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                 |   | $                       | 657,523 |   |              | $      | 709,895 |   |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | Three      months  |   |   | Three      months  |   |   | Nine      months   |   |   | Nine      months   |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|--------|--------|--------------------|--------|--------|--------------------|--------|--------|--------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | ended              |   |   | ended              |   |   | ended              |   |   | ended              |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | September 30, 2008 |   |   | September 30, 2007 |   |   | September 30, 2008 |   |   | September 30, 2007 |   |
| Interest      and Dividend Income                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |               |   |   |               |   |   |               |   |   |               |   |
|      Loans                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | $                  | 9,062  |   |               | $      | 10,681 |               |   | $      | 26,842             |   |   | $ | 31,435 |   |
|      Federal funds sold                                                                                                                                                                                                                                                                                                                                                                                                                        |   |               | 70     |   |               |   | 384    |               |   |   | 487                |   |   |   | 2,236 |   |
|      Due      from banks interest bearing accounts                                                                                                                                                                                                                                                                                                                                                                                                       |   |               | 109    |   |               |   | 116    |               |   |   | 521                |   |   |   | 116 |   |
|      Investment securities                                                                                                                                                                                                                                                                                                                                                                                                                          |   |               |   |   |               |   |   |               |   |   |               |   |   |   |   |   |
|           Taxable                                                                                                                                                                                                                                                                                                                                                                                                               |   |               | 282    |   |               |   | 779    |               |   |   | 1,122              |   |   |   | 2,113 |   |
|           Non-taxable                                                                                                                                                                                                                                                                                                                                                                                                           |   |               | 300    |   |               |   | 335    |               |   |   | 986                |   |   |   | 915 |   |
|      Other      earning assets                                                                                                                                                                                                                                                                                                                                                                                                                           |   |               | 33     |   |               |   | 26     |               |   |   | 99                 |   |   |   | 86 |   |
|                Total interest      and dividend income                                                                                                                                                                                                                                                                                                                                       |   |               | 9,856  |   |               |   | 12,321 |               |   |   | 30,057             |   |   |   | 36,901 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |               |   |   |               |   |   |               |   |   |               |   |   |   |   |   |
| Interest Expense                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |               |   |   |               |   |   |               |   |   |               |   |   |   |   |   |
|      Deposits                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |               | 1,282  |   |               |   | 2,930  |               |   |   | 4,635              |   |   |   | 8,920 |   |
|      Other borrowings                                                                                                                                                                                                                                                                                                                                                                                                                               |   |               | 247    |   |               |   | 81     |               |   |   | 394                |   |   |   | 247 |   |
|                Total interest expense                                                                                                                                                                                                                                                                                                                                                        |   |               | 1,529  |   |               |   | 3,011  |               |   |   | 5,029              |   |   |   | 9,167 |   |
|                Net interest income                                                                                                                                                                                                                                                                                                                                                           |   |               | 8,327  |   |               |   | 9,310  |               |   |   | 25,028             |   |   |   | 27,734 |   |
| Provision      for  loan losses                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |               | 3,638  |   |               |   | 990    |               |   |   | 10,060             |   |   |   | 1,250 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |               |   |   |               |   |   |               |   |   |               |   |   |   |   |   |
|                Net interest income after provision                    for loan losses                                                                                                                                                                                |   |               | 4,689  |   |               |   | 8,320  |               |   |   | 14,968             |   |   |   | 26,484 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |               |   |   |               |   |   |               |   |   |               |   |   |   |   |   |
| Other operating income                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |               |   |   |               |   |   |               |   |   |               |   |   |   |   |   |
|      Service charges on deposit accounts                                                                                                                                                                                                                                                                                                                                                                                             |   |               | 952    |   |               |   | 903    |               |   |   | 2,805              |   |   |   | 2,512 |   |
|      (Losses)      gains on other real estate owned                                                                                                                                                                                                                                                                                                                                                                                                 |   |               | (724   | )      |               |   | 174    |               |   |   | (1,376             | )      |   |   | 353 |   |
|      Gains on sales of loans      held-for-sale                                                                                                                                                                                                                                                                                                                                                                                      |   |               | 29     |   |               |   | 6      |               |   |   | 203                |   |   |   | 190 |   |
|      Investment and brokerage services income                                                                                                                                                                                                                                                                                                                                                                                        |   |               | 251    |   |               |   | 37     |               |   |   | 635                |   |   |   | 141 |   |
|      Mortgage brokerage income                                                                                                                                                                                                                                                                                                                                                                                                                 |   |               | 3      |   |               |   | 13     |               |   |   | 16                 |   |   |   | 90 |   |
|      Loan servicing income                                                                                                                                                                                                                                                                                                                                                                                                                     |   |               | 30     |   |               |   | 66     |               |   |   | 189                |   |   |   | 232 |   |
|      Fiduciary      activities income                                                                                                                                                                                                                                                                                                                                                                                                                    |   |               | 72     |   |               |   | 65     |               |   |   | 245                |   |   |   | 210 |   |
|      ATM fees                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |               | 61     |   |               |   | 77     |               |   |   | 199                |   |   |   | 216 |   |
|      Signature      based transaction fees                                                                                                                                                                                                                                                                                                                                                                                                               |   |               | 153    |   |               |   | 134    |               |   |   | 444                |   |   |   | 377 |   |
|           Gains on sales of      available-for-sale                                                                securities |   |               | 29     |   |               |   | 146    |               |   |   | 524                |   |   |   | 146 |   |
|      Other income                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |               | 188    |   |               |   | 179    |               |   |   | 583                |   |   |   | 539 |   |
|                Total other operating income                                                                                                                                                                                                                                                                                                                                             |   |               | 1,044  |   |               |   | 1,800  |               |   |   | 4,467              |   |   |   | 5,006 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |               |   |   |               |   |   |               |   |   |               |   |   |   |   |   |
| Other operating expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |               |   |   |               |   |   |               |   |   |               |   |   |   |   |   |
|      Salaries and employee benefits                                                                                                                                                                                                                                                                                                                                                                                                       |   |               | 3,650  |   |               |   | 4,373  |               |   |   | 11,716             |   |   |   | 13,183 |   |
|      Occupancy and equipment                                                                                                                                                                                                                                                                                                                                                                                                                   |   |               | 913    |   |               |   | 834    |               |   |   | 2,777              |   |   |   | 2,731 |   |
|      Data processing                                                                                                                                                                                                                                                                                                                                                                                                                                |   |               | 436    |   |               |   | 424    |               |   |   | 1,254              |   |   |   | 1,217 |   |
|      Stationery and supplies                                                                                                                                                                                                                                                                                                                                                                                                                   |   |               | 83     |   |               |   | 119    |               |   |   | 370                |   |   |   | 406 |   |
|      Advertising                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |               | 137    |   |               |   | 212    |               |   |   | 503                |   |   |   | 641 |   |
|      Directors’ fees                                                                                                                                                                                                                                                                                                                                                                                                                          |   |               | 53     |   |               |   | 49     |               |   |   | 158                |   |   |   | 149 |   |
|      Other      real estate owned expense                                                                                                                                                                                                                                                                                                                                                                                                                |   |               | 41     |   |               |   | 9      |               |   |   | 76                 |   |   |   | 27 |   |
|      Other expense                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |               | 1,021  |   |               |   | 1,170  |               |   |   | 3,979              |   |   |   | 3,909 |   |
|                Total other operating expenses                                                                                                                                                                                                                                                                                                                                           |   |               | 6,334  |   |               |   | 7,190  |               |   |   | 20,833             |   |   |   | 22,263 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |               |   |   |               |   |   |               |   |   |               |   |   |   |   |   |
|                (Loss)      income before income tax expense    (benefit)                                                                                                                                                                                                                                                                                                           |   |               | (601   | )      |               |   | 2,930  |               |   |   | (1,398             | )      |   |   | 9,227 |   |
| (Benefit)      provision for income taxes                                                                                                                                                                                                                                                                                                                                                                                                                          |   |               | (1,573 | )      |               |   | 911    |               |   |   | (1,566             | )      |   |   | 3,133 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |               |   |   |               |   |   |               |   |   |               |   |   |   |   |   |
|                Net income                                                                                                                                                                                                                                                                                                                                                                         |   | $                  | 972    |   |               | $      | 2,019  |               |   | $      | 168                |   |   | $ | 6,094 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |               |   |   |               |   |   |               |   |   |               |   |   |   |   |   |
| Basic      income per share                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | $                  | 0.11   |   |               | $      | 0.23   |               |   | $      | 0.02               |   |   | $ | 0.69 |   |
| Diluted income per share                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | $                  | 0.11   |   |               | $      | 0.22   |               |   | $      | 0.02               |   |   | $ | 0.67 |   |

----

| (in      thousands, except share amounts)                                                                      |   |
|----------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                           |   |
|                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   | Accumulated |   |   |   |   |
|                                                                                                           |   |   |   |   |   |   |   | Additional |   |   |   |   |   | Other |   |   |   |   |
|                                                                                                           |   | Common      Stock |   |   | Comprehensive |   |   | Paid-in |   |   | Retained |   |   | Comprehensive |   |   |   |   |
|                                                                                                           |   | Shares |   |   | Amounts |   |   | Income      (Loss) |   |   | Capital |   |   | Earnings |   |   | Loss |   |   | Total |   |
|                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at December 31, 2007                                                                              |   |   | 8,169,772 |   |   | $ | 50,956 |   |   |   |   |   | $ | 977 |   |   | $ | 12,209 |   |   | $ | (167 | ) |   | $ | 63,975 |   |
| Cumulative      effect of adoption of EITF 06-04                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (158 | ) |   |   |   |   |   |   | (158 | ) |
|                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive      income (loss)                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      income                                                                                                |   |   |   |   |   |   |   |   |   | $ | 168 |   |   |   |   |   |   |   | 168 |   |   |   |   |   |   |   | 168 |   |
| Other      comprehensive income:                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized      holding losses on securities arising during the current period, net of tax      effect of $677 |   |   |   |   |   |   |   |   |   |   | (1,016 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Reclassification      adjustment due to gains realized on sales of securities, net of tax effect      of $210  |   |   |   |   |   |   |   |   |   |   | (314 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Directors’      and officers’ retirement plan equity adjustments, net of tax effect of      $124   |   |   |   |   |   |   |   |   |   |   | 185 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      other comprehensive loss, net of tax effect of $763                                                 |   |   |   |   |   |   |   |   |   |   | (1,145 | ) |   |   |   |   |   |   |   |   |   |   | (1,145 | ) |   |   | (1,145 | ) |
|                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive      loss                                                                                        |   |   |   |   |   |   |   |   |   | $ | (977 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 6%      stock dividend                                                                                         |   |   | 486,542 |   |   |   | 8,641 |   |   |   |   |   |   |   |   |   |   |   | (8,641 | ) |   |   |   |   |   |   |   |   |
| Cash      in lieu of fractional shares                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (10 | ) |   |   |   |   |   |   | (10 | ) |
| Stock-based      compensation and related tax benefits                                                         |   |   |   |   |   |   | 393 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 393 |   |
| Stock      options exercised, net of swapped shares                                                            |   |   | 6,790 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock      repurchase and retirement                                                                           |   |   | (85,415 | ) |   |   | (1,359 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (1,359 | ) |
|                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at September 30, 2008                                                                             |   |   | 8,577,689 |   |   | $ | 58,631 |   |   |   |   |   |   | $ | 977 |   |   | $ | 3,568 |   |   | $ | (1,312 | ) |   | $ | 61,864 |   |

----

|                                                                                                                                                                                            |   | (in      thousands)                                  |    |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------|---------|
|                                                                                                                                                                                            |   |  Nine      months ended September 30, 2008 |    |   | Nine      months ended September 30, 2007 |   |
| Operating      Activities                                                                                                                                                                       |   |                                                 |    |   |   |   |
|           Net      Income                                                                                                                     |   | $                                                    | 168     |   |   | $ | 6,094 |   |
|           Adjustments to reconcile net income to net      cash                                                  |   |                                                 |    |   |   |   |   |   |
|  provided by operating activities:                                                                                                                                          |   |                                                 |    |   |   |   |   |   |
|  Depreciation      and amortization                                                                                                                                                        |   |                                                 | 791     |   |   |   | 853 |   |
|  Provision      for loan losses                                                                                                                                                            |   |                                                 | 10,060  |   |   |   | 1,250 |   |
|  Stock      plan accruals                                                                                                                                                                  |   |                                                 | 373     |   |   |   | 426 |   |
|  Tax      benefit for stock options                                                                                                                                                        |   |                                                 | 20      |   |   |   | 82 |   |
|  Gains      on sales of available-for-sale securities                                                                                                                                      |   |                                                 | (524    | ) |   |   | (146 | ) |
|  Losses      (gains) on sales of other real estate owned                                                                                                                                   |   |                                                 | 1,376   |   |   |   | (353 | ) |
|  Gains      on sales of loans held-for-sale                                                                                                                                                |   |                                                 | (203    | ) |   |   | (190 | ) |
|  Proceeds      from sales of loans held-for-sale                                                                                                                                           |   |                                                 | 27,386  |   |   |   | 33,447 |   |
|  Originations      of loans held-for-sale                                                                                                                                                  |   |                                                 | (27,455 | ) |   |   | (30,415 | ) |
|  Increase      in accrued interest receivable and other assets                                                                                                                             |   |                                                 | (4,175  | ) |   |   | (959 | ) |
|  Decrease      in accrued interest payable and other liabilities                                                                                                                           |   |                                                 | (1,557  | ) |   |   | (799 | ) |
|                     Net cash      provided by operating activities      |   |                                                 | 6,260   |   |   |   | 9,290 |   |
|                                                                                                                                                                                            |   |                                                 |    |   |   |   |   |   |
| Investing Activities                                                                                                                                                                       |   |                                                 |    |   |   |   |   |   |
|           Net decrease      (increase) in investment securities                                                           |   |                                                 | 32,808  |   |   |   | (15,000 | ) |
|           Net increase in loans                                                                                                |   |                                                 | (46,018 | ) |   |   | (33,967 | ) |
|           Net      increase in other interest earning assets                                                                             |   |                                                 | (91     | ) |   |   | (79 | ) |
|           Purchases of premises and equipment, net                                                                   |   |                                                 | (1,954  | ) |   |   | (722 | ) |
|                     Net cash      used in investing activities               |   |                                                 | (15,255 | ) |   |   | (49,768 | ) |
|                                                                                                                                                                                            |   |                                                 |    |   |   |   |   |   |
| Financing Activities                                                                                                                                                                       |   |                                                 |    |   |   |   |   |   |
|           Net      (decrease) increase in deposits                                                                                  |   |                                                 | (63,449 | ) |   |   | 4,138 |   |
|           Net increase      (decrease) in FHLB advances and other      borrowings                                         |   |                                                 | 14,745  |   |   |   | (303 | ) |
|           Cash dividends paid                                                                                                       |   |                                                 | (10     | ) |   |   | (13 | ) |
|           Stock      options exercised                                                                                                        |   |                                                 | — |   |   |   | 101 |   |
|           Tax      benefit for stock options                                                                                                  |   |                                                 | (20     | ) |   |   | (82 | ) |
|           Repurchase of stock                                                                                                       |   |                                                 | (1,359  | ) |   |   | (4,542 | ) |
|                     Net cash used      in financing activities               |   |                                                 | (50,093 | ) |   |   | (701 | ) |
|                                                                                                                                                                                  |   |                                                 |    |   |   |   |   |   |
|                     Net decrease      in cash and cash equivalents |   |                                                 | (59,088 | ) |   |   | (41,179 | ) |
| Cash and cash equivalents at beginning of period                                                                                                             |   |                                                 | 99,030  |   |   |   | 98,001 |   |
| Cash and cash equivalents at end of period                                                                                                                   |   | $                                                    | 39,942  |   |   | $ | 56,822 |   |
|                                                                                                                                                                                            |   |                                                 |    |   |   |   |   |   |
| Supplemental disclosures of cash flow information:                                                                                                                     |   |                                                 |    |   |   |   |   |   |
| Cash paid during the period for:                                                                                                                                       |   |                                                 |    |   |   |   |   |   |
|                     Interest                                                                |   | $                                                    | 5,260   |   |   | $ | 6,524 |   |
|                     Income Taxes                                                       |   | $                                                    | 342     |   |   | $ | 4,615 |   |
|                                                                                                                                                                                            |   |                                                 |    |   |   |   |   |   |
| Supplemental disclosures of non-cash investing and financing activities:                                                                                     |   |                                                 |    |   |   |   |   |   |
|    Transfer      of loans held-for-sale to loans held-for-investment                                                                                                             |   |                                                 | — |   |   | $ | 2,892 |   |
|    Transfer      of loans held-for-investment to other real estate owned                                                                                                         |   | $                                                    | 6,343   |   |   | $ | 1,352 |   |
|    Stock dividend distributed                                                                                                                                          |   | $                                                    | 8,641   |   |   | $ | 10,851 |   |

----

| 1. | BASIS      OF PRESENTATION |
|----|----------------------------|

----

----

|                              |   | (in      thousands)                      |   |
|-----------------------------------|--------|------------------------------------------|--------|
|                              |   |                                     |   |   |   |   |
|                              |   | Nine      months endedSeptember      30, |   |   | Year      ended December 31, |   |
|                              |   | 2008                                     |   |   | 2007 |   |   | 2007 |   |
| Balance,      beginning of period |   | $                                        | 10,876 |   |   | $ | 8,361 |   |   | $ | 8,361 |   |
| Provision      for loan losses    |   |                                     | 10,060 |   |   |   | 1,250 |   |   |   | 4,795 |   |
| Loan      charge-offs             |   |                                     | (8,009 | ) |   |   | (970 | ) |   |   | (3,060 | ) |
| Loan      recoveries              |   |                                     | 511    |   |   |   | 512 |   |   |   | 780 |   |
| Balance,      end of period       |   | $                                        | 13,438 |   |   | $ | 9,153 |   |   | $ | 10,876 |   |

----

| 3. | MORTGAGE      OPERATIONS |
|----|--------------------------|

|                                                       |   | (in      thousands)    |    |
|------------------------------------------------------------|--------|------------------------|---------|
|                                                       |   | December      31, 2007 |    |   | Additions |   |   | Reductions |   |   | September      30, 2008 |   |
|                                                       |   |                   |    |   |   |   |   |   |   |   |   |   |
| Mortgage      servicing rights                             |   | $                      | 956     |   |   | $ | 135 |   |   | $ | 134 |   |   | $ | 957 |   |
| Valuation      allowance                                   |   |                   | — |   |   |   | (34 | ) |   |   | — |   |   |   | (34 | ) |
| Mortgage      servicing rights, net of valuation allowance |   | $                      | 956     |   |   | $ | 101 |   |   | $ | 134 |   |   | $ | 923 |   |
|                                                       |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| 4. | OUTSTANDING      SHARES AND EARNINGS PER SHARE |
|----|------------------------------------------------|

|                                                     |   | (in      thousands, except share and earnings per share amounts) |      |
|----------------------------------------------------------|--------|------------------------------------------------------------------|-----------|
|                                                     |   | Three      months ended September 30,                            |      |   | Nine      months ended September 30, |   |
|                                                     |   | 2008                                                             |      |   | 2007 |   |   | 2008 |   |   | 2007 |   |
| Basic      earnings per share:                           |   |                                                             |      |   |   |   |   |   |   |   |   |   |
| Net      income                                          |   | $                                                                | 972       |   |   | $ | 2,019 |   |   | $ | 168 |   |   | $ | 6,094 |   |
|                                                     |   |                                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      average common shares outstanding          |   |                                                             | 8,577,689 |   |   |   | 8,793,412 |   |   |   | 8,619,059 |   |   |   | 8,860,922 |   |
| Basic      EPS                                           |   | $                                                                | 0.11      |   |   | $ | 0.23 |   |   | $ | 0.02 |   |   | $ | 0.69 |   |
|                                                     |   |                                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted      earnings per share:                         |   |                                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      income                                          |   | $                                                                | 972       |   |   | $ | 2,019 |   |   | $ | 168 |   |   | $ | 6,094 |   |
|                                                     |   |                                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      average common shares outstanding          |   |                                                             | 8,577,689 |   |   |   | 8,793,412 |   |   |   | 8,619,059 |   |   |   | 8,860,922 |   |
|                                                     |   |                                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Effect      of dilutive options                          |   |                                                             | 80,088    |   |   |   | 219,638 |   |   |   | 141,189 |   |   |   | 260,179 |   |
|                                                     |   |                                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Adjusted      weighted average common shares outstanding |   |                                                             | 8,657,777 |   |   |   | 9,013,050 |   |   |   | 8,760,248 |   |   |   | 9,121,101 |   |
| Diluted      EPS                                         |   | $                                                                | 0.11      |   |   | $ | 0.22 |   |   | $ | 0.02 |   |   | $ | 0.67 |   |

----

| 5. | STOCK      PLANS |
|----|------------------|

|                                                       |   | Number      of Shares |    |   | Weighted      Average Exercise Price |   |    | Aggregate      Intrinsic Value |   |   | Weighted      Average Remaining Contractual Term (in years) |   |
|------------------------------------------------------------|--------|-----------------------|---------|--------|--------------------------------------|--------|---------|--------------------------------|--------|--------|------------------------------------------------------------------|--------|
| Options      outstanding at Beginning of  Period |   |                  | 564,145 |   |                                 | $      | 10.55   |                           |   |   |                                                             |   |   |   |
|                                                       |   |                  |    |   |                                 |   |    |                           |   |   |                                                             |   |   |   |
|    Granted                                  |   |                  | — |   |                                 |   | — |                           |   |   |                                                             |   |   |   |
|                                                       |   |                  |    |   |                                 |   |    |                           |   |   |                                                             |   |   |   |
|    Cancelled      / Forfeited               |   |                  | — |   |                                 |   | — |                           |   |   |                                                             |   |   |   |
|                                                       |   |                  |    |   |                                 |   |    |                           |   |   |                                                             |   |   |   |
|    Exercised                                |   |                  | — |   |                                 |   | — |                           |   |   | —                                                          |   |   |   |   |
|                                                       |   |                  |    |   |                                 |   |    |                           |   |   |                                                             |   |   |   |   |
| Options      outstanding at End of Period                  |   |                  | 564,145 |   |                                 | $      | 10.55   |                           |   | $      | 1,067,210                                                        |   |   |   | 5.10 |   |
|                                                       |   |                  |    |   |                                 |   |    |                           |   |   |                                                             |   |   |   |   |   |
| Exercisable      (vested) at End of Period                 |   |                  | 437,669 |   |                                 | $      | 9.55    |                           |   | $      | 774,210                                                          |   |   |   | 4.28 |   |

|                                                       |   | Number      of Shares |    |   | Weighted      Average Exercise Price |   |   | Aggregate      Intrinsic Value |   |   | Weighted      Average Remaining Contractual Term |   |
|------------------------------------------------------------|--------|-----------------------|---------|--------|--------------------------------------|--------|--------|--------------------------------|--------|--------|--------------------------------------------------|--------|
| Options      outstanding at Beginning of  Period |   |                  | 542,221 |   |                                 | $      | 10.78  |                           |   |   |                                             |   |   |   |
|                                                       |   |                  |    |   |                                 |   |   |                           |   |   |                                             |   |   |   |
|    Granted                                  |   |                  | 31,464  |   |                                 | $      | 4.66   |                           |   |   |                                             |   |   |   |
|                                                       |   |                  |    |   |                                 |   |   |                           |   |   |                                             |   |   |   |
|    Cancelled      / Forfeited               |   |                  | (297    | )      |                                 | $      | 21.83  |                           |   |   |                                             |   |   |   |
|                                                       |   |                  |    |   |                                 |   |   |                           |   |   |                                             |   |   |   |
|    Exercised                                |   |                  | (9,243  | )      |                                 | $      | 3.76   |                           |   | $      | 97,143                                           |   |   |   |   |
|                                                       |   |                  |    |   |                                 |   |   |                           |   |   |                                             |   |   |   |   |
| Options      outstanding at End of Period                  |   |                  | 564,145 |   |                                 | $      | 10.55  |                           |   | $      | 1,067,210                                        |   |   |   | 5.10 |   |
|                                                       |   |                  |    |   |                                 |   |   |                           |   |   |                                             |   |   |   |   |   |
| Exercisable      (vested) at End of Period                 |   |                  | 437,669 |   |                                 | $      | 9.55   |                           |   | $      | 774,210                                          |   |   |   | 4.28 |   |

----

|                                 | Three      Months Ended |   | Nine      Months Ended |
|--------------------------------------|-------------------------|--------|------------------------|
| September      30, 2008*             | September      30, 2008 |
|  Risk      Free Interest Rate   | —                 |   | 2.76%                  |
|                                 |                    |   |                   |
|  Expected      Dividend Yield   | —                 |   | 0.0%                   |
|                                 |                    |   |                   |
|  Expected      Life in Years    | —                 |   | 5.00                   |
|                                 |                    |   |                   |
|  Expected      Price Volatility | —                 |   | 27.92%                 |

|                                 | Three      Months Ended |   | Nine      Months Ended  |   |
|--------------------------------------|-------------------------|--------|-------------------------|--------|
| September      30, 2008              | September      30, 2008 |   |
|  Risk      Free Interest Rate   |    3.28% |   |    3.28% |   |
|                                 |                    |   |                    |   |
|  Expected      Dividend Yield   |    0.00% |   |    0.00% |   |
|                                 |                    |   |                    |   |
|  Expected      Life in Years    | 1.00                    |   | 1.00                    |   |
|                                 |                    |   |                    |   |
|  Expected      Price Volatility | 31.90%                  |   | 31.90%                  |   |

----

| 6. | EXECUTIVE      SALARY CONTINUATION PLAN |
|----|-----------------------------------------|

|                                         |   | Three      months ended September, |   |
|----------------------------------------------|--------|------------------------------------|--------|
|                                         |   | 2008                               |   |   | 2007 |   |
| Components      of Net Periodic Benefit Cost |   |                               |   |   |   |   |
| Service      Cost                            |   | $                                  | 33,232 |   |   | $ | 30,383 |   |
| Interest  Cost                     |   |                               | 29,684 |   |   |   | 28,784 |   |
| Amortization      of prior service cost      |   |                               | 21,821 |   |   |   | 21,821 |   |
| Net      periodic benefit cost               |   | $                                  | 84,737 |   |   | $ | 80,988 |   |

----

| 7. | DIRECTORS'      RETIREMENT PLAN |
|----|--------------------------------------|

|                                         |   | Three      months ended September 30, |    |
|----------------------------------------------|--------|---------------------------------------|---------|
|                                         |   | 2008                                  |    |   | 2007 |   |
| Components      of Net Periodic Benefit Cost |   |                                  |    |   |   |   |
| Service      Cost                            |   | $                                     | 14,424  |   |   | $ | 14,366 |   |
| Interest  Cost                     |   |                                  | 7,731   |   |   |   | 6,736 |   |
| Amortization      of net loss                |   |                                  | — |   |   |   | 121 |   |
| Net      periodic benefit cost               |   | $                                     | 22,155  |   |   | $ | 21,223 |   |

----

| 8. | FAIR      VALUE MEASUREMENT |
|----|-----------------------------|

|   |             Level      1  |   | Valuation      is based upon quoted prices for identical instruments traded in active      markets.                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------|---------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |                  Level 2  |   | Valuation      is based upon quoted prices for similar instruments in active markets,      quoted prices for identical or similar instruments in markets that are not      active and model-based valuation techniques for which all significant      assumptions are observable or can be corroborated by observable market      data.                                                                                                                                                                            |
|   |                                                                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |                  Level 3  |   | Valuation      is generated from model-based techniques that use at least one significant      assumption not observable in the market.  These unobservable      assumptions reflect estimates of assumptions that market participants      would use in pricing the asset or liability.  Valuation      techniques include use of option pricing models, discounted cash flow      models and similar techniques and include management judgment and      estimation which may besignificant. |

----

|                                          |   |   |   |   |         |   |   |         |   |   |         |   |
|-----------------------------------------------|--------|--------|--------|--------|--------------|--------|--------|--------------|--------|--------|--------------|--------|
| (in      thousands)                           |   |   |   |   |         |   |   |         |   |   |         |   |
| September      30, 2008                       |   | Total  |   |   | Level      1 |   |   | Level      2 |   |   | Level      3 |   |
| Investment      securities available-for-sale |   | $      | 43,452 |   |         | $      | 2,272  |         |   | $      | 41,180       |   |   | $ | — |   |
|                                          |   |   |   |   |         |   |   |         |   |   |         |   |   |   |   |   |
| Total      investments at fair value          |   | $      | 43,452 |   |         | $      | 2,272  |         |   |   | 41,180       |   |   | $ | — |   |
|                                          |   |   |   |   |         |   |   |         |   |   |         |   |   |   |   |   |

|                                                              |   |   |   |   |         |   |    |         |   |   |         |   |
|-------------------------------------------------------------------|--------|--------|--------|--------|--------------|--------|---------|--------------|--------|--------|--------------|--------|
| (in      thousands)                                               |   |   |   |   |         |   |    |         |   |   |         |   |
| September      30, 2008                                           |   | Total  |   |   | Level      1 |   |    | Level      2 |   |   | Level      3 |   |
| Impaired      loans                                               |   | $      | 11,561 |   |         | $      | — |         |   | $      | 8,097        |   |   | $ | 3,464 |   |
| Loan      servicing rights                                        |   |   | 923    |   |         |   | — |         |   |   | —      |   |   |   | 923 |   |
|                                                              |   |   |   |   |         |   |    |         |   |   |         |   |   |   |   |   |
| Total      impaired loans and loan servicing rights at fair value |   | $      | 12,484 |   |         | $      | — |         |   | $      | 8,097        |   |   | $ | 4,387 |   |
|                                                              |   |   |   |   |         |   |    |         |   |   |         |   |   |   |   |   |

----

----

----

|                                                                                      |   | (in      thousands, except per share and percentage amounts) |   |
|-------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------|--------|
|                                                                                      |   |                                                         |   |   |   |   |   |   |   |   |   |   |
|                                                                                      |   | Three      months                                            |   |   | Three      months |   |   | Nine      months |   |   | Nine      months |   |
|                                                                                      |   | ended                                                        |   |   | ended |   |   | ended |   |   | ended |   |
|                                                                                      |   | September      30, 2008                                      |   |   | September      30, 2007 |   |   | September      30, 2008 |   |   | September      30, 2007 |   |
|                                                                                      |   |                                                         |   |   |   |   |   |   |   |   |   |   |
| For      the Period:                                                                      |   |                                                         |   |   |   |   |   |   |   |   |   |   |
|                                                                                      |   |                                                         |   |   |   |   |   |   |   |   |   |   |
|     Net      Income                                                   |   | $                                                            | 972    |   |   | $ | 2,019 |   |   | $ | 168 |   |   | $ | 6,094 |   |
|                                                                                      |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Basic      Earnings Per Share*                                    |   | $                                                            | 0.11   |   |   | $ | 0.23 |   |   | $ | 0.02 |   |   | $ | 0.69 |   |
|                                                                                      |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Diluted      Earnings Per Share*                                  |   | $                                                            | 0.11   |   |   | $ | 0.22 |   |   | $ | 0.02 |   |   | $ | 0.67 |   |
|                                                                                      |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                      |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| At      Period End:                                                                       |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                      |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Total      Assets                                     |   |                                                         |   |   |   |   |   |   |   | $ | 657,523 |   |   | $ | 690,333 |   |
|                                                                                      |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Total      Loans, Net (including loans held-for-sale) |   |                                                         |   |   |   |   |   |   |   | $ | 530,322 |   |   | $ | 510,360 |   |
|                                                                                      |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Total      Investment Securities                            |   |                                                         |   |   |   |   |   |   |   | $ | 43,452 |   |   | $ | 89,377 |   |
|                                                                                      |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Total      Deposits                                         |   |                                                         |   |   |   |   |   |   |   | $ | 559,222 |   |   | $ | 607,820 |   |
|                                                                                      |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Loan-To-Deposit      Ratio                            |   |                                                         |   |   |   |   |   |   |   |   | 94.8 | % |   |   | 84.0% | % |
|                                                                                      |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| *Adjusted      for stock dividends                                                        |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | Three      months ended |    |   | Three      months ended |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|---------|--------|-------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | September      30, 2008 |    |   | September      30, 2007 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | Average                 |    |   |                    |   |   | Yield/ |   |   | Average |   |   |   |   |   | Yield/ |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | Balance                 |    |   | Interest                |   |   | Rate |   |   | Balance |   |   | Interest |   |   | Rate |   |
| Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning      assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans      (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | $                       | 530,220 |   |                    | $      | 9,062 |   |   |   | 6.78 | % |   | $ | 501,560 |   |   | $ | 10,681 |   |   |   | 8.45 | % |
| Federal      funds sold                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                    | 15,044  |   |                    |   | 70 |   |   |   | 1.85 | % |   |   | 29,187 |   |   |   | 384 |   |   |   | 5.22 | % |
| Interest      bearing due from banks                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                    | 10,261  |   |                    |   | 109 |   |   |   | 4.21 | % |   |   | 7,532 |   |   |   | 116 |   |   |   | 6.11 | % |
| Investment      securities, taxable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                    | 23,175  |   |                    |   | 282 |   |   |   | 4.83 | % |   |   | 61,819 |   |   |   | 779 |   |   |   | 5.00 | % |
| Investment      securities, non-taxable  (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                    | 28,248  |   |                    |   | 300 |   |   |   | 4.21 | % |   |   | 31,061 |   |   |   | 335 |   |   |   | 4.28 | % |
| Other      interest earning assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                    | 2,271   |   |                    |   | 33 |   |   |   | 5.77 | % |   |   | 2,159 |   |   |   | 26 |   |   |   | 4.78 | % |
| Total      interest-earning assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                    | 609,219 |   |                    |   | 9,856 |   |   |   | 6.42 | % |   |   | 633,318 |   |   |   | 12,321 |   |   |   | 7.72 | % |
| Non-interest-earning      assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash      and due from banks                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                    | 22,521  |   |                    |   |   |   |   |   |   |   |   |   | 28,348 |   |   |   |   |   |   |   |   |   |
| Premises      and equipment, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                    | 8,096   |   |                    |   |   |   |   |   |   |   |   |   | 8,068 |   |   |   |   |   |   |   |   |   |
| Other      real estate owned                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                    | 5,630   |   |                    |   |   |   |   |   |   |   |   |   | 56 |   |   |   |   |   |   |   |   |   |
| Accrued      interest receivable and other assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                    | 25,992  |   |                    |   |   |   |   |   |   |   |   |   | 22,540 |   |   |   |   |   |   |   |   |   |
| Total      average assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                    | 671,458 |   |                    |   |   |   |   |   |   |   |   |   | 693,330 |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities      and Stockholders’ Equity:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing      liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing      transaction deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                    | 128,313 |   |                    |   | 208 |   |   |   | 0.64 | % |   |   | 135,061 |   |   |   | 772 |   |   |   | 2.27 | % |
| Savings      and MMDA’s                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                    | 171,971 |   |                    |   | 422 |   |   |   | 0.97 | % |   |   | 174,348 |   |   |   | 1,003 |   |   |   | 2.28 | % |
| Time,      under $100,000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                    | 45,811  |   |                    |   | 214 |   |   |   | 1.85 | % |   |   | 45,394 |   |   |   | 384 |   |   |   | 3.36 | % |
| Time,      $100,000 and over                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                    | 61,658  |   |                    |   | 438 |   |   |   | 2.82 | % |   |   | 70,468 |   |   |   | 772 |   |   |   | 4.35 | % |
| FHLB      advances and other borrowings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                    | 28,271  |   |                    |   | 247 |   |   |   | 3.47 | % |   |   | 10,626 |   |   |   | 80 |   |   |   | 2.99 | % |
| Total      interest-bearing liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                    | 436,024 |   |                    |   | 1,529 |   |   |   | 1.39 | % |   |   | 435,897 |   |   |   | 3,011 |   |   |   | 2.74 | % |
| Non-interest-bearing      liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-bearing      demand deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                    | 167,339 |   |                    |   |   |   |   |   |   |   |   |   | 186,703 |   |   |   |   |   |   |   |   |   |
| Accrued      interest payable and other liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                    | 6,178   |   |                    |   |   |   |   |   |   |   |   |   | 7,591 |   |   |   |   |   |   |   |   |   |
| Total      liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                    | 609,541 |   |                    |   |   |   |   |   |   |   |   |   | 630,191 |   |   |   |   |   |   |   |   |   |
| Total      stockholders’ equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                    | 61,917  |   |                    |   |   |   |   |   |   |   |   |   | 63,139 |   |   |   |   |   |   |   |   |   |
| Total      average liabilities and stockholders’ equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | $                       | 671,458 |   |                    |   |   |   |   |   |   |   |   | $ | 693,330 |   |   |   |   |   |   |   |   |   |
| Net      interest income and net interest margin (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                    |    |   |                    | $      | 8,327 |   |   |   | 5.42 | % |   |   |   |   |   | $ | 9,310 |   |   |   | 5.83 | % |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 1. Average      balances for loans include loans held-for-sale and non-accrual loans and      are net of the allowance for loan losses, but non-                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |
|          accrued interest thereon is excluded. Loan interest income includes      loan fees of approximately $409 and $521 for the three      months                                                                                      ended September 30, 2008 and 2007, respetively. |   |
| 2.      Interest income and yields on tax-exempt securities are not presented on a      taxable equivalent basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |
| 3. Net      interest margin is computed by dividing net interest income by total      average interest-earning assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | Nine      months ended  |    |   | Nine      months ended  |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|---------|--------|-------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | September      30, 2008 |    |   | September      30, 2007 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | Average                 |    |   |                    |   |   | Yield/ |   |   | Average |   |   |   |   |   | Yield/ |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | Balance                 |    |   | Interest                |   |   | Rate |   |   | Balance |   |   | Interest |   |   | Rate |   |
| Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning      assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans      (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | $                       | 507,804 |   |                    | $      | 26,842 |   |   |   | 7.04 | % |   | $ | 485,664 |   |   | $ | 31,435 |   |   |   | 8.65 | % |
| Federal      funds sold                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                    | 25,996  |   |                    |   | 487 |   |   |   | 2.50 | % |   |   | 57,295 |   |   |   | 2,236 |   |   |   | 5.22 | % |
| Interest      bearing due from banks                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                    | 16,524  |   |                    |   | 521 |   |   |   | 4.20 | % |   |   | 2,538 |   |   |   | 116 |   |   |   | 6.11 | % |
| Investment      securities, taxable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                    | 30,602  |   |                    |   | 1,122 |   |   |   | 4.88 | % |   |   | 56,928 |   |   |   | 2,113 |   |   |   | 4.96 | % |
| Investment      securities, non-taxable  (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                    | 31,398  |   |                    |   | 986 |   |   |   | 4.18 | % |   |   | 28,320 |   |   |   | 915 |   |   |   | 4.32 | % |
| Other      interest earning assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                    | 2,237   |   |                    |   | 99 |   |   |   | 5.90 | % |   |   | 2,133 |   |   |   | 86 |   |   |   | 5.39 | % |
| Total      interest-earning assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                    | 614,561 |   |                    |   | 30,057 |   |   |   | 6.52 | % |   |   | 632,878 |   |   |   | 36,901 |   |   |   | 7.80 | % |
| Non-interest-earning      assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash      and due from banks                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                    | 23,501  |   |                    |   |   |   |   |   |   |   |   |   | 26,639 |   |   |   |   |   |   |   |   |   |
| Premises      and equipment, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                    | 8,012   |   |                    |   |   |   |   |   |   |   |   |   | 8,174 |   |   |   |   |   |   |   |   |   |
| Other      real estate owned                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                    | 3,368   |   |                    |   |   |   |   |   |   |   |   |   | 891 |   |   |   |   |   |   |   |   |   |
| Accrued      interest receivable and other assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                    | 25,293  |   |                    |   |   |   |   |   |   |   |   |   | 22,575 |   |   |   |   |   |   |   |   |   |
| Total      average assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                    | 674,735 |   |                    |   |   |   |   |   |   |   |   |   | 691,157 |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities      and Stockholders’ Equity:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing      liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing      transaction deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                    | 130,451 |   |                    |   | 758 |   |   |   | 0.77 | % |   |   | 129,708 |   |   |   | 2,286 |   |   |   | 2.36 | % |
| Savings      and MMDA’s                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                    | 174,921 |   |                    |   | 1,419 |   |   |   | 1.08 | % |   |   | 180,286 |   |   |   | 3,225 |   |   |   | 2.39 | % |
| Time,      under $100,000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                    | 44,569  |   |                    |   | 798 |   |   |   | 2.39 | % |   |   | 46,270 |   |   |   | 1,148 |   |   |   | 3.32 | % |
| Time,      $100,000 and over                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                    | 66,628  |   |                    |   | 1,660 |   |   |   | 3.32 | % |   |   | 70,936 |   |   |   | 2,261 |   |   |   | 4.26 | % |
| FHLB      advances and other borrowings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                    | 15,964  |   |                    |   | 394 |   |   |   | 3.29 | % |   |   | 10,518 |   |   |   | 247 |   |   |   | 3.14 | % |
| Total      interest-bearing liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                    | 432,533 |   |                    |   | 5,029 |   |   |   | 1.55 | % |   |   | 437,718 |   |   |   | 9,167 |   |   |   | 2.80 | % |
| Non-interest-bearing      liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-bearing      demand deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                    | 172,669 |   |                    |   |   |   |   |   |   |   |   |   | 183,662 |   |   |   |   |   |   |   |   |   |
| Accrued      interest payable and other liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                    | 6,080   |   |                    |   |   |   |   |   |   |   |   |   | 7,106 |   |   |   |   |   |   |   |   |   |
| Total      liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                    | 611,282 |   |                    |   |   |   |   |   |   |   |   |   | 628,486 |   |   |   |   |   |   |   |   |   |
| Total      stockholders’ equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                    | 63,453  |   |                    |   |   |   |   |   |   |   |   |   | 62,671 |   |   |   |   |   |   |   |   |   |
| Total      average liabilities and stockholders’ equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | $                       | 674,735 |   |                    |   |   |   |   |   |   |   |   | $ | 691,157 |   |   |   |   |   |   |   |   |   |
| Net      interest income and net interest margin (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                    |    |   |                    | $      | 25,028 |   |   |   | 5.43 | % |   |   |   |   |   | $ | 27,734 |   |   |   | 5.86 | % |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 1. Average      balances for loans include loans held-for-sale and non-accrual loans and      are net of the allowance for loan losses, but non-                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |
|          accrued interest thereon is excluded. Loan interest income includes      loan fees of approximately $1,503 and $1,767 for the nine      months                                                                                ended September 30, 2008 and 2007, respectively. |   |
| 2. Interest      income and yields on tax-exempt securities are not presented on a taxable      equivalent basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |
| 3.      Net interest margin is computed by dividing net interest income by total      average interest-earning assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

----

----

----

----

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----

|                                                                    |   | (in      thousands) |   |
|-------------------------------------------------------------------------|--------|---------------------|--------|
|                                                                    |   |                |   |
|                                                                    |   | Three               |   |   | Three |   |   | Nine |   |   | Nine |   |
|                                                                    |   | months              |   |   | months |   |   | months |   |   | months |   |
|                                                                    |   | ended               |   |   | ended |   |   | ended |   |   | ended |   |
|                                                                    |   | September      30,  |   |   | September      30, |   |   | September      30, |   |   | September      30, |   |
|                                                                    |   | 2008                |   |   | 2007 |   |   | 2008 |   |   | 2007 |   |
| Other      miscellaneous operating expenses                             |   |                |   |   |   |   |   |   |   |   |   |   |
| Provision      (recovery of provision) for unfunded lending commitments |   | $                   | (104   | ) |   | $ | 100 |   |   | $ | (108 | ) |   | $ | 110 |   |
| FDIC      assessments                                                   |   |                | 133    |   |   |   | 17 |   |   |   | 358 |   |   |   | 52 |   |
| Contributions                                                           |   |                | 39     |   |   |   | 15 |   |   |   | 109 |   |   |   | 110 |   |
| Legal      fees                                                         |   |                | 47     |   |   |   | 58 |   |   |   | 225 |   |   |   | 237 |   |
| Accounting      and audit fees                                          |   |                | 92     |   |   |   | 57 |   |   |   | 429 |   |   |   | 309 |   |
| Consulting      fees                                                    |   |                | 76     |   |   |   | 73 |   |   |   | 308 |   |   |   | 286 |   |
| Postage      expense                                                    |   |                | 79     |   |   |   | 87 |   |   |   | 248 |   |   |   | 264 |   |
| Telephone      expense                                                  |   |                | 87     |   |   |   | 63 |   |   |   | 223 |   |   |   | 186 |   |
| Public      relations                                                   |   |                | 50     |   |   |   | 90 |   |   |   | 249 |   |   |   | 291 |   |
| Training      expense                                                   |   |                | 43     |   |   |   | 43 |   |   |   | 167 |   |   |   | 182 |   |
| Loan      origination expense                                           |   |                | 53     |   |   |   | 87 |   |   |   | 317 |   |   |   | 486 |   |
| Computer      software depreciation                                     |   |                | 64     |   |   |   | 60 |   |   |   | 186 |   |   |   | 171 |   |
| Other      miscellaneous expense                                        |   |                | 362    |   |   |   | 420 |   |   |   | 1,268 |   |   |   | 1,225 |   |
|                                                                    |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      other miscellaneous operating expenses                       |   | $                   | 1,021  |   |   | $ | 1,170 |   |   | $ | 3,979 |   |   | $ | 3,909 |   |
|                                                                    |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                                     |   |                |    |
|--------------------------------------------------------------------------|--------|---------------------|---------|
|                                                                     |   | (in      thousands) |    |
| Balance      at January 1, 2008                                          |   | $                   | 122     |   |
| Additions      for tax positions taken in the current period             |   |                | — |   |
| Reductions      for tax positions taken in the current period            |   |                | — |   |
| Additions      for tax positions taken in prior years                    |   |                | — |   |
| Reductions      for tax positions taken in prior years                   |   |                | — |   |
| Decreases  related      to settlements with taxing authorities |   |                | — |   |
| Decreases      as a result of a lapse in statue of limitations           |   |                | — |   |
|                                                                     |   |                |    |   |
| Balance      at September 30, 2008                                       |   | $                   | 122     |   |

|                              | (in      thousands) |                    |
|-----------------------------------|---------------------|-------------------------|
|                              |                |                    |   |   |   |   |
|                              |                | September      30, 2008 |   |   | December      31, 2007 |   |
|                              |                |                    |   |   |   |   |
| Undisbursed      loan commitments |                | $                       | 188,928 |   |   | $ | 214,274 |   |
| Standby      letters of credit    |                |                    | 7,347 |   |   |   | 15,188 |   |
|                              |                | $                       | 196,275 |   |   | $ | 229,462 |   |

----

----

| Analysis      of the Allowance for Loan Losses         |   |
|--------------------------------------------------------|--------|
| (Amounts      in thousands, except percentage amounts) |   |
|                                                   |   |   |   |   |   |   |
|                                                   |   | Nine      months endedSeptember      30, |   |   | Year      endedDecember      31, |   |
|                                                   |   | 2008 |   |   | 2007 |   |   | 2007 |   |
|                                                   |   |   |   |   |   |   |   |   |   |
| Balance      at beginning of period                    |   | $ | 10,876 |   |   | $ | 8,361 |   |   | $ | 8,361 |   |
| Provision      for loan losses                         |   |   | 10,060 |   |   |   | 1,250 |   |   |   | 4,795 |   |
| Loans      charged-off:                                |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                             |   |   | (537 | ) |   |   | (201 | ) |   |   | (1,428 | ) |
| Agriculture                                            |   |   | — |   |   |   | — |   |   |   | (82 | ) |
| Real      estate mortgage                              |   |   | (1,909 | ) |   |   | (216 | ) |   |   | (249 | ) |
| Real      estate construction                          |   |   | (5,271 | ) |   |   | (17 | ) |   |   | (537 | ) |
| Consumer      loans to individuals                     |   |   | (292 | ) |   |   | (536 | ) |   |   | (764 | ) |
|                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      charged-off                                 |   |   | (8,009 | ) |   |   | (970 | ) |   |   | (3,060 | ) |
|                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Recoveries:                                            |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                             |   |   | 150 |   |   |   | 116 |   |   |   | 256 |   |
| Agriculture                                            |   |   | 51 |   |   |   | 150 |   |   |   | 200 |   |
| Real      estate mortgage                              |   |   | 57 |   |   |   | — |   |   |   | — |   |
| Consumer      loans to individuals                     |   |   | 253 |   |   |   | 246 |   |   |   | 324 |   |
|                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      recoveries                                  |   |   | 511 |   |   |   | 512 |   |   |   | 780 |   |
|                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      charge-offs                                   |   |   | (7,498 | ) |   |   | (458 | ) |   |   | (2,280 | ) |
|                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at end of period                          |   | $ | 13,438 |   |   | $ | 9,153 |   |   | $ | 10,876 |   |
|                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratio      of net charge-offs                          |   |   |   |   |   |   |   |   |   |   |   |   |
| To      average loans outstanding during the period    |   |   | (1.45 | %) |   |   | (0.09 | %) |   |   | (0.46 | %) |
| Allowance      for loan losses                         |   |   |   |   |   |   |   |   |   |   |   |   |
| To      total loans at the end of the period           |   |   | 2.48 | % |   |   | 1.77 | % |   |   | 2.14 | % |
| To      non-performing loans at the end of the period  |   |   | 111.65 | % |   |   | 85.52 | % |   |   | 70.46 | % |

----

|                             |   | (in      thousands)     |   |
|----------------------------------|--------|-------------------------|--------|
|                             |   | September      30, 2008 |   |   | December      31, 2007 |   |
| Three      months or less        |   | $                       | 19,524 |   |   | $ | 29,632 |   |
| Over      three to twelve months |   |                    | 33,644 |   |   |   | 34,161 |   |
| Over      twelve months          |   |                    | 6,026  |   |   |   | 5,691 |   |
| Total                            |   | $                       | 59,194 |   |   | $ | 69,484 |   |

|                   |   | (amounts      in thousands except percentage amounts) |   |
|------------------------|--------|-------------------------------------------------------|--------|
|                   |   | Actual                                                |   |   | Well      Capitalized |   |   |   |   |
|                   |   |                                                  |   |   |   |   |   | Ratio |   |   | Minimum |   |
|                   |   | Capital                                               |   |   | Ratio |   |   | Requirement |   |   | Capital |   |
| Leverage               |   | $                                                     | 63,035 |   |   |   | 9.37 | % |   |   | 5.0 | % |   |   | 4.0 | % |
| Tier      1 Risk-Based |   | $                                                     | 63,035 |   |   |   | 10.66 | % |   |   | 6.0 | % |   |   | 4.0 | % |
| Total      Risk-Based  |   | $                                                     | 70,515 |   |   |   | 11.92 | % |   |   | 10.0 | % |   |   | 8.0 | % |

----

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|                                        |   |                                 |    |   |                                  |   |    |                                                                                |   |   |                                                                                     |   |
|---------------------------------------------|--------|--------------------------------------|---------|--------|---------------------------------------|--------|---------|-------------------------------------------------------------------------------------|--------|--------|------------------------------------------------------------------------------------------|--------|
| Period                                      |   | Total      number of sharespurchased |    |   | Average      pricepaid      per share |   |    | Number      of shares purchased as part of publicly announcedplans      or programs |   |   | Maximum      number of shares that may yet be purchased under the plans or      programs |   |
| July      1 – July 31, 2008           |   |                                 | — |   |                                  |   | — |                                                                                |   |   | —                                                                                  |   |   |   | 41,180 |   |
| August      1 – August 31, 2008       |   |                                 | — |   |                                  |   | — |                                                                                |   |   | —                                                                                  |   |   |   | 106,514 |   |
| September      1 – September 30, 2008 |   |                                 | — |   |                                  |   | — |                                                                                |   |   | —                                                                                  |   |   |   | 123,957 |   |
| Total                                       |   |                                 | — |   |                                  |   | — |                                                                                |   |   | —                                                                                  |   |   |   | 123,957 |   |

----

| ExhibitNumber | Exhibit                                                                                                                                                             |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |                                                                                                                                                                |
| 31.1          | Certification      of the Company’s Chief Executive Officer pursuant to Section 302 of the      Sarbanes-Oxley      Act of 2002                               |
| 31.2          | Certification      of the Company’s Chief Financial Officer pursuant to Section 302 of the      Sarbanes-Oxley      Act of 2002                               |
| 32.1          | Certification      of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as      adopted pursuantto      Section 906 of the Sarbanes-Oxley Act of 2002 |
| 32.2          | Certification      of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as      adopted pursuantto      Section 906 of the Sarbanes-Oxley Act of2002  |

|   |                   |   | FIRST      NORTHERN COMMUNITY BANCORP                                              |
|--------|------------------------|--------|------------------------------------------------------------------------------------|
|   |                   |   |                                                                               |
| Date:  | November      10, 2008 | By:    | /s/  Louise      A. Walker                                               |
|   |                   |   |                                                                               |
|   |                   |   | Louise      A. Walker, Sr. Executive Vice President / Chief Financial      Officer |
|   |                   |   | (Principal      Financial Officer and Duly AuthorizedOfficer)                      |