|                                                   |
|--------------------------------------------------------|
| Farmers Capital Bank Corporation                       |
| (Exact name of registrant as specified in its charter) |

| Kentucky                     |   | 000-14412    |   | 61-1017851          |
|------------------------------|--------|--------------|--------|---------------------|
| (State or other jurisdiction |   | (Commission  |   | (IRS Employer       |
| of incorporation)            |   | File Number) |   | Identification No.) |

| P.O. Box 309  Frankfort, KY    |   | 40602      |
|------------------------------------------|--------|------------|
| (Address of principal executive offices) |   | (Zip Code) |

| Not Applicable                                                 |
|----------------------------------------------------------------|
| (Former name or former address, if changed since last report.) |

----

| PART I – FINANCIAL INFORMATION                                                                           |   |
|----------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                           |   |
| Item 1. Financial Statements                                                                                   |   |
| Unaudited Consolidated Balance Sheets                                                                          | 3      |
| Unaudited Consolidated Statements of Income                                                                    | 4      |
| Unaudited Consolidated Statements of Comprehensive Income                                                      | 5      |
| Unaudited Consolidated Statements of Cash Flows                                                                | 6      |
| Unaudited Consolidated Statements of Changes in Shareholders’ Equity                                     | 7      |
| Notes to Unaudited Consolidated Financial Statements                                                           | 8      |
|                                                                                                           |   |
| Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations | 33     |
|                                                                                                           |   |
| Item 3.  Quantitative and Qualitative Disclosures About Market Risk                                  | 54     |
|                                                                                                           |   |
| Item 4.  Controls and Procedures                                                                     | 55     |
|                                                                                                           |   |
| PART II - OTHER INFORMATION                                                                                    |   |
|                                                                                                           |   |
| Item 1.  Legal Proceedings                                                                           | 55     |
|                                                                                                           |   |
| Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds                                 | 55     |
|                                                                                                           |   |
| Item 6.  Exhibits                                                                                    | 55     |
|                                                                                                           |   |
| SIGNATURES                                                                                                     | 58     |

----

| (Dollars in thousands, except share data)                                                                                                                                          |   | June 30,2012 |      |   | December 31,2011 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|-----------|--------|------------------|--------|
| Assets                                                                                                                                                                             |   |         |      |   |             |   |
| Cash and cash equivalents:                                                                                                                                                         |   |         |      |   |             |   |
| Cash and due from banks                                                                                                                                                            |   | $            | 30,355    |   |             | $      | 28,842 |   |
| Interest bearing deposits in other banks                                                                                                                                           |   |         | 38,478    |   |             |   | 62,226 |   |
| Federal funds sold and securities purchased under agreements to resell                                                                                                             |   |         | 2,168     |   |             |   | 3,241 |   |
| Total cash and cash equivalents                                                                                                                                                    |   |         | 71,001    |   |             |   | 94,309 |   |
| Investment securities:                                                                                                                                                             |   |         |      |   |             |   |   |   |
| Available for sale, amortized cost of $601,810 (2012) and $583,951 (2011)                                                                                                          |   |         | 616,856   |   |             |   | 597,819 |   |
| Held to maturity, fair value of $997 (2012) and $974 (2011)                                                                                                                        |   |         | 875       |   |             |   | 875 |   |
| Total investment securities                                                                                                                                                        |   |         | 617,731   |   |             |   | 598,694 |   |
| Loans, net of unearned income                                                                                                                                                      |   |         | 1,040,439 |   |             |   | 1,072,108 |   |
| Allowance for loan losses                                                                                                                                                          |   |         | (27,113   | )      |             |   | (28,264 | ) |
| Loans, net                                                                                                                                                                         |   |         | 1,013,326 |   |             |   | 1,043,844 |   |
| Premises and equipment, net                                                                                                                                                        |   |         | 37,569    |   |             |   | 38,770 |   |
| Company-owned life insurance                                                                                                                                                       |   |         | 27,376    |   |             |   | 27,461 |   |
| Intangible assets, net                                                                                                                                                             |   |         | 1,901     |   |             |   | 2,409 |   |
| Other real estate owned                                                                                                                                                            |   |         | 39,566    |   |             |   | 38,157 |   |
| Other assets                                                                                                                                                                       |   |         | 39,186    |   |             |   | 39,946 |   |
| Total assets                                                                                                                                                                       |   | $            | 1,847,656 |   |             | $      | 1,883,590 |   |
| Liabilities                                                                                                                                                                        |   |         |      |   |             |   |   |   |
| Deposits:                                                                                                                                                                          |   |         |      |   |             |   |   |   |
| Noninterest bearing                                                                                                                                                                |   | $            | 237,113   |   |             | $      | 224,259 |   |
| Interest bearing                                                                                                                                                                   |   |         | 1,170,335 |   |             |   | 1,210,806 |   |
| Total deposits                                                                                                                                                                     |   |         | 1,407,448 |   |             |   | 1,435,065 |   |
| Federal funds purchased and other short-term borrowings                                                                                                                            |   |         | 21,989    |   |             |   | 27,022 |   |
| Securities sold under agreements to repurchase and other long-term borrowings                                                                                                      |   |         | 180,464   |   |             |   | 190,694 |   |
| Subordinated notes payable to unconsolidated trusts                                                                                                                                |   |         | 48,970    |   |             |   | 48,970 |   |
| Dividends payable                                                                                                                                                                  |   |         | 188       |   |             |   | 188 |   |
| Other liabilities                                                                                                                                                                  |   |         | 24,861    |   |             |   | 24,594 |   |
| Total liabilities                                                                                                                                                                  |   |         | 1,683,920 |   |             |   | 1,726,533 |   |
| Shareholders’ Equity                                                                                                                                                         |   |         |      |   |             |   |   |   |
| Preferred stock, no par value 1,000,000 shares authorized; 30,000 Series A shares issued and outstanding at June 30, 2012 and December 31, 2011; Liquidation preference of $30,000 |   |         | 29,323    |   |             |   | 29,115 |   |
| Common stock, par value $.125 per share 14,608,000 shares authorized; 7,460,418 and 7,446,445 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively   |   |         | 932       |   |             |   | 931 |   |
| Capital surplus                                                                                                                                                                    |   |         | 50,929    |   |             |   | 50,848 |   |
| Retained earnings                                                                                                                                                                  |   |         | 75,018    |   |             |   | 69,520 |   |
| Accumulated other comprehensive income                                                                                                                                             |   |         | 7,534     |   |             |   | 6,643 |   |
| Total shareholders’ equity                                                                                                                                                   |   |         | 163,736   |   |             |   | 157,057 |   |
| Total liabilities and shareholders’ equity                                                                                                                                   |   | $            | 1,847,656 |   |             | $      | 1,883,590 |   |

----

|                                                                                      |   | Three Months EndedJune 30, |   |   | Six Months EndedJune 30, |   |
|-------------------------------------------------------------------------------------------|--------|----------------------------|--------|--------|--------------------------|--------|
| (In thousands, except per share data)                                                     |   | 2012                       |   |   | 2011                     |   |   | 2012 |   |   | 2011 |   |
| Interest Income                                                                           |   |                       |   |   |                     |   |   |   |   |   |   |   |
| Interest and fees on loans                                                                |   | $                          | 14,104 |   |                     | $      | 15,701 |   |   | $ | 28,385 |   |   | $ | 31,881 |   |
| Interest on investment securities:                                                        |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                                                   |   |                       | 3,394  |   |                     |   | 3,906 |   |   |   | 6,960 |   |   |   | 7,276 |   |
| Nontaxable                                                                                |   |                       | 561    |   |                     |   | 461 |   |   |   | 1,088 |   |   |   | 994 |   |
| Interest on deposits in other banks                                                       |   |                       | 27     |   |                     |   | 64 |   |   |   | 62 |   |   |   | 147 |   |
| Interest on federal funds sold and securities purchased under agreements to resell        |   |                       | 1      |   |                     |   | 1 |   |   |   | 2 |   |   |   | 3 |   |
| Total interest income                                                                     |   |                       | 18,087 |   |                     |   | 20,133 |   |   |   | 36,497 |   |   |   | 40,301 |   |
| Interest Expense                                                                          |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Interest on deposits                                                                      |   |                       | 2,368  |   |                     |   | 3,772 |   |   |   | 5,179 |   |   |   | 7,719 |   |
| Interest on federal funds purchased and other short-term borrowings                       |   |                       | 25     |   |                     |   | 49 |   |   |   | 50 |   |   |   | 111 |   |
| Interest on securities sold under agreements to repurchase and other long-term borrowings |   |                       | 1,810  |   |                     |   | 1,984 |   |   |   | 3,653 |   |   |   | 3,982 |   |
| Interest on subordinated notes payable to unconsolidated trusts                           |   |                       | 517    |   |                     |   | 506 |   |   |   | 1,041 |   |   |   | 1,011 |   |
| Total interest expense                                                                    |   |                       | 4,720  |   |                     |   | 6,311 |   |   |   | 9,923 |   |   |   | 12,823 |   |
| Net interest income                                                                       |   |                       | 13,367 |   |                     |   | 13,822 |   |   |   | 26,574 |   |   |   | 27,478 |   |
| Provision for loan losses                                                                 |   |                       | 1,341  |   |                     |   | 4,528 |   |   |   | 2,318 |   |   |   | 6,969 |   |
| Net interest income after provision for loan losses                                       |   |                       | 12,026 |   |                     |   | 9,294 |   |   |   | 24,256 |   |   |   | 20,509 |   |
| Noninterest Income                                                                        |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Service charges and fees on deposits                                                      |   |                       | 2,015  |   |                     |   | 2,177 |   |   |   | 4,018 |   |   |   | 4,230 |   |
| Allotment processing fees                                                                 |   |                       | 1,332  |   |                     |   | 1,356 |   |   |   | 2,628 |   |   |   | 2,685 |   |
| Other service charges, commissions, and fees                                              |   |                       | 1,136  |   |                     |   | 1,062 |   |   |   | 2,228 |   |   |   | 2,091 |   |
| Data processing income                                                                    |   |                       | 84     |   |                     |   | 271 |   |   |   | 168 |   |   |   | 535 |   |
| Trust income                                                                              |   |                       | 473    |   |                     |   | 659 |   |   |   | 935 |   |   |   | 1,086 |   |
| Investment securities gains, net                                                          |   |                       | 685    |   |                     |   | 413 |   |   |   | 688 |   |   |   | 823 |   |
| Gains on sale of mortgage loans, net                                                      |   |                       | 451    |   |                     |   | 151 |   |   |   | 761 |   |   |   | 292 |   |
| Income from company-owned life insurance                                                  |   |                       | 228    |   |                     |   | 241 |   |   |   | 988 |   |   |   | 476 |   |
| Other                                                                                     |   |                       | 8      |   |                     |   | 10 |   |   |   | 26 |   |   |   | 15 |   |
| Total noninterest income                                                                  |   |                       | 6,412  |   |                     |   | 6,340 |   |   |   | 12,440 |   |   |   | 12,233 |   |
| Noninterest Expense                                                                       |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Salaries and employee benefits                                                            |   |                       | 6,859  |   |                     |   | 6,870 |   |   |   | 13,980 |   |   |   | 13,635 |   |
| Occupancy expenses, net                                                                   |   |                       | 1,195  |   |                     |   | 1,210 |   |   |   | 2,371 |   |   |   | 2,442 |   |
| Equipment expenses                                                                        |   |                       | 611    |   |                     |   | 567 |   |   |   | 1,181 |   |   |   | 1,177 |   |
| Data processing and communication expenses                                                |   |                       | 989    |   |                     |   | 1,199 |   |   |   | 2,152 |   |   |   | 2,427 |   |
| Bank franchise tax                                                                        |   |                       | 620    |   |                     |   | 662 |   |   |   | 1,188 |   |   |   | 1,293 |   |
| Amortization of intangibles                                                               |   |                       | 253    |   |                     |   | 286 |   |   |   | 507 |   |   |   | 572 |   |
| Deposit insurance expense                                                                 |   |                       | 685    |   |                     |   | 722 |   |   |   | 1,372 |   |   |   | 1,611 |   |
| Other real estate expenses, net                                                           |   |                       | 704    |   |                     |   | 1,935 |   |   |   | 1,666 |   |   |   | 2,615 |   |
| Deposit fraud loss                                                                        |   |                       | -      |   |                     |   | - |   |   |   | - |   |   |   | 700 |   |
| Other                                                                                     |   |                       | 2,485  |   |                     |   | 2,056 |   |   |   | 4,577 |   |   |   | 4,317 |   |
| Total noninterest expense                                                                 |   |                       | 14,401 |   |                     |   | 15,507 |   |   |   | 28,994 |   |   |   | 30,789 |   |
| Income before income taxes                                                                |   |                       | 4,037  |   |                     |   | 127 |   |   |   | 7,702 |   |   |   | 1,953 |   |
| Income tax expense (benefit)                                                              |   |                       | 890    |   |                     |   | (42 | )  |   |   | 1,246 |   |   |   | 739 |   |
| Net income                                                                                |   |                       | 3,147  |   |                     |   | 169 |   |   |   | 6,456 |   |   |   | 1,214 |   |
| Dividends and accretion on preferred shares                                               |   |                       | (480   | )      |                     |   | (473 | ) |   |   | (958 | ) |   |   | (945 | ) |
| Net income (loss) available to common shareholders                                        |   | $                          | 2,667  |   |                     | $      | (304 | ) |   | $ | 5,498 |   |   | $ | 269 |   |
| Per Common Share                                                                          |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss), basic and diluted                                                      |   | $                          | .36    |   |                     | $      | (.04 | )  |   | $ | .74 |   |   | $ | .04 |   |
| Cash dividends declared                                                                   |   |                       | N/A    |   |                     |   | N/A |   |   |   | N/A |   |   |   | N/A |   |
| Weighted Average Common Shares Outstanding                                                |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted                                                                         |   |                       | 7,454  |   |                     |   | 7,420 |   |   |   | 7,450 |   |   |   | 7,416 |   |

----

|                                                                                                                                                                                                  |   | Three Months EndedJune 30, |   |   | Six Months EndedJune 30, |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------|--------|--------|--------------------------|--------|
| (In thousands)                                                                                                                                                                                        |   | 2012                       |   |   | 2011                     |   |   | 2012 |   |   | 2011 |   |
| Net Income                                                                                                                                                                                            |   | $                          | 3,147  |   |                     | $      | 169 |   |   | $ | 6,456 |   |   | $ | 1,214 |   |
| Other comprehensive income:                                                                                                                                                                           |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Net unrealized holding gain on available for sale securities arising during the period on securities held at end of period, net of tax of $875, $1,753, $674 and $1,661, respectively                 |   |                       | 1,625  |   |                     |   | 3,255 |   |   |   | 1,251 |   |   |   | 3,084 |   |
|                                                                                                                                                                                                  |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Reclassification adjustment for prior period unrealized gain previously reported in other comprehensive income recognized during current period, net of tax of $268, $63, $261 and $295, respectively |   |                       | (498   | )      |                     |   | (117 | ) |   |   | (484 | ) |   |   | (547 | ) |
|                                                                                                                                                                                                  |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Change in unfunded portion of postretirement benefit obligation, net of tax of $31, $31, $67 and $63, respectively                                                                                    |   |                       | 59     |   |                     |   | 59 |   |   |   | 124 |   |   |   | 117 |   |
| Other comprehensive income                                                                                                                                                                            |   |                       | 1,186  |   |                     |   | 3,197 |   |   |   | 891 |   |   |   | 2,654 |   |
| Comprehensive Income                                                                                                                                                                                  |   | $                          | 4,333  |   |                     | $      | 3,366 |   |   | $ | 7,347 |   |   | $ | 3,868 |   |

----

| Six months ended June 30, (In thousands)                                                    |   | 2012   |     |   | 2011   |   |
|---------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
| Cash Flows from Operating Activities                                                        |   |   |     |   |   |   |
| Net income                                                                                  |   | $      | 6,456    |   |   | $      | 1,214 |   |
| Adjustments to reconcile net income to net cash provided by operating activities:           |   |   |     |   |   |   |   |   |
| Depreciation and amortization                                                               |   |   | 2,268    |   |   |   | 2,374 |   |
| Net premium amortization of available for sale investment securities                        |   |   | 2,493    |   |   |   | 1,551 |   |
| Provision for loan losses                                                                   |   |   | 2,318    |   |   |   | 6,969 |   |
| Deferred income tax expense                                                                 |   |   | 31       |   |   |   | 1,684 |   |
| Noncash employee stock purchase plan expense                                                |   |   | 20       |   |   |   | 34 |   |
| Mortgage loans originated for sale                                                          |   |   | (38,743  | )      |   |   | (11,395 | ) |
| Proceeds from sale of mortgage loans                                                        |   |   | 38,059   |   |   |   | 12,574 |   |
| Gain on sale of mortgage loans, net                                                         |   |   | (761     | )      |   |   | (292 | ) |
| Loss on disposal of premises and equipment, net                                             |   |   | -        |   |   |   | 3 |   |
| Net loss on sale and write downs of other real estate                                       |   |   | 1,256    |   |   |   | 1,992 |   |
| Net gain on sale of available for sale investment securities                                |   |   | (688     | )      |   |   | (823 | ) |
| Decrease in accrued interest receivable                                                     |   |   | 509      |   |   |   | 43 |   |
| Increase in cash surrender value of company-owned life insurance                            |   |   | (437     | )      |   |   | (461 | ) |
| Death benefits in excess of cash surrender value on company-owned life insurance            |   |   | (529     | )      |   |   | - |   |
| Increase in other assets                                                                    |   |   | (337     | )      |   |   | (2,412 | ) |
| Decrease in accrued interest payable                                                        |   |   | (310     | )      |   |   | (259 | ) |
| Increase (decrease) in other liabilities                                                    |   |   | 768      |   |   |   | (39 | ) |
| Net cash provided by operating activities                                                   |   |   | 12,373   |   |   |   | 12,757 |   |
| Cash Flows from Investing Activities                                                        |   |   |     |   |   |   |   |   |
| Proceeds from maturities and calls of available for sale investment securities              |   |   | 98,820   |   |   |   | 65,886 |   |
| Proceeds from sale of available for sale investment securities                              |   |   | 66,520   |   |   |   | 64,300 |   |
| Purchase of available for sale investment securities                                        |   |   | (185,003 | )      |   |   | (266,714 | ) |
| Principal collected on loans originated for investment, net                                 |   |   | 21,772   |   |   |   | 43,728 |   |
| Proceeds from surrender of company-owned life insurance                                     |   |   | -        |   |   |   | 2,248 |   |
| Proceeds from death benefits of company-owned life insurance                                |   |   | 1,051    |   |   |   | - |   |
| Purchase of premises and equipment                                                          |   |   | (907     | )      |   |   | (1,843 | ) |
| Proceeds from sale of other real estate                                                     |   |   | 5,208    |   |   |   | 3,519 |   |
| Proceeds from sale of equipment                                                             |   |   | 426      |   |   |   | 2 |   |
| Net cash provided by (used in) investing activities                                         |   |   | 7,887    |   |   |   | (88,874 | ) |
| Cash Flows from Financing Activities                                                        |   |   |     |   |   |   |   |   |
| Net decrease in deposits                                                                    |   |   | (27,617  | )      |   |   | (16,670 | ) |
| Net (decrease) increase in federal funds purchased and other short-term borrowings          |   |   | (5,033   | )      |   |   | 17,257 |   |
| Repayments of securities sold under agreements to repurchase and other long-term borrowings |   |   | (10,230  | )      |   |   | (7,335 | ) |
| Dividends paid, preferred                                                                   |   |   | (750     | )      |   |   | (750 | ) |
| Shares issued under employee stock purchase plan                                            |   |   | 62       |   |   |   | 65 |   |
| Net cash used in financing activities                                                       |   |   | (43,568  | )      |   |   | (7,433 | ) |
| Net decrease in cash and cash equivalents                                                   |   |   | (23,308  | )      |   |   | (83,550 | ) |
| Cash and cash equivalents at beginning of year                                              |   |   | 94,309   |   |   |   | 182,056 |   |
| Cash and cash equivalents at end of period                                                  |   | $      | 71,001   |   |   | $      | 98,506 |   |
| Supplemental Disclosures                                                                    |   |   |     |   |   |   |   |   |
| Cash paid during the period for:                                                            |   |   |     |   |   |   |   |   |
| Interest                                                                                    |   | $      | 10,233   |   |   | $      |  13,082 |   |
| Income taxes                                                                                |   |   | 200      |   |   |   | 1,000 |   |
| Transfers from loans to other real estate                                                   |   |   | 10,594   |   |   |   | 10,594 |   |
| Sale and financing of other real estate                                                     |   |   | 2,721    |   |   |   | 918 |   |
| Cash dividends payable, preferred                                                           |   |   | 188      |   |   |   | 188 |   |

----

| (Dollars in thousands, except per share data)          |   |      |   |   |         |   |   |    |   |   |     |   |   |                          |   |   |                     |   |
|--------------------------------------------------------|--------|-----------|--------|--------|--------------|--------|--------|---------|--------|--------|----------|--------|--------|-------------------------------|--------|--------|--------------------------|--------|
| Six months ended                                       |   | Preferred |   |   | Common Stock |   |   | Capital |   |   | Retained |   |   | AccumulatedOtherComprehensive |   |   | TotalShareholders’ |   |
| June 30, 2012 and 2011                                 |   | Stock     |   |   | Shares       |   |   | Amount  |   |   | Surplus  |   |   | Earnings                      |   |   | Income                   |   |   | Equity |   |
| Balance at January 1, 2012                             |   | $         | 29,115 |   |         |   | 7,446  |    |   | $      | 931      |   |   | $                             | 50,848 |   |                     | $      | 69,520 |   |   | $ | 6,643 |   |   | $ | 157,057 |   |
| Net income                                             |   |      | -      |   |         |   | -      |    |   |   | -        |   |   |                          | -      |   |                     |   | 6,456 |   |   |   | - |   |   |   | 6,456 |   |
| Other comprehensive income                             |   |      | -      |   |         |   | -      |    |   |   | -        |   |   |                          | -      |   |                     |   | - |   |   |   | 891 |   |   |   | 891 |   |
| Preferred stock dividends, $25.00 per share            |   |      | -      |   |         |   | -      |    |   |   | -        |   |   |                          | -      |   |                     |   | (750 | ) |   |   | - |   |   |   | (750 | ) |
| Preferred stock discount accretion                     |   |      | 208    |   |         |   | -      |    |   |   | -        |   |   |                          | -      |   |                     |   | (208 | ) |   |   | - |   |   |   | - |   |
| Shares issued pursuant to employee stock purchase plan |   |      | -      |   |         |   | 14     |    |   |   | 1        |   |   |                          | 61     |   |                     |   | - |   |   |   | - |   |   |   | 62 |   |
| Expense related to employee stock purchase plan        |   |      | -      |   |         |   | -      |    |   |   | -        |   |   |                          | 20     |   |                     |   | - |   |   |   | - |   |   |   | 20 |   |
| Balance at June 30, 2012                               |   | $         | 29,323 |   |         |   | 7,460  |    |   | $      | 932      |   |   | $                             | 50,929 |   |                     | $      | 75,018 |   |   | $ | 7,534 |   |   | $ | 163,736 |   |
|                                                   |   |      |   |   |         |   |   |    |   |   |     |   |   |                          |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
|                                                   |   |      |   |   |         |   |   |    |   |   |     |   |   |                          |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
|                                                   |   |      |   |   |         |   |   |    |   |   |     |   |   |                          |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Balance at January 1, 2011                             |   | $         | 28,719 |   |         |   | 7,412  |    |   | $      | 926      |   |   | $                             | 50,675 |   |                     | $      | 68,678 |   |   | $ | 898 |   |   | $ | 149,896 |   |
| Net income                                             |   |      | -      |   |         |   | -      |    |   |   | -        |   |   |                          | -      |   |                     |   | 1,214 |   |   |   | - |   |   |   | 1,214 |   |
| Other comprehensive income                             |   |      | -      |   |         |   | -      |    |   |   | -        |   |   |                          | -      |   |                     |   | - |   |   |   | 2,654 |   |   |   | 2,654 |   |
| Preferred stock dividends, $25.00 per share            |   |      | -      |   |         |   | -      |    |   |   | -        |   |   |                          | -      |   |                     |   | (750 | ) |   |   | - |   |   |   | (750 | ) |
| Preferred stock discount accretion                     |   |      | 195    |   |         |   | -      |    |   |   | -        |   |   |                          | -      |   |                     |   | (195 | ) |   |   | - |   |   |   | - |   |
| Shares issued pursuant to employee stock purchase plan |   |      | -      |   |         |   | 15     |    |   |   | 2        |   |   |                          | 63     |   |                     |   | - |   |   |   | - |   |   |   | 65 |   |
| Expense related to employee stock purchase plan        |   |      | -      |   |         |   | -      |    |   |   | -        |   |   |                          | 34     |   |                     |   | - |   |   |   | - |   |   |   | 34 |   |
| Balance at June 30, 2011                               |   | $         | 28,914 |   |         |   | 7,427  |    |   | $      | 928      |   |   | $                             | 50,772 |   |                     | $      | 68,947 |   |   | $ | 3,552 |   |   | $ | 153,113 |   |

----

----

----

----

|   | · | Delinquency trends |
|--------|--------|--------------------|

|   | · | Trends in net charge-offs |
|--------|--------|---------------------------|

|   | · | Trends in loan volume |
|--------|--------|-----------------------|

|   | · | Lending philosophy risk |
|--------|--------|-------------------------|

|   | · | Management experience risk |
|--------|--------|----------------------------|

|   | · | Concentration of credit risk |
|--------|--------|------------------------------|

|   | · | Economic conditions risk |
|--------|--------|--------------------------|

----

|                                                                  |   | Three Months EndedJune 30, |   |   | Six Months EndedJune 30, |   |
|-----------------------------------------------------------------------|--------|----------------------------|--------|--------|--------------------------|--------|
| (In thousands, except per share data)                                 |   | 2012                       |   |   | 2011                     |   |   | 2012 |   |   | 2011 |   |
|                                                                  |   |                       |   |   |                     |   |   |   |   |   |   |   |
| Net income, basic and diluted                                         |   | $                          | 3,147  |   |                     | $      | 169 |   |   | $ | 6,456 |   |   | $ | 1,214 |   |
| Preferred stock dividends and discount accretion                      |   |                       | (480   | )      |                     |   | (473 | ) |   |   | (958 | ) |   |   | (945 | ) |
| Net income (loss) available to common shareholders, basic and diluted |   | $                          | 2,667  |   |                     | $      | (304 | ) |   | $ | 5,498 |   |   | $ | 269 |   |
|                                                                  |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
|                                                                  |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Average common shares issued and outstanding, basic and diluted       |   |                       | 7,454  |   |                     |   | 7,420 |   |   |   | 7,450 |   |   |   | 7,416 |   |
|                                                                  |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) per common share, basic and diluted                 |   | $                          | .36    |   |                     | $      | (.04 | )  |   | $ | .74 |   |   | $ | .04 |   |

----

|   | Level 1: | Quoted prices for identical assets or liabilities in active markets that the entity has the ability to access at the measurement date. |
|--------|----------|----------------------------------------------------------------------------------------------------------------------------------------|

|   | Level 2: | Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. |
|--------|----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Level 3: | Significant unobservable inputs that reflect a reporting entity’s own assumptions supported by little or no market activity, about the assumptions that market participants would use in pricing the asset or liability. |
|--------|----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Mutual funds and equity securities are priced utilizing real-time data feeds from active market exchanges for identical securities and are considered Level 1 inputs. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Government-sponsored agency debt securities, obligations of states and political subdivisions, mortgage-backed securities, corporate bonds, and other similar investment securities are priced with available market information through processes using benchmark yields, matrix pricing, prepayment speeds, cash flows, live trading data, and market spreads sourced from new issues, dealer quotes, and trade prices, among others sources and are considered Level 2 inputs. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                     |   |       |    |   | Fair Value Measurements Using                                 |   |
|--------------------------------------------------------------------------|--------|------------|---------|--------|---------------------------------------------------------------|--------|
| (In thousands)   Available For Sale Investment Securities |   | Fair Value |    |   | Quoted Prices in Active Markets for Identical Assets(Level 1) |   |   | Significant Other Observable Inputs(Level 2) |   |   | Significant Unobservable Inputs(Level 3) |   |
|                                                                     |   |       |    |   |                                                          |   |   |   |   |   |   |   |
| June 30, 2012                                                            |   |       |    |   |                                                          |   |   |   |   |   |   |   |
| Obligations of U.S. government-sponsored entities                        |   | $          | 76,539  |   |                                                          | $      | - |   |   | $ | 76,539 |   |   | $ | - |   |
| Obligations of states and political subdivisions                         |   |       | 102,955 |   |                                                          |   | - |   |   |   | 102,955 |   |   |   | - |   |
| Mortgage-backed securities – residential                           |   |       | 429,344 |   |                                                          |   | - |   |   |   | 429,344 |   |   |   | - |   |
| Mortgage-backed securities – commercial                            |   |       | 30      |   |                                                          |   | - |   |   |   | 30 |   |   |   | - |   |
| Mutual funds and equity securities                                       |   |       | 1,454   |   |                                                          |   | 1,454 |   |   |   | - |   |   |   | - |   |
| Corporate debt securities                                                |   |       | 6,534   |   |                                                          |   | - |   |   |   | 6,534 |   |   |   | - |   |
|      Total                                      |   | $          | 616,856 |   |                                                          | $      | 1,454 |   |   | $ | 615,402 |   |   | $ | - |   |

|                                                                     |   |       |    |   | Fair Value Measurements Using                                 |   |
|--------------------------------------------------------------------------|--------|------------|---------|--------|---------------------------------------------------------------|--------|
| (In thousands)   Available For Sale Investment Securities |   | Fair Value |    |   | Quoted Prices in Active Markets for Identical Assets(Level 1) |   |   | Significant Other Observable Inputs(Level 2) |   |   | Significant Unobservable Inputs(Level 3) |   |
|                                                                     |   |       |    |   |                                                          |   |   |   |   |   |   |   |
| December 31, 2011                                                        |   |       |    |   |                                                          |   |   |   |   |   |   |   |
| Obligations of U.S. government-sponsored entities                        |   | $          | 96,163  |   |                                                          | $      | - |   |   | $ | 96,163 |   |   | $ | - |   |
| Obligations of states and political subdivisions                         |   |       | 84,619  |   |                                                          |   | - |   |   |   | 84,619 |   |   |   | - |   |
| Mortgage-backed securities – residential                           |   |       | 408,863 |   |                                                          |   | - |   |   |   | 408,863 |   |   |   | - |   |
| Mortgage-backed securities – commercial                            |   |       | 209     |   |                                                          |   | - |   |   |   | 209 |   |   |   | - |   |
| Mutual funds and equity securities                                       |   |       | 1,601   |   |                                                          |   | 1,601 |   |   |   | - |   |   |   | - |   |
| Corporate debt securities                                                |   |       | 6,364   |   |                                                          |   | - |   |   |   | 6,364 |   |   |   | - |   |
|      Total                                      |   | $          | 597,819 |   |                                                          | $      | 1,601 |   |   | $ | 596,218 |   |   | $ | - |   |

----

|                                                           |   |       |   |   | Fair Value Measurements Using                                 |   |
|----------------------------------------------------------------|--------|------------|--------|--------|---------------------------------------------------------------|--------|
| (In thousands)   Description                    |   | Fair Value |   |   | Quoted Prices in Active Markets for Identical Assets(Level 1) |   |   | Significant Other Observable Inputs(Level 2) |   |   | Significant Unobservable Inputs(Level 3) |   |
|                                                           |   |       |   |   |                                                          |   |   |   |   |   |   |   |
| June 30, 2012                                                  |   |       |   |   |                                                          |   |   |   |   |   |   |   |
| Impaired Loans                                                 |   |       |   |   |                                                          |   |   |   |   |   |   |   |
| Real estate-construction and land development                  |   | $          | 8,595  |   |                                                          | $      | - |   |   | $ | - |   |   | $ | 8,595 |   |
| Real estate mortgage-residential                               |   |       | 8,467  |   |                                                          |   | - |   |   |   | - |   |   |   | 8,467 |   |
| Real estate mortgage-farmland and other commercial enterprises |   |       | 10,746 |   |                                                          |   | - |   |   |   | - |   |   |   | 10,746 |   |
| Commercial and industrial                                      |   |       | 16     |   |                                                          |   | - |   |   |   | - |   |   |   | 16 |   |
| Consumer-secured                                               |   |       | 21     |   |                                                          |   | - |   |   |   | - |   |   |   | 21 |   |
| Consumer-unsecured                                             |   |       | 114    |   |                                                          |   | - |   |   |   | - |   |   |   | 114 |   |
| Total                                                          |   | $          | 27,959 |   |                                                          | $      | - |   |   | $ | - |   |   | $ | 27,959 |   |
|                                                           |   |       |   |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |
| OREO                                                           |   |       |   |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |
| Real estate-construction and land development                  |   | $          | 4,162  |   |                                                          | $      | - |   |   | $ | - |   |   | $ | 4,162 |   |
| Real estate mortgage-residential                               |   |       | 2,022  |   |                                                          |   | - |   |   |   | - |   |   |   | 2,022 |   |
| Real estate mortgage-farmland and other commercial enterprises |   |       | 1,369  |   |                                                          |   | - |   |   |   | - |   |   |   | 1,369 |   |
| Total                                                          |   | $          | 7,553  |   |                                                          | $      | - |   |   | $ | - |   |   | $ | 7,553 |   |

----

|                                                           |   |       |   |   | Fair Value Measurements Using                                 |   |
|----------------------------------------------------------------|--------|------------|--------|--------|---------------------------------------------------------------|--------|
| (In thousands)   Description                    |   | Fair Value |   |   | Quoted Prices in Active Markets for Identical Assets(Level 1) |   |   | Significant Other Observable Inputs(Level 2) |   |   | Significant Unobservable Inputs(Level 3) |   |
|                                                           |   |       |   |   |                                                          |   |   |   |   |   |   |   |
| December 31, 2011                                              |   |       |   |   |                                                          |   |   |   |   |   |   |   |
| Impaired Loans                                                 |   |       |   |   |                                                          |   |   |   |   |   |   |   |
| Real estate-construction and land development                  |   | $          | 18,636 |   |                                                          | $      | - |   |   | $ | - |   |   | $ | 18,636 |   |
| Real estate mortgage-residential                               |   |       | 8,160  |   |                                                          |   | - |   |   |   | - |   |   |   | 8,160 |   |
| Real estate mortgage-farmland and other commercial enterprises |   |       | 12,928 |   |                                                          |   | - |   |   |   | - |   |   |   | 12,928 |   |
| Commercial and industrial                                      |   |       | 293    |   |                                                          |   | - |   |   |   | - |   |   |   | 293 |   |
| Consumer                                                       |   |       | 47     |   |                                                          |   | - |   |   |   | - |   |   |   | 47 |   |
| Total                                                          |   | $          | 40,064 |   |                                                          | $      | - |   |   | $ | - |   |   | $ | 40,064 |   |
|                                                           |   |       |   |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |
| OREO                                                           |   |       |   |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |
| Real estate-construction and land development                  |   | $          | 8,826  |   |                                                          | $      | - |   |   | $ | - |   |   | $ | 8,826 |   |
| Real estate mortgage-residential                               |   |       | 1,217  |   |                                                          |   | - |   |   |   | - |   |   |   | 1,217 |   |
| Real estate mortgage-farmland and other commercial enterprises |   |       | 4,785  |   |                                                          |   | - |   |   |   | - |   |   |   | 4,785 |   |
| Total                                                          |   | $          | 14,828 |   |                                                          | $      | - |   |   | $ | - |   |   | $ | 14,828 |   |

| (In thousands) |   | Fair Value at June 30, 2012 |   | Valuation Technique | Unobservable Inputs   |                   | Range  |   | Average |
|----------------|--------|----------------------------------|--------|---------------------|-----------------------|------------------------|--------|--------|---------|
| Impaired loans |   | $                                | 27,959 |                | Discounted appraisals | Marketability discount |   |   | .3%     | -  | 53.9%  |   | 6.6% |
| OREO           |   | $                                | 7,553  |                | Discounted appraisals | Marketability discount |   |   | .3%     | -  | 27.4%  |   | 8.6% |

|                |   | Three Months EndedJune 30, |   |   | Six Months EndedJune 30, |   |
|---------------------|--------|----------------------------|--------|--------|--------------------------|--------|
| (In thousands)      |   | 2012                       |   |   | 2011                     |   |   | 2012 |   |   | 2011 |   |
| Impairment charges: |   |                       |   |   |                     |   |   |   |   |   |   |   |
| Impaired loans      |   | $                          | 927    |   |                     | $      | 1,975 |   |   | $ | 5,233 |   |   | $ | 3,109 |   |
| OREO                |   |                       | 641    |   |                     |   | 1,339 |   |   |   | 1,150 |   |   |   | 1,568 |   |
| Total               |   | $                          | 1,568  |   |                     | $      | 3,314 |   |   | $ | 6,383 |   |   | $ | 4,677 |   |

----

----

|                                                                          |   |           |      |   |      |   |      | Fair Value Measurements Using                                 |   |
|-------------------------------------------------------------------------------|--------|----------------|-----------|--------|-----------|--------|-----------|---------------------------------------------------------------|--------|
| (In thousands)                                                                |   | CarryingAmount |      |   | FairValue |   |      | Quoted Prices in Active Markets for Identical Assets(Level 1) |   |   | Significant Other Observable Inputs(Level 2) |   |   | Significant Unobservable Inputs(Level 3) |   |
| June 30, 2012                                                                 |   |           |      |   |      |   |      |                                                          |   |   |   |   |   |   |   |
| Assets                                                                        |   |           |      |   |      |   |      |                                                          |   |   |   |   |   |   |   |
| Cash and cash equivalents                                                     |   | $              | 71,001    |   |      | $      | 71,001    |                                                          |   | $ | 71,001 |   |   | $ | - |   |   | $ | - |   |
| Held to maturity investment securities                                        |   |           | 875       |   |      |   | 997       |                                                          |   |   | - |   |   |   | 997 |   |   |   | - |   |
| Loans, net                                                                    |   |           | 1,013,326 |   |      |   | 1,009,964 |                                                          |   |   | - |   |   |   | - |   |   |   | 1,009,964 |   |
| Accrued interest receivable                                                   |   |           | 6,110     |   |      |   | 6,110     |                                                          |   |   | - |   |   |   | 6,110 |   |   |   | - |   |
|                                                                          |   |           |      |   |      |   |      |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities                                                                   |   |           |      |   |      |   |      |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                      |   |           | 1,407,448 |   |      |   | 1,411,919 |                                                          |   |   | 824,046 |   |   |   | - |   |   |   | 587,873 |   |
| Federal funds purchased and other short-term borrowings                       |   |           | 21,989    |   |      |   | 21,989    |                                                          |   |   | - |   |   |   | 21,989 |   |   |   | - |   |
| Securities sold under agreements to repurchase and other long-term borrowings |   |           | 180,464   |   |      |   | 201,514   |                                                          |   |   | - |   |   |   | 201,514 |   |   |   | - |   |
| Subordinated notes payable to unconsolidated trusts                           |   |           | 48,970    |   |      |   | 20,173    |                                                          |   |   | - |   |   |   | - |   |   |   | 20,173 |   |
| Accrued interest payable                                                      |   |           | 2,065     |   |      |   | 2,065     |                                                          |   |   | - |   |   |   | 2,065 |   |   |   | - |   |
|                                                                          |   |           |      |   |      |   |      |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2011                                                             |   |           |      |   |      |   |      |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets                                                                        |   |           |      |   |      |   |      |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents                                                     |   | $              | 94,309    |   |      | $      | 94,309    |                                                          |   | $ | 94,309 |   |   | $ | - |   |   | $ | - |   |
| Held to maturity investment securities                                        |   |           | 875       |   |      |   | 974       |                                                          |   |   | - |   |   |   | 974 |   |   |   | - |   |
| Loans, net                                                                    |   |           | 1,043,844 |   |      |   | 1,043,824 |                                                          |   |   | - |   |   |   | - |   |   |   | 1,043,824 |   |
| Accrued interest receivable                                                   |   |           | 6,619     |   |      |   | 6,619     |                                                          |   |   | - |   |   |   | 6,619 |   |   |   | - |   |
|                                                                          |   |           |      |   |      |   |      |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities                                                                   |   |           |      |   |      |   |      |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                      |   |           | 1,435,065 |   |      |   | 1,441,490 |                                                          |   |   | 787,396 |   |   |   | - |   |   |   | 654,094 |   |
| Federal funds purchased and other short-term borrowings                       |   |           | 27,022    |   |      |   | 27,022    |                                                          |   |   | - |   |   |   | 27,022 |   |   |   | - |   |
| Securities sold under agreements to repurchase and other long-term borrowings |   |           | 190,694   |   |      |   | 212,176   |                                                          |   |   | - |   |   |   | 212,176 |   |   |   | - |   |
| Subordinated notes payable to unconsolidated trusts                           |   |           | 48,970    |   |      |   | 20,982    |                                                          |   |   | - |   |   |   | - |   |   |   | 20,982 |   |
| Accrued interest payable                                                      |   |           | 2,375     |   |      |   | 2,375     |                                                          |   |   | - |   |   |   | 2,375 |   |   |   | - |   |

----

| June 30, 2012 (In thousands)                      |   | AmortizedCost |    |   | GrossUnrealized Gains |   |   | GrossUnrealized Losses |   |   | EstimatedFair Value |   |
|---------------------------------------------------|--------|---------------|---------|--------|-----------------------|--------|--------|------------------------|--------|--------|---------------------|--------|
| Available For Sale                                |   |          |    |   |                  |   |   |                   |   |   |                |   |
| Obligations of U.S. government-sponsored entities |   | $             | 76,264  |   |                  | $      | 285    |                   |   | $      | 10                  |   |   | $ | 76,539 |   |
| Obligations of states and political subdivisions  |   |          | 98,655  |   |                  |   | 4,385  |                   |   |   | 85                  |   |   |   | 102,955 |   |
| Mortgage-backed securities – residential    |   |          | 417,417 |   |                  |   | 12,051 |                   |   |   | 124                 |   |   |   | 429,344 |   |
| Mortgage-backed securities – commercial     |   |          | 30      |   |                  |   | -      |                   |   |   | -                   |   |   |   | 30 |   |
| Mutual funds and equity securities                |   |          | 1,451   |   |                  |   | 16     |                   |   |   | 13                  |   |   |   | 1,454 |   |
| Corporate debt securities                         |   |          | 7,993   |   |                  |   | 47     |                   |   |   | 1,506               |   |   |   | 6,534 |   |
| Total securities – available for sale       |   | $             | 601,810 |   |                  | $      | 16,784 |                   |   | $      | 1,738               |   |   | $ | 616,856 |   |
| Held To Maturity                                  |   |          |    |   |                  |   |   |                   |   |   |                |   |   |   |   |   |
| Obligations of states and political subdivisions  |   | $             | 875     |   |                  | $      | 122    |                   |   | $      | -                   |   |   | $ | 997 |   |

| December 31, 2011 (In thousands)                  |   | AmortizedCost |    |   | GrossUnrealized Gains |   |   | GrossUnrealized Losses |   |   | EstimatedFair Value |   |
|---------------------------------------------------|--------|---------------|---------|--------|-----------------------|--------|--------|------------------------|--------|--------|---------------------|--------|
| Available For Sale                                |   |          |    |   |                  |   |   |                   |   |   |                |   |
| Obligations of U.S. government-sponsored entities |   | $             | 95,770  |   |                  | $      | 408    |                   |   | $      | 15                  |   |   | $ | 96,163 |   |
| Obligations of states and political subdivisions  |   |          | 80,801  |   |                  |   | 3,903  |                   |   |   | 85                  |   |   |   | 84,619 |   |
| Mortgage-backed securities – residential    |   |          | 397,675 |   |                  |   | 11,384 |                   |   |   | 196                 |   |   |   | 408,863 |   |
| Mortgage-backed securities – commercial     |   |          | 203     |   |                  |   | 6      |                   |   |   | -                   |   |   |   | 209 |   |
| Mutual funds and equity securities                |   |          | 1,601   |   |                  |   | -      |                   |   |   | -                   |   |   |   | 1,601 |   |
| Corporate debt securities                         |   |          | 7,901   |   |                  |   | -      |                   |   |   | 1,537               |   |   |   | 6,364 |   |
| Total securities – available for sale       |   | $             | 583,951 |   |                  | $      | 15,701 |                   |   | $      | 1,833               |   |   | $ | 597,819 |   |
| Held To Maturity                                  |   |          |    |   |                  |   |   |                   |   |   |                |   |   |   |   |   |
| Obligations of states and political subdivisions  |   | $             | 875     |   |                  | $      | 99     |                   |   | $      | -                   |   |   | $ | 974 |   |

|                                   |   | Available For Sale |    |   | Held To Maturity    |   |
|----------------------------------------|--------|--------------------|---------|--------|---------------------|--------|
| June 30, 2012 (In thousands)           |   | AmortizedCost      |    |   | EstimatedFair Value |   |   | AmortizedCost |   |   | EstimatedFair Value |   |
| Due in one year or less                |   | $                  | 11,273  |   |                | $      | 11,262 |   |   | $ | - |   |   | $ | - |   |
| Due after one year through five years  |   |               | 73,957  |   |                |   | 74,672 |   |   |   | - |   |   |   | - |   |
| Due after five years through ten years |   |               | 76,922  |   |                |   | 80,197 |   |   |   | - |   |   |   | - |   |
| Due after ten years                    |   |               | 20,760  |   |                |   | 19,897 |   |   |   | 875 |   |   |   | 997 |   |
| Mortgage-backed securities             |   |               | 417,447 |   |                |   | 429,374 |   |   |   | - |   |   |   | - |   |
| Total                                  |   | $                  | 600,359 |   |                | $      | 615,402 |   |   | $ | 875 |   |   | $ | 997 |   |

----

|                  |   | Three Months EndedJune 30, |   |   | Six Months EndedJune 30, |   |
|-----------------------|--------|----------------------------|--------|--------|--------------------------|--------|
| (In thousands)        |   | 2012                       |   |   | 2011                     |   |   | 2012 |   |   | 2011 |   |
|                  |   |                       |   |   |                     |   |   |   |   |   |   |   |
| Gross realized gains  |   | $                          | 688    |   |                     | $      | 413 |   |   | $ | 695 |   |   | $ | 826 |   |
| Gross realized losses |   |                       | 3      |   |                     |   | - |   |   |   | 7 |   |   |   | 3 |   |
| Net realized gains    |   | $                          | 685    |   |                     | $      | 413 |   |   | $ | 688 |   |   | $ | 823 |   |

|                                              |   | Less than 12 Months |   |   | 12 Months or More |   |   | Total      |   |
|---------------------------------------------------|--------|---------------------|--------|--------|-------------------|--------|--------|------------|--------|
|  June 30, 2012 (In thousands)                |   | Fair Value          |   |   | UnrealizedLosses  |   |   | Fair Value |   |   | UnrealizedLosses |   |   | Fair Value |   |   | UnrealizedLosses |   |
| Obligations of U.S. government-sponsored entities |   | $                   | 9,140  |   |              | $      | 10     |       |   | $ | - |   |   | $ | - |   |   | $ | 9,140 |   |   | $ | 10 |   |
| Obligations of states and political subdivisions  |   |                | 7,259  |   |              |   | 66     |       |   |   | 6,503 |   |   |   | 19 |   |   |   | 13,762 |   |   |   | 85 |   |
| Mortgage-backed securities – residential    |   |                | 51,131 |   |              |   | 124    |       |   |   | - |   |   |   | - |   |   |   | 51,131 |   |   |   | 124 |   |
| Mutual funds and equity securities                |   |                | 664    |   |              |   | 13     |       |   |   | - |   |   |   | - |   |   |   | 664 |   |   |   | 13 |   |
| Corporate debt securities                         |   |                | 351    |   |              |   | 4      |       |   |   | 4,341 |   |   |   | 1,502 |   |   |   | 4,692 |   |   |   | 1,506 |   |
| Total                                             |   | $                   | 68,545 |   |              | $      | 217    |       |   | $ | 10,844 |   |   | $ | 1,521 |   |   | $ | 79,389 |   |   | $ | 1,738 |   |

|                                              |   | Less than 12 Months |   |   | 12 Months or More |   |   | Total      |   |
|---------------------------------------------------|--------|---------------------|--------|--------|-------------------|--------|--------|------------|--------|
|  December 31, 2011 (In thousands)            |   | Fair Value          |   |   | UnrealizedLosses  |   |   | Fair Value |   |   | UnrealizedLosses |   |   | Fair Value |   |   | UnrealizedLosses |   |
| Obligations of U.S. government-sponsored entities |   | $                   | 13,494 |   |              | $      | 15     |       |   | $ | - |   |   | $ | - |   |   | $ | 13,494 |   |   | $ | 15 |   |
| Obligations of states and political subdivisions  |   |                | 2,913  |   |              |   | 20     |       |   |   | 6,886 |   |   |   | 65 |   |   |   | 9,799 |   |   |   | 85 |   |
| Mortgage-backed securities – residential    |   |                | 56,249 |   |              |   | 196    |       |   |   | - |   |   |   | - |   |   |   | 56,249 |   |   |   | 196 |   |
| Corporate debt securities                         |   |                | -      |   |              |   | -      |       |   |   | 4,299 |   |   |   | 1,537 |   |   |   | 4,299 |   |   |   | 1,537 |   |
| Total                                             |   | $                   | 72,656 |   |              | $      | 231    |       |   | $ | 11,185 |   |   | $ | 1,602 |   |   | $ | 83,841 |   |   | $ | 1,833 |   |

----

| (In thousands)                                                         |   | June 30,2012 |      |   | December 31, 2011 |   |
|------------------------------------------------------------------------|--------|--------------|-----------|--------|------------------------|--------|
|                                                                   |   |         |      |   |                   |   |
| Real Estate:                                                           |   |         |      |   |                   |   |
| Real estate – construction and land development                  |   | $            | 116,401   |   |                   | $      | 119,989 |   |
| Real estate mortgage – residential                               |   |         | 430,651   |   |                   |   | 445,464 |   |
| Real estate mortgage – farmland and other commercial enterprises |   |         | 380,842   |   |                   |   | 384,331 |   |
| Commercial:                                                            |   |         |      |   |                   |   |   |   |
| Commercial and industrial                                              |   |         | 47,696    |   |                   |   | 48,771 |   |
| States and political subdivisions                                      |   |         | 22,779    |   |                   |   | 23,601 |   |
| Lease financing                                                        |   |         | 4,682     |   |                   |   | 7,578 |   |
| Other                                                                  |   |         | 18,607    |   |                   |   | 21,435 |   |
| Consumer:                                                              |   |         |      |   |                   |   |   |   |
| Secured                                                                |   |         | 11,840    |   |                   |   | 14,214 |   |
| Unsecured                                                              |   |         | 7,156     |   |                   |   | 7,151 |   |
| Total loans                                                            |   |         | 1,040,654 |   |                   |   | 1,072,534 |   |
| Less unearned income                                                   |   |         | (215      | )      |                   |   | (426 | ) |
| Total loans, net of unearned income                               |   | $            | 1,040,439 |   |                   | $      | 1,072,108 |   |

----

| (In thousands)                   |   | Real Estate |   |   | Commercial |   |   | Consumer |   |   | Total  |   |
|----------------------------------|--------|-------------|--------|--------|------------|--------|--------|----------|--------|--------|--------|--------|
| Three months ended June 30, 2012 |   |        |   |   |       |   |   |     |   |   |   |   |
| Balance, beginning of period     |   | $           | 23,990 |   |       | $      | 2,238  |     |   | $      | 825    |   |   | $ | 27,053 |   |
| Provision for loan losses        |   |        | 1,437  |   |       |   | (85    | )        |   |   | (11    | )      |   |   | 1,341  |   |
| Recoveries                       |   |        | 75     |   |       |   | 22     |     |   |   | 56     |   |   |   | 153 |   |
| Loans charged off                |   |        | (1,281 | )      |       |   | (38    | )        |   |   | (115   | )      |   |   | (1,434 | ) |
| Balance, end of period           |   | $           | 24,221 |   |       | $      | 2,137  |     |   | $      | 755    |   |   | $ | 27,113 |   |
|                             |   |        |   |   |       |   |   |     |   |   |   |   |   |   |   |   |
| Six months ended June 30, 2012   |   |        |   |   |       |   |   |     |   |   |   |   |   |   |   |   |
| Balance, beginning of period     |   | $           | 23,538 |   |       | $      | 3,508  |     |   | $      | 1,218  |   |   | $ | 28,264 |   |
| Provision for loan losses        |   |        | 4,030  |   |       |   | (1,381 | )        |   |   | (331   | )      |   |   | 2,318 |   |
| Recoveries                       |   |        | 202    |   |       |   | 121    |     |   |   | 112    |   |   |   | 435 |   |
| Loans charged off                |   |        | (3,549 | )      |       |   | (111   | )        |   |   | (244   | )      |   |   | (3,904 | ) |
| Balance, end of period           |   | $           | 24,221 |   |       | $      | 2,137  |     |   | $      | 755    |   |   | $ | 27,113 |   |

|  (In thousands)             |   | Real Estate |   |   | Commercial |   |   | Consumer |   |   | Total  |   |
|----------------------------------|--------|-------------|--------|--------|------------|--------|--------|----------|--------|--------|--------|--------|
| Three months ended June 30, 2011 |   |        |   |   |       |   |   |     |   |   |   |   |
| Balance, beginning of period     |   | $           | 24,609 |   |       | $      | 3,454  |     |   | $      | 959    |   |   | $ | 29,022 |   |
| Provision for loan losses        |   |        | 4,438  |   |       |   | 31     |     |   |   | 59     |   |   |   | 4,528 |   |
| Recoveries                       |   |        | 15     |   |       |   | 41     |     |   |   | 68     |   |   |   | 124 |   |
| Loans charged off                |   |        | (3,630 | )      |       |   | (157   | )        |   |   | (149   | )      |   |   | (3,936 | ) |
| Balance, end of period           |   | $           | 25,432 |   |       | $      | 3,369  |     |   | $      | 937    |   |   | $ | 29,738 |   |
|                             |   |        |   |   |       |   |   |     |   |   |   |   |   |   |   |   |
| Six months ended June 30, 2011   |   |        |   |   |       |   |   |     |   |   |   |   |   |   |   |   |
| Balance, beginning of period     |   | $           | 24,527 |   |       | $      | 3,260  |     |   | $      | 997    |   |   | $ | 28,784 |   |
| Provision for loan losses        |   |        | 6,625  |   |       |   | 258    |     |   |   | 86     |   |   |   | 6,969 |   |
| Recoveries                       |   |        | 83     |   |       |   | 80     |     |   |   | 127    |   |   |   | 290 |   |
| Loans charged off                |   |        | (5,803 | )      |       |   | (229   | )        |   |   | (273   | )      |   |   | (6,305 | ) |
| Balance, end of period           |   | $           | 25,432 |   |       | $      | 3,369  |     |   | $      | 937    |   |   | $ | 29,738 |   |

----

| June 30, 2012 (In thousands)                                           |   | RecordedInvestment |   |   | UnpaidPrincipalBalance |   |   | Allowance forLoan LossesAllocated |   |
|------------------------------------------------------------------------|--------|--------------------|--------|--------|------------------------|--------|--------|-----------------------------------|--------|
| Impaired loans with no related allowance recorded:                     |   |               |   |   |                   |   |   |                              |   |
| Real Estate                                                            |   |               |   |   |                   |   |   |                              |   |
| Real estate – construction and land development                  |   | $                  | 23,228 |   |                   | $      | 33,318 |                              |   |   |   |
| Real estate mortgage – residential                               |   |               | 7,348  |   |                   |   | 7,976  |                              |   |   |   |
| Real estate mortgage – farmland and other commercial enterprises |   |               | 16,598 |   |                   |   | 18,537 |                              |   |   |   |
| Total                                                                  |   | $                  | 47,174 |   |                   | $      | 59,831 |                              |   |   |   |
|                                                                   |   |               |   |   |                   |   |   |                              |   |   |   |
| Impaired loans with an allowance recorded:                             |   |               |   |   |                   |   |   |                              |   |   |   |
| Real Estate                                                            |   |               |   |   |                   |   |   |                              |   |   |   |
| Real estate – construction and land development                  |   | $                  | 11,026 |   |                   | $      | 11,157 |                              |   | $ | 636 |   |
| Real estate mortgage – residential                               |   |               | 13,898 |   |                   |   | 13,864 |                              |   |   | 1,827 |   |
| Real estate mortgage – farmland and other commercial enterprises |   |               | 19,945 |   |                   |   | 19,815 |                              |   |   | 2,034 |   |
| Commercial                                                             |   |               |   |   |                   |   |   |                              |   |   |   |   |
| Commercial and industrial                                              |   |               | 250    |   |                   |   | 250    |                              |   |   | 233 |   |
| Consumer                                                               |   |               |   |   |                   |   |   |                              |   |   |   |   |
| Secured                                                                |   |               | 68     |   |                   |   | 68     |                              |   |   | 47 |   |
| Unsecured                                                              |   |               | 183    |   |                   |   | 183    |                              |   |   | 70 |   |
| Total                                                                  |   | $                  | 45,370 |   |                   | $      | 45,337 |                              |   | $ | 4,847 |   |

| December 31, 2011 (In thousands)                                       |   | RecordedInvestment |   |   | UnpaidPrincipalBalance |   |   | Allowance forLoan LossesAllocated |   |
|------------------------------------------------------------------------|--------|--------------------|--------|--------|------------------------|--------|--------|-----------------------------------|--------|
| Impaired loans with no related allowance recorded:                     |   |               |   |   |                   |   |   |                              |   |
| Real Estate                                                            |   |               |   |   |                   |   |   |                              |   |
| Real estate – construction and land development                  |   | $                  | 26,363 |   |                   | $      | 26,337 |                              |   |   |   |
| Real estate mortgage – residential                               |   |               | 22,923 |   |                   |   | 22,843 |                              |   |   |   |
| Real estate mortgage – farmland and other commercial enterprises |   |               | 43,765 |   |                   |   | 43,438 |                              |   |   |   |
| Commercial                                                             |   |               |   |   |                   |   |   |                              |   |   |   |
| Commercial and industrial                                              |   |               | 2,982  |   |                   |   | 2,939  |                              |   |   |   |
| Consumer                                                               |   |               |   |   |                   |   |   |                              |   |   |   |
| Unsecured                                                              |   |               | 19     |   |                   |   | 18     |                              |   |   |   |
| Total                                                                  |   | $                  | 96,052 |   |                   | $      | 95,575 |                              |   |   |   |
|                                                                   |   |               |   |   |                   |   |   |                              |   |   |   |
| Impaired loans with an allowance recorded:                             |   |               |   |   |                   |   |   |                              |   |   |   |
| Real Estate                                                            |   |               |   |   |                   |   |   |                              |   |   |   |
| Real estate – construction and land development                  |   | $                  | 13,440 |   |                   | $      | 13,425 |                              |   | $ | 139 |   |
| Real estate mortgage – residential                               |   |               | 13,239 |   |                   |   | 13,197 |                              |   |   | 998 |   |
| Real estate mortgage – farmland and other commercial enterprises |   |               | 15,070 |   |                   |   | 15,035 |                              |   |   | 600 |   |
| Commercial                                                             |   |               |   |   |                   |   |   |                              |   |   |   |   |
| Commercial and industrial                                              |   |               | 456    |   |                   |   | 453    |                              |   |   | 159 |   |
| Consumer                                                               |   |               |   |   |                   |   |   |                              |   |   |   |   |
| Secured                                                                |   |               | 60     |   |                   |   | 58     |                              |   |   | 30 |   |
| Total                                                                  |   | $                  | 42,265 |   |                   | $      | 42,168 |                              |   | $ | 1,926 |   |

----

|                                                                   |   | Three Months Ended June 30, |    |   | Six Months Ended June 30, |   |
|------------------------------------------------------------------------|--------|-----------------------------|---------|--------|---------------------------|--------|
| (In thousands)                                                         |   | 2012                        |    |   | 2011                      |   |   | 2012 |   |   | 2011 |   |
| Average of individually impaired loans:                                |   |                        |    |   |                      |   |   |   |   |   |   |   |
| Real Estate                                                            |   |                        |    |   |                      |   |   |   |   |   |   |   |
| Real estate – construction and land development                  |   | $                           | 41,044  |   |                      | $      | 54,107 |   |   | $ | 38,297 |   |   | $ | 56,041 |   |
| Real estate mortgage – residential                               |   |                        | 21,571  |   |                      |   | 40,513 |   |   |   | 22,852 |   |   |   | 35,914 |   |
| Real estate mortgage – farmland and other commercial enterprises |   |                        | 40,761  |   |                      |   | 62,088 |   |   |   | 40,934 |   |   |   | 67,566 |   |
| Commercial                                                             |   |                        |    |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Commercial and industrial                                              |   |                        | 301     |   |                      |   | 4,553 |   |   |   | 533 |   |   |   | 4,434 |   |
| Consumer                                                               |   |                        |    |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Secured                                                                |   |                        | 70      |   |                      |   | 112 |   |   |   | 88 |   |   |   | 74 |   |
| Unsecured                                                              |   |                        | 186     |   |                      |   | - |   |   |   | 189 |   |   |   | - |   |
| Total average of impaired loans                                        |   | $                           | 103,933 |   |                      | $      | 161,373 |   |   | $ | 102,893 |   |   | $ | 164,029 |   |
|                                                                   |   |                        |    |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Interest income recognized during impairment:                          |   |                        |    |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Real Estate                                                            |   |                        |    |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Real estate – construction and land development                  |   | $                           | 128     |   |                      | $      | 265 |   |   | $ | 236 |   |   | $ | 536 |   |
| Real estate mortgage – residential                               |   |                        | 159     |   |                      |   | 469 |   |   |   | 401 |   |   |   | 851 |   |
| Real estate mortgage – farmland and other commercial enterprises |   |                        | 498     |   |                      |   | 657 |   |   |   | 1,001 |   |   |   | 1,478 |   |
| Commercial                                                             |   |                        |    |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Commercial and industrial                                              |   |                        | -       |   |                      |   | 58 |   |   |   | 14 |   |   |   | 108 |   |
| Consumer                                                               |   |                        |    |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Secured                                                                |   |                        | -       |   |                      |   | - |   |   |   | 5 |   |   |   | 3 |   |
| Unsecured                                                              |   |                        | 1       |   |                      |   | - |   |   |   | 5 |   |   |   | - |   |
| Total interest income recognized during impairment                     |   | $                           | 786     |   |                      | $      | 1,449 |   |   | $ | 1,662 |   |   | $ | 2,976 |   |
|                                                                   |   |                        |    |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Cash-basis interest income recognized:                                 |   |                        |    |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Real Estate                                                            |   |                        |    |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Real estate – construction and land development                  |   | $                           | 126     |   |                      | $      | 169 |   |   | $ | 225 |   |   | $ | 406 |   |
| Real estate mortgage – residential                               |   |                        | 166     |   |                      |   | 454 |   |   |   | 398 |   |   |   | 814 |   |
| Real estate mortgage – farmland and other commercial enterprises |   |                        | 469     |   |                      |   | 656 |   |   |   | 828 |   |   |   | 1,375 |   |
| Commercial                                                             |   |                        |    |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Commercial and industrial                                              |   |                        | -       |   |                      |   | 52 |   |   |   | 14 |   |   |   | 102 |   |
| Consumer                                                               |   |                        |    |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Secured                                                                |   |                        | -       |   |                      |   | - |   |   |   | 5 |   |   |   | 2 |   |
| Unsecured                                                              |   |                        | 1       |   |                      |   | - |   |   |   | 5 |   |   |   | - |   |
| Total cash-basis interest income recognized                            |   | $                           | 762     |   |                      | $      | 1,331 |   |   | $ | 1,475 |   |   | $ | 2,699 |   |

----

| June 30, 2012 (In thousands)                      |   | Real Estate |    |   | Commercial |   |   | Consumer |   |   | Total  |   |
|---------------------------------------------------|--------|-------------|---------|--------|------------|--------|--------|----------|--------|--------|--------|--------|
| Allowance for Loan Losses                         |   |        |    |   |       |   |   |     |   |   |   |   |
| Ending allowance balance attributable to loans:   |   |        |    |   |       |   |   |     |   |   |   |   |
| Individually evaluated for impairment             |   | $           | 4,497   |   |       | $      | 233    |     |   | $      | 117    |   |   | $ | 4,847 |   |
| Collectively evaluated for impairment             |   |        | 19,724  |   |       |   | 1,904  |     |   |   | 638    |   |   |   | 22,266 |   |
| Total ending allowance balance                    |   | $           | 24,221  |   |       | $      | 2,137  |     |   | $      | 755    |   |   | $ | 27,113 |   |
|                                              |   |        |    |   |       |   |   |     |   |   |   |   |   |   |   |   |
| Loans                                             |   |        |    |   |       |   |   |     |   |   |   |   |   |   |   |   |
| Loans individually evaluated for impairment       |   | $           | 92,043  |   |       | $      | 250    |     |   | $      | 251    |   |   | $ | 92,544 |   |
| Loans collectively evaluated for impairment       |   |        | 835,851 |   |       |   | 93,299 |     |   |   | 18,745 |   |   |   | 947,895 |   |
| Total ending loan balance, net of unearned income |   | $           | 927,894 |   |       | $      | 93,549 |     |   | $      | 18,996 |   |   | $ | 1,040,439 |   |

| December 31, 2011 (In thousands)                  |   | Real Estate |    |   | Commercial |   |    | Consumer |   |   | Total  |   |
|---------------------------------------------------|--------|-------------|---------|--------|------------|--------|---------|----------|--------|--------|--------|--------|
| Allowance for Loan Losses                         |   |        |    |   |       |   |    |     |   |   |   |   |
| Ending allowance balance attributable to loans:   |   |        |    |   |       |   |    |     |   |   |   |   |
| Individually evaluated for impairment             |   | $           | 1,737   |   |       | $      | 159     |     |   | $      | 30     |   |   | $ | 1,926 |   |
| Collectively evaluated for impairment             |   |        | 21,801  |   |       |   | 3,349   |     |   |   | 1,188  |   |   |   | 26,338 |   |
| Total ending allowance balance                    |   | $           | 23,538  |   |       | $      | 3,508   |     |   | $      | 1,218  |   |   | $ | 28,264 |   |
|                                              |   |        |    |   |       |   |    |     |   |   |   |   |   |   |   |   |
| Loans                                             |   |        |    |   |       |   |    |     |   |   |   |   |   |   |   |   |
| Loans individually evaluated for impairment       |   | $           | 134,800 |   |       | $      | 3,438   |     |   | $      | 79     |   |   | $ | 138,317 |   |
| Loans collectively evaluated for impairment       |   |        | 814,984 |   |       |   | 97,521  |     |   |   | 21,286 |   |   |   | 933,791 |   |
| Total ending loan balance, net of unearned income |   | $           | 949,784 |   |       | $      | 100,959 |     |   | $      | 21,365 |   |   | $ | 1,072,108 |   |

|  June 30, 2012 (In thousands)                                     |   | Nonaccrual |   |   | Restructured Loans |   |   | Loans Past Due 90 Days or More and Still Accruing |   |
|------------------------------------------------------------------------|--------|------------|--------|--------|--------------------|--------|--------|---------------------------------------------------|--------|
| Real Estate:                                                           |   |       |   |   |               |   |   |                                              |   |
| Real estate – construction and land development                  |   | $          | 23,966 |   |               | $      | 6,143  |                                              |   | $ | - |   |
| Real estate mortgage – residential                               |   |       | 12,428 |   |               |   | 3,468  |                                              |   |   | 28 |   |
| Real estate mortgage – farmland and other commercial enterprises |   |       | 17,444 |   |               |   | 7,929  |                                              |   |   | - |   |
| Commercial:                                                            |   |       |   |   |               |   |   |                                              |   |   |   |   |
| Commercial and industrial                                              |   |       | 554    |   |               |   | -      |                                              |   |   | - |   |
| Lease financing                                                        |   |       | 161    |   |               |   | -      |                                              |   |   | - |   |
| Consumer:                                                              |   |       |   |   |               |   |   |                                              |   |   |   |   |
| Secured                                                                |   |       | 44     |   |               |   | -      |                                              |   |   | - |   |
| Unsecured                                                              |   |       | 1      |   |               |   | -      |                                              |   |   | 1 |   |
| Total                                                                  |   | $          | 54,598 |   |               | $      | 17,540 |                                              |   | $ | 29 |   |

----

|  December 31, 2011 (In thousands)                                 |   | Nonaccrual |   |   | Restructured Loans |   |   | Loans Past Due 90 Days or More and Still Accruing |   |
|------------------------------------------------------------------------|--------|------------|--------|--------|--------------------|--------|--------|---------------------------------------------------|--------|
| Real Estate:                                                           |   |       |   |   |               |   |   |                                              |   |
| Real estate – construction and land development                  |   | $          | 30,744 |   |               | $      | 6,207  |                                              |   | $ | - |   |
| Real estate mortgage – residential                               |   |       | 14,578 |   |               |   | 4,894  |                                              |   |   | - |   |
| Real estate mortgage – farmland and other commercial enterprises |   |       | 13,831 |   |               |   | 8,024  |                                              |   |   | - |   |
| Commercial:                                                            |   |       |   |   |               |   |   |                                              |   |   |   |   |
| Commercial and industrial                                              |   |       | 386    |   |               |   | -      |                                              |   |   | - |   |
| Lease financing                                                        |   |       | 124    |   |               |   | -      |                                              |   |   | - |   |
| Consumer:                                                              |   |       |   |   |               |   |   |                                              |   |   |   |   |
| Secured                                                                |   |       | 80     |   |               |   | -      |                                              |   |   | - |   |
| Unsecured                                                              |   |       | 12     |   |               |   | -      |                                              |   |   | 1 |   |
| Total                                                                  |   | $          | 59,755 |   |               | $      | 19,125 |                                              |   | $ | 1 |   |

| June 30, 2012 (In thousands)                                           |   | 30-89 Days Past Due |   |   | 90 Daysor More Past Due |   |   | Total  |   |   | Current |   |   | Total Loans |    |
|------------------------------------------------------------------------|--------|---------------------|--------|--------|-------------------------|--------|--------|--------|--------|--------|---------|--------|--------|-------------|---------|
| Real Estate:                                                           |   |                |   |   |                    |   |   |   |   |   |    |   |   |        |    |
| Real estate – construction and land development                  |   | $                   | -      |   |                    | $      | 17,365 |   |   | $      | 17,365  |   |   | $           | 99,036  |   |   | $ | 116,401 |   |
| Real estate mortgage – residential                               |   |                | 2,526  |   |                    |   | 7,578  |   |   |   | 10,104  |   |   |        | 420,547 |   |   |   | 430,651 |   |
| Real estate mortgage – farmland and other commercial enterprises |   |                | 11,698 |   |                    |   | 12,955 |   |   |   | 24,653  |   |   |        | 356,189 |   |   |   | 380,842 |   |
| Commercial:                                                            |   |                |   |   |                    |   |   |   |   |   |    |   |   |        |    |   |   |   |   |   |
| Commercial and industrial                                              |   |                | 212    |   |                    |   | 475    |   |   |   | 687     |   |   |        | 47,009  |   |   |   | 47,696 |   |
| States and political subdivisions                                      |   |                | -      |   |                    |   | -      |   |   |   | -       |   |   |        | 22,779  |   |   |   | 22,779 |   |
| Lease financing, net                                                   |   |                | 8      |   |                    |   | 161    |   |   |   | 169     |   |   |        | 4,298   |   |   |   | 4,467 |   |
| Other                                                                  |   |                | 40     |   |                    |   | -      |   |   |   | 40      |   |   |        | 18,567  |   |   |   | 18,607 |   |
| Consumer:                                                              |   |                |   |   |                    |   |   |   |   |   |    |   |   |        |    |   |   |   |   |   |
| Secured                                                                |   |                | 81     |   |                    |   | 8      |   |   |   | 89      |   |   |        | 11,751  |   |   |   | 11,840 |   |
| Unsecured                                                              |   |                | 29     |   |                    |   | 3      |   |   |   | 32      |   |   |        | 7,124   |   |   |   | 7,156 |   |
| Total                                                                  |   | $                   | 14,594 |   |                    | $      | 38,545 |   |   | $      | 53,139  |   |   | $           | 987,300 |   |   | $ | 1,040,439 |   |

----

| December 31, 2011 (In thousands)                                       |   | 30-89 Days Past Due |   |   | 90 Days or More Past Due |   |   | Total  |   |   | Current |   |   | Total Loans |      |
|------------------------------------------------------------------------|--------|---------------------|--------|--------|-------------------------------|--------|--------|--------|--------|--------|---------|--------|--------|-------------|-----------|
| Real Estate:                                                           |   |                |   |   |                          |   |   |   |   |   |    |   |   |        |      |
| Real estate – construction and land development                  |   | $                   | 3,343  |   |                          | $      | 18,970 |   |   | $      | 22,313  |   |   | $           | 97,676    |   |   | $ | 119,989 |   |
| Real estate mortgage – residential                               |   |                | 5,836  |   |                          |   | 7,352  |   |   |   | 13,188  |   |   |        | 432,276   |   |   |   | 445,464 |   |
| Real estate mortgage – farmland and other commercial enterprises |   |                | 1,684  |   |                          |   | 12,497 |   |   |   | 14,181  |   |   |        | 370,150   |   |   |   | 384,331 |   |
| Commercial:                                                            |   |                |   |   |                          |   |   |   |   |   |    |   |   |        |      |   |   |   |   |   |
| Commercial and industrial                                              |   |                | 98     |   |                          |   | 300    |   |   |   | 398     |   |   |        | 48,373    |   |   |   | 48,771 |   |
| States and political subdivisions                                      |   |                | -      |   |                          |   | -      |   |   |   | -       |   |   |        | 23,601    |   |   |   | 23,601 |   |
| Lease financing, net                                                   |   |                | 80     |   |                          |   | 96     |   |   |   | 176     |   |   |        | 6,976     |   |   |   | 7,152 |   |
| Other                                                                  |   |                | 29     |   |                          |   | -      |   |   |   | 29      |   |   |        | 21,406    |   |   |   | 21,435 |   |
| Consumer:                                                              |   |                |   |   |                          |   |   |   |   |   |    |   |   |        |      |   |   |   |   |   |
| Secured                                                                |   |                | 200    |   |                          |   | 17     |   |   |   | 217     |   |   |        | 13,997    |   |   |   | 14,214 |   |
| Unsecured                                                              |   |                | 61     |   |                          |   | 5      |   |   |   | 66      |   |   |        | 7,085     |   |   |   | 7,151 |   |
| Total                                                                  |   | $                   | 11,331 |   |                          | $      | 39,237 |   |   | $      | 50,568  |   |   | $           | 1,021,540 |   |   | $ | 1,072,108 |   |

|                                                      |   | Real Estate                                   |    |   | Commercial                       |   |
|-----------------------------------------------------------|--------|-----------------------------------------------|---------|--------|----------------------------------|--------|
| June 30, 2012(In thousands)                               |   | Real Estate-Construction and Land Development |    |   | Real Estate Mortgage-Residential |   |   | Real Estate Mortgage-Farmland and Other Commercial Enterprises |   |   | Commercial and Industrial |   |   | States and Political Subdivisions |   |   | Lease Financing |   |   | Other |   |
| Credit risk profile by internally assigned rating grades: |   |                                          |    |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Pass                                                      |   | $                                             | 68,258  |   |                             | $      | 379,228 |   |   | $ | 300,697 |   |   | $ | 40,832 |   |   | $ | 22,779 |   |   | $ | 4,306 |   |   | $ | 17,529 |   |
| Special Mention                                           |   |                                          | 6,802   |   |                             |   | 18,671 |   |   |   | 28,905 |   |   |   | 5,866 |   |   |   | - |   |   |   | - |   |   |   | 1,067 |   |
| Substandard                                               |   |                                          | 41,341  |   |                             |   | 31,821 |   |   |   | 49,318 |   |   |   | 998 |   |   |   | - |   |   |   | 161 |   |   |   | 11 |   |
| Doubtful                                                  |   |                                          | -       |   |                             |   | 931 |   |   |   | 1,922 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total                                                     |   | $                                             | 116,401 |   |                             | $      | 430,651 |   |   | $ | 380,842 |   |   | $ | 47,696 |   |   | $ | 22,779 |   |   | $ | 4,467 |   |   | $ | 18,607 |   |

----

|                                                      |   | Real Estate                                   |    |   | Commercial                       |   |
|-----------------------------------------------------------|--------|-----------------------------------------------|---------|--------|----------------------------------|--------|
| December 31, 2011(In thousands)                           |   | Real Estate-Construction and Land Development |    |   | Real Estate Mortgage-Residential |   |   | Real Estate Mortgage-Farmland and Other Commercial Enterprises |   |   | Commercial and Industrial |   |   | States and Political Subdivisions |   |   | Lease Financing |   |   | Other |   |
| Credit risk profile by internally assigned rating grades: |   |                                          |    |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Pass                                                      |   | $                                             | 65,306  |   |                             | $      | 386,134 |   |   | $ | 303,512 |   |   | $ | 41,556 |   |   | $ | 23,601 |   |   | $ | 7,022 |   |   | $ | 20,415 |   |
| Special Mention                                           |   |                                          | 7,443   |   |                             |   | 16,585 |   |   |   | 19,393 |   |   |   | 2,969 |   |   |   | - |   |   |   | 6 |   |   |   | 1,000 |   |
| Substandard                                               |   |                                          | 47,091  |   |                             |   | 41,468 |   |   |   | 59,395 |   |   |   | 4,103 |   |   |   | - |   |   |   | 124 |   |   |   | 20 |   |
| Doubtful                                                  |   |                                          | 149     |   |                             |   | 1,277 |   |   |   | 2,031 |   |   |   | 143 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total                                                     |   | $                                             | 119,989 |   |                             | $      | 445,464 |   |   | $ | 384,331 |   |   | $ | 48,771 |   |   | $ | 23,601 |   |   | $ | 7,152 |   |   | $ | 21,435 |   |

|                                           |   | June 30, 2012  |   |   | December 31, 2011 |   |
|------------------------------------------------|--------|----------------|--------|--------|-------------------|--------|
|                                           |   |  Consumer |   |   |  Consumer    |   |
| (In thousands)                                 |   | Secured        |   |   | Unsecured         |   |   | Secured |   |   | Unsecured |   |
| Credit risk profile based on payment activity: |   |           |   |   |              |   |   |   |   |   |   |   |
| Performing                                     |   | $              | 11,796 |   |              | $      | 7,154 |   |   | $ | 14,134 |   |   | $ | 7,138 |   |
| Nonperforming                                  |   |           | 44     |   |              |   | 2 |   |   |   | 80 |   |   |   | 13 |   |
| Total                                          |   | $              | 11,840 |   |              | $      | 7,156 |   |   | $ | 14,214 |   |   | $ | 7,151 |   |

----

| (In thousands)                            |   | June 30, 2012 |   |   | December 31, 2011 |   |
|-------------------------------------------|--------|--------------------|--------|--------|-------------------|--------|
| Construction and land development         |   | $                  | 22,881 |   |              | $      | 21,951 |   |
| Residential real estate                   |   |               | 4,858  |   |              |   | 5,591 |   |
| Farmland and other commercial enterprises |   |               | 11,827 |   |              |   | 10,615 |   |
| Total                                     |   | $                  | 39,566 |   |              | $      | 38,157 |   |

| Six months ended June 30,  (In thousands) |   | 2012   |   |   | 2011   |   |
|-----------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Beginning balance                                   |   | $      | 38,157 |   |   | $      | 30,545 |   |
| Transfers from loans                                |   |   | 10,594 |   |   |   | 10,594 |   |
| Proceeds from sales                                 |   |   | (7,929 | )      |   |   | (4,437 | ) |
| Loss on sales                                       |   |   | (106   | )      |   |   | (427 | ) |
| Write downs and other decreases, net                |   |   | (1,150 | )      |   |   | (1,565 | ) |
| Ending balance                                      |   | $      | 39,566 |   |   | $      | 34,710 |   |

|                                  |   | Three Months EndedJune 30,  |   |   | Six Months EndedJune 30,  |   |
|---------------------------------------|--------|----------------------------------|--------|--------|--------------------------------|--------|
| (In thousands)                        |   | 2012                             |   |   | 2011                           |   |   | 2012 |   |   | 2011 |   |
| Service cost                          |   | $                                | 154    |   |                           | $      | 108 |   |   | $ | 308 |   |   | $ | 216 |   |
| Interest cost                         |   |                             | 152    |   |                           |   | 151 |   |   |   | 304 |   |   |   | 302 |   |
| Amortization of transition obligation |   |                             | 26     |   |                           |   | 26 |   |   |   | 52 |   |   |   | 52 |   |
| Recognized prior service cost         |   |                             | 64     |   |                           |   | 64 |   |   |   | 128 |   |   |   | 128 |   |
| Recognized net actuarial loss         |   |                             | 14     |   |                           |   | - |   |   |   | 28 |   |   |   | - |   |
| Net periodic benefit cost             |   | $                                | 410    |   |                           | $      | 349 |   |   | $ | 820 |   |   | $ | 698 |   |

----

|              |   | June 30, 2012                  |   |   | December 31, 2011       |   |
|-------------------|--------|--------------------------------|--------|--------|-------------------------|--------|
|              |   | Tier 1Risk-based Capital1 |   |   | TotalRisk-basedCapital1 |   |   | Tier 1Leverage2 |   |   | Tier 1Risk-based Capital1 |   |   | TotalRisk-basedCapital1 |   |   | Tier 1Leverage2 |   |
| Consolidated      |   |                           | 17.25  | %      |                    |   | 18.52 | % |   |   | 10.44 | % |   |   | 16.68 | % |   |   | 17.95 | % |   |   | 9.99 | % |
| Farmers Bank      |   |                           | 18.20  |   |                    |   | 19.46 |   |   |   | 9.94 |   |   |   | 17.58 |   |   |   | 18.84 |   |   |   | 9.47 |   |
| First Citizens    |   |                           | 13.51  |   |                    |   | 14.47 |   |   |   | 9.38 |   |   |   | 13.47 |   |   |   | 14.21 |   |   |   | 8.93 |   |
| United Bank       |   |                           | 14.77  |   |                    |   | 16.05 |   |   |   | 9.22 |   |   |   | 13.51 |   |   |   | 14.79 |   |   |   | 8.44 |   |
| Citizens Northern |   |                           | 12.74  |   |                    |   | 13.99 |   |   |   | 8.74 |   |   |   | 12.24 |   |   |   | 13.49 |   |   |   | 8.48 |   |

----

----

----

----

| (In thousands except per share data)                                 |   |   |   |   |   |   |
|----------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Three Months Ended June 30,                                          |   | 2012   |   |   | 2011   |   |   | Change |   |
| Interest income                                                      |   | $      | 18,087 |   |   | $      | 20,133 |   |   | $ | (2,046 | ) |
| Interest expense                                                     |   |   | 4,720  |   |   |   | 6,311 |   |   |   | (1,591 | ) |
| Net interest income                                                  |   |   | 13,367 |   |   |   | 13,822 |   |   |   | (455 | ) |
| Provision for loan losses                                            |   |   | 1,341  |   |   |   | 4,528 |   |   |   | (3,187 | ) |
| Net interest income after provision for loan losses                  |   |   | 12,026 |   |   |   | 9,294 |   |   |   | 2,732 |   |
| Noninterest income                                                   |   |   | 6,412  |   |   |   | 6,340 |   |   |   | 72 |   |
| Noninterest expenses                                                 |   |   | 14,401 |   |   |   | 15,507 |   |   |   | (1,106 | ) |
| Income before income tax expense                                     |   |   | 4,037  |   |   |   | 127 |   |   |   | 3,910 |   |
| Income tax expense                                                   |   |   | 890    |   |   |   | (42 | ) |   |   | 932 |   |
| Net income                                                           |   | $      | 3,147  |   |   | $      | 169 |   |   | $ | 2,978 |   |
| Preferred stock dividends and discount accretion                     |   |   | (480   | )      |   |   | (473 | ) |   |   | (7 | ) |
| Net income (loss) available to common shareholders                   |   | $      | 2,667  |   |   | $      | (304 | ) |   | $ | 2,971 |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted net income (loss) per common share                 |   | $      | .36    |   |   | $      | (.04 | ) |   | $ | .40 |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average common shares outstanding – basic and diluted |   |   | 7,454  |   |   |   | 7,420 |   |   |   | 34 |   |
| Return on average assets                                             |   |   | .67    | %      |   |   | .03 | % |   |   | 64 | bp |
| Return on average equity                                             |   |   | 7.75   | %      |   |   | .44 | % |   |   | 731 | bp |
| bp = basis points.                                                   |   |   |   |   |   |   |   |   |   |   |   |   |

----

----

| Three Months Ended June 30,                                                                                |   | 2012           |      |   | 2011     |   |
|------------------------------------------------------------------------------------------------------------|--------|----------------|-----------|--------|----------|--------|
|  (In thousands)                                                                                       |   | AverageBalance |      |   | Interest |   |   | AverageRate |   |   | AverageBalance |   |   | Interest |   |   | AverageRate |   |
| Earning Assets                                                                                             |   |           |      |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Investment securities                                                                                      |   |           |      |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                                                                    |   | $              | 552,384   |   |     | $      | 3,394 |   |   |   | 2.47 | % |   | $ | 496,046 |   |   | $ | 3,906 |   |   |   | 3.16 | % |
| Nontaxable1                                                                                                |   |           | 88,962    |   |     |   | 827 |   |   |   | 3.74 |   |   |   | 59,852 |   |   |   | 677 |   |   |   | 4.54 |   |
| Interest bearing deposits in banks, federal funds sold and securities purchased under agreements to resell |   |           | 48,299    |   |     |   | 28 |   |   |   | .23 |   |   |   | 102,764 |   |   |   | 65 |   |   |   | .25 |   |
| Loans1,2,3                                                                                                 |   |           | 1,041,927 |   |     |   | 14,293 |   |   |   | 5.52 |   |   |   | 1,144,035 |   |   |   | 15,916 |   |   |   | 5.58 |   |
| Total earning assets                                                                                       |   |           | 1,731,572 |   |     | $      | 18,542 |   |   |   | 4.31 | % |   |   | 1,802,697 |   |   | $ | 20,564 |   |   |   | 4.58 | % |
| Allowance for loan losses                                                                                  |   |           | (27,072   | )      |     |   |   |   |   |   |   |   |   |   | (29,181 | ) |   |   |   |   |   |   |   |   |
| Total earning assets, net of allowance for loan losses                                                     |   |           | 1,704,500 |   |     |   |   |   |   |   |   |   |   |   | 1,773,516 |   |   |   |   |   |   |   |   |   |
| Nonearning Assets                                                                                          |   |           |      |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and due from banks                                                                                    |   |           | 24,370    |   |     |   |   |   |   |   |   |   |   |   | 16,842 |   |   |   |   |   |   |   |   |   |
| Premises and equipment, net                                                                                |   |           | 38,024    |   |     |   |   |   |   |   |   |   |   |   | 39,336 |   |   |   |   |   |   |   |   |   |
| Other assets                                                                                               |   |           | 129,069   |   |     |   |   |   |   |   |   |   |   |   | 126,960 |   |   |   |   |   |   |   |   |   |
| Total assets                                                                                               |   | $              | 1,895,963 |   |     |   |   |   |   |   |   |   |   | $ | 1,956,654 |   |   |   |   |   |   |   |   |   |
| Interest Bearing Liabilities                                                                               |   |           |      |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                                                   |   |           |      |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest bearing demand                                                                                    |   | $              | 284,561   |   |     | $      | 61 |   |   |   | .09 | % |   | $ | 260,577 |   |   | $ | 94 |   |   |   | .14 | % |
| Savings                                                                                                    |   |           | 307,933   |   |     |   | 151 |   |   |   | .20 |   |   |   | 292,375 |   |   |   | 350 |   |   |   | .48 |   |
| Time                                                                                                       |   |           | 597,266   |   |     |   | 2,156 |   |   |   | 1.45 |   |   |   | 696,935 |   |   |   | 3,328 |   |   |   | 1.92 |   |
| Federal funds purchased and other short-term borrowings                                                    |   |           | 26,394    |   |     |   | 25 |   |   |   | .38 |   |   |   | 42,097 |   |   |   | 49 |   |   |   | .47 |   |
| Securities sold under agreements to repurchase and other long-term borrowings                    |   |           | 229,476   |   |     |   | 2,327 |   |   |   | 4.08 |   |   |   | 245,483 |   |   |   | 2,490 |   |   |   | 4.07 |   |
| Total interest bearing liabilities                                                                         |   |           | 1,445,630 |   |     | $      | 4,720 |   |   |   | 1.31 | % |   |   | 1,537,467 |   |   | $ | 6,311 |   |   |   | 1.65 | % |
| Noninterest Bearing Liabilities                                                                            |   |           |      |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other demand deposits                                                                                      |   |           | 232,518   |   |     |   |   |   |   |   |   |   |   |   | 216,872 |   |   |   |   |   |   |   |   |   |
| Other liabilities                                                                                          |   |           | 54,553    |   |     |   |   |   |   |   |   |   |   |   | 48,225 |   |   |   |   |   |   |   |   |   |
| Total liabilities                                                                                          |   |           | 1,732,701 |   |     |   |   |   |   |   |   |   |   |   | 1,802,564 |   |   |   |   |   |   |   |   |   |
| Shareholders’ equity                                                                                 |   |           | 163,262   |   |     |   |   |   |   |   |   |   |   |   | 154,090 |   |   |   |   |   |   |   |   |   |
| Total liabilities and shareholders’ equity                                                           |   | $              | 1,895,963 |   |     |   |   |   |   |   |   |   |   | $ | 1,956,654 |   |   |   |   |   |   |   |   |   |
| Net interest income                                                                                        |   |           |      |   |     |   | 13,822 |   |   |   |   |   |   |   |   |   |   |   | 14,253 |   |   |   |   |   |
| TE basis adjustment                                                                                        |   |           |      |   |     |   | (455 | ) |   |   |   |   |   |   |   |   |   |   | (431 | ) |   |   |   |   |
| Net interest income                                                                                        |   |           |      |   |     | $      | 13,367 |   |   |   |   |   |   |   |   |   |   | $ | 13,822 |   |   |   |   |   |
| Net interest spread                                                                                        |   |           |      |   |     |   |   |   |   |   | 3.00 | % |   |   |   |   |   |   |   |   |   |   | 2.93 | % |
| Impact of noninterest bearing sources of funds                                                             |   |           |      |   |     |   |   |   |   |   | .21 |   |   |   |   |   |   |   |   |   |   |   | .25 |   |
| Net interest margin                                                                                        |   |           |      |   |     |   |   |   |   |   | 3.21 | % |   |   |   |   |   |   |   |   |   |   | 3.18 | % |

----

| (In thousands)                                                                                             |   | Variance |       |    | Variance Attributed to |   |
|------------------------------------------------------------------------------------------------------------|--------|----------|------------|---------|------------------------|--------|
| Three Months Ended June 30,                                                                                |   |     | 2012/20111 |    |                   | Volume |   |   | Rate |   |
|                                                                                                       |   |     |       |    |                   |   |   |   |   |   |
| Interest Income                                                                                            |   |     |       |    |                   |   |   |   |   |   |
| Taxable investment securities                                                                              |   | $        | (512       | )  |                   | $      | 2,167 |   |   | $ | (2,679 | )   |
| Nontaxable investment securities2                                                                          |   |     | 150        |    |                   |   | 813 |   |   |   | (663 | )   |
| Interest bearing deposits in banks, federal funds sold and securities purchased under agreements to resell |   |     | (37        | )  |                   |   | (32 | )   |   |   | (5 | )   |
| Loans2                                                                                                     |   |     | (1,623     | )  |                   |   | (1,449 | ) |   |   | (174 | )   |
| Total interest income                                                                                      |   |     | (2,022     | )  |                   |   | 1,499 |   |   |   | (3,521 | )   |
| Interest Expense                                                                                           |   |     |       |    |                   |   |   |   |   |   |   |   |
| Interest bearing demand deposits                                                                           |   |     | (33        | )  |                   |   | 47 |   |   |   | (80 | )   |
| Savings deposits                                                                                           |   |     | (199       | )  |                   |   | 121 |   |   |   | (320 | )   |
| Time deposits                                                                                              |   |     | (1,172     | )  |                   |   | (432 | )   |   |   | (740 | )   |
| Federal funds purchased and other short-term borrowings                                                    |   |     | (24        | )  |                   |   | (16 | )   |   |   | (8 | )   |
| Securities sold under agreements to repurchase and other long-term borrowings                         |   |     | (163       | )       |                   |   | (205 | )   |   |   | 42 |   |
| Total interest expense                                                                                     |   |     | (1,591     | )  |                   |   | (485 | )   |   |   | (1,106 | )   |
| Net interest income                                                                                        |   | $        | (431       | )  |                   | $      | 1,984 |   |   | $ | (2,415 | ) |
| Percentage change                                                                                          |   |     | 100.0      | %       |                   |   | (460.3 | )% |   |   | 560.3 | % |

----

| Three Months Ended June 30,  (In thousands) |   | 2012   |   |   | 2011   |   |   | Change |   |
|-------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Service charges and fees on deposits                  |   | $      | 2,015  |   |   | $      | 2,177  |   |   | $ | (162 | ) |
| Allotment processing fees                             |   |   | 1,332  |   |   |   | 1,356  |   |   |   | (24 | ) |
| Other service charges, commissions, and fees          |   |   | 1,136  |   |   |   | 1,062  |   |   |   | 74 |   |
| Data processing income                                |   |   | 84     |   |   |   | 271    |   |   |   | (187 | ) |
| Trust income                                          |   |   | 473    |   |   |   | 659    |   |   |   | (186 | ) |
| Investment securities gains, net                      |   |   | 685    |   |   |   | 413    |   |   |   | 272 |   |
| Gain on sale of mortgage loans, net                   |   |   | 451    |   |   |   | 151    |   |   |   | 300 |   |
| Income from company-owned life insurance              |   |   | 228    |   |   |   | 241    |   |   |   | (13 | ) |
| Other                                                 |   |   | 8      |   |   |   | 10     |   |   |   | (2 | ) |
|   Total noninterest income             |   | $      | 6,412  |   |   | $      | 6,340  |   |   | $ | 72 |   |

|   | · | Service charges and fees on deposits decreased $162 thousand or 7.4% driven by a decline in fees from overdraft/insufficient funds of $241 thousand or 17.2% related to lower transaction volume. Transaction volume has declined similar to trends experienced by the banking industry as a whole, mainly as a result of increased consumer compliance regulations and changes in customer behavior that have evolved over the last several years. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The decrease in data processing income of $187 thousand or 69.0% is driven by a $138 thousand or 69.7% decline in fees related to the winding down of the Commonwealth of Kentucky (“Commonwealth”) depository services contract. Decreases in data processing revenues related to the general depository contract have been partially offset by noninterest expense reductions spread over multiple line items categories. Data processing fees have also declined $50 thousand or nearly 100% due to lower processing volumes attributed to an increase in paperless payment transactions related to the Commonwealth’s Women, Infants, and Children (“WIC”) supplemental nutrition program. Such transactions are now being processed by an unrelated third party. The Company expects to continue processing only a small number of transactions that are subject to manual processing. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The $186 thousand or 28.2% decrease in trust income is due mainly to accrual refinements resulting in a one-time increase in the amount of $165 thousand in the second quarter a year ago. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The $272 thousand or 65.9% increase in gains on the sale of investment securities is attributed to an increase in the volume of securities sold. Such sales often take place at irregular intervals based on current asset and liability management strategies. The Company periodically sells investment securities to lock in gains, increase yield, restructure expected future cash flows, and/or enhance its capital position as opportunities occur. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Net gains on the sale of mortgage loans increased $300 thousand or 199% as the volume of loans sold increased to $24.4 million from $5.4 million in the comparison. The increase in loans sold was fueled mainly by the overall low interest rate environment, which is below already low levels from a year ago. The low rate environment, along with a temporary upward movement in rates during the first quarter, has prompted many borrowers to refinance or purchase a home in anticipation that rates may rise further in the near future. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Three Months Ended June 30,  (In thousands) |   | 2012   |   |   | 2011   |   |   | Change |   |
|-------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Salaries and employee benefits                        |   | $      | 6,859  |   |   | $      | 6,870  |   |   | $ | (11 | ) |
| Occupancy expenses, net                               |   |   | 1,195  |   |   |   | 1,210  |   |   |   | (15 | ) |
| Equipment expenses                                    |   |   | 611    |   |   |   | 567    |   |   |   | 44 |   |
| Data processing and communication expense             |   |   | 989    |   |   |   | 1,199  |   |   |   | (210 | ) |
| Bank franchise tax                                    |   |   | 620    |   |   |   | 662    |   |   |   | (42 | ) |
| Amortization of intangibles                           |   |   | 253    |   |   |   | 286    |   |   |   | (33 | ) |
| Deposit insurance expense                             |   |   | 685    |   |   |   | 722    |   |   |   | (37 | ) |
| Other real estate expenses, net                       |   |   | 704    |   |   |   | 1,935  |   |   |   | (1,231 | ) |
| Other                                                 |   |   | 2,485  |   |   |   | 2,056  |   |   |   | 429 |   |
|   Total noninterest expense            |   | $      | 14,401 |   |   | $      | 15,507 |   |   | $ | (1,106 | ) |

|   | · | Data processing and communications expenses decreased $210 thousand or 17.5% mainly as a result of an agreement the Company announced during the first quarter of 2012 to reduce its debit card processing expenses combined with costs savings related to the winding down of the Company’s depository services contract with the Commonwealth. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The $1.2 million or 63.6% decrease in other real estate expense is mainly due to lower impairment charges recorded of $698 thousand or 52.1% in the comparison. Additionally, net gains from the sale of repossessed real estate were $136 thousand in the current quarter compared to a net loss of $257 thousand in the second quarter a year earlier. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The $429 thousand or 20.9% increase in other noninterest expense was driven by higher legal expenses of $251 thousand. The increase in legal expense includes $122 thousand related to registering the Company’s Series A preferred shares in order for them to be sold by the U.S. Department of Treasury (“Treasury”) to third party investors. The remaining increase in legal expense is primarily related to costs associated with problem loans. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (In thousands except per share data)                                  |   |   |   |   |   |   |
|-----------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Six Months Ended June 30,                                             |   | 2012   |   |   | 2011   |   |   | Change |   |
| Interest income                                                       |   | $      | 36,497 |   |   | $      | 40,301 |   |   | $ | (3,804 | ) |
| Interest expense                                                      |   |   | 9,923  |   |   |   | 12,823 |   |   |   | (2,900 | ) |
|    Net interest income                                 |   |   | 26,574 |   |   |   | 27,478 |   |   |   | (904 | ) |
| Provision for loan losses                                             |   |   | 2,318  |   |   |   | 6,969 |   |   |   | (4,651 | ) |
|    Net interest income after provision for loan losses |   |   | 24,256 |   |   |   | 20,509 |   |   |   | 3,747 |   |
| Noninterest income                                                    |   |   | 12,440 |   |   |   | 12,233 |   |   |   | 207 |   |
| Noninterest expenses                                                  |   |   | 28,994 |   |   |   | 30,789 |   |   |   | (1,795 | ) |
|    Income before income tax expense                    |   |   | 7,702  |   |   |   | 1,953 |   |   |   | 5,749 |   |
| Income tax expense                                                    |   |   | 1,246  |   |   |   | 739 |   |   |   | 507 |   |
|    Net income                                          |   | $      | 6,456  |   |   | $      | 1,214 |   |   | $ | 5,242 |   |
| Preferred stock dividends and discount accretion                      |   |   | (958   | )      |   |   | (945 | ) |   |   | (13 | ) |
| Net income available to common shareholders                           |   | $      | 5,498  |   |   | $      | 269 |   |   | $ | 5,229 |   |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted net income per common share                         |   | $      | .74    |   |   | $      | .04 |   |   | $ | .70 |   |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average common shares outstanding – basic and diluted  |   |   | 7,450  |   |   |   | 7,416 |   |   |   | 34 |   |
| Return on average assets                                              |   |   | .68    | %      |   |   | .13 | % |   |   | 55 | bp |
| Return on average equity                                              |   |   | 8.05   | %      |   |   | 1.60 | % |   |   | 645 | bp |
| bp = basis points.                                                    |   |   |   |   |   |   |   |   |   |   |   |   |

----

----

| Six Months Ended June 30,                                                                                  |   | 2012           |      |   | 2011     |   |
|------------------------------------------------------------------------------------------------------------|--------|----------------|-----------|--------|----------|--------|
|  (In thousands)                                                                                       |   | AverageBalance |      |   | Interest |   |   | AverageRate |   |   | AverageBalance |   |   | Interest |   |   | AverageRate |   |
| Earning Assets                                                                                             |   |           |      |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Investment securities                                                                                      |   |           |      |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                                                                    |   | $              | 547,516   |   |     | $      | 6,960 |   |   |   | 2.56 | % |   | $ | 451,933 |   |   | $ | 7,276 |   |   |   | 3.25 | % |
| Nontaxable1                                                                                                |   |           | 83,925    |   |     |   | 1,601 |   |   |   | 3.84 |   |   |   | 62,976 |   |   |   | 1,462 |   |   |   | 4.68 |   |
| Interest bearing deposits in banks, federal funds sold and securities purchased under agreements to resell |   |           | 57,159    |   |     |   | 64 |   |   |   | .23 |   |   |   | 129,186 |   |   |   | 150 |   |   |   | .23 |   |
| Loans1,2,3                                                                                                 |   |           | 1,050,012 |   |     |   | 28,776 |   |   |   | 5.51 |   |   |   | 1,158,774 |   |   |   | 32,315 |   |   |   | 5.62 |   |
| Total earning assets                                                                                       |   |           | 1,738,612 |   |     | $      | 37,401 |   |   |   | 4.33 | % |   |   | 1,802,869 |   |   | $ | 41,203 |   |   |   | 4.61 | % |
| Allowance for loan losses                                                                                  |   |           | (27,697   | )      |     |   |   |   |   |   |   |   |   |   | (29,060 | ) |   |   |   |   |   |   |   |   |
| Total earning assets, net of allowance for loan losses                                                     |   |           | 1,710,915 |   |     |   |   |   |   |   |   |   |   |   | 1,773,809 |   |   |   |   |   |   |   |   |   |
| Nonearning Assets                                                                                          |   |           |      |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and due from banks                                                                                    |   |           | 24,449    |   |     |   |   |   |   |   |   |   |   |   | 18,538 |   |   |   |   |   |   |   |   |   |
| Premises and equipment, net                                                                                |   |           | 38,260    |   |     |   |   |   |   |   |   |   |   |   | 39,314 |   |   |   |   |   |   |   |   |   |
| Other assets                                                                                               |   |           | 127,486   |   |     |   |   |   |   |   |   |   |   |   | 125,706 |   |   |   |   |   |   |   |   |   |
| Total assets                                                                                               |   | $              | 1,901,110 |   |     |   |   |   |   |   |   |   |   | $ | 1,957,367 |   |   |   |   |   |   |   |   |   |
| Interest Bearing Liabilities                                                                               |   |           |      |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                                                   |   |           |      |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest bearing demand                                                                                    |   | $              | 280,208   |   |     | $      | 125 |   |   |   | .09 | % |   | $ | 260,703 |   |   | $ | 188 |   |   |   | .15 | % |
| Savings                                                                                                    |   |           | 304,640   |   |     |   | 309 |   |   |   | .20 |   |   |   | 289,080 |   |   |   | 702 |   |   |   | .49 |   |
| Time                                                                                                       |   |           | 614,773   |   |     |   | 4,745 |   |   |   | 1.55 |   |   |   | 703,724 |   |   |   | 6,829 |   |   |   | 1.96 |   |
| Federal funds purchased and other short-term borrowings                                                    |   |           | 26,936    |   |     |   | 50 |   |   |   | .37 |   |   |   | 44,093 |   |   |   | 111 |   |   |   | .51 |   |
| Securities sold under agreements to repurchase and other long-term borrowings                    |   |           | 231,145   |   |     |   | 4,694 |   |   |   | 4.08 |   |   |   | 248,037 |   |   |   | 4,993 |   |   |   | 4.06 |   |
| Total interest bearing liabilities                                                                         |   |           | 1,457,702 |   |     | $      | 9,923 |   |   |   | 1.37 | % |   |   | 1,545,637 |   |   | $ | 12,823 |   |   |   | 1.67 | % |
| Noninterest Bearing Liabilities                                                                            |   |           |      |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other demand deposits                                                                                      |   |           | 228,651   |   |     |   |   |   |   |   |   |   |   |   | 212,307 |   |   |   |   |   |   |   |   |   |
| Other liabilities                                                                                          |   |           | 53,426    |   |     |   |   |   |   |   |   |   |   |   | 46,708 |   |   |   |   |   |   |   |   |   |
| Total liabilities                                                                                          |   |           | 1,739,779 |   |     |   |   |   |   |   |   |   |   |   | 1,804,652 |   |   |   |   |   |   |   |   |   |
| Shareholders’ equity                                                                                 |   |           | 161,331   |   |     |   |   |   |   |   |   |   |   |   | 152,715 |   |   |   |   |   |   |   |   |   |
| Total liabilities and shareholders’ equity                                                           |   | $              | 1,901,110 |   |     |   |   |   |   |   |   |   |   | $ | 1,957,367 |   |   |   |   |   |   |   |   |   |
| Net interest income                                                                                        |   |           |      |   |     |   | 27,478 |   |   |   |   |   |   |   |   |   |   |   | 28,380 |   |   |   |   |   |
| TE basis adjustment                                                                                        |   |           |      |   |     |   | (904 | ) |   |   |   |   |   |   |   |   |   |   | (902 | ) |   |   |   |   |
| Net interest income                                                                                        |   |           |      |   |     | $      | 26,574 |   |   |   |   |   |   |   |   |   |   | $ | 27,478 |   |   |   |   |   |
| Net interest spread                                                                                        |   |           |      |   |     |   |   |   |   |   | 2.96 | % |   |   |   |   |   |   |   |   |   |   | 2.94 | % |
| Impact of noninterest bearing sources of funds                                                             |   |           |      |   |     |   |   |   |   |   | .22 |   |   |   |   |   |   |   |   |   |   |   | .24 |   |
| Net interest margin                                                                                        |   |           |      |   |     |   |   |   |   |   | 3.18 | % |   |   |   |   |   |   |   |   |   |   | 3.18 | % |

----

| (In thousands)                                                                                             |   | Variance |       |          | Variance Attributed to |   |
|------------------------------------------------------------------------------------------------------------|--------|----------|------------|---------------|------------------------|--------|
| Six Months Ended June 30,                                                                                  |   |     | 2012/20111 |          |                   | Volume |   |   | Rate |   |
|                                                                                                       |   |     |       |          |                   |   |   |   |   |   |
| Interest Income                                                                                            |   |     |       |          |                   |   |   |   |   |   |
| Taxable investment securities                                                                              |   | $        | (316       | )   |                   | $      | 2,954 |   |   | $ | (3,270 | )   |
| Nontaxable investment securities2                                                                          |   |     | 139        |          |                   |   | 777 |   |   |   | (638 | )   |
| Interest bearing deposits in banks, federal funds sold and securities purchased under agreements to resell |   |     | (86        | )   |                   |   | (86 | )   |   |   | - |   |
| Loans2                                                                                                     |   |     | (3,539     | )   |                   |   | (2,928 | ) |   |   | (611 | )   |
| Total interest income                                                                                      |   |     | (3,802     | )   |                   |   | 717 |   |   |   | (4,519 | )   |
| Interest Expense                                                                                           |   |     |       |          |                   |   |   |   |   |   |   |   |
| Interest bearing demand deposits                                                                           |   |     | (63        | )   |                   |   | 39 |   |   |   | (102 | )   |
| Savings deposits                                                                                           |   |     | (393       | )   |                   |   | 107 |   |   |   | (500 | )   |
| Time deposits                                                                                              |   |     | (2,084     | )   |                   |   | (785 | )   |   |   | (1,299 | )   |
| Federal funds purchased and other short-term borrowings                                                    |   |     | (61        | )   |                   |   | (36 | )   |   |   | (25 | )   |
| Securities sold under agreements to repurchase and other long-term borrowings                         |   |     | (299       | )             |                   |   | (372 | )   |   |   | 73 |   |
| Total interest expense                                                                                     |   |     | (2,900     | )        |                   |   | (1,047 | )   |   |   | (1,853 | )   |
| Net interest income                                                                                        |   | $        | (902       | )        |                   | $      | 1,764 |   |   | $ | (2,666 | ) |
| Percentage change                                                                                          |   |     | 100.0      | %             |                   |   | (195.6 | )% |   |   | 295.6 | % |

----

| Six Months Ended June 30,  (In thousands) |   | 2012   |   |   | 2011   |   |   | Change |   |
|-----------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Service charges and fees on deposits                |   | $      | 4,018  |   |   | $      | 4,230  |   |   | $ | (212 | ) |
| Allotment processing fees                           |   |   | 2,628  |   |   |   | 2,685  |   |   |   | (57 | ) |
| Other service charges, commissions, and fees        |   |   | 2,228  |   |   |   | 2,091  |   |   |   | 137 |   |
| Data processing income                              |   |   | 168    |   |   |   | 535    |   |   |   | (367 | ) |
| Trust income                                        |   |   | 935    |   |   |   | 1,086  |   |   |   | (151 | ) |
| Investment securities gains, net                    |   |   | 688    |   |   |   | 823    |   |   |   | (135 | ) |
| Gain on sale of mortgage loans, net                 |   |   | 761    |   |   |   | 292    |   |   |   | 469 |   |
| Income from company-owned life insurance            |   |   | 988    |   |   |   | 476    |   |   |   | 512 |   |
| Other                                               |   |   | 26     |   |   |   | 15     |   |   |   | 11 |   |
|   Total noninterest income           |   | $      | 12,440 |   |   | $      | 12,233 |   |   | $ | 207 |   |

|   | · | The $212 thousand or 5.0% decrease in service charges and fees on deposits was driven by a decline in fees from overdraft/insufficient funds of $362 thousand or 13.4% related to lower transaction volume. Transaction volume has declined similar to trends experienced by the banking industry as a whole, mainly as a result of increased consumer compliance regulations and changes in customer behavior that have evolved over the last several years. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Other service charges, commissions, and fees are up $137 thousand or 6.6% due to an assortment of relatively small increases within this line item category. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The decrease in data processing income of $367 thousand or 68.6% is driven by a $263 thousand or 68.7% decline in fees related to the winding down of the depository services contract with the Commonwealth, which have been partially offset by noninterest expense reductions spread over multiple line items categories. Data processing fees have also declined $104 thousand or nearly 98.2% due to lower processing volumes attributed to an increase in paperless payment transactions related to the Commonwealth’s WIC supplemental nutrition program. Such transactions are now being processed by an unrelated third party. The Company expects to continue processing only a small number of transactions that are subject to manual processing. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The $151 thousand or 13.9% decrease in trust income is due mainly to accrual refinements in the prior-year second quarter that resulted in a one-time increase in the amount of $165 thousand. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The $135 thousand or 16.4% decrease in the gain on the sale of investment securities is attributed to the volume and timing of securities sold, as such sales often taking place at irregular intervals based on asset and liability management strategies. The Company periodically sells investment securities to lock in gains, increase yield, restructure expected future cash flows, and/or enhance its capital position as opportunities occur. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Gains on the sale of mortgage loans increased $469 thousand or 161% as the volume of loans sold increased $25.0 million or 204%. The increase in loans sold is mainly due to the overall low interest rate environment. While market interest rates are below already low levels from a year ago, rates have risen slightly since year-end 2011. This has prompted many borrowers to refinance or purchase a home in anticipation that rates may rise further in the near future. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The $512 thousand or 108% increase in income from company-owned life insurance is mainly the result of a $529 thousand gain related to death benefit proceeds received in the current year without a similar transaction in the comparable period of 2011. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Six Months Ended June 30,  (In thousands) |   | 2012   |   |   | 2011   |   |   | Change |   |
|-----------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Salaries and employee benefits                      |   | $      | 13,980 |   |   | $      | 13,635 |   |   | $ | 345 |   |
| Occupancy expenses, net                             |   |   | 2,371  |   |   |   | 2,442  |   |   |   | (71 | ) |
| Equipment expenses                                  |   |   | 1,181  |   |   |   | 1,177  |   |   |   | 4 |   |
| Data processing and communication expense           |   |   | 2,152  |   |   |   | 2,427  |   |   |   | (275 | ) |
| Bank franchise tax                                  |   |   | 1,188  |   |   |   | 1,293  |   |   |   | (105 | ) |
| Amortization of intangibles                         |   |   | 507    |   |   |   | 572    |   |   |   | (65 | ) |
| Deposit insurance expense                           |   |   | 1,372  |   |   |   | 1,611  |   |   |   | (239 | ) |
| Other real estate expenses, net                     |   |   | 1,666  |   |   |   | 2,615  |   |   |   | (949 | ) |
| Deposit fraud loss                                  |   |   | -      |   |   |   | 700    |   |   |   | (700 | ) |
| Other                                               |   |   | 4,577  |   |   |   | 4,317  |   |   |   | 260 |   |
|   Total noninterest expense          |   | $      | 28,994 |   |   | $      | 30,789 |   |   | $ | (1,795 | ) |

|   | · | The $345 thousand or 2.5% increase in salaries and employee benefits is due mainly to additional personnel hired in the credit administration and nonperforming asset management positions and modest annual employee pay increases. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Data processing and communications expenses decreased $275 thousand or 11.3% mainly as a result of an agreement the Company announced during the first quarter of 2012 to reduce its debit card processing expenses combined with costs savings related to the winding down of the Company’s depository services contract with the Commonwealth. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Bank franchise tax expense is down $105 thousand or 8.1% due to a decrease in the taxable base at certain of the Company’s bank subsidiaries. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Deposit insurance expense decreased $239 thousand or 14.8% mainly as a result of the change in the FDIC’s assessment base and rate structure that went into effect during the second quarter of 2011. Under the revised rules, the assessment base was changed from a deposit based approach to average assets less average tangible equity during the assessment period. The new assessment methodology generally shifts a greater share of total assessments to banks with more than $10 billion in assets, resulting in a lower amount attributed to many smaller community banks. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The $949 thousand or 36.3% decrease in other real estate expense was driven by lower impairment charges of $418 thousand or 26.7% and a lower net loss from the sale of repossessed real estate in the amount of $321 thousand. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The $700 thousand decrease related to the deposit fraud loss relates to a non-routine fraudulent transaction on a deposit account involving one of the Company’s customers that occurred during the first quarter of 2011. No comparable transaction occurred in 2012. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The $260 thousand or 6.0% increase in other noninterest expense was driven by higher legal expenses of $321 thousand. The increase in legal expense includes $122 thousand related to registering the Company’s Series A preferred shares in order for them to be sold by the Treasury to third party investors. The remaining increase in legal expense is primarily related to costs associated with problem loans. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                                             |   | June 30, 2012 |      |   | December 31, 2011 |   |
|------------------------------------------------------------------|--------|---------------|-----------|--------|-------------------|--------|
| (Dollars in thousands)                                           |   | Amount        |      |   | %            |   |   | Amount |   |   |  %  |   |
|                                                             |   |          |      |   |              |   |   |   |   |   |   |   |
| Commercial, financial, and agriculture                           |   | $             | 89,082    |   |              |   | 8.6 | % |   | $ | 93,807 |   |   |   | 8.7 | % |
| Real estate – construction and land development            |   |          | 116,401   |   |              |   | 11.2 |   |   |   | 119,989 |   |   |   | 11.2 |   |
| Real estate mortgage - residential                               |   |          | 430,651   |   |              |   | 41.4 |   |   |   | 445,464 |   |   |   | 41.6 |   |
| Real estate mortgage - farmland and other commercial enterprises |   |          | 380,842   |   |              |   | 36.6 |   |   |   | 384,331 |   |   |   | 35.8 |   |
| Installment                                                      |   |          | 18,996    |   |              |   | 1.8 |   |   |   | 21,365 |   |   |   | 2.0 |   |
| Lease financing                                                  |   |          | 4,467     |   |              |   | .4 |   |   |   | 7,152 |   |   |   | .7 |   |
| Total                                                            |   | $             | 1,040,439 |   |              |   | 100.0 | % |   | $ | 1,072,108 |   |   |   | 100.0 | % |

----

----

| (In thousands)                                                             |   | June 30, 2012 |   |   | December 31, 2011 |   |
|----------------------------------------------------------------------------|--------|--------------------|--------|--------|------------------------|--------|
| Nonaccrual Loans                                                           |   |               |   |   |                   |   |
| Real Estate:                                                               |   |               |   |   |                   |   |
| Real estate-construction and land development                              |   | $                  | 23,966 |   |                   | $      | 30,744 |   |
| Real estate mortgage-residential                                           |   |               | 12,428 |   |                   |   | 14,578 |   |
| Real estate mortgage-farmland and other commercial enterprises             |   |               | 17,444 |   |                   |   | 13,831 |   |
| Commercial:                                                                |   |               |   |   |                   |   |   |   |
| Commercial and industrial                                                  |   |               | 554    |   |                   |   | 386 |   |
| Lease financing                                                            |   |               | 161    |   |                   |   | 124 |   |
| Consumer:                                                                  |   |               |   |   |                   |   |   |   |
| Secured                                                                    |   |               | 44     |   |                   |   | 80 |   |
| Unsecured                                                                  |   |               | 1      |   |                   |   | 12 |   |
|   Total nonaccrual loans                                         |   | $                  | 54,598 |   |                   | $      | 59,755 |   |
|                                                                       |   |               |   |   |                   |   |   |   |
| Restructured Loans                                                         |   |               |   |   |                   |   |   |   |
| Real Estate:                                                               |   |               |   |   |                   |   |   |   |
| Real estate-construction and land development                              |   | $                  | 6,143  |   |                   | $      | 6,207 |   |
| Real estate mortgage-residential                                           |   |               | 3,468  |   |                   |   | 4,894 |   |
| Real estate mortgage-farmland and other commercial enterprises             |   |               | 7,929  |   |                   |   | 8,024 |   |
|   Total restructured loans                                       |   | $                  | 17,540 |   |                   | $      | 19,125 |   |
|                                                                       |   |               |   |   |                   |   |   |   |
| Past Due 90 Days or More and Still Accruing                                |   |               |   |   |                   |   |   |   |
| Real Estate:                                                               |   |               |   |   |                   |   |   |   |
| Real estate mortgage-residential                                           |   | $                  | 28     |   |                   | $      | - |   |
| Consumer:                                                                  |   |               |   |   |                   |   |   |   |
| Unsecured                                                                  |   |               | 1      |   |                   |   | 1 |   |
|   Total past due 90 days or more and still accruing              |   | $                  | 29     |   |                   | $      | 1 |   |
|                                                                       |   |               |   |   |                   |   |   |   |
| Total nonperforming loans                                                  |   | $                  | 72,167 |   |                   | $      | 78,881 |   |
|                                                                       |   |               |   |   |                   |   |   |   |
| Ratio of total nonperforming loans to total loans (net of unearned income) |   |               | 6.9    | %      |                   |   | 7.4 | % |

----

|                |   | End of Period |      |   | Average          |   |
|---------------------|--------|---------------|-----------|--------|------------------|--------|
| (In thousands)      |   | June 30,2012  |      |   | December 31,2011 |   |   | Difference |   |   | (Six Months)June 30,2012 |   |   | (Twelve Months)December 31,2011 |   |   | Difference |   |
| Noninterest Bearing |   | $             | 237,113   |   |             | $      | 224,259 |   |   | $ | 12,854 |   |   | $ | 228,651 |   |   | $ | 217,357 |   |   | $ | 11,294 |   |
|                |   |          |      |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest Bearing    |   |          |      |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand              |   |          | 282,301   |   |             |   | 261,920 |   |   |   | 20,381 |   |   |   | 280,208 |   |   |   | 258,244 |   |   |   | 21,964 |   |
| Savings             |   |          | 304,632   |   |             |   | 301,217 |   |   |   | 3,415 |   |   |   | 304,640 |   |   |   | 293,526 |   |   |   | 11,114 |   |
| Time                |   |          | 583,402   |   |             |   | 647,669 |   |   |   | (64,267 | ) |   |   | 614,773 |   |   |   | 687,517 |   |   |   | (72,744 | ) |
| Total               |   |          | 1,170,335 |   |             |   | 1,210,806 |   |   |   | (40,471 | ) |   |   | 1,199,621 |   |   |   | 1,239,287 |   |   |   | (39,666 | ) |
|                |   |          |      |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Deposits      |   | $             | 1,407,448 |   |             | $      | 1,435,065 |   |   | $ | (27,617 | ) |   | $ | 1,428,272 |   |   | $ | 1,456,644 |   |   | $ | (28,372 | ) |

----

----

----

|                    |   | June 30, 2012                  |   |   | December 31, 2011       |   |
|-------------------------|--------|--------------------------------|--------|--------|-------------------------|--------|
|                    |   | Tier 1Risk-based Capital1 |   |   | TotalRisk-basedCapital1 |   |   | Tier 1Leverage2 |   |   | Tier 1Risk-based Capital1 |   |   | TotalRisk-basedCapital1 |   |   | Tier 1Leverage2 |   |
| Consolidated            |   |                           | 17.25  | %      |                    |   | 18.52 | % |   |   | 10.44 | % |   |   | 16.68 | % |   |   | 17.95 | % |   |   | 9.99 | % |
|                    |   |                           |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Farmers Bank 3          |   |                           | 18.20  |   |                    |   | 19.46 |   |   |   | 9.94 |   |   |   | 17.58 |   |   |   | 18.84 |   |   |   | 9.47 |   |
| First Citizens          |   |                           | 13.51  |   |                    |   | 14.47 |   |   |   | 9.38 |   |   |   | 13.47 |   |   |   | 14.21 |   |   |   | 8.93 |   |
| United Bank3            |   |                           | 14.77  |   |                    |   | 16.05 |   |   |   | 9.22 |   |   |   | 13.51 |   |   |   | 14.79 |   |   |   | 8.44 |   |
| Citizens Northern3      |   |                           | 12.74  |   |                    |   | 13.99 |   |   |   | 8.74 |   |   |   | 12.24 |   |   |   | 13.49 |   |   |   | 8.48 |   |
|                    |   |                           |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Regulatory minimum      |   |                           | 4.00   |   |                    |   | 8.00 |   |   |   | 4.00 |   |   |   | 4.00 |   |   |   | 8.00 |   |   |   | 4.00 |   |
| Well-capitalized status |   |                           | 6.00   |   |                    |   | 10.00 |   |   |   | 5.00 |   |   |   | 6.00 |   |   |   | 10.00 |   |   |   | 5.00 |   |

| 1 | Tier 1 Risk-based and Total Risk-based Capital ratios are computed by dividing a bank’s Tier 1 or Total Capital, as defined by regulation, by a risk-weighted sum of the bank’s assets, with the risk weighting determined by general standards established by regulation. The safest assets (e.g., government obligations) are assigned a weighting of 0% with riskier assets receiving higher ratings (e.g., ordinary commercial loans are assigned a weighting of 100%). |
|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2 | Tier 1 Leverage ratio is computed by dividing a bank’s Tier 1 Capital, as defined by regulation, by its total quarterly average assets. |
|---|-----------------------------------------------------------------------------------------------------------------------------------------------|

| 3 | See Note 10 to the Company’s unaudited consolidated financial statements included as part of this Form 10-Q for minimum capital ratios required as part of the banks regulatory agreement. |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| 3.1    | Second Amended and Restated Articles of Incorporation of Farmers Capital Bank Corporation (incorporated by reference to the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2006 (File No. 000-14412)).                          |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                   |
| 3.2    | Articles of Amendment to Second Amended and Restated Articles of Incorporation of Farmers Capital Bank Corporation dated January 6, 2009 (incorporated by reference to the Current Report on Form 8-K dated January 13, 2009 (File No. 000-14412)).    |
|   |                                                                                                                                                                                                                                                   |
| 3.3    | Articles of Amendment to Second Amended and Restated Articles of Incorporation of Farmers Capital Bank Corporation dated November 16, 2009 (incorporated by reference to the Current Report on Form 8-K dated November 17, 2009 (File No. 000-14412)). |

----

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.4    | Amended and Restated Bylaws of Farmers Capital Bank Corporation (incorporated by reference to the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009 (File No. 000-14412)).                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 4.1*   | Junior Subordinated Indenture, dated as of July 21, 2005, between Farmers Capital Bank Corporation and Wilmington Trust Company, as Trustee, relating to unsecured junior subordinated deferrable interest notes that mature in 2035.                                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 4.2*   | Amended and Restated Trust Agreement, dated as of July 21, 2005, among Farmers Capital Bank Corporation, as Depositor, Wilmington Trust Company, as Property and Delaware Trustee, the Administrative Trustees (as named therein), and the Holders (as defined therein).                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 4.3*   | Guarantee Agreement, dated as of July 21, 2005, between Farmers Capital Bank Corporation, as Guarantor, and Wilmington Trust Company, as Guarantee Trustee.                                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 4.4*   | Junior Subordinated Indenture, dated as of July 26, 2005, between Farmers Capital Bank Corporation and Wilmington Trust Company, as Trustee, relating to unsecured junior subordinated deferrable interest notes that mature in 2035.                                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 4.5*   | Amended and Restated Trust Agreement, dated as of July 26, 2005, among Farmers Capital Bank Corporation, as Depositor, Wilmington Trust Company, as Property and Delaware Trustee, the Administrative Trustees (as named therein), and the Holders (as defined therein).                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 4.6*   | Guarantee Agreement, dated as of July 26, 2005, between Farmers Capital Bank Corporation, as Guarantor, and Wilmington Trust Company, as Guarantee Trustee.                                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 4.7*   | Indenture, dated as of August 14, 2007 between Farmers Capital Bank Corporation, as Issuer, and Wilmington Trust Company, as Trustee, relating to fixed/floating rate junior subordinated debt due 2037.                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 4.8*   | Amended and Restated Declaration of Trust, dated as of August 14, 2007, by Farmers Capital Bank Corporation, as Sponsor, Wilmington Trust Company, as Delaware and Institutional Trustee, the Administrative Trustees (as named therein), and the Holders (as defined therein).                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 4.9*   | Guarantee Agreement, dated as of August 14, 2007, between Farmers Capital Bank Corporation, as Guarantor, and Wilmington Trust Company, as Guarantee Trustee.                                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 4.10   | Form of Certificate for Fixed Rate Cumulative Perpetual Preferred Stock, Series A(incorporated by reference to the Current Report on Form 8-K dated January 13, 2009 (File No. 000-14412)).                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 4.11   | Articles of Amendment to Second Amended and Restated Articles of Incorporation of Farmers Capital Bank Corporation dated January 6, 2009 (incorporated by reference to the Current Report on Form 8-K dated January 13, 2009 (File No. 000-14412)).                                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 4.12   | Warrant for Purchase of Shares of Common Stock, which was repurchased by Farmers Capital Bank Corporation and cancelled on July 18, 2012(incorporated by reference to the Current Report on Form 8-K dated January 13, 2009 (File No. 000-14412)).                                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 4.13   | Letter Agreement, dated January 9, 2009, between Farmers Capital Bank Corporation and the United States Treasury, with respect to the issuance and sale of the Series A preferred stock and the warrant, and Securities Purchase Agreement-Standard Terms attached thereto as Exhibit A (incorporated by reference to the Current Report on Form 8-K dated January 13, 2009 (File No. 000-14412)).                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.1   | Amended and Restated Plan of Merger of Citizens National Bancshares, Inc. with and into FCBC Acquisition Subsidiary, LLC (incorporated by reference to Appendix A of Proxy Statement for Special Meeting of Shareholders of Citizens National Bancshares, Inc. and Prospectus in connection with an offer of up to 600,000 shares of its common stock of Farmers Capital Bank Corporation filed on Form S-4 (Rule 424(b)(3) filing) on August 7, 2006 (File No. 333-135267)). |

----

|   |                                                                                                                                                        |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.2   | Employee Stock Purchase Plan of Farmers Capital Bank Corporation (incorporated by reference to Form S-8 effective June 24, 2004 (File No. 333-116801)).     |
|   |                                                                                                                                                        |
| 10.3   | Nonqualified Stock Option Plan of Farmers Capital Bank Corporation (incorporated by reference to Form S-8 effective September 8, 1998 File No. 333-63037)). |
|   |                                                                                                                                                        |
| 31.1** | CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                 |
|   |                                                                                                                                                        |
| 31.2** | CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                 |
|   |                                                                                                                                                        |
| 32**   | CEO & CFO Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                       |

| * | Exhibit not included pursuant to Item 601(b)(4)(iii) and (v) of Regulation S-K. The Company will provide a copy of such exhibit to the Securities and Exchange Commission upon request. |
|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ** | Filed with this Quarterly Report on Form 10-Q. |
|----|------------------------------------------------|

----

| Date:  | August 7, 2012 |   | /s/ Lloyd C. Hillard, Jr.                    |
|--------|----------------|--------|----------------------------------------------|
|   |           |   | Lloyd C. Hillard, Jr.                        |
|   |           |   | President and CEO                            |
|   |           |   | (Principal Executive Officer)                |
|   |           |   |                                         |
| Date:  | 8-7-12         |   | /s/Doug Carpenter                            |
|   |           |   | C. Douglas Carpenter                         |
|   |           |   | Executive Vice President, Secretary, and CFO |
|   |           |   | (Principal Financial and Accounting Officer) |