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

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

| Kentucky                          |   | 61-1168311                        |
|-----------------------------------|--------|-----------------------------------|
| (State or other jurisdiction      |   | (IRS Employer Identification No.) |
| of incorporation or organization) |   |                              |

| 2323 Ring Road                           |   | (270) 765-2131                  |
|------------------------------------------|--------|---------------------------------|
| Elizabethown, Kentucky 42701             |   | (Registrant's telephone number, |
| (Address of principal executive offices) |   | including area code)            |
| (Zip Code)                               |   |                            |

| Class        |         | Outstanding as of April 30, 2011 |
|--------------|--------------|----------------------------------|
|         |         |                             |
| Common Stock |    | 4,739,622 shares            |

----

| PART I – FINANCIAL INFORMATION                  |                                                                                  |
|-------------------------------------------------------|---------------------------------------------------------------------------------------|
|                                                  |                                                                                  |
| Preliminary Note Regarding Forward-Looking Statements |   3                                                                              |
|                                                  |                                                                                  |
| Item 1.                                               | Consolidated Financial Statements and Notes to Consolidated Financial Statements      |   4 |
|                                                  |                                                                                  |   |
| Item 2.                                               | Management's Discussion and Analysis of Financial Condition and Results of Operations | 31 |
|                                                  |                                                                                  |   |
| Item 3.                                               | Quantitative and Qualitative Disclosures about Market Risk                            | 46 |
|                                                  |                                                                                  |   |
| Item 4.                                               | Controls and Procedures                                                               | 48 |
|                                                  |                                                                                  |
| PART II– OTHER INFORMATION                      |                                                                                  |
|                                                  |                                                                                  |
| Item 1.                                               | Legal Proceedings                                                                     | 48 |
|                                                  |                                                                                  |   |
| Item 1A.                                              | Risk Factors                                                                          | 48 |
|                                                  |                                                                                  |   |
| Item 2.                                               | Unregistered Sales of Equity Securities and Use of Proceeds                           | 49 |
|                                                  |                                                                                  |   |
| Item 3.                                               | Defaults upon Senior Securities                                                       | 49 |
|                                                  |                                                                                  |   |
| Item 4.                                               | [Removed and Reserved]                                                                | 49 |
|                                                  |                                                                                  |   |
| Item 5.                                               | Other Information                                                                     | 49 |
|                                                  |                                                                                  |   |
| Item 6.                                               | Exhibits                                                                              | 49 |
|                                                  |                                                                                  |   |
| SIGNATURES                                            | 50                                                                                    |

----

----

|                                                                                                                                                        |   | March 31, |      |   | December 31, |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------|-----------|--------|-------------------|--------|
| (Dollars in thousands, except per share data)                                                                                 |   | 2011           |      |   | 2010              |   |
|                                                                                                                                                        |   |           |      |   |              |   |
| ASSETS:                                                                                                                                                     |   |           |      |   |              |   |
| Cash and due from banks                                                                                                                                     |   | $              | 9,759     |   |              | $      | 14,840 |   |
| Interest bearing deposits                                                                                                                                   |   |           | 101,170   |   |              |   | 151,336 |   |
| Total cash and cash equivalents                                                                                                                             |   |           | 110,929   |   |              |   | 166,176 |   |
|                                                                                                                                                        |   |           |      |   |              |   |   |   |
| Securities available-for-sale                                                                                                                               |   |           | 243,395   |   |              |   | 196,029 |   |
| Securities held-to-maturity, fair value of $122 Mar (2011) and $126 Dec (2010)                                                                              |   |           | 120       |   |              |   | 124 |   |
| Total securities                                                                                                                                            |   |           | 243,515   |   |              |   | 196,153 |   |
|                                                                                                                                                        |   |           |      |   |              |   |   |   |
| Loans held for sale                                                                                                                                         |   |           | 4,055     |   |              |   | 6,388 |   |
| Loans, net of unearned fees                                                                                                                                 |   |           | 858,350   |   |              |   | 881,934 |   |
| Allowance for loan losses                                                                                                                                   |   |           | (24,591   | )      |              |   | (22,665 | ) |
| Net loans                                                                                                                                                   |   |           | 837,814   |   |              |   | 865,657 |   |
|                                                                                                                                                        |   |           |      |   |              |   |   |   |
| Federal Home Loan Bank stock                                                                                                                                |   |           | 4,909     |   |              |   | 4,909 |   |
| Cash surrender value of life insurance                                                                                                                      |   |           | 9,439     |   |              |   | 9,354 |   |
| Premises and equipment, net                                                                                                                                 |   |           | 31,773    |   |              |   | 31,988 |   |
| Real estate owned:                                                                                                                                          |   |           |      |   |              |   |   |   |
| Acquired through foreclosure                                                                                                                                |   |           | 24,908    |   |              |   | 25,807 |   |
| Held for development                                                                                                                                        |   |           | 45        |   |              |   | 45 |   |
| Other repossessed assets                                                                                                                                    |   |           | 39        |   |              |   | 40 |   |
| Core deposit intangible                                                                                                                                     |   |           | 917       |   |              |   | 994 |   |
| Accrued interest receivable                                                                                                                                 |   |           | 7,727     |   |              |   | 6,404 |   |
| Accrued income taxes                                                                                                                                        |   |           | 3,005     |   |              |   | 2,161 |   |
| Deferred income taxes                                                                                                                                       |   |           | 1,801     |   |              |   | 2,982 |   |
| Prepaid FDIC Insurance                                                                                                                                      |   |           | 3,516     |   |              |   | 4,449 |   |
| Other assets                                                                                                                                                |   |           | 5,844     |   |              |   | 2,388 |   |
|                                                                                                                                                        |   |           |      |   |              |   |   |   |
| TOTAL ASSETS                                                                                                                                                |   | $              | 1,286,181 |   |              | $      | 1,319,507 |   |
|                                                                                                                                                        |   |           |      |   |              |   |   |   |
| LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                        |   |           |      |   |              |   |   |   |
| LIABILITIES:                                                                                                                                                |   |           |      |   |              |   |   |   |
| Deposits:                                                                                                                                                   |   |           |      |   |              |   |   |   |
| Non-interest bearing                                                                                                                                        |   | $              | 71,869    |   |              | $      | 73,566 |   |
| Interest bearing                                                                                                                                            |   |           | 1,094,919 |   |              |   | 1,100,342 |   |
| Total deposits                                                                                                                                              |   |           | 1,166,788 |   |              |   | 1,173,908 |   |
|                                                                                                                                                        |   |           |      |   |              |   |   |   |
| Advances from Federal Home Loan Bank                                                                                                                        |   |           | 27,500    |   |              |   | 52,532 |   |
| Subordinated debentures                                                                                                                                     |   |           | 18,000    |   |              |   | 18,000 |   |
| Accrued interest payable                                                                                                                                    |   |           | 835       |   |              |   | 594 |   |
| Accounts payable and other liabilities                                                                                                                      |   |           | 2,930     |   |              |   | 3,162 |   |
|                                                                                                                                                        |   |           |      |   |              |   |   |   |
| TOTAL LIABILITIES                                                                                                                                           |   |           | 1,216,053 |   |              |   | 1,248,196 |   |
| Commitments and contingent liabilities                                                                                                                      |   |           | -         |   |              |   | - |   |
|                                                                                                                                                        |   |           |      |   |              |   |   |   |
| STOCKHOLDERS' EQUITY:                                                                                                                                       |   |           |      |   |              |   |   |   |
| Serial preferred stock, $1 par value per share; authorized 5,000,000 shares; issued and outstanding, 20,000 shares with a liquidation preference of $20,000 |   |           | 19,849    |   |              |   | 19,835 |   |
| Common stock, $1 par value per share; authorized 35,000,000 shares; issued and outstanding, 4,739,622 shares Mar (2011), and 4,726,329 shares Dec (2010)    |   |           | 4,740     |   |              |   | 4,726 |   |
| Additional paid-in capital                                                                                                                                  |   |           | 35,290    |   |              |   | 35,201 |   |
| Retained earnings                                                                                                                                           |   |           | 13,930    |   |              |   | 16,264 |   |
| Accumulated other comprehensive loss                                                                                                                        |   |           | (3,681    | )      |              |   | (4,715 | ) |
|                                                                                                                                                        |   |           |      |   |              |   |   |   |
| TOTAL STOCKHOLDERS' EQUITY                                                                                                                                  |   |           | 70,128    |   |              |   | 71,311 |   |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                  |   | $              | 1,286,181 |   |              | $      | 1,319,507 |   |

----

|                                                                           |   | Three Months Ended |      |
|--------------------------------------------------------------------------------|--------|--------------------|-----------|
| (Dollars in thousands, except per share data)                                  |   | March 31,          |      |
|                                                                           |   | 2011               |      |   | 2010 |   |
| Interest and Dividend Income:                                                  |   |               |      |   |   |   |
| Loans, including fees                                                          |   | $                  | 12,343    |   |   | $ | 14,047 |   |
| Taxable securities                                                             |   |               | 1,566     |   |   |   | 493 |   |
| Tax exempt securities                                                          |   |               | 257       |   |   |   | 171 |   |
| Total interest income                                                          |   |               | 14,166    |   |   |   | 14,711 |   |
|                                                                           |   |               |      |   |   |   |   |   |
| Interest Expense:                                                              |   |               |      |   |   |   |   |   |
| Deposits                                                                       |   |               | 4,914     |   |   |   | 4,869 |   |
| Short-term borrowings                                                          |   |               | -         |   |   |   | 21 |   |
| Federal Home Loan Bank advances                                                |   |               | 295       |   |   |   | 593 |   |
| Subordinated debentures                                                        |   |               | 341       |   |   |   | 327 |   |
| Total interest expense                                                         |   |               | 5,550     |   |   |   | 5,810 |   |
|                                                                           |   |               |      |   |   |   |   |   |
| Net interest income                                                            |   |               | 8,616     |   |   |   | 8,901 |   |
| Provision for loan losses                                                      |   |               | 3,465     |   |   |   | 1,752 |   |
| Net interest income after provision for loan losses                            |   |               | 5,151     |   |   |   | 7,149 |   |
|                                                                           |   |               |      |   |   |   |   |   |
| Non-interest Income:                                                           |   |               |      |   |   |   |   |   |
| Customer service fees on deposit accounts                                      |   |               | 1,445     |   |   |   | 1,525 |   |
| Gain on sale of mortgage loans                                                 |   |               | 265       |   |   |   | 299 |   |
| Gain on sale of investments                                                    |   |               | 69        |   |   |   | - |   |
| Loss on sale of investments                                                    |   |               | -         |   |   |   | (23 | ) |
| Other than temporary impairment loss:                                          |   |               |      |   |   |   |   |   |
| Total other-than-temporary impairment losses                                   |   |               | (37       | ) |   |   | (172 | ) |
| Portion of loss recognized in other comprehensive income/(loss) (before taxes) |   |               | -         |   |   |   | - |   |
| Net impairment losses recognized in earnings                                   |   |               | (37       | ) |   |   | (172 | ) |
| Loss on sale and write downs on real estate acquired through foreclosure       |   |               | (235      | ) |   |   | (26 | ) |
| Brokerage commissions                                                          |   |               | 107       |   |   |   | 93 |   |
| Other income                                                                   |   |               | 379       |   |   |   | 442 |   |
| Total non-interest income                                                      |   |               | 1,993     |   |   |   | 2,138 |   |
|                                                                           |   |               |      |   |   |   |   |   |
| Non-interest Expense:                                                          |   |               |      |   |   |   |   |   |
| Employee compensation and benefits                                             |   |               | 4,329     |   |   |   | 4,090 |   |
| Office occupancy expense and equipment                                         |   |               | 811       |   |   |   | 804 |   |
| Marketing and advertising                                                      |   |               | 225       |   |   |   | 225 |   |
| Outside services and data processing                                           |   |               | 797       |   |   |   | 730 |   |
| Bank franchise tax                                                             |   |               | 314       |   |   |   | 350 |   |
| FDIC insurance premiums                                                        |   |               | 970       |   |   |   | 660 |   |
| Amortization of core deposit intangible                                        |   |               | 77        |   |   |   | 64 |   |
| Real estate acquired through foreclosure expense                               |   |               | 382       |   |   |   | 155 |   |
| Other expense                                                                  |   |               | 1,501     |   |   |   | 1,196 |   |
| Total non-interest expense                                                     |   |               | 9,406     |   |   |   | 8,274 |   |
|                                                                           |   |               |      |   |   |   |   |   |
| Income/(loss) before income taxes                                              |   |               | (2,262    | ) |   |   | 1,013 |   |
| Income taxes/(benefits)                                                        |   |               | (192      | ) |   |   | 258 |   |
| Net Income/(Loss)                                                              |   |               | (2,070    | ) |   |   | 755 |   |
| Less:                                                                          |   |               |      |   |   |   |   |   |
| Dividends on preferred stock                                                   |   |               | (250      | ) |   |   | (250 | ) |
| Accretion on preferred stock                                                   |   |               | (14       | ) |   |   | (14 | ) |
| Net income (loss) attributable to common shareholders                          |   | $                  | (2,334    | ) |   | $ | 491 |   |
|                                                                           |   |               |      |   |   |   |   |   |
| Shares applicable to basic income per common share                             |   |               | 4,736,287 |   |   |   | 4,715,721 |   |
| Basic income (loss) per common share                                           |   | $                  | (0.49     | ) |   | $ | 0.10 |   |
|                                                                           |   |               |      |   |   |   |   |   |
| Shares applicable to diluted income per common share                           |   |               | 4,736,287 |   |   |   | 4,715,721 |   |
| Diluted income (loss) per common share                                         |   | $                  | (0.49     | ) |   | $ | 0.10 |   |
|                                                                           |   |               |      |   |   |   |   |   |
| Cash dividends declared per common share                                       |   | $                  | -         |   |   | $ | - |   |

----

|                                                                                                                                                       |   | Three Months Ended |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|--------|
|                                                                                                                                                       |   | March 31,          |   |
| (Dollars in thousands)                                                                                                                                     |   | 2011               |   |   | 2010 |   |
|                                                                                                                                                       |   |               |   |   |   |   |
| Net Income/(Loss)                                                                                                                                          |   | $                  | (2,070 | ) |   | $ | 755 |   |
| Other comprehensive income (loss):                                                                                                                         |   |               |   |   |   |   |   |   |
| Change in unrealized gain (loss) on securities available-for-sale                                                                                          |   |               | 1,207  |   |   |   | 67 |   |
| Change in unrealized gain (loss) on securities available-for-sale for which a portion of other-than-temporary impairment has been recognized into earnings |   |               | 393    |   |   |   | (28 | ) |
| Reclassification of realized amount on securities available-for-sale losses (gains)                                                                        |   |               | (44    | ) |   |   | 146 |   |
| Reclassification of unrealized loss on held-to-maturity security recognized in income                                                                      |   |               | 12     |   |   |   | 29 |   |
| Accretion (amortization) of non-credit component of other-than-temporary impairment on held-to-maturity securities                                         |   |               | (1     | ) |   |   | - |   |
| Net unrealized gain (loss) recognized in comprehensive income                                                                                              |   |               | 1,567  |   |   |   | 214 |   |
| Tax effect                                                                                                                                                 |   |               | (533   | ) |   |   | (73 | ) |
| Total other comphrehensive income                                                                                                                          |   |               | 1,034  |   |   |   | 141 |   |
|                                                                                                                                                       |   |               |   |   |   |   |   |   |
| Comprehensive Income/(Loss)                                                                                                                                |   | $                  | (1,036 | ) |   | $ | 896 |   |

|                                                                                                        |   | Balance    |              |   | Current |   |           | Balance   |   |
|-------------------------------------------------------------------------------------------------------------|--------|------------|-------------------|--------|---------|--------|----------------|-----------|--------|
|                                                                                                        |   | at         |              |   | Period  |   |           | at        |   |
|                                                                                                        |   | 12/31/2010 |              |   | Change  |   |           | 3/31/2011 |   |
| Unrealized gains (losses) on securities available-for-sale                                                  |   | $          | (5,691            | )      |    | $      | 750            |      |   | $ | (4,941 | ) |
| Unrealized gains (losses) on available-for-sale  securities for which OTTI has been recorded,     |   |       |  1,082       |   |    |   |  276      |      |   |   |  1,358 |   |
| Unrealized gains (losses) on held-to-maturity securities for which OTTI has been recorded, net of accretion |   |       |    (106 | )      |    |   |    8 |      |   |   |    (98 | ) |
|                                                                                                        |   |       |              |   |    |   |           |      |   |   |   |   |
| Total                                                                                                       |   | $          | (4,715            | )      |    | $      | 1,034          |      |   | $ | (3,681 | ) |

----

|                                                                                                                                                                                             |   | Shares    |   |   | Amount |   |   | AdditionalPaid-in |   |   | Retained |   |   | AccumulatedOtherComprehensive(Loss), Net of |   |   |     |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|--------|--------|--------|--------|--------|-------------------|--------|--------|----------|--------|--------|---------------------------------------------|--------|--------|----------|--------|
|                                                                                                                                                                                             |   | Preferred |   |   | Common |   |   | Preferred         |   |   | Common   |   |   | Capital                                     |   |   | Earnings |   |   | Tax |   |   | Total |   |
|                                                                                                                                                                                             |   |      |   |   |   |   |   |              |   |   |     |   |   |                                        |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, January 1, 2011                                                                                                                                                                         |   |      | 20,000 |   |   |   | 4,726  |              |   | $      | 19,835   |   |   | $                                           | 4,726  |   |     | $      | 35,201 |   |   | $ | 16,264 |   |   | $ | (4,715 | ) |   | $ | 71,311 |   |
| Net loss                                                                                                                                                                                         |   |      |   |   |   |   |   |              |   |   |     |   |   |                                        |   |   |     |   |   |   |   |   | (2,070 | ) |   |   |   |   |   |   | (2,070 | ) |
| Shares issued under dividend reinvestment program                                                                                                                                                |   |      |   |   |   |   | 1      |              |   |   |     |   |   |                                        | 1      |   |     |   | 1 |   |   |   |   |   |   |   |   |   |   |   | 2 |   |
| Stock issued for employee benefit plans                                                                                                                                                          |   |      |   |   |   |   | 13     |              |   |   |     |   |   |                                        | 13     |   |     |   | 40 |   |   |   |   |   |   |   |   |   |   |   | 53 |   |
| Stock-based compensation expense                                                                                                                                                                 |   |      |   |   |   |   |   |              |   |   |     |   |   |                                        |   |   |     |   | 48 |   |   |   |   |   |   |   |   |   |   |   | 48 |   |
| Net change in unrealized gains (losses) on securities available-for-sale,                                                                                                                        |   |      |   |   |   |   |   |              |   |   |     |   |   |                                        |   |   |     |   |   |   |   |   |   |   |   |   | 750 |   |   |   | 750 |   |
| Change in unrealized gains (losses) on held-to-maturity securities for which an other-than-temporary impairment charge has been recorded,                                                        |   |      |   |   |   |   |   |              |   |   |     |   |   |                                        |   |   |     |   |   |   |   |   |   |   |   |   | 8 |   |   |   | 8 |   |
| Change in unrealized gains (losses) on securities available-for-sale for which a portion of an other-than-temporary impairment charge has been recognized into earnings, net of reclassification |   |      |   |   |   |   |   |              |   |   |     |   |   |                                        |   |   |     |   |   |   |   |   |   |   |   |   | 276 |   |   |   | 276 |   |
| Dividends on preferred stock                                                                                                                                                                     |   |      |   |   |   |   |   |              |   |   |     |   |   |                                        |   |   |     |   |   |   |   |   | (250 | ) |   |   |   |   |   |   | (250 | ) |
| Accretion of preferred stock discount                                                                                                                                                            |   |      | -      |   |   |   | -      |              |   |   | 14       |   |   |                                        | -      |   |     |   | - |   |   |   | (14 | ) |   |   | - |   |   |   | - |   |
| Balance, March 31, 2011                                                                                                                                                                          |   |      | 20,000 |   |   |   | 4,740  |              |   | $      | 19,849   |   |   | $                                           | 4,740  |   |     | $      | 35,290 |   |   | $ | 13,930 |   |   | $ | (3,681 | ) |   | $ | 70,128 |   |

----

|                                                                              |   | Three Months Ended |    |
|-----------------------------------------------------------------------------------|--------|------------------------------|---------|
|                                                                              |   | March 31,               |    |
|                                                                              |   | 2011                         |    |   | 2010 |   |
| Operating Activities:                                                             |   |                         |    |   |   |   |
| Net income/(loss)                                                                 |   | $                            | (2,070  | ) |   | $ | 755 |   |
| Adjustments to reconcile net income to net cash provided by operating activities: |   |                         |    |   |   |   |   |   |
| Provision for loan losses                                                         |   |                         | 3,465   |   |   |   | 1,752 |   |
| Depreciation on premises and equipment                                            |   |                         | 449     |   |   |   | 427 |   |
| Core deposit intangible amortization                                              |   |                         | 77      |   |   |   | 64 |   |
| Net amortization (accretion) available-for-sale                                   |   |                         | 439     |   |   |   | (148 | ) |
| Impairment loss on securities available-for-sale                                  |   |                         | 25      |   |   |   | 123 |   |
| Impairment loss on securities held-to-maturity                                    |   |                         | 12      |   |   |   | 49 |   |
| Loss on sale of investments available-for-sale                                    |   |                         | -       |   |   |   | 23 |   |
| Gain on sale of investments available-for-sale                                    |   |                         | (69     | ) |   |   | - |   |
| Gain on sale of mortgage loans                                                    |   |                         | (265    | ) |   |   | (299 | ) |
| Origination of loans held for sale                                                |   |                         | (14,572 | ) |   |   | (24,629 | ) |
| Proceeds on sale of loans held for sale                                           |   |                         | 17,170  |   |   |   | 27,884 |   |
| Stock-based compensation expense                                                  |   |                         | 48      |   |   |   | 24 |   |
| Prepaid FDIC premium                                                              |   |                         | 933     |   |   |   | 614 |   |
| Changes in:                                                                       |   |                         |    |   |   |   |   |   |
| Cash surrender value of life insurance                                            |   |                         | (85     | ) |   |   | (88 | ) |
| Interest receivable                                                               |   |                         | (1,323  | ) |   |   | (204 | ) |
| Other assets                                                                      |   |                         | (2,803  | ) |   |   | (458 | ) |
| Interest payable                                                                  |   |                         | 241     |   |   |   | (46 | ) |
| Accounts payable and other liabilities                                            |   |                         | (232    | ) |   |   | 746 |   |
| Net cash from operating activities                                                |   |                         | 1,440   |   |   |   | 6,589 |   |
|                                                                              |   |                         |    |   |   |   |   |   |
| Investing Activities:                                                             |   |                         |    |   |   |   |   |   |
| Sales of securities available-for-sale                                            |   |                         | 16,271  |   |   |   | 500 |   |
| Purchases of securities available-for-sale                                        |   |                         | (70,000 | ) |   |   | (34,614 | ) |
| Maturities of securities available-for-sale                                       |   |                         | 7,524   |   |   |   | 553 |   |
| Maturities of securities held-to-maturity                                         |   |                         | 3       |   |   |   | 785 |   |
| Net change in loans                                                               |   |                         | 22,096  |   |   |   | 26,172 |   |
| Net purchases of premises and equipment                                           |   |                         | (234    | ) |   |   | (774 | ) |
| Net cash from investing activities                                                |   |                         | (24,340 | ) |   |   | (7,378 | ) |
|                                                                              |   |                         |    |   |   |   |   |   |
| Financing Activities                                                              |   |                         |    |   |   |   |   |   |
| Net change in deposits                                                            |   |                         | (7,120  | ) |   |   | 42,399 |   |
| Change in short-term borrowings                                                   |   |                         | -       |   |   |   | (658 | ) |
| Maturity of Federal Home Loan Bank advance                                        |   |                         | (25,000 | ) |   |   | - |   |
| Repayments to Federal Home Loan Bank                                              |   |                         | (32     | ) |   |   | (118 | ) |
| Issuance of common stock under dividend reinvestment program                      |   |                         | 2       |   |   |   | 8 |   |
| Issuance of common stock for employee benefit plans                               |   |                         | 53      |   |   |   | 63 |   |
| Dividends paid on preferred stock                                                 |   |                         | (250    | ) |   |   | (250 | ) |
| Net cash from financing activities                                                |   |                         | (32,347 | ) |   |   | 41,444 |   |
|                                                                              |   |                         |    |   |   |   |   |   |
| (Decrease) Increase in cash and cash equivalents                                  |   |                         | (55,247 | ) |   |   | 40,655 |   |
| Cash and cash equivalents, beginning of period                                    |   |                         | 166,176 |   |   |   | 98,533 |   |
| Cash and cash equivalents, end of period                                          |   | $                            | 110,929 |   |   | $ | 139,188 |   |
|                                                                              |   |                         |    |   |   |   |   |   |
| Supplemental noncash disclosures:                                                 |   |                         |    |   |   |   |   |   |
| Transfers from loans to real estate owned                                         |   | $                            | 1,932   |   |   | $ | 2,337 |   |

----

| 1. | BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|----|----------------------------------------------------------------------|

| 2. | REGULATORY MATTERS |
|----|--------------------|

|   | · | Raising capital by selling capital stock through a public offering or private placement. |
|--------|--------|------------------------------------------------------------------------------------------|

----

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

|   | · | Continuing to operate the Company and the Bank in a safe and sound manner.  Until we can complete a capital raise, this will most likely require us to reduce lending concentrations, potentially sell loans, and take significant operating expense reductions and other cost cutting measures aimed at lowering expenses.  Additionally, we would adjust the mix of our assets to reduce the total risk weight of our assets, reduce total assets over time and potentially sell branches, deposits and loans. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Evaluating other strategic alternatives, such as a sale of assets, one or more branches, or the institution. |
|--------|--------|--------------------------------------------------------------------------------------------------------------|

----

| 3.  | SECURITIES |
|----------|------------|

|                                             |   |      |    |   | Gross      |   |   | Gross      |   |   |       |   |
|--------------------------------------------------|--------|-----------|---------|--------|------------|--------|--------|------------|--------|--------|------------|--------|
| (Dollars in thousands)                           |   | Amortized |    |   | Unrealized |   |   | Unrealized |   |   |       |   |
|                                             |   | Cost      |    |   | Gains      |   |   | Losses     |   |   | Fair Value |   |
| Securities available-for-sale:                   |   |      |    |   |       |   |   |       |   |   |       |   |
| March 31, 2011:                                  |   |      |    |   |       |   |   |       |   |   |       |   |
| U.S. Treasury and agencies                       |   | $         | 174,347 |   |       | $      | 197    |       |   | $      | (3,792     | )      |   | $ | 170,752 |   |
| Government-sponsored mortgage-backed residential |   |      | 48,679  |   |       |   | 464    |       |   |   | (263       | )      |   |   | 48,880 |   |
| Equity                                           |   |      | 299     |   |       |   | -      |       |   |   | (5         | )      |   |   | 294 |   |
| State and municipal                              |   |      | 22,555  |   |       |   | 531    |       |   |   | (89        | )      |   |   | 22,997 |   |
| Trust preferred securities                       |   |      | 1,073   |   |       |   | -      |       |   |   | (601       | )      |   |   | 472 |   |
|                                             |   |      |    |   |       |   |   |       |   |   |       |   |   |   |   |   |
| Total                                            |   | $         | 246,953 |   |       | $      | 1,192  |       |   | $      | (4,750     | )      |   | $ | 243,395 |   |
|                                             |   |      |    |   |       |   |   |       |   |   |       |   |   |   |   |   |
| December 31, 2010:                               |   |      |    |   |       |   |   |       |   |   |       |   |   |   |   |   |
| U.S. Treasury and agencies                       |   | $         | 117,886 |   |       | $      | 97     |       |   | $      | (4,090     | )      |   | $ | 113,893 |   |
| Government-sponsored mortgage-backed residential |   |      | 59,320  |   |       |   | 448    |       |   |   | (598       | )      |   |   | 59,170 |   |
| Equity                                           |   |      | 299     |   |       |   | -      |       |   |   | (6         | )      |   |   | 293 |   |
| State and municipal                              |   |      | 22,564  |   |       |   | 264    |       |   |   | (210       | )      |   |   | 22,618 |   |
| Trust preferred securities                       |   |      | 1,074   |   |       |   | -      |       |   |   | (1,019     | )      |   |   | 55 |   |
|                                             |   |      |    |   |       |   |   |       |   |   |       |   |   |   |   |   |
| Total                                            |   | $         | 201,143 |   |       | $      | 809    |       |   | $      | (5,923     | )      |   | $ | 196,029 |   |

|                                             |   |      |   |   | Gross        |   |   | Gross        |   |   |       |   |
|--------------------------------------------------|--------|-----------|--------|--------|--------------|--------|--------|--------------|--------|--------|------------|--------|
|                                             |   | Amortized |   |   | Unrecognized |   |   | Unrecognized |   |   |       |   |
|                                             |   | Cost      |   |   | Gains        |   |   | Losses       |   |   | Fair Value |   |
| Securities held-to-maturity:                     |   |      |   |   |         |   |   |         |   |   |       |   |
| March 31, 2011:                                  |   |      |   |   |         |   |   |         |   |   |       |   |
| Government-sponsored mortgage-backed residential |   | $         | 97     |   |         | $      | 2      |         |   | $      | -          |   |   | $ | 99 |   |
| Trust preferred securities                       |   |      | 23     |   |         |   | -      |         |   |   | -          |   |   |   | 23 |   |
|                                             |   |      |   |   |         |   |   |         |   |   |       |   |   |   |   |   |
| Total                                            |   | $         | 120    |   |         | $      | 2      |         |   | $      | -          |   |   | $ | 122 |   |
|                                             |   |      |   |   |         |   |   |         |   |   |       |   |   |   |   |   |
| December 31, 2010:                               |   |      |   |   |         |   |   |         |   |   |       |   |   |   |   |   |
| Government-sponsored mortgage-backed residential |   | $         | 102    |   |         | $      | 2      |         |   | $      | -          |   |   | $ | 104 |   |
| Trust preferred securities                       |   |      | 22     |   |         |   | -      |         |   |   | -          |   |   |   | 22 |   |
|                                             |   |      |   |   |         |   |   |         |   |   |       |   |   |   |   |   |
| Total                                            |   | $         | 124    |   |         | $      | 2      |         |   | $      | -          |   |   | $ | 126 |   |

----

| 3. | SECURITIES – (Continued) |
|----|--------------------------------|

|                                             |   | Available for Sale |    |   | Held-to-Maturity |   |
|--------------------------------------------------|--------|--------------------|---------|--------|------------------|--------|
|                                             |   | Amortized          |    |   | Fair             |   |   | Amortized |   |   | Fair |   |
| (Dollars in thousands)                           |   | Cost               |    |   | Value            |   |   | Cost |   |   | Value |   |
|                                             |   |               |    |   |             |   |   |   |   |   |   |   |
| Due in one year or less                          |   | $                  | 115     |   |             | $      | 116 |   |   | $ | - |   |   | $ | - |   |
| Due after one year through five years            |   |               | 62,044  |   |             |   | 62,030 |   |   |   | - |   |   |   | - |   |
| Due after five years through ten years           |   |               | 23,737  |   |             |   | 23,395 |   |   |   | - |   |   |   | - |   |
| Due after ten years                              |   |               | 112,079 |   |             |   | 108,680 |   |   |   | 23 |   |   |   | 23 |   |
| Government-sponsored mortgage-backed residential |   |               | 48,679  |   |             |   | 48,880 |   |   |   | 97 |   |   |   | 99 |   |
| Equity                                           |   |               | 299     |   |             |   | 294 |   |   |   | - |   |   |   | - |   |
|                                             |   | $                  | 246,953 |   |             | $      | 243,395 |   |   | $ | 120 |   |   | $ | 122 |   |

| March 31, 2011                                              |   | Less than 12 Months |    |   | 12 Months or More |   |   | Total  |   |
|-------------------------------------------------------------|--------|---------------------|---------|--------|-------------------|--------|--------|--------|--------|
|                                                        |   | Fair                |    |   | Unrealized        |   |   | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
| Description of Securities                                   |   | Value               |    |   | Loss              |   |   | Value  |   |   | Loss |   |   | Value |   |   | Loss |   |
|                                                   |   |                |    |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Treasury and agencies                             |   | $                   | 101,127 |   |              | $      | (3,792 | )      |   | $ | - |   |   | $ | - |   |   | $ | 101,127 |   |   | $ | (3,792 | ) |
| Government-sponsored  mortgage-backed residential |   |                | 21,660  |   |              |   | (263   | )      |   |   | - |   |   |   | - |   |   |   | 21,660 |   |   |   | (263 | ) |
| Equity                                                 |   |                | 3       |   |              |   | (5     | )      |   |   | - |   |   |   | - |   |   |   | 3 |   |   |   | (5 | ) |
| State and municipal                                    |   |                | 2,602   |   |              |   | (58    | )      |   |   | 548 |   |   |   | (31 | ) |   |   | 3,150 |   |   |   | (89 | ) |
| Trust preferred securities                                  |   |                | -       |   |              |   | -      |   |   |   | 472 |   |   |   | (601 | ) |   |   | 472 |   |   |   | (601 | ) |
|                                                        |   |                |    |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total temporarily impaired                                  |   | $                   | 125,392 |   |              | $      | (4,118 | )      |   | $ | 1,020 |   |   | $ | (632 | ) |   | $ | 126,412 |   |   | $ | (4,750 | ) |

| December 31, 2010                      |   | Less than 12 Months |    |   | 12 Months or More |   |   | Total  |   |
|--------------------------------------------------|--------|------------------------------------|---------|--------|----------------------------------|--------|--------|--------|--------|
|                                             |   | Fair                               |    |   | Unrealized                       |   |   | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
| Description of Securities              |   | Value                              |    |   | Loss                             |   |   | Value  |   |   | Loss |   |   | Value |   |   | Loss |   |
|                                        |   |                               |    |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Treasury and agencies                       |   | $                                  | 70,896  |   |                             | $      | (4,090 | )      |   | $ | - |   |   | $ | - |   |   | $ | 70,896 |   |   | $ | (4,090 | ) |
| Government-sponsored mortgage-backed residential |   |                               | 22,084  |   |                             |   | (598   | )      |   |   | - |   |   |   | - |   |   |   | 22,084 |   |   |   | (598 | ) |
| Equity                                      |   |                               | 3       |   |                             |   | (6     | )      |   |   | - |   |   |   | - |   |   |   | 3 |   |   |   | (6 | ) |
| State and municipal                         |   |                               | 11,095  |   |                             |   | (157   | )      |   |   | 527 |   |   |   | (53 | ) |   |   | 11,622 |   |   |   | (210 | ) |
| Trust preferred securities                       |   |                               | -       |   |                             |   | -      |   |   |   | 55 |   |   |   | (1,019 | ) |   |   | 55 |   |   |   | (1,019 | ) |
|                                        |   |                               |    |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total temporarily impaired                       |   | $                                  | 104,078 |   |                             | $      | (4,851 | )      |   | $ | 582 |   |   | $ | (1,072 | ) |   | $ | 104,660 |   |   | $ | (5,923 | ) |

----

| 3.  | SECURITIES – (Continued) |
|----------|--------------------------------|

|   | · | We assume default rates on individual entities behind the pools based on Fitch ratings for financial institutions and A.M. Best ratings for insurance companies.  These ratings are used to predict the default rates for the next several quarters.  Two of the trust preferred securities hold a limited number of real estate investment trusts (REITs) in their pools.  REITs are evaluated on an individual basis to predict future default rates. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | We assume that annual defaults for the remaining life of each security will be 37.5 basis points. |
|--------|--------|---------------------------------------------------------------------------------------------------|

|   | · | We assume a recovery rate of 15% on deferrals after two years. |
|--------|--------|----------------------------------------------------------------|

----

| 3.  | SECURITIES – (Continued) |
|----------|--------------------------------|

|   | · | We assume 2% prepayments through the five year par call and then 2% per annum for the remaining life of the security. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------|

|   | · | Our securities have been modeled using the above assumptions by FTN Financial using the forward LIBOR curve plus original spread to discount projected cash flows to present values. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Valuation estimates provided by our investment broker; |
|--------|--------|--------------------------------------------------------|

|   | · | The amount of fair value decline; |
|--------|--------|-----------------------------------|

|   | · | How long the decline in fair value has existed; |
|--------|--------|-------------------------------------------------|

|   | · | Significant rating agency changes on the issuer; |
|--------|--------|--------------------------------------------------|

|   | · | Level of interest rates and any movement in pricing for credit and other risks; |
|--------|--------|---------------------------------------------------------------------------------|

|   | · | Information about the performance of the underlying institutions that issued the debt instruments, such as net income, return on equity, capital adequacy, non-performing assets, Texas ratios, etc; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Our intent to sell the security or whether it is more likely than not that we will be required to sell the security before its anticipated recovery; and |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Other relevant observable inputs. |
|--------|--------|-----------------------------------|

|                         |   |      |   | Moody's   |   |    |   |   |   |   |      |   |   |      |   |   |      |   |   | % of Current |    |   |                   |   |
|-----------------------------------|--------|-----------|--------|-----------|--------|---------|--------|--------|--------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|--------|------------------------|---------|--------|------------------------|--------|
|                              |   |      |   | Credit    |   | Current |   |   |   |   |      |   |   |      |   |   | Current   |   |   | Deferrals and     |    |   |                   |   |
| (Dollars in thousands)  |   |      |   | Ratings   |   | Moody's |   |   |   |   |      |   |   | Estimated |   |   | Deferrals |   |   | Defaults               |    |   | Year to Date |   |
|                              |   |      |   | When      |   | Credit  |   | Par    |   |   | Amortized |   |   | Fair      |   |   | and       |   |   | to Current        |    |   | OTTI                   |   |
| Security                          |   | Tranche   |   | Purchased |   | Ratings |   | Value  |   |   | Cost      |   |   | Value     |   |   | Defaults  |   |   | Collateral             |    |   | Recognized             |   |
|                              |   |      |   |      |   |    |   |   |   |   |      |   |   |      |   |   |      |   |   |                   |    |   |                   |   |
| Preferred Term Securities IV      |   | Mezzanine |   | A3        |   | Ca      |   | $      | 244    |   |      | $      | 180    |      |   | $      | 77        |   |   | $                      | 18,000  |   |                   |   | 27 | % |   | $ | 1 |   |
| Preferred Term Securities VI      |   | Mezzanine |   | A1        |   | Caa1    |   |   | 259    |   |      |   | 23     |      |   |   | 23        |   |   |                   | 33,000  |   |                   |   | 81 | % |   |   | 12 |   |
| Preferred Term Securities XV B1   |   | Mezzanine |   | A2        |   | Ca      |   |   | 1,004  |   |      |   | 420    |      |   |   | 187       |   |   |                   | 156,050 |   |                   |   | 26 | % |   |   | - |   |
| Preferred Term Securities XXI C2  |   | Mezzanine |   | A3        |   | Ca      |   |   | 1,018  |   |      |   | 392    |      |   |   | 148       |   |   |                   | 202,000 |   |                   |   | 27 | % |   |   | 24 |   |
| Preferred Term Securities XXII C1 |   | Mezzanine |   | A3        |   | Ca      |   |   | 503    |   |      |   | 81     |      |   |   | 60        |   |   |                   | 367,500 |   |                   |   | 27 | % |   |   | - |   |
|                              |   |      |   |      |   |    |   |   |   |   |      |   |   |      |   |   |      |   |   |                   |    |   |                   |   |   |   |   |   |   |   |
| Total                             |   |      |   |      |   |    |   | $      | 3,028  |   |      | $      | 1,096  |      |   | $      | 495       |   |   |                   |    |   |                   |   |   |   |   | $ | 37 |   |

| (Dollars in thousands)                                                                                       |   | Three Months Ended |   |
|------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|--------|
|                                                                                                                   |   | March 31,               |   |
|                                                                                                                   |   | 2011                         |   |   | 2010 |   |
|                                                                                                                   |   |                         |   |   |   |   |
| Beginning balance                                                                                                      |   | $                            | 1,910  |   |   | $ | 862 |   |
| Increases to the amount related to the credit loss for which other-than-temporary impairment was previously recognized |   |                         | 37     |   |   |   | 172 |   |
| Ending balance                                                                                                         |   | $                            | 1,947  |   |   | $ | 1,034 |   |

----

| 4.  | LOANS |
|----------|-------|

|                               |   | March 31, |    |   | December 31, |   |
|------------------------------------|--------|----------------|---------|--------|-------------------|--------|
| (Dollars in thousands)   |   | 2011           |    |   | 2010              |   |
|                               |   |           |    |   |              |   |
| Commercial                         |   | $              | 35,569  |   |              | $      | 42,265 |   |
| Commercial Real Estate:            |   |           |    |   |              |   |   |   |
| Land Development                   |   |           | 55,487  |   |              |   | 56,086 |   |
| Building Lots                      |   |           | 11,237  |   |              |   | 11,333 |   |
| Other                              |   |           | 484,977 |   |              |   | 490,345 |   |
| Real estate construction           |   |           | 7,964   |   |              |   | 11,034 |   |
| Residential mortgage               |   |           | 160,610 |   |              |   | 163,975 |   |
| Consumer and home equity           |   |           | 75,491  |   |              |   | 77,781 |   |
| Indirect consumer                  |   |           | 27,434  |   |              |   | 29,588 |   |
| Loans held for sale                |   |           | 4,055   |   |              |   | 6,388 |   |
|                               |   |           | 862,824 |   |              |   | 888,795 |   |
| Less:                              |   |           |    |   |              |   |   |   |
| Net deferred loan origination fees |   |           | (419    | )      |              |   | (473 | ) |
| Allowance for loan losses          |   |           | (24,591 | )      |              |   | (22,665 | ) |
|                               |   |           | (25,010 | )      |              |   | (23,138 | ) |
|                               |   |           |    |   |              |   |   |   |
| Net Loans                          |   | $              | 837,814 |   |              | $      | 865,657 |   |

| March 31, 2011         |   |       |   |   | Commercial       |   |   | Real Estate |   |   | Residential |   |   | Consumer & |   |   | Indirect |   |   |   |   |
|----------------------------------|--------|------------|--------|--------|------------------|--------|--------|------------------|--------|--------|-------------|--------|--------|---------------------|--------|--------|----------|--------|--------|--------|--------|
|                             |   | Commercial |   |   | Real Estate |   |   | Construction     |   |   | Mortgage    |   |   | Home Equity    |   |   | Consumer |   |   | Total  |   |
| (Dollars in thousands) |   |       |   |   |             |   |   |             |   |   |        |   |   |                |   |   |     |   |   |   |   |
| Allowance for loan losses:       |   |       |   |   |             |   |   |             |   |   |        |   |   |                |   |   |     |   |   |   |   |
| Beginning Balance                |   | $          | 1,657  |   |             | $      | 18,595 |             |   | $      | 158         |   |   | $                   | 751    |   |     | $      | 708    |   |   | $ | 796 |   |   | $ | 22,665 |   |
| Provision for loan losses        |   |       | 22     |   |             |   | 3,351  |             |   |   | -           |   |   |                | 43     |   |     |   | 84     |   |   |   | (35 | ) |   |   | 3,465 |   |
| Charge-offs                      |   |       | (42    | )      |             |   | (1,616 | )                |   |   | (54         | )      |   |                | (19    | )      |     |   | (98    | )      |   |   | (31 | ) |   |   | (1,860 | ) |
| Recoveries                       |   |       | 42     |   |             |   | 206    |             |   |   | -           |   |   |                | 1      |   |     |   | 48     |   |   |   | 24 |   |   |   | 321 |   |
| Total ending allowance balance   |   | $          | 1,679  |   |             | $      | 20,536 |             |   | $      | 104         |   |   | $                   | 776    |   |     | $      | 742    |   |   | $ | 754 |   |   | $ | 24,591 |   |

| (Dollars in thousands) |   |   |   |
|----------------------------------|--------|--------|--------|
|                             |   |   |   |
| Balance, beginning of period     |   | $      | 17,719 |   |
| Provision for loan losses        |   |   | 1,752  |   |
| Charge-offs                      |   |   | (711   | ) |
| Recoveries                       |   |   | 50     |   |
| Balance, end of period           |   | $      | 18,810 |   |

----

| 4.  | LOANS– (Continued) |
|----------|--------------------------|

| March 31, 2011                        |   |       |   |   | Commercial       |   |    | Real Estate |   |   | Residential |   |   | Consumer & |    |   | Indirect |   |   |   |   |
|-------------------------------------------------|--------|------------|--------|--------|------------------|--------|---------|------------------|--------|--------|-------------|--------|--------|---------------------|---------|--------|----------|--------|--------|--------|--------|
|                                            |   | Commercial |   |   | Real Estate |   |    | Construction     |   |   | Mortgage    |   |   | Home Equity    |    |   | Consumer |   |   | Total  |   |
| (Dollars in thousands)                |   |       |   |   |             |   |    |             |   |   |        |   |   |                |    |   |     |   |   |   |   |
| Allowance for loan losses:                      |   |       |   |   |             |   |    |             |   |   |        |   |   |                |    |   |     |   |   |   |   |
| Ending allowance balance attributable to loans: |   |       |   |   |             |   |    |             |   |   |        |   |   |                |    |   |     |   |   |   |   |
| Individually evaluated for impairment           |   | $          | 827    |   |             | $      | 14,020  |             |   |   | -           |   |   | $                   | 385     |   |     | $      | 191    |   |   | $ | 37 |   |   | $ | 15,460 |   |
| Collectively evaluated for impairment           |   |       | 852    |   |             |   | 6,516   |             |   |   | 104         |   |   |                | 391     |   |     |   | 551    |   |   |   | 717 |   |   |   | 9,131 |   |
|                                            |   |       |   |   |             |   |    |             |   |   |        |   |   |                |    |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Total ending allowance balance                  |   | $          | 1,679  |   |             | $      | 20,536  |             |   |   | 104         |   |   | $                   | 776     |   |     | $      | 742    |   |   | $ | 754 |   |   | $ | 24,591 |   |
|                                            |   |       |   |   |             |   |    |             |   |   |        |   |   |                |    |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Loans:                                          |   |       |   |   |             |   |    |             |   |   |        |   |   |                |    |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Loans individually evaluated for impairment     |   | $          | 1,927  |   |             | $      | 97,370  |             |   | $      | 290         |   |   | $                   | 1,871   |   |     | $      | 298    |   |   | $ | 137 |   |   | $ | 101,893 |   |
| Loans collectively evaluated for impairment     |   |       | 33,642 |   |             |   | 454,331 |             |   |   | 7,674       |   |   |                | 158,739 |   |     |   | 75,193 |   |   |   | 27,297 |   |   |   | 756,876 |   |
| Loans acquired with deteriorated credit quality |   |       | -      |   |             |   | -       |             |   |   | -           |   |   |                | -       |   |     |   | -      |   |   |   | - |   |   |   | - |   |
|                                            |   |       |   |   |             |   |    |             |   |   |        |   |   |                |    |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Total ending loans balance                      |   | $          | 35,569 |   |             | $      | 551,701 |             |   | $      | 7,964       |   |   | $                   | 160,610 |   |     | $      | 75,491 |   |   | $ | 27,434 |   |   | $ | 858,769 |   |

| December 31, 2010                     |   |       |   |   | Commercial       |   |    | Real Estate |   |   | Residential |   |   | Consumer & |    |   | Indirect |   |   |   |   |
|-------------------------------------------------|--------|------------|--------|--------|------------------|--------|---------|------------------|--------|--------|-------------|--------|--------|---------------------|---------|--------|----------|--------|--------|--------|--------|
|                                            |   | Commercial |   |   | Real Estate |   |    | Construction     |   |   | Mortgage    |   |   | Home Equity    |    |   | Consumer |   |   | Total  |   |
| (Dollars in thousands)                |   |       |   |   |             |   |    |             |   |   |        |   |   |                |    |   |     |   |   |   |   |
| Allowance for loan losses:                      |   |       |   |   |             |   |    |             |   |   |        |   |   |                |    |   |     |   |   |   |   |
| Ending allowance balance attributable to loans: |   |       |   |   |             |   |    |             |   |   |        |   |   |                |    |   |     |   |   |   |   |
| Individually evaluated for impairment           |   | $          | 691    |   |             | $      | 11,872  |             |   |   | 24          |   |   | $                   | 334     |   |     | $      | 147    |   |   | $ | 29 |   |   | $ | 13,097 |   |
| Collectively evaluated for impairment           |   |       | 966    |   |             |   | 6,723   |             |   |   | 134         |   |   |                | 417     |   |     |   | 561    |   |   |   | 767 |   |   |   | 9,568 |   |
|                                            |   |       |   |   |             |   |    |             |   |   |        |   |   |                |    |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Total ending allowance balance                  |   | $          | 1,657  |   |             | $      | 18,595  |             |   |   | 158         |   |   | $                   | 751     |   |     | $      | 708    |   |   | $ | 796 |   |   | $ | 22,665 |   |
|                                            |   |       |   |   |             |   |    |             |   |   |        |   |   |                |    |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Loans:                                          |   |       |   |   |             |   |    |             |   |   |        |   |   |                |    |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Loans individually evaluated for impairment     |   | $          | 1,870  |   |             | $      | 86,250  |             |   | $      | 1,267       |   |   | $                   | 1,609   |   |     | $      | 337    |   |   | $ | 91 |   |   | $ | 91,424 |   |
| Loans collectively evaluated for impairment     |   |       | 40,395 |   |             |   | 471,514 |             |   |   | 9,767       |   |   |                | 162,366 |   |     |   | 77,444 |   |   |   | 29,497 |   |   |   | 790,983 |   |
| Loans acquired with deteriorated credit quality |   |       | -      |   |             |   | -       |             |   |   | -           |   |   |                | -       |   |     |   | -      |   |   |   | - |   |   |   | - |   |
|                                            |   |       |   |   |             |   |    |             |   |   |        |   |   |                |    |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Total ending loans balance                      |   | $          | 42,265 |   |             | $      | 557,764 |             |   | $      | 11,034      |   |   | $                   | 163,975 |   |     | $      | 77,781 |   |   | $ | 29,588 |   |   | $ | 882,407 |   |

----

| 4.  | LOANS– (Continued) |
|----------|--------------------------|

| March 31,2011                  |   | Unpaid    |    |   |       |   |    | Allowance for |   |   | Average    |   |   | Interest   |   |   | Cash Basis |   |
|-------------------------------------|--------|-----------|---------|--------|------------|--------|---------|--------------------|--------|--------|------------|--------|--------|------------|--------|--------|-----------------|--------|
|                                |   | Principal |    |   | Recorded   |   |    | Loan Losses   |   |   | Recorded   |   |   | Income     |   |   | Interest        |   |
| (Dollars in thousands)    |   | Balance   |    |   | Investment |   |    | Allocated          |   |   | Investment |   |   | Recognized |   |   | Recognized      |   |
|                                |   |      |    |   |       |   |    |               |   |   |       |   |   |       |   |   |            |   |
| With no related allowance recorded: |   |      |    |   |       |   |    |               |   |   |       |   |   |       |   |   |            |   |
| Commercial                          |   | $         | 262     |   |       | $      | 263     |               |   | $      | -          |   |   | $          | 288    |   |            | $      | 11 |   |   | $ | 11 |   |
| Commercial Real Estate:             |   |      |    |   |       |   |    |               |   |   |       |   |   |       |   |   |            |   |   |   |   |   |   |   |
| Land Development                    |   |      | -       |   |       |   | -       |               |   |   | -          |   |   |       | -      |   |            |   | - |   |   |   | - |   |
| Building Lots                       |   |      | -       |   |       |   | -       |               |   |   | -          |   |   |       | -      |   |            |   | - |   |   |   | - |   |
| Other                               |   |      | 42,845  |   |       |   | 44,145  |               |   |   | -          |   |   |       | 38,239 |   |            |   | 1,467 |   |   |   | 1,467 |   |
| Real Estate Construction            |   |      | 290     |   |       |   | 290     |               |   |   | -          |   |   |       | 238    |   |            |   | 7 |   |   |   | 7 |   |
| Residential Mortgage                |   |      | -       |   |       |   | -       |               |   |   | -          |   |   |       | -      |   |            |   | - |   |   |   | - |   |
| Consumer and Home Equity            |   |      | -       |   |       |   | -       |               |   |   | -          |   |   |       | -      |   |            |   | - |   |   |   | - |   |
| Indirect Consumer                   |   |      | -       |   |       |   | -       |               |   |   | -          |   |   |       | -      |   |            |   | - |   |   |   | - |   |
|                                |   |      |    |   |       |   |    |               |   |   |       |   |   |       |   |   |            |   |   |   |   |   |   |   |
| With an allowance recorded:         |   |      |    |   |       |   |    |               |   |   |       |   |   |       |   |   |            |   |   |   |   |   |   |   |
| Commercial                          |   |      | 1,664   |   |       |   | 1,664   |               |   |   | 827        |   |   |       | 1,611  |   |            |   | 64 |   |   |   | 64 |   |
| Commercial Real Estate:             |   |      |    |   |       |   |    |               |   |   |       |   |   |       |   |   |            |   |   |   |   |   |   |   |
| Land Development                    |   |      | 23,169  |   |       |   | 23,169  |               |   |   | 7,047      |   |   |       | 23,032 |   |            |   | 411 |   |   |   | 411 |   |
| Building Lots                       |   |      | 3,430   |   |       |   | 3,430   |               |   |   | 37         |   |   |       | 3,430  |   |            |   | - |   |   |   | - |   |
| Other                               |   |      | 26,626  |   |       |   | 26,626  |               |   |   | 6,936      |   |   |       | 27,110 |   |            |   | 1,040 |   |   |   | 1,040 |   |
| Real Estate Construction            |   |      | -       |   |       |   | -       |               |   |   | -          |   |   |       | 541    |   |            |   | 37 |   |   |   | 37 |   |
| Residential Mortgage                |   |      | 1,871   |   |       |   | 1,871   |               |   |   | 385        |   |   |       | 1,740  |   |            |   | 2 |   |   |   | 2 |   |
| Consumer and Home Equity            |   |      | 298     |   |       |   | 298     |               |   |   | 191        |   |   |       | 318    |   |            |   | - |   |   |   | - |   |
| Indirect Consumer                   |   |      | 137     |   |       |   | 137     |               |   |   | 37         |   |   |       | 114    |   |            |   | - |   |   |   | - |   |
|                                |   |      |    |   |       |   |    |               |   |   |       |   |   |       |   |   |            |   |   |   |   |   |   |   |
| Total                               |   | $         | 100,592 |   |       | $      | 101,893 |               |   | $      | 15,460     |   |   | $          | 96,661 |   |            | $      | 3,039 |   |   | $ | 3,039 |   |

| December 31, 2010         |   | Unpaid    |   |   |       |   |   | Allowance for |   |
|-------------------------------------|--------|-----------|--------|--------|------------|--------|--------|--------------------|--------|
|                                |   | Principal |   |   | Recorded   |   |   | Loan Losses   |   |
| (Dollars in thousands)    |   | Balance   |   |   | Investment |   |   | Allocated          |   |
|                                |   |      |   |   |       |   |   |               |   |
| With no related allowance recorded: |   |      |   |   |       |   |   |               |   |
| Commercial                          |   | $         | 312    |   |       | $      | 312    |               |   | $ | - |   |
| Commercial Real Estate:             |   |      |   |   |       |   |   |               |   |   |   |   |
| Land Development                    |   |      | -      |   |       |   | -      |               |   |   | - |   |
| Building Lots                       |   |      | -      |   |       |   | -      |               |   |   | - |   |
| Other                               |   |      | 30,337 |   |       |   | 32,332 |               |   |   | - |   |
| Real Estate Construction            |   |      | 185    |   |       |   | 185    |               |   |   | - |   |
| Residential Mortgage                |   |      | -      |   |       |   | -      |               |   |   | - |   |
| Consumer and Home Equity            |   |      | -      |   |       |   | -      |               |   |   | - |   |
| Indirect Consumer                   |   |      | -      |   |       |   | -      |               |   |   | - |   |
|                                |   |      |   |   |       |   |   |               |   |   |   |   |
| With an allowance recorded:         |   |      |   |   |       |   |   |               |   |   |   |   |
| Commercial                          |   |      | 1,558  |   |       |   | 1,558  |               |   |   | 691 |   |
| Commercial Real Estate:             |   |      |   |   |       |   |   |               |   |   |   |   |
| Land Development                    |   |      | 22,895 |   |       |   | 22,895 |               |   |   | 4,562 |   |
| Building Lots                       |   |      | 3,430  |   |       |   | 3,430  |               |   |   | 39 |   |
| Other                               |   |      | 27,593 |   |       |   | 27,593 |               |   |   | 7,271 |   |
| Real Estate Construction            |   |      | 1,082  |   |       |   | 1,082  |               |   |   | 24 |   |
| Residential Mortgage                |   |      | 1,609  |   |       |   | 1,609  |               |   |   | 334 |   |
| Consumer and Home Equity            |   |      | 337    |   |       |   | 337    |               |   |   | 147 |   |
| Indirect Consumer                   |   |      | 91     |   |       |   | 91     |               |   |   | 29 |   |
|                                |   |      |   |   |       |   |   |               |   |   |   |   |
| Total                               |   | $         | 89,429 |   |       | $      | 91,424 |               |   | $ | 13,097 |   |

----

| 4.  | LOANS– (Continued) |
|----------|--------------------------|

|                                                 |   | March 31, |   |
|------------------------------------------------------|--------|----------------|--------|
| (Dollars in thousands)                     |   | 2010           |   |
|                                                 |   |           |   |
| Average of individually impaired loans during period |   |           | 59,655 |   |
| Interest income recognized during impairment         |   |           | 1,938  |   |
| Cash-basis interest income recognized                |   |           | 1,938  |   |

|                             |   |         | Loans Past Due |   |                   |   |   |
|----------------------------------|--------|--------------|--------------------------|--------|------------------------|--------|--------|
| March 31, 2011         |   |         |                     |   | Over 90 Days |   |   |   |   |
|                             |   |         |                     |   | Still                  |   |   |   |   |
| (Dollars in thousands) |   | Restructured |                     |   | Accruing               |   |   | Nonaccrual |   |
|                             |   |         |                     |   |                   |   |   |   |   |
| Commercial                       |   | $            | 388                      |   |                   |   | -      |   |   | $ | 579 |   |
| Commercial Real Estate:          |   |         |                     |   |                   |   |   |   |   |   |   |   |
| Land Development                 |   |         | -                        |   |                   |   | -      |   |   |   | 16,299 |   |
| Building Lots                    |   |         | -                        |   |                   |   |   |   |   |   | 3,430 |   |
| Other                            |   |         | 17,543                   |   |                   |   | -      |   |   |   | 22,939 |   |
| Real Estate Construction         |   |         | -                        |   |                   |   |   |   |   |   | - |   |
| Residential Mortgage             |   |         | 750                      |   |                   |   | -      |   |   |   | 1,120 |   |
| Consumer and Home Equity         |   |         | 70                       |   |                   |   |   |   |   |   | 387 |   |
| Indirect Consumer                |   |         | -                        |   |                   |   | -      |   |   |   | 145 |   |
|                             |   |         |                     |   |                   |   |   |   |   |   |   |   |
| Total                            |   | $            | 18,751                   |   |                   |   | -      |   |   | $ | 44,899 |   |

|                             |   |         | Loans Past Due |   |                   |   |   |
|----------------------------------|--------|--------------|--------------------------|--------|------------------------|--------|--------|
| December 31, 2010      |   |         |                     |   | Over 90 Days |   |   |   |   |
|                             |   |         |                     |   | Still                  |   |   |   |   |
| (Dollars in thousands) |   | Restructured |                     |   | Accruing               |   |   | Nonaccrual |   |
|                             |   |         |                     |   |                   |   |   |   |   |
| Commercial                       |   | $            | 179                      |   |                   |   | -      |   |   | $ | 597 |   |
| Commercial Real Estate:          |   |         |                     |   |                   |   |   |   |   |   |   |   |
| Land Development                 |   |         | -                        |   |                   |   | -      |   |   |   | 15,356 |   |
| Building Lots                    |   |         | -                        |   |                   |   |   |   |   |   | 3,430 |   |
| Other                            |   |         | 3,394                    |   |                   |   | -      |   |   |   | 19,939 |   |
| Real Estate Construction         |   |         | -                        |   |                   |   |   |   |   |   | - |   |
| Residential Mortgage             |   |         | 306                      |   |                   |   | -      |   |   |   | 2,294 |   |
| Consumer and Home Equity         |   |         | 27                       |   |                   |   |   |   |   |   | 365 |   |
| Indirect Consumer                |   |         | -                        |   |                   |   | -      |   |   |   | 188 |   |
|                             |   |         |                     |   |                   |   |   |   |   |   |   |   |
| Total                            |   | $            | 3,906                    |   |                   |   | -      |   |   | $ | 42,169 |   |

----

| 4.  | LOANS– (Continued) |
|----------|--------------------------|

| March 31, 2011         |   | 30-59         |   |   | 60-89         |   |   | Greater than |   |   |          |   |   |           |   |   |   |   |
|----------------------------------|--------|---------------|--------|--------|---------------|--------|--------|-------------------|--------|--------|---------------|--------|--------|----------------|--------|--------|--------|--------|
|                             |   | Days          |   |   | Days          |   |   | 90 Days      |   |   | Total         |   |   | Loans Not |   |   |   |   |
| (Dollars in thousands) |   | Past Due |   |   | Past Due |   |   | Past Due     |   |   | Past Due |   |   | Past Due  |   |   | Total  |   |
|                             |   |          |   |   |          |   |   |              |   |   |          |   |   |           |   |   |   |   |
| Commercial                       |   | $             | 552    |   |          | $      | -      |              |   | $      | 1,187         |   |   | $              | 1,739  |   |   | $      | 33,830 |   |   | $ | 35,569 |   |
| Commercial Real Estate:          |   |          |   |   |          |   |   |              |   |   |          |   |   |           |   |   |   |   |   |   |   |   |   |   |
| Land Development                 |   |          | 150    |   |          |   | 4,506  |              |   |   | 8,624         |   |   |           | 13,280 |   |   |   | 42,189 |   |   |   | 55,469 |   |
| Building Lots                    |   |          | 206    |   |          |   | 135    |              |   |   | 3,430         |   |   |           | 3,771  |   |   |   | 7,466 |   |   |   | 11,237 |   |
| Other                            |   |          | 7,465  |   |          |   | 16,930 |              |   |   | 37,866        |   |   |           | 62,261 |   |   |   | 422,734 |   |   |   | 484,995 |   |
| Real Estate Construction         |   |          | -      |   |          |   | -      |              |   |   | -             |   |   |           | -      |   |   |   | 7,964 |   |   |   | 7,964 |   |
| Residential Mortgage             |   |          | 781    |   |          |   | 598    |              |   |   | 3,707         |   |   |           | 5,086  |   |   |   | 155,524 |   |   |   | 160,610 |   |
| Consumer and Home Equity         |   |          | 550    |   |          |   | 48     |              |   |   | 641           |   |   |           | 1,239  |   |   |   | 74,252 |   |   |   | 75,491 |   |
| Indirect Consumer                |   |          | 172    |   |          |   | 72     |              |   |   | 145           |   |   |           | 389    |   |   |   | 27,045 |   |   |   | 27,434 |   |
|                             |   |          |   |   |          |   |   |              |   |   |          |   |   |           |   |   |   |   |   |   |   |   |   |   |
| Total                            |   | $             | 9,876  |   |          | $      | 22,289 |              |   | $      | 55,600        |   |   | $              | 87,765 |   |   | $      | 771,004 |   |   | $ | 858,769 |   |

| December 31, 2010      |   | 30-59         |   |   | 60-89         |   |   | Greater than |   |   |          |   |   |           |   |   |   |   |
|----------------------------------|--------|---------------|--------|--------|---------------|--------|--------|-------------------|--------|--------|---------------|--------|--------|----------------|--------|--------|--------|--------|
|                             |   | Days          |   |   | Days          |   |   | 90 Days      |   |   | Total         |   |   | Loans Not |   |   |   |   |
| (Dollars in thousands) |   | Past Due |   |   | Past Due |   |   | Past Due     |   |   | Past Due |   |   | Past Due  |   |   | Total  |   |
|                             |   |          |   |   |          |   |   |              |   |   |          |   |   |           |   |   |   |   |
| Commercial                       |   | $             | 719    |   |          | $      | 683    |              |   | $      | 574           |   |   | $              | 1,976  |   |   | $      | 40,289 |   |   | $ | 42,265 |   |
| Commercial Real Estate:          |   |          |   |   |          |   |   |              |   |   |          |   |   |           |   |   |   |   |   |   |   |   |   |   |
| Land Development                 |   |          | -      |   |          |   | -      |              |   |   | 7,682         |   |   |           | 7,682  |   |   |   | 48,404 |   |   |   | 56,086 |   |
| Building Lots                    |   |          | -      |   |          |   | -      |              |   |   | 3,430         |   |   |           | 3,430  |   |   |   | 7,903 |   |   |   | 11,333 |   |
| Other                            |   |          | 2,824  |   |          |   | 10,110 |              |   |   | 16,294        |   |   |           | 29,228 |   |   |   | 461,117 |   |   |   | 490,345 |   |
| Real Estate Construction         |   |          | 1,082  |   |          |   | -      |              |   |   | -             |   |   |           | 1,082  |   |   |   | 9,952 |   |   |   | 11,034 |   |
| Residential Mortgage             |   |          | 313    |   |          |   | 962    |              |   |   | 4,386         |   |   |           | 5,661  |   |   |   | 158,314 |   |   |   | 163,975 |   |
| Consumer and Home Equity         |   |          | 527    |   |          |   | 70     |              |   |   | 680           |   |   |           | 1,277  |   |   |   | 76,504 |   |   |   | 77,781 |   |
| Indirect Consumer                |   |          | 386    |   |          |   | 51     |              |   |   | 188           |   |   |           | 625    |   |   |   | 28,963 |   |   |   | 29,588 |   |
|                             |   |          |   |   |          |   |   |              |   |   |          |   |   |           |   |   |   |   |   |   |   |   |   |   |
| Total                            |   | $             | 5,851  |   |          | $      | 11,876 |              |   | $      | 33,234        |   |   | $              | 50,961 |   |   | $      | 831,446 |   |   | $ | 882,407 |   |

----

| 4.  | LOANS– (Continued) |
|----------|--------------------------|

| March 31, 2011         |   |           |    |   |   |   |    |       |   |   |        |   |   |     |    |   |   |   |   |   |   |
|----------------------------------|--------|----------------|---------|--------|--------|--------|---------|------------|--------|--------|-------------|--------|--------|----------|---------|--------|--------|--------|--------|--------|--------|
| (Dollars in thousands) |   | Not Rated |    |   | Pass   |   |    | Criticized |   |   | Substandard |   |   | Doubtful |    |   | Loss   |   |   | Total  |   |
|                             |   |           |    |   |   |   |    |       |   |   |        |   |   |     |    |   |   |   |   |   |   |
| Commercial                       |   | $              | -       |   |   | $      | 31,402  |       |   | $      | 2,240       |   |   | $        | 1,414   |   |   | $      | 513    |   |   | $ | - |   |   | $ | 35,569 |   |
| Commercial Real Estate:          |   |           |    |   |   |   |    |       |   |   |        |   |   |     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Land Development                 |   |           | -       |   |   |   | 24,921  |       |   |   | 7,379       |   |   |     | 23,169  |   |   |   | -      |   |   |   | - |   |   |   | 55,469 |   |
| Building Lots                    |   |           | -       |   |   |   | 6,990   |       |   |   | 817         |   |   |     | 3,430   |   |   |   | -      |   |   |   | - |   |   |   | 11,237 |   |
| Other                            |   |           | -       |   |   |   | 391,030 |       |   |   | 23,021      |   |   |     | 70,646  |   |   |   | 125    |   |   |   | 173 |   |   |   | 484,995 |   |
| Real Estate Construction         |   |           | -       |   |   |   | 7,673   |       |   |   | -           |   |   |     | 291     |   |   |   | -      |   |   |   | - |   |   |   | 7,964 |   |
| Residential Mortgage             |   |           | 154,403 |   |   |   | -       |       |   |   | 1,179       |   |   |     | 5,025   |   |   |   | -      |   |   |   | 3 |   |   |   | 160,610 |   |
| Consumer and Home Equity         |   |           | 73,706  |   |   |   | -       |       |   |   | 664         |   |   |     | 1,119   |   |   |   | -      |   |   |   | 2 |   |   |   | 75,491 |   |
| Indirect Consumer                |   |           | 27,120  |   |   |   | -       |       |   |   | 38          |   |   |     | 276     |   |   |   | -      |   |   |   | - |   |   |   | 27,434 |   |
|                             |   |           |    |   |   |   |    |       |   |   |        |   |   |     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                            |   | $              | 255,229 |   |   | $      | 462,016 |       |   | $      | 35,338      |   |   | $        | 105,370 |   |   | $      | 638    |   |   | $ | 178 |   |   | $ | 858,769 |   |

| December 31, 2010        |   |      |    |   |   |   |    |       |   |   |        |   |   |     |   |   |   |   |   |   |   |
|--------------------------|--------|-----------|---------|--------|--------|--------|---------|------------|--------|--------|-------------|--------|--------|----------|--------|--------|--------|--------|--------|--------|--------|
| (Dollars in thousands)   |   | Not Rated |    |   | Pass   |   |    | Criticized |   |   | Substandard |   |   | Doubtful |   |   | Loss   |   |   | Total  |   |
|                     |   |      |    |   |   |   |    |       |   |   |        |   |   |     |   |   |   |   |   |   |   |
| Commercial               |   | $         | -       |   |   | $      | 38,036  |       |   | $      | 2,359       |   |   | $        | 1,412  |   |   | $      | 458    |   |   | $ | - |   |   | $ | 42,265 |   |
| Commercial Real Estate:  |   |      |    |   |   |   |    |       |   |   |        |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Land Development         |   |      | -       |   |   |   | 29,769  |       |   |   | 3,422       |   |   |     | 22,895 |   |   |   | -      |   |   |   | - |   |   |   | 56,086 |   |
| Building Lots            |   |      | -       |   |   |   | 7,903   |       |   |   | -           |   |   |     | 3,430  |   |   |   | -      |   |   |   | - |   |   |   | 11,333 |   |
| Other                    |   |      | -       |   |   |   | 409,387 |       |   |   | 21,012      |   |   |     | 59,800 |   |   |   | 125    |   |   |   | 21 |   |   |   | 490,345 |   |
| Real Estate Construction |   |      | -       |   |   |   | 9,767   |       |   |   | -           |   |   |     | 1,267  |   |   |   | -      |   |   |   | - |   |   |   | 11,034 |   |
| Residential Mortgage     |   |      | 157,498 |   |   |   | -       |       |   |   | 917         |   |   |     | 5,560  |   |   |   | -      |   |   |   | - |   |   |   | 163,975 |   |
| Consumer and Home Equity |   |      | 76,086  |   |   |   | -       |       |   |   | 599         |   |   |     | 1,072  |   |   |   | -      |   |   |   | 24 |   |   |   | 77,781 |   |
| Indirect Consumer        |   |      | 29,342  |   |   |   | -       |       |   |   | -           |   |   |     | 227    |   |   |   | -      |   |   |   | 19 |   |   |   | 29,588 |   |
|                     |   |      |    |   |   |   |    |       |   |   |        |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                    |   | $         | 262,926 |   |   | $      | 494,862 |       |   | $      | 28,309      |   |   | $        | 95,663 |   |   | $      | 583    |   |   | $ | 64 |   |   | $ | 882,407 |   |

----

| 4.  | LOANS– (Continued) |
|----------|--------------------------|

| March 31, 2011         |   | Residential |    |   | Consumer & |   |   | Indirect |   |
|----------------------------------|--------|-------------|---------|--------|---------------------|--------|--------|----------|--------|
| (Dollars in thousands) |   | Mortgage    |    |   | Home Equity    |   |   | Consumer |   |
|                             |   |        |    |   |                |   |   |     |   |
| Performing                       |   | $           | 158,740 |   |                | $      | 75,034 |     |   | $ | 27,289 |   |
| Restructured & Non-accrual   |   |        | 1,870   |   |                |   | 457    |     |   |   | 145 |   |
|                             |   |        |    |   |                |   |   |     |   |   |   |   |
| Total                            |   | $           | 160,610 |   |                | $      | 75,491 |     |   | $ | 27,434 |   |

| December 31, 2010      |   | Residential |    |   | Consumer & |   |   | Indirect |   |
|----------------------------------|--------|-------------|---------|--------|---------------------|--------|--------|----------|--------|
| (Dollars in thousands) |   | Mortgage    |    |   | Home Equity    |   |   | Consumer |   |
|                             |   |        |    |   |                |   |   |     |   |
| Performing                       |   | $           | 161,375 |   |                | $      | 77,389 |     |   | $ | 29,400 |   |
| Restructured & Non-accrual   |   |        | 2,600   |   |                |   | 392    |     |   |   | 188 |   |
|                             |   |        |    |   |                |   |   |     |   |   |   |   |
| Total                            |   | $           | 163,975 |   |                | $      | 77,781 |     |   | $ | 29,588 |   |

| 5.  | REAL ESTATE ACQUIRED THROUGH FORECLOSURE |
|----------|------------------------------------------|

|                             |   | March 31, |   |   | December 31, |   |
|----------------------------------|--------|----------------|--------|--------|-------------------|--------|
| (Dollars in thousands) |   | 2011           |   |   | 2010              |   |
|                             |   |           |   |   |              |   |
| Beginning balance                |   | $              | 25,807 |   |              | $      | 8,428 |   |
| Additions                        |   |           | 1,932  |   |              |   | 24,622 |   |
| Sales                            |   |           | (2,629 | )      |              |   | (4,928 | ) |
| Writedowns                       |   |           | (202   | )      |              |   | (2,315 | ) |
| Ending balance                   |   | $              | 24,908 |   |              | $      | 25,807 |   |

| 6.  | INCOME TAXES |
|----------|--------------|

----

| 7.  | EARNINGS (LOSS) PER SHARE |
|----------|---------------------------|

|   | The reconciliation of the numerators and denominators of the basic and diluted EPS is as follows: |
|--------|---------------------------------------------------------------------------------------------------|

|                                               |   | Three Months Ended |   |
|----------------------------------------------------|--------|------------------------------|--------|
| (Dollars in thousands,                   |   | March 31,               |   |
| except per share data)              |   | 2011                         |   |   | 2010 |   |
|                                               |   |                         |   |   |   |   |
| Basic:                                             |   |                         |   |   |   |   |
| Net income/(loss)                                  |   | $                            | (2,070 | ) |   | $ | 755 |   |
| Less:                                              |   |                         |   |   |   |   |   |   |
| Preferred stock dividends                          |   |                         | (250   | ) |   |   | (250 | ) |
| Accretion on preferred stock discount              |   |                         | (14    | ) |   |   | (14 | ) |
| Net income (loss) available to common shareholders |   | $                            | (2,334 | ) |   | $ | 491 |   |
| Weighted average common shares                     |   |                         | 4,736  |   |   |   | 4,716 |   |
|                                               |   |                         |   |   |   |   |   |   |
| Diluted:                                           |   |                         |   |   |   |   |   |   |
| Weighted average common shares                     |   |                         | 4,736  |   |   |   | 4,716 |   |
| Dilutive effect of stock options and warrants      |   |                         | -      |   |   |   | - |   |
| Weighted average common and incremental shares     |   |                         | 4,736  |   |   |   | 4,716 |   |
|                                               |   |                         |   |   |   |   |   |   |
| Earnings (Loss) Per Common Share:                  |   |                         |   |   |   |   |   |   |
| Basic                                              |   | $                            | (0.49  | ) |   | $ | 0.10 |   |
| Diluted                                            |   | $                            | (0.49  | ) |   | $ | 0.10 |   |

| 8.  | STOCK BASED COMPENSATION PLAN |
|----------|-------------------------------|

----

| 8.  | STOCK OPTION PLAN - (Continued) |
|----------|---------------------------------|

|                                |   |    |    |   |     |   |   | Weighted    |   |                             |      |   |
|-------------------------------------|--------|---------|---------|--------|----------|--------|--------|-------------|--------|----------------------------------|-----------|--------|
|                                |   |    |    |   | Weighted |   |   | Average     |   |                             |      |   |
|                                |   | Number  |    |   | Average  |   |   | Remaining   |   |                             | Aggregate |   |
|                                |   | of      |    |   | Exercise |   |   | Contractual |   |                             | Intrinsic |   |
|                                |   | Options |    |   | Price    |   |   | Term        |   |                             | Value     |   |
|                                |   |    |    |   |     |   |   |        |   | (Dollars In Thousands) |
|                                |   |    |    |   |     |   |   |        |   |                             |      |   |
| Outstanding, beginning of period    |   |    | 296,521 |   |     | $      | 13.70  |        |   |                             |      |   |   |   |
| Granted during period               |   |    | -       |   |     |   | -      |        |   |                             |      |   |   |   |
| Forfeited during period             |   |    | (30,000 | )      |     |   | 14.03  |        |   |                             |      |   |   |   |
| Exercised during period             |   |    | -       |   |     |   | -      |        |   |                             |      |   |   |   |
| Outstanding, end of period          |   |    | 266,521 |   |     | $      | 13.67  |        |   |                             | 6.9       |   |   | $ | - |   |
|                                |   |    |    |   |     |   |   |        |   |                             |      |   |   |   |   |   |
| Eligible for exercise at period end |   |    | 125,455 |   |     | $      | 19.32  |        |   |                             | 4.7       |   |   | $ | - |   |

| 9.  | FAIR VALUE |
|----------|------------|

----

| 9.  | FAIR VALUE - (Continued) |
|----------|--------------------------|

|                                             |   |           | Quoted Prices in |   |                         |   |   |                   |   |   |
|--------------------------------------------------|--------|----------------|----------------------------|--------|------------------------------|--------|--------|------------------------|--------|--------|
|                                             |   |           |                       |   | Active Markets for |   |   | Significant Other |   |   | Significant |   |
|                                             |   | March 31, |                       |   | Identical Assets        |   |   | Observable Inputs |   |   | Unobservable Inputs |   |
| (Dollars in thousands)                 |   | 2011           |                       |   | (Level 1)               |   |   | (Level 2)         |   |   | (Level 3) |   |
|                                             |   |           |                       |   |                         |   |   |                   |   |   |   |   |
| Assets:                                          |   |           |                       |   |                         |   |   |                   |   |   |   |   |
| U.S. Treasury and agencies                       |   | $              | 170,752                    |   |                         | $      | -      |                   |   | $      | 170,752 |   |   | $ | - |   |
| Government-sponsored mortgage-backed residential |   |           | 48,880                     |   |                         |   | -      |                   |   |   | 48,880 |   |   |   | - |   |
| Equity                                           |   |           | 294                        |   |                         |   | 3      |                   |   |   | - |   |   |   | 291 |   |
| State and municipal                              |   |           | 22,997                     |   |                         |   | -      |                   |   |   | 22,997 |   |   |   | - |   |
| Trust preferred securities                       |   |           | 472                        |   |                         |   | -      |                   |   |   | - |   |   |   | 472 |   |
|                                             |   |           |                       |   |                         |   |   |                   |   |   |   |   |   |   |   |   |
| Total                                            |   | $              | 243,395                    |   |                         | $      | 3      |                   |   | $      | 242,629 |   |   | $ | 763 |   |

|                                             |   |              | Quoted Prices in |   |                         |   |   |                   |   |   |
|--------------------------------------------------|--------|-------------------|----------------------------|--------|------------------------------|--------|--------|------------------------|--------|--------|
|                                             |   |              |                       |   | Active Markets for |   |   | Significant Other |   |   | Significant |   |
|                                             |   | December 31, |                       |   | Identical Assets        |   |   | Observable Inputs |   |   | Unobservable Inputs |   |
| (Dollars in thousands)                 |   | 2010              |                       |   | (Level 1)               |   |   | (Level 2)         |   |   | (Level 3) |   |
|                                             |   |              |                       |   |                         |   |   |                   |   |   |   |   |
| Assets:                                          |   |              |                       |   |                         |   |   |                   |   |   |   |   |
| U.S. Treasury and agencies                       |   | $                 | 113,893                    |   |                         | $      | -      |                   |   | $      | 113,893 |   |   | $ | - |   |
| Government-sponsored mortgage-backed residential |   |              | 59,170                     |   |                         |   | -      |                   |   |   | 59,170 |   |   |   | - |   |
| Equity                                           |   |              | 293                        |   |                         |   | 2      |                   |   |   | - |   |   |   | 291 |   |
| State and municipal                              |   |              | 22,618                     |   |                         |   | -      |                   |   |   | 22,618 |   |   |   | - |   |
| Trust preferred securities                       |   |              | 55                         |   |                         |   | -      |                   |   |   | - |   |   |   | 55 |   |
|                                             |   |              |                       |   |                         |   |   |                   |   |   |   |   |   |   |   |   |
| Total                                            |   | $                 | 196,029                    |   |                         | $      | 2      |                   |   | $      | 195,681 |   |   | $ | 346 |   |

----

| 9.  | FAIR VALUE - (Continued) |
|----------|--------------------------|

|                                   |   | Fair Value Measurements |   |
|----------------------------------------|--------|-----------------------------------|--------|
|                                   |   | Using Significant            |   |
|                                   |   | Unobservable Inputs          |   |
|                                   |   | (Level 3)                    |   |
|                                   |   | Three Months Ended      |   |
|                                   |   | March 31,                    |   |
| (Dollars in thousands)       |   | 2011                              |   |   | 2010 |   |
|                                   |   |                              |   |   |   |   |
| Beginning balance                      |   | $                                 | 346    |   |   | $ | 340 |   |
| Total gains or losses:                 |   |                              |   |   |   |   |   |   |
| Impairment charges on securities       |   |                              | (25    | ) |   |   | (123 | ) |
| Included in other comprehensive income |   |                              | 442    |   |   |   | 118 |   |
| Transfers in and/or out of Level 3     |   |                              | -      |   |   |   | - |   |
| Ending balance                         |   | $                                 | 763    |   |   | $ | 335 |   |

----

| 9.  | FAIR VALUE - (Continued) |
|----------|--------------------------|

|                             |   | Changes in Unrealized Gains/Losses                        |   |
|----------------------------------|--------|--------------------------------------------------------------------------|--------|
|                             |   | Relating to Assets Still Held at Reporting |   |
|                             |   | Date for the Three Months Ended                 |   |
|                             |   | March 31,                                                           |   |
| (Dollars in thousands) |   | 2011                                                                     |   |   | 2010 |   |
|                             |   |                                                                     |   |   |   |   |
| Interest income on securities    |   | $                                                                        | -      |   |   | $ | - |   |
| Other changes in fair value      |   |                                                                     | 25     |   |   |   | 123 |   |
| Total                            |   | $                                                                        | 25     |   |   | $ | 123 |   |

|                                      |   |           |   |   | Quoted Prices in   |   |   |                   |   |   |                     |   |
|-------------------------------------------|--------|----------------|--------|--------|------------------------------|--------|--------|------------------------|--------|--------|--------------------------|--------|
|                                      |   |           |   |   | Active Markets for |   |   | Significant Other |   |   | Significant              |   |
|                                      |   | March 31, |   |   | Identical Assets        |   |   | Observable Inputs |   |   | Unobservable Inputs |   |
| (Dollars in thousands)          |   | 2011           |   |   | (Level 1)               |   |   | (Level 2)         |   |   | (Level 3)           |   |
|                                      |   |           |   |   |                         |   |   |                   |   |   |                     |   |
| Assets:                                   |   |           |   |   |                         |   |   |                   |   |   |                     |   |
| Impaired loans:                           |   |           |   |   |                         |   |   |                   |   |   |                     |   |
| Commercial                                |   | $              | 948    |   |                         | $      | -      |                   |   | $      | -                        |   |   | $ | 948 |   |
| Commercial Real Estate:                   |   |           |   |   |                         |   |   |                   |   |   |                     |   |   |   |   |   |
| Land Development                          |   |           | 16,122 |   |                         |   | -      |                   |   |   | -                        |   |   |   | 16,122 |   |
| Building Lots                             |   |           | 3,393  |   |                         |   | -      |                   |   |   | -                        |   |   |   | 3,393 |   |
| Other                                     |   |           | 49,600 |   |                         |   | -      |                   |   |   | -                        |   |   |   | 49,600 |   |
| Real Estate Contruction                   |   |           | 291    |   |                         |   | -      |                   |   |   | -                        |   |   |   | 291 |   |
| Residential Mortgage                      |   |           | 3,908  |   |                         |   | -      |                   |   |   | -                        |   |   |   | 3,908 |   |
| Consumer and Home Equity                  |   |           | 777    |   |                         |   | -      |                   |   |   | -                        |   |   |   | 777 |   |
| Indirect Consumer                         |   |           | 211    |   |                         |   | -      |                   |   |   | -                        |   |   |   | 211 |   |
| Real estate acquired through foreclosure  |   |           | 8,618  |   |                         |   | -      |                   |   |   | -                        |   |   |   | 8,618 |   |
| Trust preferred security held-to-maturity |   |           | 23     |   |                         |   | -      |                   |   |   | -                        |   |   |   | 23 |   |

|                                      |   |              |   |   | Quoted Prices in   |   |   |                   |   |   |                     |   |
|-------------------------------------------|--------|-------------------|--------|--------|------------------------------|--------|--------|------------------------|--------|--------|--------------------------|--------|
|                                      |   |              |   |   | Active Markets for |   |   | Significant Other |   |   | Significant              |   |
|                                      |   | December 31, |   |   | Identical Assets        |   |   | Observable Inputs |   |   | Unobservable Inputs |   |
| (Dollars in thousands)          |   | 2010              |   |   | (Level 1)               |   |   | (Level 2)         |   |   | (Level 3)           |   |
|                                      |   |              |   |   |                         |   |   |                   |   |   |                     |   |
| Assets:                                   |   |              |   |   |                         |   |   |                   |   |   |                     |   |
| Impaired loans:                           |   |              |   |   |                         |   |   |                   |   |   |                     |   |
| Commercial                                |   | $                 | 1,092  |   |                         | $      | -      |                   |   | $      | -                        |   |   | $ | 1,092 |   |
| Commercial Real Estate:                   |   |              |   |   |                         |   |   |                   |   |   |                     |   |   |   |   |   |
| Land Development                          |   |              | 18,333 |   |                         |   | -      |                   |   |   | -                        |   |   |   | 18,333 |   |
| Building Lots                             |   |              | 3,391  |   |                         |   | -      |                   |   |   | -                        |   |   |   | 3,391 |   |
| Other                                     |   |              | 49,505 |   |                         |   | -      |                   |   |   | -                        |   |   |   | 49,505 |   |
| Real Estate Contruction                   |   |              | 1,057  |   |                         |   | -      |                   |   |   | -                        |   |   |   | 1,057 |   |
| Residential Mortgage                      |   |              | 4,821  |   |                         |   | -      |                   |   |   | -                        |   |   |   | 4,821 |   |
| Consumer and Home Equity                  |   |              | 824    |   |                         |   | -      |                   |   |   | -                        |   |   |   | 824 |   |
| Indirect Consumer                         |   |              | 171    |   |                         |   | -      |                   |   |   | -                        |   |   |   | 171 |   |
| Real estate acquired through foreclosure  |   |              | 8,578  |   |                         |   | -      |                   |   |   | -                        |   |   |   | 8,578 |   |
| Trust preferred security held-to-maturity |   |              | 22     |   |                         |   | -      |                   |   |   | -                        |   |   |   | 22 |   |

----

| 9.  | FAIR VALUE - (Continued) |
|----------|--------------------------|

| (Dollars in thousands)               |   | March 31, 2011 |      |   | December 31, 2010 |   |
|--------------------------------------|--------|----------------|-----------|--------|-------------------|--------|
|                                 |   | Carrying       |      |   | Fair              |   |   | Carrying |   |   | Fair |   |
|                                 |   | Value          |      |   | Value             |   |   | Value |   |   | Value |   |
| Financial assets:                    |   |           |      |   |              |   |   |   |   |   |   |   |
| Cash and due from banks              |   | $              | 110,929   |   |              | $      | 110,929 |   |   | $ | 166,176 |   |   | $ | 166,176 |   |
| Securities held-to-maturity          |   |           | 97        |   |              |   | 99 |   |   |   | 102 |   |   |   | 104 |   |
| Loans held for sale                  |   |           | 4,055     |   |              |   | 4,119 |   |   |   | 6,388 |   |   |   | 6,472 |   |
| Loans, net                           |   |           | 758,509   |   |              |   | 768,032 |   |   |   | 780,075 |   |   |   | 789,889 |   |
| Accrued interest receivable          |   |           | 7,727     |   |              |   | 7,727 |   |   |   | 6,404 |   |   |   | 6,404 |   |
| FHLB stock                           |   |           | 4,909     |   |              |   | N/A |   |   |   | 4,909 |   |   |   | N/A |   |
|                                 |   |           |      |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities:               |   |           |      |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                             |   |           | 1,166,788 |   |              |   | 1,156,002 |   |   |   | 1,173,908 |   |   | 1,163,654 |   |
| Advances from Federal Home Loan Bank |   |           | 27,500    |   |              |   | 29,830 |   |   |   | 52,532 |   |   |   | 55,190 |   |
| Subordinated debentures              |   |           | 18,000    |   |              |   | 12,743 |   |   |   | 18,000 |   |   |   | 12,743 |   |
| Accrued interest payable             |   |           | 835       |   |              |   | 835 |   |   |   | 594 |   |   |   | 594 |   |

----

| 9. | FAIR VALUE - (Continued) |
|----|--------------------------|

| 10. | PREFERRED STOCK |
|-----|-----------------|

----

| 11.  | STOCKHOLDERS’ EQUITY |
|-----------|----------------------------|

----

| 11. | STOCKHOLDERS’ EQUITY - (Continued) |
|-----|------------------------------------------|

| (Dollars in thousands)                             |   |   |    |   |              |   |   | For Capital |   |
|----------------------------------------------------|--------|--------|---------|--------|-------------------|--------|--------|-------------|--------|
|                                               |   | Actual |    |   | Adequacy Purposes |   |
| As of March 31, 2011:                              |   | Amount |    |   | Ratio             |   |   | Amount      |   |   | Ratio |   |
| Total risk-based capital (to risk-weighted assets) |   |   |    |   |              |   |   |        |   |   |   |   |
| Consolidated                                       |   | $      | 102,363 |   |              |   | 11.32  | %           |   | $ | 72,362 |   |   |   | 8.00 | % |
| Bank                                               |   |   | 103,317 |   |              |   | 11.43  |        |   |   | 72,344 |   |   |   | 8.00 |   |
| Tier I capital (to risk-weighted assets)           |   |   |    |   |              |   |   |        |   |   |   |   |   |   |   |   |
| Consolidated                                       |   |   | 90,892  |   |              |   | 10.05  |        |   |   | 36,181 |   |   |   | 4.00 |   |
| Bank                                               |   |   | 91,843  |   |              |   | 10.16  |        |   |   | 36,172 |   |   |   | 4.00 |   |
| Tier I capital (to average assets)                 |   |   |    |   |              |   |   |        |   |   |   |   |   |   |   |   |
| Consolidated                                       |   |   | 90,892  |   |              |   | 7.01   |        |   |   | 51,891 |   |   |   | 4.00 |   |
| Bank                                               |   |   | 91,843  |   |              |   | 7.08   |        |   |   | 51,880 |   |   |   | 4.00 |   |

|                                          |   |   |    |   |              |   |   |              |   |   |       |   |   | To Be Considered |   |
|----------------------------------------------------|--------|--------|---------|--------|-------------------|--------|--------|-------------------|--------|--------|------------|--------|--------|------------------|--------|
|                                               |   |   |    |   |              |   |   |              |   |   |       |   |   | Well Capitalized |   |
|                                               |   |   |    |   |              |   |   |              |   |   |       |   |   | Under Prompt     |   |
| (Dollars in thousands)                             |   |   |    |   |              |   |   | For Capital       |   |   | Correction |   |
|                                               |   | Actual |    |   | Adequacy Purposes |   |   | Action Provisions |   |
| As of December 31, 2010:                           |   | Amount |    |   | Ratio             |   |   | Amount            |   |   | Ratio      |   |   | Amount           |   |   | Ratio |   |
| Total risk-based capital (to risk-weighted assets) |   |   |    |   |              |   |   |              |   |   |       |   |   |             |   |   |   |   |
| Consolidated                                       |   | $      | 104,717 |   |              |   | 11.34  | %                 |   | $      | 73,890     |   |   |             | 8.00   | % |   |   | N/A |   |   |   | N/A |   |
| Bank                                               |   |   | 105,116 |   |              |   | 11.38  |              |   |   | 73,880     |   |   |             | 8.00   |   |   |   | 92,350 |   |   |   | 10.00 |   |
| Tier I capital (to risk-weighted assets)           |   |   |    |   |              |   |   |              |   |   |       |   |   |             |   |   |   |   |   |   |   |   |   |   |
| Consolidated                                       |   |   | 93,034  |   |              |   | 10.07  |              |   |   | 36,945     |   |   |             | 4.00   |   |   |   | N/A |   |   |   | N/A |   |
| Bank                                               |   |   | 93,423  |   |              |   | 10.12  |              |   |   | 36,940     |   |   |             | 4.00   |   |   |   | 55,410 |   |   |   | 6.00 |   |
| Tier I capital (to average assets)Consolidated     |   |   | 93,034  |   |              |   | 7.16   |              |   |   | 52,003     |   |   |             | 4.00   |   |   |   | N/A |   |   |   | N/A |   |
| Bank                                               |   |   | 93,423  |   |              |   | 7.18   |              |   |   | 52,082     |   |   |             | 4.00   |   |   |   | 65,103 |   |   |   | 5.00 |   |

|                                   |   |         |   |   | Ratio Required |   |   | Ratio Required |   |
|----------------------------------------|--------|--------------|--------|--------|----------------|--------|--------|----------------|--------|
|                                   |   | Actual as of |   |   | by the Order   |   |   | by the Order   |   |
|                                   |   | 3/31/2011    |   |   | at 3/31/2011   |   |   | at 6/30/2011   |   |
| Total capital to risk-weighted assets  |   |         | 11.43  | %      |           |   | 11.50  | %              |   |   | 12.00 | % |
| Tier 1 capital to average total assets |   |         | 7.08   | %      |           |   | 8.50   | %              |   |   | 9.00 | % |

----

----

|   | · | Raising capital by selling capital stock through a public offering or private placement. |
|--------|--------|------------------------------------------------------------------------------------------|

|   | · | Continuing to operate the Company and the Bank in a safe and sound manner.  Until we can complete a capital raise, this will most likely require us to reduce lending concentrations, potentially sell loans, and take significant operating expense reductions and other cost cutting measures aimed at lowering expenses.  Additionally, we would adjust the mix of our assets to reduce the total risk weight of our assets, reduce total assets over time and potentially sell branches, deposits and loans. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Evaluating other strategic alternatives, such as a sale of assets, one or more branches, or the institution. |
|--------|--------|--------------------------------------------------------------------------------------------------------------|

----

----

----

|                                            |   | Quarter Ended March 31, |      |
|-------------------------------------------------|--------|-------------------------|-----------|
|                                            |   |                    |      |   | 2011 |   |   |   |   |   |   |   |   | 2010 |   |   |   |   |
| (Dollars in thousands)                          |   | Average                 |      |   |   |   |   | Average |   |   | Average |   |   |   |   |   | Average |   |
|                                            |   | Balance                 |      |   | Interest |   |   | Yield/Cost (5) |   |   | Balance |   |   | Interest |   |   | Yield/Cost (5) |   |
|                                            |   |                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ASSETS                                          |   |                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest earning assets:                        |   |                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Treasury and agencies                      |   | $                       | 137,355   |   |   | $ | 897 |   |   |   | 2.65 | % |   | $ | 28,443 |   |   | $ | 175 |   |   |   | 2.50 | % |
| Mortgage-backed securities                      |   |                    | 53,965    |   |   |   | 507 |   |   |   | 3.81 |   |   |   | 14,304 |   |   |   | 149 |   |   |   | 4.22 |   |
| Equity securities                               |   |                    | 294       |   |   |   | 10 |   |   |   | 13.81 |   |   |   | 830 |   |   |   | 25 |   |   |   | 12.22 |   |
| State and political subdivision securities (1)  |   |                    | 22,616    |   |   |   | 389 |   |   |   | 6.98 |   |   |   | 16,367 |   |   |   | 257 |   |   |   | 6.37 |   |
| Corporate bonds                                 |   |                    | 1,106     |   |   |   | 24 |   |   |   | 8.80 |   |   |   | 2,045 |   |   |   | 26 |   |   |   | 5.16 |   |
| Loans (2) (3) (4)                               |   |                    | 877,140   |   |   |   | 12,343 |   |   |   | 5.71 |   |   |   | 988,646 |   |   |   | 14,047 |   |   |   | 5.76 |   |
| FHLB stock                                      |   |                    | 4,909     |   |   |   | 54 |   |   |   | 4.46 |   |   |   | 8,515 |   |   |   | 93 |   |   |   | 4.43 |   |
| Interest bearing deposits                       |   |                    | 120,460   |   |   |   | 74 |   |   |   | 0.25 |   |   |   | 108,060 |   |   |   | 26 |   |   |   | 0.10 |   |
| Total interest earning assets                   |   |                    | 1,217,845 |   |   |   | 14,298 |   |   |   | 4.76 |   |   |   | 1,167,210 |   |   |   | 14,798 |   |   |   | 5.14 |   |
| Less:  Allowance for loan losses      |   |                    | (21,879   | ) |   |   |   |   |   |   |   |   |   |   | (17,421 | ) |   |   |   |   |   |   |   |   |
| Non-interest earning assets                     |   |                    | 102,234   |   |   |   |   |   |   |   |   |   |   |   | 83,567 |   |   |   |   |   |   |   |   |   |
| Total assets                                    |   | $                       | 1,298,200 |   |   |   |   |   |   |   |   |   |   | $ | 1,233,356 |   |   |   |   |   |   |   |   |   |
|                                            |   |                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| LIABILITIES AND STOCKHOLDERS' EQUITY            |   |                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest bearing liabilities:                   |   |                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings accounts                                |   | $                       | 115,951   |   |   | $ | 178 |   |   |   | 0.62 | % |   | $ | 126,561 |   |   | $ | 239 |   |   |   | 0.77 | % |
| NOW and money market accounts                   |   |                    | 281,673   |   |   |   | 694 |   |   |   | 1.00 |   |   |   | 253,426 |   |   |   | 774 |   |   |   | 1.24 |   |
| Certificates of deposit and other time deposits |   |                    | 695,244   |   |   |   | 4,042 |   |   |   | 2.36 |   |   |   | 625,566 |   |   |   | 3,856 |   |   |   | 2.50 |   |
| Short term borrowings                           |   |                    | -         |   |   |   | - |   |   |   | - |   |   |   | 920 |   |   |   | 21 |   |   |   | 9.26 |   |
| FHLB advances                                   |   |                    | 28,586    |   |   |   | 295 |   |   |   | 4.19 |   |   |   | 52,689 |   |   |   | 593 |   |   |   | 4.56 |   |
| Subordinated debentures                         |   |                    | 18,000    |   |   |   | 341 |   |   |   | 7.68 |   |   |   | 18,000 |   |   |   | 327 |   |   |   | 7.37 |   |
| Total interest bearing liabilities              |   |                    | 1,139,454 |   |   |   | 5,550 |   |   |   | 1.98 |   |   |   | 1,077,162 |   |   |   | 5,810 |   |   |   | 2.19 |   |
| Non-interest bearing liabilities:               |   |                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest bearing deposits                   |   |                    | 76,785    |   |   |   |   |   |   |   |   |   |   |   | 66,078 |   |   |   |   |   |   |   |   |   |
| Other liabilities                               |   |                    | 4,476     |   |   |   |   |   |   |   |   |   |   |   | 3,977 |   |   |   |   |   |   |   |   |   |
| Total liabilities                               |   |                    | 1,220,715 |   |   |   |   |   |   |   |   |   |   |   | 1,147,217 |   |   |   |   |   |   |   |   |   |
|                                            |   |                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stockholders' equity                            |   |                    | 77,485    |   |   |   |   |   |   |   |   |   |   |   | 86,139 |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders' equity      |   | $                       | 1,298,200 |   |   |   |   |   |   |   |   |   |   | $ | 1,233,356 |   |   |   |   |   |   |   |   |   |
|                                            |   |                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income                             |   |                    |      |   |   | $ | 8,748 |   |   |   |   |   |   |   |   |   |   | $ | 8,988 |   |   |   |   |   |
| Net interest spread                             |   |                    |      |   |   |   |   |   |   |   | 2.78 | % |   |   |   |   |   |   |   |   |   |   | 2.95 | % |
| Net interest margin                             |   |                    |      |   |   |   |   |   |   |   | 2.91 | % |   |   |   |   |   |   |   |   |   |   | 3.12 | % |

----

|                                            |   | Three Months Ended  |   |
|-------------------------------------------------|--------|---------------------|--------|
|                                            |   | March 31,           |   |
|                                            |   | 2011 vs. 2010       |   |
|                                            |   | Increase (decrease) |   |
|                                            |   | Due to change in    |   |
| (Dollars in thousands)                          |   |                |   |   |   |   |   | Net |   |
|                                            |   | Rate                |   |   | Volume |   |   | Change |   |
| Interest income:                                |   |                |   |   |   |   |   |   |   |
| U.S. Treasury and agencies                      |   | $                   | 11     |   |   | $ | 711 |   |   | $ | 722 |   |
| Mortgage-backed securities                      |   |                | (16    | ) |   |   | 374 |   |   |   | 358 |   |
| Equity securities                               |   |                | 3      |   |   |   | (18 | ) |   |   | (15 | ) |
| State and political subdivision securities      |   |                | 26     |   |   |   | 106 |   |   |   | 132 |   |
| Corporate bonds                                 |   |                | 13     |   |   |   | (15 | ) |   |   | (2 | ) |
| Loans                                           |   |                | (134   | ) |   |   | (1,570 | ) |   |   | (1,704 | ) |
| FHLB stock                                      |   |                | 1      |   |   |   | (40 | ) |   |   | (39 | ) |
| Interest bearing deposits                       |   |                | 45     |   |   |   | 3 |   |   |   | 48 |   |
|                                            |   |                |   |   |   |   |   |   |   |   |   |   |
| Total interest earning assets                   |   |                | (51    | ) |   |   | (449 | ) |   |   | (500 | ) |
|                                            |   |                |   |   |   |   |   |   |   |   |   |   |
| Interest expense:                               |   |                |   |   |   |   |   |   |   |   |   |   |
| Savings accounts                                |   |                | (42    | ) |   |   | (19 | ) |   |   | (61 | ) |
| NOW and money market accounts                   |   |                | (160   | ) |   |   | 80 |   |   |   | (80 | ) |
| Certificates of deposit and other time deposits |   |                | (227   | ) |   |   | 413 |   |   |   | 186 |   |
| Short term borrowings                           |   |                | (16    | ) |   |   | (5 | ) |   |   | (21 | ) |
| FHLB advances                                   |   |                | (46    | ) |   |   | (252 | ) |   |   | (298 | ) |
| Subordinated debentures                         |   |                | 14     |   |   |   | - |   |   |   | 14 |   |
|                                            |   |                |   |   |   |   |   |   |   |   |   |   |
| Total interest bearing liabilities              |   |                | (477   | ) |   |   | 217 |   |   |   | (260 | ) |
|                                            |   |                |   |   |   |   |   |   |   |   |   |   |
| Net change in net interest income               |   | $                   | 426    |   |   | $ | (666 | ) |   | $ | (240 | ) |

|                                                                     |   | Three Months Ended |   |
|--------------------------------------------------------------------------|--------|--------------------|--------|
|                                                                     |   | March 31,          |   |
| (Dollars in thousands)                                                   |   | 2011               |   |   | 2010 |   |   | Change |   |   | % |   |
| Non-interest income                                                      |   |               |   |   |   |   |   |   |   |   |   |   |
| Customer service fees on deposit accounts                                |   | $                  | 1,445  |   |   | $ | 1,525 |   |   | $ | (80 | ) |   |   | -5.2 | % |
| Gain on sale of mortgage loans                                           |   |               | 265    |   |   |   | 299 |   |   |   | (34 | ) |   |   | -11.4 | % |
| Gain on sale of investments                                              |   |               | 69     |   |   |   | - |   |   |   | 69 |   |   |   | 100.0 | % |
| Loss on sale of investments                                              |   |               | -      |   |   |   | (23 | ) |   |   | 23 |   |   |   | -100.0 | % |
| Net impairment losses recognized in earnings                             |   |               | (37    | ) |   |   | (172 | ) |   |   | 135 |   |   |   | -78.5 | % |
| Loss on sale and write downs of real estate acquired through foreclosure |   |               | (235   | ) |   |   | (26 | ) |   |   | (209 | ) |   |   | 803.8 | % |
| Brokerage commissions                                                    |   |               | 107    |   |   |   | 93 |   |   |   | 14 |   |   |   | 15.1 | % |
| Other income                                                             |   |               | 379    |   |   |   | 442 |   |   |   | (63 | ) |   |   | -14.3 | % |
|                                                                     |   | $                  | 1,993  |   |   | $ | 2,138 |   |   | $ | (145 | ) |   |   | -6.8 | % |

----

|                                             |   | Three Months Ended |   |
|--------------------------------------------------|--------|--------------------|--------|
|                                             |   | March 31,          |   |
| (Dollars in thousands)                           |   | 2011               |   |   | 2010 |   |   | Change |   |   | % |   |
| Non-interest expenses                            |   |               |   |   |   |   |   |   |   |   |   |   |
| Employee compensation and benefits               |   | $                  | 4,329  |   |   | $ | 4,090 |   |   | $ | 239 |   |   |   | 5.8 | % |
| Office occupancy expense and equipment           |   |               | 811    |   |   |   | 804 |   |   |   | 7 |   |   |   | 0.9 | % |
| Marketing and advertising                        |   |               | 225    |   |   |   | 225 |   |   |   | - |   |   |   | 0.0 | % |
| Outside services and data processing             |   |               | 797    |   |   |   | 730 |   |   |   | 67 |   |   |   | 9.2 | % |
| Bank franchise tax                               |   |               | 314    |   |   |   | 350 |   |   |   | (36 | ) |   |   | -10.3 | % |
| FDIC insurance premiums                          |   |               | 970    |   |   |   | 660 |   |   |   | 310 |   |   |   | 47.0 | % |
| Amortization of core deposit intangible          |   |               | 77     |   |   |   | 64 |   |   |   | 13 |   |   |   | 20.3 | % |
| Real estate acquired through foreclosure expense |   |               | 382    |   |   |   | 155 |   |   |   | 227 |   |   |   | 146.5 | % |
| Other expense                                    |   |               | 1,501  |   |   |   | 1,196 |   |   |   | 305 |   |   |   | 25.5 | % |
|                                             |   | $                  | 9,406  |   |   | $ | 8,274 |   |   | $ | 1,132 |   |   |   | 13.7 | % |

----

|                               |   | March 31, |    |   | December 31, |   |
|------------------------------------|--------|-----------|---------|--------|--------------|--------|
| (Dollars in thousands)             |   | 2011      |    |   | 2010         |   |
|                               |   |      |    |   |         |   |
| Commercial                         |   | $         | 35,569  |   |         | $      | 42,265 |   |
| Commercial Real Estate:            |   |      |    |   |         |   |   |   |
| Land Development                   |   |      | 55,487  |   |         |   | 56,086 |   |
| Building Lots                      |   |      | 11,237  |   |         |   | 11,333 |   |
| Other                              |   |      | 484,977 |   |         |   | 490,345 |   |
| Real estate construction           |   |      | 7,964   |   |         |   | 11,034 |   |
| Residential mortgage               |   |      | 160,610 |   |         |   | 163,975 |   |
| Consumer and home equity           |   |      | 75,491  |   |         |   | 77,781 |   |
| Indirect consumer                  |   |      | 27,434  |   |         |   | 29,588 |   |
| Loans held for sale                |   |      | 4,055   |   |         |   | 6,388 |   |
|                               |   |      | 862,824 |   |         |   | 888,795 |   |
| Less:                              |   |      |    |   |         |   |   |   |
| Net deferred loan origination fees |   |      | (419    | )      |         |   | (473 | ) |
| Allowance for loan losses          |   |      | (24,591 | )      |         |   | (22,665 | ) |
|                               |   |      | (25,010 | )      |         |   | (23,138 | ) |
|                               |   |      |    |   |         |   |   |   |
| Net Loans                          |   | $         | 837,814 |   |         | $      | 865,657 |   |

----

|                                                    |   | Three Months Ended |   |
|---------------------------------------------------------|--------|--------------------|--------|
|                                                    |   | March 31,          |   |
| (Dollars in thousands)                                  |   | 2011               |   |   | 2010 |   |
|                                                    |   |               |   |   |   |   |
| Balance at beginning of period                          |   | $                  | 22,665 |   |   | $ | 17,719 |   |
|                                                    |   |               |   |   |   |   |   |   |
| Loans charged-off:                                      |   |               |   |   |   |   |   |   |
| Residential mortgage                                    |   |               | 19     |   |   |   | 543 |   |
| Consumer & home equity                              |   |               | 129    |   |   |   | 168 |   |
| Commercial & commercial real estate                 |   |               | 1,712  |   |   |   | - |   |
| Total charge-offs                                       |   |               | 1,860  |   |   |   | 711 |   |
| Recoveries:                                             |   |               |   |   |   |   |   |   |
| Residential mortgage                                    |   |               | -      |   |   |   | 1 |   |
| Consumer & home equity                              |   |               | 73     |   |   |   | 43 |   |
| Commercial & commercial real estate                 |   |               | 248    |   |   |   | 6 |   |
| Total recoveries                                        |   |               | 321    |   |   |   | 50 |   |
|                                                    |   |               |   |   |   |   |   |   |
| Net loans charged-off                                   |   |               | 1,539  |   |   |   | 661 |   |
|                                                    |   |               |   |   |   |   |   |   |
| Provision for loan losses                               |   |               | 3,465  |   |   |   | 1,752 |   |
|                                                    |   |               |   |   |   |   |   |   |
| Balance at end of period                                |   | $                  | 24,591 |   |   | $ | 18,810 |   |
|                                                    |   |               |   |   |   |   |   |   |
| Allowance for loan losses to total loans                |   |               |   |   |   |   |   |   |
| (excluding loans held for sale)                         |   |               | 2.86   | % |   |   | 1.95 | % |
| Annualized net charge-offs to average loans outstanding |   |               | 0.71   | % |   |   | 0.27 | % |
| Allowance for loan losses to total non-performing loans |   |               | 39     | % |   |   | 57 | % |

----

|                            |   | March 31, |    |   | December 31, |   |    | September 30, |   |   | June 30, |   |   | March 31, |    |
|---------------------------------|--------|-----------|---------|--------|--------------|--------|---------|---------------|--------|--------|----------|--------|--------|-----------|---------|
| (Dollars in thousands)          |   | 2011      |    |   | 2010         |   |    | 2010          |   |   | 2010     |   |   | 2010      |    |
| Criticized Loans:               |   |      |    |   |         |   |    |          |   |   |     |   |   |      |    |
| Total Criticized                |   | $         | 35,338  |   |         | $      | 28,309  |          |   | $      | 29,285   |   |   | $         | 52,564  |   |   | $ | 53,024 |   |
|                            |   |      |    |   |         |   |    |          |   |   |     |   |   |      |    |   |   |   |   |   |
| Classified Loans:               |   |      |    |   |         |   |    |          |   |   |     |   |   |      |    |   |   |   |   |   |
| Substandard                     |   | $         | 105,370 |   |         | $      | 95,663  |          |   | $      | 97,544   |   |   | $         | 74,305  |   |   | $ | 65,028 |   |
| Doubtful                        |   |      | 638     |   |         |   | 583     |          |   |   | 43       |   |   |      | 463     |   |   |   | 407 |   |
| Loss                            |   |      | 178     |   |         |   | 64      |          |   |   | 2,506    |   |   |      | 231     |   |   |   | 26 |   |
| Total Classified                |   | $         | 106,186 |   |         | $      | 96,310  |          |   | $      | 100,093  |   |   | $         | 74,999  |   |   | $ | 65,461 |   |
|                            |   |      |    |   |         |   |    |          |   |   |     |   |   |      |    |   |   |   |   |   |
| Total Criticized and Classified |   | $         | 141,524 |   |         | $      | 124,619 |          |   | $      | 129,378  |   |   | $         | 127,563 |   |   | $ | 118,485 |   |

----

|                   |   | March 31, |   |   | December 31, |   |
|------------------------|--------|-----------|--------|--------|--------------|--------|
| (Dollars in thousands) |   | 2011      |   |   | 2010         |   |
|                   |   |      |   |   |         |   |
| Beginning balance      |   | $         | 25,807 |   |         | $      | 8,428 |   |
| Additions              |   |      | 1,932  |   |         |   | 24,622 |   |
| Sales                  |   |      | (2,629 | )      |         |   | (4,928 | ) |
| Writedowns             |   |      | (202   | )      |         |   | (2,315 | ) |
| Ending balance         |   | $         | 24,908 |   |         | $      | 25,807 |   |

|                                                                |   | March 31, |   |   | December 31, |   |
|---------------------------------------------------------------------|--------|-----------|--------|--------|--------------|--------|
| (Dollar in thousands)                                               |   | 2011      |   |   | 2010         |   |
|                                                                |   |      |   |   |         |   |
| Restructured                                                        |   | $         | 18,751 |   |         | $      | 3,906 |   |
| Past due 90 days still on accrual                                   |   |      | -      |   |         |   | - |   |
| Loans on non-accrual status                                         |   |      | 44,899 |   |         |   | 42,169 |   |
|                                                                |   |      |   |   |         |   |   |   |
| Total non-performing loans                                          |   |      | 63,650 |   |         |   | 46,075 |   |
| Real estate acquired through foreclosure                            |   |      | 24,908 |   |         |   | 25,807 |   |
| Other repossessed assets                                            |   |      | 39     |   |         |   | 40 |   |
| Total non-performing assets                                         |   | $         | 88,597 |   |         | $      | 71,922 |   |
|                                                                |   |      |   |   |         |   |   |   |
| Interest income that would have been earned on non-performing loans |   | $         | 3,634  |   |         | $      | 2,654 |   |
| Interest income recognized on non-performing loans                  |   |      | 377    |   |         |   | 277 |   |
| Ratios:  Non-performing loans to total loans              |   |      |   |   |         |   |   |   |
|     (excluding loans held for sale)                       |   |      | 7.42   | %      |         |   | 5.22 | % |
|   Non-performing assets to total assets                        |   |      | 6.89   | %      |         |   | 5.45 | % |

----

----

|                    |   | March 31,      |      |   | December 31, |   |
|-------------------------|--------|----------------|-----------|--------|--------------|--------|
|                    |   | 2011           |      |   | 2010         |   |
|                    |   | (In Thousands) |      |
|                    |   |           |      |   |         |   |
| Non-interest bearing    |   | $              | 71,869    |   |         | $      | 73,566 |   |
| NOW demand              |   |           | 130,592   |   |         |   | 129,887 |   |
| Savings                 |   |           | 114,945   |   |         |   | 109,349 |   |
| Money market            |   |           | 151,123   |   |         |   | 157,135 |   |
| Certificates of deposit |   |           | 698,259   |   |         |   | 703,971 |   |
|                    |   | $              | 1,166,788 |   |         | $      | 1,173,908 |   |

----

----

----

|                         |   | Capital Adequacy Ratios as of |   |
|------------------------------|--------|-------------------------------|--------|
|                         |   | March 31, 2011                |   |
|                         |   | Regulatory                    |   |   |   |   |   |   |   |
| Risk-Based Capital Ratios    |   | Minimums                      |   |   | The Bank |   |   | The Corporation |   |
| Tier 1 capital (1)           |   |                          | 4.00   | % |   |   | 10.16 | % |   |   | 10.05 | % |
| Total risk-based capital (2) |   |                          | 8.00   | % |   |   | 11.43 | % |   |   | 11.32 | % |
| Tier 1 leverage ratio (3)    |   |                          | 4.00   | % |   |   | 7.08 | % |   |   | 7.01 | % |

|                                   |   |         |   |   | Ratio Required |   |   | Ratio Required |   |
|----------------------------------------|--------|--------------|--------|--------|----------------|--------|--------|----------------|--------|
|                                   |   | Actual as of |   |   | by the Order   |   |   | by the Order   |   |
|                                   |   | 3/31/2011    |   |   | at 3/31/2011   |   |   | at 6/30/2011   |   |
| Total capital to risk-weighted assets  |   |         | 11.43  | %      |           |   | 11.50  | %              |   |   | 12.00 | % |
| Tier 1 capital to average total assets |   |         | 7.08   | %      |           |   | 8.50   | %              |   |   | 9.00 | % |

----

|                  |   | March 31, 2011    |   |
|----------------------------|--------|-------------------|--------|
|                       |   | Decrease in Rates |   |   |   |   |   | Increase in Rates |   |
|                       |   | 200               |   |   | 100 |   |   |   |   |   | 100 |   |   | 200 |   |
| (Dollars in thousands)     |   | Basis Points      |   |   | Basis Points |   |   | Base |   |   | Basis Points |   |   | Basis Points |   |
|                       |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Projected interest income  |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                      |   | $                 | 49,528 |   |   | $ | 50,640 |   |   | $ | 51,712 |   |   | $ | 52,871 |   |   | $ | 54,036 |   |
| Investments                |   |              | 8,657  |   |   |   | 9,081 |   |   |   | 8,671 |   |   |   | 9,380 |   |   |   | 10,101 |   |
| Total interest income      |   |              | 58,185 |   |   |   | 59,721 |   |   |   | 60,383 |   |   |   | 62,251 |   |   |   | 64,137 |   |
|                       |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Projected interest expense |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                   |   |              | 17,568 |   |   |   | 17,670 |   |   |   | 17,967 |   |   |   | 19,010 |   |   |   | 19,222 |   |
| Borrowed funds             |   |              | 2,374  |   |   |   | 2,373 |   |   |   | 2,373 |   |   |   | 2,379 |   |   |   | 2,384 |   |
| Total interest expense     |   |              | 19,942 |   |   |   | 20,043 |   |   |   | 20,340 |   |   |   | 21,389 |   |   |   | 21,606 |   |
|                       |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income        |   | $                 | 38,243 |   |   | $ | 39,678 |   |   | $ | 40,043 |   |   | $ | 40,862 |   |   | $ | 42,531 |   |
| Change from base           |   | $                 | (1,800 | ) |   | $ | (365 | ) |   |   |   |   |   | $ | 819 |   |   | $ | 2,488 |   |
| % Change from base         |   |              | (4.50  | )% |   |   | (0.91 | )% |   |   |   |   |   |   | 2.05 | % |   |   | 6.21 | % |

|                  |   | December 31, 2010 |   |
|----------------------------|--------|-------------------|--------|
|                       |   | Decrease in Rates |   |   |   |   |   | Increase in Rates |   |
|                       |   | 200               |   |   | 100 |   |   |   |   |   | 100 |   |   | 200 |   |
| (Dollars in thousands)     |   | Basis Points      |   |   | Basis Points |   |   | Base |   |   | Basis Points |   |   | Basis Points |   |
|                       |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Projected interest income  |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                      |   | $                 | 51,538 |   |   | $ | 52,676 |   |   | $ | 53,694 |   |   | $ | 54,888 |   |   | $ | 56,060 |   |
| Investments                |   |              | 7,122  |   |   |   | 7,287 |   |   |   | 6,909 |   |   |   | 7,808 |   |   |   | 8,745 |   |
| Total interest income      |   |              | 58,660 |   |   |   | 59,963 |   |   |   | 60,603 |   |   |   | 62,696 |   |   |   | 64,805 |   |
|                       |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Projected interest expense |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                   |   |              | 17,668 |   |   |   | 17,764 |   |   |   | 18,068 |   |   |   | 19,048 |   |   |   | 19,278 |   |
| Borrowed funds             |   |              | 2,491  |   |   |   | 2,491 |   |   |   | 2,490 |   |   |   | 2,525 |   |   |   | 2,554 |   |
| Total interest expense     |   |              | 20,159 |   |   |   | 20,255 |   |   |   | 20,558 |   |   |   | 21,573 |   |   |   | 21,832 |   |
|                       |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income        |   | $                 | 38,501 |   |   | $ | 39,708 |   |   | $ | 40,045 |   |   | $ | 41,123 |   |   | $ | 42,973 |   |
| Change from base           |   | $                 | (1,544 | ) |   | $ | (337 | ) |   |   |   |   |   | $ | 1,078 |   |   | $ | 2,928 |   |
| % Change from base         |   |              | (3.86  | )% |   |   | (0.84 | )% |   |   |   |   |   |   | 2.69 | % |   |   | 7.31 | % |

----

|   | · | Starting May 16, 2011, the executive loan committee will review on a weekly basis any classified and/or collateral dependent loans as well as other real estate owned properties for new and updated appraisals, changes in market conditions and the status of the borrowers and/or guarantors; and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Establish a tracking system to be shared with the finance department, loan officers and special assets officers showing property name, loan/asset number, and the date the appraisals were ordered, received and reviewed, and what, if any, change in valuation occurred. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Item 1. | Legal Proceedings |
|--------|---------|-------------------|

|   | Item 1A. | Risk Factors |
|--------|----------|--------------|

----

|   | Item 2. | Unregistered Sales of Securities and Use of Proceeds |
|--------|---------|------------------------------------------------------|

|   | Item 3. | Defaults Upon Senior Securities |
|--------|---------|---------------------------------|

|   | Item 4. | [Removed and Reserved] |
|--------|---------|------------------------|

|   | Item 5. | Other Information |
|--------|---------|-------------------|

|   | Item 6. | Exhibits: |
|--------|---------|-----------|

|   | 31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act |
|--------|------|----------------------------------------------------------------------------------------|

|   | 31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act |
|--------|------|----------------------------------------------------------------------------------------|

|   | 32 | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 18 U.S.C. Section 1350 (As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Date:  May 19, 2011 | By: /s/ | B. Keith Johnson              |
|-------------------------------|---------|-------------------------------|
|                          |    | B. Keith Johnson              |
|                          |    | Chief Executive Officer       |
|                          |    |
| Date:  May 19, 2011 | By: /s/ | Gregory S. Schreacke          |
|                          |    | Gregory S. Schreacke          |
|                          |    | President                     |
|                          |    | Chief Financial Officer & |
|                          |    | Principal Accounting Officer  |

----

| Exhibit No. |   | Description                                                                                                                                                                    |
|-------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |   |                                                                                                                                                                           |
|   31.1 |   | Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act                                                                                         |
|        |   |                                                                                                                                                                           |
|   31.2 |   | Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act                                                                                         |
|        |   |                                                                                                                                                                           |
|   32   |   | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 (As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) |

----