----

----

| Pennsylvania                    |   | 23-2288763          |
|---------------------------------|--------|---------------------|
| (State or other jurisdiction of |   | (I.R.S. Employer    |
| Incorporation or organization)  |   | Identification No.) |

| 9 North High Street, West Chester, Pennsylvania |   | 19380      |
|-------------------------------------------------|--------|------------|
| (Address of principal executive office)         |   | (Zip code) |

| Large accelerated filer o | Accelerated filer x | Non-accelerated filer (Do not check if a smaller reporting company o | Smaller reporting company o |
|---------------------------|---------------------|----------------------------------------------------------------------|-----------------------------|

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INDEX

|     |                  |                                                                                               | PAGE   |
|----------|-----------------------|----------------------------------------------------------------------------------------------------|--------|
| Part I.  | FINANCIAL INFORMATION |                                                                                               |
|     |                  |                                                                                               |   |
|     | Item 1 -              | Financial Statements                                                                               |   |
|     |                  | Consolidated Balance SheetsJune 30, 2009 (unaudited) and December 31, 2008                         | 4      |
|     |                  |                                                                                               |   |
|     |                  | Consolidated Statements of IncomeThree and Six Months Ended June 30, 2009 and 2008 (unaudited)     | 5      |
|     |                  |                                                                                               |   |
|     |                  | Consolidated Statements of Cash FlowsSix-Months Ended June 30, 2009 and 2008 (unaudited)           | 6      |
|     |                  |                                                                                               |   |
|     |                  | Consolidated Statements of Stockholders' EquitySix-Months Ended June 30, 2009 and 2008 (unaudited) | 7      |
|     |                  |                                                                                               |   |
|     |                  | Notes to Consolidated Financial Statements (unaudited)                                             | 8-21   |
|     |                  |                                                                                               |   |
|     | Item 2 -              | Management's Discussion and Analysis of Financial Condition and Results of Operations              | 22-42  |
|     |                  |                                                                                               |   |
|     | Item 3 -              | Quantitative and Qualitative Disclosures About Market Risk                                         | 43     |
|     |                  |                                                                                               |   |
|     | Item 4 -              | Controls & Procedures                                                                          | 43     |
|     |                  |                                                                                               |   |
| Part II. | OTHER INFORMATION     |                                                                                               |
|     |                  |                                                                                               |   |
|     | Item 1 -              | Legal Proceedings                                                                                  | 44     |
|     |                  |                                                                                               |   |
|     | Item 1A -             | Risk Factors                                                                                       | 44     |
|     |                  |                                                                                               |   |
|     | Item 2 -              | Unregistered Sales of Equity Securities and Use of Proceeds                                        | 44     |
|     |                  |                                                                                               |   |
|     | Item 3 -              | Defaults Upon Senior Securities                                                                    | 44     |
|     |                  |                                                                                               |   |
|     | Item 4 -              | Submission of Matters to a Vote of Security Holders                                                | 44-45  |
|     |                  |                                                                                               |   |
|     | Item 5 -              | Other Information                                                                                  | 45     |
|     |                  |                                                                                               |   |
|     | Item 6 -              | Exhibits                                                                                           | 46     |
|     |                  |                                                                                               |   |
|     | Signatures            |                                                                                               | 47     |
|     |                  |                                                                                               |   |
|     | Index to Exhibits     |                                                                                               | 48     |
|     |                  |                                                                                               |   |
|     | Exhibits              |                                                                                               |   |

----

Index

ITEM 1.

| (Dollars in thousands)                                                                                                                       |   | June 30,    |      |   |         |   |
|----------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------|-----------|--------|--------------|--------|
|                                                                                                                                         |   | 2009        |      |   | December 31, |   |
|                                                                                                                                         |   | (unaudited) |      |   | 2008         |   |
| ASSETS                                                                                                                                       |   |        |      |   |         |   |
| Cash and due from banks                                                                                                                      |   | $           | 15,123    |   |         | $      | 24,939 |   |
| Federal funds sold and other overnight investments                                                                                           |   |        | 2,301     |   |         |   | 4,884 |   |
| Interest bearing deposits                                                                                                                    |   |        | 4,935     |   |         |   | 65,327 |   |
| Total cash and cash equivalents                                                                                                              |   |        | 22,359    |   |         |   | 95,150 |   |
|                                                                                                                                         |   |        |      |   |         |   |   |   |
| Investment securities available-for-sale, at fair value                                                                                      |   |        | 81,893    |   |         |   | 114,584 |   |
|                                                                                                                                         |   |        |      |   |         |   |   |   |
| Mortgage loans held for sale                                                                                                                 |   |        | 341,609   |   |         |   | 90,940 |   |
|                                                                                                                                         |   |        |      |   |         |   |   |   |
| Loans and leases                                                                                                                             |   |        | 947,914   |   |         |   | 940,083 |   |
| Less:  allowance for loan and lease losses                                                                                         |   |        | (12,016   | )      |         |   | (10,335 | ) |
| Net loans and leases                                                                                                                         |   |        | 935,898   |   |         |   | 929,748 |   |
|                                                                                                                                         |   |        |      |   |         |   |   |   |
| Premises and equipment, net                                                                                                                  |   |        | 23,613    |   |         |   | 22,076 |   |
| Net deferred tax asset                                                                                                                       |   |        | 8,615     |   |         |   | 8,585 |   |
| Due from mortgage investors                                                                                                                  |   |        | -         |   |         |   | 9,036 |   |
| Bank owned life insurance                                                                                                                    |   |        | 1,424     |   |         |   | 1,398 |   |
| Goodwill                                                                                                                                     |   |        | 8,126     |   |         |   | 5,906 |   |
| Other assets                                                                                                                                 |   |        | 27,739    |   |         |   | 22,755 |   |
| Total assets                                                                                                                                 |   | $           | 1,451,276 |   |         | $      | 1,300,178 |   |
| LIABILITIES                                                                                                                                  |   |        |      |   |         |   |   |   |
| Deposits                                                                                                                                     |   |        |      |   |         |   |   |   |
| Non-interest-bearing                                                                                                                         |   | $           | 155,297   |   |         | $      | 146,248 |   |
| Interest-bearing (including certificates of deposit over $100 of $163,117 and $100,018 at June 30, 2009 and December 31, 2008, respectively) |   |        | 860,137   |   |         |   | 868,944 |   |
| Total deposits                                                                                                                               |   |        | 1,015,434 |   |         |   | 1,015,192 |   |
| Federal Home Loan Bank advances and other borrowings                                                                                         |   |        | 305,373   |   |         |   | 171,170 |   |
| Subordinated debentures                                                                                                                      |   |        | 20,795    |   |         |   | 15,465 |   |
| Other liabilities                                                                                                                            |   |        | 19,670    |   |         |   | 13,034 |   |
| Total liabilities                                                                                                                            |   |        | 1,361,272 |   |         |   | 1,214,861 |   |
|                                                                                                                                         |   |        |      |   |         |   |   |   |
| STOCKHOLDERS' EQUITY                                                                                                                         |   |        |      |   |         |   |   |   |
| Common stock, par value $1.00; authorized 25,000,000 shares;                                                                                 |   |        |      |   |         |   |   |   |
| Outstanding, 6,331,975 at June 30, 2009 and December 31, 2008                                                                                |   |        | 6,332     |   |         |   | 6,332 |   |
| Additional paid-in capital                                                                                                                   |   |        | 23,492    |   |         |   | 24,708 |   |
| Retained earnings                                                                                                                            |   |        | 61,190    |   |         |   | 57,899 |   |
| Accumulated other comprehensive loss                                                                                                         |   |        | (2,404    | )      |         |   | (3,292 | ) |
| Treasury stock, at cost: 26,118 shares and 92,931 shares at June 30, 2009 and December 31, 2008, respectively                                |   |        | (409      | )      |         |   | (1,815 | ) |
| Total First Chester County Corporation stockholders’ equity                                                                            |   |        | 88,201    |   |         |   | 83,832 |   |
| Non-controlling interest                                                                                                                     |   |        | 1,803     |   |         |   | 1,485 |   |
| Total stockholders' equity                                                                                                                   |   |        | 90,004    |   |         |   | 85,317 |   |
|                                                                                                                                         |   |        |      |   |         |   |   |   |
| Total liabilities and stockholders' equity                                                                                                   |   | $           | 1,451,276 |   |         | $      | 1,300,178 |   |

----

Index

FIRST

| (Dollars in thousands - except per share)                                                                                                                   |   | Three Months EndedJune 30, |       |   | Six Months EndedJune 30, |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------|------------|--------|--------------------------|--------|
|                                                                                                                                                        |   | 2009                       |       |   | 2008                     |   |   | 2009 |   |   | 2008 |   |
| INTEREST INCOME                                                                                                                                             |   |                       |       |   |                     |   |   |   |   |   |   |   |
|      Loans and leases, including fees                                                                                              |   | $                          | 13,367     |   |                     | $      | 12,020 |   |   | $ | 26,572 |   |   | $ | 24,409 |   |
|      Mortgage loans held for sale                                                                                                  |   |                       | 3,095      |   |                     |   | 8 |   |   |   | 4,939 |   |   |   | 15 |   |
|      Investment securities                                                                                                         |   |                       | 996        |   |                     |   | 1,351 |   |   |   | 2,227 |   |   |   | 2,581 |   |
|      Federal funds sold and deposits in banks                                                                                      |   |                       | 17         |   |                     |   | 417 |   |   |   | 44 |   |   |   | 868 |   |
|                     Total interest income               |   |                       | 17,475     |   |                     |   | 13,796 |   |   |   | 33,782 |   |   |   | 27,873 |   |
| INTEREST EXPENSE                                                                                                                                            |   |                       |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
|      Deposits                                                                                                                      |   |                       | 3,883      |   |                     |   | 3,954 |   |   |   | 8,354 |   |   |   | 8,452 |   |
|      Subordinated debt                                                                                                             |   |                       | 252        |   |                     |   | 215 |   |   |   | 426 |   |   |   | 474 |   |
|      Federal Home Loan Bank and other borrowings                                                                                   |   |                       | 1,617      |   |                     |   | 1,478 |   |   |   | 3,153 |   |   |   | 2,920 |   |
|                     Total interest expense              |   |                       | 5,752      |   |                     |   | 5,647 |   |   |   | 11,933 |   |   |   | 11,846 |   |
|                                                                                                                                                        |   |                       |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income                                                                                                                                         |   |                       | 11,723     |   |                     |   | 8,149 |   |   |   | 21,849 |   |   |   | 16,027 |   |
|      Provision for loan and lease losses                                                                                           |   |                       | 1,572      |   |                     |   | 449 |   |   |   | 2,959 |   |   |   | 660 |   |
|                     Net interest income after provision |   |                       |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
|                     for loan and lease losses           |   |                       | 10,151     |   |                     |   | 7,700 |   |   |   | 18,890 |   |   |   | 15,367 |   |
|                                                                                                                                                        |   |                       |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| NON-INTEREST INCOME                                                                                                                                         |   |                       |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
|      Wealth management and advisory services                                                                                       |   |                       | 1,048      |   |                     |   | 1,080 |   |   |   | 1,966 |   |   |   | 2,075 |   |
|      Service charges on deposit accounts                                                                                           |   |                       | 659        |   |                     |   | 643 |   |   |   | 1,291 |   |   |   | 1,196 |   |
|      Gains (losses) on sales of investment securities, net                                                                         |   |                       | 89         |   |                     |   | (78 | ) |   |   | 1 |   |   |   | 184 |   |
|      Operating lease rental income                                                                                                 |   |                       | 345        |   |                     |   | 330 |   |   |   | 685 |   |   |   | 639 |   |
|      Net gains on the sale of fixed assets and OREO                                                                                |   |                       | 72         |   |                     |   | 45 |   |   |   | 117 |   |   |   | 91 |   |
|      Loan fees and other                                                                                                           |   |                       | 1,801      |   |                     |   | 89 |   |   |   | 2,836 |   |   |   | 180 |   |
|      Net gain from mortgage banking activities                                                                                     |   |                       | 13,416     |   |                     |   | 94 |   |   |   | 24,263 |   |   |   | 164 |   |
|      Bank owned life insurance                                                                                                     |   |                       | 13         |   |                     |   | 92 |   |   |   | 26 |   |   |   | 157 |   |
|      Other                                                                                                                         |   |                       | 545        |   |                     |   | 476 |   |   |   | 1,051 |   |   |   | 943 |   |
|                      Total non-interest income     |   |                       | 17,988     |   |                     |   | 2,771 |   |   |   | 32,236 |   |   |   | 5,629 |   |
|                                                                                                                                                        |   |                       |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| NON-INTEREST EXPENSE                                                                                                                                        |   |                       |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
|      Salaries and employee benefits                                                                                                |   |                       | 15,605     |   |                     |   | 4,201 |   |   |   | 27,769 |   |   |   | 8,998 |   |
|      Occupancy, equipment and data processing                                                                                      |   |                       | 2,893      |   |                     |   | 1,470 |   |   |   | 5,669 |   |   |   | 2,908 |   |
|      Depreciation expense on operating leases                                                                                      |   |                       | 290        |   |                     |   | 271 |   |   |   | 570 |   |   |   | 526 |   |
|      FDIC deposit insurance                                                                                                        |   |                       | 1,062      |   |                     |   | 118 |   |   |   | 1,475 |   |   |   | 212 |   |
|      Bank shares tax                                                                                                               |   |                       | 232        |   |                     |   | 193 |   |   |   | 467 |   |   |   | 386 |   |
|      Professional services                                                                                                         |   |                       | 1,677      |   |                     |   | 495 |   |   |   | 2,923 |   |   |   | 919 |   |
|      Marketing                                                                                                                     |   |                       | 566        |   |                     |   | 335 |   |   |   | 824 |   |   |   | 533 |   |
|      Other                                                                                                                         |   |                       | 2,002      |   |                     |   | 922 |   |   |   | 3,764 |   |   |   | 1,971 |   |
|                     Total non-interest expense          |   |                       | 24,327     |   |                     |   | 8,005 |   |   |   | 43,461 |   |   |   | 16,453 |   |
|                     Income before income taxes          |   |                       | 3,812      |   |                     |   | 2,466 |   |   |   | 7,665 |   |   |   | 4,543 |   |
| INCOME TAXES                                                                                                                                                |   |                       | 932        |   |                     |   | 624 |   |   |   | 1,995 |   |   |   | 1,181 |   |
| Net income including noncontrolling interests                                                                                                          |   | $                          | 2,880      |   |                     | $      | 1,842 |   |   | $ | 5,670 |   |   | $ | 3,362 |   |
| Less: Net income from non-controlling interests                                                                                                        |   |                       | 633        |   |                     |   | - |   |   |   | 870 |   |   |   | - |   |
| NET INCOME FOR FIRST CHESTER COUNTY CORPORATION                                                                                                             |   | $                          | 2,247      |   |                     | $      | 1,842 |   |   | $ | 4,800 |   |   | $ | 3,362 |   |
| PER SHARE DATA                                                                                                                                              |   |                       |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
|      Net income per share (Basic)                                                                                                  |   | $                          | 0.36       |   |                     | $      | 0.36 |   |   | $ | 0.77 |   |   | $ | 0.65 |   |
|      Net income per share (Diluted)                                                                                                |   | $                          | 0.36       |   |                     | $      | 0.35 |   |   | $ | 0.77 |   |   | $ | 0.65 |   |
|      Dividends declared                                                                                                            |   | $                          |  0.14 |   |                     | $      | 0.14 |   |   | $ | 0.28 |   |   | $ | 0.28 |   |
|                                                                                                                                                        |   |                       |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Basic weighted average shares outstanding                                                                                                                   |   |                       | 6,268,195  |   |                     |   | 5,187,398 |   |   |   | 6,255,295 |   |   |   | 5,181,955 |   |
|                                                                                                                                                        |   |                       |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Diluted weighted average shares outstanding                                                                                                                 |   |                       | 6,268,195  |   |                     |   | 5,206,736 |   |   |   | 6,255,295 |   |   |   | 5,202,278 |   |

----

Index

FIRST

| (Dollars in thousands)                                                                                                                        |   |                      |           |   |   |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------|----------------|--------|--------|--------|
|                                                                                                                                          |   | Six Months Ended June 30, |           |
|                                                                                                                                          |   | 2009                      |           |   | 2008   |   |
| OPERATING ACTIVITIES                                                                                                                          |   |                      |           |   |   |   |
|      Net income                                                                                                      |   | $                         |  4,800    |   |   | $      |  3,362 |   |
|      Adjustments to reconcile net income to net cash (used in)                                                       |   |                      |           |   |   |   |   |   |
|          Provided by operating activities:                                                            |   |                      |           |   |   |   |   |   |
|        Depreciation                                                                                        |   |                      | 1,835          |   |   |   | 1,221 |   |
|        Provision for loan and lease losses                                                                 |   |                      | 2,959          |   |   |   | 660 |   |
|        Amortization of investment security premiums and accretion of discounts, net                        |   |                      | 182            |   |   |   | 159 |   |
|        Amortization of deferred loan fees                                                                  |   |                      | (1,099         | )      |   |   | (411 | ) |
|        Gains on sales of investment securities, net                                                        |   |                      | (1             | )      |   |   | (184 | ) |
|        Gains from sales of assets                                                                          |   |                      | -              |   |   |   | (91 | ) |
|        Net gain from mortgage banking activities                                                           |   |                      | (24,263        | )      |   |   | (164 | ) |
|        Proceeds from the sale of mortgage loans held for sale                                              |   |                      | 1,218,374      |   |   |   | 9,636 |   |
|        Origination of mortgage loans held for sale                                                         |   |                      | (1,435,744     | )      |   |   | (9,966 | ) |
|        Net cash paid for the settlement of derivative contracts                                            |   |                      | (1,005         | )      |   |   | - |   |
|        Stock-based compensation expense                                                                    |   |                      | 100            |   |   |   | 92 |   |
|        Increase in other assets                                                                            |   |                      | (4,031         | )      |   |   | (677 | ) |
|        Increase (decrease) in other liabilities                                                            |   |                      | 5,762          |   |   |   | (1,368 | ) |
|                                                                                                                                          |   |                      |           |   |   |   |   |   |
|                Net cash provided by (used in) operating activities |   | $                         |  (232,131 | )      |   | $      | 2,269 |   |
|                                                                                                                                          |   |                      |           |   |   |   |   |   |
| INVESTING ACTIVITIES                                                                                                                          |   |                      |           |   |   |   |   |   |
|      Net increase in loans                                                                                           |   |                      | (8,010         | )      |   |   | (42,247 | ) |
|      Proceeds from sales of investment securities available-for-sale                                                 |   |                      | 30,333         |   |   |   | 13,228 |   |
|      Proceeds from maturities of investment securities available-for-sale                                            |   |                      | 6,867          |   |   |   | 9,537 |   |
|      Purchases of investment securities available-for-sale                                                           |   |                      | (5,786         | )      |   |   | (41,542 | ) |
|      Purchase of BOLI (Bank Owned Life Insurance)                                                                    |   |                      | -              |   |   |   | (10,000 | ) |
|      Purchase of premises and equipment                                                                              |   |                      | (3,372         | )      |   |   | (3,139 | ) |
|      Proceeds from the sale of fixed assets                                                                          |   |                      | -              |   |   |   | 48 |   |
|                                                                                                                                          |   |                      |           |   |   |   |   |   |
|                Net cash provided by (used in) investing activities |   | $                         | 20,032         |   |   | $      | (74,115 | ) |
|                                                                                                                                          |   |                      |           |   |   |   |   |   |
| FINANCING ACTIVITIES                                                                                                                          |   |                      |           |   |   |   |   |   |
|      Change in subsidiary’s shares from non-controlling interest                                               |   |                      | 318            |   |   |   | - |   |
|      Increase in short term Loan Bank Federal Home  and other short term borrowings                        |   |                      | 145,000        |   |   |   | - |   |
|      Increase in long term Federal Home Loan Bank and other borrowings                                               |   |                      | 48,300         |   |   |   | 51,500 |   |
|      Repayment of long term Federal Home Loan Bank and other borrowings                                              |   |                      | (59,097        | )      |   |   | (13,782 | ) |
|      Proceeds from issuance of subordinated debentures                                                               |   |                      | 5,330          |   |   |   | - |   |
|      Net increase in deposits                                                                                        |   |                      | 241            |   |   |   | 24,448 |   |
|      Cash dividends paid                                                                                             |   |                      | (874           | )      |   |   | (1,453 | ) |
|      Net increase (decrease) in treasury stock transactions                                                          |   |                      | 90             |   |   |   | (69 | ) |
|                                                                                                                                          |   |                      |           |   |   |   |   |   |
|                Net cash provided by financing activities           |   |                      | 139,308        |   |   |   | 60,644 |   |
|                                                                                                                                          |   |                      |           |   |   |   |   |   |
|                NET DECREASE IN CASH AND CASH EQUIVALENTS           |   |                      | (72,791        | )      |   |   | (11,202 | ) |
|                                                                                                                                          |   |                      |           |   |   |   |   |   |
| Cash and cash equivalents at beginning of period                                                                                              |   |                      | 95,150         |   |   |   | 53,360 |   |
|                                                                                                                                          |   |                      |           |   |   |   |   |   |
| Cash and cash equivalents at end of period                                                                                                    |   | $                         | 22,359         |   |   | $      | 42,158 |   |

----

Index

FIRST

|                                                              |   |        |      |   |      |   |   |       |   |   |          |   |   | Accumulated   |   |   |        |   |   |                |   |   |          |   |   |   |   |
|-------------------------------------------------------------------|--------|-------------|-----------|--------|-----------|--------|--------|------------|--------|--------|---------------|--------|--------|---------------|--------|--------|-------------|--------|--------|---------------------|--------|--------|---------------|--------|--------|--------|--------|
|                                                              |   |        |      |   |      |   |   | Additional |   |   |          |   |   | Other         |   |   |        |   |   | Non-                |   |   | Total         |   |   |   |   |
|                                                              |   | CommonStock |      |   | Paid-in   |   |   | Retained   |   |   | Comprehensive |   |   | Treasury      |   |   | controlling |   |   | Stockholders’ |   |   | Comprehensive |   |
| (Dollars in thousands)                                            |   | Shares      |      |   | Par Value |   |   | Capital    |   |   | Earnings      |   |   | Income/(loss) |   |   | Stock       |   |   | Interest            |   |   | Equity        |   |   | Income |   |
|                                                              |   |        |      |   |      |   |   |       |   |   |          |   |   |          |   |   |        |   |   |                |   |   |          |   |   |   |   |
| Balance January 1, 2008                                           |   |        | 5,279,815 |   |      | $      | 5,280  |       |   | $      | 11,113        |   |   | $             | 55,347 |   |        | $      | (1,207 | )                   |   | $      | (2,554        | )      |   |   | -      |   |   | $ | 67,979 |   |   |   |   |
|                                                              |   |        |      |   |      |   |   |       |   |   |          |   |   |          |   |   |        |   |   |                |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                        |   |        |      |   |      |   |   |       |   |   |          |   |   |          | 3,362  |   |        |   |   |                |   |   |          |   |   |   |   |   |   |   | 3,362 |   |   | $ | 3,362 |   |
| Cash dividends declared                                           |   |        |      |   |      |   |   |       |   |   |          |   |   |          | (1,453 | )      |        |   |   |                |   |   |          |   |   |   |   |   |   |   | (1,453 | ) |   |   |   |   |
| Other comprehensive income                                        |   |        |      |   |      |   |   |       |   |   |          |   |   |          |   |   |        |   |   |                |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net unrealized losses on investment securities available-for-sale |   |        |      |   |      |   |   |       |   |   |          |   |   |          |   |   |        |   | (1,270 | )                   |   |   |          |   |   |   |   |   |   |   | (1,270 | ) |   |   | (1,270 | ) |
| Treasury stock transactions                                       |   |        |      |   |      |   |   |       |   |   | (723          | )      |   |          |   |   |        |   |   |                |   |   | 746           |   |   |   |   |   |   |   | 23 |   |   |   |   |   |
| Total comprehensive income                                        |   |        |      |   |      |   |   |       |   |   |          |   |   |          |   |   |        |   |   |                |   |   |          |   |   |   |   |   |   |   |   |   |   | $ | 2,092 |   |
|                                                              |   |        |      |   |      |   |   |       |   |   |          |   |   |          |   |   |        |   |   |                |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance June 30, 2008                                             |   |        | 5,279,815 |   |      | $      | 5,280  |       |   | $      | 10,390        |   |   | $             | 57,256 |   |        | $      | (2,477 | )                   |   | $      | (1,808        | )      |   |   | -      |   |   | $ | 68,641 |   |   |   |   |   |
|                                                              |   |        |      |   |      |   |   |       |   |   |          |   |   |          |   |   |        |   |   |                |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance January 1, 2009                                           |   |        | 6,331,975 |   |      | $      | 6,332  |       |   | $      | 24,708        |   |   | $             | 57,899 |   |        | $      | (3,292 | )                   |   | $      | (1,815        | )      |   |   | 1,485  |   |   | $ | 85,317 |   |   |   |   |   |
|                                                              |   |        |      |   |      |   |   |       |   |   |          |   |   |          |   |   |        |   |   |                |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cumulative effect adjustment under FASB no. 156                   |   |        |      |   |      |   |   |       |   |   |          |   |   |          | 240    |   |        |   |   |                |   |   |          |   |   |   |   |   |   |   | 240 |   |   |   |   |   |
| Balance January 1, 2009, as adjusted                              |   |        | 6,331,975 |   |      |   | 6,332  |       |   |   | 24,708        |   |   |          | 58,139 |   |        |   | (3,292 | )                   |   |   | (1,815        | )      |   |   | 1,485  |   |   |   | 85,557 |   |   |   |   |   |
|                                                              |   |        |      |   |      |   |   |       |   |   |          |   |   |          |   |   |        |   |   |                |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Change in subsidiary shares from non-controlling interest         |   |        |      |   |      |   |   |       |   |   |          |   |   |          |   |   |        |   |   |                |   |   |          |   |   |   | (552   | ) |   |   | (552 | ) |   |   |   |   |
| Net income                                                        |   |        |      |   |      |   |   |       |   |   |          |   |   |          | 4,800  |   |        |   |   |                |   |   |          |   |   |   | 870    |   |   |   | 5,670 |   |   |   | 5,670 |   |
| Cash dividends declared                                           |   |        |      |   |      |   |   |       |   |   |          |   |   |          | (1,749 | )      |        |   |   |                |   |   |          |   |   |   |   |   |   |   | (1,749 | ) |   |   |   |   |
| Other comprehensive income                                        |   |        |      |   |      |   |   |       |   |   |          |   |   |          |   |   |        |   |   |                |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net unrealized gains on investment securities available-for-sale  |   |        |      |   |      |   |   |       |   |   |          |   |   |          |   |   |        |   | 888    |                |   |   |          |   |   |   |   |   |   |   | 888 |   |   |   | 888 |   |
| Treasury stock transactions                                       |   |        |      |   |      |   |   |       |   |   | (1,316        | )      |   |          |   |   |        |   |   |                |   |   | 1,406         |   |   |   |   |   |   |   | 90 |   |   |   |   |   |
| Stock based compensation                                          |   |        |      |   |      |   |   |       |   |   | 100           |   |   |          |   |   |        |   |   |                |   |   |          |   |   |   |   |   |   |   | 100 |   |   |   |   |   |
| Total comprehensive income                                        |   |        |      |   |      |   |   |       |   |   |          |   |   |          |   |   |        |   |   |                |   |   |          |   |   |   |   |   |   |   |   |   |   | $ | 6,558 |   |
|                                                              |   |        |      |   |      |   |   |       |   |   |          |   |   |          |   |   |        |   |   |                |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance June 30, 2009                                             |   |        | 6,331,975 |   |      | $      | 6,332  |       |   | $      | 23,492        |   |   | $             | 61,190 |   |        | $      | (2,404 | )                   |   | $      | (409          | )      |   |   | 1,803  |   |   | $ | 90,004 |   |   |   |   |   |

----

Index

FIRST 

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

| 2.   | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|----------------|--------------------------------------------|

| 3.  | ACCOUNTING FOR STOCK-BASED COMPENSATION PLANS |
|----------|-----------------------------------------------|

|   |  (Dollars in thousands, except shares, and per share data) |   |   |   |   |                  |   |                                         |
|--------|-----------------------------------------------------------------|--------|--------|--------|--------|-----------------------|--------|----------------------------------------------|
|   |                                                            |   | Shares |   |   | Grant Date Fair Value |   | Aggregate Intrinsic Value of Unvested Shares |
|   | Unvested at January 1, 2009                                     |   |   | 44,075 |   |                  |   | $18.74                                       |   |   |
|   | Granted                                                         |   |   | 54,650 |   |                  |   | $11.35                                       |   |   |
|   | Vested                                                          |   |   | 6,400  |   |                  |   | $21.05                                       |   |   |
|   | Forfeited                                                       |   |   |   |   |                  |   |                                         |   |   |
|   | Unvested at June 30, 2009                                       |   |   | 92,325 |   |                  |   | $14.21                                       |   | $950.9 |

----

Index

|   | (Dollars in thousands, except shares, per share and years data) |   |               |    |   |                          |   |   |                                             |   |   |                    |   |
|--------|-----------------------------------------------------------------|--------|--------------------|---------|--------|-------------------------------|--------|--------|--------------------------------------------------|--------|--------|-------------------------|--------|
|   |    Options                                       |   |   Shares |    |   | Weighted-AverageExercisePrice |   |   | Weighted-AverageRemainingContractualTerm (years) |   |   | AggregateIntrinsicValue |   |
|   | Outstanding at January 1, 2009                                  |   |               | 298,034 |   |                          | $      | 15.43  |                                             |   |   | -                       |   |   | $ | - |   |
|   | Granted                                                         |   |               | -       |   |                          |   | -      |                                             |   |   | -                       |   |   |   | - |   |
|   | Exercised                                                       |   |               | -       |   |                          |   | -      |                                             |   |   | -                       |   |   |   | - |   |
|   | Forfeited                                                       |   |               | -       |   |                          |   | -      |                                             |   |   | -                       |   |   |   | - |   |
|   | Expired                                                         |   |               | (8,987  | )      |                          | $      | 18.04  |                                             |   |   | -                       |   |   |   | - |   |
|   | Outstanding at June 30, 2009                                    |   |               | 289,047 |   |                          | $      | 15.35  |                                             |   |   | 3.12                    |   |   | $ | - |   |
|   | Exercisable at June 30, 2009                                    |   |               | 289,047 |   |                          | $      | 15.35  |                                             |   |   | 3.12                    |   |   | $ | - |   |

|   | There were no options granted during the six months ended June 30, 2009.  The total intrinsic value (market value on date of exercise less grant price) of options exercised during the year ended December 31, 2008 was $0. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.   | EARNINGS PER SHARE |
|----------------|--------------------|

|   | Three Months ended June 30, 2009 |
|--------|----------------------------------|

|   |                                                          |   | Income      |   |   |          |   |      |      |   |
|--------|---------------------------------------------------------------|--------|-------------|--------|--------|---------------|--------|-----------|-----------|--------|
|   |                                                          |   | (thousands) |   |   | Shares        |   |      | Per Share |   |
|   |                                                          |   | (numerator) |   |   | (denominator) |   |      | Amount    |   |
|   | Basic earnings per share                                      |   |        |   |   |          |   |      |      |   |
|   |    Net income available to common stockholders |   | $           | 2,247  |   |          |   | 6,268,195 |      |   | $ | 0.36 |   |
|   | Effect of Dilutive Securities                                 |   |        |   |   |          |   |      |      |   |   |   |   |
|   |    Options to purchase common stock            |   |        | -      |   |          |   | -         |      |   |   | - |   |
|   | Diluted earnings per share                                    |   |        |   |   |          |   |      |      |   |   |   |   |
|   |    Net income available to common stockholders |   | $           | 2,247  |   |          |   | 6,268,195 |      |   | $ | 0.36 |   |

|   | Six Months ended June 30, 2009 |
|--------|--------------------------------|

|   |                                                          |   | Income      |   |   |          |   |      |      |   |
|--------|---------------------------------------------------------------|--------|-------------|--------|--------|---------------|--------|-----------|-----------|--------|
|   |                                                          |   | (thousands) |   |   | Shares        |   |      | Per Share |   |
|   |                                                          |   | (numerator) |   |   | (denominator) |   |      | Amount    |   |
|   | Basic earnings per share                                      |   |        |   |   |          |   |      |      |   |
|   |    Net income available to common stockholders |   | $           | 4,800  |   |          |   | 6,255,295 |      |   | $ | 0.77 |   |
|   | Effect of Dilutive Securities                                 |   |        |   |   |          |   |      |      |   |   |   |   |
|   |    Options to purchase common stock            |   |        | -      |   |          |   | -         |      |   |   | - |   |
|   | Diluted earnings per share                                    |   |        |   |   |          |   |      |      |   |   |   |   |
|   |    Net income available to common stockholders |   | $           | 4,800  |   |          |   | 6,255,295 |      |   | $ | 0.77 |   |

----

Index

|   | Three Months ended June 30, 2008 |
|--------|----------------------------------|

|   |                                                          |   | Income      |   |   |          |   |      |      |   |
|--------|---------------------------------------------------------------|--------|-------------|--------|--------|---------------|--------|-----------|-----------|--------|
|   |                                                          |   | (thousands) |   |   | Shares        |   |      | Per Share |   |
|   |                                                          |   | (numerator) |   |   | (denominator) |   |      | Amount    |   |
|   | Basic earnings per share                                      |   |        |   |   |          |   |      |      |   |
|   |    Net income available to common stockholders |   | $           | 1,842  |   |          |   | 5,187,398 |      |   | $ | 0.36 |   |
|   | Effect of Dilutive Securities                                 |   |        |   |   |          |   |      |      |   |   |   |   |
|   |    Options to purchase common stock            |   |        | -      |   |          |   | 19,338    |      |   |   | (.01 | ) |
|   | Diluted earnings per share                                    |   |        |   |   |          |   |      |      |   |   |   |   |
|   |    Net income available to common stockholders |   | $           | 1,842  |   |          |   | 5,206,736 |      |   | $ | 0.35 |   |

|   | Six Months ended June 30, 2008 |
|--------|--------------------------------|

|   |                                                          |   | Income      |   |   |          |   |      |      |   |
|--------|---------------------------------------------------------------|--------|-------------|--------|--------|---------------|--------|-----------|-----------|--------|
|   |                                                          |   | (thousands) |   |   | Shares        |   |      | Per Share |   |
|   |                                                          |   | (numerator) |   |   | (denominator) |   |      | Amount    |   |
|   | Basic earnings per share                                      |   |        |   |   |          |   |      |      |   |
|   |    Net income available to common stockholders |   | $           | 3,362  |   |          |   | 5,181,955 |      |   | $ | 0.65 |   |
|   | Effect of Dilutive Securities                                 |   |        |   |   |          |   |      |      |   |   |   |   |
|   |    Options to purchase common stock            |   |        | -      |   |          |   | 20,323    |      |   |   | - |   |
|   | Diluted earnings per share                                    |   |        |   |   |          |   |      |      |   |   |   |   |
|   |    Net income available to common stockholders |   | $           | 3,362  |   |          |   | 5,202,278 |      |   | $ | 0.65 |   |

| 5.   | COMPREHENSIVE INCOME |
|----------------|----------------------|

|   | Components of comprehensive income are presented in the following chart: |
|--------|--------------------------------------------------------------------------|

|   |                                                            |   | Three Months Ended June 30, |   |   | Six Months Ended June 30, |   |
|--------|-----------------------------------------------------------------|--------|-----------------------------|--------|--------|--------------------------------|--------|
|   |                                                            |   | 2009                        |   |   | 2008                           |   |   | 2009 |   |   | 2008 |   |
|   | Unrealized gains (losses) on securities:                        |   |                        |   |   |                           |   |   |   |   |   |   |   |
|   | Unrealized gains (losses) arising in period                     |   | $                           | 1,869  |   |                           | $      | (2,118 | ) |   | $ | 1,345 |   |   | $ | (2,108 | ) |
|   | Reclassification adjustment                                     |   |                        | 89     |   |                           |   | (78 | ) |   |   | 1 |   |   |   | 184 |   |
|   | Net unrealized  gain (loss)                           |   |                        | 1,958  |   |                           |   | (2,196 | ) |   |   | 1,346 |   |   |   | (1,924 | ) |
|   | Other comprehensive income (loss) before taxes                  |   |                        | 1,958  |   |                           |   | (2,196 | ) |   |   | 1,346 |   |   |   | (1,924 | ) |
|   | Income tax benefit (expense)                                    |   |                        | (666   | )      |                           |   | 747 |   |   |   | (458 | ) |   |   | 654 |   |
|   | Other comprehensive income (loss)                               |   |                        | 1,292  |   |                           |   | (1,449 | ) |   |   | 888 |   |   |   | (1,270 | ) |
|   | Net income including non-controlling interests                  |   |                        | 2,880  |   |                           |   | 1,842 |   |   |   | 5,670 |   |   |   | 3,362 |   |
|   | Comprehensive income                                            |   |                        | 4,172  |   |                           |   | 393 |   |   |   | 6,558 |   |   |   | 2,092 |   |
|   | Comprehensive income attributable to non- controlling interests |   |                        | 633    |   |                           |   | - |   |   |   | 870 |   |   |   | - |   |
|   | Comprehensive income for First Chester County Corporation       |   | $                           | 3,539  |   |                           | $      | 393 |   |   | $ | 5,688 |   |   | $ | 2,092 |   |

----

Index

| 6.   | CASH FLOW INFORMATION |
|----------------|-----------------------|

| 7.   | ACQUISITION |
|----------------|-------------|

|   |                                 |   | Goodwill Balance |   |
|--------|--------------------------------------|--------|------------------|--------|
|   |                                 |   |             |   |
|   | December 31, 2008                    |   | $                | 5,906  |   |
|   |                                 |   |             |   |   |
|   | Adjustment to consideration paid (A) |   |             | 1,600  |   |
|   |                                 |   |             |   |   |
|   | Other adjustments (B)                |   |             | 620    |   |
|   |                                 |   |             |   |   |
|   | June 30, 2009                        |   | $                | 8,126  |   |

| (A)   | During the first quarter of 2009, the Corporation recorded a $1.6 million purchase accounting adjustment related to additional consideration identified for the acquisition. This amount relates to the lump sum payments for the AHB shares of former executive officers of AHB in connection with the finalization of the AHB Management Incentive Plan (as describedin the Corporation's Current Report on Form 8-K filed on May 5, 2009 containing Item 5.02 disclosure). The full amount of this additional consideration was allocated to goodwill. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (B)   | Other adjustments relate to amounts recorded in the second quarter of 2009 to updated acquisition date valuation estimates of certain assets and liabilities including other real estate owned, deferred rent, expense accruals and deferred tax assets. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

| 8.   | SEGMENT REPORTING |
|----------------|-------------------|

|   | (Dollars in thousands)     |   | As of and for the three months ended June 30, 2009 |    |
|--------|----------------------------|--------|----------------------------------------------------|---------|
|   |                       |   |                                               |    |   |   |   |   |   |   |
|   |                       |   | Community Banking                                  |    |   | Mortgage Banking |   |   |   |   |
|   |                       |   | Segment                                            |    |   | Segment |   |   | Consolidated |   |
|   |                       |   |                                               |    |   |   |   |   |   |   |
|   | Total assets               |   | $                                                  | 973,305 |   |   | $ | 477,971 |   |   | $ | 1,451,276 |   |
|   |                       |   |                                               |    |   |   |   |   |   |   |   |   |   |
|   | Net interest income        |   | $                                                  | 8,862   |   |   | $ | 2,861 |   |   | $ | 11,723 |   |
|   |                       |   |                                               |    |   |   |   |   |   |   |   |   |   |
|   | Total non-interest income  |   | $                                                  | 2,707   |   |   | $ | 15,281 |   |   | $ | 17,988 |   |
|   | Total non-interest expense |   | $                                                  | 10,442  |   |   | $ | 13,885 |   |   | $ | 24,327 |   |
|   |                       |   |                                               |    |   |   |   |   |   |   |   |   |   |
|   | Net Income                 |   | $                                                  | 77      |   |   | $ | 2,170 |   |   | $ | 2,247 |   |

|   | (Dollars in thousands)     |   | As of and for the six months ended June 30, 2009 |    |
|--------|----------------------------|--------|--------------------------------------------------|---------|
|   |                       |   |                                             |    |   |   |   |   |   |   |
|   |                       |   | Community Banking                                |    |   | Mortgage Banking |   |   |   |   |
|   |                       |   | Segment                                          |    |   | Segment |   |   | Consolidated |   |
|   |                       |   |                                             |    |   |   |   |   |   |   |
|   | Total assets               |   | $                                                | 973,305 |   |   | $ | 477,971 |   |   | $ | 1,451,276 |   |
|   |                       |   |                                             |    |   |   |   |   |   |   |   |   |   |
|   | Net interest income        |   | $                                                | 16,910  |   |   | $ | 4,939 |   |   | $ | 21,849 |   |
|   |                       |   |                                             |    |   |   |   |   |   |   |   |   |   |
|   | Total non-interest income  |   | $                                                | 5,030   |   |   | $ | 27,206 |   |   | $ | 32,236 |   |
|   | Total non-interest expense |   | $                                                | 19,398  |   |   | $ | 24,063 |   |   | $ | 43,461 |   |
|   |                       |   |                                             |    |   |   |   |   |   |   |   |   |   |
|   | Net Income                 |   | $                                                | 547     |   |   | $ | 4,253 |   |   | $ | 4,800 |   |

----

Index

|   | (Dollars in thousands)     |   | As of and for the three months ended June 30, 2008 |    |
|--------|----------------------------|--------|----------------------------------------------------|---------|
|   |                       |   |                                               |    |   |   |   |   |   |   |
|   |                       |   | Community Banking                                  |    |   | Mortgage Banking |   |   |   |   |
|   |                       |   | Segment                                            |    |   | Segment |   |   | Consolidated |   |
|   |                       |   |                                               |    |   |   |   |   |   |   |
|   | Total assets               |   | $                                                  | 976,150 |   |   | $ | - |   |   | $ | 976,150 |   |
|   |                       |   |                                               |    |   |   |   |   |   |   |   |   |   |
|   | Net interest income        |   | $                                                  | 8,149   |   |   | $ | - |   |   | $ | 8,149 |   |
|   |                       |   |                                               |    |   |   |   |   |   |   |   |   |   |
|   | Total non-interest income  |   | $                                                  | 2,771   |   |   | $ | - |   |   | $ | 2,771 |   |
|   | Total non-interest expense |   | $                                                  | 8,005   |   |   | $ | - |   |   | $ | 8,005 |   |
|   |                       |   |                                               |    |   |   |   |   |   |   |   |   |   |
|   | Net Income                 |   | $                                                  | 1,842   |   |   | $ | - |   |   | $ | 1,842 |   |

|   |  (Dollars in thousands) |   | As of and for the six months ended June 30, 2008 |    |
|--------|------------------------------|--------|--------------------------------------------------|---------|
|   |                         |   |                                             |    |   |   |   |   |   |   |
|   |                         |   | Community Banking                                |    |   | Mortgage Banking |   |   |   |   |
|   |                         |   | Segment                                          |    |   | Segment |   |   | Consolidated |   |
|   |                         |   |                                             |    |   |   |   |   |   |   |
|   | Total assets                 |   | $                                                | 976,150 |   |   | $ | - |   |   | $ | 976,150 |   |
|   |                         |   |                                             |    |   |   |   |   |   |   |   |   |   |
|   | Net interest income          |   | $                                                | 16,027  |   |   | $ | - |   |   | $ | 16,027 |   |
|   |                         |   |                                             |    |   |   |   |   |   |   |   |   |   |
|   | Total non-interest income    |   | $                                                | 5,629   |   |   | $ | - |   |   | $ | 5,629 |   |
|   | Total non-interest expense   |   | $                                                | 16,453  |   |   | $ | - |   |   | $ | 16,453 |   |
|   |                         |   |                                             |    |   |   |   |   |   |   |   |   |   |
|   | Net Income                   |   | $                                                | 3,362   |   |   | $ | - |   |   | $ | 3,362 |   |

| 9.   | RECENT ACCOUNTING PRONOUNCEMENTS |
|----------------|----------------------------------|

----

Index

----

Index

| 10.   | FAIR VALUE MEASUREMENT AND FAIR VALUE OF FINANCIAL INSTRUMENTS |
|-----------------|----------------------------------------------------------------|

----

Index

|   | The table below presents the balance of assets and liabilities at June 30, 2009, measured at fair value on a recurring basis:  |
|--------|-------------------------------------------------------------------------------------------------------------------------------------|

|   | Dollars in thousands                     |   |    |   |   |    |   |    |    |   |   |   |   |
|--------|------------------------------------------|--------|---------|--------|--------|---------|--------|---------|---------|--------|--------|--------|--------|
|   |                                     |   | Level 1 |   |   | Level 2 |   |    | Level 3 |   |   | Total  |   |
|   | Assets                                   |   |    |   |   |    |   |    |    |   |   |   |   |
|   | Investment securities available for sale |   | $       | 937    |   |    | $      | 80,956  |    |   | $      | -      |   |   | $ | 81,893 |   |
|   | Loans held for sale                      |   |    | -      |   |    |   | 341,609 |    |   |   | -      |   |   |   | 341,609 |   |
|   | Mortgage servicing rights                |   |    | -      |   |    |   | -       |    |   |   | 532    |   |   |   | 532 |   |
|   | Interest rate lock commitments           |   |    | -      |   |    |   | -       |    |   |   | 1,717  |   |   |   | 1,717 |   |
|   | Liabilities                              |   |    |   |   |    |   |    |    |   |   |   |   |   |   |   |   |
|   | Forward sales commitments                |   | $       | -      |   |    | $      | 449     |    |   | $      | -      |   |   | $ | 449 |   |

----

Index

|   | Dollars in thousands        |   |    |   |   |    |   |   |    |   |   |   |   |
|--------|-----------------------------|--------|---------|--------|--------|---------|--------|--------|---------|--------|--------|--------|--------|
|   |                        |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |   | Total  |   |
|   |                        |   |    |   |   |    |   |   |    |   |   |   |   |
|   | Impaired loans & leases |   | $       | -      |   |    | $      | -      |    |   | $      | 17,045 |   |   | $ | 17,045 |   |
|   |                        |   |    |   |   |    |   |   |    |   |   |   |   |   |   |   |   |
|   | OREO                        |   |    | -      |   |    |   | -      |    |   |   | 1,592  |   |   |   | 1,592 |   |

| Dollars in thousands                  |   | Mortgage Servicing Rights |   |   | Interest Rate lock Commitments |   |   | Loans  |   |   | OREO   |   |
|---------------------------------------|--------|---------------------------|--------|--------|--------------------------------|--------|--------|--------|--------|--------|--------|--------|
| Beginning balance                     |   | $                         | 239    |   |                           | $      | 412    |   |   | $      | 9,658  |   |   | $ | 1,872 |   |
| Net transferred into (out of) level 3 |   |                      | 239    |   |                           |   | 1,305  |   |   |   | 8,597  |   |   |   | (280 | ) |
| Net unrealized gains (losses)         |   |                      | 54     |   |                           |   | -      |   |   |   | (1,210 | )      |   |   |   |   |
| Ending Balance                        |   | $                         | 532    |   |                           | $      | 1,717  |   |   | $      | 17,045 |   |   | $ | 1,592 |   |

|   |                                                           |   | June 30, 2009 |      |   | December 31, 2008 |   |
|--------|----------------------------------------------------------------|--------|---------------|-----------|--------|-------------------|--------|
|   | (Dollars in thousands)                                         |   | Estimated     |      |   | Carrying          |   |   | Estimated |   |   | Carrying |   |
|   |                                                           |   | Fair Value    |      |   | Amount            |   |   | Fair Value |   |   | Amount |   |
|   | Financial Assets                                               |   |          |      |   |              |   |   |   |   |   |   |   |
|   | Cash and cash equivalents                                      |   | $             | 22,359    |   |              | $      | 22,359 |   |   | $ | 95,150 |   |   | $ | 95,150 |   |
|   | Investment securities available-for-sale                       |   |          | 81,893    |   |              |   | 81,893 |   |   |   | 114,584 |   |   |   | 114,584 |   |
|   | Loans held for sale                                            |   |          | 341,609   |   |              |   | 341,609 |   |   |   | 90,940 |   |   |   | 90,940 |   |
|   | Gross loans and leases                                         |   |          | 1,038,261 |   |              |   | 947,914 |   |   |   | 1,042,799 |   |   |   | 940,083 |   |
|   | Due from mortgage investors                                    |   |          | -         |   |              |   | - |   |   |   | 9,036 |   |   |   | 9,036 |   |
|   | Mortgage servicing rights                                      |   |          | 532       |   |              |   | 532 |   |   |   | 239 |   |   |   | 239 |   |
|   | Derivative instruments                                         |   |          | 1,717     |   |              |   | 1,717 |   |   |   | 412 |   |   |   | 412 |   |
|   |                                                           |   |          |      |   |              |   |   |   |   |   |   |   |   |   |   |   |
|   | Financial Liabilities                                          |   |          |      |   |              |   |   |   |   |   |   |   |   |   |   |   |
|   | Deposits with no stated maturities                             |   |          | 551,537   |   |              |   | 599,633 |   |   |   | 524,737 |   |   |   | 563,501 |   |
|   | Deposits with stated maturities                                |   |          | 414,971   |   |              |   | 415,801 |   |   |   | 451,691 |   |   |   | 451,691 |   |
|   | FHLB and other borrowings                                      |   |          | 304,581   |   |              |   | 305,373 |   |   |   | 167,766 |   |   |   | 171,170 |   |
|   | Subordinated debentures                                        |   |          | 20,795    |   |              |   | 20,795 |   |   |   | 15,465 |   |   |   | 15,465 |   |
|   | Derivative instruments                                         |   |          | 449       |   |              |   | 449 |   |   |   | 618 |   |   |   | 618 |   |
|   |                                                           |   |          |      |   |              |   |   |   |   |   |   |   |   |   |   |   |
|   | Off-Balance-Sheet                                              |   |          |      |   |              |   |   |   |   |   |   |   |   |   |   |   |
|   | Commitments to extend credit and outstanding letters of credit |   | $             | 232,818   |   |              |   | - |   |   | $ | 244,033 |   |   |   | - |   |

----

Index

| 11.   | INVESTMENT SECURITIES |
|-----------------|-----------------------|

|   | (Dollars in thousands)     |   |      |   |   | Gross      |   |   | Gross      |   |   |   |   |
|--------|----------------------------|--------|-----------|--------|--------|------------|--------|--------|------------|--------|--------|--------|--------|
|   | As of June 30, 2009        |   | Amortized |   |   | Unrealized |   |   | Unrealized |   |   | Fair   |   |
|   |                       |   | Cost      |   |   | Gains      |   |   | Losses     |   |   | Value  |   |
|   |                       |   |      |   |   |       |   |   |       |   |   |   |   |
|   | U.S. Treasury              |   | $         | 5,004  |   |       | $      | --     |       |   | $      | (1     | )      |   | $ | 5,003 |   |
|   | U.S. Government agency     |   |      | 8,757  |   |       |   | 140    |       |   |   | (5     | )      |   |   | 8,892 |   |
|   | Mortgage-backed securities |   |      | 37,660 |   |       |   | 765    |       |   |   | (29    | )      |   |   | 38,396 |   |
|   | State and municipal        |   |      | 6,698  |   |       |   | 44     |       |   |   | (7     | )      |   |   | 6,735 |   |
|   | Corporate securities       |   |      | 13,684 |   |       |   | -      |       |   |   | (2,820 | )      |   |   | 10,864 |   |
|   | Other equity securities    |   |      | 13,732 |   |       |   | 50     |       |   |   | (1,779 | )      |   |   | 12,003 |   |
|   |                       |   | $         | 85,535 |   |       | $      | 999    |       |   | $      | (4,641 | )      |   | $ | 81,893 |   |

|   | (Dollars in thousands)     |   |      |    |   | Gross      |   |   | Gross      |   |   |   |   |
|--------|----------------------------|--------|-----------|---------|--------|------------|--------|--------|------------|--------|--------|--------|--------|
|   | As of December 31, 2008    |   | Amortized |    |   | Unrealized |   |   | Unrealized |   |   | Fair   |   |
|   |                       |   | Cost      |    |   | Gains      |   |   | Losses     |   |   | Value  |   |
|   |                       |   |      |    |   |       |   |   |       |   |   |   |   |
|   | U.S. Government agency     |   | $         | 12,182  |   |       | $      | 144    |       |   | $      | (7     | )      |   | $ | 12,319 |   |
|   | Mortgage-backed securities |   |      | 52,151  |   |       |   | 974    |       |   |   | (95    | )      |   |   | 53,030 |   |
|   | State and municipal        |   |      | 10,327  |   |       |   | 74     |       |   |   | -      |   |   |   | 10,401 |   |
|   | Corporate securities       |   |      | 31,089  |   |       |   | -      |       |   |   | (5,072 | )      |   |   | 26,017 |   |
|   | Other equity securities    |   |      | 13,659  |   |       |   | 50     |       |   |   | (892   | )      |   |   | 12,817 |   |
|   |                       |   | $         | 119,408 |   |       | $      | 1,242  |       |   | $      | (6,066 | )      |   | $ | 114,584 |   |

|   | (Dollars in thousands)                 |   | Amortized |   |   | Fair   |   |
|--------|----------------------------------------|--------|-----------|--------|--------|--------|--------|
|   |                                   |   | Cost      |   |   | Value  |   |
|   | Due in one year or less                |   | $         | 6,268  |   |   | $      | 6,268 |   |
|   | Due after one year through five years  |   |      | 14,170 |   |   |   | 12,802 |   |
|   | Due after five years through ten years |   |      | 3,018  |   |   |   | 2,879 |   |
|   | Due after ten years                    |   |      | 10,687 |   |   |   | 9,545 |   |
|   |                                   |   |      | 34,143 |   |   |   | 31,494 |   |
|   | Mortgage-backed securities             |   |      | 37,660 |   |   |   | 38,396 |   |
|   | Other equity securities                |   |      | 13,732 |   |   |   | 12,003 |   |
|   |                                   |   | $         | 85,535 |   |   | $      | 81,893 |   |

----

Index

| (Dollars in thousands)                           |   |                |   |   | Less than 12 months |   |   | 12 months or longer |   |   | Total     |   |
|--------------------------------------------------|--------|---------------------|--------|--------|---------------------|--------|--------|---------------------|--------|--------|-----------|--------|
| Description of Securities                        |   | Number ofSecurities |   |   | FairValue           |   |   | UnrealizedLosses    |   |   | FairValue |   |   | UnrealizedLosses |   |   | FairValue |   |   | UnrealizedLosses |   |
| U.S. Treasury                                    |   |                | 1      |   |                | $      | 5,003  |                |   | $      | (1        | )      |   | $ | - |   |   | $ | - |   |   | $ | 5,003 |   |   | $ | (1 | ) |
| U.S. Government agency                           |   |                | 2      |   |                |   | 1,467  |                |   |   | (6        | )      |   |   | - |   |   |   | - |   |   |   | 1,467 |   |   |   | (6 | ) |
| Mortgage-backed securities                       |   |                | 3      |   |                |   | 4,325  |                |   |   | (15       | )      |   |   | 1,350 |   |   |   | (13 | ) |   |   | 5,675 |   |   |   | (28 | ) |
| State and municipal                              |   |                | 5      |   |                |   | 734    |                |   |   | (7        | )      |   |   | - |   |   |   | - |   |   |   | 734 |   |   |   | (7 | ) |
| Corporate Securities                             |   |                | 13     |   |                |   | 7      |                |   |   | (0        | )      |   |   | 10,857 |   |   |   | (2,820 | ) |   |   | 10,864 |   |   |   | (2,820 | ) |
| Marketable Equity Securities                     |   |                | 6      |   |                |   | -      |                |   |   | -         |   |   |   | 2,515 |   |   |   | (1,779 | ) |   |   | 2,515 |   |   |   | (1,779 | ) |
|                                             |   |                |   |   |                |   |   |                |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total temporarily impaired investment securities |   |                | 30     |   |                | $      | 11,536 |                |   | $      | (29       | )      |   | $ | 14,722 |   |   | $ | (4,612 | ) |   | $ | 26,258 |   |   | $ | (4,641 | ) |

| (Dollars in thousands)                                                                                                                                 |   |                |   |   | Less than 12 months |   |   | 12 months or longer |   |   | Total     |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|--------|--------|---------------------|--------|--------|---------------------|--------|--------|-----------|--------|
| Description of  Securities                    |   | Number ofSecurities |   |   | FairValue           |   |   | UnrealizedLosses    |   |   | FairValue |   |   | UnrealizedLosses |   |   | FairValue |   |   | UnrealizedLosses |   |
| U.S. Government agency                                                                                                                                 |   |                | 2      |   |                | $      | 1,475  |                |   | $      | (5        | )      |   | $ | 173 |   |   | $ | (2 | ) |   | $ | 1,648 |   |   | $ | (7 | ) |
| Mortgage-backed securities                                                                                                                             |   |                | 4      |   |                |   | 3,332  |                |   |   | (45       | )      |   |   | 1,809 |   |   |   | (50 | ) |   |   | 5,141 |   |   |   | (95 | ) |
| State and municipal                                                                                                                                    |   |                | -      |   |                |   | -      |                |   |   | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Corporate Securities                                                                                                                                   |   |                | 25     |   |                |   | 17,605 |                |   |   | (1,977    | )      |   |   | 8,412 |   |   |   | (3,095 | ) |   |   | 26,017 |   |   |   | (5,072 | ) |
| Marketable Equity Securities                                                                                                                           |   |                | 5      |   |                |   | -      |                |   |   | -         |   |   |   | 13,658 |   |   |   | (892 | ) |   |   | 13,658 |   |   |   | (892 | ) |
|                                                                                                                                                   |   |                |   |   |                |   |   |                |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total temporarily  impaired investment  securities                                                                                 |   |                | 36     |   |                | $      | 22,412 |                |   | $      | (2,027    | )      |   | $ | 24,052 |   |   | $ | (4,039 | ) |   | $ | 46,464 |   |   | $ | (6,066 | ) |

----

Index

| 12.   | DERIVATIVE INSTRUMENTS |
|-----------------|------------------------|

|                                   | Asset Derivatives |   | Liability Derivatives |   |
|----------------------------------------|-------------------|--------|-----------------------|--------|
|                                   | June 30, 2009     |   | December 31, 2008     |   | June 30, 2009 |   | December 31, 2008 |   |
| (Dollars inthousands)                  | Balance           |   |                  |   | Balance |   |   |   | Balance |   |   |   | Balance |   |   |   |
|                                   | Sheet             |   | Fair                  |   | Sheet |   | Fair |   | Sheet |   | Fair |   | Sheet |   | Fair |   |
|                                   | Location          |   | Value                 |   | Location |   | Value |   | Location |   | Value |   | Location |   | Value |   |
|                                   |              |   |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mandatory forward sales commitments    | Other assets      |   | $                     | -      |   | Other assets |   | $ | - |   | Other Liabilities |   | $ | 449 |   | Other Liabilities |   | $ | 583 |   |
| Best efforts forward sales commitments | Other assets      |   |                  | -      |   | Other assets |   |   | - |   | Other Liabilities |   |   | - |   | Other Liabilities |   |   | 35 |   |
| Interest rate lock commitments         | Other assets      |   |                  | 1,717  |   | Other assets |   |   | 412 |   | Other Liabilities |   |   | - |   | Other Liabilities |   |   | - |   |

----

Index

| 13.   | BORROWINGS |
|-----------------|------------|

| 14.   | SUBSEQUENT EVENTS |
|-----------------|-------------------|

| 15.   | RECLASSIFICATIONS |
|-----------------|-------------------|

----

Index

ITEM 2.  

----

Index

----

Index

----

Index

|                     |   | Three Months EndedJune 30, |   |   | Six Months EndedJune 30, |   |
|--------------------------|--------|----------------------------|--------|--------|--------------------------|--------|
|                     |   | 2009                       |   |   | 2008                     |   |   | 2009 |   |   | 2008 |   |
| Return on Average Assets |   |                       | 0.66   | %      |                     |   | 0.74 | % |   |   | 0.72 | % |   |   | 0.69 | % |
| Return on Average Equity |   |                       | 10.12  | %      |                     |   | 10.64 | % |   |   | 11.00 | % |   |   | 9.72 | % |
| Dividend Payout Ratio    |   |                       | 38.94  | %      |                     |   | 39.40 | % |   |   | 36.44 | % |   |   | 43.19 | % |
| Book Value Per Share     |   | $                          | 14.27  |   |                     | $      | 13.23 |   |   | $ | 14.27 |   |   | $ | 13.23 |   |

----

Index

|                                                            |   |    |      |   | 2009     |   |   |   |   |   |    |   |   | 2008     |    |   |   |   |
|-----------------------------------------------------------------|--------|---------|-----------|--------|----------|--------|--------|--------|--------|--------|---------|--------|--------|----------|---------|--------|--------|--------|
| (Dollars in thousands)                                          |   |    |      |   |     |   |   |   |   |   |    |   |   |     |    |   |   |   |
|                                                            |   | Average |      |   |     |   |   |   |   |   | Average |   |   |     |    |   |   |   |
|                                                            |   | Balance |      |   | Interest |   |   | Rate%  |   |   | Balance |   |   | Interest |    |   | Rate%  |   |
| ASSETS                                                          |   |    |      |   |     |   |   |   |   |   |    |   |   |     |    |   |   |   |
| Federal funds sold, interest-bearing                            |   | $       | 16,019    |   |     | $      | 17     |   |   |   | 0.41    | %      |   | $        | 55,248  |   |   | $      | 417 |   |   |   | 3.04 | % |
| deposits in banks and other                                     |   |    |      |   |     |   |   |   |   |   |    |   |   |     |    |   |   |   |   |   |   |   |   |   |
| overnight investments                                           |   |    |      |   |     |   |   |   |   |   |    |   |   |     |    |   |   |   |   |   |   |   |   |   |
| Investment securities:                                          |   |    |      |   |     |   |   |   |   |   |    |   |   |     |    |   |   |   |   |   |   |   |   |   |
| Taxable                                                         |   |    | 87,642    |   |     |   | 934    |   |   |   | 4.28    | %      |   |     | 103,764 |   |   |   | 1,242 |   |   |   | 4.81 | % |
| Tax-exempt (1)                                                  |   |    | 7,544     |   |     |   | 91     |   |   |   | 4.82    | %      |   |     | 13,386  |   |   |   | 157 |   |   |   | 4.73 | % |
| Total investment securities                                     |   |    | 95,186    |   |     |   | 1,025  |   |   |   | 4.32    | %      |   |     | 117,150 |   |   |   | 1,399 |   |   |   | 4.80 | % |
|                                                            |   |    |      |   |     |   |   |   |   |   |    |   |   |     |    |   |   |   |   |   |   |   |   |   |
| Loans held for sale                                             |   |    | 267,299   |   |     |   | 3,095  |   |   |   | 4.64    | %      |   |     | 721     |   |   |   | 8 |   |   |   | 4.46 | % |
|                                                            |   |    |      |   |     |   |   |   |   |   |    |   |   |     |    |   |   |   |   |   |   |   |   |   |
| Loans and leases: (2)                                           |   |    |      |   |     |   |   |   |   |   |    |   |   |     |    |   |   |   |   |   |   |   |   |   |
| Taxable                                                         |   |    | 924,294   |   |     |   | 13,112 |   |   |   | 5.69    | %      |   |     | 753,386 |   |   |   | 11,788 |   |   |   | 6.29 | % |
| Tax-exempt (1)                                                  |   |    | 20,532    |   |     |   | 377    |   |   |   | 7.36    | %      |   |     | 18,906  |   |   |   | 340 |   |   |   | 7.24 | % |
| Total loans and leases                                          |   |    | 944,826   |   |     |   | 13,489 |   |   |   | 5.73    | %      |   |     | 772,292 |   |   |   | 12,128 |   |   |   | 6.31 | % |
|                                                            |   |    |      |   |     |   |   |   |   |   |    |   |   |     |    |   |   |   |   |   |   |   |   |   |
| Total interest-earning assets                                   |   |    | 1,323,330 |   |     |   | 17,626 |   |   |   | 5.34    | %      |   |     | 945,411 |   |   |   | 13,952 |   |   |   | 5.94 | % |
| Non-interest-earning assets                                     |   |    |      |   |     |   |   |   |   |   |    |   |   |     |    |   |   |   |   |   |   |   |   |   |
| Allowance for loan and lease losses                             |   |    | (11,236   | )      |     |   |   |   |   |   |    |   |   |     | (7,972  | )      |   |   |   |   |   |   |   |   |
| Cash and due from banks                                         |   |    | 10,848    |   |     |   |   |   |   |   |    |   |   |     | 17,957  |   |   |   |   |   |   |   |   |   |
| Other assets                                                    |   |    | 47,004    |   |     |   |   |   |   |   |    |   |   |     | 39,775  |   |   |   |   |   |   |   |   |   |
|                                                            |   |    |      |   |     |   |   |   |   |   |    |   |   |     |    |   |   |   |   |   |   |   |   |   |
| Total assets                                                    |   | $       | 1,369,946 |   |     |   |   |   |   |   |    |   |   | $        | 995,171 |   |   |   |   |   |   |   |   |   |
|                                                            |   |    |      |   |     |   |   |   |   |   |    |   |   |     |    |   |   |   |   |   |   |   |   |   |
|                                                            |   |    |      |   |     |   |   |   |   |   |    |   |   |     |    |   |   |   |   |   |   |   |   |   |
| LIABILITIES AND STOCKHOLDERS' EQUITY                            |   |    |      |   |     |   |   |   |   |   |    |   |   |     |    |   |   |   |   |   |   |   |   |   |
| Savings, NOW, and money market deposits                         |   | $       | 437,316   |   |     | $      | 1,040  |   |   |   | 0.95    | %      |   | $        | 393,554 |   |   | $      | 1,605 |   |   |   | 1.64 | % |
| Certificates of deposit and other time                          |   |    | 429,948   |   |     |   | 2,843  |   |   |   | 2.65    | %      |   |     | 235,775 |   |   |   | 2,349 |   |   |   | 4.01 | % |
| Total interest-bearing deposits                                 |   |    | 867,264   |   |     |   | 3,883  |   |   |   | 1.80    | %      |   |     | 629,329 |   |   |   | 3,954 |   |   |   | 2.53 | % |
| Subordinated debt                                               |   |    | 19,436    |   |     |   | 252    |   |   |   | 5.20    | %      |   |     | 15,465  |   |   |   | 215 |   |   |   | 5.59 | % |
| Federal Home Loan Bank advances  and other borrowings |   |    | 228,188   |   |     |   | 1,617  |   |   |   | 2.84    | %      |   |     | 152,288 |   |   |   | 1,478 |   |   |   | 3.90 | % |
| Total interest-bearing liabilities                              |   |    | 1,114,888 |   |     |   | 5,752  |   |   |   | 2.07    | %      |   |     | 797,082 |   |   |   | 5,647 |   |   |   | 2.85 | % |
| Non-interest-bearing liabilities:                               |   |    |      |   |     |   |   |   |   |   |    |   |   |     |    |   |   |   |   |   |   |   |   |   |
| Non-interest-bearing demand deposits                            |   |    | 149,078   |   |     |   |   |   |   |   |    |   |   |     | 119,951 |   |   |   |   |   |   |   |   |   |
| Other liabilities                                               |   |    | 16,925    |   |     |   |   |   |   |   |    |   |   |     | 8,877   |   |   |   |   |   |   |   |   |   |
| Total liabilities                                               |   |    | 1,280,891 |   |     |   |   |   |   |   |    |   |   |     | 925,910 |   |   |   |   |   |   |   |   |   |
| Stockholders' equity                                            |   |    | 89,055    |   |     |   |   |   |   |   |    |   |   |     | 69,261  |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders' equity                      |   | $       | 1,369,946 |   |     |   |   |   |   |   |    |   |   | $        | 995,171 |   |   |   |   |   |   |   |   |   |
|                                                            |   |    |      |   |     |   |   |   |   |   |    |   |   |     |    |   |   |   |   |   |   |   |   |   |
| Net interest income                                             |   |    |      |   |     | $      | 11,874 |   |   |   |    |   |   |     |    |   |   | $      | 8,305 |   |   |   |   |   |
| Net yield on interest-earning assets                            |   |    |      |   |     |   |   |   |   |   | 3.60    | %      |   |     |    |   |   |   |   |   |   |   | 3.53 | % |

| (1) | The indicated income and annual rate are presented on a taxable equivalent basis using the federal marginal rate of 34% adjusted for the TEFRA 20% interest expense disallowance for 2009 and 2008. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)  | Non-accruing loans are included in the average balance. |
|-----------|---------------------------------------------------------|

----

Index

|                                                                               |   |    |      |   | 2009     |   |   |   |   |   |    |   |   | 2008     |    |   |   |   |
|------------------------------------------------------------------------------------|--------|---------|-----------|--------|----------|--------|--------|--------|--------|--------|---------|--------|--------|----------|---------|--------|--------|--------|
| (Dollars in thousands)                                                             |   |    |      |   |     |   |   |   |   |   |    |   |   |     |    |   |   |   |
|                                                                               |   | Average |      |   |     |   |   |   |   |   | Average |   |   |     |    |   |   |   |
|                                                                               |   | Balance |      |   | Interest |   |   | Rate%  |   |   | Balance |   |   | Interest |    |   | Rate%  |   |
| ASSETS                                                                             |   |    |      |   |     |   |   |   |   |   |    |   |   |     |    |   |   |   |
| Federal funds sold, interest-bearing                                |   | $       | 21,238    |   |     | $      | 44     |   |   |   | 0.42    | %      |   | $        | 52,365  |   |   | $      | 868 |   |   |   | 3.34 | % |
| deposits in banks and other                                    |   |    |      |   |     |   |   |   |   |   |    |   |   |     |    |   |   |   |   |   |   |   |   |   |
| overnight investments                                                         |   |    |      |   |     |   |   |   |   |   |    |   |   |     |    |   |   |   |   |   |   |   |   |   |
| Investment securities:                                                        |   |    |      |   |     |   |   |   |   |   |    |   |   |     |    |   |   |   |   |   |   |   |   |   |
| Taxable                                                                            |   |    | 94,732    |   |     |   | 2,087  |   |   |   | 4.44    | %      |   |     | 98,231  |   |   |   | 2,358 |   |   |   | 4.83 | % |
| Tax-exempt (1)                                                                |   |    | 8,569     |   |     |   | 204    |   |   |   | 4.81    | %      |   |     | 13,532  |   |   |   | 321 |   |   |   | 4.77 | % |
| Total investment securities                                              |   |    | 103,301   |   |     |   | 2,291  |   |   |   | 4.47    | %      |   |     | 111,763 |   |   |   | 2,679 |   |   |   | 4.82 | % |
|                                                                               |   |    |      |   |     |   |   |   |   |   |    |   |   |     |    |   |   |   |   |   |   |   |   |   |
| Loans held for sale                                                                |   |    | 209,291   |   |     |   | 4,939  |   |   |   | 4.76    | %      |   |     | 664     |   |   |   | 15 |   |   |   | 4.54 | % |
|                                                                               |   |    |      |   |     |   |   |   |   |   |    |   |   |     |    |   |   |   |   |   |   |   |   |   |
| Loans and leases: (2)                                               |   |    |      |   |     |   |   |   |   |   |    |   |   |     |    |   |   |   |   |   |   |   |   |   |
| Taxable                                                                            |   |    | 921,975   |   |     |   | 26,062 |   |   |   | 5.70    | %      |   |     | 740,925 |   |   |   | 23,938 |   |   |   | 6.50 | % |
| Tax-exempt (1)                                                                |   |    | 20,633    |   |     |   | 754    |   |   |   | 7.36    | %      |   |     | 19,239  |   |   |   | 689 |   |   |   | 7.20 | % |
| Total loans and leases                                              |   |    | 942,608   |   |     |   | 26,816 |   |   |   | 5.74    | %      |   |     | 760,164 |   |   |   | 24,627 |   |   |   | 6.51 | % |
|                                                                               |   |    |      |   |     |   |   |   |   |   |    |   |   |     |    |   |   |   |   |   |   |   |   |   |
| Total interest-earning assets                                            |   |    | 1,276,438 |   |     |   | 34,090 |   |   |   | 5.39    | %      |   |     | 924,956 |   |   |   | 28,189 |   |   |   | 6.13 | % |
| Non-interest-earning assets                                                   |   |    |      |   |     |   |   |   |   |   |    |   |   |     |    |   |   |   |   |   |   |   |   |   |
| Allowance for loan and lease losses                                 |   |    | (10,904   | )      |     |   |   |   |   |   |    |   |   |     | (7,928  | )      |   |   |   |   |   |   |   |   |
| Cash and due from banks                                        |   |    | 19,353    |   |     |   |   |   |   |   |    |   |   |     | 19,552  |   |   |   |   |   |   |   |   |   |
| Other assets                                                                  |   |    | 54,057    |   |     |   |   |   |   |   |    |   |   |     | 37,395  |   |   |   |   |   |   |   |   |   |
|                                                                               |   |    |      |   |     |   |   |   |   |   |    |   |   |     |    |   |   |   |   |   |   |   |   |   |
| Total assets                                                                  |   | $       | 1,338,944 |   |     |   |   |   |   |   |    |   |   | $        | 973,975 |   |   |   |   |   |   |   |   |   |
|                                                                               |   |    |      |   |     |   |   |   |   |   |    |   |   |     |    |   |   |   |   |   |   |   |   |   |
| LIABILITIES AND STOCKHOLDERS' EQUITY                                               |   |    |      |   |     |   |   |   |   |   |    |   |   |     |    |   |   |   |   |   |   |   |   |   |
| Savings, NOW, and money market deposits                        |   | $       | 431,189   |   |     | $      | 2,246  |   |   |   | 1.05    | %      |   | $        | 383,526 |   |   | $      | 3,640 |   |   |   | 1.91 | % |
| Certificates of deposit and other time                    |   |    | 438,686   |   |     |   | 6,108  |   |   |   | 2.81    | %      |   |     | 228,451 |   |   |   | 4,812 |   |   |   | 4.24 | % |
| Total interest-bearing deposits                                          |   |    | 869,875   |   |     |   | 8,354  |   |   |   | 1.94    | %      |   |     | 611,977 |   |   |   | 8,452 |   |   |   | 2.78 | % |
| Subordinated debt                                                             |   |    | 17,461    |   |     |   | 426    |   |   |   | 4.92    | %      |   |     | 15,465  |   |   |   | 474 |   |   |   | 6.16 | % |
| Federal Home Loan Bank advances and other borrowings |   |    | 201,343   |   |     |   | 3,153  |   |   |   | 3.16    | %      |   |     | 149,425 |   |   |   | 2,920 |   |   |   | 3.93 | % |
| Total interest-bearing liabilities                                       |   |    | 1,088,679 |   |     |   | 11,933 |   |   |   | 2.21    | %      |   |     | 776,867 |   |   |   | 11,846 |   |   |   | 3.07 | % |
| Non-interest-bearing liabilities:                                             |   |    |      |   |     |   |   |   |   |   |    |   |   |     |    |   |   |   |   |   |   |   |   |   |
| Non-interest-bearing demand deposits                                     |   |    | 146,583   |   |     |   |   |   |   |   |    |   |   |     | 118,216 |   |   |   |   |   |   |   |   |   |
| Other liabilities                                                             |   |    | 15,667    |   |     |   |   |   |   |   |    |   |   |     | 9,705   |   |   |   |   |   |   |   |   |   |
| Total liabilities                                                             |   |    | 1,250,929 |   |     |   |   |   |   |   |    |   |   |     | 904,788 |   |   |   |   |   |   |   |   |   |
| Stockholders' equity                                                          |   |    | 88,015    |   |     |   |   |   |   |   |    |   |   |     | 69,187  |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders' equity                     |   | $       | 1,338,944 |   |     |   |   |   |   |   |    |   |   | $        | 973,975 |   |   |   |   |   |   |   |   |   |
|                                                                               |   |    |      |   |     |   |   |   |   |   |    |   |   |     |    |   |   |   |   |   |   |   |   |   |
| Net interest income                                                      |   |    |      |   |     | $      | 22,157 |   |   |   |    |   |   |     |    |   |   | $      | 16,343 |   |   |   |   |   |
| Net yield on interest-earning assets                           |   |    |      |   |     |   |   |   |   |   | 3.50    | %      |   |     |    |   |   |   |   |   |   |   | 3.55 | % |

| (1) | The indicated income and annual rate are presented on a taxable equivalent basis using the federal marginal rate of 34% adjusted for the TEFRA 20% interest expense disallowance for 2009 and 2008. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)  |   Non-accruing loans are included in the average balance. |
|-----------|---------------------------------------------------------------------|

----

Index

----

Index

----

Index

----

Index

----

Index

|                                                                                |   | Three MonthsEndedJune 30, |    |   | Six MonthsEndedJune 30, |   |
|-------------------------------------------------------------------------------------|--------|---------------------------|---------|--------|-------------------------|--------|
|                                                                                |   | 2009                      |    |   | 2008                    |   |   | 2009 |   |   | 2008 |   |
|                                                                                |   |                      |    |   |                    |   |   |   |   |   |   |   |
| Balance at beginning of period                                                      |   | $                         | 11,263  |   |                    | $      | 7,930 |   |   | $ | 10,335 |   |   | $ | 7,817 |   |
|                                                                                |   |                      |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |
| Provision charged to operating expense                                              |   |                      | 1,572   |   |                    |   | 449 |   |   |   | 2,959 |   |   |   | 660 |   |
|                                                                                |   |                      |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |
| Recoveries of loans previously charged-off                                          |   |                      | 104     |   |                    |   | 97 |   |   |   | 249 |   |   |   | 197 |   |
| Loans charged-off                                                                   |   |                      | (924    | )      |                    |   | (117 | ) |   |   | (1,366 | ) |   |   | (276 | ) |
| Net loan charge-offs                                                                |   |                      | (820    | )      |                    |   | (20 | ) |   |   | (1,117 | ) |   |   | (79 | ) |
|                                                                                |   |                      |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |
| Allowance other adjustment (1)                                                      |   |                      | 1       |   |                    |   | 74 |   |   |   | (161 | ) |   |   | 35 |   |
|                                                                                |   |                      |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |
| Balance at end of period                                                            |   | $                         | 12,016  |   |                    | $      | 8,433 |   |   | $ | 12,016 |   |   | $ | 8,433 |   |
|                                                                                |   |                      |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |
| Period-end loans outstanding                                                        |   | $                         | 947,914 |   |                    | $      | 786,548 |   |   | $ | 947,914 |   |   | $ | 786,548 |   |
| Average loans outstanding                                                           |   | $                         | 944,826 |   |                    | $      | 772,292 |   |   | $ | 942,608 |   |   | $ | 760,164 |   |
|                                                                                |   |                      |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan and lease losses as a percentage of period-end loans outstanding |   |                      | 1.27    | %      |                    |   | 1.07 | % |   |   | 1.27 | % |   |   | 1.07 | % |
| Net charge-offs to average loans outstanding                                        |   |                      | 0.09    | %      |                    |   | 0.00 | % |   |   | 0.12 | % |   |   | 0.01 | % |

----

Index

| (Dollars in thousands)                                                                 |   | June 30, |   |   | December 31, |   |
|----------------------------------------------------------------------------------------|--------|----------|--------|--------|--------------|--------|
|                                                                                   |   | 2009     |   |   | 2008         |   |   | 2008 |   |
|                                                                                   |   |     |   |   |         |   |   |   |   |
| Past due over 90 days and still accruing                                               |   | $        | 686    |   |         | $      | 115 |   |   | $ | 870 |   |
| Non-accrual loans and leases (1)                                                       |   |     | 19,111 |   |         |   | 2,042 |   |   |   | 10,514 |   |
| Total non-performing loans and leases                                                  |   |     | 19,797 |   |         |   | 2,157 |   |   |   | 11,384 |   |
|                                                                                   |   |     |   |   |         |   |   |   |   |   |   |   |
| Other real estate owned                                                                |   |     | 1,592  |   |         |   | 459 |   |   |   | 1,872 |   |
| Total non-performing assets                                                            |   | $        | 21,389 |   |         | $      | 2,616 |   |   | $ | 13,256 |   |
|                                                                                   |   |     |   |   |         |   |   |   |   |   |   |   |
| Non-performing loans and leases as a percentage of total loans and leases              |   |     | 2.09   | %      |         |   | 0.27 | % |   |   | 1.21 | % |
|                                                                                   |   |     |   |   |         |   |   |   |   |   |   |   |
| Allowance for loan and lease losses as a percentage of non-performing loans and leases |   |     | 60.70  | %      |         |   | 390.89 | % |   |   | 90.78 | % |
|                                                                                   |   |     |   |   |         |   |   |   |   |   |   |   |
| Non-performing assets as a percentage of total loans and other real estate owned       |   |     | 2.25   | %      |         |   | 0.33 | % |   |   | 1.41 | % |
|                                                                                   |   |     |   |   |         |   |   |   |   |   |   |   |
| Allowance for loan and lease losses as a percentage of non-performing assets           |   |     | 56.18  | %      |         |   | 322.38 | % |   |   | 77.96 | % |

----

Index

| June 30, 2009                                |   |    |    |   |         |   |   |      |   |   |        |   |
|----------------------------------------------|--------|---------|---------|--------|--------------|--------|--------|-----------|--------|--------|-------------|--------|
|                                         |   |    |    |   |         |   |   | Number of |   |   |        |   |
|                                         |   | Loan    |    |   | Impaired     |   |   | Impaired  |   |   | Allowance   |   |
| (Dollars in thousands)                       |   | Balance |    |   | Loan Balance |   |   | Loans     |   |   | on Impaired |   |
|                                         |   |    |    |   |         |   |   |      |   |   |        |   |
| Commercial loans                             |   | $       | 342,582 |   |         | $      | 4,694  |      |   |   | 13          |   |   | $ | 224 |   |
| Real estate – commercial               |   |    | 291,587 |   |         |   | 2,084  |      |   |   | 2           |   |   |   | 291 |   |
| Real estate – commercial construction  |   |    | 69,511  |   |         |   | 4,464  |      |   |   | 4           |   |   |   | 879 |   |
| Real estate – residential              |   |    | 85,875  |   |         |   | 1,307  |      |   |   | 5           |   |   |   | 44 |   |
| Real estate – residential construction |   |    | 32,385  |   |         |   | 4,869  |      |   |   | 14          |   |   |   | 474 |   |
| Consumer loans                               |   |    | 123,243 |   |         |   | 1,533  |      |   |   | 22          |   |   |   | 154 |   |
| Lease financing receivables                  |   |    | 2,731   |   |         |   | 160    |      |   |   | 2           |   |   |   | - |   |
|                                         |   |    |    |   |         |   |   |      |   |   |        |   |   |   |   |   |
| Totals                                       |   | $       | 947,914 |   |         | $      | 19,111 |      |   |   | 62          |   |   | $ | 2,066 |   |

----

Index

|                                         |   |    |    |   |         |   |   | Number of |   |   |        |   |
|----------------------------------------------|--------|---------|---------|--------|--------------|--------|--------|-----------|--------|--------|-------------|--------|
|                                         |   | Loan    |    |   | Impaired     |   |   | Impaired  |   |   | Allowance   |   |
| (Dollars in thousands)                       |   | Balance |    |   | Loan Balance |   |   | Loans     |   |   | on Impaired |   |
|                                         |   |    |    |   |         |   |   |      |   |   |        |   |
| Commercial loans                             |   | $       | 327,472 |   |         | $      | 3,632  |      |   |   | 20          |   |   | $ | 285 |   |
| Real estate – commercial               |   |    | 280,549 |   |         |   | 1,650  |      |   |   | 2           |   |   |   | 126 |   |
| Real estate – commercial construction  |   |    | 69,057  |   |         |   | -      |      |   |   | -           |   |   |   | - |   |
| Real estate – residential              |   |    | 87,413  |   |         |   | 3,876  |      |   |   | 13          |   |   |   | 350 |   |
| Real estate – residential construction |   |    | 45,466  |   |         |   | -      |      |   |   | -           |   |   |   | - |   |
| Consumer loans                               |   |    | 125,318 |   |         |   | 1,166  |      |   |   | 30          |   |   |   | 95 |   |
| Lease financing receivables                  |   |    | 4,808   |   |         |   | 190    |      |   |   | 4           |   |   |   | - |   |
|                                         |   |    |    |   |         |   |   |      |   |   |        |   |   |   |   |   |
| Totals                                       |   | $       | 940,083 |   |         | $      | 10,514 |      |   |   | 69          |   |   | $ | 856 |   |

----

Index

----

Index

----

Index

----

Index

| (Dollars in thousands)              |   | For the Six Months EndedJune 30, 2009 |      |   | For the Year EndedDecember 31, 2008 |   |
|-------------------------------------|--------|---------------------------------------|-----------|--------|-------------------------------------|--------|
| DEPOSIT TYPE                        |   | AverageBalance                        |      |   | EffectiveYield                      |   |   | AverageBalance |   |   | EffectiveYield |   |
| NOW Accounts                        |   | $                                     | 185,193   |   |                                |   | 0.92 | % |   | $ | 179,512 |   |   |   | 1.64 | % |
| Money Market                        |   |                                  | 158,012   |   |                                |   | 1.30 | % |   |   | 117,393 |   |   |   | 2.46 | % |
| Statement Savings                   |   |                                  | 41,362    |   |                                |   | 0.60 | % |   |   | 40,300 |   |   |   | 0.70 | % |
| Other Savings                       |   |                                  | 1,658     |   |                                |   | 1.02 | % |   |   | 2,802 |   |   |   | 1.50 | % |
| Tiered Savings                      |   |                                  | 44,964    |   |                                |   | 1.14 | % |   |   | 48,915 |   |   |   | 1.30 | % |
| Total NOW Savings, and Money Market |   |                                  | 431,189   |   |                                |   | 1.05 | % |   |   | 388,922 |   |   |   | 1.75 | % |
|                                |   |                                  |      |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| CDs Less than $100,000              |   |                                  | 313,014   |   |                                |   | 2.78 | % |   |   | 162,650 |   |   |   | 3.73 | % |
| CDs Greater than $100,000           |   |                                  | 125,672   |   |                                |   | 2.88 | % |   |   | 74,822 |   |   |   | 3.90 | % |
| Total CDs                           |   |                                  | 438,686   |   |                                |   | 2.81 | % |   |   | 237,472 |   |   |   | 3.78 | % |
|                                |   |                                  |      |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Total Interest Bearing Deposits     |   |                                  | 869,875   |   |                                |   |   |   |   |   | 626,394 |   |   |   |   |   |
|                                |   |                                  |      |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Non-Interest Bearing                |   |                                  |      |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Demand Deposits                     |   |                                  | 146,583   |   |                                |   |   |   |   |   | 120,941 |   |   |   |   |   |
|                                |   |                                  |      |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Total Deposits                      |   | $                                     | 1,016,458 |   |                                |   |   |   |   | $ | 747,335 |   |   |   |   |   |

----

Index

----

Index

|                                                             |   |     |      |   | Two        |   |    | Over   |   |   |      |   |   |   |     |
|------------------------------------------------------------------|--------|----------|-----------|--------|------------|--------|---------|--------|--------|--------|-----------|--------|--------|--------|----------|
| (Dollars in thousands)                                           |   | Within   |      |   | through    |   |    | five   |   |   | Non-rate  |   |   |   |     |
|                                                             |   | one year |      |   | five years |   |    | years  |   |   | sensitive |   |   | Total  |     |
| ASSETS                                                           |   |     |      |   |       |   |    |   |   |   |      |   |   |   |     |
| Federal funds sold and overnight investments                     |   | $        | 2,301     |   |       | $      | 0       |   |   | $      | 0         |   |   | $      | 0        |   |   | $ | 2,301 |   |
| Investment securities                                            |   |     | 18,545    |   |       |   | 42,851  |   |   |   | 20,497    |   |   |   | 0        |   |   |   | 81,893 |   |
| Interest bearing deposits in banks                               |   |     | 4,935     |   |       |   | 0       |   |   |   | 0         |   |   |   | 0        |   |   |   | 4,935 |   |
| Loans held for sale                                              |   |     | 341,609   |   |       |   | 0       |   |   |   | 0         |   |   |   | 0        |   |   |   | 341,609 |   |
| Net loans and leases                                             |   |     | 402,416   |   |       |   | 402,569 |   |   |   | 142,929   |   |   |   | (12,016  | ) |   |   | 935,898 |   |
| Cash and due from banks                                          |   |     | 0         |   |       |   | 0       |   |   |   | 0         |   |   |   | 15,123   |   |   |   | 15,123 |   |
| Premises and equipment                                           |   |     | 0         |   |       |   | 0       |   |   |   | 0         |   |   |   | 23,613   |   |   |   | 23,613 |   |
| Other assets                                                     |   |     | 0         |   |       |   | 0       |   |   |   | 0         |   |   |   | 45,904   |   |   |   | 45,904 |   |
| Total assets                                                     |   | $        | 769,806   |   |       | $      | 445,420 |   |   | $      | 163,426   |   |   | $      | 72,624   |   |   | $ | 1,451,276 |   |
|                                                             |   |     |      |   |       |   |    |   |   |   |      |   |   |   |     |   |   |   |   |   |
| LIABILITIES AND CAPITAL                                          |   |     |      |   |       |   |    |   |   |   |      |   |   |   |     |   |   |   |   |   |
| Non-interest bearing deposits                                    |   | $        | 0         |   |       | $      | 0       |   |   | $      | 0         |   |   | $      | 155,297  |   |   | $ | 155,297 |   |
| Interest bearing deposits                                        |   |     | 832,013   |   |       |   | 21,371  |   |   |   | 6,753     |   |   |   | 0        |   |   |   | 860,137 |   |
| FHLB advances and other Borrowings                               |   |     | 225,341   |   |       |   | 76,500  |   |   |   | 3,532     |   |   |   | 0        |   |   |   | 305,373 |   |
| Subordinated debentures                                          |   |     | 20,795    |   |       |   | 0       |   |   |   | 0         |   |   |   | 0        |   |   |   | 20,795 |   |
| Other liabilities                                                |   |     | 0         |   |       |   | 0       |   |   |   | 19,670    |   |   |   | 0        |   |   |   | 19,670 |   |
| Capital                                                          |   |     | 0         |   |       |   | 0       |   |   |   | 0         |   |   |   | 90,004   |   |   |   | 90,004 |   |
| Total liabilities & capital                                  |   | $        | 1,078,149 |   |       | $      | 97,871  |   |   | $      | 29,955    |   |   | $      | 245,301  |   |   | $ | 1,451,276 |   |
| Net interest rate sensitivity gap                                |   | $        | (308,343  | )      |       | $      | 347,549 |   |   | $      | 133,471   |   |   | $      | (172,677 | ) |   |   |   |   |
| Cumulative interest rate sensitivity gap                         |   | $        | (308,343  | )      |       | $      | 39,206  |   |   | $      | 172,677   |   |   | $      | 0        |   |   |   |   |   |
| Cumulative interest rate sensitivity gap divided by total assets |   |     | (21.2%    | )      |       |   | 2.7%    |   |   |   | 11.9%     |   |   |   |     |   |   |   |   |   |

----

Index

|                                      |   | As of June 30, |   |   | As of December 31, |   |   | "Well Capitalized" |   |
|-------------------------------------------|--------|----------------|--------|--------|--------------------|--------|--------|--------------------|--------|
|                                      |   | 2009           |   |   | 2008               |   |   | 2008               |   |   | Requirements |   |
|      Corporation |   |           |   |   |               |   |   |               |   |   |   |   |
| Leverage Ratio                            |   |           | 6.86   | %      |               |   | 8.58   | %                  |   |   | 9.87 | % |   |   | N/A |   |
| Tier I Capital Ratio                      |   |           | 9.20   | %      |               |   | 10.15  | %                  |   |   | 9.14 | % |   |   | N/A |   |
| Total Risk-Based Capital Ratio            |   |           | 10.33  | %      |               |   | 11.22  | %                  |   |   | 10.15 | % |   |   | N/A |   |
|      Bank        |   |           |   |   |               |   |   |               |   |   |   |   |   |   |   |   |
| Leverage Ratio                            |   |           | 7.50   | %      |               |   | 8.02   | %                  |   |   | 9.95 | % |   |   | 5.00 | % |
| Tier I Capital Ratio                      |   |           | 9.33   | %      |               |   | 9.48   | %                  |   |   | 9.40 | % |   |   | 6.00 | % |
| Total Risk-Based Capital Ratio            |   |           | 10.46  | %      |               |   | 10.55  | %                  |   |   | 10.42 | % |   |   | 10.00 | % |

----

Index

ITEM 3. 

ITEM 4.

----

Index

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

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

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

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

| Item 4. | Submission of Matters to a Vote of Security Holders |
|---------|-----------------------------------------------------|

----

Index

| Nominee                   |   | For    |      |   | Withheld |   |
|---------------------------|--------|--------|-----------|--------|----------|--------|
|                      |   |   |      |   |     |   |   |
| Clifford E. DeBaptiste    |   |   | 3,833,968 |   |     |   | 417,240 |   |
|                      |   |   |      |   |     |   |   |   |   |
| James M. Deitch           |   |   | 4,072,645 |   |     |   | 178,563 |   |
|                      |   |   |      |   |     |   |   |   |   |
| Lynn Marie Johnson-Porter |   |   | 3,985,632 |   |     |   | 265,576 |   |
|                      |   |   |      |   |     |   |   |   |   |
| John B. Waldron           |   |   | 3,843,448 |   |     |   | 407,760 |   |

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

----

Index

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

----

Index

SIGN

|              August 10, 2009 |   /s/ John A. Featherman                |
|-----------------------------------------------------------------------------------------------|----------------------------------------------|
|                                                                                          | John A. Featherman, III                      |
|                                                                                          | Chief Executive Officer                      |
|                                                                                          |                                         |
|                                                                                          |                                         |
|                                                                                          |                                         |
|                                                                                          |                                         |
|              August 10, 2009 |    /s/ John E. Balzarini           |
|                                                                                          | John E. Balzarini                            |
|                                                                                          | Chief Financial Officer                      |
|                                                                                          | (Principal Financial and Accounting Officer) |
|                                                                                          |                                         |

----

Index

IN

31.1

31.2

31.3

32.1

32.2

32.3

----