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

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

|   | Indiana                                                    |   | 35-2042093          |   |
|--------|------------------------------------------------------------|--------|---------------------|--------|
|   | (State or other jurisdiction                               |   | (I.R.S. Employer    |   |
|   | of incorporation or organization)                          |   | Identification No.) |   |
|   |                                                       |   |                |   |
|   | 707 Ridge Road, Munster, Indiana                           |   | 46321               |   |
|   | (Address of principal executive offices)                   |   | (Zip code)          |   |
|   |                                                       |   |                |   |
|   | (219) 836-5500                                             |   |
|   | (Registrant’s telephone number, including area code) |   |

| Large accelerated filer £                                             | Accelerated filer £    |   |
|----------------------------------------------------------------------------|-----------------------------|--------|
| Non-accelerated filer £ (Do not check if a smaller reporting company) | Smaller reporting company R |   |

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TABLE OF CONTENTS

|                                                                          |                                                                                        | Page   |
|-------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------|--------|
|                                                                          | PART I - FINANCIAL INFORMATION                                                              |   |
|                                                                          |                                                                                        |   |
| Item 1.                                                                       | Financial Statements (Unaudited)                                                            |   |
|                                                                          | Condensed Consolidated Statements of Condition                                              | 3      |
|                                                                          | Condensed Consolidated Statements of Income                                                 | 4      |
|                                                                          | Condensed Consolidated Statements of Changes in Shareholders’ Equity                  | 5      |
|                                                                          | Condensed Consolidated Statements of Cash Flows                                             | 6      |
|                                                                          | Notes to Condensed Consolidated Financial Statements                                        | 7      |
|                                                                          |                                                                                        |   |
| Item 2.                                                                       | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 19     |
|                                                                          |                                                                                        |   |
| Item 3.                                                                       | Quantitative and Qualitative Disclosures about Market Risk                                  | 42     |
|                                                                          |                                                                                        |   |
| Item 4.                                                                       | Controls and Procedures                                                                     | 44     |
|                                                                          |                                                                                        |   |
|                                                                          |                                                                                        |   |
|                                                                          | PART II - OTHER INFORMATION                                                                 |   |
|                                                                          |                                                                                        |   |
| Item 1.                                                                       | Legal Proceedings                                                                           | 45     |
|                                                                          |                                                                                        |   |
| Item 1A.                                                                      | Risk Factors                                                                                | 45     |
|                                                                          |                                                                                        |   |
| Item 2.                                                                       | Unregistered Sales of Equity Securities and Use of Proceeds                                 | 45     |
|                                                                          |                                                                                        |   |
| Item 3.                                                                       | Defaults Upon Senior Securities                                                             | 45     |
|                                                                          |                                                                                        |   |
| Item 4.                                                                       | Reserved                                                                                    | 45     |
|                                                                          |                                                                                        |   |
| Item 5.                                                                       | Other Information                                                                           | 45     |
|                                                                          |                                                                                        |   |
| Item 6.                                                                       | Exhibits                                                                                    | 47     |
|                                                                          |                                                                                        |   |
| Signature Page                                                                | 49                                                                                          |
|                                                                          |                                                                                        |   |
| Certifications of Principal Executive Officer and Principal Financial Officer | 50                                                                                          |
|                                                                          |  Exhibit 10.12                                                                         |   |
|                                                                          |  Exhibit 10.21                                                                         |   |
|                                                                          |  Exhibit 31.1                                                                          |   |
|                                                                          |  Exhibit 31.2                                                                          |   |
|                                                                          |  Exhibit 32.0                                                                          |   |

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table of contents

CFS BANCORP, INC.

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | March 31, 2010         |      |   | December 31, 2009 |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|-----------|--------|-------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |  (Unaudited)      |      |   |
| ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | (Dollars in thousands) |
| Cash and amounts due from depository institutions                                                                                          |   | $                      | 26,170    |   |              | $      | 24,041 |   |
| Interest-bearing deposits                                                                                                                  |   |                   | 12,851    |   |              |   | 387 |   |
| Cash and cash equivalents                                                                                                                                 |   |                   | 39,021    |   |              |   | 24,428 |   |
| Securities available-for-sale, at fair value                                                                                               |   |                   | 184,005   |   |              |   | 188,781 |   |
| Securities held-to-maturity, at cost                                                                                                       |   |                   | 5,000     |   |              |   | 5,000 |   |
| Investment in Federal Home Loan Bank stock, at cost                                                                                        |   |                   | 23,944    |   |              |   | 23,944 |   |
| Loans receivable                                                                                                                           |   |                   | 763,767   |   |              |   | 762,386 |   |
| Allowance for losses on loans                                                                                                                             |   |                   | (20,402   | )      |              |   | (19,461 | ) |
| Net loans                                                                                                                                                           |   |                   | 743,365   |   |              |   | 742,925 |   |
| Interest receivable                                                                                                                        |   |                   | 3,478     |   |              |   | 3,469 |   |
| Other real estate owned                                                                                                                    |   |                   | 10,616    |   |              |   | 9,242 |   |
| Office properties and equipment                                                                                                            |   |                   | 20,128    |   |              |   | 20,382 |   |
| Investment in bank-owned life insurance                                                                                                    |   |                   | 34,797    |   |              |   | 34,575 |   |
| Net deferred tax assets                                                                                                                    |   |                   | 17,817    |   |              |   | 18,036 |   |
| Other assets                                                                                                                               |   |                   | 9,956     |   |              |   | 10,733 |   |
| Total assets                                                                                                                                                        |   | $                      | 1,092,127 |   |              | $      | 1,081,515 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                   |      |   |              |   |   |   |
| LIABILITIES AND SHAREHOLDERS’ EQUITY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                   |      |   |              |   |   |   |
| Deposits                                                                                                                                   |   | $                      | 887,137   |   |              | $      | 849,758 |   |
| Borrowed money                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                   | 83,440    |   |              |   | 111,808 |   |
| Advance payments by borrowers for taxes and insurance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                   | 4,815     |   |              |   | 4,322 |   |
| Other liabilities                                                                                                                          |   |                   | 5,542     |   |              |   | 5,254 |   |
| Total liabilities                                                                                                                                                   |   |                   | 980,934   |   |              |   | 971,142 |   |
| Commitments and contingencies                                                                                                              |   |                   | ―   |   |              |   | ― |   |
| Shareholders’ equity:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                   |      |   |              |   |   |   |
| Preferred stock, $0.01 par value; 15,000,000 shares authorized                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                   | ―   |   |              |   | ― |   |
| Common stock, $0.01 par value; 85,000,000 shares authorized;23,423,306 shares issued; 10,819,635 and 10,771,061 sharesoutstanding                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                   | 234       |   |              |   | 234 |   |
| Additional paid-in capital                                                                                                                 |   |                   | 188,740   |   |              |   | 188,930 |   |
| Retained earnings                                                                                                                          |   |                   | 81,156    |   |              |   | 80,564 |   |
| Treasury stock, at cost; 12,603,671 and 12,652,245 shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                   | (156,852  | )      |              |   | (157,041 | ) |
| Accumulated other comprehensive loss, net of tax                                                                                           |   |                   | (2,085    | )      |              |   | (2,314 | ) |
| Total shareholders’ equity                                                                                                                                    |   |                   | 111,193   |   |              |   | 110,373 |   |
| Total liabilities and shareholders’ equity                                                                                                                    |   | $                      | 1,092,127 |   |              | $      | 1,081,515 |   |

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table of contents

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Three Months EndedMarch 31,                             |       |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------|------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 2010                                                    |       | 2009 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | (Unaudited)                                             |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | (Dollars in thousands, except share and per share data) |       |
| Interest income:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                    |       |   |   |
| Loans                                                                                                                                                         | $                                                       | 9,678      |   | $ | 9,945 |   |
| Securities                                                                                                                                                    |                                                    | 2,213      |   |   | 3,043 |   |
| Other                                                                                                                                                         |                                                    | 124        |   |   | 243 |   |
| Total interest income                                                                                                                                                   |                                                    | 12,015     |   |   | 13,231 |   |
| Interest expense:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                    |       |   |   |   |   |
| Deposits                                                                                                                                                      |                                                    | 2,053      |   |   | 3,096 |   |
| Borrowed money                                                                                                                                                |                                                    | 519        |   |   | 960 |   |
| Total interest expense                                                                                                                                                  |                                                    | 2,572      |   |   | 4,056 |   |
| Net interest income                                                                                                                            |                                                    | 9,443      |   |   | 9,175 |   |
| Provision for losses on loans                                                                                                                  |                                                    | 1,710      |   |   | 624 |   |
| Net interest income after provision for losses on loans                                                                                        |                                                    | 7,733      |   |   | 8,551 |   |
| Non-interest income:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                    |       |   |   |   |   |
| Service charges and other fees                                                                                                                                |                                                    | 1,220      |   |   | 1,299 |   |
| Card-based fees                                                                                                                                               |                                                    | 437        |   |   | 388 |   |
| Commission income                                                                                                                                             |                                                    | 54         |   |   | 71 |   |
| Security gains, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                    | 456        |   |   | 720 |   |
| Other asset gains, net                                                                                                                                        |                                                    | 1          |   |   | ― |   |
| Income from bank-owned life insurance                                                                                                                         |                                                    | 223        |   |   | 178 |   |
| Other income                                                                                                                                                  |                                                    | 155        |   |   | 295 |   |
| Total non-interest income                                                                                                                                               |                                                    | 2,546      |   |   | 2,951 |   |
| Non-interest expense:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                    |       |   |   |   |   |
| Compensation and employee benefits                                                                                                                            |                                                    | 4,672      |   |   | 5,175 |   |
| Net occupancy expense                                                                                                                                         |                                                    | 755        |   |   | 897 |   |
| Professional fees                                                                                                                                             |                                                    | 684        |   |   | 350 |   |
| Furniture and equipment expense                                                                                                                               |                                                    | 533        |   |   | 535 |   |
| FDIC insurance premiums                                                                                                                                       |                                                    | 498        |   |   | 304 |   |
| Data processing                                                                                                                                               |                                                    | 430        |   |   | 419 |   |
| Marketing                                                                                                                                                     |                                                    | 114        |   |   | 198 |   |
| OREO related expense                                                                                                                                          |                                                    | 636        |   |   | 199 |   |
| Loan collection expense                                                                                                                                       |                                                    | 169        |   |   | 298 |   |
| Other general and administrative expenses                                                                                                                     |                                                    | 981        |   |   | 1,053 |   |
| Total non-interest expense                                                                                                                                              |                                                    | 9,472      |   |   | 9,428 |   |
| Income before income taxes                                                                                                                     |                                                    | 807        |   |   | 2,074 |   |
| Income tax expense                                                                                                                             |                                                    | 109        |   |   | 613 |   |
| Net income                                                                                                                                                              | $                                                       | 698        |   | $ | 1,461 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                    |       |   |   |   |   |
| Per share data:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                                                    |       |   |   |   |   |
| Basic earnings per share                                                                                                                                      | $                                                       | 0.07       |   | $ | 0.14 |   |
| Diluted earnings per share                                                                                                                                    |                                                    | 0.07       |   |   | 0.14 |   |
| Cash dividends declared per share                                                                                                                             |                                                    | 0.01       |   |   | 0.01 |   |
| Weighted-average shares outstanding                                                                                                            |                                                    | 10,581,770 |   |   | 10,495,835 |   |
| Weighted-average diluted shares outstanding                                                                                                    |                                                    | 10,673,776 |   |   | 10,628,901 |   |

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table of contents

|                                                                                                                                                                                                                                                                                                                                                            |   | CommonStock                                         |    |   | AdditionalPaid-InCapital |   |    | RetainedEarnings |   |   | TreasuryStock |   |   | UnallocatedCommonStock HeldBy ESOP |     |   | AccumulatedOtherComprehensiveLoss |   |    | Total  |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|---------|--------|--------------------------|--------|---------|------------------|--------|--------|---------------|--------|--------|------------------------------------|----------|--------|-----------------------------------|--------|---------|--------|--------|
|                                                                                                                                                                                                                                                                                                                                                            |   |    (Unaudited)                       |
|                                                                                                                                                                                                                                                                                                                                                            |   |  (Dollars in thousands, except per share data) |
| Balance at January 1, 2009                                                                                                                                                                                                                                                                                                                                      |   | $                                                   | 234     |   |                     | $      | 189,211 |             |   | $      | 81,525        |   |   | $                                  | (157,466 | )      |                              | $      | (832    | )      |   | $ | (863 | ) |   | $ | 111,809 |   |
| Net income                                                                             |   |                                                | ― |   |                     |   | ― |             |   |   | 1,461         |   |   |                               | ―  |   |                              |   | ― |   |   |   | ― |   |   |   | 1,461 |   |
| Comprehensive loss:Change in unrealized depreciation on available-for-sale securities, net of reclassification and tax                                                                                                                                                                                                                                          |   |                                                | ― |   |                     |   | ― |             |   |   | ―       |   |   |                               | ―  |   |                              |   | ― |   |   |   | (2,854 | ) |   |   | (2,854 | ) |
| Total comprehensive loss                                                                                                                                                                                                                                                                                                                                        |   |                                                | ― |   |                     |   | ― |             |   |   | ―       |   |   |                               | ―  |   |                              |   | ― |   |   |   | ― |   |   |   | (1,393 | ) |
| Net purchases of Rabbi Trust shares                                                                                                                                                                                                                                                                                                                             |   |                                                | ― |   |                     |   | ― |             |   |   | ―       |   |   |                               | (4       | )      |                              |   | ― |   |   |   | ― |   |   |   | (4 | ) |
| Shares earned under ESOP                                                                                                                                                                                                                                                                                                                                        |   |                                                | ― |   |                     |   | (401    | )                |   |   | ―       |   |   |                               | ―  |   |                              |   | 832     |   |   |   | ― |   |   |   | 431 |   |
| Forfeiture of RRP award                                                                                                                                                                                                                                                                                                                                         |   |                                                | ― |   |                     |   | 906     |             |   |   | ―       |   |   |                               | (906     | )      |                              |   | ― |   |   |   | ― |   |   |   | ― |   |
| Unearned compensation restricted stock awards                                                                                                                                                                                                                                                                                                                   |   |                                                | ― |   |                     |   | (349    | )                |   |   | ―       |   |   |                               | 349      |   |                              |   | ― |   |   |   | ― |   |   |   | ― |   |
| Dividends declared on common stock ($0.01per share)                                                   |   |                                                | ― |   |                     |   | ― |             |   |   | (92           | )      |   |                               | ―  |   |                              |   | ― |   |   |   | ― |   |   |   | (92 | ) |
| Balance at March 31, 2009                                                                                                                                                                                                                                                                                                                                       |   | $                                                   | 234     |   |                     | $      | 189,367 |             |   | $      | 82,894        |   |   | $                                  | (158,027 | )      |                              | $      | ― |   |   | $ | (3,717 | ) |   | $ | 110,751 |   |
|                                                                                                                                                                                                                                                                                                                                                            |   |                                                |    |   |                     |   |    |             |   |   |          |   |   |                               |     |   |                              |   |    |   |   |   |   |   |   |   |   |   |
| Balance at January 1, 2010                                                                                                                                                                                                                                                                                                                                      |   | $                                                   | 234     |   |                     | $      | 188,930 |             |   | $      | 80,564        |   |   | $                                  | (157,041 | )      |                              | $      | ― |   |   | $ | (2,314 | ) |   | $ | 110,373 |   |
| Net income                                                                             |   |                                                | ― |   |                     |   | ― |             |   |   | 698           |   |   |                               | ―  |   |                              |   | ― |   |   |   | ― |   |   |   | 698 |   |
| Comprehensive income:Change in unrealized appreciation on available-for-sale securities, net of reclassification and tax                                                                                                                                                                                                                                        |   |                                                | ― |   |                     |   | ― |             |   |   | ―       |   |   |                               | ―  |   |                              |   | ― |   |   |   |     229 |   |   |   |     229 |   |
| Total comprehensive income                                                                                                                                                                                                                                                                                                                                      |   |                                                | ― |   |                     |   | ― |             |   |   | ―       |   |   |                               | ―  |   |                              |   | ― |   |   |   | ― |   |   |   | 927 |   |
| Net purchases of Rabbi Trust shares                                                                                                                                                                                                                                                                                                                             |   |                                                | ― |   |                     |   | ― |             |   |   | ―       |   |   |                               | (1       | )      |                              |   | ― |   |   |   | ― |   |   |   | (1 | ) |
| Forfeiture of restricted stock awards                                                                                                                                                                                                                                                                                                                           |   |                                                | ― |   |                     |   | 205     |             |   |   | ―       |   |   |                               | (205     | )      |                              |   | ― |   |   |   | ― |   |   |   | ― |   |
| Unearned compensation restricted stock awards                                                                                                                                                                                                                                                                                                                   |   |                                                | ― |   |                     |   | (395    | )                |   |   | ―       |   |   |                               | 395      |   |                              |   | ― |   |   |   | ― |   |   |   | ― |   |
| Dividends declared on common stock ($0.01per share)                                                   |   |                                                | ― |   |                     |   | ― |             |   |   | (106          | )      |   |                               | ―  |   |                              |   | ― |   |   |   | ― |   |   |   | (106 | ) |
| Balance at March 31, 2010                                                                                                                                                                                                          |   | $                                                   | 234     |   |                     | $      | 188,740 |             |   | $      | 81,156        |   |   | $                                  | (156,852 | )      |                              | $      | ― |   |   | $ | (2,085 | ) |   | $ | 111,193 |   |

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table of contents

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | Three Months EndedMarch 31, |    |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 2010                        |    |   | 2009 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | (Unaudited)                 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | (Dollars in thousands)      |
| OPERATING ACTIVITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                        |    |   |   |   |
| Net income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | $                           | 698     |   |   | $ | 1,461 |   |
| Adjustments to reconcile net income to net cash provided byoperating activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                        |    |   |   |   |   |   |
| Provision for losses on loans                                                                                                                                     |                        | 1,710   |   |   |   | 624 |   |
| Depreciation and amortization                                                                                                                                     |                        | 404     |   |   |   | 394 |   |
| Premium amortization on the early extinguishment of debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                        | ― |   |   |   | 72 |   |
| Net discount accretion on securities available-for-sale                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                        | (198    | ) |   |   | (324 | ) |
| Deferred income tax expense                                                                                                                                       |                        | 110     |   |   |   | 202 |   |
| Share-based compensation                                                                                                                                          |                        | ― |   |   |   | 431 |   |
| Securities gains, net                                                                                                                                             |                        | (456    | ) |   |   | (720 | ) |
| Other asset gains, net                                                                                                                                            |                        | (1      | ) |   |   | ― |   |
| Increase in cash surrender value of bank-owned life insurance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                        | (223    | ) |   |   | (178 | ) |
| Decrease in other assets                                                                                                                                          |                        | 1,275   |   |   |   | 1,754 |   |
| Increase (decrease) in other liabilities                                                                                                                          |                        | 288     |   |   |   | (394 | ) |
| Net cash provided by operating activities                                                                                                                                   |                        | 3,607   |   |   |   | 3,322 |   |
| INVESTING ACTIVITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                        |    |   |   |   |   |   |
| Securities, available-for-sale:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                        |    |   |   |   |   |   |
| Proceeds from sales                                                                                                                                |                        | 9,603   |   |   |   | 9,906 |   |
| Proceeds from maturities and paydowns                                                                                                              |                        | 19,043  |   |   |   | 20,921 |   |
| Purchases                                                                                                                                          |                        | (22,871 | ) |   |   | (5,136 | ) |
| Net loan fundings                                                                                                                        |                        | (4,059  | ) |   |   | (7,055 | ) |
| Proceeds from sale of real estate owned                                                                                                  |                        | 57      |   |   |   | 15 |   |
| Purchases of property and equipment                                                                                                      |                        | (150    | ) |   |   | (301 | ) |
| Net cash provided by investing activities                                                                                                                         |                        | 1,623   |   |   |   | 18,350 |   |
| FINANCING ACTIVITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                        |    |   |   |   |   |   |
| Dividends paid on common stock                                                                                                           |                        | (109    | ) |   |   | (432 | ) |
| Net purchase of Rabbi Trust shares                                                                                                       |                        | (1      | ) |   |   | (4 | ) |
| Net increase in deposit accounts                                                                                                         |                        | 37,348  |   |   |   | 39,760 |   |
| Net increase in advance payments by borrowers for taxes and insurance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                        | 493     |   |   |   | 274 |   |
| Decrease in short-term borrowed money                                                                                                    |                        | (9,321  | ) |   |   | (18,195 | ) |
| Proceeds from Federal Home Loan Bank borrowed money                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                        | 18,000  |   |   |   | 73,000 |   |
| Repayments of Federal Home Loan Bank borrowed money                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                        | (37,047 | ) |   |   | (103,044 | ) |
| Net cash provided by (used for) financing activities                                                                                                    |                        | 9,363   |   |   |   | (8,641 | ) |
| Increase in cash and cash equivalents                                                                                                    |                        | 14,593  |   |   |   | 13,031 |   |
| Cash and cash equivalents at beginning of period                                                                                         |                        | 24,428  |   |   |   | 19,106 |   |
| Cash and cash equivalents at end of period                                                                                               | $                           | 39,021  |   |   | $ | 32,137 |   |

| Supplemental disclosures:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |   |   |   |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|
| Loans transferred to real estate owned                                                                                           | $      | 1,845  |   |   | $      | 208 |   |
| Cash paid for interest on deposits                                                                                               |   | 2,044  |   |   |   | 3,176 |   |
| Cash paid for interest on borrowed money                                                                                         |   | 543    |   |   |   | 895 |   |
| Cash paid for taxes                                                                                                              |   | 275    |   |   |   | ― |   |

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table of contents

| 1. | Basis of Financial Statements Presentation |
|----|--------------------------------------------|

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table of contents

| 2. | Securities |
|----|------------|

|                                         |   | ParValue               |    |   | Amortized Cost |   |    | Gross Unrealized Gains |   |   | Gross Unrealized Losses |   |   | FairValue |    |
|----------------------------------------------|--------|------------------------|---------|--------|----------------|--------|---------|------------------------|--------|--------|-------------------------|--------|--------|-----------|---------|
|                                         |   | (Dollars in thousands) |    |
| At March 31, 2010:                           |   |                   |    |   |           |   |    |                   |   |   |                    |   |   |      |    |
| Government sponsored entity (GSE) securities |   | $                      | 41,450  |   |           | $      | 41,575  |                   |   | $      | 688                     |   |   | $         | (27     | ) |   | $ | 42,236 |   |
| Collateralized mortgage obligations          |   |                   | 60,836  |   |           |   | 59,998  |                   |   |   | 1,651                   |   |   |      | (671    | ) |   |   | 60,978 |   |
| Commercial mortgage-backed securities        |   |                   | 59,094  |   |           |   | 58,843  |                   |   |   | 1,874                   |   |   |      | (18     | ) |   |   | 60,699 |   |
| Pooled trust preferred securities            |   |                   | 30,059  |   |           |   | 26,978  |                   |   |   | ―                 |   |   |      | (7,077  | ) |   |   | 19,901 |   |
| Equity securities                            |   |                   | 5,837   |   |           |   | ― |                   |   |   | 191                     |   |   |      | ― |   |   |   | 191 |   |
|                                         |   | $                      | 197,276 |   |           | $      | 187,394 |                   |   | $      | 4,404                   |   |   | $         | (7,793  | ) |   | $ | 184,005 |   |

|                                         |   | ParValue               |    |   | Amortized Cost |   |    | Gross Unrealized Gains |   |   | Gross Unrealized Losses |   |   | FairValue |    |
|----------------------------------------------|--------|------------------------|---------|--------|----------------|--------|---------|------------------------|--------|--------|-------------------------|--------|--------|-----------|---------|
|                                         |   | (Dollars in thousands) |    |
| At December 31, 2009:                        |   |                   |    |   |           |   |    |                   |   |   |                    |   |   |      |    |
| Government sponsored entity (GSE) securities |   | $                      | 40,450  |   |           | $      | 40,374  |                   |   | $      | 1,083                   |   |   | $         | ― |   |   | $ | 41,457 |   |
| Mortgage-backed securities                   |   |                   | 9,527   |   |           |   | 9,426   |                   |   |   | 409                     |   |   |      | ― |   |   |   | 9,835 |   |
| Collateralized mortgage obligations          |   |                   | 67,307  |   |           |   | 66,413  |                   |   |   | 1,336                   |   |   |      | (981    | ) |   |   | 66,768 |   |
| Commercial mortgage-backed securities        |   |                   | 49,722  |   |           |   | 49,210  |                   |   |   | 1,347                   |   |   |      | (35     | ) |   |   | 50,522 |   |
| Pooled trust preferred securities            |   |                   | 30,223  |   |           |   | 27,093  |                   |   |   | ―                 |   |   |      | (7,081  | ) |   |   | 20,012 |   |
| Equity securities                            |   |                   | 5,837   |   |           |   | ― |                   |   |   | 187                     |   |   |      | ― |   |   |   | 187 |   |
|                                         |   | $                      | 203,066 |   |           | $      | 192,516 |                   |   | $      | 4,362                   |   |   | $         | (8,097  | ) |   | $ | 188,781 |   |

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|                                         |   | March 31, 2010         |    |
|----------------------------------------------|--------|------------------------|---------|
|                                         |   | Less than 12 Months    |    |   | 12 Months or More |   |   | Total |   |
|                                         |   | Fair Value             |    |   | Unrealized Losses |   |   | Fair Value |   |   | Unrealized Losses |   |   | Fair Value |   |   | Unrealized Losses |   |
|                                         |   | (Dollars in thousands) |
| Government sponsored entity (GSE) securities |   | $                      | 6,066   |   |   | $ | (27 | ) |   | $ | ― |   |   | $ | ― |   |   | $ | 6,066 |   |   | $ | (27 | ) |
| Collateralized mortgage obligations          |   |                   | 1,837   |   |   |   | (115 | ) |   |   | 5,767 |   |   |   | (556 | ) |   |   | 7,604 |   |   |   | (671 | ) |
| Commercial mortgage-backed securities        |   |                   | 4,959   |   |   |   | (18 | ) |   |   | ― |   |   |   | ― |   |   |   | 4,959 |   |   |   | (18 | ) |
| Pooled trust preferred securities            |   |                   | ― |   |   |   | ― |   |   |   | 19,901 |   |   |   | (7,077 | ) |   |   | 19,901 |   |   |   | (7,077 | ) |
|                                         |   | $                      | 12,862  |   |   | $ | (160 | ) |   | $ | 25,668 |   |   | $ | (7,633 | ) |   | $ | 38,530 |   |   | $ | (7,793 | ) |

|                                  |   | December 31, 2009      |    |
|---------------------------------------|--------|------------------------|---------|
|                                  |   | Less than 12 Months    |    |   | 12 Months or More |   |   | Total |   |
|                                  |   | Fair Value             |    |   | Unrealized Losses |   |   | Fair Value |   |   | Unrealized Losses |   |   | Fair Value |   |   | Unrealized Losses |   |
|                                  |   | (Dollars in thousands) |
| Collateralized mortgage obligations   |   | $                      | 12,461  |   |   | $ | (201 | ) |   | $ | 14,764 |   |   | $ | (780 | ) |   | $ | 27,225 |   |   | $ | (981 | ) |
| Commercial mortgage-backed securities |   |                   | 1,598   |   |   |   | (35 | ) |   |   | ― |   |   |   | ― |   |   |   | 1,598 |   |   |   | (35 | ) |
| Pooled trust preferred securities     |   |                   | ― |   |   |   | ― |   |   |   | 20,012 |   |   |   | (7,081 | ) |   |   | 20,012 |   |   |   | (7,081 | ) |
|                                  |   | $                      | 14,059  |   |   | $ | (236 | ) |   | $ | 34,776 |   |   | $ | (7,861 | ) |   | $ | 48,835 |   |   | $ | (8,097 | ) |

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|                                   |   | Available-for-Sale     |    |
|----------------------------------------|--------|------------------------|---------|
|                                   |   | AmortizedCost          |    |   | FairValue |   |
|                                   |   | (Dollars in thousands) |    |
| GSE and callable GSE securities:  |   |                   |    |
| Due in one year or less                |   | $                      | 32,619  |   |   | $ | 33,239 |   |
| Due after one year through five years  |   |                   | 8,956   |   |   |   | 8,997 |   |
| Collateralized mortgage obligations    |   |                   | 59,998  |   |   |   | 60,978 |   |
| Commercial mortgage-backed securities  |   |                   | 58,843  |   |   |   | 60,699 |   |
| Pooled trust preferred securities      |   |                   | 26,978  |   |   |   | 19,901 |   |
| Equity securities                      |   |                   | ― |   |   |   | 191 |   |
|                                   |   | $                      | 187,394 |   |   | $ | 184,005 |   |

|                                  |   | Held-to-Maturity       |   |
|---------------------------------------|--------|------------------------|--------|
|                                  |   | AmortizedCost          |   |   | FairValue |   |
|                                  |   | (Dollars in thousands) |   |
| State and municipal securities:  |   |                   |   |   |   |   |
| Due in one year or less               |   | $                      | 2,000  |   |   | $ | 2,025 |   |
| Due after one year through five years |   |                   | 3,000  |   |   |   | 3,121 |   |
|                                  |   | $                      | 5,000  |   |   | $ | 5,146 |   |

| 3. | Fair Value Measurements |
|----|-------------------------|

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|                                                                                                                                                                                                                                                                                                        |   | Fair Value Measurements at March 31, 2010 |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                        |   | Fair Value                                |   |   | Quoted Prices inActive Markets for Identical Assets(Level 1) |   |   | Significant Other Observable Inputs (Level 2) |   |   | Significant Unobservable Inputs(Level 3) |   |
|                                                                                                                                                                                                                                                                                                        |   | (Dollars in thousands)                    |   |
| Securities available-for-sale:                                                                                                                                                                                                                                                                              |   |                                      |   |   |   |   |   |   |   |   |   |   |
| Government sponsored entity (GSE) securities                                                                                                                                                                                                                                                                |   | $                                         | 42,236 |   |   | $ | ― |   |   | $ | 42,236 |   |   | $ | ― |   |
| Collateralized mortgage obligations                                                                                                                                                                                                                                                                         |   |                                      | 60,978 |   |   |   | ― |   |   |   | 60,978 |   |   |   | ― |   |
| Commercial mortgage-backed securities                                                                                                                                                                                                                                                                       |   |                                      | 60,699 |   |   |   | ― |   |   |   | 60,699 |   |   |   | ― |   |
| Pooled trust preferred securities                                                                                                                                                                                                                                                                           |   |                                      | 19,901 |   |   |   | ― |   |   |   | ― |   |   |   | 19,901 |   |
| Equity securities                                                |   |                                      | 191    |   |   |   | 191 |   |   |   | ― |   |   |   | ― |   |

|                                                                                                                                                                                                                                                                                                                 |   | Fair Value Measurements at December 31, 2009 |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                 |   | Fair Value                                   |   |   | Quoted Prices inActive Markets for Identical Assets(Level 1) |   |   | Significant Other Observable Inputs (Level 2) |   |   | Significant Unobservable Inputs(Level 3) |   |
|                                                                                                                                                                                                                                                                                                                 |   | (Dollars in thousands)                       |   |
| Securities available-for-sale:                                                                                                                                                                                                                                                                                       |   |                                         |   |   |   |   |   |   |   |   |   |   |
| Government sponsored entity (GSE) securities                                                                                                                                                                                                                                                                         |   | $                                            | 41,457 |   |   | $ | ― |   |   | $ | 41,457 |   |   | $ | ― |   |
| Mortgage-backed securities                                                |   |                                         | 9,835  |   |   |   | ― |   |   |   | 9,835 |   |   |   | ― |   |
| Collateralized mortgage obligations                                                                                                                                                                                                                                                                                  |   |                                         | 66,768 |   |   |   | ― |   |   |   | 66,768 |   |   |   | ― |   |
| Commercial mortgage-backed securities                                                                                                                                                                                                                         |   |                                         | 50,522 |   |   |   | ― |   |   |   | 50,522 |   |   |   | ― |   |
| Pooled trust preferred securities                                                                                                                                                                                                                                                                                    |   |                                         | 20,012 |   |   |   | ― |   |   |   | ― |   |   |   | 20,012 |   |
| Equity securities                                                         |   |                                         | 187    |   |   |   | 187 |   |   |   | ― |   |   |   | ― |   |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | Available-for-sale Securities |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | 2010                          |   |   | 2009 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | (Dollars in thousands)        |   |
| Beginning balance at January 1                                                                               |   | $                             | 20,012 |   |   | $ | 24,133 |   |
| Total realized and unrealized gains (losses):                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                          |   |   |   |   |   |   |
| Included in accumulated other comprehensive loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                          | 3      |   |   |   | (3,027 | ) |
| Purchases, sales, issuances and settlements, net                                                                            |   |                          | (114   | ) |   |   | (146 | ) |
| Ending balance March 31                                                                                      |   | $                             | 19,901 |   |   | $ | 20,960 |   |

|                                                                                                                                                                                                                                               |   | Fair Value Measurements at March 31, 2010 |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|--------|
|                                                                                                                                                                                                                                               |   | Fair Value                                |   |   | Quoted Prices inActive Markets for Identical Assets(Level 1) |   |   | Significant Other Observable Inputs (Level 2) |   |   | Significant UnobservableInputs(Level 3) |   |
|                                                                                                                                                                                                                                               |   | (Dollars in thousands)                    |   |
| Impaired loans                                       |   | $                                         | 7,483  |   |   | $ | ― |   |   | $ | ― |   |   | $ | 7,483 |   |
| Other real estate owned                                                                                                                                                                                                                            |   |                                      | 1,416  |   |   |   | ― |   |   |   | ― |   |   |   | 1,416 |   |

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|                                                                                                                                                                                                                                               |   | Fair Value Measurements at December 31, 2009 |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|--------|
|                                                                                                                                                                                                                                               |   | Fair Value                                   |   |   | Quoted Prices inActive Markets for Identical Assets(Level 1) |   |   | Significant Other Observable Inputs (Level 2) |   |   | Significant UnobservableInputs(Level 3) |   |
|                                                                                                                                                                                                                                               |   | (Dollars in thousands)                       |   |
| Impaired loans                                       |   | $                                            | 29,411 |   |   | $ | ― |   |   | $ | ― |   |   | $ | 29,411 |   |
| Other real estate owned                                                                                                                                                                                                                            |   |                                         | 1,740  |   |   |   | ― |   |   |   | ― |   |   |   | 1,740 |   |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | March 31,              |      |   | December 31, |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|-----------|--------|--------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | 2010                   |      |   | 2009         |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | Carrying               |      |   | Fair         |   |   | Carrying |   |   | Fair |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | Amount                 |      |   | Value        |   |   | Amount |   |   | Value |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | (Dollars in thousands) |      |
| Financial Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                   |      |   |         |   |   |   |   |   |   |   |
| Cash and cash equivalents                                                                                 |   | $                      | 39,021    |   |         | $      | 39,021 |   |   | $ | 24,428 |   |   | $ | 24,428 |   |
| Securities, available-for-sale                                                                            |   |                   | 184,005   |   |         |   | 184,005 |   |   |   | 188,781 |   |   |   | 188,781 |   |
| Securities, held-to-maturity                                                                              |   |                   | 5,000     |   |         |   | 5,146 |   |   |   | 5,000 |   |   |   | 5,179 |   |
| Federal Home Loan Bank stock                                                                              |   |                   | 23,944    |   |         |   | 23,944 |   |   |   | 23,944 |   |   |   | 23,944 |   |
| Loans receivable, net of allowance for losses on loans                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                   | 743,365   |   |         |   | 747,031 |   |   |   | 742,925 |   |   |   | 745,594 |   |
| Interest receivable                                                                                       |   |                   | 3,478     |   |         |   | 3,478 |   |   |   | 3,469 |   |   |   | 3,469 |   |
| Total financial assets                                                                                    |   | $                      | 998,813   |   |         | $      | 1,002,625 |   |   | $ | 988,547 |   |   | $ | 991,395 |   |
| Financial Liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                   |      |   |         |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                                                  |   | $                      | 887,137   |   |         | $      | 887,820 |   |   | $ | 849,758 |   |   | $ | 850,894 |   |
| Borrowed money                                                                                            |   |                   | 83,440    |   |         |   | 85,159 |   |   |   | 111,808 |   |   |   | 113,379 |   |
| Interest payable                                                                                          |   |                   |  130 |   |         |   |  130 |   |   |   | 145 |   |   |   | 145 |   |
| Total financial liabilities                                                                               |   | $                      | 970,707   |   |         | $      | 973,109 |   |   | $ | 961,711 |   |   | $ | 964,418 |   |

| 4. | Earnings Per Share |
|----|--------------------|

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | Three Months EndedMarch 31,                  |       |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 2010                                         |       |   | 2009 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | (Dollars in thousands, except pershare data) |       |
| Net income                                                                                                                                                             |   | $                                            | 698        |   |   | $ | 1,461 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                         |       |   |   |   |   |   |
| Weighted-average common shares outstanding                                                                                                                             |   |                                         | 10,581,770 |   |   |   | 10,495,835 |   |
| Weighted-average common share equivalents                                                                                                                              |   |                                         | 92,006     |   |   |   | 133,066 |   |
| Weighted-average common shares and common share equivalents outstanding                                                                                                                                                                                                                                                                                                                       |   |                                         | 10,673,776 |   |   |   | 10,628,901 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                         |       |   |   |   |   |   |
| Basic earnings per share                                                                                                                                               |   | $                                            | 0.07       |   |   | $ | 0.14 |   |
| Diluted earnings per share                                                                                                                                             |   |                                         | 0.07       |   |   |   | 0.14 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                         |       |   |   |   |   |   |
| Number of anti-dilutive stock options excluded from the dilutedearnings per share calculation                                                                                    |   |                                         | 740,995    |   |   |   | 1,130,245 |   |
| Weighted-average exercise price of anti-dilutive option shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | $                                            | 13.24      |   |   | $ | 12.15 |   |

| 5. | Share-Based Compensation |
|----|--------------------------|

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|                          |   |  Number of Shares |    |   | Weighted-AverageGrant-Date Fair Value |   |
|-------------------------------|--------|------------------------|---------|--------|---------------------------------------|--------|
| Unvested at December 31, 2009 |   |                   | 165,664 |   |                                  | $      | 6.04 |   |
| Granted                       |   |                   | 113,109 |   |                                  |   | 3.49 |   |
| Vested                        |   |                   | ― |   |                                  |   | ― |   |
| Forfeited                     |   |                   | (64,449 | )      |                                  |   | 3.17 |   |
| Unvested at March 31, 2010    |   |                   | 214,324 |   |                                  | $      | 5.56 |   |

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|                              |   | Number ofShares |    |   | Weighted-AverageExercise Price |   |
|----------------------------------------|--------|-----------------|---------|--------|--------------------------------|--------|
| Options outstanding at January 1, 2010 |   |            | 769,795 |   |                           | $      | 13.08 |   |
| Granted                                |   |            | ― |   |                           |   | ― |   |
| Exercised                              |   |            | ― |   |                           |   | ― |   |
| Forfeited                              |   |            | (3,000  | )      |                           |   | 13.48 |   |
| Expired unexercised                    |   |            | (25,800 | )      |                           |   | 8.44 |   |
| Options outstanding at March 31, 2010  |   |            | 740,995 |   |                           | $      | 13.24 |   |
| Options exercisable at March 31, 2010  |   |            | 740,995 |   |                           | $      | 13.24 |   |

| 6. | Other Comprehensive Income (Loss) |
|----|-----------------------------------|

|                                                                                                                                                                                                                                                                                                                                                                                            |   | Three Months EndedMarch 31, |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                            |   | 2010                        |   |   | 2009 |   |
|                                                                                                                                                                                                                                                                                                                                                                                            |   | (Dollars in thousands)      |   |
| Unrealized holding gains (losses) arising during the period:                                                                                                                                                                                                                                                                                                                                    |   |                        |   |   |   |   |
| Unrealized net gains (losses)                                                            |   | $                           | 802    |   |   | $ | (3,823 | ) |
| Related tax (expense) benefit                                                            |   |                        | (272   | ) |   |   | 1,424 |   |
| Net                                                                                      |   |                        | 530    |   |   |   | (2,399 | ) |
| Less:  reclassification adjustment for net gains (losses) realized during the period:                                                                                                                                                                                                                                                                                            |   |                        |   |   |   |   |   |   |
| Realized net gains                                                                                 |   |                        | 456    |   |   |   | 720 |   |
| Related tax expense                                                                                |   |                        | (155   | ) |   |   | (265 | ) |
| Net                                                                                                |   |                        | 301    |   |   |   | 455 |   |
| Total other comprehensive income (loss)                                                                                                                                                                                                                                                                                                                                                         |   | $                           | 229    |   |   | $ | (2,854 | ) |

| 7. | Recent Accounting Pronouncements |
|----|----------------------------------|

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Item 2. 

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|   | • | the elimination or renegotiation of ten operational contracts with an estimated annual savings of $430,000; |
|--------|---------|-------------------------------------------------------------------------------------------------------------|

|   | • | the implementation of a salary freeze with an estimated annual savings of $300,000; |
|--------|---------|-------------------------------------------------------------------------------------|

|   | • | the ongoing conversion of paper statements to electronic statements with an estimated annual savings of $157,000 to date; |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------|

|   | • | relocation of our operations center from a leased facility to existing facilities with an estimated annual savings of $100,000; |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------|

|   | • | the implementation of remote deposit recapture at our branch offices with an estimated annual savings of $72,000; and |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------|

|   | • | the elimination of deposit functionality at eleven low volume ATMs with an estimated annual savings of $68,000. |
|--------|---------|-----------------------------------------------------------------------------------------------------------------|

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|                                                                                                                                                                                                                                                                                                                          |   | Three Months Ended March 31, |      |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|-----------|
|                                                                                                                                                                                                                                                                                                                          |   | 2010                         |      |   | 2009 |   |
|                                                                                                                                                                                                                                                                                                                          |   | Average Balance              |      |   | Interest |   |   | AverageYield/Cost |   |   | Average Balance |   |   | Interest |   |   | AverageYield/Cost |   |
|                                                                                                                                                                                                                                                                                                                          |   | (Dollars in thousands)       |      |
| Interest-earning assets:                                                                                                                                                                                                                                                                                                      |   |                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans receivable (1)                                                                                                                                                                                                                                                                                                          |   | $                            | 760,822   |   |   | $ | 9,678 |   |   |   | 5.16 | % |   | $ | 753,064 |   |   | $ | 9,945 |   |   |   | 5.36 | % |
| Securities (2)                                                                     |   |                         | 194,812   |   |   |   | 2,213 |   |   |   | 4.54 |   |   |   | 244,224 |   |   |   | 3,043 |   |   |   | 4.98 |   |
| Other interest-earning assets (3)                                                                                                                                                                                                                                                                                             |   |                         | 26,996    |   |   |   | 124 |   |   |   | 1.86 |   |   |   | 33,492 |   |   |   | 243 |   |   |   | 2.94 |   |
| Total interest-earning assets                                                                                                                                                                                                                                                                                                 |   |                         | 982,630   |   |   |   | 12,015 |   |   |   | 4.96 |   |   |   | 1,030,780 |   |   |   | 13,231 |   |   |   | 5.21 |   |
|                                                                                                                                                                                                                                                                                                                          |   |                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest earning assets                                                                                                                                                                                                                                                                                              |   |                         | 100,684   |   |   |   |   |   |   |   |   |   |   |   | 83,727 |   |   |   |   |   |   |   |   |   |
| Total assets                                                        |   | $                            | 1,083,314 |   |   |   |   |   |   |   |   |   |   | $ | 1,114,507 |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                          |   |                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                                                                                                                                                                                                                                                                                 |   |                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                                                                                                                                                                                                                                                                                                     |   |                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Checking accounts                                                                                                                                                                                                                                                                                                             |   | $                            | 134,715   |   |   |   | 67 |   |   |   | 0.20 |   |   | $ | 111,664 |   |   |   | 92 |   |   |   | 0.33 |   |
| Money market accounts                                                                                                                                                                                                                                                                                                    |   |                         | 152,912   |   |   |   | 246 |   |   |   | 0.65 |   |   |   | 161,770 |   |   |   | 332 |   |   |   | 0.83 |   |
| Savings accounts                                                                                                                                                                                                                                                                                                              |   |                         | 115,497   |   |   |   | 94 |   |   |   | 0.33 |   |   |   | 116,620 |   |   |   | 102 |   |   |   | 0.35 |   |
| Certificates of deposit                                                                                                                                                                                                                                                                                                       |   |                         | 368,106   |   |   |   | 1,646 |   |   |   | 1.81 |   |   |   | 369,580 |   |   |   | 2,570 |   |   |   | 2.82 |   |
| Total deposits                                                                                              |   |                         | 771,230   |   |   |   | 2,053 |   |   |   | 1.08 |   |   |   | 759,634 |   |   |   | 3,096 |   |   |   | 1.65 |   |
|                                                                                                                                                                                                                                                                                                                          |   |                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Borrowed money:                                                                                                                                                                                                                                                                                                               |   |                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other short-term borrowed money (4)                                                                                                                                                                                                                                                                                           |   |                         | 16,711    |   |   |   | 21 |   |   |   | 0.51 |   |   |   | 17,458 |   |   |   | 33 |   |   |   | 0.77 |   |
| FHLB borrowed money (5)                                                                                                                                                                                                                                                                                                  |   |                         | 80,147    |   |   |   | 498 |   |   |   | 2.49 |   |   |   | 147,231 |   |   |   | 927 |   |   |   | 2.52 |   |
| Total borrowed money                                                                                                                                                                                                                                                                                                          |   |                         | 96,858    |   |   |   | 519 |   |   |   | 2.14 |   |   |   | 164,689 |   |   |   | 960 |   |   |   | 2.33 |   |
| Total interest-bearing liabilities                                                                                                                                                                                                                                                                                            |   |                         | 868,088   |   |   |   | 2,572 |   |   |   | 1.20 |   |   |   | 924,323 |   |   |   | 4,056 |   |   |   | 1.78 |   |
| Non-interest bearing deposits                                                                                                                                                                                                                                                                                            |   |                         | 93,620    |   |   |   |   |   |   |   |   |   |   |   | 63,849 |   |   |   |   |   |   |   |   |   |
| Non-interest bearing liabilities                                                                                                                                                                                                                                                                                         |   |                         | 10,425    |   |   |   |   |   |   |   |   |   |   |   | 13,888 |   |   |   |   |   |   |   |   |   |
| Total liabilities                                                   |   |                         | 972,133   |   |   |   |   |   |   |   |   |   |   |   | 1,002,060 |   |   |   |   |   |   |   |   |   |
| Shareholders’ equity                                                                                                                                                                                                                                                                                |   |                         | 111,181   |   |   |   |   |   |   |   |   |   |   |   | 112,447 |   |   |   |   |   |   |   |   |   |
| Total liabilities and shareholders’ equity                                                                                                                                                                                                                                                                              |   | $                            | 1,083,314 |   |   |   |   |   |   |   |   |   |   | $ | 1,114,507 |   |   |   |   |   |   |   |   |   |
| Net interest-earning assets                                                                                                                                                                                                                                                                                              |   | $                            | 114,542   |   |   |   |   |   |   |   |   |   |   | $ | 106,457 |   |   |   |   |   |   |   |   |   |
| Net interest income / interest rate spread                                                                                                                                                                                                                                                                                    |   |                         |      |   |   | $ | 9,443 |   |   |   | 3.76 | % |   |   |   |   |   | $ | 9,175 |   |   |   | 3.43 | % |
| Net interest margin                                                                                                                                                                                                                                                                                                 |   |                         |      |   |   |   |   |   |   |   | 3.90 | % |   |   |   |   |   |   |   |   |   |   | 3.61 | % |
| Ratio of average interest-earning assetsto average interest-bearing liabilities                                                                                                                                                                                                                                               |   |                         |      |   |   |   |   |   |   |   | 113.19 | % |   |   |   |   |   |   |   |   |   |   | 111.39 | % |

| (1) | The average balance of loans receivable includes non-performing loans, interest on which is recognized on a cash basis. |
|-----|-------------------------------------------------------------------------------------------------------------------------|

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| (2)    | Average balances of securities are based on amortized cost.                                                                                                                                                                                 |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3)    | Includes Federal Home Loan Bank (FHLB) stock, money market accounts, federal funds sold, and interest-earning bank deposits.                                                                                                                |
| (4)    | Includes federal funds purchased, overnight borrowings from the Federal Reserve Bank discount window, and repurchase agreements (Repo Sweeps).                                                                                              |
| (5)    | The 2009 period includes an average of $147.4 million of contractual FHLB borrowed money reduced by an average of $142,000 of unamortized deferred premium on the early extinguishment of debt.  Interest expense on              |
|   | borrowings includes $72,000 of amortization of the deferred premium on the early extinguishment of debt.  The amortization of the deferred premium increased the average cost of borrowed money by 18 basis points to 2.33%. |

|                                                                                                                                                                                                                                                                                                                                                                              |   | Three Months Ended March 31, |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                              |   | 2010 compared to 2009        |   |
|                                                                                                                                                                                                                                                                                                                                                                              |   | Increase (decrease) due to   |   |
|                                                                                                                                                                                                                                                                                                                                                                              |   | Rate                         |   |   | Volume |   |   | Rate /Volume |   |   | Total Net Increase / (Decrease) |   |
|                                                                                                                                                                                                                                                                                                                                                                              |   | (Dollars in thousands)       |   |
| Interest-earning assets:                                                                                                                                                                                                                                                                                                                                                          |   |                         |   |   |   |   |   |   |   |   |   |   |
| Loans receivable                                                                                    |   | $                            | (365   | ) |   | $ | 102 |   |   | $ | (4 | ) |   | $ | (267 | ) |
| Securities                                                                                          |   |                         | (268   | ) |   |   | (615 | ) |   |   | 53 |   |   |   | (830 | ) |
| Other interest-earning assets                                                                       |   |                         | (89    | ) |   |   | (47 | ) |   |   | 17 |   |   |   | (119 | ) |
| Total net change in income on interest-earning assets                                                                                                                                                                                                                                                                                                                             |   |                         | (722   | ) |   |   | (560 | ) |   |   | 66 |   |   |   | (1,216 | ) |
| Interest-bearing liabilities:                                                                                                                                                                                                                                                                                                                                                     |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                                                                                                                                                                                                                                                                                                                                                         |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Checking accounts                                                                                                  |   |                         | (36    | ) |   |   | 19 |   |   |   | (8 | ) |   |   | (25 | ) |
| Money market accounts                                                                                              |   |                         | (72    | ) |   |   | (18 | ) |   |   | 4 |   |   |   | (86 | ) |
| Savings accounts                                                                                                   |   |                         | (7     | ) |   |   | (1 | ) |   |   | ― |   |   |   | (8 | ) |
| Certificates of deposit                                                                                            |   |                         | (918   | ) |   |   | (10 | ) |   |   | 4 |   |   |   | (924 | ) |
| Total deposits                                                                                                               |   |                         | (1,033 | ) |   |   | (10 | ) |   |   | ― |   |   |   | (1,043 | ) |
| Borrowed money:                                                                                                                                                                                                                                                                                                                                                                   |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other short-term borrowed money                                                                                                                                                                                                                                                                                                                                                   |   |                         | (11    | ) |   |   | (1 | ) |   |   | ― |   |   |   | (12 | ) |
| FHLB borrowed money                                                                                                |   |                         | (13    | ) |   |   | (422 | ) |   |   | 6 |   |   |   | (429 | ) |
| Total borrowed money                                                                                                         |   |                         | (24    | ) |   |   | (423 | ) |   |   | 6 |   |   |   | (441 | ) |
| Total net change in expense on interest-bearing liabilities                                                                                                                                                                                                                                                                                                                       |   |                         | (1,057 | ) |   |   | (433 | ) |   |   | 6 |   |   |   | (1,484 | ) |
| Net change in net interest income                                                         |   | $                            | 335    |   |   | $ | (127 | ) |   | $ | 60 |   |   | $ | 268 |   |

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|                                  |   | Three Months Ended March 31, |   |
|---------------------------------------|--------|------------------------------|--------|
|                                  |   | 2010                         |   |   | 2009 |   |   | $ Change |   |   | % Change |   |
|                                  |   | (Dollars in thousands)       |   |
| Service charges and other fees        |   | $                            | 1,220  |   |   | $ | 1,299 |   |   | $ | (79 | ) |   |   | (6.1 | )% |
| Card-based fees                       |   |                         | 437    |   |   |   | 388 |   |   |   | 49 |   |   |   | 12.6 |   |
| Commission income                     |   |                         | 54     |   |   |   | 71 |   |   |   | (17 | ) |   |   | (23.9 | ) |
| Subtotal fee based revenues           |   |                         | 1,711  |   |   |   | 1,758 |   |   |   | (47 | ) |   |   | (2.7 | ) |
| Income from bank-owned life insurance |   |                         | 223    |   |   |   | 178 |   |   |   | 45 |   |   |   | 25.3 |   |
| Other income                          |   |                         | 155    |   |   |   | 295 |   |   |   | (140 | ) |   |   | (47.5 | ) |
| Subtotal                              |   |                         | 2,089  |   |   |   | 2,231 |   |   |   | (142 | ) |   |   | (6.4 | ) |
| Security gains, net                   |   |                         | 456    |   |   |   | 720 |   |   |   | (264 | ) |   |   | (36.7 | ) |
| Other asset gains, net                |   |                         | 1      |   |   |   | ― |   |   |   | 1 |   |   |   | NM |   |
| Total non-interest income             |   | $                            | 2,546  |   |   | $ | 2,951 |   |   | $ | (405 | ) |   |   | (13.7 | ) |

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|                                                                                                                                                                                                                                                                                                                                                                                        |   | Three Months Ended March 31, |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                        |   | 2010                         |    |   | 2009 |   |   | $ Change |   |   | % Change |   |
|                                                                                                                                                                                                                                                                                                                                                                                        |   | (Dollars in thousands)       |    |
| Controllable expense:                                                                                                                                                                                                                                                                                                                                                                       |   |                         |    |   |   |   |   |   |   |   |   |   |
| Compensation and mandatory benefits                                                                                                                                                                                                                                                                                                                                                         |   | $                            | 4,084   |   |   | $ | 4,257 |   |   | $ | (173 | ) |   |   | (4.1 | )% |
| Retirement and stock related compensation                                                                                                                                                                                                                                                                                                                                                   |   |                         | 194     |   |   |   | 610 |   |   |   | (416 | ) |   |   | (68.2 | ) |
| Medical and life benefits                                                                 |   |                         | 375     |   |   |   | 290 |   |   |   | 85 |   |   |   | 29.3 |   |
| Other employee benefits                                                                   |   |                         | 19      |   |   |   | 19 |   |   |   | ― |   |   |   | ― |   |
| Subtotal compensation and employee benefits                                                                                                                                                                                                                                                                                                                                                 |   |                         | 4,672   |   |   |   | 5,176 |   |   |   | (504 | ) |   |   | (9.7 | ) |
| Net occupancy expense                                                                     |   |                         | 755     |   |   |   | 897 |   |   |   | (142 | ) |   |   | (15.8 | ) |
| Professional fees                                                                         |   |                         | 466     |   |   |   | 350 |   |   |   | 116 |   |   |   | 33.1 |   |
| Furniture and equipment expense                                                           |   |                         | 533     |   |   |   | 535 |   |   |   | (2 | ) |   |   | (0.4 | ) |
| Data processing                                                                           |   |                         | 430     |   |   |   | 419 |   |   |   | 11 |   |   |   | 2.6 |   |
| Marketing                                                                                 |   |                         | 114     |   |   |   | 198 |   |   |   | (84 | ) |   |   | (42.4 | ) |
| Other general and administrative expense                                                                                                                                                                                                                                                                                                                                                    |   |                         | 981     |   |   |   | 1,053 |   |   |   | (72 | ) |   |   | (6.8 | ) |
| Subtotal discretionary costs                                                                        |   |                         | 7,951   |   |   |   | 8,628 |   |   |   | (677 | ) |   |   | (7.8 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                        |   |                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-controllable expense:                                                                                                                                                                                                                                                                                                                                                                   |   |                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Compensation and mandatory benefits                                                                                                                                                                                                                                                                                                                                                         |   |                         | ― |   |   |   | (1 | ) |   |   | 1 |   |   |   | 100.0 |   |
| Professional fees                                                                         |   |                         | 218     |   |   |   | ― |   |   |   | 218 |   |   |   | 100.0 |   |
| FDIC insurance premiums                                                                   |   |                         | 498     |   |   |   | 304 |   |   |   | 194 |   |   |   | 63.8 |   |
| OREO related expense                                                                      |   |                         | 636     |   |   |   | 199 |   |   |   | 437 |   |   |   | 219.6 |   |
| Loan collection expense                                                                   |   |                         | 169     |   |   |   | 298 |   |   |   | (129 | ) |   |   | (43.3 | ) |
| Subtotal nondiscretionary costs                                                                     |   |                         | 1,521   |   |   |   | 800 |   |   |   | 721 |   |   |   | 90.1 |   |
| Total non-interest expense                                                                                         |   | $                            | 9,472   |   |   | $ | 9,428 |   |   | $ | 44 |   |   |   | 0.5 | % |

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|                                                                                                                                                                                                                                                                                                                                                                                                                    |   | Three Months EndedMarch 31, |    |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                    |   | 2010                        |    |   | 2009 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                    |   | (Dollars in thousands)      |    |
| Efficiency ratio:                                                                                                                                                                                                                                                                                                                                                                                                       |   |                        |    |   |   |   |
| Non-interest expense                                                                    |   | $                           | 9,472   |   |   | $ | 9,428 |   |
| Net interest income plus non-interest income                                                                                                                                                                                                                                                                                                                                                                            |   | $                           | 11,989  |   |   | $ | 12,126 |   |
| Efficiency ratio                                                                        |   |                        | 79.0    | % |   |   | 77.8 | % |
|                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                        |    |   |   |   |   |   |
| Core efficiency ratio:                                                                                                                                                                                                                                                                                                                                                                                                  |   |                        |    |   |   |   |   |   |
| Non-interest expense                                                                                                                                                                                                                                                                                                                                                                                               |   | $                           | 9,472   |   |   | $ | 9,428 |   |
| OREO related expense                                                                    |   |                        | (636    | ) |   |   | (199 | ) |
| Loan collection expense                                                                 |   |                        | (169    | ) |   |   |  (298 | ) |
| Non-interest expense – as adjusted                                                                                                                                                                                                                                                                                                                                                                                |   |                        | 8,667   |   |   |   | 8,931 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                        |    |   |   |   |   |   |
| Net interest income plus non-interest income                                                                                                                                                                                                                                                                                                                                                                            |   | $                           | 11,989  |   |   | $ | 12,126 |   |
| Adjustments:                                                                                                                                                                                                                                                                                                                                                                                                            |   |                        |    |   |   |   |   |   |
| Security gains, net                                                                                    |   |                        | (456    | ) |   |   | (720 | ) |
| Other asset gains, net                                                                                 |   |                        | (1      | ) |   |   | ― |   |
| Amortization of deferred premium on the early extinguishment of debt                                                                                                                                                                                                                                                                                                                                                    |   |                        | ― |   |   |   | 72 |   |
| Net interest income plus non-interest income – as adjusted                                                                                                                                                                                                                                                                                                                                                        |   | $                           | 11,532  |   |   | $ | 11,478 |   |
| Core efficiency ratio                                                                   |   |                        | 75.2    | % |   |   | 77.8 | % |

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|                                         |   | ParValue               |    |   | Amortized Cost |   |    | Gross Unrealized Gains |   |   | Gross Unrealized Losses |   |   | FairValue |    |
|----------------------------------------------|--------|------------------------|---------|--------|----------------|--------|---------|------------------------|--------|--------|-------------------------|--------|--------|-----------|---------|
|                                         |   | (Dollars in thousands) |    |
| At March 31, 2010:                           |   |                   |    |   |           |   |    |                   |   |   |                    |   |   |      |    |
| Government sponsored entity (GSE) securities |   | $                      | 41,450  |   |           | $      | 41,575  |                   |   | $      | 688                     |   |   | $         | (27     | ) |   | $ | 42,236 |   |
| Collateralized mortgage obligations          |   |                   | 60,836  |   |           |   | 59,998  |                   |   |   | 1,651                   |   |   |      | (671    | ) |   |   | 60,978 |   |
| Commercial mortgage-backed securities        |   |                   | 59,094  |   |           |   | 58,843  |                   |   |   | 1,874                   |   |   |      | (18     | ) |   |   | 60,699 |   |
| Pooled trust preferred securities            |   |                   | 30,059  |   |           |   | 26,978  |                   |   |   | ―                 |   |   |      | (7,077  | ) |   |   | 19,901 |   |
| Equity securities                            |   |                   | 5,837   |   |           |   | ― |                   |   |   | 191                     |   |   |      | ― |   |   |   | 191 |   |
|                                         |   | $                      | 197,276 |   |           | $      | 187,394 |                   |   | $      | 4,404                   |   |   | $         | (7,793  | ) |   | $ | 184,005 |   |

|                                         |   | ParValue               |    |   | Amortized Cost |   |    | Gross Unrealized Gains |   |   | Gross Unrealized Losses |   |   | FairValue |    |
|----------------------------------------------|--------|------------------------|---------|--------|----------------|--------|---------|------------------------|--------|--------|-------------------------|--------|--------|-----------|---------|
|                                         |   | (Dollars in thousands) |    |
| At December 31, 2009:                        |   |                   |    |   |           |   |    |                   |   |   |                    |   |   |      |    |
| Government sponsored entity (GSE) securities |   | $                      | 40,450  |   |           | $      | 40,374  |                   |   | $      | 1,083                   |   |   | $         | ― |   |   | $ | 41,457 |   |
| Mortgage-backed securities                   |   |                   | 9,527   |   |           |   | 9,426   |                   |   |   | 409                     |   |   |      | ― |   |   |   | 9,835 |   |
| Collateralized mortgage obligations          |   |                   | 67,307  |   |           |   | 66,413  |                   |   |   | 1,336                   |   |   |      | (981    | ) |   |   | 66,768 |   |
| Commercial mortgage-backed securities        |   |                   | 49,722  |   |           |   | 49,210  |                   |   |   | 1,347                   |   |   |      | (35     | ) |   |   | 50,522 |   |
| Pooled trust preferred securities            |   |                   | 30,223  |   |           |   | 27,093  |                   |   |   | ―                 |   |   |      | (7,081  | ) |   |   | 20,012 |   |
| Equity securities                            |   |                   | 5,837   |   |           |   | ― |                   |   |   | 187                     |   |   |      | ― |   |   |   | 187 |   |
|                                         |   | $                      | 203,066 |   |           | $      | 192,516 |                   |   | $      | 4,362                   |   |   | $         | (8,097  | ) |   | $ | 188,781 |   |

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table of contents

|                                              |   | March 31, 2010         |    |   | December 31, 2009 |   |   |   |   |
|---------------------------------------------------|--------|------------------------|---------|--------|-------------------|--------|--------|--------|--------|
|                                              |   | Amount                 |    |   | % of Total        |   |   | Amount |   |   | % of Total |   |   | % Change |   |
|                                              |   | (Dollars in thousands) |    |
| Commercial loans:                                 |   |                   |    |   |              |   |   |   |   |   |   |   |   |   |   |
| Commercial and industrial                         |   | $                      | 75,713  |   |              |   | 9.9    | %      |   | $ | 78,600 |   |   |   | 10.3 | % |   |   | (3.7 | )% |
| Commercial real estate – owner occupied     |   |                   | 100,083 |   |              |   | 13.1   |   |   |   | 99,559 |   |   |   | 13.1 |   |   |   | 0.5 |   |
| Commercial real estate – non-owner occupied |   |                   | 217,491 |   |              |   | 28.5   |   |   |   | 218,329 |   |   |   | 28.6 |   |   |   | (0.4 | ) |
| Commercial real estate – multifamily        |   |                   | 70,767  |   |              |   | 9.3    |   |   |   | 63,008 |   |   |   | 8.3 |   |   |   | 12.3 |   |
| Commercial construction and land development      |   |                   | 53,081  |   |              |   | 6.9    |   |   |   | 55,733 |   |   |   | 7.3 |   |   |   | (4.8 | ) |
|     Total commercial loans    |   |                   | 517,135 |   |              |   | 67.7   |   |   |   | 515,229 |   |   |   | 67.6 |   |   |   | 0.4 |   |
|                                              |   |                   |    |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Retail loans:                                     |   |                   |    |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| One-to-four family residential                    |   |                   | 185,253 |   |              |   | 24.3   |   |   |   | 185,293 |   |   |   | 24.3 |   |   |   | ― |   |
| Home equity lines of credit                       |   |                   | 56,029  |   |              |   | 7.3    |   |   |   | 56,911 |   |   |   | 7.5 |   |   |   | (1.5 | ) |
| Retail construction and land development          |   |                   | 4,034   |   |              |   | 0.5    |   |   |   | 3,401 |   |   |   | 0.4 |   |   |   | 18.6 |   |
| Other                                             |   |                   | 1,316   |   |              |   | 0.2    |   |   |   | 1,552 |   |   |   | 0.2 |   |   |   | (15.2 | ) |
| Total retail loans                                |   |                   | 246,632 |   |              |   | 32.3   |   |   |   | 247,157 |   |   |   | 32.4 |   |   |   | (0.2 | ) |
|                                              |   |                   |    |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total loans receivable, net of unearned fees      |   | $                      | 763,767 |   |              |   | 100.0  | %      |   | $ | 762,386 |   |   |   | 100.0 | % |   |   | 0.2 | % |

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table of contents

|                                  |   | March 31, 2010         |   |   | December 31, 2009 |   |   |   |   |
|---------------------------------------|--------|------------------------|--------|--------|-------------------|--------|--------|--------|--------|
|                                  |   | Amount                 |   |   | % of Total        |   |   | Amount |   |   | % of Total |   |   | % Change |   |
|                                  |   | (Dollars in thousands) |   |
| Illinois                              |   | $                      | 21,880 |   |              |   | 42.0   | %      |   | $ | 21,964 |   |   |   | 41.9 | % |   |   | (0.4 | )% |
| Indiana                               |   |                   | 13,229 |   |              |   | 25.4   |   |   |   | 13,149 |   |   |   | 25.1 |   |   |   | 0.6 |   |
| Ohio                                  |   |                   | 9,166  |   |              |   | 17.6   |   |   |   | 9,284 |   |   |   | 17.7 |   |   |   | (1.3 | ) |
| Florida                               |   |                   | 3,303  |   |              |   | 6.3    |   |   |   | 3,303 |   |   |   | 6.4 |   |   |   | 0.0 |   |
| Colorado                              |   |                   | 2,429  |   |              |   | 4.7    |   |   |   | 2,514 |   |   |   | 4.8 |   |   |   | (3.4 | ) |
| Texas                                 |   |                   | 1,641  |   |              |   | 3.2    |   |   |   | 1,660 |   |   |   | 3.2 |   |   |   | (1.1 | ) |
| New York                              |   |                   | 432    |   |              |   | 0.8    |   |   |   | 491 |   |   |   | 0.9 |   |   |   | (12.0 | ) |
| Total participations and syndications |   | $                      | 52,080 |   |              |   | 100.0  | %      |   | $ | 52,365 |   |   |   | 100.0 | % |   |   | (0.5 | )% |

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table of contents

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | Three Months EndedMarch 31, |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | 2010                        |   |   | 2009 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | (Dollars in thousands)      |   |
| Balance at beginning of period                                                                                             |   | $                           | 19,461 |   |   | $ | 15,558 |   |
| Loan charge-offs                                                                                                                               |   |                        | (881   | ) |   |   | (723 | ) |
| Recoveries of loans previously charged-off                                                                                                     |   |                        | 112    |   |   |   | 13 |   |
| Net loan charge-offs                                                                                                                                               |   |                        | (769   | ) |   |   | (710 | ) |
| Provision for losses on loans                                                                                                                  |   |                        | 1,710  |   |   |   | 624 |   |
| Balance at end of period                                                                                                   |   | $                           | 20,402 |   |   | $ | 15,472 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | March 31, 2010    |    |   | December 31,2009 |   |    | March 31,2009 |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|---------|--------|------------------|--------|---------|---------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | (Dollars in thousands) |    |
| Allowance for losses on loans                                                                                                    |   | $                      | 20,402  |   |             | $      | 19,461  |          |   | $ | 15,472 |   |
| Total loans receivable, net of unearned fees                                                                                     |   |                   | 763,767 |   |             |   | 762,386 |          |   |   | 756,134 |   |
| Allowance for losses on loans to total loans                                                                                     |   |                   | 2.67    | %      |             |   | 2.55    | %             |   |   | 2.05 | % |
| Allowance for losses on loans to non-performing loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                   | 35.29   |   |             |   | 32.98   |          |   |   | 27.96 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | March 31,2010          |   |   | December 31, 2009 |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|--------|--------|-------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | (Dollars in thousands) |   |
| Impaired loans:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                   |   |   |              |   |
| With a valuation reserve                                                                                                                  |   | $                      | 17,200 |   |              | $      | 17,200 |   |
| With no valuation reserve required*                                                                                                       |   |                   | 41,906 |   |              |   | 42,021 |   |
| Total impaired loans                                                                                                                      |   | $                      | 59,106 |   |              | $      | 59,221 |   |
| Valuation reserve relating to impaired loans                                                                               |   | $                      | 9,797  |   |              | $      | 9,181 |   |
| Average outstanding impaired loans                                                                                         |   |                   | 59,182 |   |              |   | 48,547 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                   |   |   |              |   |   |   |
| *Net of partial charge-offs on impaired loans with no valuation reserve                                                                                                                                                                                                                                                                                                                        |   | $                      | 9,429  |   |              | $      | 9,412 |   |

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table of contents

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | March 31,2010          |   |   | December 31,2009 |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|--------|--------|------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | (Dollars in thousands) |   |
| Non-accrual loans:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                   |   |
| Commercial loans:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                   |   |   |             |   |
| Commercial and industrial                                                                                                                                  |   | $                      | 946    |   |             | $      | 1,399 |   |
| Commercial real estate – owner occupied                                                                                                              |   |                   | 3,562  |   |             |   | 3,627 |   |
| Commercial real estate – non-owner occupied                                                                                                          |   |                   | 22,103 |   |             |   | 22,103 |   |
| Commercial real estate – multifamily                                                                                                                 |   |                   | 1,300  |   |             |   | 623 |   |
| Commercial construction and land development                                                                                                               |   |                   | 25,259 |   |             |   | 26,059 |   |
| Total commercial loans                                                                                                                                     |   |                   | 53,170 |   |             |   | 53,811 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                   |   |   |             |   |   |   |
| Retail loans:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                   |   |   |             |   |   |   |
| One-to-four family residential                                                                                                                             |   |                   | 3,908  |   |             |   | 4,519 |   |
| Home equity lines of credit                                                                                                                                |   |                   | 433    |   |             |   | 393 |   |
| Retail construction and land development                                                                                                                   |   |                   | 298    |   |             |   | 279 |   |
| Other                                                                                                                                                      |   |                   | 7      |   |             |   | 7 |   |
| Total retail loans                                                                                                                                         |   |                   | 4,646  |   |             |   | 5,198 |   |
| Total non-accrual loans                                                                                                                                    |   |                   | 57,816 |   |             |   | 59,009 |   |
| Other real estate owned, net                                                                                                      |   |                   | 10,616 |   |             |   | 9,242 |   |
| Total non-performing assets                                                                                                                      |   |                   | 68,432 |   |             |   | 68,251 |   |
| 90 days past due and still accruing interest                                                                                      |   |                   | 1,334  |   |             |   | 640 |   |
| Total non-performing assets plus 90 days past due loans still accruing interest                                                                                                                                                                                                                                                                                                                                           |   | $                      | 69,766 |   |             | $      | 68,891 |   |
| Non-performing assets to total assets                                                                                             |   |                   | 6.27   | %      |             |   | 6.31 | % |
| Non-performing loans to total loans                                                                                               |   |                   | 7.57   | %      |             |   | 7.74 | % |

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|                                                                |   |   March 31,2010   |   | December 31, 2009 |   | % change |   |
|---------------------------------------------------------------------|--------|------------------------|--------|-------------------|--------|----------|--------|
|                                                                |   | (Dollars in thousands) |   |
| Commercial real estate – non-owner occupied                   |   | $                      | 10,158 |              |   | $        | 10,158 |   |   | ― | % |
| Commercial construction and land development                        |   |                   | 16,571 |              |   |     | 16,571 |   |   | ― |   |
| Total non-performing syndications and purchased participations |   | $                      | 26,729 |              |   | $        | 26,729 |   |   | ― |   |
| Percentage of total non-performing loans                            |   |                   | 46.2   | %                 |   |     | 45.3   | % |   |   |   |
| Percentage of total syndications and purchased participations       |   |                   | 51.3   |              |   |     | 51.0   |   |   |   |   |

|                                                                                                                                                                                                                                                                                                                                                                                   |   | March 31,2010          |   |   | December 31,2009 |   |   | % Change |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|--------|--------|------------------|--------|--------|----------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                   |   | (Dollars in thousands) |   |
| Illinois                                                              |   | $                      | 10,659 |   |             | $      | 10,659 |     |   | ― | % |
| Indiana                                                               |   |                   | 12,767 |   |             |   | 12,767 |     |   | ― |   |
| Florida                                                               |   |                   | 3,303  |   |             |   | 3,303  |     |   | ― |   |
| Total non-performing syndications and purchased participations                                                                                                                                                                                                                                                                                      |   | $                      | 26,729 |   |             | $      | 26,729 |     |   | ― |   |

|                                                                                                                                                                                                                                                                                                                                                                                                   |   | March 31,2010          |   |   | December 31,2009 |   |   | % Change |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|--------|--------|------------------|--------|--------|----------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                   |   | (Dollars in thousands) |   |
| Commercial real estate – non-owner occupied                                                                                                                                                                                                                                                                                                                                                      |   | $                      | 2,403  |   |             | $      | 2,819  |     |   | (14.8 | )% |
| Commercial construction and land development                                                                                                                                                                                                                                                                                                                                                           |   |                   | 7,659  |   |             |   | 5,940  |     |   | 28.9 |   |
| One-to-four family residential                                                             |   |                   | 554    |   |             |   | 483    |     |   | 14.7 |   |
| Total other real estate owned                                                                             |   | $                      | 10,616 |   |             | $      | 9,242  |     |   | 14.9 | % |

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|                                   |   | March 31, 2010         |    |   | December 31, 2009 |   |   |   |   |
|----------------------------------------|--------|------------------------|---------|--------|-------------------|--------|--------|--------|--------|
|                                   |   | Amount                 |    |   | % of Total        |   |   | Amount |   |   | % of Total |   |   | % Change |   |
|                                   |   | (Dollars in thousands) |    |
| Core deposits:                         |   |                   |    |   |              |   |   |   |   |   |   |   |   |   |   |
| Non-interest bearing checking accounts |   | $                      | 97,735  |   |              |   | 11.0   | %      |   | $ | 89,261 |   |   |   | 10.5 | % |   |   | 9.5 | % |
| Interest bearing checking accounts     |   |                   | 104,856 |   |              |   | 11.8   |   |   |   | 106,013 |   |   |   | 12.5 |   |   |   | (1.1 | ) |
| Money market accounts                  |   |                   | 144,216 |   |              |   | 16.3   |   |   |   | 136,411 |   |   |   | 16.0 |   |   |   | 5.7 |   |
| Savings accounts                       |   |                   | 118,121 |   |              |   | 13.3   |   |   |   | 113,865 |   |   |   | 13.4 |   |   |   | 3.7 |   |
| Subtotal core deposits                 |   |                   | 464,928 |   |              |   | 52.4   |   |   |   | 445,550 |   |   |   | 52.4 |   |   |   | 4.3 |   |
| Certificates of deposit                |   |                   | 370,454 |   |              |   | 41.8   |   |   |   | 354,401 |   |   |   | 41.7 |   |   |   | 4.5 |   |
| Non-municipal deposits                 |   |                   | 835,382 |   |              |   | 94.2   |   |   |   | 799,951 |   |   |   | 94.1 |   |   |   | 4.4 |   |
| Municipal core deposits                |   |                   | 40,758  |   |              |   | 4.6    |   |   |   | 38,993 |   |   |   | 4.6 |   |   |   | 4.5 |   |
| Municipal certificates of deposit      |   |                   | 10,997  |   |              |   | 1.2    |   |   |   | 10,814 |   |   |   | 1.3 |   |   |   | 1.7 |   |
| Municipal deposits                     |   |                   | 51,755  |   |              |   | 5.8    |   |   |   | 49,807 |   |   |   | 5.9 |   |   |   | 3.9 |   |
| Total deposits                         |   | $                      | 887,137 |   |              |   | 100.0  | %      |   | $ | 849,758 |   |   |   | 100.0 | % |   |   | 4.4 |   |

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|                                                                                                                                                                                                                                                                                                                                                                                                                        |   | March 31, 2010                   |    |   | December 31, 2009 |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|---------|--------|-------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                        |   | Weighted-AverageContractual Rate |    |   |  Amount      |   |   | Weighted- AverageContractual Rate |   |   |  Amount |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                        |   | (Dollars in thousands)           |    |
| Short-term variable-rate borrowings:                                                                                                                                                                                                                                                                                                                                                                                        |   |                             |    |   |              |   |   |   |   |   |   |   |
| Repo Sweep accounts                                                                                        |   |                             | 0.50    | %      |              | $      | 14,978 |   |   |   | 0.50 | % |   | $ | 15,659 |   |
|     Federal Reserve Bank discount window                                                                                                                                                                                                                                                                                                                                                                |   |                             | ― |   |              |   | ― |   |   |   | 0.50 |   |   |   | 8,640 |   |
| Secured borrowings from FHLB – Indianapolis:                                                                                                                                                                                                                                                                                                                                                                          |   |                             |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Maturing in 2010 – variable-rate                                                                |   |                             | 0.49    |   |              |   | 9,000 |   |   |   | 0.47 |   |   |   | 6,000 |   |
| Maturing in 2010 – fixed-rate                                                                   |   |                             | 0.63    |   |              |   | 19,000 |   |   |   | 1.56 |   |   |   | 41,000 |   |
| Maturing in 2011 – fixed-rate                                                                   |   |                             | 3.75    |   |              |   | 15,000 |   |   |   | 3.75 |   |   |   | 15,000 |   |
| Maturing in 2013 – fixed-rate                                                                   |   |                             | 2.22    |   |              |   | 15,000 |   |   |   | 2.22 |   |   |   | 15,000 |   |
| Maturing in 2014 – fixed-rate (1)                                                               |   |                             | 6.71    |   |              |   | 1,122 |   |   |   | 6.71 |   |   |   | 1,122 |   |
| Maturing in 2018 – fixed-rate (1)                                                               |   |                             | 5.54    |   |              |   | 2,582 |   |   |   | 5.54 |   |   |   | 2,582 |   |
| Maturing in 2019 – fixed-rate (1)                                                               |   |                             | 6.30    |   |              |   | 6,758 |   |   |   | 6.30 |   |   |   | 6,805 |   |
| Subtotal FHLB – Indianapolis borrowings                                                                                                                                                                                                                                                                                                                                                                               |   |                             |    |   |              |   | 68,462 |   |   |   |   |   |   |   | 87,509 |   |
| Total borrowed money                                                                        |   |                             |    |   |              | $      | 83,440 |   |   |   |   |   |   | $ | 111,808 |   |
| Weighted-average contractual interest rate                                                                                                                                                                                                                                                                                                                                                                                  |   |                             | 2.13    | %      |              |   |   |   |   |   | 2.09 | % |   |   |   |   |

|  (1) | These advances are amortizing and are listed by their contractual maturity. |
|-----------|-----------------------------------------------------------------------------|

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|                                           |   | Actual                 |    | To BeAdequately Capitalized |                                                  | To BeWell-Capitalized |
|------------------------------------------------|--------|------------------------|---------|-----------------------------|-------------------------------------------------------|-----------------------|
|                                           |   | Amount                 |    | Ratio                       |                                                  | Amount                |   | Ratio |   | Amount |   | Ratio |
|                                           |   | (Dollars in thousands) |
| As of March 31, 2010:                          |   |                   |    |                        |                                                  |                  |   |   |   |   |   |   |   |
| Total capital to risk-weighted assets          |   | $                      | 107,065 |                        | 12.63%                                                |                  | $ | 67,836 |   | >8.00% |   | $ | 84,795 |   | >10.00% |   |
| Tier 1 (core) capital to risk-weighted assets  |   |                   | 96,484  |                        |        11.38       |                  |   | 33,918 |   |    >4.00 |   |   | 50,877 |   |        >6.00 |   |
| Tier 1 (core) capital to adjusted total assets |   |                   | 96,484  |                        |          8.92 |                  |   | 43,270 |   |    >4.00 |   |   | 54,088 |   |        >5.00 |   |
| Tangible capital to adjusted total assets      |   |                   | 96,484  |                        |          8.92 |                  |   | 16,226 |   |    >1.50 |   |   | 21,635 |   |        >2.00 |   |
|                                           |   |                   |    |                        |                                                  |                  |   |   |   |   |   |   |   |   |   |   |
| As of December 31, 2009:                       |   |                   |    |                        |                                                  |                  |   |   |   |   |   |   |   |   |   |   |
| Total capital to risk-weighted assets          |   | $                      | 105,323 |                        |        12.35%           |                  | $ | 68,200 |   | >8.00% |   | $ | 85,250 |   | >10.00% |   |
| Tier 1 (core) capital to risk-weighted assets  |   |                   | 95,078  |                        |        11.15            |                  |   | 34,100 |   |    >4.00 |   |   | 51,150 |   |        >6.00 |   |
| Tier 1 (core) capital to adjusted total assets |   |                   | 95,078  |                        |          8.88 |                  |   | 42,838 |   |    >4.00 |   |   | 53,548 |   |        >5.00 |   |
| Tangible capital to adjusted total assets      |   |                   | 95,078  |                        |          8.88 |                  |   | 16,064 |   |    >1.50 |   |   | 21,419 |   |        >2.00 |   |

|   | • | deposits and Repo Sweeps; |
|--------|---------|---------------------------|

|   | • | scheduled payments of amortizing loans and mortgage-backed securities;  |
|--------|---------|------------------------------------------------------------------------------|

|   | • | prepayments and maturities of outstanding loans and mortgage-backed securities;  |
|--------|---------|---------------------------------------------------------------------------------------|

|   | • | maturities of investment securities and other short-term investments;  |
|--------|---------|-----------------------------------------------------------------------------|

|   | • | funds provided from operations; |
|--------|---------|---------------------------------|

|   | • | federal funds line of credit; and |
|--------|---------|-----------------------------------|

|   | • | borrowed money from the FHLB and Federal Reserve Bank. |
|--------|---------|--------------------------------------------------------|

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table of contents

|   | • | increases in deposit accounts totaling $37.4 million; |
|--------|---------|-------------------------------------------------------|

|   | • | proceeds from sales, maturities, and paydowns of securities aggregating $28.6 million; and |
|--------|---------|--------------------------------------------------------------------------------------------|

|   | • | proceeds from FHLB advances totaling $18.0 million. |
|--------|---------|-----------------------------------------------------|

|   | • | purchases of available-for-sale securities totaling $22.9 million; |
|--------|---------|--------------------------------------------------------------------|

|   | • | repayment of short-term borrowings totaling $9.3 million; and |
|--------|---------|---------------------------------------------------------------|

|   | • | repayment of FHLB advances totaling $37.0 million. |
|--------|---------|----------------------------------------------------|

|                                                                                                                                                                                                                                                                                                              |   | Payments Due By Period |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|--------|
|                                                                                                                                                                                                                                                                                                              |   | One YearOr Less        |   |   | Over OneThroughThree Years |   |   | Over Three ThroughFive Years |   |   | Over FiveYears |   |   | Total |   |
|                                                                                                                                                                                                                                                                                                              |   | (Dollars in thousands) |   |
| FHLB borrowed money (1)                                                |   | $                      | 43,314 |   |   | $ | 696 |   |   | $ | 16,770 |   |   | $ | 7,682 |   |   | $ | 68,462 |   |
| Short-term borrowed money (2)                                                                                                                                                                                                                                                                                     |   |                   | 14,978 |   |   |   | ― |   |   |   | ― |   |   |   | ― |   |   |   | 14,978 |   |
| Service bureau contract                                                |   |                   | 1,548  |   |   |   | 3,096 |   |   |   | 3,096 |   |   |   | ― |   |   |   | 7,740 |   |
| Operating leases                                                       |   |                   | 406    |   |   |   | 472 |   |   |   | 283 |   |   |   | 2,096 |   |   |   | 3,257 |   |
| Dividends payable on common stock                                                                                                                                                                                                                                                                                 |   |                   | 109    |   |   |   | ― |   |   |   | ― |   |   |   | ― |   |   |   | 109 |   |
|                                                                                                                                                                                                                                                                                                              |   | $                      | 60,355 |   |   | $ | 4,264 |   |   | $ | 20,149 |   |   | $ | 9,778 |   |   | $ | 94,546 |   |

| (1) | Does not include interest expense at the weighted-average contractual rate of 2.49% for the periods presented. |
|-----|----------------------------------------------------------------------------------------------------------------|

| (2) | Does not include interest expense at the weighted-average contractual rate of 0.50% for the periods presented. |
|-----|----------------------------------------------------------------------------------------------------------------|

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table of contents

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                   |   |   | Over One    |   |    | Over Three |   |   | Over    |   |   |   |    |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|--------|--------|-------------|--------|---------|------------|--------|--------|---------|--------|--------|--------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | One Year               |   |   | Through     |   |    | through    |   |   | Five    |   |   |   |    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | or Less                |   |   | Three Years |   |    | Five Years |   |   | Years   |   |   | Total  |    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | (Dollars in thousands) |   |
| Commitments to extend credit:                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                   |   |   |        |   |    |       |   |   |    |   |   |   |    |
|        Commercial and industrial                                                                          |   | $                      | 4,207  |   |        | $      | 48      |       |   | $      | ― |   |   | $      | ― |   |   | $ | 4,255 |   |
|        Commercial real estate – owner occupied                                                                                                                                                                                                                                                                                                                                                                                                               |   |                   | 2,775  |   |        |   | ― |       |   |   | 135     |   |   |   | 50      |   |   |   | 2,960 |   |
|        Commercial real estate – non-owner occupied                                                                                                                                                                                                                                                                                                                                                                                                           |   |                   | 3,451  |   |        |   | ― |       |   |   | ― |   |   |   | ― |   |   |   | 3,451 |   |
|        Commercial real estate – multifamily                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                   | 10,813 |   |        |   | ― |       |   |   | ― |   |   |   | ― |   |   |   | 10,813 |   |
|        Commercial construction and land development                                                                                                                                                                                                                                                                                                                                                                                                                |   |                   | 2,333  |   |        |   | 167     |       |   |   | ― |   |   |   | ― |   |   |   | 2,500 |   |
|        Retail                                                                                   |   |                   | 2,859  |   |        |   | ― |       |   |   | ― |   |   |   | ― |   |   |   | 2,859 |   |
| Commitments to fund unused construction loans                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                   | 5,443  |   |        |   | ― |       |   |   | ― |   |   |   | 704     |   |   |   | 6,147 |   |
| Commitments to fund unused lines of credit                                                                                                                                                                                                                                     |   |                   | 40,847 |   |        |   | 5,334   |       |   |   | 171     |   |   |   | 43,573  |   |   |   | 89,925 |   |
| Letters of credit                                                                                                             |   |                   | 8,426  |   |        |   | 119     |       |   |   | ― |   |   |   | ― |   |   |   | 8,545 |   |
| Credit enhancements                                                                                                           |   |                   | 14,704 |   |        |   | ― |       |   |   | ― |   |   |   | 14,637  |   |   |   | 29,341 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | $                      | 95,858 |   |        | $      | 5,668   |       |   | $      | 306     |   |   | $      | 58,964  |   |   | $ | 160,796 |   |

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Item 3. 

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table of contents

|                                            |   |   | Net Portfolio Value    |    |
|-------------------------------------------------|--------|--------|------------------------|---------|
|                                            |   |   | At March 31, 2010      |    |   |   | At December 31, 2009 |   |
|                                            |   |   | $ Amount               |    |   | $ Change |   |   | % Change |   |   |   | $ Amount |   |   | $ Change |   |   | % Change |   |
|                                            |   |   | (Dollars in thousands) |    |
| Assumed Change in Interest Rates (Basis Points) |   |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  +300                                      |   |   | $                      | 137,281 |   |   | $ | 4,175 |   |   |   | 3.1 | % |   |   | $ | 130,797 |   |   | $ | 2,065 |   |   |   | 1.6 | % |
|  +200                                      |   |   |                   | 137,197 |   |   |   | 4,092 |   |   |   | 3.1 |   |   |   |   | 131,109 |   |   |   | 2,377 |   |   |   | 1.8 |   |
|  +100                                      |   |   |                   | 136,184 |   |   |   | 3,078 |   |   |   | 2.3 |   |   |   |   | 130,917 |   |   |   | 2,185 |   |   |   | 1.7 |   |
|        0          |   |   |                   | 133,106 |   |   |   | ― |   |   |   | ― |   |   |   |   | 128,732 |   |   |   | ― |   |   |   | ― |   |
|   -100                                     |   |   |                   | 120,377 |   |   |   | (12,729 | ) |   |   | (9.6 | ) |   |   |   | 117,387 |   |   |   | (11,345 | ) |   |   | (8.8 | ) |
|   -200                                     |   |   |                   | 107,250 |   |   |   | (25,855 | ) |   |   | (19.4 | ) |   |   |   | 105,417 |   |   |   | (23,315 | ) |   |   | (18.1 | ) |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | Percentage of Deposits MaturingIn First Year |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | March 31, 2010                               |   |   | December 31, 2009 |   |
| Deposit Category:                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                         |   |   |   |   |
| Business checking accounts                                                                       |   |                                         | 20     | % |   |   | 20 | % |
| Interest checking accounts                                                                       |   |                                         | 20     |   |   |   | 20 |   |
| High-yield checking accounts                                                                     |   |                                         | 95     |   |   |   | 95 |   |
| Savings accounts                                                                                 |   |                                         | 30     |   |   |   | 30 |   |
| Money market accounts                                                                            |   |                                         | 50     |   |   |   | 50 |   |

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table of contents

|                                                  |   |   | Percentage Change in Net Interest IncomeOver a Twelve Month Time Period |   |
|-------------------------------------------------------|--------|--------|-------------------------------------------------------------------------|--------|
|                                                  |   |   | March 31, 2010                                                          |   |   | December 31, 2009 |   |
| Assumed Change in Interest Rates (Basis Points): |   |   |                                                                    |   |   |   |   |
| +300                                                  |   |   |                                                                    | 2.1    | % |   |   | 0.1 | % |
| +200                                                  |   |   |                                                                    | 1.8    |   |   |   | 0.2 |   |
| +100                                                  |   |   |                                                                    | 0.8    |   |   |   | 0.0 |   |
|  -100                                            |   |   |                                                                    | 2.7    |   |   |   | 3.3 |   |
|  -200                                            |   |   |                                                                    | 1.2    |   |   |   | 1.5 |   |

Item 4.

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table of contents

Item 1.

Item 1A.

Item 2. 

| (a)    | Not applicable.                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                |
| (b)    | Not applicable.                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                |
| (c)    | We did not repurchase any shares of our common stock during the quarter ended March 31, 2010 or through April 27, 2010.  Under our repurchase plan publicly announced on March 20, 2008 for 530,000 shares, we have 448,612 shares that may yet be purchased.  We are currently prohibited from repurchasing our common stock without prior approval pursuant to an informal regulatory agreement with the OTS. |

Item 3.

| (a)    | None.           |
|--------|-----------------|
|   |            |
| (b)    | Not applicable. |

Item 4.

Item 5.

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table of contents

| Name                                                                                                                                                                                                                                                  |   | Number of Performance-based Shares |   |   | Number of Service-basedShares |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|--------|--------|-------------------------------|--------|
| Daryl D. Pomranke                                       |   |                               | 9,145  |   |                          |   | 5,053 |   |
| Charles V. Cole                                         |   |                               | 4,379  |   |                          |   | 3,236 |   |
| Dale S. Clapp                                           |   |                               | 4,145  |   |                          |   | 2,954 |   |
| Daniel J. Zimmer                                        |   |                               | 3,223  |   |                          |   | 2,255 |   |

|    Name                                                                                                                                                                  | TargetedIncentive as a Percentage ofBase Salary |    Performance Objective                                                       |   Weighted Percentage |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------|-----------------------------------------------------------------------------------------------|---------------------------------|
| Thomas F. Prisby                                                                                                                                                                        |    45.0%                              | Diluted earnings per shareReduction in non-performing assetsDeposit growth                    |    60.0%20.020.0 |
| Daryl D. Pomranke                                                                                                                                                                       | 28.0                                            | Diluted earnings per shareReduction in non-performing assetsDeposit growth                    | 60.020.020.0                    |
| Charles V. Cole                             | 24.0                                            | Diluted earnings per shareIndividual performance objectives                                   | 60.040.0                        |
| Dale S. Clapp                               | 24.0                                            | Diluted earnings per shareDeposit growthLoan originationsCash management unit sales           | 60.020.010.010.0                |
| Daniel J. Zimmer                                                                                                                                                                        | 21.0                                            | Diluted earnings per shareReduction in non-performing assetsIndividual performance objectives | 60.030.010.0                    |

| Name                                                                                                                                                                                                                                                                                      | Threshold                      | Target                         | Maximum                        |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|--------------------------------|--------------------------------|
| Thomas F. Prisby                                              | $35,190                        | $175,950                       | $228,735                       |
| Daryl D. Pomranke                                             |     13,888 |     69,440 |     90,272 |
| Charles V. Cole                                               |     9,240  |     46,200 |     60,060 |
| Dale S. Clapp                                                 |     8,400  |     42,000 |     54,600 |
| Daniel J. Zimmer                                              |     6,090  |     30,450 |     39,585 |

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table of contents

Item 6.

|   | (a)    |   | List of exhibits (filed herewith unless otherwise noted).                                                                            |
|--------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------|
|   | 3.1    |   | Articles of Incorporation of CFS Bancorp, Inc. (1)                                                                                   |
|   | 3.2    |   | Bylaws of CFS Bancorp, Inc. (2)                                                                                                      |
|   | 4.0    |   | Form of Stock Certificate of CFS Bancorp, Inc. (3)                                                                                   |
|   | 10.1*  |   | Employment Agreement entered into between Citizens Financial Bank and Thomas F. Prisby (4)                                           |
|   | 10.2*  |   | Employment Agreement entered into between CFS Bancorp, Inc. and Thomas F. Prisby (4)                                                 |
|   | 10.3*  |   | CFS Bancorp, Inc. Amended and Restated 1998 Stock Option Plan (5)                                                                    |
|   | 10.4*  |   | CFS Bancorp, Inc. Amended and Restated 1998 Recognition and Retention Plan and Trust Agreement (5)                                   |
|   | 10.5*  |   | CFS Bancorp, Inc. 2003 Stock Option Plan (6)                                                                                         |
|   | 10.6*  |   | Employment Agreement entered into between CFS Bancorp, Inc., Citizens Financial Bank, and Charles V. Cole (7)                        |
|   | 10.8*  |   | Amended and Restated Supplemental ESOP Benefit Plan of CFS Bancorp, Inc. and Citizens Financial Services, FSB (8)                    |
|   | 10.9*  |   | CFS Bancorp, Inc. Directors’ Deferred Compensation Plan (8)                                                                    |
|   | 10.10* |   | CFS Bancorp, Inc. 2008 Omnibus Equity Incentive Plan (9)                                                                             |
|   | 10.11* |   | Employment Agreement entered into between CFS Bancorp, Inc., Citizens Financial Bank, and Daryl D. Pomranke (7)                      |
|   | 10.12* |   | CFS Bancorp, Inc. 2010 Cash Incentive Compensation Program                                                                      |
|   | 10.13* |   | CFS Bancorp, Inc. 2009 Service Retention Program Agreement (10)                                                                      |
|   | 10.14  |   | Form of Indemnification Agreement, dated June 15, 2009, by and between the Company and each of Gene Diamond and Frank D. Lester (11) |
|   | 10.15  |   | Indemnification Agreement, dated June 15, 2009, by and between the Company and Lawrence T. Toombs (11)                               |
|   | 10.16* |   | Amendment to the Employment Agreement between Citizens Financial Bank and Thomas F. Prisby (7)                                       |

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table of contents

|   | 10.17* |   | Amendment to the Employment Agreement between CFS Bancorp, Inc. and Thomas F. Prisby (7) |
|--------|--------|--------|------------------------------------------------------------------------------------------|
|   | 10.18* |   | Change in Control Agreement between Citizens Financial Bank and Dale S. Clapp (7)        |
|   | 10.19* |   | Change in Control Agreement between Citizens Financial Bank and Daniel J. Zimmer (7)     |
|   | 10.20* |   | CFS Bancorp, Inc. and Citizens Financial Bank Compensation Clawback Policy (12)          |
|   | 10.21* |   | 2010 Long-Term Cash Award Agreement between CFS Bancorp, Inc. and Thomas F. Prisby       |
|   | 31.1   |   | Rule 13a-14(a) Certification of Chief Executive Officer                                  |
|   | 31.2   |   | Rule 13a-14(a) Certification of Chief Financial Officer                                  |
|   | 32.0   |   | Section 1350 Certifications                                                              |

| (1) | Incorporated herein by Reference to the Company’s Definitive Proxy Statement from the Annual Meeting of Shareholders filed with the SEC on March 25, 2005 (File No. 000-24611). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Incorporated herein by Reference to the Company’s Form 8-K filed with the SEC on July 31, 2009. |
|-----|-------------------------------------------------------------------------------------------------------|

| (3) | Incorporated herein by Reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 filed with the SEC on March 15, 2007. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Incorporated herein by Reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 filed with the SEC on May 5, 2008. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Incorporated herein by Reference to the Company’s Definitive Proxy Statement for the Annual Meeting of Shareholders filed with the SEC on March 23, 2001 (File No. 000-24611). |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Incorporated herein by Reference to the Company’s Definitive Proxy Statement for the Annual Meeting of Shareholders filed with the SEC on March 31, 2003 (File No. 000-24611). |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7) | Incorporated herein by Reference to the Company’s Form 8-K filed with the SEC on December 23, 2009. |
|-----|-----------------------------------------------------------------------------------------------------------|

| (8) | Incorporated herein by Reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004 filed with the SEC on March 16, 2005 (File No. 000-24611). |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (9) | Incorporated herein by Reference to the Company’s Definitive Proxy Statement from the Annual Meeting of Shareholders filed with the SEC on March 17, 2008. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (10) | Incorporated herein by Reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 filed with the SEC on May 4, 2009. |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (11) | Incorporated herein by Reference to the Company’s Form 8-K filed with the SEC on June 19, 2009. |
|------|-------------------------------------------------------------------------------------------------------|

| (12) | Incorporated herein by Reference to the Company’s Form 8-K filed with the SEC on January 29, 2010. |
|------|----------------------------------------------------------------------------------------------------------|

| * | Indicates management contract or compensatory plan or arrangement required to be filed as an exhibit to this report. |
|---|----------------------------------------------------------------------------------------------------------------------|

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SIGNATURES

| Date:  April 28, 2010 | By:    | /s/ Thomas F. Prisby                                                          |
|---------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                            |   | Thomas F. Prisby, Chairman of the Board and                                                                                                                                                                                                                                                                                                                           |
|                            |   | Chief Executive Officer                                                                                                                                                                                                                                                                                                                                               |
|                            |   |                                                                                                                                                                                                                                                                                                                                                                  |
| Date:  April 28, 2010 | By:    | /s/ Charles V. Cole                                                                                                        |
|                            |   | Charles V. Cole, Executive Vice President and                                                                                                                                                                                                                                                                                                                         |
|                            |   | Chief Financial Officer                                                                                                                                                                                                                                                                                                                                               |

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table of contents

|   |  10.12 |  CFS Bancorp, Inc. 2010 Performance-based Cash Incentive Plan |
|--------|-------------|--------------------------------------------------------------------|
|   |  10.21 |  Long-Term Cash Award Agreement 2010                          |
|   |  31.1  |  Rule 13a-14(a) Certification of Chief Executive Officer      |
|   |  31.2  |  Rule 13a-14(a) Certification of Chief Financial Officer |
|   |  32.0  |  Section 1350 Certification                                   |

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