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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 (Loss)                                               | 4      |
|                                                                                  | Condensed      Consolidated Statements of Changes in Shareholders’ Equity                       | 5      |
|                                                                                  | Condensed      Consolidated Statements of Cash Flows                                                  | 6      |
|                                                                                  | Notes      to Condensed Consolidated Financial Statements                                             | 8      |
|                                                                                  |                                                                                                  |   |
| Item 2.                                                                               | Management’s      Discussion and Analysis of Financial Condition and Results of      Operations | 18     |
|                                                                                  |                                                                                                  |   |
| 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                                      | 46     |
|                                                                                  |                                                                                                  |   |
| Item 3.                                                                               | Defaults      Upon Senior Securities                                                                  | 46     |
|                                                                                  |                                                                                                  |   |
| Item 4.                                                                               | Submission      of Matters to a Vote of Security Holders                                              | 46     |
|                                                                                  |                                                                                                  |   |
| Item 5.                                                                               | Other      Information                                                                                | 46     |
|                                                                                  |                                                                                                  |   |
| Item 6.                                                                               | Exhibits                                                                                              | 47     |
|                                                                                  |                                                                                                  |   |
| Signature Page                                                                        | 49                                                                                                    |
|                                                                                  |                                                                                                  |   |
| Certifications      of Principal Executive Officer and Principal Financial    Officer | 50                                                                                                    |
|                                                                                  |  Exhibit 31.1                                                                                    |   |
|                                                                                  |  Exhibit 31.2                                                                                    |   |
|                                                                                  |  Exhibit 32.0                                                                                    |   |

table of contents

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CFS BANCORP, INC.

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | September      30, 2009     |      |   | December 31,      2008 |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|-----------|--------|------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | (Unaudited)                 |      |   |                        |   |
| ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | (Dollars      in thousands) |      |
| Cash      and amounts due from depository      institutions                                                                                          |   | $                           | 22,040    |   |                   | $      | 15,714 |   |
| Interest-bearing      deposits                                                                                                                       |   |                        | 261       |   |                   |   | 3,133 |   |
| Federal      funds      sold                                                                                                                         |   |                        | –   |   |                   |   | 259 |   |
| Cash and cash      equivalents                                                                                                                                      |   |                        | 22,301    |   |                   |   | 19,106 |   |
| Securities      available-for-sale, at fair      value                                                                                               |   |                        | 205,877   |   |                   |   | 251,270 |   |
| Securities      held-to-maturity, at      cost                                                                                                       |   |                        | 6,000     |   |                   |   | 6,940 |   |
| Investment      in Federal Home Loan Bank stock, at      cost                                                                                        |   |                        | 23,944    |   |                   |   | 23,944 |   |
| Loans      receivable                                                                                                                                |   |                        | 748,464   |   |                   |   | 749,973 |   |
| Allowance for losses on      loans                                                                                                                                  |   |                        | (20,799   | )      |                   |   | (15,558 | ) |
| Net      loans                                                                                                                                                                |   |                        | 727,665   |   |                   |   | 734,415 |   |
| Interest      receivable                                                                                                                             |   |                        | 3,614     |   |                   |   | 4,325 |   |
| Other      real estate      owned                                                                                                                    |   |                        | 7,421     |   |                   |   | 3,242 |   |
| Office      properties and      equipment                                                                                                            |   |                        | 20,612    |   |                   |   | 19,790 |   |
| Investment      in bank-owned life      insurance                                                                                                    |   |                        | 36,662    |   |                   |   | 36,606 |   |
| Net      deferred tax      assets                                                                                                                    |   |                        | 16,997    |   |                   |   | 15,494 |   |
| Other      assets                                                                                                                                    |   |                        | 7,327     |   |                   |   | 6,723 |   |
| Total      assets                                                                                                                                                             |   | $                           | 1,078,420 |   |                   | $      | 1,121,855 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                        |      |   |                   |   |   |   |
| LIABILITIES      AND SHAREHOLDERS’ EQUITY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                        |      |   |                   |   |   |   |
| Deposits                                                                                                                                             |   | $                           | 847,178   |   |                   | $      | 824,097 |   |
| Borrowed      money                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                        | 105,357   |   |                   |   | 172,937 |   |
| Advance      payments by borrowers for taxes and insurance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                        | 7,349     |   |                   |   | 4,320 |   |
| Other      liabilities                                                                                                                               |   |                        | 9,037     |   |                   |   | 8,692 |   |
| Total      liabilities                                                                                                                                                        |   |                        | 968,921   |   |                   |   | 1,010,046 |   |
| 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;      10,773,173 and 10,674,511 sharesoutstanding                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                        | 234       |   |                   |   | 234 |   |
| Additional      paid-in      capital                                                                                                                 |   |                        | 188,930   |   |                   |   | 189,211 |   |
| Retained      earnings                                                                                                                               |   |                        | 78,675    |   |                   |   | 81,525 |   |
| Treasury      stock, at cost; 12,650,133 and 12,748,795 shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                        | (157,041  | )      |                   |   | (157,466 | ) |
| Unallocated      common stock held by Employee Stock Ownership Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                        | –   |   |                   |   | (832 | ) |
| Accumulated      other comprehensive loss, net of      tax                                                                                           |   |                        | (1,299    | )      |                   |   | (863 | ) |
| Total shareholders’      equity                                                                                                                                         |   |                        | 109,499   |   |                   |   | 111,809 |   |
| Total liabilities and      shareholders’      equity                                                                                                                    |   | $                           | 1,078,420 |   |                   | $      | 1,121,855 |   |

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table of contents

|                                                                |   | Three      Months Ended September      30,              |       |   | Nine      Months Ended  September      30, |   |
|---------------------------------------------------------------------|--------|--------------------------------------------------------------|------------|--------|------------------------------------------------------|--------|
|                                                                |   | 2009                                                         |       |   | 2008                                                 |   |   | 2009 |   |   | 2008 |   |
|                                                                |   | (Unaudited)                                                  |       |
|                                                                |   | (Dollars      in thousands, except share and per share data) |       |
| Interest      income:                                               |   |                                                         |       |   |                                                 |   |   |   |   |   |   |   |
| Loans                                                               |   | $                                                            | 9,648      |   |                                                 | $      | 10,739 |   |   | $ | 29,400 |   |   | $ | 34,823 |   |
| Securities                                                          |   |                                                         | 2,742      |   |                                                 |   | 3,278 |   |   |   | 8,805 |   |   |   | 9,529 |   |
| Other                                                               |   |                                                         | 195        |   |                                                 |   | 347 |   |   |   | 575 |   |   |   | 1,358 |   |
| Total interest income                                               |   |                                                         | 12,585     |   |                                                 |   | 14,364 |   |   |   | 38,780 |   |   |   | 45,710 |   |
| Interest      expense:                                              |   |                                                         |       |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                            |   |                                                         | 2,431      |   |                                                 |   | 4,058 |   |   |   | 8,276 |   |   |   | 14,300 |   |
| Borrowed money                                                      |   |                                                         | 758        |   |                                                 |   | 1,399 |   |   |   | 2,598 |   |   |   | 5,241 |   |
| Total interest expense                                              |   |                                                         | 3,189      |   |                                                 |   | 5,457 |   |   |   | 10,874 |   |   |   | 19,541 |   |
| Net      interest income                                            |   |                                                         | 9,396      |   |                                                 |   | 8,907 |   |   |   | 27,906 |   |   |   | 26,169 |   |
| Provision      for losses on loans                                  |   |                                                         | 9,430      |   |                                                 |   | 1,441 |   |   |   | 10,767 |   |   |   | 9,355 |   |
| Net      interest income (loss) after provision for losses on loans |   |                                                         | (34        | )      |                                                 |   | 7,466 |   |   |   | 17,139 |   |   |   | 16,814 |   |
| Non-interest      income:                                           |   |                                                         |       |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Service charges and other      fees                                 |   |                                                         | 1,479      |   |                                                 |   | 1,640 |   |   |   | 4,154 |   |   |   | 4,544 |   |
| Card-based fees                                                     |   |                                                         | 429        |   |                                                 |   | 408 |   |   |   | 1,249 |   |   |   | 1,203 |   |
| Commission income                                                   |   |                                                         | 56         |   |                                                 |   | 88 |   |   |   | 197 |   |   |   | 281 |   |
| Security gains (losses),      net                                   |   |                                                         | 321        |   |                                                 |   | (3,470 | ) |   |   | 1,041 |   |   |   | (3,983 | ) |
| Other asset gains (losses), net      other assets                   |   |                                                         | (15        | )      |                                                 |   | 11 |   |   |   | (21 | ) |   |   | 8 |   |
| Income from bank-owned life      insurance                          |   |                                                         | 218        |   |                                                 |   | 349 |   |   |   | 552 |   |   |   | 1,129 |   |
| Other income                                                        |   |                                                         | 112        |   |                                                 |   | 124 |   |   |   | 504 |   |   |   | 445 |   |
| Total non-interest income                                           |   |                                                         | 2,600      |   |                                                 |   | (850 | ) |   |   | 7,676 |   |   |   | 3,627 |   |
| Non-interest      expense:                                          |   |                                                         |       |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Compensation and employee      benefits                             |   |                                                         | 4,505      |   |                                                 |   | 4,510 |   |   |   | 14,758 |   |   |   | 13,025 |   |
| Net occupancy expense                                               |   |                                                         | 763        |   |                                                 |   | 865 |   |   |   | 2,410 |   |   |   | 2,406 |   |
| FDIC insurance premiums                                             |   |                                                         | 471        |   |                                                 |   | 40 |   |   |   | 1,738 |   |   |   | 120 |   |
| Professional fees                                                   |   |                                                         | 754        |   |                                                 |   | 379 |   |   |   | 1,708 |   |   |   | 865 |   |
| Furniture and equipment      expense                                |   |                                                         | 526        |   |                                                 |   | 562 |   |   |   | 1,581 |   |   |   | 1,656 |   |
| Data processing                                                     |   |                                                         | 407        |   |                                                 |   | 387 |   |   |   | 1,246 |   |   |   | 1,329 |   |
| Marketing                                                           |   |                                                         | 155        |   |                                                 |   | 289 |   |   |   | 571 |   |   |   | 675 |   |
| Other      real estate owned expenses                               |   |                                                         | 1,343      |   |                                                 |   | 89 |   |   |   | 1,754 |   |   |   | 279 |   |
| Loan      collection expense                                        |   |                                                         | 290        |   |                                                 |   | 311 |   |   |   | 818 |   |   |   | 404 |   |
| Other general and      administrative expenses                      |   |                                                         | 1,034      |   |                                                 |   | 1,243 |   |   |   | 3,035 |   |   |   | 3,645 |   |
| Total non-interest expense                                          |   |                                                         | 10,248     |   |                                                 |   | 8,675 |   |   |   | 29,619 |   |   |   | 24,404 |   |
| Loss      before income taxes                                       |   |                                                         | (7,682     | )      |                                                 |   | (2,059 | ) |   |   | (4,804 | ) |   |   | (3,963 | ) |
| Income      tax benefit                                             |   |                                                         | (3,011     | )      |                                                 |   | (1,020 | ) |   |   | (2,264 | ) |   |   | (2,408 | ) |
| Net loss                                                            |   | $                                                            | (4,671     | )      |                                                 | $      | (1,039 | ) |   | $ | (2,540 | ) |   | $ | (1,555 | ) |
|                                                                |   |                                                         |       |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Per      share data:                                                |   |                                                         |       |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Basic loss per share                                                |   | $                                                            | (0.44      | )      |                                                 | $      | (0.10 | ) |   | $ | (0.24 | ) |   | $ | (0.15 | ) |
| Diluted loss per share                                              |   |                                                         | (0.44      | )      |                                                 |   | (0.10 | ) |   |   | (0.24 | ) |   |   | (0.15 | ) |
| Cash dividends declared per      share                              |   |                                                         | 0.01       |   |                                                 |   | 0.12 |   |   |   | 0.03 |   |   |   | 0.36 |   |
| Weighted-average      shares outstanding                            |   |                                                         | 10,603,828 |   |                                                 |   | 10,269,945 |   |   |   | 10,563,814 |   |   |   | 10,315,899 |   |
| Weighted-average      diluted shares outstanding                    |   |                                                         | 10,695,719 |   |                                                 |   | 10,406,919 |   |   |   | 10,674,247 |   |   |   | 10,539,043 |   |

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table of contents

|                                                                                                                                                                                                                                                                                                                                                                      |                                                     |  Common      Stock |    |   | Additional Paid-In Capital |   |    | Retained      Earnings |   |   | Treasury      Stock |   |   | Unallocated      Common Stock Held By ESOP |     |   | Accumulated      Other ComprehensiveIncome (Loss) |   |    | Total  |   |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------|-------------------------|---------|--------|----------------------------|--------|---------|------------------------|--------|--------|---------------------|--------|--------|--------------------------------------------|----------|--------|---------------------------------------------------|--------|---------|--------|--------|--------|
|                                                                                                                                                                                                                                                                                                                                                                      |  (Unaudited)                                        |                    |
|                                                                                                                                                                                                                                                                                                                                                                      |  (Dollars      in thousands, except per share data) |                    |
| Balance      at January 1,      2008                                                             |                                                     | $                       | 234     |   |                       | $      | 191,162 |                   |   | $      | 97,029              |   |   | $                                          | (156,661 | )      |                                              | $      | (3,126  | )      |   | $      | 1,776 |   |   | $ | 130,414 |   |   |
| Net      loss                                                                                    |                                                     |                    | – |   |                       |   | – |                   |   |   | (1,555              | )      |   |                                       | –  |   |                                              |   | – |   |   |   | – |   |   |   | (1,555 | ) |   |
| Comprehensive      loss:Change      in unrealized appreciation on available-for-sale securities, net of      reclassification and tax                                                                                                                                                                                                                                     |                                                     |                    | – |   |                       |   | – |                   |   |   | –             |   |   |                                       | –  |   |                                              |   | – |   |   |   | (2,240 | ) |   |   | (2,240 | ) |   |
| Total      comprehensive      loss                                                               |                                                     |                    | – |   |                       |   | – |                   |   |   | –             |   |   |                                       | –  |   |                                              |   | – |   |   |   | – |   |   |   | (3,795 | ) |   |
| Purchase      of treasury      stock                                                             |                                                     |                    | – |   |                       |   | – |                   |   |   | –             |   |   |                                       | (2,997   | )      |                                              |   | – |   |   |   | – |   |   |   | (2,997 | ) |   |
| Net      distributions of Rabbi Trust shares                                                                                                                                                                                                                                                                                                                              |                                                     |                    | – |   |                       |   | – |                   |   |   | –             |   |   |                                       | 45       |   |                                              |   | – |   |   |   | – |   |   |   | 45 |   |   |
| Shares      earned under      ESOP                                                               |                                                     |                    | – |   |                       |   | 64      |                   |   |   | –             |   |   |                                       | –  |   |                                              |   | 234     |   |   |   | – |   |   |   | 298 |   |   |
| Amortization      of award under RRP                                                                                                                                                                                                                                                                                                                                      |                                                     |                    | – |   |                       |   | 38      |                   |   |   | –             |   |   |                                       | –  |   |                                              |   | – |   |   |   | – |   |   |   | 38 |   |   |
| Forfeiture      of RRP      award                                                                |                                                     |                    | – |   |                       |   | 11      |                   |   |   | –             |   |   |                                       | (11      | )      |                                              |   | – |   |   |   | – |   |   |   | – |   |   |
| Unearned      compensation restricted stock awards                                                                                                                                                                                                                                                                                                                        |                                                     |                    | – |   |                       |   | (1,555  | )                      |   |   | –             |   |   |                                       | 1,555    |   |                                              |   | – |   |   |   | – |   |   |   | – |   |   |
| Exercise      of stock      options                                                              |                                                     |                    | – |   |                       |   | 200     |                   |   |   | –             |   |   |                                       | 630      |   |                                              |   | – |   |   |   | – |   |   |   | 830 |   |   |
| Tax      benefit related to stock-based benefit plans                                                                                                                                                                                                                                                                                                                     |                                                     |                    | – |   |                       |   | 46      |                   |   |   | –             |   |   |                                       | –  |   |                                              |   | – |   |   |   | – |   |   |   | 46 |   |   |
| Dividends      declared on common stock ($0.36per      share)                                                   |                                                     |                    | – |   |                       |   | – |                   |   |   | (3,778              | )      |   |                                       | –  |   |                                              |   | – |   |   |   | – |   |   |   | (3,778 | ) |   |
| Balance      at September 30,      2008                                                          |                                                     | $                       | 234     |   |                       | $      | 189,966 |                   |   | $      | 91,696              |   |   | $                                          | (157,439 | )      |                                              | $      | (2,892  | )      |   | $      | (464 | ) |   | $ | 121,101 |   |   |
|                                                                                                                                                                                                                                                                                                                                                                      |                                                     |                    |    |   |                       |   |    |                   |   |   |                |   |   |                                       |     |   |                                              |   |    |   |   |   |   |   |   |   |   |   |   |
| Balance      at January 1,      2009                                                             |                                                     | $                       | 234     |   |                       | $      | 189,211 |                   |   | $      | 81,525              |   |   | $                                          | (157,466 | )      |                                              | $      | (832    | )      |   | $      | (863 | ) |   | $ | 111,809 |   |   |
| Net      loss                                                                                    |                                                     |                    | – |   |                       |   | – |                   |   |   | (2,540              | )      |   |                                       | –  |   |                                              |   | – |   |   |   | – |   |   |   | (2,540 | ) |   |
| Comprehensive      loss:Change      in unrealized depreciation on available-for-sale securities, net of      reclassification and tax                                                                                                                                                                                                                                     |                                                     |                    | – |   |                       |   | – |                   |   |   | –             |   |   |                                       | –  |   |                                              |   | – |   |   |   | (436 | ) |   |   | (436 | ) |   |
| Total      comprehensive      loss                                                               |                                                     |                    | – |   |                       |   | – |                   |   |   | –             |   |   |                                       | –  |   |                                              |   | – |   |   |   | – |   |   |   | (2,976 | ) |   |
| Net      distributions of Rabbi Trust shares                                                                                                                                                                                                                                                                                                                              |                                                     |                    | – |   |                       |   | (414    | )                      |   |   | –             |   |   |                                       | 958      |   |                                              |   | – |   |   |   | – |   |   |   | 544 |   |   |
| Shares      earned under      ESOP                                                               |                                                     |                    | – |   |                       |   | (401    | )                      |   |   | –             |   |   |                                       | –  |   |                                              |   | 832     |   |   |   | – |   |   |   | 431 |   |   |
| Amortization      of award under RRP                                                                                                                                                                                                                                                                                                                                      |                                                     |                    | – |   |                       |   | 1       |                   |   |   | –             |   |   |                                       | –  |   |                                              |   | – |   |   |   | – |   |   |   | 1 |   |   |
| Forfeiture      of restricted stock awards                                                                                                                                                                                                                                                                                                                                |                                                     |                    | – |   |                       |   | 906     |                   |   |   | –             |   |   |                                       | (906     | )      |                                              |   | – |   |   |   | – |   |   |   | – |   |   |
| Unearned      compensation restricted stock awards                                                                                                                                                                                                                                                                                                                        |                                                     |                    | – |   |                       |   | (373    | )                      |   |   | –             |   |   |                                       | 373      |   |                                              |   | – |   |   |   | – |   |   |   | – |   |   |
| Dividends      declared on common stock ($0.03per      share)                                                   |                                                     |                    | – |   |                       |   | – |                   |   |   | (310                | )      |   |                                       | –  |   |                                              |   | – |   |   |   | – |   |   |   | (310 | ) |   |
| Balance      at September 30,      2009                                                          |                                                     | $                       | 234     |   |                       | $      | 188,930 |                   |   | $      | 78,675              |   |   | $                                          | (157,041 | )      |                                              | $      | – |   |   | $      | (1,299 | ) |   | $ | 109,499 |   |   |

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table of contents

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | Nine      Months EndedSeptember 30, |     |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|----------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | 2009                                |     |   | 2008 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | (Unaudited)                         |     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | (Dollars      in thousands)         |     |
| OPERATING      ACTIVITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                |     |   |   |   |
| Net loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | $                                   | (2,540   | ) |   | $ | (1,555 | ) |
| Adjustments to reconcile net loss      to net cash provided by operating activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                |     |   |   |   |   |   |
| Provision for losses on      loans                                                                                                                                          |   |                                | 10,767   |   |   |   | 9,355 |   |
| Depreciation and      amortization                                                                                                                                          |   |                                | 1,171    |   |   |   | 1,312 |   |
| Premium amortization on the      early extinguishment of debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                | 157      |   |   |   | 1,246 |   |
| Net      discount accretion on securities available-for-sale                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                | (1,136   | ) |   |   | (871 | ) |
| Impairment of securities      available-for-sale                                                                                                                            |   |                                | ―  |   |   |   | 4,052 |   |
| Deferred income tax      benefit                                                                                                                                            |   |                                | (1,145   | ) |   |   | (2,746 | ) |
| Tax benefit from stock-based      benefits                                                                                                                                  |   |                                | ―  |   |   |   | (46 | ) |
| Amortization of cost of      stock-based benefit      plans                                                                                                                 |   |                                | 432      |   |   |   | 336 |   |
| Proceeds from sale of loans      held-for-sale                                                                                                                              |   |                                | ―  |   |   |   | 45 |   |
| Securities gains,      net                                                                                                                                                  |   |                                | (1,041   | ) |   |   | (69 | ) |
| Other      asset (gains) losses,      net                                                                                                                                   |   |                                | 21       |   |   |   | (8 | ) |
| Increase in cash surrender      value of bank-owned life insurance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                | (552     | ) |   |   | (1,129 | ) |
| Decrease in other      assets                                                                                                                                               |   |                                | 1,483    |   |   |   | 126 |   |
| Increase (decrease) in other      liabilities                                                                                                                               |   |                                | 695      |   |   |   | (5,505 | ) |
| Net cash provided by operating      activities                                                                                                                                        |   |                                | 8,312    |   |   |   | 4,543 |   |
| INVESTING      ACTIVITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                |     |   |   |   |   |   |
| Securities,      available-for-sale:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                |     |   |   |   |   |   |
| Proceeds from      sales                                                                                                                                     |   |                                | 11,657   |   |   |   | 1,992 |   |
| Proceeds from maturities and      paydowns                                                                                                                   |   |                                | 66,550   |   |   |   | 55,464 |   |
| Purchases                                                                                                                                                    |   |                                | (31,429  | ) |   |   | (89,128 | ) |
| Securities,      held-to-maturity:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                |     |   |   |   |   |   |
| Proceeds from maturities and      paydowns                                                                                                                   |   |                                | 940      |   |   |   | 440 |   |
| Net loan (fundings) principal      payments      received                                                                                          |   |                                | (9,940   | ) |   |   | 39,944 |   |
| Proceeds from sale of real      estate      owned                                                                                                  |   |                                | 408      |   |   |   | 263 |   |
| Proceeds from bank-owned life      insurance                                                                                                       |   |                                | 496      |   |   |   | 1,169 |   |
| Purchases of property and      equipment                                                                                                           |   |                                | (1,993   | ) |   |   | (1,844 | ) |
| Net cash provided by investing      activities                                                                                                                              |   |                                | 36,689   |   |   |   | 8,300 |   |
| FINANCING      ACTIVITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                |     |   |   |   |   |   |
| Proceeds from exercise of stock      options                                                                                                       |   |                                | ―  |   |   |   | 830 |   |
| Tax benefit from stock-based      benefits                                                                                                         |   |                                | ―  |   |   |   | 46 |   |
| Dividends paid on common      stock                                                                                                                |   |                                | (649     | ) |   |   | (3,895 | ) |
| Purchase of treasury      stock                                                                                                                    |   |                                | ―  |   |   |   | (2,997 | ) |
| Net distributions of Rabbi      Trust      shares                                                                                                  |   |                                | 544      |   |   |   | 45 |   |
| Net increase (decrease) in      deposit      accounts                                                                                              |   |                                | 23,007   |   |   |   | (31,155 | ) |
| Net increase in advance      payments by borrowers for taxes and insurance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                | 3,029    |   |   |   | 3,668 |   |
| (Decrease) increase in      short-term borrowed      money                                                                                         |   |                                | (9,511   | ) |   |   | 14,652 |   |
| Proceeds from Federal Home Loan      Bank borrowed money                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                | 119,000  |   |   |   | 75,000 |   |
| Repayments of Federal Home Loan      Bank borrowed money                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                | (177,226 | ) |   |   | (85,211 | ) |
| Net cash used for financing      activities                                                                                                                       |   |                                | (41,806  | ) |   |   | (29,017 | ) |
| Increase (decrease) in cash and      cash      equivalents                                                                                         |   |                                | 3,195    |   |   |   | (16,174 | ) |
| Cash and cash equivalents at      beginning of      period                                                                                         |   |                                | 19,106   |   |   |   | 38,909 |   |
| Cash and cash equivalents at      end of      period                                                                                               |   | $                                   | 22,301   |   |   | $ | 22,735 |   |

----

table of contents

| Supplemental      disclosures:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |   |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Loans transferred to real      estate      owned                                                                                           |   | $      | 6,012  |   |   | $      | 2,480 |   |
| Cash paid for interest on      deposits                                                                                                    |   |   | 8,417  |   |   |   | 14,532 |   |
| Cash paid for interest on      borrowed      money                                                                                         |   |   | 2,483  |   |   |   | 4,030 |   |
| Cash paid for      taxes                                                                                                                   |   |   | 460    |   |   |   | 800 |   |

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table of contents

| 1. | Basis      of Financial StatementsPresentation |
|----|------------------------------------------------|

----

table of contents

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

|                                              |   | ParValue                    |    |   | Amortized      Cost |   |    | Gross      Unrealized Gains |   |   | Gross      Unrealized Losses |   |   | FairValue |    |
|---------------------------------------------------|--------|-----------------------------|---------|--------|---------------------|--------|---------|-----------------------------|--------|--------|------------------------------|--------|--------|-----------|---------|
|                                              |   | (Dollars      in thousands) |    |
| At      September 30, 2009:                       |   |                        |    |   |                |   |    |                        |   |   |                         |   |   |      |    |
| Government sponsored entity (GSE)      securities |   | $                           | 56,150  |   |                | $      | 56,022  |                        |   | $      | 1,703                        |   |   | $         | ― |   |   | $ | 57,725 |   |
| Mortgage-backed securities                        |   |                        | 9,840   |   |                |   | 9,735   |                        |   |   | 439                          |   |   |      | ― |   |   |   | 10,174 |   |
| Collateralized mortgage      obligations          |   |                        | 66,080  |   |                |   | 64,690  |                        |   |   | 1,460                        |   |   |      | (1,168  | ) |   |   | 64,982 |   |
| Commercial mortgage-backed      securities        |   |                        | 50,962  |   |                |   | 50,369  |                        |   |   | 1,495                        |   |   |      | (149    | ) |   |   | 51,715 |   |
| Pooled trust preferred      securities            |   |                        | 30,359  |   |                |   | 27,189  |                        |   |   | ―                      |   |   |      | (6,235  | ) |   |   | 20,954 |   |
| Equity securities                                 |   |                        | 5,837   |   |                |   | ― |                        |   |   | 327                          |   |   |      | ― |   |   |   | 327 |   |
|                                              |   | $                           | 219,228 |   |                | $      | 208,005 |                        |   | $      | 5,424                        |   |   | $         | (7,552  | ) |   | $ | 205,877 |   |
|                                              |   |                        |    |   |                |   |    |                        |   |   |                         |   |   |      |    |   |   |   |   |   |

|                                       |   | September 30, 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   |   | $                           | 8,176  |   |   | $ | (202 | ) |   | $ | 15,710 |   |   | $ | (966 | ) |   | $ | 23,886 |   |   | $ | (1,168 | ) |
| Commercial      mortgage-backed securities |   |                        | 1,622  |   |   |   | (16 | ) |   |   | 2,715 |   |   |   | (133 | ) |   |   | 4,337 |   |   |   | (149 | ) |
| Pooled      trust preferred securities     |   |                        | 12,622 |   |   |   | (3,793 | ) |   |   | 8,332 |   |   |   | (2,442 | ) |   |   | 20,954 |   |   |   | (6,235 | ) |
|                                       |   | $                           | 22,420 |   |   | $ | (4,011 | ) |   | $ | 26,757 |   |   | $ | (3,541 | ) |   | $ | 49,177 |   |   | $ | (7,552 | ) |

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table of contents

|                                        |   | Available-for-Sale          |    |
|---------------------------------------------|--------|-----------------------------|---------|
|                                        |   | AmortizedCost               |    |   | FairValue |   |
|                                        |   | (Dollars      in thousands) |    |
| GSE      and callable GSE securities:  |   |                        |    |
| Due in one year or less                     |   | $                           | 42,757  |   |   | $ | 43,730 |   |
| Due after one year through five      years  |   |                        | 13,265  |   |   |   | 13,995 |   |
| Mortgage-backed      securities             |   |                        | 9,735   |   |   |   | 10,174 |   |
| Collateralized      mortgage obligations    |   |                        | 64,690  |   |   |   | 64,982 |   |
| Commercial      mortgage-backed securities  |   |                        | 50,369  |   |   |   | 51,715 |   |
| Pooled      trust preferred securities      |   |                        | 27,189  |   |   |   | 20,954 |   |
| Equity      securities                      |   |                        | ― |   |   |   | 327 |   |
|                                        |   | $                           | 208,005 |   |   | $ | 205,877 |   |

|                                       |   | Held-to-Maturity            |   |
|--------------------------------------------|--------|-----------------------------|--------|
|                                       |   | AmortizedCost               |   |   | FairValue |   |
|                                       |   | (Dollars      in thousands) |   |
| State      and municipal securities:  |   |                        |   |   |   |   |
| Due in one year or less                    |   | $                           | 2,000  |   |   | $ | 2,023 |   |
| Due after one year through five      years |   |                        | 4,000  |   |   |   | 4,170 |   |
|                                       |   | $                           | 6,000  |   |   | $ | 6,193 |   |

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

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table of contents

|                                                                                                                                                                                                                                                                                                                           |   | Fair Value Measurements at September 30,      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                                             |   | $                                                  | 57,725 |   |   | $ | ― |   |   | $ | 57,725 |   |   | $ | ― |   |
| Mortgage-backed      securities                                                     |   |                                               | 10,174 |   |   |   | ― |   |   |   | 10,174 |   |   |   | ― |   |
| Collateralized mortgage      obligations                                                                                                                                                                                                                                                                                       |   |                                               | 64,982 |   |   |   | ― |   |   |   | 64,982 |   |   |   | ― |   |
| Commercial mortgage-backed      securities                                                         |   |                                               | 51,715 |   |   |   | ― |   |   |   | 51,715 |   |   |   | ― |   |
| Pooled trust preferred      securities                                                                                                                                                                                                                                                                                         |   |                                               | 20,954 |   |   |   | ― |   |   |   | ― |   |   |   | 20,954 |   |
| Equity      securities                                                              |   |                                               | 327    |   |   |   | 327 |   |   |   | ― |   |   |   | ― |   |

|                                                                                                                                                                                                                                                                                                               |   | Fair Value Measurements at September 30,      2008 |    |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|---------|
|                                                                                                                                                                                                                                                                                                               |   | 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                                           |   | $                                                  | 107,564 |   |   | $ | ― |   |   | $ | 107,564 |   |   | $ | ― |   |
| Mortgage-backed      securities                                                        |   |                                               | 11,017  |   |   |   | ― |   |   |   | 11,017 |   |   |   | ― |   |
| Collateralized mortgage      obligations                                                                                                                                                                                                                                                                           |   |                                               | 77,944  |   |   |   | ― |   |   |   | 77,944 |   |   |   | ― |   |
| Commercial mortgage-backed      securities                                                       |   |                                               | 27,979  |   |   |   | ― |   |   |   | 27,979 |   |   |   | ― |   |
| Pooled trust preferred      securities                                                                                                                                                                                                                                                                             |   |                                               | 24,850  |   |   |   | ― |   |   |   | ― |   |   |   | 24,850 |   |
| Equity      securities                                                                 |   |                                               | 282     |   |   |   | ― |   |   |   | 282 |   |   |   | ― |   |

----

table of contents

|                                                                                                                                                                                                                                                                                                                                                                                                             |   | Available-for-sale    Securities |    |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                             |   |  Three      Months Ended    |    |   |  Nine      Months Ended |   |
|                                                                                                                                                                                                                                                                                                                                                                                                             |   | September 30, 2009               |    |   | September 30, 2009 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                             |   | (Dollars      in thousands)      |    |
| Balance      at beginning of      period                                                             |   | $                                | 25,832  |   |   | $ | 24,133 |   |
| Total realized and unrealized      gains and losses:                                                                                                                                                                                                                                                                                                                                                             |   |                             |    |   |   |   |   |   |
| Included in net      income                                                                                                                  |   |                             | ― |   |   |   | ― |   |
| Included in accumulated other      comprehensive      income                                                                                                |   |                             | (4,749  | ) |   |   | (2,700 | ) |
| Purchases, issuances, and      settlements                                                                                                                                                                                                                                                                                                                                                                       |   |                             | (129    | ) |   |   | (479 | ) |
| Transfers in and/or out of Level      3                                                                             |   |                             | ― |   |   |   | ― |   |
| Balance      at end of      period                                                                   |   | $                                | 20,954  |   |   | $ | 20,954 |   |

----

table of contents

|                                                                                                                                                                                                                                                    |   | Fair Value Measurements at September 30,      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)                        |   |
| Impaired      loans                                       |   | $                                                  | 21,411 |   |   | $ | ― |   |   | $ | ― |   |   | $ | 21,411 |   |
| Other real estate      owned                                                                                                                                                                                                                            |   |                                               | 3,181  |   |   |   | ― |   |   |   | ― |   |   |   | 3,181 |   |

|                                                                                                                                                                                                                                                    |   | Fair Value Measurements at September 30,      2008 |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|--------|
|                                                                                                                                                                                                                                                    |   | 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)                        |   |
| Impaired      loans                                       |   | $                                                  | 29,825 |   |   | $ | ― |   |   | $ | ― |   |   | $ | 29,825 |   |

----

table of contents

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | September 30,               |      |   | December 31, |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|-----------|--------|--------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | 2009                        |      |   | 2008         |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | Carrying                    |      |   | Fair         |   |   | Carrying |   |   | Fair |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | Amount                      |      |   | Value        |   |   | Amount |   |   | Value |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | (Dollars      in thousands) |      |
| Financial      Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                        |      |   |         |   |   |   |   |   |   |   |
| Cash      and cash      equivalents                                                                               |   | $                           | 22,301    |   |         | $      | 22,301 |   |   | $ | 19,106 |   |   | $ | 19,106 |   |
| Securities,      available-for-sale                                                                               |   |                        | 205,877   |   |         |   | 205,877 |   |   |   | 251,270 |   |   |   | 251,270 |   |
| Securities,      held-to-maturity                                                                                 |   |                        | 6,000     |   |         |   | 6,193 |   |   |   | 6,940 |   |   |   | 7,101 |   |
| Federal      Home Loan Bank      stock                                                                            |   |                        | 23,944    |   |         |   | 23,944 |   |   |   | 23,944 |   |   |   | 23,944 |   |
| Loans      receivable, net of allowance for losses on loans                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                        | 727,665   |   |         |   | 731,690 |   |   |   | 734,415 |   |   |   | 741,440 |   |
| Interest      receivable                                                                                          |   |                        | 3,614     |   |         |   | 3,614 |   |   |   | 4,325 |   |   |   | 4,325 |   |
| Total      financial      assets                                                                                  |   | $                           | 989,401   |   |         | $      | 993,619 |   |   | $ | 1,040,000 |   |   | $ | 1,047,186 |   |
| Financial      Liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                        |      |   |         |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                                                          |   | $                           | 847,178   |   |         | $      | 848,564 |   |   | $ | 824,097 |   |   | $ | 827,389 |   |
| Borrowed      money                                                                                               |   |                        | 105,357   |   |         |   | 107,713 |   |   |   | 172,937 |   |   |   | 177,087 |   |
| Interest      payable                                                                                             |   |                        |  187 |   |         |   |  187 |   |   |   | 370 |   |   |   | 370 |   |
| Total      financial      liabilities                                                                             |   | $                           | 952,722   |   |         | $      | 956,464 |   |   | $ | 997,404 |   |   | $ | 1,004,846 |   |

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

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table of contents

|                                                                                                                                                                                                                                                                                                                                                                                                                             |   | Three      Months EndedSeptember 30,               |       |   | Nine      Months EndedSeptember 30, |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|------------|--------|-------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                             |   | 2009                                               |       |   | 2008                                |   |   | 2009 |   |   | 2008 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                             |   | (Dollars      in thousands, except per share data) |       |
| Net      loss                                                                                    |   | $                                                  | (4,671     | )      |                                | $      | (1,039 | ) |   | $ | (2,540 | ) |   | $ | (1,555 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                               |       |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Weighted-average      common shares outstanding                                                                                                                                                                                                                                                                                                                                                                                  |   |                                               | 10,603,828 |   |                                |   | 10,269,945 |   |   |   | 10,563,814 |   |   |   | 10,315,899 |   |
| Weighted-average      common share equivalents                                                                                                                                                                                                                                                                                                                                                                                   |   |                                               | 91,891     |   |                                |   | 136,974 |   |   |   | 110,433 |   |   |   | 223,144 |   |
| Weighted-average      common shares and common shareequivalents outstanding                                                                                                                                                                                                                                                                                                                                                 |   |                                               | 10,695,719 |   |                                |   | 10,406,919 |   |   |   | 10,674,247 |   |   |   | 10,539,043 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                               |       |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Basic      loss per      share                                                                   |   | $                                                  | (0.44      | )      |                                | $      | (0.10 | ) |   | $ | (0.24 | ) |   | $ | (0.15 | ) |
| Diluted      loss per      share                                                                 |   |                                               | (0.44      | )      |                                |   | (0.10 | ) |   |   | (0.24 | ) |   |   | (0.15 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                               |       |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Number      of anti-dilutive stock options excluded from the      diluted earnings per share calculation                                                                                                                                                                                                                                                                                                                    |   |                                               | 778,795    |   |                                |   | 1,076,445 |   |   |   | 898,824 |   |   |   | 498,233 |   |
| Weighted-average      exercise price of anti-dilutive option      shares                                                                                                                                                                                                                                                                                                                                                         |   | $                                                  | 13.08      |   |                                | $      | 12.38 |   |   | $ | 12.69 |   |   | $ | 12.99 |   |

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

----

table of contents

|                                   |   |  Number      of Shares |    |   | Weighted-AverageGrant-Date      Fair Value |   |
|----------------------------------------|--------|-----------------------------|---------|--------|--------------------------------------------|--------|
| Unvested      at December 31, 2008     |   |                        | 109,452 |   |                                       | $      | 14.02 |   |
| Granted                                |   |                        | 119,772 |   |                                       |   | 3.12 |   |
| Vested                                 |   |                        | (105    | )      |                                       |   | 14.64 |   |
| Forfeited                              |   |                        | (63,455 | )      |                                       |   | 14.27 |   |
| Unvested      as of September 30, 2009 |   |                        | 165,664 |   |                                       | $      | 6.04 |   |

|                                      |   | Number      ofShares |      |   | Weighted-AverageExercise Price |   |
|------------------------------------------------|--------|----------------------|-----------|--------|--------------------------------|--------|
| Options      outstanding at January 1, 2009    |   |                 | 1,130,245 |   |                           | $      | 12.15 |   |
| Granted                                        |   |                 | ―   |   |                           |   | ― |   |
| Exercised                                      |   |                 | ―   |   |                           |   | ― |   |
| Forfeited                                      |   |                 | ―   |   |                           |   | ― |   |
| Expired      unexercised                       |   |                 | (351,450  | )      |                           |   | 10.10 |   |
| Options      outstanding at September 30, 2009 |   |                 | 778,795   |   |                           | $      | 13.08 |   |
| Options      exercisable at September 30, 2009 |   |                 | 778,795   |   |                           | $      | 13.08 |   |

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table of contents

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

|                                                                                                                                                                                                                                                                                                                                                                                                                         |   | Nine      Months EndedSeptember 30, |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                         |   | 2009                                |   |   | 2008 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                         |   | (Dollars      in thousands)         |   |
| Unrealized      holding gains (losses) arising during the period:                                                                                                                                                                                                                                                                                                                                                            |   |                                |   |   |   |   |
| Unrealized net gains      (losses)                                                                                    |   | $                                   | 247    |   |   | $ | (7,504 | ) |
| Related tax (expense)      benefit                                                                                    |   |                                | (16    | ) |   |   | 2,769 |   |
| Net                                                                                                                   |   |                                | 231    |   |   |   | (4,735 | ) |
| Less:  reclassification      adjustment for net gains (losses) realized during the      period:                                                                                                                                                                                                                                                                                                               |   |                                |   |   |   |   |   |   |
| Realized net gains      (losses)                                                                                                |   |                                | 1,041  |   |   |   | (3,983 | ) |
| Related tax (expense)      benefit                                                                                              |   |                                | (374   | ) |   |   | 1,488 |   |
| Net                                                                                                                             |   |                                | 667    |   |   |   | (2,495 | ) |
| Total      other comprehensive      loss                                                               |   | $                                   | (436   | ) |   | $ | (2,240 | ) |

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

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Item 2.

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|                                                                                                                                                                                                                                                                                                                                                   |   | Three Months Ended September      30, |      |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|-----------|
|                                                                                                                                                                                                                                                                                                                                                   |   | 2009                                  |      |   | 2008 |   |
|                                                                                                                                                                                                                                                                                                                                                   |   | AverageBalance                        |      |   | Interest |   |   | AverageYield/Cost |   |   | AverageBalance |   |   | Interest |   |   | AverageYield/Cost |   |
|                                                                                                                                                                                                                                                                                                                                                   |   | (Dollars      in thousands)           |      |
| Interest-earning      assets:                                                                                                                                                                                                                                                                                                                          |   |                                  |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans receivable      (1)                                                                                   |   | $                                     | 747,491   |   |   | $ | 9,648 |   |   |   | 5.12 | % |   | $ | 728,312 |   |   | $ | 10,739 |   |   |   | 5.87 | % |
| Securities      (2)                                                                                         |   |                                  | 222,025   |   |   |   | 2,742 |   |   |   | 4.83 |   |   |   | 261,574 |   |   |   | 3,278 |   |   |   | 4.90 |   |
| Other interest-earning assets      (3)                                                                                                                                                                                                                                                                                                                 |   |                                  | 26,529    |   |   |   | 195 |   |   |   | 2.92 |   |   |   | 31,143 |   |   |   | 347 |   |   |   | 4.43 |   |
| Total interest-earning      assets                                                                                                                                                                                                                                                                                                                     |   |                                  | 996,045   |   |   |   | 12,585 |   |   |   | 5.01 |   |   |   | 1,021,029 |   |   |   | 14,364 |   |   |   | 5.60 |   |
|                                                                                                                                                                                                                                                                                                                                                   |   |                                  |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest      earning      assets                                                        |   |                                  | 93,065    |   |   |   |   |   |   |   |   |   |   |   | 82,098 |   |   |   |   |   |   |   |   |   |
| Total      assets                                                                            |   | $                                     | 1,089,110 |   |   |   |   |   |   |   |   |   |   | $ | 1,103,127 |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                   |   |                                  |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing      liabilities:                                                                                                                                                                                                                                                                                                                     |   |                                  |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                                                                                                                                                                                                                                                                                                                              |   |                                  |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Checking      accounts                                                                                                |   | $                                     | 133,719   |   |   |   | 74 |   |   |   | 0.22 |   |   | $ | 104,159 |   |   |   | 141 |   |   |   | 0.54 |   |
| Money market      accounts                                                                                            |   |                                  | 154,347   |   |   |   | 263 |   |   |   | 0.68 |   |   |   | 181,771 |   |   |   | 887 |   |   |   | 1.94 |   |
| Savings      accounts                                                                                                 |   |                                  | 118,134   |   |   |   | 98 |   |   |   | 0.33 |   |   |   | 122,037 |   |   |   | 140 |   |   |   | 0.46 |   |
| Certificates of      deposit                                                                                          |   |                                  | 364,876   |   |   |   | 1,996 |   |   |   | 2.17 |   |   |   | 367,993 |   |   |   | 2,890 |   |   |   | 3.12 |   |
| Total      deposits                                                                                                                  |   |                                  | 771,076   |   |   |   | 2,431 |   |   |   | 1.25 |   |   |   | 775,960 |   |   |   | 4,058 |   |   |   | 2.08 |   |
|                                                                                                                                                                                                                                                                                                                                                   |   |                                  |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Borrowedmoney:                                                                                                                                                                                                                                                                                                                                         |   |                                  |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other short-term borrowed      money (4)                                                                                                                                                                                                                                                                                                               |   |                                  | 11,969    |   |   |   | 24 |   |   |   | 0.80 |   |   |   | 29,140 |   |   |   | 129 |   |   |   | 1.76 |   |
| FHLB borrowed money      (5)(6)                                                                                                                                                                                                                                                                                                                        |   |                                  | 104,253   |   |   |   | 734 |   |   |   | 2.76 |   |   |   | 94,118 |   |   |   | 1,270 |   |   |   | 5.28 |   |
| Total borrowed      money                                                                                                            |   |                                  | 116,222   |   |   |   | 758 |   |   |   | 2.55 |   |   |   | 123,258 |   |   |   | 1,399 |   |   |   | 4.44 |   |
| Total interest-bearing      liabilities                                                                                                                                                                                                                                                                                                                |   |                                  | 887,298   |   |   |   | 3,189 |   |   |   | 1.43 |   |   |   | 899,218 |   |   |   | 5,457 |   |   |   | 2.41 |   |
| Non-interest      bearing      deposits                                                      |   |                                  | 69,341    |   |   |   |   |   |   |   |   |   |   |   | 63,418 |   |   |   |   |   |   |   |   |   |
| Non-interest      bearing      liabilities                                                   |   |                                  | 17,060    |   |   |   |   |   |   |   |   |   |   |   | 17,298 |   |   |   |   |   |   |   |   |   |
| Total      liabilities                                                                       |   |                                  | 973,699   |   |   |   |   |   |   |   |   |   |   |   | 979,934 |   |   |   |   |   |   |   |   |   |
| Shareholders’      equity                                                              |   |                                  | 115,411   |   |   |   |   |   |   |   |   |   |   |   | 123,193 |   |   |   |   |   |   |   |   |   |
| Total      liabilities and shareholders’ equity                                                                                                                                                                                                                                                                                                  |   | $                                     | 1,089,110 |   |   |   |   |   |   |   |   |   |   | $ | 1,103,127 |   |   |   |   |   |   |   |   |   |
| Net      interest-earning      assets                                                        |   | $                                     | 108,747   |   |   |   |   |   |   |   |   |   |   | $ | 121,811 |   |   |   |   |   |   |   |   |   |
| Net      interest income / interest rate spread                                                                                                                                                                                                                                                                                                        |   |                                  |      |   |   | $ | 9,396 |   |   |   | 3.58 | % |   |   |   |   |   | $ | 8,907 |   |   |   | 3.19 | % |
| Net      interest      margin                                                                |   |                                  |      |   |   |   |   |   |   |   | 3.74 | % |   |   |   |   |   |   |   |   |   |   | 3.47 | % |
| Ratio      of average interest-earning assetsto average interest-bearing      liabilities                                                                                                                                                                                                                                                              |   |                                  |      |   |   |   |   |   |   |   | 112.26 | % |   |   |   |   |   |   |   |   |   |   | 113.55 | % |

|   |   |
|--------|--------|

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

| (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 $104.3 million of contractual FHLB      borrowed money reduced by an average of $31,000 of unamortized deferred      premium on the early extinguishment of debt.  Interest expense      on borrowed money includes $24,000 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 as reported      to 2.55% compared to the average rate for the period of      2.47%. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | The      2008 period includes an average of $94.6 million of contractual FHLB      borrowed money reduced by an average of $531,000 of unamortized deferred      premium on the early extinguishment of debt.  Interest expense      on borrowed money |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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table of contents

|                                                                                                                                                                                                                                                                                                                                                |   | Nine Months Ended September    30, |      |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|-----------|
|                                                                                                                                                                                                                                                                                                                                                               |   | 2009                               |      |   | 2008 |   |
|                                                                                                                                                                                                                                                                                                                                                               |   | AverageBalance                     |      |   | Interest |   |   | AverageYield/Cost |   |   | AverageBalance |   |   | Interest |   |   | AverageYield/Cost |   |
|                                                                                                                                                                                                                                                                                                                                                               |   | (Dollars      in thousands)        |      |
| Interest-earning      assets:                                                                                                                                                                                                                                                                                                                                      |   |                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans receivable (1)                                                                                                                                                                                                                                                                                                                                               |   | $                                  | 750,071   |   |   | $ | 29,400 |   |   |   | 5.24 | % |   | $ | 752,672 |   |   | $ | 34,823 |   |   |   | 6.18 | % |
| Securities (2)                                                                                                                                                                                                                                                                                                                                                     |   |                               | 232,953   |   |   |   | 8,805 |   |   |   | 4.98 |   |   |   | 251,608 |   |   |   | 9,529 |   |   |   | 4.98 |   |
| Other interest-earning assets      (3)                                                                                                                                                                                                                                                                                                                             |   |                               | 29,903    |   |   |   | 575 |   |   |   | 2.57 |   |   |   | 50,492 |   |   |   | 1,358 |   |   |   | 3.59 |   |
| Total interest-earning      assets                                                                                                                                                                                                                                                                                                                                 |   |                               | 1,012,927 |   |   |   | 38,780 |   |   |   | 5.12 |   |   |   | 1,054,772 |   |   |   | 45,710 |   |   |   | 5.79 |   |
|                                                                                                                                                                                                                                                                                                                                                               |   |                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest      earning      assets                                                                    |   |                               | 88,101    |   |   |   |   |   |   |   |   |   |   |   | 85,156 |   |   |   |   |   |   |   |   |   |
| Total      assets                                                                                        |   | $                                  | 1,101,028 |   |   |   |   |   |   |   |   |   |   | $ | 1,139,928 |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                               |   |                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing      liabilities:                                                                                                                                                                                                                                                                                                                                 |   |                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                                                                                                                                                                                                                                                                                                                                          |   |                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Checking      accounts                                                                                                            |   | $                                  | 127,032   |   |   |   | 281 |   |   |   | 0.30 |   |   | $ | 105,791 |   |   |   | 498 |   |   |   | 0.63 |   |
| Money market      accounts                                                                                                        |   |                               | 158,125   |   |   |   | 881 |   |   |   | 0.74 |   |   |   | 187,363 |   |   |   | 3,152 |   |   |   | 2.25 |   |
| Savings      accounts                                                                                                             |   |                               | 118,216   |   |   |   | 304 |   |   |   | 0.34 |   |   |   | 123,822 |   |   |   | 465 |   |   |   | 0.50 |   |
| Certificates of      deposit                                                                                                      |   |                               | 367,274   |   |   |   | 6,810 |   |   |   | 2.48 |   |   |   | 374,514 |   |   |   | 10,185 |   |   |   | 3.63 |   |
| Total      deposits                                                                                                                              |   |                               | 770,647   |   |   |   | 8,276 |   |   |   | 1.44 |   |   |   | 791,490 |   |   |   | 14,300 |   |   |   | 2.41 |   |
|                                                                                                                                                                                                                                                                                                                                                               |   |                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Borrowed      money:                                                                                                                                                                                                                                                                                                                       |   |                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Other      short-term borrowed money (4)                                                                                                                                                                                                                                                                                 |   |                               | 13,412    |   |   |   | 77 |   |   |   | 0.77 |   |   |   | 25,323 |   |   |   | 367 |   |   |   | 1.94 |   |
|        FHLB      borrowed money (5)(6)                                                                                                                                                                                                                                                                                          |   |                               | 122,727   |   |   |   | 2,521 |   |   |   | 2.71 |   |   |   | 115,575 |   |   |   | 4,874 |   |   |   | 5.54 |   |
|        Total      borrowed      money                                                |   |                               | 136,139   |   |   |   | 2,598 |   |   |   | 2.52 |   |   |   | 140,898 |   |   |   | 5,241 |   |   |   | 4.89 |   |
| Total interest-bearing      liabilities                                                                                                                                                                                                                                                                                                                            |   |                               | 906,786   |   |   |   | 10,874 |   |   |   | 1.60 |   |   |   | 932,388 |   |   |   | 19,541 |   |   |   | 2.80 |   |
| Non-interest      bearing deposits                                                                                                                                                                                                                                                                                                                                 |   |                               | 65,919    |   |   |   |   |   |   |   |   |   |   |   | 62,357 |   |   |   |   |   |   |   |   |   |
| Non-interest bearing liabilities                                                                                                                                                                                                                                                                                                                                   |   |                               | 15,168    |   |   |   |   |   |   |   |   |   |   |   | 16,597 |   |   |   |   |   |   |   |   |   |
| Total      liabilities                                                                                   |   |                               | 987,873   |   |   |   |   |   |   |   |   |   |   |   | 1,011,342 |   |   |   |   |   |   |   |   |   |
| Shareholders'      equity                                                                                |   |                               | 113,155   |   |   |   |   |   |   |   |   |   |   |   | 128,586 |   |   |   |   |   |   |   |   |   |
| Total      liabilities and shareholders' equity                                                                                                                                                                                                                                                                                                                    |   | $                                  | 1,101,028 |   |   |   |   |   |   |   |   |   |   | $ | 1,139,928 |   |   |   |   |   |   |   |   |   |
| Net      interest-earning      assets                                                                    |   | $                                  | 106,141   |   |   |   |   |   |   |   |   |   |   | $ | 122,384 |   |   |   |   |   |   |   |   |   |
| Net      interest income / interest rate spread                                                                                                                                                                                                                                                                                                                    |   |                               |      |   |   | $ | 27,906 |   |   |   | 3.52 | % |   |   |   |   |   | $ | 26,169 |   |   |   | 2.99 | % |
| Net      interest      margin                                                                            |   |                               |      |   |   |   |   |   |   |   | 3.68 | % |   |   |   |   |   |   |   |   |   |   | 3.31 | % |
| Ratio      of average interest-earning assets to    average      interest-bearing liabilities                                                                                                                                                                                                                                             |   |                               |      |   |   |   |   |   |   |   | 111.71 | % |   |   |   |   |   |   |   |   |   |   | 113.13 | % |

|   |   |
|--------|--------|

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

| (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 $122.8 million of contractual FHLB      borrowed money reduced by an average of $81,000 of unamortized deferred      premium on the early extinguishment of debt.  Interest expense      on borrowed money includes $157,000 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 to      2.52% compared to the average rate for the period of      2.36%. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | The      2008 period includes an average of $116.5 million of contractual FHLB      borrowed money reduced by an average of $929,000 of unamortized premium on      the early extinguishment of debt.  Interest expense on borrowed      money includes $1.2 million 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 as reported to 4.89%      compared to the average rate for the period of      3.73%. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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table of contents

|                                                                                                                                                                                                                                                                                                                                                                                        |   | Three      Months Ended September 30, |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                        |   | 2009 compared to 2008                 |   |
|                                                                                                                                                                                                                                                                                                                                                                                        |   | Increase (decrease) due to            |   |
|                                                                                                                                                                                                                                                                                                                                                                                        |   | Rate                                  |   |   | Volume |   |   | Rate      /Volume |   |   | Total      Net Increase / (Decrease) |   |
|                                                                                                                                                                                                                                                                                                                                                                                        |   | (Dollars      in thousands)           |   |
| Interest-earning      assets:                                                                                                                                                                                                                                                                                                                                                               |   |                                  |   |   |   |   |   |   |   |   |   |   |
| Loans      receivable                                                                                         |   | $                                     | (1,339 | ) |   | $ | 283 |   |   | $ | (35 | ) |   | $ | (1,091 | ) |
| Securities                                                                                                    |   |                                  | (46    | ) |   |   | (497 | ) |   |   | 7 |   |   |   | (536 | ) |
| Other interest-earning      assets                                                                            |   |                                  | (118   | ) |   |   | (51 | ) |   |   | 17 |   |   |   | (152 | ) |
| Total net change in income on      interest-earning      assets                                                                             |   |                                  | (1,503 | ) |   |   | (265 | ) |   |   | (11 | ) |   |   | (1,779 | ) |
| Interest-bearing      liabilities:                                                                                                                                                                                                                                                                                                                                                          |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                                                                                                                                                                                                                                                                                                                                                                   |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Checking      accounts                                                                                                       |   |                                  | (83    | ) |   |   | 40 |   |   |   | (24 | ) |   |   | (67 | ) |
| Money market      accounts                                                                                                   |   |                                  | (577   | ) |   |   | (134 | ) |   |   | 87 |   |   |   | (624 | ) |
| Savings      accounts                                                                                                        |   |                                  | (39    | ) |   |   | (4 | ) |   |   | 1 |   |   |   | (42 | ) |
| Certificates of      deposit                                                                                                 |   |                                  | (875   | ) |   |   | (25 | ) |   |   | 6 |   |   |   | (894 | ) |
| Total      deposits                                                                                                                    |   |                                  | (1,574 | ) |   |   | (123 | ) |   |   | 70 |   |   |   | (1,627 | ) |
| Borrowed money:                                                                                                                                                                                                                                                                                                                                                                             |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other short-term      borrowings                                                                                             |   |                                  | (71    | ) |   |   | (76 | ) |   |   | 42 |   |   |   | (105 | ) |
| FHLB      borrowings                                                                                                         |   |                                  | (608   | ) |   |   | 137 |   |   |   | (65 | ) |   |   | (536 | ) |
| Total borrowed      money                                                                                                              |   |                                  | (679   | ) |   |   | 61 |   |   |   | (23 | ) |   |   | (641 | ) |
| Total net change in expense on      interest-bearing      liabilities                                                                       |   |                                  | (2,253 | ) |   |   | (62 | ) |   |   | 47 |   |   |   | (2,268 | ) |
| Net      change in net interest      income                                                         |   | $                                     | 750    |   |   | $ | (203 | ) |   | $ | (58 | ) |   | $ | 489 |   |

----

table of contents

|                                                                                                                                                                                                                                                                                                                                                                                                                            |   | Nine      Months Ended September 30, |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 2009 compared to 2008                |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                            |   | Increase (decrease) due to           |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                            |   | Rate                                 |   |   | Volume |   |   | Rate      /Volume |   |   | Total      Net Increase / (Decrease) |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                            |   | (Dollars      in thousands)          |   |
| Interest-earning      assets:                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                 |   |   |   |   |   |   |   |   |   |   |
| Loans      receivable                                                                                                                             |   | $                                    | (5,321 | ) |   | $ | (120 | ) |   | $ | 18 |   |   | $ | (5,423 | ) |
| Securities                                                                                                                                        |   |                                 | (22    | ) |   |   | (704 | ) |   |   | 2 |   |   |   | (724 | ) |
| Other interest-earning      assets                                                                                                                |   |                                 | (387   | ) |   |   | (553 | ) |   |   | 157 |   |   |   | (783 | ) |
| Total net change in income on      interest-earning      assets                                                                                                                 |   |                                 | (5,730 | ) |   |   | (1,377 | ) |   |   | 177 |   |   |   | (6,930 | ) |
| Interest-bearing      liabilities:                                                                                                                                                                                                                                                                                                                                                                                              |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Checking      accounts                                                                                                                                           |   |                                 | (264   | ) |   |   | 100 |   |   |   | (53 | ) |   |   | (217 | ) |
| Money market      accounts                                                                                                                                       |   |                                 | (2,109 | ) |   |   | (492 | ) |   |   | 330 |   |   |   | (2,271 | ) |
| Savings      accounts                                                                                                                                            |   |                                 | (147   | ) |   |   | (21 | ) |   |   | 7 |   |   |   | (161 | ) |
| Certificates of      deposit                                                                                                                                     |   |                                 | (3,236 | ) |   |   | (199 | ) |   |   | 60 |   |   |   | (3,375 | ) |
| Total      deposits                                                                                                                                                        |   |                                 | (5,756 | ) |   |   | (612 | ) |   |   | 344 |   |   |   | (6,024 | ) |
|     Borrowed      money:                                                                                                                                                                                                                                                                                                                                                                                    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Other      short-term      borrowings                                                         |   |                                 | (222   | ) |   |   | (173 | ) |   |   | 105 |   |   |   | (290 | ) |
|        FHLB      debt                                                                                |   |                                 | (2,500 | ) |   |   | 302 |   |   |   | (155 | ) |   |   | (2,353 | ) |
|        Total      borrowed      money                                                                          |   |                                 | (2,722 | ) |   |   | 129 |   |   |   | (50 | ) |   |   | (2,643 | ) |
| Total net change in expense on      interest-bearing      liabilities                                                                                                           |   |                                 | (8,478 | ) |   |   | (483 | ) |   |   | 294 |   |   |   | (8,667 | ) |
| Net      change in net interest      income                                                                                             |   | $                                    | 2,748  |   |   | $ | (894 | ) |   | $ | (117 | ) |   | $ | 1,737 |   |

----

table of contents

|                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | Three Months Ended September      30, |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | 2009                                  |   |   | 2008 |   |   | $ Change |   |   | % Change |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | (Dollars      in thousands)           |   |
| Interest      expense on short-term borrowed      money at contractual      rates                                                           |   | $                                     | 24     |   |   | $ | 129 |   |   | $ | (105 | ) |   | NM |   |
| Interest      expense on FHLB borrowed money      at contractual      rates                                                                 |   |                                  | 710    |   |   |   | 1,000 |   |   |   | (290 | ) |   |   | (29.0 | ) |
| Amortization      of deferred      premium                                                                                   |   |                                  | 24     |   |   |   | 270 |   |   |   | (246 | ) |   | NM |   |
| Total      interest expense on      borrowings                                                                               |   | $                                     | 758    |   |   | $ | 1,399 |   |   | $ | (641 | ) |   |   | (45.8 | ) |

|                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | Nine Months Ended September    30, |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | 2009                               |   |   | 2008 |   |   | $ Change |   |   | % Change |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | (Dollars      in thousands)        |   |
| Interest      expense on short-term borrowed      money at contractual      rates                                                           |   | $                                  | 77     |   |   | $ | 367 |   |   | $ | (290 | ) |   | NM |   |
| Interest      expense on FHLB borrowed money      at contractual      rates                                                                 |   |                               | 2,364  |   |   |   | 3,628 |   |   |   | (1,264 | ) |   |   | (34.8 | ) |
| Amortization      of deferred      premium                                                                                   |   |                               | 157    |   |   |   | 1,246 |   |   |   | (1,089 | ) |   | NM |   |
| Total      interest expense on      borrowings                                                                               |   | $                                  | 2,598  |   |   | $ | 5,241 |   |   | $ | (2,643 | ) |   |   | (50.4 | ) |

----

table of contents

|                                       |   | Three Months Ended September      30, |   |
|--------------------------------------------|--------|---------------------------------------|--------|
|                                       |   | 2009                                  |   |   | 2008 |   |   | $ Change |   |   | % Change |   |
|                                       |   | (Dollars      in thousands)           |   |
| Service      charges and other fees        |   | $                                     | 1,479  |   |   | $ | 1,640 |   |   | $ | (161 | ) |   |   | (9.8 | )% |
| Card-based      fees                       |   |                                  | 429    |   |   |   | 408 |   |   |   | 21 |   |   |   | 5.1 |   |
| Commission      income                     |   |                                  | 56     |   |   |   | 88 |   |   |   | (32 | ) |   |   | (36.4 | ) |
| Subtotal fee based revenues                |   |                                  | 1,964  |   |   |   | 2,136 |   |   |   | (172 | ) |   |   | (8.1 | ) |
| Income      from bank-owned life insurance |   |                                  | 218    |   |   |   | 349 |   |   |   | (131 | ) |   |   | (37.5 | ) |
| Other      income                          |   |                                  | 112    |   |   |   | 124 |   |   |   | (12 | ) |   |   | (9.7 | ) |
| Subtotal                                   |   |                                  | 2,294  |   |   |   | 2,609 |   |   |   | (315 | ) |   |   | (12.1 | ) |
| Security      gains (losses), net          |   |                                  | 321    |   |   |   | (3,470 | ) |   |   | 3,791 |   |   | NM |   |
| Other      asset gains (losses), net       |   |                                  | (15    | ) |   |   | 11 |   |   |   | (26 | ) |   | NM |   |
| Total non-interest income                  |   | $                                     | 2,600  |   |   | $ | (850 | ) |   | $ | 3,450 |   |   | NM |   |

|                                       |   | Nine Months Ended September    30, |   |
|--------------------------------------------|--------|------------------------------------|--------|
|                                       |   | 2009                               |   |   | 2008 |   |   | $ Change |   |   | % Change |   |
|                                       |   | (Dollars      in thousands)        |   |
| Service      charges and other fees        |   | $                                  | 4,154  |   |   | $ | 4,544 |   |   | $ | (390 | ) |   |   | (8.6 | )% |
| Card-based      fees                       |   |                               | 1,249  |   |   |   | 1,203 |   |   |   | 46 |   |   |   | 3.8 |   |
| Commission      income                     |   |                               | 197    |   |   |   | 281 |   |   |   | (84 | ) |   |   | (29.9 | ) |
| Subtotal fee based revenues                |   |                               | 5,600  |   |   |   | 6,028 |   |   |   | (428 | ) |   |   | (7.1 | ) |
| Income      from bank-owned life insurance |   |                               | 552    |   |   |   | 1,129 |   |   |   | (577 | ) |   |   | (51.1 | ) |
| Other      income                          |   |                               | 504    |   |   |   | 445 |   |   |   | 59 |   |   |   | 13.3 |   |
| Subtotal                                   |   |                               | 6,656  |   |   |   | 7,602 |   |   |   | (946 | ) |   |   | (12.4 | ) |
| Security      gains (losses), net          |   |                               | 1,041  |   |   |   | (3,983 | ) |   |   | 5,024 |   |   | NM |   |
| Other      asset gains (losses), net       |   |                               | (21    | ) |   |   | 8 |   |   |   | (29 | ) |   | NM |   |
| Total non-interest income                  |   | $                                  | 7,676  |   |   | $ | 3,627 |   |   | $ | 4,049 |   |   |   | 111.6 | % |

----

table of contents

|                                             |   | Three Months Ended September      30, |   |
|--------------------------------------------------|--------|---------------------------------------|--------|
|                                             |   | 2009                                  |   |   | 2008 |   |   | $ Change |   |   | % Change |   |
|                                             |   | (Dollars      in thousands)           |   |
| Compensation      and mandatory benefits         |   | $                                     | 3,650  |   |   | $ | 3,789 |   |   | $ | (139 | ) |   |   | (3.7 | )% |
| Retirement      and stock related compensation   |   |                                  | 372    |   |   |   | 365 |   |   |   | 7 |   |   |   | 1.9 |   |
| Medical      and life benefits                   |   |                                  | 475    |   |   |   | 345 |   |   |   | 130 |   |   |   | 37.7 |   |
| Other      employee benefits                     |   |                                  | 8      |   |   |   | 11 |   |   |   | (3 | ) |   |   | (27.3 | ) |
| Subtotal compensation and employee      benefits |   |                                  | 4,505  |   |   |   | 4,510 |   |   |   | (5 | ) |   |   | (0.1 | ) |
| Net      occupancy expense                       |   |                                  | 763    |   |   |   | 865 |   |   |   | (102 | ) |   |   | (11.8 | ) |
| FDIC      insurance premiums                     |   |                                  | 471    |   |   |   | 80 |   |   |   | 391 |   |   | NM |   |
| Professional      fees                           |   |                                  | 754    |   |   |   | 379 |   |   |   | 375 |   |   |   | 98.9 |   |
| Furniture      and equipment expense             |   |                                  | 526    |   |   |   | 562 |   |   |   | (36 | ) |   |   | (6.4 | ) |
| Data      processing                             |   |                                  | 407    |   |   |   | 387 |   |   |   | 20 |   |   |   | 5.2 |   |
| Marketing                                        |   |                                  | 155    |   |   |   | 289 |   |   |   | (134 | ) |   |   | (46.4 | ) |
| OREO      related expenses                       |   |                                  | 1,343  |   |   |   | 89 |   |   |   | 1,254 |   |   | NM |   |
| Loan      collection expenses                    |   |                                  | 290    |   |   |   | 311 |   |   |   | (21 | ) |   |   | (6.8 | ) |
| Other      general and administrative expense    |   |                                  | 1,034  |   |   |   | 1,203 |   |   |   | (169 | ) |   |   | (14.0 | ) |
| Total non-interest expense                       |   | $                                     | 10,248 |   |   | $ | 8,675 |   |   | $ | 1,573 |   |   |   | 18.1 | % |

|                                             |   | Nine Months Ended September    30, |   |
|--------------------------------------------------|--------|------------------------------------|--------|
|                                             |   | 2009                               |   |   | 2008 |   |   | $ Change |   |   | % Change |   |
|                                             |   | (Dollars      in thousands)        |   |
| Compensation      and mandatory benefits         |   | $                                  | 12,288 |   |   | $ | 11,266 |   |   | $ | 1,022 |   |   |   | 9.1 | % |
| Retirement      and stock related compensation   |   |                               | 1,373  |   |   |   | 654 |   |   |   | 719 |   |   |   | 109.9 |   |
| Medical      and life benefits                   |   |                               | 1,055  |   |   |   | 1,020 |   |   |   | 35 |   |   |   | 3.4 |   |
| Other      employee benefits                     |   |                               | 42     |   |   |   | 85 |   |   |   | (43 | ) |   |   | (50.6 | ) |
| Subtotal compensation and employee      benefits |   |                               | 14,758 |   |   |   | 13,025 |   |   |   | 1,733 |   |   |   | 13.3 |   |
| Net      occupancy expense                       |   |                               | 2,410  |   |   |   | 2,406 |   |   |   | 4 |   |   |   | 0.2 |   |
| FDIC      insurance premiums                     |   |                               | 1,738  |   |   |   | 120 |   |   |   | 1,618 |   |   | NM |   |
| Professional      fees                           |   |                               | 1,708  |   |   |   | 865 |   |   |   | 843 |   |   |   | 97.5 |   |
| Furniture      and equipment expense             |   |                               | 1,581  |   |   |   | 1,656 |   |   |   | (75 | ) |   |   | (4.5 | ) |
| Data      processing                             |   |                               | 1,246  |   |   |   | 1,329 |   |   |   | (83 | ) |   |   | (6.2 | ) |
| Marketing                                        |   |                               | 571    |   |   |   | 675 |   |   |   | (104 | ) |   |   | (15.4 | ) |
| OREO      related expenses                       |   |                               | 1,754  |   |   |   | 279 |   |   |   | 1,475 |   |   | NM |   |
| Loan      collection expenses                    |   |                               | 818    |   |   |   | 404 |   |   |   | 414 |   |   |   | 102.5 |   |
| Other      general and administrative expense    |   |                               | 3,035  |   |   |   | 3,645 |   |   |   | (610 | ) |   |   | (16.7 | ) |
| Total non-interest expense                       |   | $                                  | 29,619 |   |   | $ | 24,404 |   |   | $ | 5,215 |   |   |   | 21.4 | % |

----

table of contents

|                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | Three      Months EndedSeptember 30, |    |   | Nine      Months EndedSeptember 30, |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|---------|--------|-------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | 2009                                 |    |   | 2008                                |   |   | 2009 |   |   | 2008 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | (Dollars      in thousands)          |    |
| Efficiency      ratio:                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                 |    |   |                                |   |   |   |   |   |   |   |
| Non-interest      expense                                                                                           |   | $                                    | 10,248  |   |                                | $      | 8,675 |   |   | $ | 29,619 |   |   | $ | 24,404 |   |
| Net      interest income plus non-interest income                                                                                                                                                                                                                                                                                                                                                                                                   |   | $                                    | 11,996  |   |                                | $      | 8,057 |   |   | $ | 35,582 |   |   | $ | 29,796 |   |
| Efficiency      ratio                                                                                               |   |                                 | 85.4    | %      |                                |   | 107.7 | % |   |   | 83.2 | % |   |   | 81.9 | % |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                 |    |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Core      efficiency ratio:                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                 |    |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest      expense                                                                                                                                                                                                                                                                                                                                                                                                                      |   | $                                    | 10,248  |   |                                | $      | 8,675 |   |   | $ | 29,619 |   |   | $ | 24,404 |   |
| Special      assessment – FDIC      insurance                                                                 |   |                                 | ― |   |                                |   | ― |   |   |   | (495 | ) |   |   | ― |   |
| Non-interest expense – as      adjusted                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                 | 10,248  |   |                                |   | 8,675 |   |   |   | 29,124 |   |   |   | 24,404 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                 |    |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Net      interest income plus non-interest income                                                                                                                                                                                                                                                                                                                                                                                                   |   | $                                    | 11,996  |   |                                | $      | 8,057 |   |   | $ | 35,582 |   |   | $ | 29,796 |   |
| Adjustments:                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                 |    |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Security (gains) losses,      net                                                                                                  |   |                                 | (321    | )      |                                |   | 3,470 |   |   |   | (1,041 | ) |   |   | 3,983 |   |
| Other asset (gains) losses,      net                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                 | 15      |   |                                |   | (11 | ) |   |   | 21 |   |   |   | (8 | ) |
| Amortization      of deferred premium on the early extinguishment of debt                                                                                                                                                                                                                                                                                                                                                                           |   |                                 | 24      |   |                                |   | 270 |   |   |   | 157 |   |   |   | 1,246 |   |
| Net interest income plus      non-interest income – as      adjusted                                                                   |   | $                                    | 11,714  |   |                                | $      | 11,786 |   |   | $ | 34,719 |   |   | $ | 35,017 |   |
| Core      efficiency      ratio                                                                                     |   |                                 | 87.5    | %      |                                |   | 73.6 | % |   |   | 83.9 | % |   |   | 69.7 | % |

----

table of contents

----

table of contents

|                                              |   | ParValue                    |    |   | Amortized      Cost |   |    | Gross      Unrealized      Gains |   |   | Gross      Unrealized      Losses |   |   | FairValue |    |
|---------------------------------------------------|--------|-----------------------------|---------|--------|---------------------|--------|---------|----------------------------------|--------|--------|-----------------------------------|--------|--------|-----------|---------|
|                                              |   | (Dollars      in thousands) |    |
| At      September 30, 2009:                       |   |                        |    |   |                |   |    |                             |   |   |                              |   |   |      |    |
| Government sponsored entity (GSE)      securities |   | $                           | 56,150  |   |                | $      | 56,022  |                             |   | $      | 1,703                             |   |   | $         | ― |   |   | $ | 57,725 |   |
| Mortgage-backed securities                        |   |                        | 9,840   |   |                |   | 9,735   |                             |   |   | 439                               |   |   |      | ― |   |   |   | 10,174 |   |
| Collateralized mortgage      obligations          |   |                        | 66,080  |   |                |   | 64,690  |                             |   |   | 1,460                             |   |   |      | (1,168  | ) |   |   | 64,982 |   |
| Commercial mortgage-backed      securities        |   |                        | 50,962  |   |                |   | 50,369  |                             |   |   | 1,495                             |   |   |      | (149    | ) |   |   | 51,715 |   |
| Pooled trust preferred      securities            |   |                        | 30,359  |   |                |   | 27,189  |                             |   |   | ―                           |   |   |      | (6,235  | ) |   |   | 20,954 |   |
| Equity securities                                 |   |                        | 5,837   |   |                |   | ― |                             |   |   | 327                               |   |   |      | ― |   |   |   | 327 |   |
|                                              |   | $                           | 219,228 |   |                | $      | 208,005 |                             |   | $      | 5,424                             |   |   | $         | (7,552  | ) |   | $ | 205,877 |   |
|                                              |   |                        |    |   |                |   |    |                             |   |   |                              |   |   |      |    |   |   |   |   |   |

|                                              |   | ParValue                    |    |   | Amortized      Cost |   |    | Gross      Unrealized      Gains |   |   | Gross      Unrealized      Losses |   |   | FairValue |    |
|---------------------------------------------------|--------|-----------------------------|---------|--------|---------------------|--------|---------|----------------------------------|--------|--------|-----------------------------------|--------|--------|-----------|---------|
|                                              |   | (Dollars      in thousands) |    |
| At      December 31, 2008:                        |   |                        |    |   |                |   |    |                             |   |   |                              |   |   |      |    |
| Government sponsored entity (GSE)      securities |   | $                           | 98,400  |   |                | $      | 97,987  |                             |   | $      | 4,358                             |   |   | $         | ― |   |   | $ | 102,345 |   |
| Mortgage-backed securities                        |   |                        | 10,881  |   |                |   | 10,774  |                             |   |   | 83                                |   |   |      | (1      | ) |   |   | 10,856 |   |
| Collateralized mortgage      obligations          |   |                        | 78,276  |   |                |   | 76,506  |                             |   |   | 919                               |   |   |      | (1,882  | ) |   |   | 75,543 |   |
| Commercial mortgage-backed      securities        |   |                        | 40,511  |   |                |   | 39,669  |                             |   |   | 203                               |   |   |      | (1,479  | ) |   |   | 38,393 |   |
| Pooled trust preferred      securities            |   |                        | 30,966  |   |                |   | 27,668  |                             |   |   | ―                           |   |   |      | (3,535  | ) |   |   | 24,133 |   |
| Equity securities                                 |   |                        | 5,837   |   |                |   | ― |                             |   |   | ―                           |   |   |      | ― |   |   |   | ― |   |
|                                              |   | $                           | 264,871 |   |                | $      | 252,604 |                             |   | $      | 5,563                             |   |   | $         | (6,897  | ) |   | $ | 251,270 |   |

----

table of contents

|                                                   |   | September 30, 2009          |    |   | December 31, 2008 |   |   |   |   |
|--------------------------------------------------------|--------|-----------------------------|---------|--------|-------------------|--------|--------|--------|--------|
|                                                   |   | Amount                      |    |   | % of Total        |   |   | Amount |   |   | % of Total |   |   | % Change |   |
|                                                   |   | (Dollars      in thousands) |    |
| Commercial      loans:                                 |   |                        |    |   |              |   |   |   |   |   |   |   |   |   |   |
| Commercial and industrial                              |   | $                           | 69,058  |   |              |   | 9.2    | %      |   | $ | 64,021 |   |   |   | 8.5 | % |   |   | 7.9 | % |
| Commercial      real estate – owner occupied     |   |                        | 91,463  |   |              |   | 12.2   |   |   |   | 85,565 |   |   |   | 11.4 |   |   |   | 6.9 |   |
| Commercial real estate –      non-owner occupied |   |                        | 218,700 |   |              |   | 29.3   |   |   |   | 222,048 |   |   |   | 29.6 |   |   |   | (1.5 | ) |
| Commercial real estate –      multifamily        |   |                        | 58,118  |   |              |   | 7.8    |   |   |   | 40,503 |   |   |   | 5.4 |   |   |   | 43.5 |   |
| Commercial construction and land      development      |   |                        | 60,801  |   |              |   | 8.1    |   |   |   | 70,848 |   |   |   | 9.5 |   |   |   | (14.2 | ) |
|     Total      commercial loans    |   |                        | 498,140 |   |              |   | 66.6   |   |   |   | 482,985 |   |   |   | 64.4 |   |   |   | 3.1 |   |
|                                                   |   |                        |    |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Retail      loans:                                     |   |                        |    |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| One-to-four family      residential                    |   |                        | 189,067 |   |              |   | 25.2   |   |   |   | 203,797 |   |   |   | 27.2 |   |   |   | (7.2 | ) |
| Home equity lines of credit                            |   |                        | 57,082  |   |              |   | 7.6    |   |   |   | 58,918 |   |   |   | 7.8 |   |   |   | (3.1 | ) |
| Retail construction and land      development          |   |                        | 2,965   |   |              |   | 0.4    |   |   |   | 2,650 |   |   |   | 0.4 |   |   |   | 11.9 |   |
| Other                                                  |   |                        | 1,210   |   |              |   | 0.2    |   |   |   | 1,623 |   |   |   | 0.2 |   |   |   | (25.4 | ) |
| Total      retail loans                                |   |                        | 250,324 |   |              |   | 33.4   |   |   |   | 266,988 |   |   |   | 35.6 |   |   |   | (6.2 | ) |
|                                                   |   |                        |    |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      loans receivable, net of unearned fees      |   | $                           | 748,464 |   |              |   | 100.0  | %      |   | $ | 749,973 |   |   |   | 100.0 | % |   |   | (0.2 | )% |

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table of contents

|                                       |   | September 30, 2009          |   |   | December 31, 2008 |   |   |   |   |
|--------------------------------------------|--------|-----------------------------|--------|--------|-------------------|--------|--------|--------|--------|
|                                       |   | Amount                      |   |   | % of Total        |   |   | Amount |   |   | % of Total |   |   | % Change |   |
|                                       |   | (Dollars      in thousands) |   |
| Illinois                                   |   | $                           | 21,840 |   |              |   | 40.3   | %      |   | $ | 25,012 |   |   |   | 41.3 | % |   |   | (12.7 | )% |
| Indiana                                    |   |                        | 13,151 |   |              |   | 24.3   |   |   |   | 13,215 |   |   |   | 21.8 |   |   |   | (0.5 | ) |
| Ohio                                       |   |                        | 9,399  |   |              |   | 17.3   |   |   |   | 9,734 |   |   |   | 16.1 |   |   |   | (3.4 | ) |
| Florida                                    |   |                        | 4,778  |   |              |   | 8.8    |   |   |   | 6,590 |   |   |   | 10.9 |   |   |   | (27.5 | ) |
| Colorado                                   |   |                        | 2,640  |   |              |   | 4.9    |   |   |   | 3,103 |   |   |   | 5.1 |   |   |   | (14.9 | ) |
| Texas                                      |   |                        | 1,679  |   |              |   | 3.1    |   |   |   | 1,732 |   |   |   | 2.9 |   |   |   | (3.1 | ) |
| New      York                              |   |                        | 700    |   |              |   | 1.3    |   |   |   | 1,150 |   |   |   | 1.9 |   |   |   | (39.1 | ) |
| Total participations and      syndications |   | $                           | 54,187 |   |              |   | 100.0  | %      |   | $ | 60,536 |   |   |   | 100.0 | % |   |   | (10.5 | )% |

Allowancefor Losses on Loans.  We maintain our allowance for losses onloans at a level that we believe is sufficient to absorb credit losses inherentin the loan portfolio.  Our allowance for losses on loans representsour estimate of inherent losses existing in our loan portfolio that are bothprobable and reasonable to estimate at each balance sheet date and is based onour review of available and relevant information.  While we believethat the allowance for losses on loans was adequate at September 30, 2009, it ispossible that further deterioration in the economy, devaluations of collateralheld or requirements from regulatory agencies may require us to make futureprovisions to the allowance.

|                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | Three      Months EndedSeptember 30, |   |   | Nine      Months EndedSeptember 30, |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|--------|--------|-------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | 2009                                 |   |   | 2008                                |   |   | 2009 |   |   | 2008 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | (Dollars      in thousands)          |   |
| Balance      at beginning of      period                                                                 |   | $                                    | 14,934 |   |                                | $      | 10,403 |   |   | $ | 15,558 |   |   | $ | 8,026 |   |
| Provision      for losses on      loans                                                                  |   |                                 | 9,430  |   |                                |   | 1,441 |   |   |   | 10,767 |   |   |   | 9,355 |   |
| Charge-offs                                                                                              |   |                                 | (3,623 | )      |                                |   | (3,246 | ) |   |   | (5,677 | ) |   |   | (8,833 | ) |
| Recoveries                                                                                               |   |                                 | 58     |   |                                |   | 66 |   |   |   | 151 |   |   |   | 116 |   |
| Balance      at end of      period                                                                       |   | $                                    | 20,799 |   |                                | $      | 8,664 |   |   | $ | 20,799 |   |   | $ | 8,664 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | September      30, 2009 |    |   | December      31,2008 |   |    | September      30,2008 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|---------|--------|-----------------------|--------|---------|------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | (Dollars      in thousands)  |    |
| Allowance      for losses on      loans                                                                                                    |   | $                            | 20,799  |   |                  | $      | 15,558  |                   |   | $ | 8,664 |   |
| Total      loans receivable, net of unearned      fees                                                                                     |   |                         | 748,464 |   |                  |   | 749,973 |                   |   |   | 742,298 |   |
| Allowance      for losses on loans to total      loans                                                                                     |   |                         | 2.78    | %      |                  |   | 2.07    | %                      |   |   | 1.17 | % |
| Allowance      for losses on loans to non-performing loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                         | 37.15   |   |                  |   | 28.44   |                   |   |   | 18.13 |   |

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table of contents

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | September      30, 2009     |   |   | December      31, 2008 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|--------|--------|------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | (Dollars      in thousands) |   |
| Impaired      loans:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                        |   |   |                   |   |
| With a valuation      reserve                                                                                                                       |   | $                           | 22,959 |   |                   | $      | 20,219 |   |
| With no valuation reserve      required                                                                                                             |   |                        | 31,766 |   |                   |   | 27,259 |   |
| Total impaired      loans                                                                                                                           |   | $                           | 54,725 |   |                   | $      | 47,478 |   |
| Valuation      reserve relating to impaired      loans                                                                               |   | $                           | 11,006 |   |                   | $      | 5,930 |   |
| Average      outstanding impaired      loans                                                                                         |   |                        | 50,181 |   |                   |   | 32,676 |   |

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table of contents

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | September      30,2009      |   |   | December      31,2008 |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|--------|--------|-----------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | (Dollars      in thousands) |   |
| Non-accrual      loans:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                        |   |
| Commercial    loans:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                        |   |   |                  |   |
| Commercial and      industrial                                                                                                                                            |   | $                           | 2,488  |   |                  | $      | 2,551 |   |
| Commercial real estate – owner      occupied                                                                                                                        |   |                        | 3,230  |   |                  |   | 4,141 |   |
| Commercial real estate –      non-owner      occupied                                                                                                               |   |                        | 23,495 |   |                  |   | 22,337 |   |
| Commercial real estate –      multifamily                                                                                                                           |   |                        | 631    |   |                  |   | 342 |   |
| Commercial construction and      land      development                                                                                                                    |   |                        | 20,072 |   |                  |   | 20,428 |   |
| Total commercial      loans                                                                                                                                               |   |                        | 49,916 |   |                  |   | 49,799 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                        |   |   |                  |   |   |   |
| Retail loans:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                        |   |   |                  |   |   |   |
| One-to-four family      residential                                                                                                                                       |   |                        | 4,619  |   |                  |   | 3,048 |   |
| Home equity lines of      credit                                                                                                                                          |   |                        | 1,158  |   |                  |   | 1,570 |   |
| Retail construction and land      development                                                                                                                             |   |                        | 279    |   |                  |   | 279 |   |
| Other                                                                                                                                                                     |   |                        | 8      |   |                  |   | 5 |   |
| Total retail      loans                                                                                                                                                   |   |                        | 6,064  |   |                  |   | 4,902 |   |
| Total non-accrual      loans                                                                                                                                              |   |                        | 55,980 |   |                  |   | 54,701 |   |
| Other      real estate owned,      net                                                                                                           |   |                        | 7,421  |   |                  |   | 3,242 |   |
| Total non-performing      assets                                                                                                                                |   |                        | 63,401 |   |                  |   | 57,943 |   |
| 90      days past due and still accruing      interest                                                                                           |   |                        | 605    |   |                  |   | 605 |   |
| Total non-performing assets      plus 90 days past due loans still accruing      interest                                                                                 |   | $                           | 64,006 |   |                  | $      | 58,548 |   |
| Non-performing      assets to total      assets                                                                                                  |   |                        | 5.88   | %      |                  |   | 5.16 | % |
| Non-performing      loans to total      loans                                                                                                    |   |                        | 7.48   | %      |                  |   | 7.29 | % |

| •   | three      non-owner occupied commercial real estate loan relationships totaling $3.3      million; |
|---------------------|-----------------------------------------------------------------------------------------------------|

| •   | two      commercial construction and land development loan relationships totaling      $5.8 million; |
|---------------------|------------------------------------------------------------------------------------------------------|

| •   | various      one-to-four family loans totaling $3.6 million;  and |
|---------------------|-------------------------------------------------------------------|

| •   | various      home equity lines of credit totaling $1.9  million. |
|---------------------|------------------------------------------------------------------|

|   | • | the      sale of one owner occupied commercial real estate loan totaling      $887,000; |
|--------|---------|-----------------------------------------------------------------------------------------|

| •   | partial      charge-offs totaling $1.5 million on two non-owner occupied commercial      real estate relationships; |
|---------------------|---------------------------------------------------------------------------------------------------------------------|

| •   | partial      charge-offs totaling $1.9 million on six commercial construction and land      development borrowingrelationships; |
|---------------------|---------------------------------------------------------------------------------------------------------------------------------|

| •   | the      transfer to accruing status of $1.3 million of one-to-four family      residential loans that were brought current;and |
|---------------------|---------------------------------------------------------------------------------------------------------------------------------|

| •   | charge-offs      totaling $1.7 million on home equity lines of  credit. |
|---------------------|-------------------------------------------------------------------------|

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table of contents

|                                                                                                                                                                                                                                                                                                                                                                                                                           |   | September      30,  2009 |   |   | December      31,2008 |   |   | % Change |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|--------|--------|-----------------------|--------|--------|----------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                           |   | (Dollars      in thousands)   |   |
| Illinois                                                                                                      |   | $                             | 10,662 |   |                  | $      | 12,261 |     |   |   | (13.0 | )% |
| Indiana                                                                                                       |   |                          | 5,302  |   |                  |   | 5,423  |     |   |   | (2.2 | ) |
| Florida                                                                                                       |   |                          | 4,778  |   |                  |   | 3,643  |     |   |   | 31.2 |   |
| Total non-performing      syndications and purchased participations                                                          |   | $                             | 20,742 |   |                  | $      | 21,327 |     |   |   | (2.7 | ) |
| Percentage to total      non-performing loans                                                                                                                                                                                                                                                                                                                                                                                  |   |                          | 37.1   | %      |                  |   | 39.0   | %        |   |   |   |   |
| Percentage to total syndications      and purchased participations                                                                |   |                          | 38.3   |   |                  |   | 35.2   |     |   |   |   |   |

|                                        |   | September 30, 2009          |    |   | December 31, 2008 |   |   |   |   |
|---------------------------------------------|--------|-----------------------------|---------|--------|-------------------|--------|--------|--------|--------|
|                                        |   | Amount                      |    |   | % of Total        |   |   | Amount |   |   | % of Total |   |   | % Change |   |
|                                        |   | (Dollars      in thousands) |    |
| Core      deposits:                         |   |                        |    |   |              |   |   |   |   |   |   |   |   |   |   |
| Non-interest bearing checking      accounts |   | $                           | 81,367  |   |              |   | 9.6    | %      |   | $ | 63,485 |   |   |   | 7.7 | % |   |   | 28.2 | % |
| Interest bearing checking      accounts     |   |                        | 102,092 |   |              |   | 12.1   |   |   |   | 96,069 |   |   |   | 11.6 |   |   |   | 6.3 |   |
| Money market accounts                       |   |                        | 138,854 |   |              |   | 16.4   |   |   |   | 134,997 |   |   |   | 16.4 |   |   |   | 2.9 |   |
| Savings accounts                            |   |                        | 118,370 |   |              |   | 14.0   |   |   |   | 114,633 |   |   |   | 13.9 |   |   |   | 3.3 |   |
| Subtotal core deposits                      |   |                        | 440,683 |   |              |   | 52.0   |   |   |   | 409,184 |   |   |   | 49.7 |   |   |   | 7.7 |   |
| Certificates      of deposit                |   |                        | 353,868 |   |              |   | 41.7   |   |   |   | 356,227 |   |   |   | 43.3 |   |   |   | (0.7 | ) |
| Non-municipal deposits                      |   |                        | 794,551 |   |              |   | 93.8   |   |   |   | 765,411 |   |   |   | 92.9 |   |   |   | 3.8 |   |
| Municipal      core deposits                |   |                        | 42,024  |   |              |   | 5.0    |   |   |   | 39,221 |   |   |   | 4.8 |   |   |   | 7.1 |   |
| Municipal      certificates of deposit      |   |                        | 10,603  |   |              |   | 1.2    |   |   |   | 19,465 |   |   |   | 2.3 |   |   |   | (45.5 | ) |
| Municipal deposits                          |   |                        | 52,627  |   |              |   | 6.2    |   |   |   | 58,686 |   |   |   | 7.1 |   |   |   | (10.3 | ) |
| Total deposits                              |   | $                           | 847,178 |   |              |   | 100.0  | %      |   | $ | 824,097 |   |   |   | 100.0 | % |   |   | 2.8 |   |

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table of contents

|                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | September 30, 2009                          |    |   | December 31, 2008 |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------|---------|--------|-------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | Weighted-      AverageContractual      Rate |    |   |  Amount      |   |   | Weighted-      AverageContractual      Rate |   |   |  Amount |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | (Dollars      in thousands)                 |    |
| Short-term      variable-rate borrowings:                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                        |    |   |              |   |   |   |   |   |   |   |
| Repo Sweep      accounts                                                                                                     |   |                                        | 0.65    | %      |              | $      | 14,901 |   |   |   | 0.82 | % |   | $ | 17,512 |   |
| Federal Reserve Board discount      window                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                        | 0.50    |   |              |   | 3,900 |   |   |   | ― |   |   |   | ― |   |
| Overnight federal funds      purchased                                                                                       |   |                                        | ― |   |              |   | ― |   |   |   | 0.45 |   |   |   | 10,800 |   |
| Secured      borrowings from FHLB – Indianapolis:                                                                                                                                                                                                                                                                                                                                                                                       |   |                                        |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Maturing in 2009 –      variable-rate                                                                             |   |                                        | 0.47    |   |              |   | 5,000 |   |   |   | 0.65 |   |   |   | 30,000 |   |
| Maturing in 2009 –      fixed-rate                                                                                |   |                                        | 2.47    |   |              |   | 36,000 |   |   |   | 2.14 |   |   |   | 74,000 |   |
| Maturing      in 2010 –      fixed-rate                                                                           |   |                                        | 2.59    |   |              |   | 20,000 |   |   |   | 3.22 |   |   |   | 15,000 |   |
| Maturing in 2011 –      fixed-rate                                                                                |   |                                        | 3.75    |   |              |   | 15,000 |   |   |   | 3.75 |   |   |   | 15,000 |   |
| Maturing in 2014 – fixed-rate      (1)                                                                            |   |                                        | 6.71    |   |              |   | 1,122 |   |   |   | 6.71 |   |   |   | 1,146 |   |
| Maturing in 2018 – fixed-rate      (1)                                                                            |   |                                        | 5.54    |   |              |   | 2,647 |   |   |   | 5.54 |   |   |   | 2,647 |   |
| Maturing in 2019 – fixed-rate      (1)                                                                            |   |                                        | 6.30    |   |              |   | 6,804 |   |   |   | 6.30 |   |   |   | 7,007 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                        |    |   |              |   | 86,573 |   |   |   |   |   |   |   | 144,800 |   |
| Less:  deferred premium      on early extinguishment of      debt                                                            |   |                                        |    |   |              |   | (17 | ) |   |   |   |   |   |   | (175 | ) |
| Net FHLB – Indianapolis      borrowed money                                                                                                                                                                                                                                                                                                                                                                                             |   |                                        |    |   |              |   | 86,556 |   |   |   |   |   |   |   | 144,625 |   |
| Total      borrowed      money                                                                                |   |                                        |    |   |              | $      | 105,357 |   |   |   |   |   |   | $ | 172,937 |   |
| Weighted-average      contractual interest rate                                                                                                                                                                                                                                                                                                                                                                                               |   |                                        | 2.62    | %      |              |   |   |   |   |   | 2.13 | % |   |   |   |   |

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

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table of contents

|                                                |   | Actual                      |    |   | To      Be Adequately Capitalized |   |   | To Be      Well-Capitalized |   |
|-----------------------------------------------------|--------|-----------------------------|---------|--------|-----------------------------------|--------|--------|-----------------------------|--------|
|                                                |   | Amount                      |    | Ratio  |                              |   | Amount |                        |   | Ratio |   |   | Amount |   |   |  Ratio |   |
|                                                |   | (Dollars      in thousands) |
| As      of September 30, 2009:                      |   |                        |    |   |                              |   |   |                        |   |   |   |   |   |   |   |   |   |
| Total      capital to risk-weighted assets          |   | $                           | 102,839 |   |                              | 12.02  | %      |                        | $      | 68,455 |   |   | >8.00 | % |   | $ | 85,569 |   |   | >10.00 |  % |
| Tier 1 (core) capital to      risk-weighted assets  |   |                        | 92,019  |   |                              | 10.75  |   |                        |   | 34,227 |   |   | >4.00 |   |   |   | 51,341 |   |   | >6.00 |   |
| Tier 1 (core) capital to      adjusted total assets |   |                        | 92,019  |   |                              | 8.63   |   |                        |   | 42,646 |   |   | >4.00 |   |   |   | 53,307 |   |   | >5.00 |   |
| Tangible capital to adjusted      total assets      |   |                        | 92,019  |   |                              | 8.63   |   |                        |   | 15,992 |   |   | >1.50 |   |   |   | 21,323 |   |   | >2.00 |   |
|                                                |   |                        |    |   |                              |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| As      of December 31, 2008:                       |   |                        |    |   |                              |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total capital to risk-weighted      assets          |   | $                           | 111,941 |   |                              | 13.21  | %      |                        | $      | 67,777 |   |   | >8.00 |  % |   | $ | 84,722 |   |   | >10.00 | % |
| Tier 1 (core) capital to      risk-weighted assets  |   |                        | 101,289 |   |                              | 11.96  |   |                        |   | 33,889 |   |   | >4.00 |   |   |   | 50,833 |   |   | >6.00 |   |
| Tier 1 (core) capital to      adjusted total assets |   |                        | 101,289 |   |                              | 9.07   |   |                        |   | 44,683 |   |   | >4.00 |   |   |   | 55,854 |   |   | >5.00 |   |
| Tangible capital to adjusted      total assets      |   |                        | 101,289 |   |                              | 9.07   |   |                        |   | 16,756 |   |   | >1.50 |   |   |   | 22,341 |   |   | >2.00 |   |

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table of contents

|   | • | 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 ReserveBank. |
|--------|---------|------------------------------------------------------------|

----

table of contents

|                                                                                                                                                                                                                                                                                                                        |   | Payments Due By Period      |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|--------|
|                                                                                                                                                                                                                                                                                                                        |   | One      YearOr Less        |   |   | Over      OneThroughThree Years |   |   | Over      Three ThroughFive Years |   |   | Over      FiveYears |   |   | Total |   |
|                                                                                                                                                                                                                                                                                                                        |   | (Dollars      in thousands) |   |
| FHLB      borrowed money      (1)                                                |   | $                           | 61,306 |   |   | $ | 15,679 |   |   | $ | 1,750 |   |   | $ | 7,838 |   |   | $ | 86,573 |   |
| Short-term      borrowed money (2)                                                                                                                                                                                                                                                                                          |   |                        | 18,801 |   |   |   | ― |   |   |   | ― |   |   |   | ― |   |   |   | 18,801 |   |
| Operating      leases                                                            |   |                        | 497    |   |   |   | 570 |   |   |   | 306 |   |   |   | 2,161 |   |   |   | 3,534 |   |
| Dividends      payable on common stock                                                                                                                                                                                                                                                                                      |   |                        | 109    |   |   |   | ― |   |   |   | ― |   |   |   | ― |   |   |   | 109 |   |
|                                                                                                                                                                                                                                                                                                                        |   | $                           | 80,713 |   |   | $ | 16,249 |   |   | $ | 2,056 |   |   | $ | 9,999 |   |   | $ | 109,017 |   |

| (1) | Does      not include interest expense at the weighted-average contractual rate of      3.05% for the periods presented. |
|-----|--------------------------------------------------------------------------------------------------------------------------|

| (2) | Does      not include interest expense at the weighted-average contractual rate of      0.62% 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                                                                                                          |   | $                           | 8,958   |   |          | $      | ― |            |   | $      | 48      |   |   | $      | 250     |   |   | $ | 9,256 |   |
|        Commercial      real estate – owner occupied                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                        | 5,648   |   |          |   | ― |            |   |   | ― |   |   |   | 55      |   |   |   | 5,703 |   |
|        Commercial      real estate – non-owner occupied                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                        | 8,707   |   |          |   | ― |            |   |   | 98      |   |   |   | 43      |   |   |   | 8,848 |   |
|        Commercial      real estate –      multifamily                                                                          |   |                        | 7,506   |   |          |   | ― |            |   |   | ― |   |   |   | ― |   |   |   | 7,506 |   |
|        Commercial      construction and land development                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                        | 1,484   |   |          |   | 183     |            |   |   | ― |   |   |   | ― |   |   |   | 1,667 |   |
|                  Retail                                                                                                                             |   |                        | 1,272   |   |          |   | ― |            |   |   | ― |   |   |   | ― |   |   |   | 1,272 |   |
| Commitments      to fund unused construction loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                        | 11,420  |   |          |   | 229     |            |   |   | ― |   |   |   | ― |   |   |   | 11,649 |   |
| Commitments      to fund unused lines of credit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                        | 44,880  |   |          |   | 2,235   |            |   |   | 28      |   |   |   | 44,478  |   |   |   | 91,621 |   |
| Letters      of      credit                                                                                                                                             |   |                        | 8,881   |   |          |   | 254     |            |   |   | ― |   |   |   | 3,439   |   |   |   | 12,574 |   |
| Credit      enhancements                                                                                                                                                |   |                        | 14,805  |   |          |   | 5,416   |            |   |   | ― |   |   |   | 6,164   |   |   |   | 26,385 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | $                           | 113,561 |   |          | $      | 8,317   |            |   | $      | 174     |   |   | $      | 54,429  |   |   | $ | 176,481 |   |

Item 3.

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table of contents

|                                                                                     |                                  |   | Net Portfolio Value         |   |
|------------------------------------------------------------------------------------------|---------------------------------------|--------|-----------------------------|--------|
|                                                                                     |                                  |   | At September 30, 2009       |   |   | At December 31, 2008 |   |
|                                                                                     |                                  |   | $ Amount                    |   |   | $ Change |   |   | % Change |   |   | $ Amount |   |   | $ Change |   |   | % Change |   |
|                                                                                     |                                  |   | (Dollars      in thousands) |   |
| Assumed      Change in Interest Rates            (Basis Points) |                                  |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                     | +300                                  |   |                        | $      | 201,883 |   |   | $ | 15,188 |   |   |   | 8.1 | % |   | $ | 164,766 |   |   | $ | 9,082 |   |   |   | 5.8 | % |
|                                                                                     | +200                                  |   |                        |   | 198,742 |   |   |   | 12,047 |   |   |   | 6.5 |   |   |   | 163,073 |   |   |   | 7,389 |   |   |   | 4.7 |   |
|                                                                                     | +100                                  |   |                        |   | 194,288 |   |   |   | 7,593 |   |   |   | 4.1 |   |   |   | 160,467 |   |   |   | 4,783 |   |   |   | 3.1 |   |
|                                                                                     |            0 |   |                        |   | 186,695 |   |   |   | ― |   |   |   | ― |   |   |   | 155,684 |   |   |   | ― |   |   |   | ― |   |
|                                                                                     | -100                                  |   |                        |   | 167,358 |   |   |   | (19,337 | ) |   |   | (10.4 | ) |   |   | 142,862 |   |   |   | (12,822 | ) |   |   | (8.2 | ) |
|                                                                                     | -200                                  |   |                        |   | 143,074 |   |   |   | (43,621 | ) |   |   | (23.4 | ) |   |   | 124,618 |   |   |   | (31,006 | ) |   |   | (20.0 | ) |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | Percentage      of Deposits MaturingIn First Year |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | September 30, 2009                                |   |   | December 31, 2008 |   |
| 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 |   |

|                                                                                          |   |   | Percentage      Change inNet      Interest IncomeOver      a Twelve MonthTime Period |   |
|-----------------------------------------------------------------------------------------------|--------|--------|--------------------------------------------------------------------------------------|--------|
|                                                                                          |   |   | September 30, 2009                                                                   |   |   | December 31, 2008 |   |
| Assumed      Change in Interest Rates      (Basis      Points): |   |   |                                                                                 |   |   |   |   |
|                                                                                          | +300   |   |                                                                                 |   | (2.3 | )% |   |   | (3.3 | )% |
|                                                                                          | +200   |   |                                                                                 |   | (1.5 | ) |   |   | (1.8 | ) |
|                                                                                          | +100   |   |                                                                                 |   | (0.8 | ) |   |   | (0.7 | ) |
|                                                                                          | -100   |   |                                                                                 |   | 3.7 |   |   |   | 1.2 |   |
|                                                                                          | -200   |   |                                                                                 |   | 2.5 |   |   |   | 1.6 |   |

Item 4. 

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Item 1.

Item 1A. 

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table of contents

Item 2.

| (a)    | Not      applicable.                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| (b)    | Not      applicable.                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| (c)    | We      did not repurchase any shares of our common stock during the quarter ended      September 30, 2009 or during October 2009.  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.

| (a)    | Not      applicable. |
|--------|----------------------|
|   |
| (b)    | Not      applicable. |
|   |
| (c)    | Not      applicable. |
|   |
| (d)    | Not      applicable. |

Item 5. 

|   | Not      applicable.  |
|--------|----------------------------|

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Item6.

| (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 Citizens Financial Bank and Charles V. Cole      (4)                                                  |
| 10.7*   | Employment      Agreement entered into between CFS Bancorp, Inc. and Charles V. Cole      (4)                                                        |
| 10.8*   | Amended      and Restated Supplemental ESOP Benefit Plan of CFS Bancorp, Inc. and      Citizens Financial Services, FSB (7)                          |
| 10.9*   | CFS      Bancorp, Inc. Directors’ Deferred Compensation Plan (7)                                                                               |
| 10.10*  | CFS      Bancorp, Inc. 2008 Omnibus Equity Incentive Plan (8)                                                                                        |
| 10.11*  | Employment      Agreement entered into between Citizens Financial Bank and Daryl D.      Pomranke (4)                                                |
| 10.12*  | Employment      Agreement entered into between CFS Bancorp, Inc. and Daryl D. Pomranke      (4)                                                      |
| 10.13*  | CFS      Bancorp, Inc. 2009 Cash Incentive Compensation Program  (9)                                                                                 |
| 10.14*  | CFS      Bancorp, Inc. 2009 Service Retention Program Agreement  (9)                                                                                 |
| 10.15   | Form      of Indemnification Agreement, dated June 15, 2009, by and between      the      Company and each of Gene Diamond and Frank D. Lester  (10) |
| 10.16   | Indemnification      Agreement, dated June 15, 2009, by and between the Company      and Lawrence T. Toombs (10)                                     |
| 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      by Reference from the Company’s Definitive Proxy Statement from the Annual      Meeting of Shareholders filed with the SEC on March 25,    2005. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| (3) | Incorporated      by Reference from the Company’s Annual Report on Form 10-K for the year      ended December 31, 2006. |
|-----|-------------------------------------------------------------------------------------------------------------------------------|

| (4) | Incorporated      by Reference from the Company’s Quarterly Report on Form 10-Q for the      quarter ended March 31, 2008. |
|-----|----------------------------------------------------------------------------------------------------------------------------------|

| (5) | Incorporated      by Reference from the Company’s Definitive Proxy Statement for the Annual      Meeting of Shareholders filed with the SEC on March 23,    2001. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Incorporated      by Reference from the Company’s Definitive Proxy Statement for the Annual      Meeting of Shareholders filed with the SEC on March 31,    2003. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| (7) | Incorporated      by Reference from the Company’s Annual Report on Form 10-K for the year      ended December 31, 2004. |
|-----|-------------------------------------------------------------------------------------------------------------------------------|

| (8) | Incorporated      by Reference from the Company’s Definitive Proxy Statement from the Annual      Meeting of Shareholders filed with the SEC on March 17,    2008. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (9) | Incorporated      by Reference from the Company’s Quarterly Report on Form 10-Q for the      quarter ended March 31, 2009. |
|-----|----------------------------------------------------------------------------------------------------------------------------------|

| (10) | Incorporated      by Reference from the Company’s Form 8-K filed on June 19,      2009. |
|------|-----------------------------------------------------------------------------------------------|

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

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SIGNATURES

| Date:  November      9, 2009 | By:    | /s/      Thomas F. Prisby                          |
|----------------------------------------|--------|----------------------------------------------------|
|                                   |   | Thomas      F. Prisby, Chairman of the Board and   |
|                                   |   | Chief      Executive Officer                       |
|                                   |   |                                               |
| Date:  November      9, 2009 | By:    | /s/      Charles V. Cole                           |
|                                   |   | Charles      V. Cole, Executive Vice President and |
|                                   |   | Chief      Financial Officer                       |

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31.1

31.2

32.0

----