##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q







|x | Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------------

for the Quarterly Period Ended March 31, 2013

or



| ̈ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------------

for the Transition Period from             to

Commission File Number No. 333-140879





FIRST PRIORITY FINANCIAL CORP.







|                                                          |  |                                     
|--------------------------------------------------------- |  | ------------------------------------
|Pennsylvania                                              |  | 20-8420347                          
|(State or other jurisdiction of
incorporation)            |  | (I.R.S. Employer Identification No.)
|                                                          | 
|2 West Liberty Boulevard, Suite 104
Malvern, Pennsylvania |  | 19355                               
|(Address of principal executive offices)                  |  | (Zip Code)                          

Registrants telephone number, including area code: (610) 280-7100





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No   ̈.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈ |  | Accelerated filer         |  |  ̈
|                        |  |   | 
|Non-accelerated filer   |  |  ̈ |  | Smaller reporting company |  | x

Indicate by check mark if the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes   ̈    No  x

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.



|                              |  |                                               
|----------------------------- |  | ----------------------------------------------
|Title of Each Class           |  | Number of Shares Outstanding as of May 1,
2013
|Common Stock, $1.00 Par Value |  | 6,328,421 Outstanding Shares                  









---

##### Table of Contents

TABLE OF CONTENTS



|                             |  |                                                                                       |    |      |    | 
|---------------------------- |  | ------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                             |  |                                                                                       |    | Page |   
|PART IFINANCIAL INFORMATION |  |                                                                                       | 1  |     
|                             |  |                                                                                      
|Item 1.                      |  | Financial Statements (Unaudited)                                                      |    |      | 1  | 
|                             |  |                                                                                      
|Item 2.                      |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |    |      | 33 | 
|                             |  |                                                                                      
|Item 3.                      |  | Quantitative and Qualitative Disclosures About Market Risk                            |    |      | 56 | 
|                             |  |                                                                                      
|Item 4.                      |  | Controls and Procedures                                                               |    |      | 57 | 
|                             | 
|PART IIOTHER INFORMATION    |  |                                                                                       | 57 |     
|                             |  |                                                                                      
|Item 1.                      |  | Legal Proceedings                                                                     |    |      | 57 | 
|                             |  |                                                                                      
|Item 1A.                     |  | Risk Factors                                                                          |    |      | 57 | 
|                             |  |                                                                                      
|Item 2.                      |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |    |      | 57 | 
|                             |  |                                                                                      
|Item 3.                      |  | Defaults Upon Senior Securities                                                       |    |      | 57 | 
|                             |  |                                                                                      
|Item 4.                      |  | Mine Safety Disclosures                                                               |    |      | 57 | 
|                             |  |                                                                                      
|Item 5.                      |  | Other Information                                                                     |    |      | 57 | 
|                             |  |                                                                                      
|Item 6.                      |  | Exhibits                                                                              |    |      | 58 | 



---

##### Table of Contents

A CAUTION ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements, and as such, statements containing the words
believes, expects, anticipates, estimates, plans, projects, predicts, intends, seeks, will, may, should,
would, continues, hope and similar expressions, or the negative of these terms, constitute forward-looking statements that involve risks and uncertainties. Such statements are based on current expectations and are
subject to risks, uncertainties and changes in condition, significance, value, and effect. Such risks, uncertainties and changes in condition, significance, value and effect could cause First Priority Financial Corp.s actual results to differ
materially from those anticipated events.

Although the Company believes its plans, intentions, and expectations as reflected
in or suggested by these forward-looking statements are reasonable, it can give no assurance that its plans, intentions, or expectations will be achieved. Accordingly, you should not place undue reliance on them. Listed below, and discussed
elsewhere, are some important risks, uncertainties, and contingencies that could cause actual results, performances, or achievements to be materially different from the forward-looking statements made in this document. These factors, risks,
uncertainties, and contingencies include, but are not limited to, the following:



| |  |  | the strength of the United States economy in general and the strength of the regional and local economies in which First Priority conducts operations;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the effects of changing economic conditions in First Prioritys market areas and nationally;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | the effects of, and changes in, trade, monetary, and fiscal policies and laws, including interest rate policies of the Board of Governors of the
Federal Reserve System;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in federal and state banking, insurance, and investment laws and regulations which could impact First Prioritys operations;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | inflation, interest rate, market, and monetary fluctuations;
| | - |  | ------------------------------------------------------------



| |  |  | First Prioritys timely development of competitive new products and services in a changing environment and the acceptance of such products and
services by customers;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the impact of changes in financial services policies, laws, and regulations, including laws, regulations, policies, and practices concerning taxes,
banking, capital, liquidity, proper accounting treatment, securities, and insurance, and the application thereof by regulatory bodies and the impact of changes in and interpretations of generally accepted accounting principles;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the occurrence of adverse changes in the securities markets;
| | - |  | ------------------------------------------------------------



| |  |  | the effects of changes in technology or in consumer spending and savings habits;
| | - |  | --------------------------------------------------------------------------------



| |  |  | terrorist attacks in the United States or upon United States interests abroad, or armed conflicts involving the United States military;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------



| |  |  | regulatory or judicial proceedings;
| | - |  | -----------------------------------



| |  |  | changes in asset quality;
| | - |  | -------------------------



| |  |  | First Prioritys ability to effectively integrate the business and operations of Affinity Bancorp, Inc. and/or Affinity Bank of Pennsylvania,
which were acquired on February 28, 2013; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | First Prioritys success in managing the risks involved in the foregoing.
| | - |  | -------------------------------------------------------------------------

The effects of these factors are difficult to predict. New factors emerge from time to time, and we are not able assess the impact of any
such factor on the business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements speak only as of the date of this
document.

Because these forward-looking statements are subject to assumptions and uncertainties, actual results may differ
materially from those expressed or implied by these forward-looking statements. You are cautioned not to place undue reliance on these statements, which speak only as of the date of this quarterly report or the date of any document incorporated by
reference in this quarterly report.



---

##### Table of Contents

PART I

Item 1. Financial Statements.

First Priority Financial
Corp.

Consolidated Balance Sheets

(Unaudited, in thousands, except share and per share data)



|                                                                                                                   |  |               |         |   |                  |   |         |  
|------------------------------------------------------------------------------------------------------------------ |  | ------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                                   |  | March 31,2013 |         |   | December 31,2012 |  
|Assets                                                                                                             |  |               |         |   |                  |   |         |  
|Cash and due from banks                                                                                            |  | $             | 5,705   |   |                  | $ | 4,841   |  
|Interest bearing deposits in banks                                                                                 |  |               | 39,364  |   |                  |   | 6,175   |  
|                                                                                                                   |  |               |         |   |                  |   |         |  
|Total cash and cash equivalents                                                                                    |  |               | 45,069  |   |                  |   | 11,016  |  
|Residential mortgage loans held for sale                                                                           |  |               | 90      |   |                  |   |        |  
|Securities available for sale (amortized cost: $55,590 and $15,996, respectively)                                  |  |               | 56,337  |   |                  |   | 16,679  |  
|Loans receivable                                                                                                   |  |               | 331,393 |   |                  |   | 244,275 |  
|Less: allowance for loan losses                                                                                    |  |               | 2,565   |   |                  |   | 2,460   |  
|                                                                                                                   |  |               |         |   |                  |   |         |  
|Net loans                                                                                                          |  |               | 328,828 |   |                  |   | 241,815 |  
|Restricted investments in bank stocks                                                                              |  |               | 2,789   |   |                  |   | 1,337   |  
|Premises and equipment, net                                                                                        |  |               | 2,708   |   |                  |   | 901     |  
|Accrued interest receivable                                                                                        |  |               | 1,401   |   |                  |   | 1,040   |  
|Other real estate owned                                                                                            |  |               | 1,237   |   |                  |   | 184     |  
|Goodwill                                                                                                           |  |               | 2,200   |   |                  |   | 1,194   |  
|Intangible assets with finite lives                                                                                |  |               | 573     |   |                  |   |        |  
|Other assets                                                                                                       |  |               | 1,464   |   |                  |   | 980     |  
|                                                                                                                   |  |               |         |   |                  |   |         |  
|Total Assets                                                                                                       |  | $             | 442,696 |   |                  | $ | 275,146 |  
|                                                                                                                   |  |               |         |   |                  |   |         |  
|Liabilities and Shareholders Equity                                                                               |  |               |         |   |                  |   |         |  
|Liabilities                                                                                                        |  |               |         |   |                  |   |         |  
|Deposits:                                                                                                          |  |               |         |   |                  |   |         |  
|Non-interest bearing                                                                                               |  | $             | 38,801  |   |                  | $ | 28,176  |  
|Interest-bearing                                                                                                   |  |               | 319,641 |   |                  |   | 204,867 |  
|                                                                                                                   |  |               |         |   |                  |   |         |  
|Total deposits                                                                                                     |  |               | 358,442 |   |                  |   | 233,043 |  
|Short-term borrowings                                                                                              |  |               | 25,000  |   |                  |   |        |  
|Long-term debt                                                                                                     |  |               | 13,000  |   |                  |   | 13,000  |  
|Accrued interest payable                                                                                           |  |               | 460     |   |                  |   | 378     |  
|Other liabilities                                                                                                  |  |               | 2,138   |   |                  |   | 1,015   |  
|                                                                                                                   |  |               |         |   |                  |   |         |  
|Total Liabilities                                                                                                  |  |               | 399,040 |   |                  |   | 247,436 |  
|                                                                                                                   |  |               |         |   |                  |   |         |  
|Shareholders Equity                                                                                               |  |               |         |   |                  |   |         |  
|Preferred stock, $100 par value; authorized 10,000,000 shares; liquidation value: $1,000 per share:                |  |               |         |   |                  |   |         |  
|Series A: 5%; 4,579 shares issued and outstanding; liquidation value: $4,579                                       |  |               | 4,528   |   |                  |   | 4,513   |  
|Series B: 9%; 229 shares issued and outstanding; liquidation value: $229                                           |  |               | 234     |   |                  |   | 236     |  
|Series C: 5%; 4,596 shares issued and outstanding; liquidation value: $4,596                                       |  |               | 4,593   |   |                  |   | 4,593   |  
|Common stock, $1 par value; authorized 10,000,000 shares; issued and outstanding: 2013: 6,328,421; 2012:
3,144,003 |  |               | 6,328   |   |                  |   | 3,144   |  
|Surplus                                                                                                            |  |               | 39,696  |   |                  |   | 26,230  |  
|Accumulated deficit                                                                                                |  |               | (12,470 | ) |                  |   | (11,689 | )
|Accumulated other comprehensive income                                                                             |  |               | 747     |   |                  |   | 683     |  
|                                                                                                                   |  |               |         |   |                  |   |         |  
|Total Shareholders Equity                                                                                         |  |               | 43,656  |   |                  |   | 27,710  |  
|                                                                                                                   |  |               |         |   |                  |   |         |  
|Total Liabilities and Shareholders Equity                                                                         |  | $             | 442,696 |   |                  | $ | 275,146 |  
|                                                                                                                   |  |               |         |   |                  |   |         |  

See notes to consolidated financial statements.



1



---

##### Table of Contents

First Priority Financial Corp.

Consolidated Statements of Income

(Unaudited, in thousands, except per share data)



|                                                    |  |                                     |       |   |      |   |       | 
|--------------------------------------------------- |  | ----------------------------------- | ----- | - | ---- | - | ----- | 
|                                                    |  | For the three months endedMarch 31, |      
|                                                    |  | 2013                                |       |   | 2012 |  
|Interest Income                                     |  |                                     |       |   |      |   |       | 
|Loans receivable, including fees                    |  | $                                   | 3,488 |   |      | $ | 3,109 | 
|Securitiestaxable                                  |  |                                     | 166   |   |      |   | 193   | 
|Securitiesexempt from federal taxes                |  |                                     | 27    |   |      |   | 11    | 
|Interest bearing deposits and other                 |  |                                     | 9     |   |      |   | 3     | 
|                                                    |  |                                     |       |   |      |   |       | 
|Total Interest Income                               |  |                                     | 3,690 |   |      |   | 3,316 | 
|                                                    |  |                                     |       |   |      |   |       | 
|Interest Expense                                    |  |                                     |       |   |      |   |       | 
|Deposits                                            |  |                                     | 728   |   |      |   | 895   | 
|Short-term borrowings                               |  |                                     | 2     |   |      |   |      | 
|Long-term debt                                      |  |                                     | 63    |   |      |   | 83    | 
|                                                    |  |                                     |       |   |      |   |       | 
|Total Interest Expense                              |  |                                     | 793   |   |      |   | 978   | 
|                                                    |  |                                     |       |   |      |   |       | 
|Net Interest Income                                 |  |                                     | 2,897 |   |      |   | 2,338 | 
|Provision for Loan Losses                           |  |                                     | 165   |   |      |   | 175   | 
|                                                    |  |                                     |       |   |      |   |       | 
|Net Interest Income after Provision for Loan Losses |  |                                     | 2,732 |   |      |   | 2,163 | 
|                                                    |  |                                     |       |   |      |   |       | 
|Non-Interest Income                                 |  |                                     |       |   |      |   |       | 
|Wealth management fee income                        |  |                                     | 59    |   |      |   | 77    | 
|Gains on sales of investment securities             |  |                                     |      |   |      |   | 142   | 
|Other                                               |  |                                     | 61    |   |      |   | 42    | 
|                                                    |  |                                     |       |   |      |   |       | 
|Total Non-Interest Income                           |  |                                     | 120   |   |      |   | 261   | 
|                                                    |  |                                     |       |   |      |   |       | 
|Non-Interest Expenses                               |  |                                     |       |   |      |   |       | 
|Salaries and employee benefits                      |  |                                     | 1,540 |   |      |   | 1,221 | 
|Occupancy and equipment                             |  |                                     | 355   |   |      |   | 258   | 
|Data processing equipment and operations            |  |                                     | 169   |   |      |   | 125   | 
|Professional fees                                   |  |                                     | 146   |   |      |   | 179   | 
|Marketing, advertising, and business development    |  |                                     | 36    |   |      |   | 19    | 
|FDIC insurance assessments                          |  |                                     | 73    |   |      |   | 63    | 
|Pennsylvania bank shares tax expense                |  |                                     | 74    |   |      |   | 57    | 
|Collateral protection expense                       |  |                                     |      |   |      |   | 79    | 
|Merger related costs                                |  |                                     | 797   |   |      |   |      | 
|Other real estate owned                             |  |                                     | 118   |   |      |   |      | 
|Other                                               |  |                                     | 192   |   |      |   | 161   | 
|                                                    |  |                                     |       |   |      |   |       | 
|Total Non-Interest Expenses                         |  |                                     | 3,500 |   |      |   | 2,162 | 
|                                                    |  |                                     |       |   |      |   |       | 
|Net Income (Loss)                                   |  | $                                   | (648  | ) |      | $ | 262   | 
|                                                    |  |                                     |       |   |      |   |       | 
|Preferred dividends, including net amortization     |  |                                     | 133   |   |      |   | 133   | 
|                                                    |  |                                     |       |   |      |   |       | 
|Income (loss) to Common Shareholders                |  | $                                   | (781  | ) |      | $ | 129   | 
|                                                    |  |                                     |       |   |      |   |       | 
|Income (loss) per common share:                     |  |                                     |       |   |      |   |       | 
|Basic                                               |  | $                                   | (0.18 | ) |      | $ | 0.04  | 
|Diluted                                             |  | $                                   | (0.18 | ) |      | $ | 0.04  | 
|Weighted average common shares outstanding          |  |                                     |       |   |      |   |       | 
|Basic                                               |  |                                     | 4,241 |   |      |   | 3,144 | 
|Diluted                                             |  |                                     | 4,241 |   |      |   | 3,148 | 

See notes to consolidated financial statements.



2



---

##### Table of Contents

First Priority Financial Corp.

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited, in thousands)



|                                                                             |  |                                     |      |   |      |   |      |  
|---------------------------------------------------------------------------- |  | ----------------------------------- | ---- | - | ---- | - | ---- | -
|                                                                             |  | For the three months endedMarch 31, |     
|                                                                             |  | 2013                                |      |   | 2012 |  
|Net income (loss)                                                            |  | $                                   | (648 | ) |      | $ | 262  |  
|                                                                             |  |                                     |      |   |      |   |      |  
|Other comprehensive income (loss):                                           |  |                                     |      |   |      |   |      |  
|Change in unrealized holding gains (losses) on available for sale securities |  |                                     | 64   |   |      |   | (340 | )
|Reclassification adjustment for net investment gains realized in income      |  |                                     |     |   |      |   | 142  |  
|                                                                             |  |                                     |      |   |      |   |      |  
|Total other comprehensive income (loss)                                      |  |                                     | 64   |   |      |   | (198 | )
|                                                                             |  |                                     |      |   |      |   |      |  
|Total comprehensive income (loss)                                            |  | $                                   | (584 | ) |      | $ | 64   |  
|                                                                             |  |                                     |      |   |      |   |      |  

See notes to consolidated financial statements.



3



---

##### Table of Contents

First Priority Financial Corp.

Consolidated Statements of Shareholders Equity

For the Three Months Ended March 31, 2013 and 2012

(Unaudited, dollars in thousands)



|                                                                                   |  |                |       |  |             |   |       |         |  |   |                    |   |  |                                       |         |   |       |   |      |   |  |   |        |  
|---------------------------------------------------------------------------------- |  | -------------- | ----- |  | ----------- | - | ----- | ------- |  | - | ------------------ | - |  | ------------------------------------- | ------- | - | ----- | - | ---- | - |  | - | ------ | -
|                                                                                   |  | PreferredStock |       |  | CommonStock |   |       | Surplus |  |   | AccumulatedDeficit |   |  | AccumulatedOtherComprehen-sive Income |         |   | Total |  
|BalanceDecember 31, 2011                                                          |  | $              | 9,289 |  |             | $ | 3,142 |         |  | $ | 26,062             |   |  | $                                     | (11,910 | ) |       | $ | 861  |   |  | $ | 27,444 |  
|Preferred stock dividends                                                          |  |                |      |  |             |   |      |         |  |   |                   |   |  |                                       | (120    | ) |       |   |     |   |  |   | (120   | )
|Net amortization on preferred stock                                                |  |                | 13    |  |             |   |      |         |  |   |                   |   |  |                                       | (13     | ) |       |   |     |   |  |   |       |  
|Issuance of 1,875 shares of restricted common stock                                |  |                |      |  |             |   | 2     |         |  |   | (2                 | ) |  |                                       |        |   |       |   |     |   |  |   |       |  
|Net income                                                                         |  |                |      |  |             |   |      |         |  |   |                   |   |  |                                       | 262     |   |       |   |     |   |  |   | 262    |  
|Other comprehensive loss                                                           |  |                |      |  |             |   |      |         |  |   |                   |   |  |                                       |        |   |       |   | (198 | ) |  |   | (198   | )
|Stock options expense                                                              |  |                |      |  |             |   |      |         |  |   | 28                 |   |  |                                       |        |   |       |   |     |   |  |   | 28     |  
|                                                                                   |  |                |       |  |             |   |       |         |  |   |                    |   |  |                                       |         |   |       |   |      |   |  |   |        |  
|BalanceMarch 31, 2012                                                             |  | $              | 9,302 |  |             | $ | 3,144 |         |  | $ | 26,088             |   |  | $                                     | (11,781 | ) |       | $ | 663  |   |  | $ | 27,416 |  
|                                                                                   |  |                |       |  |             |   |       |         |  |   |                    |   |  |                                       |         |   |       |   |      |   |  |   |        |  
|BalanceDecember 31, 2012                                                          |  | $              | 9,342 |  |             | $ | 3,144 |         |  | $ | 26,230             |   |  | $                                     | (11,689 | ) |       | $ | 683  |   |  | $ | 27,710 |  
|Preferred stock dividends                                                          |  |                |      |  |             |   |      |         |  |   |                   |   |  |                                       | (120    | ) |       |   |     |   |  |   | (120   | )
|Net amortization on preferred stock                                                |  |                | 13    |  |             |   |      |         |  |   |                   |   |  |                                       | (13     | ) |       |   |     |   |  |   |       |  
|Forfeiture of 100 shares of restricted common stock                                |  |                |      |  |             |   |      |         |  |   |                   |   |  |                                       |        |   |       |   |     |   |  |   |       |  
|Issuance of 1,268,576 shares of common stock in private placement                  |  |                |      |  |             |   | 1,268 |         |  |   | 5,304              |   |  |                                       |        |   |       |   |     |   |  |   | 6,572  |  
|Issuance of 1,915,942 shares of common stock in merger with Affinity Bancorp, Inc. |  |                |      |  |             |   | 1,916 |         |  |   | 8,130              |   |  |                                       |        |   |       |   |     |   |  |   | 10,046 |  
|Cash in lieu of fractional shares for merger with Affinity Bancorp, Inc.           |  |                |      |  |             |   |      |         |  |   | (1                 | ) |  |                                       |        |   |       |   |     |   |  |   | (1     | )
|Net loss                                                                           |  |                |      |  |             |   |      |         |  |   |                   |   |  |                                       | (648    | ) |       |   |     |   |  |   | (648   | )
|Other comprehensive income                                                         |  |                |      |  |             |   |      |         |  |   |                   |   |  |                                       |        |   |       |   | 64   |   |  |   | 64     |  
|Stock options expense                                                              |  |                |      |  |             |   |      |         |  |   | 33                 |   |  |                                       |        |   |       |   |     |   |  |   | 33     |  
|                                                                                   |  |                |       |  |             |   |       |         |  |   |                    |   |  |                                       |         |   |       |   |      |   |  |   |        |  
|BalanceMarch 31, 2013                                                             |  | $              | 9,355 |  |             | $ | 6,328 |         |  | $ | 39,696             |   |  | $                                     | (12,470 | ) |       | $ | 747  |   |  | $ | 43,656 |  
|                                                                                   |  |                |       |  |             |   |       |         |  |   |                    |   |  |                                       |         |   |       |   |      |   |  |   |        |  

See notes to consolidated financial statements.



4



---

##### Table of Contents

First Priority Financial Corp.

Consolidated Statements of Cash Flows

(Unaudited, dollars in thousands)



|                                                                                                   |  |                                     |         |   |      |   |         |  
|-------------------------------------------------------------------------------------------------- |  | ----------------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                                   |  | For the three months endedMarch 31, |        
|                                                                                                   |  | 2013                                |         |   | 2012 |  
|Cash Flows from Operating Activities                                                               |  |                                     |         |   |      |   |         |  
|Net income (loss)                                                                                  |  | $                                   | (648    | ) |      | $ | 262     |  
|Adjustments to reconcile net income (loss) to net cash (Used in) provided by operating activities: |  |                                     |         |   |      |   |         |  
|Provision for loan losses                                                                          |  |                                     | 165     |   |      |   | 175     |  
|Provision for foreclosed asset losses                                                              |  |                                     | 101     |   |      |   | 32      |  
|Depreciation and amortization                                                                      |  |                                     | 72      |   |      |   | 60      |  
|Net (accretion) amortization of securities premiums                                                |  |                                     | (23     | ) |      |   | 13      |  
|Stock based compensation expense                                                                   |  |                                     | 15      |   |      |   | 28      |  
|Gains on sales of investment securities                                                            |  |                                     |        |   |      |   | (142    | )
|Decrease in accrued interest receivable                                                            |  |                                     | 41      |   |      |   | 22      |  
|Increase in other assets                                                                           |  |                                     | (84     | ) |      |   | (25     | )
|Increase (decrease) in accrued interest payable                                                    |  |                                     | (113    | ) |      |   | 21      |  
|Increase (decrease) in other liabilities                                                           |  |                                     | (135    | ) |      |   | 18      |  
|                                                                                                   |  |                                     |         |   |      |   |         |  
|Net Cash (Used in) Provided by Operating Activities                                                |  |                                     | (609    | ) |      |   | 464     |  
|                                                                                                   |  |                                     |         |   |      |   |         |  
|Cash Flows from Investing Activities                                                               |  |                                     |         |   |      |   |         |  
|Net increase in loans                                                                              |  |                                     | (9,218  | ) |      |   | (3,761  | )
|Increase in mortgage loans held for sale                                                           |  |                                     | (90     | ) |      |   |        |  
|Purchases of securities available for sale                                                         |  |                                     | (14,342 | ) |      |   | (4,742  | )
|(Purchase)/Redemption of restricted stock                                                          |  |                                     | (353    | ) |      |   | 70      |  
|Proceeds from maturities or calls of securities available for sale                                 |  |                                     | 7,501   |   |      |   | 427     |  
|Proceeds from the sale of securities available for sale                                            |  |                                     | 1,305   |   |      |   | 2,736   |  
|Proceeds from the sale of other real estate owned                                                  |  |                                     | 180     |   |      |   |        |  
|Proceeds related to receivables for investment securities sold                                     |  |                                     | 33,630  |   |      |   |        |  
|Net (increase) decrease of premises and equipment                                                  |  |                                     | 6       |   |      |   | (36     | )
|Net cash received from acquisition                                                                 |  |                                     | 24,419  |   |      |   |        |  
|                                                                                                   |  |                                     |         |   |      |   |         |  
|Net Cash Provided by (Used in) Investing Activities                                                |  |                                     | 43,038  |   |      |   | (5,306  | )
|                                                                                                   |  |                                     |         |   |      |   |         |  
|Cash Flows from Financing Activities                                                               |  |                                     |         |   |      |   |         |  
|Net decrease in deposits                                                                           |  |                                     | (25,470 | ) |      |   | (8,132  | )
|Net increase in short-term borrowings                                                              |  |                                     | 25,000  |   |      |   | 1,000   |  
|Decrease in long-term debt                                                                         |  |                                     | (14,358 | ) |      |   |        |  
|Proceeds from issuance of common stock                                                             |  |                                     | 6,572   |   |      |   |        |  
|Cash dividends paid on preferred stock                                                             |  |                                     | (120    | ) |      |   | (120    | )
|                                                                                                   |  |                                     |         |   |      |   |         |  
|Net Cash Used in Financing Activities                                                              |  |                                     | (8,376  | ) |      |   | (7,252  | )
|                                                                                                   |  |                                     |         |   |      |   |         |  
|Net Increase (Decrease) in Cash and Cash Equivalents                                               |  |                                     | 34,053  |   |      |   | (12,094 | )
|Cash and Cash EquivalentsBeginning                                                                |  |                                     | 11,016  |   |      |   | 16,218  |  
|                                                                                                   |  |                                     |         |   |      |   |         |  
|Cash and Cash EquivalentsEnding                                                                   |  | $                                   | 45,069  |   |      | $ | 4,124   |  
|                                                                                                   |  |                                     |         |   |      |   |         |  
|Supplementary Disclosures of Cash Flows Information                                                |  |                                     |         |   |      |   |         |  
|Noncash activity:                                                                                  |  |                                     |         |   |      |   |         |  
|Trade date accounting for investment securities purchases                                          |  | $                                   | 1,000   |   |      | $ | 1,000   |  
|Cash paid for interest on deposits and borrowings                                                  |  | $                                   | 1,103   |   |      | $ | 957     |  
|Cash paid for income taxes                                                                         |  | $                                   |        |   |      | $ | 10      |  

See notes to consolidated financial statements.



5



---

##### Table of Contents

First Priority Financial Corp.

Unaudited Notes to Consolidated Financial Statements

Note 1Summary of Significant Accounting Policies

Organization and Nature of Operations

First Priority Financial Corp.

First Priority Financial Corp. (First Priority,
the Company) was incorporated under the laws of the Commonwealth of Pennsylvania on February 13, 2007, for the purpose of becoming the holding company of First Priority Bank (the Bank) and had no prior operating history.
On May 11, 2007, as a result of a reorganization and merger where each outstanding share of First Priority Bank common stock and each outstanding warrant to acquire a share of First Priority Bank common stock were converted into one share of
First Priority common stock and one warrant to acquire First Priority common stock, First Priority Bank became a wholly-owned subsidiary of First Priority.

On February 29, 2008, First Priority acquired Prestige Community Bank (Prestige) and Prestige merged with and into First Priority Bank.

On May 23, 2012, First Priority and Affinity Bancorp, Inc. (Affinity), the holding company for Affinity Bank of PA (Affinity
Bank), jointly announced a definitive agreement to merge their respective holding companies and bank subsidiaries. Subsequently, on February 28, 2013, the merger with Affinity was completed. Total assets acquired as a result of the merger
were $175.9 million, including $77.9 million in loans, and deposits of $150.9 million. Affinity operated five branch offices within the Berks County, Pennsylvania market. Under the terms of the merger agreement, shareholders of Affinity received
0.9813 newly issued shares of First Priority in exchange for each Affinity share. A total of 1,915,942 shares of First Priority common stock were issued in connection with the merger. Also, in conjunction with the completion of the merger, the
Company also issued 1,268,576 shares of First Priority common stock as part of a private placement offering resulting in incremental net equity proceeds of $6.6 million.

First Priority provides banking services through First Priority Bank and does not engage in any activities other than banking and related activities. As of March 31, 2013, First Priority had total
assets of $442.7 million and total shareholders equity of $43.7 million. First Prioritys principal executive offices are located at 2 West Liberty Boulevard, Suite 104, Malvern, Pennsylvania 19355. The telephone number is
(877) 533-4420.

First Priority Bank

First Priority Bank is a state-chartered commercial banking institution which was incorporated under the laws of the Commonwealth of Pennsylvania on May 25, 2005. First Priority Banks deposits
are insured by the FDIC up to the maximum amount permitted for all banks. As of March 31, 2013, First Priority Bank had total assets of $442.8 million, total loans of $331.4 million, total deposits of $359.6 million and total
shareholders equity of $42.9 million. First Priority Banks administrative headquarters and full service main office are located at 2 West Liberty Boulevard, Suite 104, Malvern, PA 19355. The main telephone number is
(877) 533-4420.

First Priority Bank engages in a full service commercial and consumer banking business with strong private banking and
individual wealth management services. First Priority Bank offers a variety of consumer, private banking and commercial loans, mortgage products and commercial real estate financing. First Priority Bank does not engage in sub-prime lending. The
Companys operations are significantly affected by prevailing economic conditions, competition, and the monetary, fiscal, and regulatory policies of governmental agencies. Lending activities are influenced by a number of factors, including the
general credit needs of individuals and small and medium-sized businesses in the Companys market area, competition, the current regulatory environment, the level of interest rates, and the availability of funds. Deposit flows and costs of
funds are influenced by prevailing market rates of interest, competition, account maturities, and the level of personal income and savings in the market area.

First Priority Bank also offers certain financial planning and investment management services. These investment services are provided by First Priority Financial Services, a Division of First Priority
Bank, through an agreement with a third party provider. In addition, various life insurance products are offered through First Priority Bank, and the Bank has also entered into solicitation agreements with several investment advisors to provide
portfolio management services for introduced customers of the Bank.

The ability to originate loans and build a sound, growing loan portfolio
is critically important to the success of First Priority Bank. The Bank provides highly customized loan products offered with excellent service and expertise with a goal of timely responsiveness within the market, and delivers these products and
quality services through a staff of highly experienced lenders who are properly supported in the marketplace by seasoned management. The Banks lenders provide true relationship banking based upon a deep understanding of client needs, personal
service, prompt decision making and customized banking solutions.



6



---

##### Table of Contents

First Priority Bank currently seeks deposits and commercial and private banking relationships through its
ten banking offices with completion of the integration of Affinitys branches. The Bank provides deposit products that include checking, money market and savings accounts, and certificates of deposit as well as other deposit services, including
cash management and electronic banking products and online account opening capabilities. The Bank obtains funding in the local community by providing excellent service and competitive rates to its customers and utilizes electronic and print media
advertising to attract current and potential deposit customers. The Bank also uses brokered certificates of deposit as a cost effective funding alternative.

Basis of Presentation

The accompanying unaudited consolidated financial statements were
prepared in accordance with instructions to Form 10-Q, and therefore, do not include information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles
generally accepted in the United States (GAAP). However, all normal recurring adjustments that, in the opinion of management, are necessary for a fair presentation of these financial statements have been included. These financial
statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for First Priority Financial Corp. for the year ended December 31, 2012, included in the Companys Form 10-K filed with the
Securities and Exchange Commission on April 9, 2013. The results of interim periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.

The accompanying unaudited consolidated financial statements consist of the parent company, First Priority Financial Corp. and its consolidated wholly
owned subsidiary, First Priority Bank. The consolidated balance sheets and related statements of income of the Company are substantially the same as the consolidated balance sheets and related statements of income of the Bank. All significant
intercompany accounts and transactions have been eliminated in consolidation.

These statements are prepared in accordance with accounting
principles generally accepted in the United States of America (GAAP).

Acquired Loans

Acquired loans are initially recorded at their acquisition date fair values. The carryover of allowance for loan losses is prohibited as any credit losses
in the loans are included in the determination of the fair value of the loans at the acquisition date. Fair values for acquired loans are based on a discounted cash flow methodology that involves assumptions and judgments as to credit risk,
prepayment risk, liquidity risk, default rates, loss severity, payment speeds, collateral values and discount rate.

For acquired loans that
are not deemed impaired at acquisition, credit discounts representing principal losses expected over the life of the loan are a component of the initial fair value. Subsequent to the acquisition date, the methods used to estimate the required
allowance for loan losses for these loans is similar to originated loans. However, the Company records a provision for loan losses only when the required allowance exceeds any remaining credit discount. The remaining differences between the purchase
price and the unpaid principal balance at the date of acquisition are recorded in interest income over the life of the loan.

Acquired loans
that have evidence of deterioration in credit quality since origination and for which it is probable, at acquisition, that the Company will be unable to collect all contractually required payments are accounted for as impaired loans under ASC
310-30. The excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable discount and is recognized into interest income over the remaining life of the loans. The difference between contractually
required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the non-accretable discount. The non-accretable discount represents estimated future credit losses expected to be incurred over the life of
the loan. Subsequent decreases to the expected cash flows require the Company to evaluate the need for an allowance for loan losses on these loans. Subsequent improvements in expected cash flows result in the reversal of a corresponding amount of
the non-accretable discount which the Company then reclassifies as an accretable discount that is recognized into interest income over the remaining life of the loans using the interest method.

Acquired loans that met the criteria for non-accrual of interest prior to acquisition may be considered performing upon acquisition, or in the future,
regardless of whether the customer is contractually delinquent, if the Company can reasonably estimate the timing and amount of the expected cash flows on such loans and if the Company expects to fully collect the new carrying value of the loans. As
such, the Company may no longer consider the loan to be non-accrual or non-performing and may accrue interest on these loans, including the impact of any accretable discount. For acquired loans that are not deemed impaired at acquisition, credit
discounts representing the principal losses expected over the life of the loan are a component of the initial fair value and amortized over the life of the asset. Subsequent to the acquisition date, the methods utilized to estimate the required
allowance for loan losses for these loans is similar to originated loans, however, the Company records a provision for loan losses only when the required allowance exceeds any remaining pooled discounts for loans evaluated collectively for
impairment.



7



---

##### Table of Contents

Allowance for Loan Losses

The allowance for loan losses consists of the allowance for loan losses and the reserve for unfunded lending commitments. The allowance for loan losses represents managements estimate of losses
inherent in the loan portfolio as of the balance sheet date and is recorded as a reduction to loans. The reserve for unfunded lending commitments represents managements estimate of losses inherent in its unfunded loan commitments and is
recorded in other liabilities on the consolidated balance sheet. The allowance for loan losses is increased by the provision for loan losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the
allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of loans receivable are charged off to the allowance as soon as it is determined that the repayment of all, or part,
of the principal balance is highly unlikely. Because all identified losses are immediately charged off, no portion of the allowance for loan losses is restricted to any individual loan or groups of loans, and the entire allowance is available to
absorb any and all loan losses.

The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be
reasonably anticipated. Management performs a quarterly evaluation of the adequacy of the allowance. The allowance is based on the Companys past loan loss experience, known and inherent risks in the portfolio, adverse situations that may
affect the borrowers ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires
material estimates that may be susceptible to significant revision as more information becomes available.

The allowance consists of specific,
general and unallocated components. The specific component relates to loans that are classified as impaired. For loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable
market price) of the impaired loan is lower than the carrying value of that loan. The general component covers pools of loans by loan class including commercial loans not considered impaired, as well as smaller balance homogeneous loans, such as
residential real estate, home equity and other consumer loans. These pools of loans are evaluated for loss exposure based upon historical loss rates for each of these categories of loans, adjusted for qualitative factors. These qualitative risk
factors include:



| | 1. | Lending policies and procedures, including underwriting standards and collection, charge-off, and recovery practices.
| | -- | ---------------------------------------------------------------------------------------------------------------------



| | 2. | National, regional, and local economic and business conditions as well as the condition of various market segments, including the value of underlying collateral for
collateral dependent loans.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | Nature and volume of the portfolio and terms of loans.
| | -- | ------------------------------------------------------



| | 4. | Management team with experience, depth, and knowledge in banking and in many areas of lending. Each contributes to the sound credit culture and control within the Bank.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. | Volume and severity of past due, classified and nonaccrual loans as well as and other loan modifications.
| | -- | ---------------------------------------------------------------------------------------------------------



| | 6. | The Bank engages a third party to perform an independent review of the loan portfolio as a measure for quality and consistency in credit evaluation and credit
decisions.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 7. | Existence and effect of any concentrations of credit and changes in the level of such concentrations.
| | -- | -----------------------------------------------------------------------------------------------------



| | 8. | Effect of external factors, such as competition and legal and regulatory requirements.
| | -- | --------------------------------------------------------------------------------------

Each factor is assigned a value to reflect improving, stable or declining conditions based on managements best judgment using relevant information available at the time of the evaluation.
Adjustments to the factors are supported through documentation of changes in conditions in a narrative accompanying the allowance for loan loss calculation.

A majority of the Banks loans are to business owners of many types. The Bank makes commercial loans for real estate development and other business purposes required by our customers.

The Banks credit policies determine advance rates against the different forms of collateral that can be pledged against commercial loans.
Typically, the majority of loans will be limited to a percentage of their underlying collateral values such as real estate values, equipment, eligible accounts receivable and inventory. Individual loan advance rates may be higher or lower depending
upon the financial strength of the borrower and/or term of the loan. The assets financed through commercial loans are used within the business for its ongoing operation. Repayment of these kinds of loans generally comes from the cash flow of the
business or the ongoing conversions of assets. Commercial real estate loans include long-term loans financing commercial properties. Repayment of this kind of loan is dependent upon either the ongoing cash flow of the borrowing entity or the resale
of or lease of the subject property. Commercial real estate loans typically require a loan to value ratio of not greater than 80% and vary in terms.

Residential mortgages and home equity loans are secured by the borrowers residential real estate in either a first or second lien position. Residential mortgages and home equity loans have varying
loan rates depending on the financial condition of the borrower and the loan to value ratio. Residential mortgages have amortizations up to 30 years and home equity loans have maturities up to 10 years.



8



---

##### Table of Contents

Other consumer loans include installment loans, car loans, and overdraft lines of credit. The majority of
these loans are secured.

An unallocated component is maintained to cover uncertainties that could affect managements estimate of
probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled
payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled
principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a
case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrowers prior payment record and the amount of the shortfall in
relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial and industrial loans, commercial real estate loans and commercial construction loans by either the present value of expected future cash flows
discounted at the loans effective interest rate or the fair value of the collateral if the loan is collateral dependent.

An allowance
for loan losses is established for an impaired loan if its carrying value exceeds its estimated fair value. The estimated fair values of substantially all of the Companys impaired loans are measured based on the estimated fair value of the
loans collateral.

For commercial loans secured by real estate, estimated fair values are determined primarily through third-party
appraisals. When a real estate secured loan becomes impaired, a decision is made regarding whether an updated certified appraisal of the real estate is necessary. This decision is based on various considerations, including the age of the most recent
appraisal, the loan-to-value ratio based on the original appraisal and the condition of the property. Appraised values may be discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value.
The discounts also include estimated costs to sell the property.

For commercial and industrial loans secured by non-real estate collateral,
such as accounts receivable, inventory and equipment, estimated fair values are determined based on the borrowers financial statements, inventory reports, accounts receivable agings or equipment appraisals or invoices. Indications of value
from these sources are generally discounted based on the age of the financial information or the quality of the assets.

Large groups of
smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual residential mortgage loans, home equity loans and other consumer loans for impairment disclosures, unless
such loans are the subject of a troubled debt restructuring agreement.

Acquired loans are recorded at acquisition date at their acquisition
date fair values, and therefore, are excluded from the calculation of loan loss reserves as of the acquisition date. To the extent there is a decrease in the present value of cash from the acquired impaired loans after the date of acquisition, the
Company records a provision for potential losses. During the three months ended March 31, 2013, the Company did not record an allowance for loan losses for acquired impaired loans. There were no acquired loans as of March 31, 2012.

For acquired loans that are not deemed impaired at acquisition, credit discounts representing the principal losses expected over the life of
the loan are a component of the initial fair value. Subsequent to the acquisition date, the methods utilized to estimate the required allowance for loan losses for these loans is similar to originated loans, however, the Company records a provision
for loan losses only when the required allowance exceeds any remaining pooled discounts for loans evaluated collectively for impairment. During the three months ended March 31, 2013, the Company did not record a provision for loan losses on
acquired non-impaired loans. There were no acquired loans as of March 31, 2012.

The allowance calculation methodology includes further
segregation of loan classes into risk rating categories. The borrowers overall financial condition, repayment sources, guarantors and value of collateral, if appropriate, are evaluated annually for commercial loans or when credit deficiencies
arise, such as delinquent loan payments, for commercial and consumer loans. Credit quality risk ratings include regulatory classifications of special mention, substandard, doubtful and loss. Loans criticized special mention have potential weaknesses
that deserve managements close attention. If uncorrected, the potential weaknesses may result in deterioration of the repayment prospects. Loans classified substandard have a well-defined weakness or weaknesses that jeopardize the liquidation
of the debt. They include loans that are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified doubtful have all the weaknesses inherent in loans classified
substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified as a loss are considered uncollectible and are charged to the allowance for loan
losses. Loans not classified are rated pass.



9



---

##### Table of Contents

In addition, Federal regulatory agencies, as an integral part of their examination process, periodically
review the Companys allowance for loan losses and may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination, which may not be currently
available to management. Based on managements comprehensive analysis of the loan portfolio, management believes the current level of the allowance for loan losses is adequate.

Subsequent Events

The Company has evaluated subsequent events for potential recognition
and/or disclosure through the date that these financial statements were issued.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, stock-based compensation,
impairment of goodwill, impairment of restricted investments in bank stocks and the valuation of deferred tax assets and other real estate owned.

Restricted Investments in Bank Stocks

Restricted investments in bank stocks, which
represents the required investment in the common stock of correspondent banks, are carried at cost and consists of stock of the Federal Home Loan Bank of Pittsburgh (FHLB) and Atlantic Central Bankers Bank. Federal law requires a member
institution of the FHLB to hold FHLB stock according to a predetermined formula. Managements determination of whether these investments are impaired is based on their assessment of the ultimate recoverability of their cost rather than by
recognizing temporary declines in value.

Note 2Merger with Affinity Bancorp, Inc.

On February 28, 2013, First Priority and Affinity Bancorp, Inc. completed a merger, pursuant to a definitive merger agreement
dated May 23, 2012, whereby the companies agreed to merge their respective holding companies and bank subsidiaries. Under the terms of the merger agreement, shareholders of Affinity received 0.9813 newly issued shares of First Priority in
exchange for each Affinity share. A total of 1,915,942 shares of First Priority common stock were issued in connection with the merger. The combination created a full-service community bank serving the Berks, Chester, Montgomery and Bucks County
markets. The Company is headquartered in Malvern, PA.

The acquisition is being accounted for using acquisition accounting, which requires the
Company to allocate the total consideration transferred to the assets acquired and liabilities assumed, based on their respective fair values at the merger date, with any remaining excess consideration being recorded as goodwill. The fair value of
total assets acquired as a result of the merger totaled $175.9 million, which consisted of $77.9 million in loans, $33.3 million in securities available for sale, $24.4 million in cash and due from banks and $38.7 million in other assets, of which
$33.6 million was related to receivables for investment securities sold prior to the merger, pending settlement. The transaction also resulted in a core deposit intangible asset of $582 thousand and goodwill of $1.0 million. The fair value of
liabilities assumed aggregated $165.8 million, including $150.9 million of deposits and $14.4 million in long-term borrowings, of which the borrowings were subsequently paid off prior to March 31, 2013. The transaction added $10.0 million to
First Prioritys equity. The results of Affinitys operations have been included in the Companys consolidated financial statements prospectively from the date of the merger.

The fair value estimates are subject to change for up to one year after the closing date of the transaction if additional information relative to the closing date fair values becomes available. As the
Company continues to analyze the acquired assets and liabilities, there may be adjustments to the recorded carrying values.



10



---

##### Table of Contents

|                                                                                                          |  |   |           |  |  |   |         | 
|--------------------------------------------------------------------------------------------------------- |  | - | --------- |  |  | - | ------- | 
|(In thousands, except share and per share data)                                                           |  |   |           |  |  |  
|Purchase Price Consideration in Common Stock                                                              |  |   |           |  |  |   |         | 
|Affinity common shares settled for stock                                                                  |  |   | 1,952,644 |  |  |   |         | 
|Exchange ratio                                                                                            |  |   | 0.9813    |  |  |   |         | 
|First Priority shares issued                                                                              |  |   | 1,915,942 |  |  |   |         | 
|Value assigned to First Prioritys common shares                                                          |  | $ | 5.22      |  |  |   |         | 
|Purchase Price assigned to Affinity common shares exchanged for First Priority StockTotal Purchase Price |  |   |           |  |  | $ | 10,001  | 
|Purchase Price ConsiderationAffinity Options Rolled over to First Priority Options                       |  |   |           |  |  |   | 44      | 
|                                                                                                          |  |   |           |  |  |   |         | 
|Total Purchase Price                                                                                      |  |   |           |  |  |   | 10,045  | 
|Identifiable assets:                                                                                      |  |   |           |  |  |   |         | 
|Cash and due from banks                                                                                   |  | $ | 24,419    |  |  |   |         | 
|Securities available for sale                                                                             |  |   | 33,253    |  |  |   |         | 
|Loans and leases                                                                                          |  |   | 77,884    |  |  |   |         | 
|Intangible assets                                                                                         |  |   | 582       |  |  |   |         | 
|Other assets                                                                                              |  |   | 38,738    |  |  |   |         | 
|                                                                                                          |  |   |           |  |  |   |         | 
|Total identifiable assets                                                                                 |  |   |           |  |  |   | 174,876 | 
|Liabilities:                                                                                              |  |   |           |  |  |   |         | 
|Deposits                                                                                                  |  | $ | 150,904   |  |  |   |         | 
|Long-term borrowings                                                                                      |  |   | 14,358    |  |  |   |         | 
|Other liabilities                                                                                         |  |   | 575       |  |  |   |         | 
|                                                                                                          |  |   |           |  |  |   |         | 
|Total liabilities                                                                                         |  |   |           |  |  |   | 165,837 | 
|                                                                                                          |  |   |           |  |  |   |         | 
|Net goodwill resulting from merger                                                                        |  |   |           |  |  | $ | 1,006   | 
|                                                                                                          |  |   |           |  |  |   |         | 

The acquired assets and assumed liabilities were measured at estimated fair values. In many cases, determining the fair
value of the acquired assets and assumed liabilities required First Priority to estimate cash flows expected to result from those assets and liabilities and to discount those cash flows at appropriate rates of interest, which required the
utilization of significant estimates and judgment in accounting for the acquisition.

The estimated fair values of cash and due from banks,
other assets and other liabilities approximate their stated value.

The estimated fair values of the investment securities available for sale
were calculated primarily using level 2 inputs. The prices for these instruments are obtained through an independent pricing service and are derived from market quotations and matrix pricing. The fair value measurements consider observable data that
may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bonds terms and conditions, among other things.
Management reviewed the data and assumptions used in pricing the securities to ensure the highest level of significant inputs are derived from market observable data.

Real estate acquired through foreclosure was primarily valued based on estimated or appraised collateral values.

The most significant fair value determination related to the valuation of acquired loans. Management measured loan fair values based on loan file reviews (including borrower financial statements or tax
returns), appraised collateral values, expected cash flows and historical loss factors. The business combination resulted in the acquisition of loans with and without evidence of credit quality deterioration.

Affinitys loans without evidence of credit deterioration were fair valued by discounting both expected principal and interest cash flows using an
observable discount rate for similar instruments that a market participant would consider in determining fair value. Additionally, consideration was given to managements best estimates of default rates and payment speeds. At acquisition,
Affinitys loan portfolio without evidence of deterioration was recorded at a current fair value of $75.3 million. The Company utilized an interest rate loan fair value analysis, which resulted in a positive fair value adjustment of $1.6
million related to this portion of the acquired loans and a general credit fair value analysis which resulted in an offsetting $1.6 million reduction in the fair value.



11



---

##### Table of Contents

To prepare the interest rate loan fair value analysis loans were assembled into groupings by characteristics
such as loan type, term, collateral and rate. Market rates for similar loans were obtained from various external data sources and reviewed by Company management for reasonableness. The average of these rates was used as the fair value interest rate
a market participant would utilize. A present value approach was utilized to calculate the interest rate fair value adjustment. The general credit risk fair value adjustment was calculated using a two part general credit fair value analysis;
(1) expected lifetime losses, using an average of historical losses of the Company, Affinity and peer banks; and, (2) an estimated fair value adjustment for qualitative factors related to general economic conditions and the risk related to
lack of familiarity with the originators underwriting process.

Affinitys loans were deemed impaired at the acquisition date if
the Company did not expect to receive all contractually required cash flows due to concerns about credit quality. Such loans were fair valued and the difference between contractually required payments at the acquisition date and cash flows expected
to be collected was recorded as a nonaccretable difference. At the acquisition date, the Company recorded $2.5 million of purchased credit-impaired loans subject to a nonaccretable discount difference of $1.1 million. The method of measuring
carrying value of purchased loans differs from loans originated by the Company (originated loans), and as such, the Company identifies purchased loans and purchased loans with a credit quality discount and originated loans at amortized
cost. The aggregate expected cash flows less the acquisition date fair value will result in an accretable yield amount of $258 thousand, which will be recognized over the life of the loans on a level yield basis as an adjustment to yield.

The following is a summary of the acquired impaired loans at March 31, 2013 resulting from the merger with Affinity (dollars in
thousands):



|                                                              |  |                       |       | 
|------------------------------------------------------------- |  | --------------------- | ----- | 
|                                                              |  | AcquiredImpairedLoans |      
|Contractually required principal and interest at acquisition  |  | $                     | 4,999 | 
|Contractual cash flows not expected to be collected           |  |                       | 2,141 | 
|                                                              |  |                       |       | 
|Expected cash flows at acquisition                            |  |                       | 2,858 | 
|Interest component of expected cash flows                     |  |                       | 318   | 
|                                                              |  |                       |       | 
|Basis in acquired loans at acquisition  estimated fair value |  | $                     | 2,540 | 
|                                                              |  |                       |       | 

The fair value of demand deposits, money market and savings deposits acquired through the merger with Affinity was
assumed to be approximately the carrying value as these accounts have no stated maturity and are payable on demand. Certificate of deposit accounts were valued as the present value of the certificates expected contractual payments discounted at
market rates for similar certificates.

Core deposit intangibles (CDI) represent the value assigned to demand, interest checking, money market
and savings accounts acquired as part of an acquisition. The CDI value represents the future economic benefit of the potential cost savings from acquiring Core Deposits as part of an acquisition compared to the cost of alternative funding sources
and the alternative cost to grow a similar core deposit base. The core deposit intangible of $582 thousand is being amortized over an estimated useful life of approximately 10 years.

Management used specific market quotations from the FHLB to fair value long-term FHLB advances. These borrowings were subsequently paid off by the Company prior to March 31, 2013 at the recorded fair
values.

In addition, the Company has determined, based on the analysis of available positive and negative evidence, that a valuation
allowance should be recorded against deferred taxes of the Company. Therefore, the incremental net deferred tax assets resulting from the merger with Affinity, totaling $1.6 million, were fully reserved by a valuation allowance. Affinity had a
Federal net operating loss carryforward (NOL) for tax purposes of $1.5 million, or a $500 thousand tax impact at the statutory federal income tax rate of 34%, which is subject to certain limitations and expires in 2028 if not fully
utilized. The $500 thousand deferred tax asset related to the NOL is included in the $1.6 million net deferred tax asset discussed above.



12



---

##### Table of Contents

In connection with the merger with Affinity, First Priority incurred merger related costs in regards to
completion of the merger, including costs of integrating merged operations with and into First Priority. These expenses consist of professional services, conversion of systems and/or integration of operations, and termination of duplicate existing
contractual arrangements. A summary of merger related costs included in the consolidated statement of income follows (dollars in thousands):

For the three months ended March 31, 2013:



|                             |  |   |     | 
|---------------------------- |  | - | --- | 
|Legal                        |  | $ | 5   | 
|Accounting                   |  |   | 17  | 
|Investment banking           |  |   | 350 | 
|Contract termination         |  |   | 314 | 
|Document printing and filing |  |   | 111 | 
|                             |  |   |     | 
|Total                        |  | $ | 797 | 
|                             |  |   |     | 

Pro Forma Condensed Combined Financial Information

If the merger between First Priority and Affinity had been completed on January 1, 2012, total revenue, consisting of net interest income plus non-interest income, would have been $4.90 million and
$4.22 million for the three months ended March 31, 2013 and 2012, respectively, and net income on a pro forma basis would have been $949 thousand for the three months ended March 31, 2013 while a net loss of $662 thousand would have been
recorded for the three months ended March 31, 2012. Supplemental pro forma earnings for 2013 were adjusted to exclude $1.04 million of merger related costs incurred in the first three months of 2013; the results for the first three months of
2012 were adjusted to include these charges.

The pro forma financial information does not include the impact of possible business model
changes, nor does it consider any potential impacts of current market conditions or revenues, expense efficiencies, or other factors.

The
amount of total revenue (net interest income plus non-interest income) and net income specifically related to Affinity for the period beginning March 1, 2013, included in the consolidated statements of income of First Priority, is $443 thousand
and $77 thousand, respectively, for the three months ended March 31, 2013.

Note 3Recently Issued Accounting Standards

In February 2013, the Financial Accounting Standards Board, or FASB issued Accounting Standards Update (ASU) 2013-02, Reporting
of Amounts Reclassified Out of Accumulated Other Comprehensive Income. ASU 2013-02 requires reporting the effect of significant reclassifications out of accumulated other comprehensive income by component on the respective line items in the
income statement parenthetically or in the notes to the financial statements if the amounts being reclassified are required under U.S. GAAP to be reclassified in their entirety to net income. This ASU is effective for public companies prospectively
for fiscal years, and interim periods within those years, beginning after December 15, 2012 and early adoption is permitted. The adoptions of ASU 2013-02 did not have an impact on our results of operations or financial position.

In January 2013, the FASB issued ASU 2013-01, Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities in order to clarify
the scope of ASU 2011-11, Disclosures About Offsetting Assets and Liabilities, issued in December 2011. ASU 2011-11 required entities to disclose both gross and net information about instruments and transactions eligible for offset in
the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. This ASU was issued to allow investors to better compare financial statements prepared under U.S. GAAP with
financial statements prepared under International Financial Reporting Standards, or IFRS. ASU 2013-01 clarified that ASU 2011-11 applies to derivatives, sale and repurchase agreements and reverse sale of repurchase agreements, and securities
borrowing and securities lending arrangements, but does not apply to standard commercial contracts allowing either party to net in the event of default or to broker-dealer unsettled regular-way trades. Both ASUs are effective for public companies
retrospectively for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. The adoption of ASU 2013-02 and ASU 2011-11 did not have an impact on our results of operations or financial position.

In February 2013, the FASB issued ASU 2013-04 Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the
Obligation is Fixed at the Reporting Date. The ASU requires the measurement of obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date as the sum of the
amount the reporting entity agreed to pay on the basis of its arrangement with its co-obligors as well as any additional amount that the entity expects to pay on behalf of its co-obligors. The new standard is effective retrospectively for fiscal
years and interim periods within those years, beginning after December 15, 2013, and early adoption is permitted. We are currently evaluating the implications of ASU 2013-04.



13



---

##### Table of Contents

Note 4Earnings (Loss) Per Common Share

All weighted average shares, actual shares and per share information in the consolidated financial statements have been adjusted
retroactively for the effect of stock dividends and splits, if applicable, in the calculation of basic and diluted earnings (loss) per common share.

Diluted earnings per common share take into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock. Proceeds
assumed to have been received on such exercise or conversion, are assumed to be used to purchase shares of the Companys common stock at the average market price during the period, as required by the treasury stock method of
accounting. For purposes of calculating the basic and diluted loss per share, the Companys reported net income (loss) is adjusted for dividends on preferred stock and net accretion/amortization related to the issuance of preferred stock to
determine the net income (loss) to common shareholders.

The calculations of basic and diluted earnings (loss) per common share are presented
below for the three months ended March 31, 2013 and 2012:



|                                                                                    |  |                                              |       |   |      |   |       |  
|----------------------------------------------------------------------------------- |  | -------------------------------------------- | ----- | - | ---- | - | ----- | -
|                                                                                    |  | For the three months ended March 31,         |      
|                                                                                    |  | 2013                                         |       |   | 2012 |  
|                                                                                    |  | (In thousands, except per share information) |      
|Net income (loss)                                                                   |  | $                                            | (648  | ) |      | $ | 262   |  
|Less: preferred stock dividends                                                     |  |                                              | (120  | ) |      |   | (120  | )
|Less: net discount accretion on preferred stock                                     |  |                                              | (13   | ) |      |   | (13   | )
|                                                                                    |  |                                              |       |   |      |   |       |  
|Income (loss) to common shareholders                                                |  | $                                            | (781  | ) |      | $ | 129   |  
|                                                                                    |  |                                              |       |   |      |   |       |  
|Average basic common shares outstanding                                             |  |                                              | 4,241 |   |      |   | 3,144 |  
|Effect of dilutive stock options                                                    |  |                                              |      |   |      |   | 4     |  
|                                                                                    |  |                                              |       |   |      |   |       |  
|Average number of common shares used to calculate diluted earnings per common share |  |                                              | 4,241 |   |      |   | 3,148 |  
|                                                                                    |  |                                              |       |   |      |   |       |  
|Basic earnings (loss) per common share                                              |  | $                                            | (0.18 | ) |      | $ | 0.04  |  
|Diluted earnings (loss) per common share                                            |  | $                                            | (0.18 | ) |      | $ | 0.04  |  

The amount of preferred stock dividends and the net accretion or amortization related to each series of preferred stock
is presented below for the three months ended March 31, 2013 and 2012:



|                                                      |  |                                     |     |   |      |   |     |  
|----------------------------------------------------- |  | ----------------------------------- | --- | - | ---- | - | --- | -
|                                                      |  | For the three monthsended March 31, |    
|                                                      |  | 2013                                |     |   | 2012 |  
|                                                      |  | (Dollars in thousands)              |    
|Preferred dividends:                                  |  |                                     |     |   |      |   |     |  
|Preferred Series A                                    |  | $                                   | 57  |   |      | $ | 57  |  
|Preferred Series B                                    |  |                                     | 5   |   |      |   | 5   |  
|Preferred Series C                                    |  |                                     | 58  |   |      |   | 58  |  
|                                                      |  |                                     |     |   |      |   |     |  
|Total preferred dividends                             |  | $                                   | 120 |   |      | $ | 120 |  
|                                                      |  |                                     |     |   |      |   |     |  
|Net accretion (amortization) on preferred stock:      |  |                                     |     |   |      |   |     |  
|Preferred Series A                                    |  | $                                   | (15 | ) |      | $ | (15 | )
|Preferred Series B                                    |  |                                     | 2   |   |      |   | 2   |  
|Preferred Series C                                    |  |                                     |    |   |      |   |    |  
|                                                      |  |                                     |     |   |      |   |     |  
|Total net accretion (amortization) on preferred stock |  | $                                   | (13 | ) |      | $ | (13 | )
|                                                      |  |                                     |     |   |      |   |     |  



14



---

##### Table of Contents

Note 5Securities Available for Sale

The amortized cost, unrealized gains and losses, and the estimated fair value of the Companys investment securities available for
sale are as follows:



|                                                         |  |                        |        |  |                      |   |     |                       |  |   |                     |   |  |   |        | 
|-------------------------------------------------------- |  | ---------------------- | ------ |  | -------------------- | - | --- | --------------------- |  | - | ------------------- | - |  | - | ------ | 
|                                                         |  | March 31, 2013         |       
|                                                         |  | AmortizedCost          |        |  | GrossUnrealizedGains |   |     | GrossUnrealizedLosses |  |   | EstimatedFair Value |  
|                                                         |  | (Dollars in thousands) |       
|Obligations of U.S. government agencies and corporations |  | $                      | 21,966 |  |                      | $ | 41  |                       |  | $ | (6                  | ) |  | $ | 22,001 | 
|Obligations of states and political subdivisions         |  |                        | 19,635 |  |                      |   | 651 |                       |  |   | (65                 | ) |  |   | 20,221 | 
|Federal agency mortgage-backed securities                |  |                        | 10,484 |  |                      |   | 118 |                       |  |   | (1                  | ) |  |   | 10,601 | 
|Federal agency collateralized mortgage obligations       |  |                        | 1,210  |  |                      |   | 1   |                       |  |   | (1                  | ) |  |   | 1,210  | 
|Other debt securities                                    |  |                        | 2,264  |  |                      |   | 10  |                       |  |   | (1                  | ) |  |   | 2,273  | 
|Money market mutual fund                                 |  |                        | 31     |  |                      |   |    |                       |  |   |                    |   |  |   | 31     | 
|                                                         |  |                        |        |  |                      |   |     |                       |  |   |                     |   |  |   |        | 
|Total investment securities available for sale           |  | $                      | 55,590 |  |                      | $ | 821 |                       |  | $ | (74                 | ) |  | $ | 56,337 | 
|                                                         |  |                        |        |  |                      |   |     |                       |  |   |                     |   |  |   |        | 
|                                                         | 
|                                                         |  | December 31, 2012      |       
|                                                         |  | AmortizedCost          |        |  | GrossUnrealizedGains |   |     | GrossUnrealizedLosses |  |   | EstimatedFair Value |  
|                                                         |  | (Dollars in thousands) |       
|Obligations of U.S. government agencies and corporations |  | $                      | 1,000  |  |                      | $ | 1   |                       |  | $ |                    |   |  | $ | 1,001  | 
|Obligations of states and political subdivisions         |  |                        | 11,304 |  |                      |   | 585 |                       |  |   | (32                 | ) |  |   | 11,857 | 
|Agency mortgage-backed securities                        |  |                        | 3,552  |  |                      |   | 129 |                       |  |   |                    |   |  |   | 3,681  | 
|Money market mutual fund                                 |  |                        | 140    |  |                      |   |    |                       |  |   |                    |   |  |   | 140    | 
|                                                         |  |                        |        |  |                      |   |     |                       |  |   |                     |   |  |   |        | 
|Total investment securities available for sale           |  | $                      | 15,996 |  |                      | $ | 715 |                       |  | $ | (32                 | ) |  | $ | 16,679 | 
|                                                         |  |                        |        |  |                      |   |     |                       |  |   |                     |   |  |   |        | 

There were no individual securities in a continuous unrealized loss position for twelve months or longer as of
March 31, 2013 and December 31, 2012.

Securities with an estimated fair value of $27.9 million were pledged at March 31,
2013 to secure public fund deposits acquired through the merger with Affinity. There were no securities pledged for public fund deposits by the Bank as of December 31, 2012. In addition, there were no securities pledged to secure borrowings by
the Bank as of March 31, 2013; however, securities with a fair value of $4.7 million were pledged to secure borrowings at December 31, 2012.

The amortized cost and fair value of securities as of March 31, 2013 by contractual maturity are shown below. Certain of these investment securities have call features which allow the issuer to call
the security prior to its maturity date at the issuers discretion.



|                                       |  |                               |        |  |            |   |        | 
|-------------------------------------- |  | ----------------------------- | ------ |  | ---------- | - | ------ | 
|                                       |  | March 31, 2013                |       
|                                       |  | Available for Sale Securities |       
|                                       |  | Amortized Cost                |        |  | Fair Value |  
|                                       |  | (Dollars in thousands)        |       
|Due within one year                    |  | $                             | 252    |  |            | $ | 252    | 
|Due after one year through five years  |  |                               | 7,539  |  |            |   | 7,543  | 
|Due after five years through ten years |  |                               | 21,232 |  |            |   | 21,364 | 
|Due after ten years                    |  |                               | 26,536 |  |            |   | 27,147 | 
|                                       |  |                               |        |  |            |   |        | 
|                                       |  |                               | 55,559 |  |            |   | 56,306 | 
|Money market mutual fund               |  |                               | 31     |  |            |   | 31     | 
|                                       |  |                               |        |  |            |   |        | 
|Total                                  |  | $                             | 55,590 |  |            | $ | 56,337 | 
|                                       |  |                               |        |  |            |   |        | 



15



---

##### Table of Contents

Note 6Loans Receivable and Related Allowance for Loan Losses

Loans receivable consist of the following at March 31, 2013 and December 31, 2012. For presentation, originated loans exclude
loans acquired through the merger with Affinity consummated on February 28, 2013, and acquired loans include loans acquired through the merger with Affinity as of this same date.



|                            |  |                        |         |   |                  |   |         |  
|--------------------------- |  | ---------------------- | ------- | - | ---------------- | - | ------- | -
|                            |  | March 31,2013          |         |   | December 31,2012 |  
|                            |  | (Dollars in thousands) |        
|Commercial:                 |  |                        |         |   |                  |   |         |  
|Commercial and industrial   |  | $                      | 88,586  |   |                  | $ | 62,366  |  
|Commercial mortgage         |  |                        | 123,127 |   |                  |   | 93,775  |  
|Commercial construction     |  |                        | 4,987   |   |                  |   | 4,112   |  
|                            |  |                        |         |   |                  |   |         |  
|Total commercial            |  |                        | 216,700 |   |                  |   | 160,253 |  
|                            |  |                        |         |   |                  |   |         |  
|Residential mortgage loans  |  |                        | 55,834  |   |                  |   | 49,354  |  
|Consumer:                   |  |                        |         |   |                  |   |         |  
|Home equity lines of credit |  |                        | 33,621  |   |                  |   | 20,654  |  
|Other consumer loans        |  |                        | 25,529  |   |                  |   | 14,298  |  
|                            |  |                        |         |   |                  |   |         |  
|Total consumer              |  |                        | 59,150  |   |                  |   | 34,952  |  
|                            |  |                        |         |   |                  |   |         |  
|Total loans                 |  |                        | 331,684 |   |                  |   | 244,559 |  
|Allowance for loan losses   |  |                        | (2,565  | ) |                  |   | (2,460  | )
|Net deferred loan fees      |  |                        | (291    | ) |                  |   | (284    | )
|                            |  |                        |         |   |                  |   |         |  
|Total loans receivable, net |  | $                      | 328,828 |   |                  | $ | 241,815 |  
|                            |  |                        |         |   |                  |   |         |  
|Originated loans            |  | $                      | 254,509 |   |                  | $ | 244,559 |  
|Acquired loans              |  |                        | 77,175  |   |                  |   |        |  
|                            |  |                        |         |   |                  |   |         |  
|Total loans                 |  | $                      | 331,684 |   |                  | $ | 244,559 |  
|                            |  |                        |         |   |                  |   |         |  

The Banks loans consist of credits to borrowers spread over a broad range of industrial classifications. The
largest concentrations of loans are to lessors of nonresidential buildings and lessors of residential buildings and dwellings. As of March 31, 2013, these loans totaled $56.9 million and $33.7 million, respectively, or 17.2% and 10.2%,
respectively, of the total loans outstanding. As of December 31, 2012, these same classifications of loans totaled $48.1 million and $27.6 million, respectively, or 19.7% and 11.3%, respectively, of the total loans outstanding at that time.
These credits were subject to normal underwriting standards and did not present more than the normal amount of risk assumed by the Banks other lending activities. Management believes this concentration does not pose abnormal risk when compared
to the risk it assumes in other types of lending. The Bank has no other concentration of loans which exceeds 10% of total loans.

The
following tables summarize the activity in the allowance for loan losses by loan class for the three months ended March 31, 2013 and 2012:



|                            |  |                                                                   |       |  |             |   |     |            |  |   |                         |  |  |               |     |   |  |   |       | 
|--------------------------- |  | ----------------------------------------------------------------- | ----- |  | ----------- | - | --- | ---------- |  | - | ----------------------- |  |  | ------------- | --- | - |  | - | ----- | 
|                            |  | For the three months endedMarch 31, 2013Allowance for Loan Losses |      
|                            |  | (Dollars in thousands)                                            |      
|                            |  | BeginningBalance                                                  |       |  | Charge-offs |   |     | Recoveries |  |   | Provisionfor loanlosses |  |  | EndingBalance |    
|Commercial and industrial   |  | $                                                                 | 566   |  |             | $ | (54 | )          |  | $ |                        |  |  | $             | 248 |   |  | $ | 760   | 
|Commercial mortgage         |  |                                                                   | 559   |  |             |   |    |            |  |   |                        |  |  |               | 28  |   |  |   | 587   | 
|Commercial construction     |  |                                                                   | 31    |  |             |   |    |            |  |   |                        |  |  |               | (5  | ) |  |   | 26    | 
|Residential mortgage loans  |  |                                                                   | 176   |  |             |   | (8  | )          |  |   | 1                       |  |  |               | (37 | ) |  |   | 132   | 
|Home equity lines of credit |  |                                                                   | 89    |  |             |   |    |            |  |   |                        |  |  |               | (2  | ) |  |   | 87    | 
|Other consumer loans        |  |                                                                   | 41    |  |             |   |    |            |  |   | 1                       |  |  |               | 1   |   |  |   | 43    | 
|Unallocated                 |  |                                                                   | 998   |  |             |   |    |            |  |   |                        |  |  |               | (68 | ) |  |   | 930   | 
|                            |  |                                                                   |       |  |             |   |     |            |  |   |                         |  |  |               |     |   |  |   |       | 
|Total loans                 |  | $                                                                 | 2,460 |  |             | $ | (62 | )          |  | $ | 2                       |  |  | $             | 165 |   |  | $ | 2,565 | 
|                            |  |                                                                   |       |  |             |   |     |            |  |   |                         |  |  |               |     |   |  |   |       | 



16



---

##### Table of Contents

|                            |  |                                                                   |       |  |             |   |      |            |  |   |                         |  |  |               |     |   |  |   |       | 
|--------------------------- |  | ----------------------------------------------------------------- | ----- |  | ----------- | - | ---- | ---------- |  | - | ----------------------- |  |  | ------------- | --- | - |  | - | ----- | 
|                            |  | For the three months endedMarch 31, 2012Allowance for Loan Losses |      
|                            |  | (Dollars in thousands)                                            |      
|                            |  | BeginningBalance                                                  |       |  | Charge-offs |   |      | Recoveries |  |   | Provisionfor loanlosses |  |  | EndingBalance |    
|Commercial and industrial   |  | $                                                                 | 1,404 |  |             | $ |     |            |  | $ | 1                       |  |  | $             | (13 | ) |  | $ | 1,392 | 
|Commercial mortgage         |  |                                                                   | 198   |  |             |   |     |            |  |   |                        |  |  |               | 12  |   |  |   | 210   | 
|Commercial construction     |  |                                                                   | 10    |  |             |   |     |            |  |   |                        |  |  |               | (1  | ) |  |   | 9     | 
|Residential mortgage loans  |  |                                                                   | 190   |  |             |   |     |            |  |   |                        |  |  |               | (12 | ) |  |   | 178   | 
|Home equity lines of credit |  |                                                                   | 94    |  |             |   | (190 | )          |  |   |                        |  |  |               | 146 |   |  |   | 50    | 
|Other consumer loans        |  |                                                                   | 34    |  |             |   |     |            |  |   |                        |  |  |               | (1  | ) |  |   | 33    | 
|Unallocated                 |  |                                                                   | 540   |  |             |   |     |            |  |   |                        |  |  |               | 44  |   |  |   | 584   | 
|                            |  |                                                                   |       |  |             |   |      |            |  |   |                         |  |  |               |     |   |  |   |       | 
|Total loans                 |  | $                                                                 | 2,470 |  |             | $ | (190 | )          |  | $ | 1                       |  |  | $             | 175 |   |  | $ | 2,456 | 
|                            |  |                                                                   |       |  |             |   |      |            |  |   |                         |  |  |               |     |   |  |   |       | 

The following tables present the balance in the allowance for loan losses at March 31, 2013 and December 31,
2012 disaggregated on the basis of the Companys impairment method by class of loans receivable along with the balance of loans receivable by class disaggregated on the basis of the Companys impairment methodology:



|                            |  |                           |       |  |                                                  |   |     |                                                  |  |   |               |  |  |                                                  |         |  |                                                  |   |        |  |  |   |         | 
|--------------------------- |  | ------------------------- | ----- |  | ------------------------------------------------ | - | --- | ------------------------------------------------ |  | - | ------------- |  |  | ------------------------------------------------ | ------- |  | ------------------------------------------------ | - | ------ |  |  | - | ------- | 
|                            |  | March 31, 2013            |      
|                            |  | Allowance for Loan Losses |       |  | Loans Receivables                                |  
|                            |  | (Dollars in thousands)    |      
|                            |  | EndingBalance             |       |  | EndingBalance:IndividuallyEvaluatedforImpairment |   |     | EndingBalance:CollectivelyEvaluatedforImpairment |  |   | EndingBalance |  |  | EndingBalance:IndividuallyEvaluatedforImpairment |         |  | EndingBalance:CollectivelyEvaluatedforImpairment |  
|Commercial and industrial   |  | $                         | 760   |  |                                                  | $ | 484 |                                                  |  | $ | 276           |  |  | $                                                | 88,586  |  |                                                  | $ | 3,538  |  |  | $ | 85,048  | 
|Commercial mortgage         |  |                           | 587   |  |                                                  |   | 249 |                                                  |  |   | 338           |  |  |                                                  | 123,127 |  |                                                  |   | 3,245  |  |  |   | 119,882 | 
|Commercial construction     |  |                           | 26    |  |                                                  |   | 19  |                                                  |  |   | 7             |  |  |                                                  | 4,987   |  |                                                  |   | 1,045  |  |  |   | 3,942   | 
|Residential mortgage loans  |  |                           | 132   |  |                                                  |   |    |                                                  |  |   | 132           |  |  |                                                  | 55,834  |  |                                                  |   | 1,115  |  |  |   | 54,719  | 
|Home equity lines of credit |  |                           | 87    |  |                                                  |   |    |                                                  |  |   | 87            |  |  |                                                  | 33,621  |  |                                                  |   | 1,160  |  |  |   | 32,461  | 
|Other consumer loans        |  |                           | 43    |  |                                                  |   |    |                                                  |  |   | 43            |  |  |                                                  | 25,529  |  |                                                  |   |       |  |  |   | 25,529  | 
|Unallocated                 |  |                           | 930   |  |                                                  |   |    |                                                  |  |   | 930           |  |  |                                                  |        |  |                                                  |   |       |  |  |   |        | 
|                            |  |                           |       |  |                                                  |   |     |                                                  |  |   |               |  |  |                                                  |         |  |                                                  |   |        |  |  |   |         | 
|Total loans                 |  | $                         | 2,565 |  |                                                  | $ | 752 |                                                  |  | $ | 1,813         |  |  | $                                                | 331,684 |  |                                                  | $ | 10,103 |  |  | $ | 321,581 | 
|                            |  |                           |       |  |                                                  |   |     |                                                  |  |   |               |  |  |                                                  |         |  |                                                  |   |        |  |  |   |         | 
|Commercial and industrial   |  | $                         | 760   |  |                                                  | $ | 484 |                                                  |  | $ | 276           |  |  | $                                                | 65,083  |  |                                                  | $ | 2,728  |  |  | $ | 62,355  | 
|Commercial mortgage         |  |                           | 587   |  |                                                  |   | 249 |                                                  |  |   | 338           |  |  |                                                  | 105,021 |  |                                                  |   | 2,690  |  |  |   | 102,331 | 
|Commercial construction     |  |                           | 26    |  |                                                  |   | 19  |                                                  |  |   | 7             |  |  |                                                  | 2,822   |  |                                                  |   | 576    |  |  |   | 2,246   | 
|Residential mortgage loans  |  |                           | 132   |  |                                                  |   |    |                                                  |  |   | 132           |  |  |                                                  | 46,898  |  |                                                  |   | 905    |  |  |   | 45,993  | 
|Home equity lines of credit |  |                           | 87    |  |                                                  |   |    |                                                  |  |   | 87            |  |  |                                                  | 9,416   |  |                                                  |   | 406    |  |  |   | 9,010   | 
|Other consumer loans        |  |                           | 43    |  |                                                  |   |    |                                                  |  |   | 43            |  |  |                                                  | 25,269  |  |                                                  |   |       |  |  |   | 25,269  | 
|Unallocated                 |  |                           | 930   |  |                                                  |   |    |                                                  |  |   | 930           |  |  |                                                  |        |  |                                                  |   |       |  |  |   |        | 
|                            |  |                           |       |  |                                                  |   |     |                                                  |  |   |               |  |  |                                                  |         |  |                                                  |   |        |  |  |   |         | 
|Total originated loans      |  | $                         | 2,565 |  |                                                  | $ | 752 |                                                  |  | $ | 1,813         |  |  | $                                                | 254,509 |  |                                                  | $ | 7,305  |  |  | $ | 247,204 | 
|                            |  |                           |       |  |                                                  |   |     |                                                  |  |   |               |  |  |                                                  |         |  |                                                  |   |        |  |  |   |         | 
|Commercial and industrial   |  | $                         |      |  |                                                  | $ |    |                                                  |  | $ |              |  |  | $                                                | 23,503  |  |                                                  | $ | 810    |  |  | $ | 22,693  | 
|Commercial mortgage         |  |                           |      |  |                                                  |   |    |                                                  |  |   |              |  |  |                                                  | 18,106  |  |                                                  |   | 555    |  |  |   | 17,551  | 
|Commercial construction     |  |                           |      |  |                                                  |   |    |                                                  |  |   |              |  |  |                                                  | 2,165   |  |                                                  |   | 469    |  |  |   | 1,696   | 
|Residential mortgage loans  |  |                           |      |  |                                                  |   |    |                                                  |  |   |              |  |  |                                                  | 8,936   |  |                                                  |   | 210    |  |  |   | 8,726   | 
|Home equity lines of credit |  |                           |      |  |                                                  |   |    |                                                  |  |   |              |  |  |                                                  | 24,205  |  |                                                  |   | 754    |  |  |   | 23,451  | 
|Other consumer loans        |  |                           |      |  |                                                  |   |    |                                                  |  |   |              |  |  |                                                  | 260     |  |                                                  |   |       |  |  |   | 260     | 
|Unallocated                 |  |                           |      |  |                                                  |   |    |                                                  |  |   |              |  |  |                                                  |        |  |                                                  |   |       |  |  |   |        | 
|                            |  |                           |       |  |                                                  |   |     |                                                  |  |   |               |  |  |                                                  |         |  |                                                  |   |        |  |  |   |         | 
|Total acquired loans        |  | $                         |      |  |                                                  | $ |    |                                                  |  | $ |              |  |  | $                                                | 77,175  |  |                                                  | $ | 2,798  |  |  | $ | 74,377  | 
|                            |  |                           |       |  |                                                  |   |     |                                                  |  |   |               |  |  |                                                  |         |  |                                                  |   |        |  |  |   |         | 



17



---

##### Table of Contents

|                            |  |                           |       |  |                                                  |   |     |                                                  |  |   |               |  |  |                                                  |         |  |                                                  |   |        |  |  |   |         | 
|--------------------------- |  | ------------------------- | ----- |  | ------------------------------------------------ | - | --- | ------------------------------------------------ |  | - | ------------- |  |  | ------------------------------------------------ | ------- |  | ------------------------------------------------ | - | ------ |  |  | - | ------- | 
|                            |  | December 31, 2012         |      
|                            |  | Allowance for Loan Losses |       |  | Loans Receivables                                |  
|                            |  | (Dollars in thousands)    |      
|                            |  | EndingBalance             |       |  | EndingBalance:IndividuallyEvaluatedforImpairment |   |     | EndingBalance:CollectivelyEvaluatedforImpairment |  |   | EndingBalance |  |  | EndingBalance:IndividuallyEvaluatedforImpairment |         |  | EndingBalance:CollectivelyEvaluatedforImpairment |  
|Commercial and industrial   |  | $                         | 566   |  |                                                  | $ | 315 |                                                  |  | $ | 251           |  |  | $                                                | 62,366  |  |                                                  | $ | 6,372  |  |  | $ | 55,994  | 
|Commercial mortgage         |  |                           | 559   |  |                                                  |   | 244 |                                                  |  |   | 315           |  |  |                                                  | 93,775  |  |                                                  |   | 2,293  |  |  |   | 91,482  | 
|Commercial construction     |  |                           | 31    |  |                                                  |   | 20  |                                                  |  |   | 11            |  |  |                                                  | 4,112   |  |                                                  |   | 577    |  |  |   | 3,535   | 
|Residential mortgage loans  |  |                           | 176   |  |                                                  |   | 37  |                                                  |  |   | 139           |  |  |                                                  | 49,354  |  |                                                  |   | 1,040  |  |  |   | 48,314  | 
|Home equity lines of credit |  |                           | 89    |  |                                                  |   |    |                                                  |  |   | 89            |  |  |                                                  | 20,654  |  |                                                  |   | 406    |  |  |   | 20,248  | 
|Other consumer loans        |  |                           | 41    |  |                                                  |   |    |                                                  |  |   | 41            |  |  |                                                  | 14,298  |  |                                                  |   |       |  |  |   | 14,298  | 
|Unallocated                 |  |                           | 998   |  |                                                  |   |    |                                                  |  |   | 998           |  |  |                                                  |        |  |                                                  |   |       |  |  |   |        | 
|                            |  |                           |       |  |                                                  |   |     |                                                  |  |   |               |  |  |                                                  |         |  |                                                  |   |        |  |  |   |         | 
|Total loans                 |  | $                         | 2,460 |  |                                                  | $ | 616 |                                                  |  | $ | 1,844         |  |  | $                                                | 244,559 |  |                                                  | $ | 10,688 |  |  | $ | 233,871 | 
|                            |  |                           |       |  |                                                  |   |     |                                                  |  |   |               |  |  |                                                  |         |  |                                                  |   |        |  |  |   |         | 

The Bank had no loans acquired with deteriorated credit quality as of December 31, 2012.

The following tables summarize information in regard to impaired loans by loan portfolio class as of March 31, 2013 and December 31, 2012 as
well as for the periods then ended, respectively:



|                                    |  |                        |        |  |                        |   |        |                  |  |   |                           |  |  |                          |       |  |  |   |    | 
|----------------------------------- |  | ---------------------- | ------ |  | ---------------------- | - | ------ | ---------------- |  | - | ------------------------- |  |  | ------------------------ | ----- |  |  | - | -- | 
|                                    |  | March 31, 2013         |       
|                                    |  | RecordedInvestment     |        |  | UnpaidPrincipalBalance |   |        | RelatedAllowance |  |   | AverageRecordedInvestment |  |  | InterestIncomeRecognized |      
|                                    |  | (Dollars in thousands) |       
|With no related allowance recorded: |  |                        |        |  |                        |   |        |                  |  |   |                           |  |  |                          |       |  |  |   |    | 
|Commercial and industrial           |  | $                      | 1,814  |  |                        | $ | 2,207  |                  |  | $ |                          |  |  | $                        | 3,090 |  |  | $ | 8  | 
|Commercial mortgage                 |  |                        | 555    |  |                        |   | 662    |                  |  |   |                          |  |  |                          | 185   |  |  |   |   | 
|Commercial construction             |  |                        | 469    |  |                        |   | 886    |                  |  |   |                          |  |  |                          | 156   |  |  |   | 7  | 
|Residential mortgage loans          |  |                        | 1,115  |  |                        |   | 1,192  |                  |  |   |                          |  |  |                          | 976   |  |  |   | 5  | 
|Home equity lines of credit         |  |                        | 1,160  |  |                        |   | 1,728  |                  |  |   |                          |  |  |                          | 657   |  |  |   | 1  | 
|Other consumer loans                |  |                        |       |  |                        |   |       |                  |  |   |                          |  |  |                          |      |  |  |   |   | 
|With an allowance recorded:         |  |                        |        |  |                        |   |        |                  |  |   |                           |  |  |                          |       |  |  |   |    | 
|Commercial and industrial           |  | $                      | 1,724  |  |                        | $ | 2,096  |                  |  | $ | 484                       |  |  | $                        | 1,730 |  |  | $ | 13 | 
|Commercial mortgage                 |  |                        | 2,690  |  |                        |   | 2,728  |                  |  |   | 249                       |  |  |                          | 2,492 |  |  |   |   | 
|Commercial construction             |  |                        | 576    |  |                        |   | 604    |                  |  |   | 19                        |  |  |                          | 577   |  |  |   | 6  | 
|Residential mortgage loans          |  |                        |       |  |                        |   |       |                  |  |   |                          |  |  |                          | 66    |  |  |   |   | 
|Home equity lines of credit         |  |                        |       |  |                        |   |       |                  |  |   |                          |  |  |                          |      |  |  |   |   | 
|Other consumer loans                |  |                        |       |  |                        |   |       |                  |  |   |                          |  |  |                          |      |  |  |   |   | 
|Total:                              |  |                        |        |  |                        |   |        |                  |  |   |                           |  |  |                          |       |  |  |   |    | 
|Commercial and industrial           |  | $                      | 3,538  |  |                        | $ | 4,303  |                  |  | $ | 484                       |  |  | $                        | 4,820 |  |  | $ | 21 | 
|Commercial mortgage                 |  |                        | 3,245  |  |                        |   | 3,390  |                  |  |   | 249                       |  |  |                          | 2,677 |  |  |   |   | 
|Commercial construction             |  |                        | 1,045  |  |                        |   | 1,490  |                  |  |   | 19                        |  |  |                          | 733   |  |  |   | 13 | 
|Residential mortgage loans          |  |                        | 1,115  |  |                        |   | 1,192  |                  |  |   |                          |  |  |                          | 1,042 |  |  |   | 5  | 
|Home equity lines of credit         |  |                        | 1,160  |  |                        |   | 1,728  |                  |  |   |                          |  |  |                          | 657   |  |  |   | 1  | 
|Other consumer loans                |  |                        |       |  |                        |   |       |                  |  |   |                          |  |  |                          |      |  |  |   |   | 
|                                    |  |                        |        |  |                        |   |        |                  |  |   |                           |  |  |                          |       |  |  |   |    | 
|Total                               |  | $                      | 10,103 |  |                        | $ | 12,103 |                  |  | $ | 752                       |  |  | $                        | 9,929 |  |  | $ | 40 | 
|                                    |  |                        |        |  |                        |   |        |                  |  |   |                           |  |  |                          |       |  |  |   |    | 
|With no related allowance recorded: |  |                        |        |  |                        |   |        |                  |  |   |                           |  |  |                          |       |  |  |   |    | 
|Originated loans                    |  | $                      | 2,315  |  |                        | $ | 2,771  |                  |  | $ |                          |  |  | $                        | 4,132 |  |  | $ | 14 | 
|Acquired Loans                      |  |                        | 2,798  |  |                        |   | 3,904  |                  |  |   |                          |  |  |                          | 932   |  |  |   | 7  | 
|                                    |  |                        |        |  |                        |   |        |                  |  |   |                           |  |  |                          |       |  |  |   |    | 
|Total                               |  | $                      | 5,113  |  |                        | $ | 6,675  |                  |  | $ |                          |  |  | $                        | 5,064 |  |  | $ | 21 | 
|                                    |  |                        |        |  |                        |   |        |                  |  |   |                           |  |  |                          |       |  |  |   |    | 



18



---

##### Table of Contents

|                                    |  |                        |        |  |                        |   |        |                  |  |   |                           |  |  |                          |       |  |  |   |     | 
|----------------------------------- |  | ---------------------- | ------ |  | ---------------------- | - | ------ | ---------------- |  | - | ------------------------- |  |  | ------------------------ | ----- |  |  | - | --- | 
|                                    |  | March 31, 2013         |       
|                                    |  | RecordedInvestment     |        |  | UnpaidPrincipalBalance |   |        | RelatedAllowance |  |   | AverageRecordedInvestment |  |  | InterestIncomeRecognized |      
|                                    |  | (Dollars in thousands) |       
|With an allowance recorded:         |  |                        |        |  |                        |   |        |                  |  |   |                           |  |  |                          |       |  |  |   |     | 
|Originated loans                    |  | $                      | 4,990  |  |                        | $ | 5,428  |                  |  | $ | 752                       |  |  | $                        | 4,865 |  |  | $ | 19  | 
|Acquired Loans                      |  |                        |       |  |                        |   |       |                  |  |   |                          |  |  |                          |      |  |  |   |    | 
|                                    |  |                        |        |  |                        |   |        |                  |  |   |                           |  |  |                          |       |  |  |   |     | 
|Total                               |  | $                      | 4,990  |  |                        | $ | 5,428  |                  |  | $ | 752                       |  |  | $                        | 4,865 |  |  | $ | 19  | 
|                                    |  |                        |        |  |                        |   |        |                  |  |   |                           |  |  |                          |       |  |  |   |     | 
|Total:                              |  |                        |        |  |                        |   |        |                  |  |   |                           |  |  |                          |       |  |  |   |     | 
|Originated loans                    |  | $                      | 7,305  |  |                        | $ | 8,199  |                  |  | $ | 752                       |  |  | $                        | 8,997 |  |  | $ | 33  | 
|Acquired Loans                      |  |                        | 2,798  |  |                        |   | 3,904  |                  |  |   |                          |  |  |                          | 932   |  |  |   | 7   | 
|                                    |  |                        |        |  |                        |   |        |                  |  |   |                           |  |  |                          |       |  |  |   |     | 
|Total                               |  | $                      | 10,103 |  |                        | $ | 12,103 |                  |  | $ | 752                       |  |  | $                        | 9,929 |  |  | $ | 40  | 
|                                    |  |                        |        |  |                        |   |        |                  |  |   |                           |  |  |                          |       |  |  |   |     | 
|                                    | 
|                                    |  | December 31, 2012      |       
|                                    |  | RecordedInvestment     |        |  | UnpaidPrincipalBalance |   |        | RelatedAllowance |  |   | AverageRecordedInvestment |  |  | InterestIncomeRecognized |      
|                                    |  | (Dollars in thousands) |       
|With no related allowance recorded: |  |                        |        |  |                        |   |        |                  |  |   |                           |  |  |                          |       |  |  |   |     | 
|Commercial and industrial           |  | $                      | 4,635  |  |                        | $ | 4,707  |                  |  | $ |                          |  |  | $                        | 927   |  |  | $ | 44  | 
|Commercial mortgage                 |  |                        |       |  |                        |   |       |                  |  |   |                          |  |  |                          |      |  |  |   |    | 
|Commercial construction             |  |                        |       |  |                        |   |       |                  |  |   |                          |  |  |                          |      |  |  |   |    | 
|Residential mortgage loans          |  |                        | 908    |  |                        |   | 908    |                  |  |   |                          |  |  |                          | 351   |  |  |   | 30  | 
|Home equity lines of credit         |  |                        | 406    |  |                        |   | 860    |                  |  |   |                          |  |  |                          | 316   |  |  |   | 3   | 
|Other consumer loans                |  |                        |       |  |                        |   |       |                  |  |   |                          |  |  |                          |      |  |  |   |    | 
|With an allowance recorded:         |  |                        |        |  |                        |   |        |                  |  |   |                           |  |  |                          |       |  |  |   |     | 
|Commercial and industrial           |  | $                      | 1,737  |  |                        | $ | 2,120  |                  |  | $ | 315                       |  |  | $                        | 4,628 |  |  | $ | 54  | 
|Commercial mortgage                 |  |                        | 2,293  |  |                        |   | 2,329  |                  |  |   | 244                       |  |  |                          | 785   |  |  |   | 75  | 
|Commercial construction             |  |                        | 577    |  |                        |   | 604    |                  |  |   | 20                        |  |  |                          | 115   |  |  |   | 25  | 
|Residential mortgage loans          |  |                        | 132    |  |                        |   | 143    |                  |  |   | 37                        |  |  |                          | 137   |  |  |   |    | 
|Home equity lines of credit         |  |                        |       |  |                        |   |       |                  |  |   |                          |  |  |                          |      |  |  |   |    | 
|Other consumer loans                |  |                        |       |  |                        |   |       |                  |  |   |                          |  |  |                          |      |  |  |   |    | 
|Total:                              |  |                        |        |  |                        |   |        |                  |  |   |                           |  |  |                          |       |  |  |   |     | 
|Commercial and industrial           |  | $                      | 6,372  |  |                        | $ | 6,827  |                  |  | $ | 315                       |  |  | $                        | 5,555 |  |  | $ | 98  | 
|Commercial mortgage                 |  |                        | 2,293  |  |                        |   | 2,329  |                  |  |   | 244                       |  |  |                          | 785   |  |  |   | 75  | 
|Commercial construction             |  |                        | 577    |  |                        |   | 604    |                  |  |   | 20                        |  |  |                          | 115   |  |  |   | 25  | 
|Residential mortgage loans          |  |                        | 1,040  |  |                        |   | 1,051  |                  |  |   | 37                        |  |  |                          | 488   |  |  |   | 30  | 
|Home equity lines of credit         |  |                        | 406    |  |                        |   | 860    |                  |  |   |                          |  |  |                          | 316   |  |  |   | 3   | 
|Other consumer loans                |  |                        |       |  |                        |   |       |                  |  |   |                          |  |  |                          |      |  |  |   |    | 
|                                    |  |                        |        |  |                        |   |        |                  |  |   |                           |  |  |                          |       |  |  |   |     | 
|Total                               |  | $                      | 10,688 |  |                        | $ | 11,671 |                  |  | $ | 616                       |  |  | $                        | 7,259 |  |  | $ | 231 | 
|                                    |  |                        |        |  |                        |   |        |                  |  |   |                           |  |  |                          |       |  |  |   |     | 



19



---

##### Table of Contents

The following table presents nonaccrual loans by classes of the loan portfolio as of March 31, 2013 and
December 31, 2012:



|                            |  |                        |       |  |                  |   |       | 
|--------------------------- |  | ---------------------- | ----- |  | ---------------- | - | ----- | 
|                            |  | March 31,2013          |       |  | December 31,2012 |  
|                            |  | (Dollars in thousands) |      
|Commercial and industrial   |  | $                      | 1,727 |  |                  | $ | 1,130 | 
|Commercial mortgage         |  |                        | 3,325 |  |                  |   | 2,293 | 
|Commercial construction     |  |                        | 252   |  |                  |   |      | 
|Residential mortgage loans  |  |                        | 875   |  |                  |   | 424   | 
|Home equity lines of credit |  |                        | 903   |  |                  |   | 246   | 
|Other consumer loans        |  |                        | 83    |  |                  |   |      | 
|                            |  |                        |       |  |                  |   |       | 
|Total loans                 |  | $                      | 7,165 |  |                  | $ | 4,093 | 
|                            |  |                        |       |  |                  |   |       | 
|Commercial and industrial   |  | $                      | 1,048 |  |                  | $ | 1,130 | 
|Commercial mortgage         |  |                        | 2,769 |  |                  |   | 2,293 | 
|Commercial construction     |  |                        |      |  |                  |   |      | 
|Residential mortgage loans  |  |                        | 424   |  |                  |   | 424   | 
|Home equity lines of credit |  |                        | 246   |  |                  |   | 246   | 
|Other consumer loans        |  |                        | 83    |  |                  |   |      | 
|                            |  |                        |       |  |                  |   |       | 
|Total originated loans      |  | $                      | 4,570 |  |                  | $ | 4,093 | 
|                            |  |                        |       |  |                  |   |       | 
|Commercial and industrial   |  | $                      | 679   |  |                  | $ |      | 
|Commercial mortgage         |  |                        | 556   |  |                  |   |      | 
|Commercial construction     |  |                        | 252   |  |                  |   |      | 
|Residential mortgage loans  |  |                        | 451   |  |                  |   |      | 
|Home equity lines of credit |  |                        | 657   |  |                  |   |      | 
|Other consumer loans        |  |                        |      |  |                  |   |      | 
|                            |  |                        |       |  |                  |   |       | 
|Total acquired loans        |  | $                      | 2,595 |  |                  | $ |      | 
|                            |  |                        |       |  |                  |   |       | 

The Banks policy for interest income recognition on nonaccrual loans is to recognize income under the cash basis
when the loans are both current and the collateral on the loan is sufficient to cover the outstanding obligation to the Bank. The Bank will not recognize income if these factors do not exist. Interest that would have been accrued on non-accruing
loans under the original terms but was not recognized as interest income totaled $62 thousand and $65 thousand for the three months ended March 31, 2013 and 2012, respectively.

The following tables present the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Companys
internal risk rating system as of March 31, 2013 and December 31, 2012:



|                            |  |                        |         |  |                |   |     |             |  |   |          |  |  |       |   |  |  |   |         | 
|--------------------------- |  | ---------------------- | ------- |  | -------------- | - | --- | ----------- |  | - | -------- |  |  | ----- | - |  |  | - | ------- | 
|                            |  | March 31, 2013         |        
|                            |  | Pass                   |         |  | SpecialMention |   |     | Substandard |  |   | Doubtful |  |  | Total |  
|                            |  | (Dollars in thousands) |        
|Commercial:                 |  |                        |         |  |                |   |     |             |  |   |          |  |  |       |   |  |  |   |         | 
|Commercial and industrial   |  | $                      | 84,365  |  |                | $ | 806 |             |  | $ | 3,415    |  |  | $     |  |  |  | $ | 88,586  | 
|Commercial mortgage         |  |                        | 119,801 |  |                |   |    |             |  |   | 3,326    |  |  |       |  |  |  |   | 123,127 | 
|Commercial construction     |  |                        | 3,796   |  |                |   |    |             |  |   | 1,191    |  |  |       |  |  |  |   | 4,987   | 
|Residential mortgage loans  |  |                        | 55,410  |  |                |   |    |             |  |   | 424      |  |  |       |  |  |  |   | 55,834  | 
|Consumer:                   |  |                        |         |  |                |   |     |             |  |   |          |  |  |       |   |  |  |   |         | 
|Home equity lines of credit |  |                        | 32,220  |  |                |   |    |             |  |   | 1,401    |  |  |       |  |  |  |   | 33,621  | 
|Other consumer loans        |  |                        | 25,529  |  |                |   |    |             |  |   |         |  |  |       |  |  |  |   | 25,529  | 
|                            |  |                        |         |  |                |   |     |             |  |   |          |  |  |       |   |  |  |   |         | 
|Total                       |  | $                      | 321,121 |  |                | $ | 806 |             |  | $ | 9,757    |  |  | $     |  |  |  | $ | 331,684 | 
|                            |  |                        |         |  |                |   |     |             |  |   |          |  |  |       |   |  |  |   |         | 



20



---

##### Table of Contents

|                            |  |                        |         |  |                |   |     |             |  |   |          |  |  |       |   |  |  |   |         | 
|--------------------------- |  | ---------------------- | ------- |  | -------------- | - | --- | ----------- |  | - | -------- |  |  | ----- | - |  |  | - | ------- | 
|Commercial:                 |  |                        |         |  |                |   |     |             |  |   |          |  |  |       |   |  |  |   |         | 
|Commercial and industrial   |  | $                      | 61,793  |  |                | $ | 806 |             |  | $ | 2,484    |  |  | $     |  |  |  | $ | 65,083  | 
|Commercial mortgage         |  |                        | 102,251 |  |                |   |    |             |  |   | 2,770    |  |  |       |  |  |  |   | 105,021 | 
|Commercial construction     |  |                        | 2,246   |  |                |   |    |             |  |   | 576      |  |  |       |  |  |  |   | 2,822   | 
|Residential mortgage loans  |  |                        | 46,474  |  |                |   |    |             |  |   | 424      |  |  |       |  |  |  |   | 46,898  | 
|Consumer:                   |  |                        |         |  |                |   |     |             |  |   |          |  |  |       |   |  |  |   |         | 
|Home equity lines of credit |  |                        | 9,170   |  |                |   |    |             |  |   | 246      |  |  |       |  |  |  |   | 9,416   | 
|Other consumer loans        |  |                        | 25,269  |  |                |   |    |             |  |   |         |  |  |       |  |  |  |   | 25,269  | 
|                            |  |                        |         |  |                |   |     |             |  |   |          |  |  |       |   |  |  |   |         | 
|Total originated loans      |  | $                      | 247,203 |  |                | $ | 806 |             |  | $ | 6,500    |  |  | $     |  |  |  | $ | 254,509 | 
|                            |  |                        |         |  |                |   |     |             |  |   |          |  |  |       |   |  |  |   |         | 
|Commercial:                 |  |                        |         |  |                |   |     |             |  |   |          |  |  |       |   |  |  |   |         | 
|Commercial and industrial   |  | $                      | 22,572  |  |                | $ |    |             |  | $ | 931      |  |  | $     |  |  |  | $ | 23,503  | 
|Commercial mortgage         |  |                        | 17,550  |  |                |   |    |             |  |   | 556      |  |  |       |  |  |  |   | 18,106  | 
|Commercial construction     |  |                        | 1,550   |  |                |   |    |             |  |   | 615      |  |  |       |  |  |  |   | 2,165   | 
|Residential mortgage loans  |  |                        | 8,936   |  |                |   |    |             |  |   |         |  |  |       |  |  |  |   | 8,936   | 
|Consumer:                   |  |                        |         |  |                |   |     |             |  |   |          |  |  |       |   |  |  |   |         | 
|Home equity lines of credit |  |                        | 23,050  |  |                |   |    |             |  |   | 1,155    |  |  |       |  |  |  |   | 24,205  | 
|Other consumer loans        |  |                        | 260     |  |                |   |    |             |  |   |         |  |  |       |  |  |  |   | 260     | 
|                            |  |                        |         |  |                |   |     |             |  |   |          |  |  |       |   |  |  |   |         | 
|Total acquired loans        |  | $                      | 73,918  |  |                | $ |    |             |  | $ | 3,257    |  |  | $     |  |  |  | $ | 77,175  | 
|                            |  |                        |         |  |                |   |     |             |  |   |          |  |  |       |   |  |  |   |         | 
|                            | 
|                            |  | December 31, 2012      |        
|                            |  | Pass                   |         |  | SpecialMention |   |     | Substandard |  |   | Doubtful |  |  | Total |  
|                            |  | (Dollars in thousands) |        
|Commercial:                 |  |                        |         |  |                |   |     |             |  |   |          |  |  |       |   |  |  |   |         | 
|Commercial and industrial   |  | $                      | 55,861  |  |                | $ | 818 |             |  | $ | 5,687    |  |  | $     |  |  |  | $ | 62,366  | 
|Commercial mortgage         |  |                        | 91,482  |  |                |   |    |             |  |   | 2,293    |  |  |       |  |  |  |   | 93,775  | 
|Commercial construction     |  |                        | 3,535   |  |                |   |    |             |  |   | 577      |  |  |       |  |  |  |   | 4,112   | 
|Residential mortgage loans  |  |                        | 48,446  |  |                |   |    |             |  |   | 908      |  |  |       |  |  |  |   | 49,354  | 
|Consumer:                   |  |                        |         |  |                |   |     |             |  |   |          |  |  |       |   |  |  |   |         | 
|Home equity lines of credit |  |                        | 20,248  |  |                |   |    |             |  |   | 406      |  |  |       |  |  |  |   | 20,654  | 
|Other consumer loans        |  |                        | 14,298  |  |                |   |    |             |  |   |         |  |  |       |  |  |  |   | 14,298  | 
|                            |  |                        |         |  |                |   |     |             |  |   |          |  |  |       |   |  |  |   |         | 
|Total                       |  | $                      | 233,870 |  |                | $ | 818 |             |  | $ | 9,871    |  |  | $     |  |  |  | $ | 244,559 | 
|                            |  |                        |         |  |                |   |     |             |  |   |          |  |  |       |   |  |  |   |         | 



21



---

##### Table of Contents

The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans
receivable as determined by the length of time a recorded payment is past due. The following tables present the classes of the loan portfolio summarized by the past due status as of March 31, 2013 and December 31, 2012:



|                            |  |                        |     |  |                    |   |     |                    |  |   |              |  |  |         |       |  |                       |   |         |  |  |   |         | 
|--------------------------- |  | ---------------------- | --- |  | ------------------ | - | --- | ------------------ |  | - | ------------ |  |  | ------- | ----- |  | --------------------- | - | ------- |  |  | - | ------- | 
|                            |  | March 31, 2013         |    
|                            |  | 30-59 DaysPast Due     |     |  | 60-89 DaysPast Due |   |     | GreaterThan90 Days |  |   | TotalPastDue |  |  | Current |       |  | TotalLoansReceivables |  
|                            |  | (Dollars in thousands) |    
|Commercial:                 |  |                        |     |  |                    |   |     |                    |  |   |              |  |  |         |       |  |                       |   |         |  |  |   |         | 
|Commercial and industrial   |  | $                      |    |  |                    | $ |    |                    |  | $ | 1,164        |  |  | $       | 1,164 |  |                       | $ | 87,422  |  |  | $ | 88,586  | 
|Commercial mortgage         |  |                        | 301 |  |                    |   |    |                    |  |   | 2,888        |  |  |         | 3,189 |  |                       |   | 119,938 |  |  |   | 123,127 | 
|Commercial construction     |  |                        |    |  |                    |   |    |                    |  |   | 252          |  |  |         | 252   |  |                       |   | 4,735   |  |  |   | 4,987   | 
|Residential mortgage loans  |  |                        | 381 |  |                    |   |    |                    |  |   | 753          |  |  |         | 1,134 |  |                       |   | 54,700  |  |  |   | 55,834  | 
|Consumer:                   |  |                        |     |  |                    |   |     |                    |  |   |              |  |  |         |       |  |                       |   |         |  |  |   |         | 
|Home equity lines of credit |  |                        | 166 |  |                    |   |    |                    |  |   | 1,073        |  |  |         | 1,239 |  |                       |   | 32,382  |  |  |   | 33,621  | 
|Other consumer loans        |  |                        | 49  |  |                    |   | 83  |                    |  |   |             |  |  |         | 132   |  |                       |   | 25,397  |  |  |   | 25,529  | 
|                            |  |                        |     |  |                    |   |     |                    |  |   |              |  |  |         |       |  |                       |   |         |  |  |   |         | 
|Total                       |  | $                      | 897 |  |                    | $ | 83  |                    |  | $ | 6,130        |  |  | $       | 7,110 |  |                       | $ | 324,574 |  |  | $ | 331,684 | 
|                            |  |                        |     |  |                    |   |     |                    |  |   |              |  |  |         |       |  |                       |   |         |  |  |   |         | 
|Commercial:                 |  |                        |     |  |                    |   |     |                    |  |   |              |  |  |         |       |  |                       |   |         |  |  |   |         | 
|Commercial and industrial   |  | $                      |    |  |                    | $ |    |                    |  | $ | 1,048        |  |  | $       | 1,048 |  |                       | $ | 64,035  |  |  | $ | 65,083  | 
|Commercial mortgage         |  |                        | 223 |  |                    |   |    |                    |  |   | 2,379        |  |  |         | 2,602 |  |                       |   | 102,419 |  |  |   | 105,021 | 
|Commercial construction     |  |                        |    |  |                    |   |    |                    |  |   |             |  |  |         |      |  |                       |   | 2,822   |  |  |   | 2,822   | 
|Residential mortgage loans  |  |                        |    |  |                    |   |    |                    |  |   | 424          |  |  |         | 424   |  |                       |   | 46,474  |  |  |   | 46,898  | 
|Consumer:                   |  |                        |     |  |                    |   |     |                    |  |   |              |  |  |         |       |  |                       |   |         |  |  |   |         | 
|Home equity lines of credit |  |                        |    |  |                    |   |    |                    |  |   | 246          |  |  |         | 246   |  |                       |   | 9,170   |  |  |   | 9,416   | 
|Other consumer loans        |  |                        | 49  |  |                    |   | 83  |                    |  |   |             |  |  |         | 132   |  |                       |   | 25,137  |  |  |   | 25,269  | 
|                            |  |                        |     |  |                    |   |     |                    |  |   |              |  |  |         |       |  |                       |   |         |  |  |   |         | 
|Total originated loans      |  | $                      | 272 |  |                    | $ | 83  |                    |  | $ | 4,097        |  |  | $       | 4,452 |  |                       | $ | 250,057 |  |  | $ | 254,509 | 
|                            |  |                        |     |  |                    |   |     |                    |  |   |              |  |  |         |       |  |                       |   |         |  |  |   |         | 
|Commercial:                 |  |                        |     |  |                    |   |     |                    |  |   |              |  |  |         |       |  |                       |   |         |  |  |   |         | 
|Commercial and industrial   |  | $                      |    |  |                    | $ |    |                    |  | $ | 116          |  |  | $       | 116   |  |                       | $ | 23,387  |  |  | $ | 23,503  | 
|Commercial mortgage         |  |                        | 78  |  |                    |   |    |                    |  |   | 509          |  |  |         | 587   |  |                       |   | 17,519  |  |  |   | 18,106  | 
|Commercial construction     |  |                        |    |  |                    |   |    |                    |  |   | 252          |  |  |         | 252   |  |                       |   | 1,913   |  |  |   | 2,165   | 
|Residential mortgage loans  |  |                        | 381 |  |                    |   |    |                    |  |   | 329          |  |  |         | 710   |  |                       |   | 8,226   |  |  |   | 8,936   | 
|Consumer:                   |  |                        |     |  |                    |   |     |                    |  |   |              |  |  |         |       |  |                       |   |         |  |  |   |         | 
|Home equity lines of credit |  |                        | 166 |  |                    |   |    |                    |  |   | 827          |  |  |         | 993   |  |                       |   | 23,212  |  |  |   | 24,205  | 
|Other consumer loans        |  |                        |    |  |                    |   |    |                    |  |   |             |  |  |         |      |  |                       |   | 260     |  |  |   | 260     | 
|                            |  |                        |     |  |                    |   |     |                    |  |   |              |  |  |         |       |  |                       |   |         |  |  |   |         | 
|Total acquired loans        |  | $                      | 625 |  |                    |   |    |                    |  | $ | 2,033        |  |  | $       | 2,658 |  |                       | $ | 74,517  |  |  | $ | 77,175  | 
|                            |  |                        |     |  |                    |   |     |                    |  |   |              |  |  |         |       |  |                       |   |         |  |  |   |         | 
|                            | 
|                            |  | December 31, 2012      |    
|                            |  | 30-59 DaysPast Due     |     |  | 60-89 DaysPast Due |   |     | GreaterThan90 Days |  |   | TotalPastDue |  |  | Current |       |  | TotalLoansReceivables |  
|                            |  | (Dollars in thousands) |    
|Commercial:                 |  |                        |     |  |                    |   |     |                    |  |   |              |  |  |         |       |  |                       |   |         |  |  |   |         | 
|Commercial and industrial   |  | $                      |    |  |                    | $ | 250 |                    |  | $ | 880          |  |  | $       | 1,130 |  |                       | $ | 61,236  |  |  | $ | 62,366  | 
|Commercial mortgage         |  |                        | 412 |  |                    |   | 224 |                    |  |   | 1,898        |  |  |         | 2,534 |  |                       |   | 91,241  |  |  |   | 93,775  | 
|Commercial construction     |  |                        |    |  |                    |   |    |                    |  |   |             |  |  |         |      |  |                       |   | 4,112   |  |  |   | 4,112   | 
|Residential mortgage loans  |  |                        |    |  |                    |   | 7   |                    |  |   | 424          |  |  |         | 431   |  |                       |   | 48,923  |  |  |   | 49,354  | 
|Consumer:                   |  |                        |     |  |                    |   |     |                    |  |   |              |  |  |         |       |  |                       |   |         |  |  |   |         | 
|Home equity lines of credit |  |                        |    |  |                    |   |    |                    |  |   | 246          |  |  |         | 246   |  |                       |   | 20,408  |  |  |   | 20,654  | 
|Other consumer loans        |  |                        |    |  |                    |   | 31  |                    |  |   |             |  |  |         | 31    |  |                       |   | 14,267  |  |  |   | 14,298  | 
|                            |  |                        |     |  |                    |   |     |                    |  |   |              |  |  |         |       |  |                       |   |         |  |  |   |         | 
|Total                       |  | $                      | 412 |  |                    | $ | 512 |                    |  | $ | 3,448        |  |  | $       | 4,372 |  |                       | $ | 240,187 |  |  | $ | 244,559 | 
|                            |  |                        |     |  |                    |   |     |                    |  |   |              |  |  |         |       |  |                       |   |         |  |  |   |         | 

As of March 31, 2013 and December 31, 2012, there were no loans greater than 90 days past due and still
accruing.



22



---

##### Table of Contents

The Bank may grant a concession or modification for economic or legal reasons related to a borrowers
financial condition that it would not otherwise consider, resulting in a modified loan which is then identified as a troubled debt restructuring (TDR). The Bank may modify loans through rate reductions, extensions of maturity, interest
only payments, or payment modifications to better match the timing of cash flows due under the modified terms with the cash flows from the borrowers operations. Loan modifications are intended to minimize the economic loss and to avoid
foreclosure or repossession of the collateral. TDRs are considered impaired loans for purposes of calculating the Banks allowance for loan losses.

The Bank identifies loans for potential restructure primarily through direct communication with the borrower and evaluation of the borrowers financial statements, revenue projections, tax returns,
and credit reports. Even if the borrower is not presently in default, management will consider the likelihood that cash flow shortages, adverse economic conditions, and negative trends may result in a payment default in the near future.

There were no troubled debt restructurings entered into by the Bank for the three months ended March 31, 2013.

The following tables reflect information regarding troubled debt restructurings entered into by the Bank for the year ended December 31, 2012:



|                              |  |                                     |   |  |                                                |   |       |                                                  |  |   |       | 
|----------------------------- |  | ----------------------------------- | - |  | ---------------------------------------------- | - | ----- | ------------------------------------------------ |  | - | ----- | 
|                              |  | For the Year EndedDecember 31,
2012 |  
|                              |  | NumberofContracts                   |   |  | Pre-ModificationOutstandingRecordedInvestments |   |       | Post-ModificationOutstandingRecorded
Investments | 
|                              |  | (Dollars in thousands)              |  
|Troubled debt restructurings: |  |                                     |   | 
|Commercial and industrial     |  |                                     | 3 |  |                                                | $ | 1,000 |                                                  |  | $ | 1,000 | 
|Commercial mortgage           |  |                                     |  |  |                                                |   |      |                                                  |  |   |      | 
|Commercial construction       |  |                                     |  |  |                                                |   |      |                                                  |  |   |      | 
|Residential mortgage loans    |  |                                     |  |  |                                                |   |      |                                                  |  |   |      | 
|Home equity lines of credit   |  |                                     |  |  |                                                |   |      |                                                  |  |   |      | 
|Other consumer loans          |  |                                     |  |  |                                                |   |      |                                                  |  |   |      | 
|                              |  |                                     |   |  |                                                |   |       |                                                  |  |   |       | 
|Total                         |  |                                     | 3 |  |                                                | $ | 1,000 |                                                  |  | $ | 1,000 | 
|                              |  |                                     |   |  |                                                |   |       |                                                  |  |   |       | 

As of March 31, 2013, two commercial loans classified as troubled debt restructurings with combined outstanding
balances totaling $82 thousand and one home equity line of credit classified as a troubled debt restructuring with a pre-modification balance of $695 thousand and a current balance of $246 thousand were in default and also classified as non-accrual
status at both March 31, 2013 and December 31, 2012, respectively. No other TDRs have subsequently defaulted in the prior twelve months as of each of these dates.

Note 7Deposits

The components of deposits at March 31, 2013 and December 31, 2012 are as follows:



|                                  |  |                        |         |  |                  |   |         | 
|--------------------------------- |  | ---------------------- | ------- |  | ---------------- | - | ------- | 
|                                  |  | March 31,2013          |         |  | December 31,2012 |  
|                                  |  | (Dollars in thousands) |        
|Demand, non-interest bearing      |  | $                      | 38,801  |  |                  | $ | 28,176  | 
|Demand, interest-bearing          |  |                        | 47,662  |  |                  |   | 9,392   | 
|Money market and savings accounts |  |                        | 105,575 |  |                  |   | 59,636  | 
|Time, $100 and over               |  |                        | 48,560  |  |                  |   | 33,049  | 
|Time, other                       |  |                        | 117,844 |  |                  |   | 102,790 | 
|                                  |  |                        |         |  |                  |   |         | 
|                                  |  | $                      | 358,442 |  |                  | $ | 233,043 | 
|                                  |  |                        |         |  |                  |   |         | 

Included in time, other at March 31, 2013 and December 31, 2012 are brokered deposits of $35.5 million, and
$48.5 million, respectively.



23



---

##### Table of Contents

At March 31, 2013, the scheduled maturities of time deposits were as follows:



|           |  |                       |         | 
|---------- |  | --------------------- | ------- | 
|           |  | March 31, 2013        |        
|           |  | (Dollars inthousands) |        
|3/31/2014  |  | $                     | 66,102  | 
|3/31/2015  |  |                       | 39,180  | 
|3/31/2016  |  |                       | 29,036  | 
|3/31/2017  |  |                       | 17,357  | 
|3/31/2018  |  |                       | 14,662  | 
|Thereafter |  |                       | 67      | 
|           |  |                       |         | 
|           |  | $                     | 166,404 | 
|           |  |                       |         | 

Note 8Shareholders Equity

During the initial offering period in 2005, the Company sold 2,107,500 shares of common stock at $10.00 per share, which resulted in
net proceeds of $21.0 million, as well as warrants to purchase a total of 421,500 shares of common stock at an exercise price of $12.50 per share with an expiration date in November 2010, five years from the date of issuance. As of February 29,
2008, in connection with the acquisition of Prestige, First Priority issued an additional 976,137 shares of common stock and warrants to purchase 195,227 shares of its common stock at an exercise price of $12.50 per share with an expiration date in
October 2012, resulting in additional equity of $7.4 million. Subsequently, on October 28, 2010, the Companys Board of Directors authorized an extension of the expiration date of the total 616,727 warrants outstanding to December 31,
2013.

On August 1, 2008, 39,292 shares of common stock were issued to convert $390 thousand of convertible subordinated debentures,
issued in June and July 2007, which the Company elected to convert, resulting in additional equity of $403 thousand. On December 31, 2009, 20,302 shares of restricted common stock were issued to a select group of executives of the Company under
provisions of the Companys Deferred Compensation Plan which became effective January 1, 2009. Of the 20,302 restricted shares issued under this plan, 1,003 shares were forfeited during 2010 resulting in 19,299 restricted shares remaining
outstanding as of December 31, 2012 and December 31, 2011. Additionally, during 2012, 2,075 shares of restricted common stock were issued to non-management employees throughout the Company under the Stock Compensation Program as described
in Note 9, of which 1,775 shares remained outstanding as of December 31, 2012.

On February 28, 2013, in conjunction with the merger
with Affinity Bancorp, Inc. and under the terms of the merger agreement, shareholders of Affinity received 0.9813 newly issued shares of First Priority common stock in exchange for each Affinity share. A total of 1,915,942 shares of First Priority
common stock were issued.

Also, on February 28, 2013 and in conjunction with the merger Affinity Bancorp, Inc., First Priority issued
1,268,576 shares of common stock at an issuance price of $5.22 per share through a private placement resulting in total proceeds of $6.6 million, net of $50 thousand of related issuance costs.

Preferred Stock Outstanding

On
February 20, 2009, First Priority entered into a Letter Agreement with the Treasury (the Purchase Agreement) as part of the Treasurys TARP Capital Purchase Program, pursuant to which the Company issued and sold, and the
Treasury agreed to purchase, (i) 4,579 shares of the Companys Fixed Rate Cumulative Perpetual Preferred Stock, Series A, $100 par value per share, having a liquidation preference of $1,000 per share (the Series A Preferred
Stock), and (ii) a warrant (the Warrant) to purchase, on a net basis, up to 229 shares of the Companys Fixed Rate Cumulative Perpetual Preferred Stock, Series B, par value $100 per share (the Series B Preferred
Stock), with an exercise price of $100 per share, for an aggregate purchase price of $4.58 million in cash, less $29 thousand in legal issuance costs. On February 20, 2009, the Treasury immediately exercised the Warrant, on a
cashless basis, which resulted in the issuance of the 229 shares of the Series B Preferred Stock. The Series A and Series B Preferred Stock were recorded at fair value and will be amortized to liquidation value over a five year expected life.

On December 18, 2009, First Priority entered into an additional Purchase Agreement with the Treasury as part of the Treasurys TARP
Capital Purchase Program for Small Banks, pursuant to which the Company issued and sold, and the Treasury agreed to purchase, (i) 4,596 shares of the Companys Fixed Rate Cumulative Perpetual Preferred Stock, Series C, $100 par value per
share, having a liquidation preference of $1,000 per share (the Series C Preferred Stock), for an aggregate purchase price of $4.60 million in cash, less $8 thousand in legal issuance costs.



24



---

##### Table of Contents

The Series A and Series C Preferred Stock will pay cumulative dividends at a rate of 5% per annum for
the first five years and 9% per annum thereafter. The Series B Preferred Stock will pay cumulative dividends at a rate of 9% per annum. The Series A, B and C Preferred Stock have no maturity date and rank senior to common stock with
respect to dividends and upon liquidation, dissolution, or winding up. The Company may redeem the Series A or Series C Preferred Stock, in whole or in part, at its liquidation preference plus accrued and unpaid dividends.

On February 8, 2013, the U.S. Department of Treasury sold its entire holdings of the Companys preferred stock as part of its ongoing efforts
to wind down and recover its remaining Capital Purchase Program (CPP) investments in financial institutions through a modified Dutch auction methodology by offering to domestic qualified institutional buyers and certain domestic
institutional accredited investors an opportunity to purchase the Companys preferred stock from the Treasury. Upon final closing of the sale of these securities to private investors, the previously placed limitations on executive compensation
expired. There were no additional changes to the previously existing outstanding preferred stock which resulted from the sale to private investors.

Note 9Stock Compensation Program

In 2005, the Company adopted the 2005 Stock Compensation Program, which was amended at the Companys annual meeting on
April 23, 2009 as the 2009 Stock Compensation Program (the Program) and further amended effective March 18, 2010. The Program allows equity benefits to be awarded in the form of Incentive Stock Options, Compensatory Stock
Options or Restricted Stock. The Program authorizes the Board of Directors to grant options up to an aggregate maximum of 825,000 shares to officers, other employees and directors of the Company. An additional 382,957 shares were authorized for
grant under this plan as a result of the merger with ABI. Only employees of the Company will be eligible to receive Incentive Stock Options and such grants are subject to the limitations under Section 422 of the Internal Revenue Code.

All stock options granted under the Program fully vest in four years from the date of grant (or potentially earlier upon a change of control)
and terminate ten years from the date of the grant. The exercise price of the options granted shall be the fair market value of a share of common stock at the time of the grant, with a minimum exercise price of $10 per share for shares issued prior
to March 18, 2010. Effective March 18, 2010, the Companys stock compensation program was amended to eliminate the minimum exercise price.

A summary of stock option activity for the three months ended March 31, 2013 is presented below:



|                                   |  |        |         |  |                              |   |      | 
|---------------------------------- |  | ------ | ------- |  | ---------------------------- | - | ---- | 
|                                   |  | Shares |         |  | WeightedAverageExercisePrice |  
|Outstanding at beginning of period |  |        | 712,350 |  |                              | $ | 8.87 | 
|Granted during period              |  |        |        |  |                              |   |     | 
|Acquired in merger with ABI        |  |        | 132,112 |  |                              |   | 8.49 | 
|Forfeited/cancelled during period  |  |        |        |  |                              |   |     | 
|                                   |  |        |         |  |                              |   |      | 
|Outstanding at end of period (1)   |  |        | 844,462 |  |                              | $ | 8.81 | 
|                                   |  |        |         |  |                              |   |      | 
|Exercisable at end of period (1)   |  |        | 641,962 |  |                              | $ | 9.70 | 
|                                   |  |        |         |  |                              |   |      | 



|(1) | Included in options outstanding and exercisable at March 31, 2013 are 100,000 organizer options, with an exercise price of $10.00 per share, exchanged as part of
the 2008 acquisition of Prestige which were issued outside of the Program.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The weighted average remaining contractual life of
all outstanding stock options and exercisable options at March 31, 2013 was 4.5 years and 3.4 years, respectively. Options outstanding and exercisable options at March 31, 2013 had no intrinsic value.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. There were no options granted in the
three months ending March 31, 2013, other than options granted in conjunction with the merger of ABI.



25



---

##### Table of Contents

Under the terms of the merger agreement, each ABI option became fully vested and was exchanged for a grant
of 0.9813 FPFC options, with an adjusted exercise price to reflect the exchange ratio and maintains the same expiration date as the original option. As a result, 132,112 options to purchase common shares of FPFC were issued with an average exercise
price of $8.49, an expected remaining term of 2.6 years and a contractual term of 3.2 years. These options were valued at the date of the merger at $44 thousand based on the following weighted average assumptions:



|                                     |  |                |           |  
|------------------------------------ |  | -------------- | --------- | -
|                                     |  | March 31, 2013 |          
|Dividend yield                       |  |                | 0.0       | %
|Expected life                        |  |                | 2.6 years |  
|Expected volatility                  |  |                | 33        | %
|Risk-free interest rate              |  |                | 0.38      | %
|Weighted average fair value          |  | $              | 0.36      |  
|FPFC stock price at date of issuance |  | $              | 5.22      |  

The dividend yield assumption is based on the Companys history and expectation of dividend payouts. Due to the
Companys lack of sufficient historical exercise data and the limited period of time for which shares have been issued, the simplified method is used to determine the expected life of options, calculated as the average of the sum of
the vesting term and original contractual term for all periods presented. In valuing ABI options, an expected life was calculated assuming all options expire with a three year expiration date expire at expiration date; otherwise, the expected
expiration date is the average of three years and the expiration date. The expected volatility percentage is based on the average expected volatility of similar public financial institutions in the Companys market area. The risk-free interest
rates for periods within the contractual life of the awards are based on the U.S. Treasury yield curve in effect at the time of the grant.

As
of March 31, 2013, there was $230 thousand of unrecognized compensation cost related to non-vested stock options granted after January 1, 2007. That cost is expected to be recognized over a weighted average period of 2.5 years. There
was no tax benefit recognized related to this stock-based compensation.

Restricted Stock grants fully vest three years from the date of grant
(or potentially earlier upon a change of control), subject to the recipient remaining an employee of the Company. Upon issuance of the shares, resale of the shares is restricted during the vesting period, during which the shares may not be sold,
pledged, or otherwise disposed of. Prior to the vesting date and in the event the recipient terminates association with Company for any reasons other than death, disability or change of control, the recipient forfeits all rights to the shares that
would otherwise be issued under the grant. Restricted stock awards granted under the Plan were recorded at the date of the award based on the estimated fair value of the shares. As of March 31, 2013, there was $58 thousand of unrecognized
compensation cost related to restricted stock, which will be amortized through December 31, 2015.

A summary of restricted stock award
activity is presented below for the three months ended March 31, 2013:



|                                       |  |        |        |  
|-------------------------------------- |  | ------ | ------ | -
|                                       |  | Shares |       
|Outstanding at beginning of period (1) |  |        | 21,074 |  
|Granted during year                    |  |        |       |  
|Forfeited/cancelled during year        |  |        | (50    | )
|                                       |  |        |        |  
|Outstanding at end of period           |  |        | 21,024 |  
|                                       |  |        |        |  



|(1) | Included in outstanding restricted stock are 19,299 grants issued as part of the 2009 Deferred Compensation Plan
|--- | ----------------------------------------------------------------------------------------------------------------

Note 10Financial Instruments with Off-Balance Sheet Risk

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing
needs of its customers. These financial instruments include commitments to extend credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheet.

The Companys exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to
extend credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

At March 31, 2013 and December 31, 2012, outstanding commitments to extend credit consisting of total unfunded commitments under lines of
credit were $64.5 million and $53.7 million, respectively. In addition, as of each of these dates, there were $1.2 million of performance standby letters of credit outstanding, and as of March 31, 2013, $1.3 million of financial standby letters
of credit. There were no financial standby letters of credit outstanding as of December 31, 2012.

Commitments to extend credit are
agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent
future cash requirements.



26



---

##### Table of Contents

Commitments generally have fixed expiration dates or other termination clauses and may require payment of a
fee. The Bank evaluates each customers credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on managements credit evaluation. Collateral held
varies but may include personal or commercial real estate, accounts receivable, inventory and equipment.

In addition, as of March 31,
2013 and December 31, 2012 the Bank pledged $199 thousand of deposit balances at a correspondent bank to support a $199 thousand letter of credit issued by the correspondent on behalf of a customer of the Bank. This transaction is fully secured
by the customer through a pledge of the customers deposits at the Bank. Also, as of March 31, 2013, the Bank had outstanding a financial standby letter of credit, which was collateralized by a pledge of Bank assets at a correspondent bank
totaling $615 thousand.

Note 11Regulatory Matters

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet the
minimum capital requirements can initiate certain mandatory and possibly additional discretionary-actions by regulators that, if undertaken, could have a direct material effect on the Banks consolidated financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Banks assets, liabilities and certain off-balance sheet items as calculated
under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings and other factors. Prompt corrective action provisions are not applicable to
bank holding companies.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to
maintain minimum amounts and ratios (set forth below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets and of Tier 1 capital to average assets. Management believes, as of March 31, 2013, that the Company and
the Bank meet all capital adequacy requirements to which it is subject.

The Banks capital amounts and ratios at March 31, 2013 and
December 31, 2012 are presented below:



|                                         |  |                        |        |  |                            |  |       |                                                               |  |   |         |  |  |        |     |   |       |   |         |  |  |   |      |  
|---------------------------------------- |  | ---------------------- | ------ |  | -------------------------- |  | ----- | ------------------------------------------------------------- |  | - | ------- |  |  | ------ | --- | - | ----- | - | ------- |  |  | - | ---- | -
|                                         |  | Actual                 |        |  | Minimum CapitalRequirement |  |       | To be WellCapitalized underPrompt CorrectiveAction Provisions | 
|                                         |  | Amount                 |        |  | Ratio                      |  |       | Amount                                                        |  |   | Ratio   |  |  | Amount |     |   | Ratio |  
|                                         |  | (Dollars in thousands) |       
|March 31, 2013                           |  |                        |        |  |                            |  |       |                                                               |  |   |         |  |  |        |     |   |       |   |         |  |  |   |      |  
|Total capital (to risk-weighted assets)  |  | $                      | 41,968 |  |                            |  | 13.34 | %                                                             |  | $ | 325,178 |  |  | 3      | 8.0 | % |       | $ | 331,472 |  |  | 3 | 10.0 | %
|Tier 1 capital (to risk-weighted assets) |  |                        | 39,369 |  |                            |  | 12.51 |                                                               |  | 3 | 12,589  |  |  | 3      | 4.0 |   |       | 3 | 18,883  |  |  | 3 | 6.0  |  
|Tier 1 capital (to total assets)         |  |                        | 39,369 |  |                            |  | 12.16 |                                                               |  | 3 | 12,954  |  |  | 3      | 4.0 |   |       | 3 | 16,192  |  |  | 3 | 5.0  |  
|December 31, 2012                        |  |                        |        |  |                            |  |       |                                                               |  |   |         |  |  |        |     |   |       |   |         |  |  |   |      |  
|Total capital (to risk-weighted assets)  |  | $                      | 28,073 |  |                            |  | 12.48 | %                                                             |  | $ | 318,054 |  |  | 3      | 8.0 | % |       | $ | 322,568 |  |  | 3 | 10.0 | %
|Tier 1 capital (to risk-weighted assets) |  |                        | 25,703 |  |                            |  | 11.39 |                                                               |  | 3 | 9,027   |  |  | 3      | 4.0 |   |       | 3 | 13,541  |  |  | 3 | 6.0  |  
|Tier 1 capital (to total assets)         |  |                        | 25,703 |  |                            |  | 9.40  |                                                               |  | 3 | 10,934  |  |  | 3      | 4.0 |   |       | 3 | 13,668  |  |  | 3 | 5.0  |  

First Prioritys ability to pay cash dividends is dependent on receiving cash in the form of dividends from First
Priority Bank. However, certain restrictions exist regarding the ability of First Priority Bank to transfer funds to First Priority in the form of cash dividends. All dividends are currently subject to prior approval of the Pennsylvania Department
of Banking and Securities and the FDIC and are payable only from the undivided profits of First Priority Bank, with the exception of an exemption enacted by the Pennsylvania Department of Banking and Securities which allows the Bank to pay dividends
related to the preferred stock originally issued under the U.S. Department of the Treasurys Troubled Asset Relief ProgramCapital Purchase Program. Additionally, any payment of dividends by First Priority, including dividends on the
aforementioned preferred stock, requires prior approval of The Federal Reserve Bank when net income for the past four quarters is not sufficient to fund the dividend payments over that same period or when such payment would negatively impact capital
adequacy of the Company.

The Companys capital amounts and ratios are similar to those of the Bank.



27



---

##### Table of Contents

Note 12Fair Value Measurements and Fair Values of Financial Instruments

Management uses its best judgment in estimating the fair value of the Banks financial instruments; however, there are inherent
weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction on the dates
indicated. The estimated fair value amounts have been measured as of March 31, 2013 and December 31, 2012 and have not been re-evaluated or updated for purposes of these financial statements subsequent to those respective dates. As such,
the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each period end.

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with FASB ASC Topic 820  Fair Value
Measurements and Disclosures, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is
best determined based upon quoted market prices. However, in some instances, there are no quoted market prices for the Companys various financial instruments. In cases where quoted market prices are not available, fair values are based on
estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be
realized in an immediate settlement of the instrument.

The recent fair value guidance provides a consistent definition of fair value, which
focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and
level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the
measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current
market conditions.

FASB ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure
fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of
the fair value hierarchy under FASB ASC Topic 820 are as follows:

Level 1: Unadjusted quoted prices in active markets that are
accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Quoted prices in markets that are not
active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.

Level
3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).

An assets or liabilitys level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.



28



---

##### Table of Contents

For financial assets measured at fair value on a recurring basis, the fair value measurements by level
within the fair value hierarchy used at March 31, 2013 and December 31, 2012 are as follows:



|                                                         |  |                        |        |  |                                                            |   |     |                                           |  |   |                                        |  |  |   |   | 
|-------------------------------------------------------- |  | ---------------------- | ------ |  | ---------------------------------------------------------- | - | --- | ----------------------------------------- |  | - | -------------------------------------- |  |  | - | - | 
|Description                                              |  | Fair Value             |        |  | (Level
1)Quoted Pricesin ActiveMarkets forIdentical Assets |   |     | (Level 2)SignificantOtherObservableInputs |  |   | (Level 3)SignificantUnobservableInputs | 
|                                                         |  | (Dollars in thousands) |       
|As of March 31, 2013:                                    |  |                        |        |  |                                                            |   |     |                                           |  |   |                                        |  |  |   |   | 
|Obligations of U.S. government agencies and corporations |  | $                      | 22,001 |  |                                                            | $ |    |                                           |  | $ | 22,001                                 |  |  | $ |  | 
|Obligations of states and political subdivisions         |  |                        | 20,221 |  |                                                            |   |    |                                           |  |   | 20,221                                 |  |  |   |  | 
|Agency mortgage-backed securities                        |  |                        | 10,601 |  |                                                            |   |    |                                           |  |   | 10,601                                 |  |  |   |  | 
|Agency CMOs                                             |  |                        | 1,210  |  |                                                            |   |    |                                           |  |   | 1,210                                  |  |  |   |  | 
|Other debt securities                                    |  |                        | 2,273  |  |                                                            |   |    |                                           |  |   | 2,273                                  |  |  |   |  | 
|Money market mutual fund                                 |  |                        | 31     |  |                                                            |   | 31  |                                           |  |   |                                       |  |  |   |  | 
|                                                         |  |                        |        |  |                                                            |   |     |                                           |  |   |                                        |  |  |   |   | 
|Total assets measured at fair value on a recurring basis |  | $                      | 56,337 |  |                                                            | $ | 31  |                                           |  | $ | 56,306                                 |  |  | $ |  | 
|                                                         |  |                        |        |  |                                                            |   |     |                                           |  |   |                                        |  |  |   |   | 
|As of December 31, 2012:                                 |  |                        |        |  |                                                            |   |     |                                           |  |   |                                        |  |  |   |   | 
|Obligations of U.S. government agencies and corporations |  | $                      | 1,001  |  |                                                            | $ |    |                                           |  | $ | 1,001                                  |  |  | $ |  | 
|Obligations of states and political subdivisions         |  |                        | 11,857 |  |                                                            |   |    |                                           |  |   | 11,857                                 |  |  |   |  | 
|Agency mortgage-backed securities                        |  |                        | 3,681  |  |                                                            |   |    |                                           |  |   | 3,681                                  |  |  |   |  | 
|Money market mutual fund                                 |  |                        | 140    |  |                                                            |   | 140 |                                           |  |   |                                       |  |  |   |  | 
|                                                         |  |                        |        |  |                                                            |   |     |                                           |  |   |                                        |  |  |   |   | 
|Total assets measured at fair value on a recurring basis |  | $                      | 16,679 |  |                                                            | $ | 140 |                                           |  | $ | 16,539                                 |  |  | $ |  | 
|                                                         |  |                        |        |  |                                                            |   |     |                                           |  |   |                                        |  |  |   |   | 

For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair
value hierarchy used at March 31, 2013 and December 31, 2012 are as follows:



|                                                            |  |                        |        |  |                                                           |   |   |                                           |  |   |                                        |  |  |   |        | 
|----------------------------------------------------------- |  | ---------------------- | ------ |  | --------------------------------------------------------- | - | - | ----------------------------------------- |  | - | -------------------------------------- |  |  | - | ------ | 
|Description                                                 |  | Fair Value             |        |  | (Level 1)Quoted Pricesin
ActiveMarkets forIdenticalAssets |   |   | (Level 2)SignificantOtherObservableInputs |  |   | (Level 3)SignificantUnobservableInputs | 
|                                                            |  | (Dollars in thousands) |       
|As of March 31, 2013:                                       |  |                        |        |  |                                                           |   |   |                                           |  |   |                                        |  |  |   |        | 
|Impaired loans                                              |  | $                      | 9,351  |  |                                                           | $ |  |                                           |  | $ |                                       |  |  | $ | 9,351  | 
|Other real estate owned                                     |  |                        | 1,237  |  |                                                           |   |  |                                           |  |   |                                       |  |  |   | 1,237  | 
|                                                            |  |                        |        |  |                                                           |   |   |                                           |  |   |                                        |  |  |   |        | 
|Total assets measured at fair value on a nonrecurring basis |  | $                      | 10,588 |  |                                                           | $ |  |                                           |  | $ |                                       |  |  | $ | 10,588 | 
|                                                            |  |                        |        |  |                                                           |   |   |                                           |  |   |                                        |  |  |   |        | 
|As of December 31, 2012:                                    |  |                        |        |  |                                                           |   |   |                                           |  |   |                                        |  |  |   |        | 
|Impaired loans                                              |  | $                      | 10,072 |  |                                                           | $ |  |                                           |  | $ |                                       |  |  | $ | 10,072 | 
|Other real estate owned                                     |  |                        | 184    |  |                                                           |   |  |                                           |  |   |                                       |  |  |   | 184    | 
|                                                            |  |                        |        |  |                                                           |   |   |                                           |  |   |                                        |  |  |   |        | 
|Total assets measured at fair value on a nonrecurring basis |  | $                      | 10,256 |  |                                                           | $ |  |                                           |  | $ |                                       |  |  | $ | 10,256 | 
|                                                            |  |                        |        |  |                                                           |   |   |                                           |  |   |                                        |  |  |   |        | 

Management generally uses a discounted appraisal technique in valuing impaired assets, resulting in the discounting of
the collateral values underlying each impaired asset. A discounted tax assessment rate has been applied for smaller assets to determine the discounted collateral value. All impaired loans are classified as Level 3 in the fair value hierarchy.
Collateral may be real estate and / or business assets. Impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment.

Of the total impaired loan portfolio at March 31, 2013 totaling $9.4 million, $5.0 million of originated loans were carried at cost with a fair value of $4.2 million and a specific reserve allocation
of $752 thousand; $2.3 million of originated loans were carried at cost with no specific reserve allocation as the fair value of the collateral exceeded the carrying value; and $2.8 million of acquired loans were carried at fair value.



29



---

##### Table of Contents

Quantitative information about Level 3 fair value measurements at March 31, 2013 is included in the
table below:



|                        |  |                        |  |                                                 |  |                       |  |                                   
|----------------------- |  | ---------------------- |  | ----------------------------------------------- |  | --------------------- |  | ----------------------------------
|                        |  | Fair Value             |  | ValuationTechniques                             |  | Unobservable
Inputs   |  | Estimated Range(Weighted 
Average)
|                        |  | (Dollars in thousands)
|Impaired loans          |  | $9,351                 |  | Appraisal of real estate collateral             |  | Appraisal adjustments |  | 0% - 15%(4.9%)                    
|                        |  |                        |  | Valuation of business assets used as collateral |  | Valuation adjustments |  | 25% - 30%                         
|                        |  |                        |  |                                                 |  | Liquidation expenses  |  | 5% - 10%(9.8%)                    
|                        |  |                        |  |                                                 |  |                       |  |                                   
|Other real estate owned |  | $1,237                 |  | Appraisal of collateral                         |  | Appraisal adjustments |  | None                              
|                        |  |                        |  |                                                 |  | Liquidation expenses  |  | 5% - 10%(8.3%)                    

Quantitative information about Level 3 fair value measurements at December 31, 2012 is included in the table below:



|                        |  |                        |        |  |                     |                                                 |                    |                       |                                    |               
|----------------------- |  | ---------------------- | ------ |  | ------------------- | ----------------------------------------------- | ------------------ | --------------------- | ---------------------------------- | --------------
|                        |  | Fair Value             |        |  | ValuationTechniques |                                                 | UnobservableInputs |                       | Estimated Range(Weighted 
Average)
|                        |  | (Dollars in thousands)
|Impaired loans          |  | $                      | 10,072 |  |                     | Appraisal of real estate collateral             |                    | Appraisal adjustments |                                    | 0% - 15%(8.6%)
|                        |  |                        |        |  |                     | Valuation of business assets used as collateral |                    | Valuation adjustments |                                    | 25% - 30%     
|                        |  |                        |        |  |                     |                                                 |                    | Liquidation expenses  |                                    | 5% - 10%(9.9%)
|                        |  |                        |        |  |                     |                                                 |                    |                       |                                    |               
|Other real estate owned |  | $                      | 184    |  |                     | Appraisal of collateral                         |                    | Appraisal adjustments |                                    | None          
|                        |  |                        |        |  |                     |                                                 |                    | Liquidation expenses  |                                    | 5% - 10%(8.0%)

Valuation of real estate collateral may be discounted based on the age of the existing appraisal. No discounts are taken
for recent appraisals. Valuations related to business assets used as collateral are typically discounted more heavily due to the inherent level of uncertainty in determining the fair value of these types of assets.

Real estate properties acquired through, or in lieu of, foreclosure are to be sold and are carried at fair value less estimated cost to sell. Fair value
is based upon independent market prices or appraised value of the property. These assets are included in Level 3 fair value based upon the lowest level of input that is significant to the fair value measurement.

The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only
provided for a limited portion of the Companys assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Companys disclosures and those of
other companies may not be meaningful.

The following methods and assumptions were used to estimate the fair values of the Companys
financial instruments at March 31, 2013 and December 31, 2012:



30



---

##### Table of Contents

Cash and Cash Equivalents

The carrying amounts reported in the balance sheet for cash and short-term instruments approximate those assets fair values.

Securities

The fair value of securities available for sale (carried at
fair value) are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without
relying exclusively on quoted market prices for the specific securities but rather by relying on the securities relationship to other benchmark quoted prices. For certain securities which are not traded in active markets or are subject to
transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments are generally based on available market evidence (Level 3). In the absence of such evidence, managements best estimate is
used. Managements best estimate consists of both internal and external support on certain Level 3 investments. Internal cash flow models using a present value formula that includes assumptions market participants would use along with
indicative exit pricing obtained from broker/dealers (where available) were used to support fair values of certain Level 3 investments, if applicable.

Loans Receivable

The fair values of loans are estimated using discounted
cash flow analyses, using market rates at the balance sheet date that reflect the credit and interest rate-risk inherent in the loans. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and
prepayments of principal.

Impaired Loans

Impaired loans are those that are accounted for under FASB ASC Topic 310, Receivables, in which the Company has measured impairment generally based on the fair value of the loans
collateral. Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level
of input that is significant to the fair value measurements. The fair value consists of impaired loan balances of $9.4 million, net of a valuation allowance of $752 thousand as of March 31, 2013 and impaired loans of $10.7 million, net of a
valuation allowance of $616 thousand as of the year ended December 31, 2012.

Other Real Estate Owned

Other real estate owned consists of properties acquired as a result of accepting a deed in lieu of foreclosure, foreclosure or through
other means related to collateral on Bank loans. Costs relating to the development or improvement of assets are capitalized, and costs relating to holding the property are charged to expense. The Company had $1.2 million and $184 thousand of other
real estate owned at March 31, 2013 and December 31, 2012, respectively.

Repossessed Assets

Repossessed assets consist of personal property, specifically manufactured housing, that has been acquired for debts previously contracted
and are included in other assets on the balance sheet. Costs relating to these assets are charged to expense. There were no repossessed assets at March 31, 2013 or December 31, 2012.

Restricted Investment in Bank Stock

The carrying amount of restricted investment in bank stock approximates fair value, and considers the limited marketability of such securities.

Accrued Interest Receivable and Payable

The carrying amount of accrued
interest receivable and accrued interest payable approximates fair value.

Deposit Liabilities

The fair values disclosed for demand deposits (interest and noninterest checking), money market and savings accounts are, by definition,
equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered
in the market to the maturities of the time deposits.



31



---

##### Table of Contents

Short-Term Borrowings

The carrying amounts of short-term borrowings approximate their fair values.

Long-Term Debt

Fair values of FHLB advances are estimated using discounted cash flow analysis, based on quoted prices for new FHLB
advances with similar credit risk characteristics, terms and remaining maturity. These prices obtained from this active market represent a market value that is deemed to represent the transfer price if the liability were assumed by a third party.

Off-Balance Sheet Financial Instruments

Fair values for the Companys off-balance sheet financial instruments (lending commitments and letters of credit) are based on fees currently charged in the market to enter into similar agreements,
taking into account, the remaining terms of the agreements and the counterparties credit standing.

At March 31, 2013 and
December 31, 2012, the estimated fair values of the Companys financial instruments were as follows:



|                                              |  |                        |         |  |            |   |         |         |  |   |         |  |  |         |         |  |  |   |         | 
|--------------------------------------------- |  | ---------------------- | ------- |  | ---------- | - | ------- | ------- |  | - | ------- |  |  | ------- | ------- |  |  | - | ------- | 
|                                              |  | March 31, 2013         |        
|                                              |  | CarryingAmount         |         |  | Fair Value |   |         | Level 1 |  |   | Level 2 |  |  | Level 3 |        
|                                              |  | (Dollars in thousands) |        
|Assets:                                       |  |                        |         |  |            |   |         |         |  |   |         |  |  |         |         |  |  |   |         | 
|Cash and cash equivalents                     |  | $                      | 45,069  |  |            | $ | 45,069  |         |  | $ | 45,069  |  |  |         |        |  |  |   |        | 
|Securities available for sale                 |  |                        | 56,337  |  |            |   | 56,337  |         |  |   | 31      |  |  | $       | 56,306  |  |  |   |        | 
|Loans receivable, net                         |  |                        | 328,828 |  |            |   | 333,157 |         |  |   |        |  |  |         |        |  |  | $ | 333,157 | 
|Restricted stock                              |  |                        | 2,789   |  |            |   | 2,789   |         |  |   |        |  |  |         | 2,789   |  |  |   |        | 
|Accrued interest receivable                   |  |                        | 1,401   |  |            |   | 1,401   |         |  |   |        |  |  |         | 1,401   |  |  |   |        | 
|Liabilities:                                  |  |                        |         |  |            |   |         |         |  |   |         |  |  |         |         |  |  |   |         | 
|Deposits                                      |  |                        | 358,442 |  |            |   | 361,052 |         |  |   |        |  |  |         | 361,052 |  |  |   |        | 
|Short-term borrowings                         |  |                        | 25,000  |  |            |   | 25,000  |         |  |   |         |  |  |         | 25,000  |  |  |   |         | 
|Long-term debt                                |  |                        | 13,000  |  |            |   | 12,968  |         |  |   |        |  |  |         | 12,968  |  |  |   |        | 
|Accrued interest payable                      |  |                        | 460     |  |            |   | 460     |         |  |   |        |  |  |         | 460     |  |  |   |        | 
|Off-balance sheet credit related instruments: |  |                        |         |  |            |   |         |         |  |   |         |  |  |         |         |  |  |   |         | 
|Commitments to extend credit                  |  |                        |        |  |            |   |        |         |  |   |        |  |  |         |        |  |  |   |        | 
|                                              | 
|                                              |  | December 31, 2012      |        
|                                              |  | CarryingAmount         |         |  | Fair Value |   |         | Level 1 |  |   | Level 2 |  |  | Level 3 |        
|                                              |  | (Dollars in thousands) |        
|Assets:                                       |  |                        |         |  |            |   |         |         |  |   |         |  |  |         |         |  |  |   |         | 
|Cash and cash equivalents                     |  | $                      | 11,016  |  |            | $ | 11,016  |         |  | $ | 11,016  |  |  |         |        |  |  |   |        | 
|Securities available for sale                 |  |                        | 16,679  |  |            |   | 16,679  |         |  |   | 140     |  |  | $       | 16,539  |  |  |   |        | 
|Loans receivable, net                         |  |                        | 241,815 |  |            |   | 245,493 |         |  |   |        |  |  |         |        |  |  | $ | 245,493 | 
|Restricted stock                              |  |                        | 1,337   |  |            |   | 1,337   |         |  |   |        |  |  |         | 1,337   |  |  |   |        | 
|Accrued interest receivable                   |  |                        | 1,040   |  |            |   | 1,040   |         |  |   |        |  |  |         | 1,040   |  |  |   |        | 
|Liabilities:                                  |  |                        |         |  |            |   |         |         |  |   |         |  |  |         |         |  |  |   |         | 
|Deposits                                      |  |                        | 233,043 |  |            |   | 235,563 |         |  |   |        |  |  |         | 235,563 |  |  |   |        | 
|Long-term debt                                |  |                        | 13,000  |  |            |   | 12,902  |         |  |   |        |  |  |         | 12,902  |  |  |   |        | 
|Accrued interest payable                      |  |                        | 378     |  |            |   | 378     |         |  |   |        |  |  |         | 378     |  |  |   |        | 
|Off-balance sheet credit related instruments: |  |                        |         |  |            |   |         |         |  |   |         |  |  |         |         |  |  |   |         | 
|Commitments to extend credit                  |  |                        |        |  |            |   |        |         |  |   |        |  |  |         |        |  |  |   |        | 



32



---

##### Table of Contents

Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations.

The following discussion summarizes First Prioritys results of operations and highlights
material changes for the three months ended March 31, 2013 and 2012, the years ended December 31, 2012 and 2011, and its financial condition as of March 31, 2013, December 31, 2012 and December 31, 2011. This discussion is
intended to provide additional information about the significant changes in the results of operations presented in the accompanying consolidated financial statements for First Priority and its wholly owned subsidiary, First Priority Bank. First
Prioritys consolidated financial condition and results of operations consist essentially of First Priority Banks financial condition and results of operations. Current performance does not guarantee, and may not be indicative of, similar
performance in the future.

You should read this discussion and analysis in conjunction with the consolidated unaudited
financial statements for the three months ended March 31, 2013 as well as with the audited consolidated financial statements and the accompanying footnotes for the year ended December 31, 2012, included in the Companys Form 10-K
filed with the Securities and Exchange Commission.

This discussion and analysis of financial condition and results of
operations contains forward-looking statements that involve risks and uncertainties, such as First Prioritys plans, objectives, expectations and intentions. Therefore, this analysis should be read in conjunction with the Cautionary
Statement Regarding Forward-Looking Statements presented elsewhere in this document.

Overview

The following table sets forth selected measures of First Prioritys financial position or performance for the dates or periods
indicated.



|                       |  |                                                   |         |   |                                           |      |         |  |  |   |         | 
|---------------------- |  | ------------------------------------------------- | ------- | - | ----------------------------------------- | ---- | ------- |  |  | - | ------- | 
|                       |  | As of and for the threemonths endedMarch 31, 2013 |         |   | As of and for the yearsended December 31, |     
|                       |  |                                                   | 2012    |   |                                           | 2011 |        
|                       |  | (Dollars in thousands)                            |        
|Total revenue (1)      |  | $                                                 | 3,017   |   |                                           | $    | 10,673  |  |  | $ | 10,848  | 
|Net income (loss)      |  |                                                   | (648    | ) |                                           |      | 753     |  |  |   | 70      | 
|Total assets           |  |                                                   | 442,696 |   |                                           |      | 275,146 |  |  |   | 285,350 | 
|Total loans receivable |  |                                                   | 331,393 |   |                                           |      | 244,275 |  |  |   | 240,115 | 
|Total deposits         |  |                                                   | 358,442 |   |                                           |      | 233,043 |  |  |   | 245,736 | 



|(1) | Total revenue equals net interest income plus non-interest income
|--- | -----------------------------------------------------------------

Like most financial institutions, First Priority derives the majority of its income from interest it receives on its interest-earning assets, such as loans and investments. First Prioritys primary
source of funds for making these loans and investments is its deposits, on which it pays interest. Consequently, one of the key measures of First Prioritys success is its amount of net interest income, or the difference between the income on
its average interest-earning assets and the expense on its average interest-bearing liabilities, such as deposits and borrowings. Another key measure is the spread between the yield First Priority earns on these average interest-earning assets and
the rate it pays on its average interest-bearing liabilities, which is called its net interest spread.

There are risks
inherent in all loans, and First Priority maintains an allowance for loan losses to absorb probable losses on existing loans that may become uncollectible. This allowance is maintained by charging a provision for loan losses against operating
earnings. A detailed discussion of this process, as well as several tables describing the allowance for loan losses is included.

In addition to earning interest on its loans and investments, First Priority earns income through other sources, such as fees and other charges to its banking customers and income from providing wealth
management services, as well as net gains or losses realized from the sale of assets. The various components of non-interest income, as well as non-interest expense, are described in this section.

Income Statement Review

First Prioritys results of operations are affected by five major elements: (1) net interest income, or the difference between
interest income earned on loans and investments and interest expense paid on deposits and borrowed funds; (2) the provision for loan losses, or the amount added to the allowance for loan losses to provide reserves for inherent losses on loans;
(3) non-interest income, consisting of income from wealth management services, fees and other charges to our banking customers, and net gains or losses realized from the sale of assets; (4) non-interest expense, which consists primarily of
salaries, employee benefits and other operating expenses; and (5) income taxes, including deferred taxes, when applicable. Each of these major elements is reviewed in more detail in the following discussion.



33



---

##### Table of Contents

Critical Accounting Policies

First Priority has adopted various accounting policies that govern the application of accounting principles generally accepted in the
United States of America and that are consistent with general practices within the banking industry in the preparation of its consolidated financial statements. First Prioritys significant accounting policies are described in Note 1 of the
Unaudited Notes to Consolidated Financial Statements.

Certain accounting policies involve significant judgments and
assumptions by First Priority that have a material impact on the carrying value of certain assets and liabilities. First Priority considers these accounting policies to be critical accounting policies. The judgment and assumptions used are based on
historical experience and other factors, which First Priority believes to be reasonable under the circumstances and have been reasonably consistent with prior results. Because of the nature of the judgments and assumptions made, actual results could
differ from these estimates, which could have a material impact on the carrying values of its assets and liabilities and its results of operations. Material estimates that are particularly susceptible to significant change in the near term relate to
investment securities impairment evaluation, impairment of restricted investments in bank stocks, the determination of the allowance for loan losses, valuation of other real estate owned, the analysis of potential impairment of goodwill, the
valuation of deferred tax assets and accounting for stock-based compensation.

Investment Securities Impairment
Evaluation. In estimating other-than-temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost (2) the financial condition and near-term prospects of the
issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. When a determination is made that an other-than-temporary
impairment exists but the Company does not intend to sell the debt security and it is more likely than not that it will be required to sell the debt security prior to its anticipated recovery, the other-than-temporary impairment is separated into
(a) the amount of the total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the debt security (the credit loss) and (b) the amount of the total other-than-temporary impairment related to
all other factors. The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings. The amount of the total other-than-temporary impairment related to all other factors is recognized in other
comprehensive income. Management believes that there are no investment securities with other-than-temporary impairment for each of the reporting periods presented.

Restricted Investments in Bank Stocks. Restricted investments in bank stocks, which represents the required investment in the common stock of correspondent banks, are carried at cost and
consists of stock of the Federal Home Loan Bank of Pittsburgh (FHLB) and Atlantic Central Bankers Bank. Federal law requires a member institution of the FHLB to hold FHLB stock according to a predetermined formula. Managements
determination of whether these investments are impaired is based on their assessment of the ultimate recoverability of their cost rather than by recognizing temporary declines in value.

Acquired Loans.Acquired loans are initially recorded at their acquisition date fair values. The carryover of allowance for
loan losses is prohibited as any credit losses in the loans are included in the determination of the fair value of the loans at the acquisition date. Fair values for acquired loans are based on a discounted cash flow methodology that involves
assumptions and judgments as to credit risk, prepayment risk, liquidity risk, default rates, loss severity, payment speeds, collateral values and discount rate.

For acquired loans that are not deemed impaired at acquisition, credit discounts representing principal losses expected over the life of the loan are a component of the initial fair value. Subsequent to
the acquisition date, the methods used to estimate the required allowance for loan losses for these loans is similar to originated loans. However, the Company records a provision for loan losses only when the required allowance exceeds any remaining
credit discount. The remaining differences between the purchase price and the unpaid principal balance at the date of acquisition are recorded in interest income over the life of the loan.

Acquired loans that have evidence of deterioration in credit quality since origination and for which it is probable, at acquisition, that
the Company will be unable to collect all contractually required payments are accounted for as impaired loans under ASC 310-30. The excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable discount
and is recognized into interest income over the remaining life of the loans. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the non-accretable
discount. The non-accretable discount represents estimated future credit losses expected to be incurred over the life of the loan. Subsequent decreases to the expected cash flows require the Company to evaluate the need for an allowance for loan
losses on these loans. Subsequent improvements in expected cash flows result in the reversal of a corresponding amount of the non-accretable discount which the Company then reclassifies as an accretable discount that is recognized into interest
income over the remaining life of the loans using the interest method.

Acquired loans that met the criteria for non-accrual
of interest prior to acquisition may be considered performing upon acquisition, or in the future, regardless of whether the customer is contractually delinquent, if the Company can reasonably estimate the timing and amount of the expected cash flows
on such loans and if the Company expects to fully collect the new carrying value of the loans. As such, the Company may no longer consider the loan to be non-accrual or non-performing and may accrue interest on



34



---

##### Table of Contents

these loans, including the impact of any accretable discount. For acquired loans that are not deemed impaired at acquisition, credit discounts representing the principal losses expected over the
life of the loan are a component of the initial fair value and amortized over the life of the asset. Subsequent to the acquisition date, the methods utilized to estimate the required allowance for loan losses for these loans is similar to originated
loans, however, the Company records a provision for loan losses only when the required allowance exceeds any remaining pooled discounts for loans evaluated collectively for impairment.

Allowance for Loan Losses.The allowance for loan losses consists of the allowance for loan losses and the reserve for
unfunded lending commitments. The allowance for loan losses represents managements estimate of losses inherent in the loan portfolio as of the balance sheet date and is recorded as a reduction to loans. The reserve for unfunded lending
commitments represents managements estimate of losses inherent in its unfunded loan commitments and is recorded in other liabilities on the consolidated balance sheet. The allowance for loan losses is increased by the provision for loan
losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of
loans receivable are charged off to the allowance as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely. Because all identified losses are immediately charged off, no portion of the allowance for
loan losses is restricted to any individual loan or groups of loans, and the entire allowance is available to absorb any and all loan losses.

The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management performs a quarterly evaluation of the adequacy of the
allowance. The allowance is based on the Companys past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrowers ability to repay, the estimated value of any underlying collateral,
composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes
available.

The allowance consists of specific, general and unallocated components. The specific component relates to loans
that are classified as impaired. For loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that
loan. The general component covers pools of loans by loan class including commercial loans not considered impaired, as well as smaller balance homogeneous loans, such as residential real estate, home equity and other consumer loans. These pools of
loans are evaluated for loss exposure based upon historical loss rates for each of these categories of loans, adjusted for qualitative factors. These qualitative risk factors include:



| | 1. | Lending policies and procedures, including underwriting standards and collection, charge-off, and recovery practices.
| | -- | ---------------------------------------------------------------------------------------------------------------------



| | 2. | National, regional, and local economic and business conditions as well as the condition of various market segments, including the value of underlying collateral for
collateral dependent loans.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | Nature and volume of the portfolio and terms of loans.
| | -- | ------------------------------------------------------



| | 4. | Management team with experience, depth, and knowledge in banking and in many areas of lending. Each contributes to the sound credit culture and control within the Bank.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. | Volume and severity of past due, classified and nonaccrual loans as well as and other loan modifications.
| | -- | ---------------------------------------------------------------------------------------------------------



| | 6. | The Bank engages a third party to perform an independent review of the loan portfolio as a measure for quality and consistency in credit evaluation and credit
decisions.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 7. | Existence and effect of any concentrations of credit and changes in the level of such concentrations.
| | -- | -----------------------------------------------------------------------------------------------------



| | 8. | Effect of external factors, such as competition and legal and regulatory requirements.
| | -- | --------------------------------------------------------------------------------------

Each factor is assigned a value to reflect improving, stable or declining conditions based on managements best judgment using
relevant information available at the time of the evaluation. Adjustments to the factors are supported through documentation of changes in conditions in a narrative accompanying the allowance for loan loss calculation.

A majority of the Banks loans are to business owners of many types. The Bank makes commercial loans for real estate development and
other business purposes required by our customers.

The Banks credit policies determine advance rates against the
different forms of collateral that can be pledged against commercial loans. Typically, the majority of loans will be limited to a percentage of their underlying collateral values such as real estate values, equipment, eligible accounts receivable
and inventory. Individual loan advance rates may be higher or lower depending upon the financial strength of the borrower and/or term of the loan. The assets financed through commercial loans are used within the business for its ongoing operation.
Repayment of these kinds of loans generally comes from the cash flow of the business or the ongoing conversions of assets. Commercial real estate loans include long-term loans financing commercial properties. Repayment of this kind of loan is
dependent upon either the ongoing cash flow of the borrowing entity or the resale of or lease of the subject property. Commercial real estate loans typically require a loan to value ratio of not greater than 80% and vary in terms.



35



---

##### Table of Contents

Residential mortgages and home equity loans are secured by the borrowers residential
real estate in either a first or second lien position. Residential mortgages and home equity loans have varying loan rates depending on the financial condition of the borrower and the loan to value ratio. Residential mortgages have amortizations up
to 30 years and home equity loans have maturities up to 10 years.

Other consumer loans include installment loans, car
loans, and overdraft lines of credit. The majority of these loans are secured.

An unallocated component is maintained to
cover uncertainties that could affect managements estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating
specific and general losses in the portfolio.

A loan is considered impaired when, based on current information and events, it
is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment
status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines
the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the
borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial and industrial loans, commercial real estate loans and commercial
construction loans by either the present value of expected future cash flows discounted at the loans effective interest rate or the fair value of the collateral if the loan is collateral dependent.

An allowance for loan losses is established for an impaired loan if its carrying value exceeds its estimated fair value. The estimated
fair values of substantially all of the Companys impaired loans are measured based on the estimated fair value of the loans collateral.

For commercial loans secured by real estate, estimated fair values are determined primarily through third-party appraisals. When a real estate secured loan becomes impaired, a decision is made regarding
whether an updated certified appraisal of the real estate is necessary. This decision is based on various considerations, including the age of the most recent appraisal, the loan-to-value ratio based on the original appraisal and the condition of
the property. Appraised values may be discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include estimated costs to sell the property.

For commercial and industrial loans secured by non-real estate collateral, such as accounts receivable, inventory and equipment,
estimated fair values are determined based on the borrowers financial statements, inventory reports, accounts receivable agings or equipment appraisals or invoices. Indications of value from these sources are generally discounted based on the
age of the financial information or the quality of the assets.

Large groups of smaller balance homogeneous loans are
collectively evaluated for impairment. Accordingly, the Company does not separately identify individual residential mortgage loans, home equity loans and other consumer loans for impairment disclosures, unless such loans are the subject of a
troubled debt restructuring agreement.

Acquired loans are recorded at acquisition date at their acquisition date fair values,
and therefore, are excluded from the calculation of loan loss reserves as of the acquisition date. To the extent there is a decrease in the present value of cash flows from the acquired impaired loans after the date of acquisition, the Company
records a provision for potential losses. During the three months ending March 31, 2013 and 2012, the Company did not record an allowance for loan losses for acquired impaired loans.

For acquired loans that are not deemed impaired at acquisition, credit discounts representing the principal losses expected over the life
of the loan are a component of the initial fair value. Subsequent to the acquisition date, the methods utilized to estimate the required allowance for loan losses for these loans is similar to originated loans, however, the Company records a
provision for loan losses only when the required allowance exceeds any remaining pooled discounts for loans evaluated collectively for impairment. During the three months ending March 31, 2013 and 2012, the Company did not record a provision
for loan losses on acquired non-impaired loans.

The allowance calculation methodology includes further segregation of loan
classes into risk rating categories. The borrowers overall financial condition, repayment sources, guarantors and value of collateral, if appropriate, are evaluated annually for commercial loans or when credit deficiencies arise, such as
delinquent loan payments, for commercial and consumer loans. Credit quality risk ratings include regulatory classifications of special mention, substandard, doubtful and loss. Loans classified as special



36



---

##### Table of Contents

mention have potential weaknesses that deserve managements close attention. If uncorrected, the potential weaknesses may result in deterioration of the repayment prospects. Loans classified
as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They include loans that are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged,
if any. Loans classified as doubtful have all the weaknesses inherent in loans classified substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans
classified as a loss are considered uncollectible and are charged to the allowance for loan losses. Loans not classified are rated pass.

In addition, Federal regulatory agencies, as an integral part of their examination process, periodically review the Companys allowance for loan losses and may require the Company to recognize
additions to the allowance based on their judgments about information available to them at the time of their examination, which may not be currently available to management. Based on managements comprehensive analysis of the loan portfolio,
management believes the current level of the allowance for loan losses is adequate.

See the Allowance for Loan Losses
sections related to Balance Sheet Review as of March 31, 2013 and December 31, 2012 for more information.

Other Real Estate Owned. Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially
recorded at fair value less cost to sell at the date of foreclosure, establishing a new cost basis. Any write-down, at or prior to the dates the real estate is considered foreclosed, is charged to the allowance for loan losses. Subsequent to
foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance (write-downs)
are included in other non-interest expenses. Any gain or loss upon the sale of real estate owned is charged to operations as incurred.

Goodwill.Goodwill represents the excess of the cost of an acquired entity over the fair value of the identifiable net assets acquired in accordance with the acquisition method of
accounting. Goodwill is not amortized but is reviewed for potential impairment on an annual basis, or more often if events or circumstances indicate that there may be impairment. Goodwill is tested for impairment at the reporting unit level and an
impairment loss is recorded to the extent that the carrying amount of goodwill exceeds its implied fair value. The Company employs general industry practices in evaluating the fair value of its goodwill. Any impairment loss related to goodwill and
other intangible assets is reflected as other non-interest expense in the statement of income in the period in which the impairment is determined. No assurance can be given that future impairment tests will not result in a charge to earnings.

Income Taxes. Deferred taxes are provided on the liability method whereby deferred tax assets are recognized
for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company files a consolidated federal income tax return with the Bank.

The Company evaluates the carrying amount of its deferred tax assets on a quarterly basis or more frequently, if necessary, in accordance
with the guidance provided in Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 740 (ASC 740), in particular, applying the criteria set forth therein to determine whether it is more likely than not (i.e. a
likelihood of more than 50%) that some portion, or all, of the deferred tax asset will not be realized within its life cycle, based on the weight of available evidence. If management makes a determination based on the available evidence that it
is more likely than not that some portion or all of the deferred tax assets will not be realized in future periods a valuation allowance is calculated and recorded. These determinations are inherently subjective and dependent upon estimates and
judgments concerning managements evaluation of both positive and negative evidence. In assessing the need for a valuation allowance, the Company carefully weighed both positive and negative evidence currently available. Judgment is
required when considering the relative impact of such evidence. The weight given to the potential effect of positive and negative evidence must be commensurate with the extent to which it can be objectively verified.

When determining an estimate for a valuation allowance, the Company assessed the possible sources of taxable income available under tax
law to realize a tax benefit for deductible temporary differences and carryforwards as defined in paragraph 740-10-30-18. A cumulative loss in recent years is a significant piece of negative evidence that is difficult to overcome. As a result of
cumulative losses in the Companys formative years and the uncertain nature of the current economic environment, the Company did not use projections of future taxable income, exclusive of reversing temporary timing differences and
carryforwards, as a factor.

The Company also considers tax planning strategies which could accelerate taxable income and
allow the Company to take advantage of future deductible differences. The strategy must be prudent and feasible; however, the Company does not need to have specific plans to implement the strategy, but could be an opportunity that the Company could
implement in order to take advantage of net operating loss carryforwards. One such strategy would be unrealized gains which exist on available for sale securities.



37



---

##### Table of Contents

Based on the analysis of available positive and negative evidence, the Company determined
that a valuation allowance should be recorded as of each period presented. As of March 31, 2013, First Priority has a total net deferred tax asset of $5.3 million (before the valuation allowance) which is fully reserved through the valuation
allowance for deferred taxes. Similarly, as of December 31, 2012, the Company had a total net deferred tax asset of $3.7 million (before the valuation allowance) which is also fully reserved through the related valuation allowance.

The incremental net deferred tax assets resulting from the merger with Affinity totaled $1.6 million, as discussed in Note 2 
Merger with Affinity Bancorp, Inc. Included in this net deferred tax assets, Affinity had a net operating loss carryforward for Federal tax purposes of $1.5 million, or a $500 thousand tax impact at the statutory federal income tax rate
of 34%, which is subject to certain limitations and expires in 2028 if not fully utilized.

The most significant component of
the Companys unrecognized deferred tax asset balances relates to the Companys net operating loss carryforward of $9.0 million and $6.8 million, respectively, or a $3.1 million and $2.3 million tax impact computed at the statutory federal
income tax rate of 34%, respectively as of March 31, 2013 and December 31, 2012 which expire in 2026 through 2033.

In regards to the acquisition of Prestige Community Bank in February, 2008, the Company acquired a NOL for tax purposes which totaled
$2.0 million, or a $684 thousand tax impact at the statutory federal income tax rate of 34%, as of both March 31, 2013 and December 31, 2012, respectively, which is subject to certain limitations and expires in 2028 if not fully utilized.
As the Company is able to utilize the acquired NOL, the impact of this reduction in the Companys tax liability is recognized as a reduction of goodwill.

Stock Based Compensation. Compensation costs related to share-based payment transactions are recognized in the financial statements over the period that an employee provides service in
exchange for the award. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model based on these management assumptions. The dividend yield assumption is based on the Companys history
and expectation of dividend payouts. Due to the Companys lack of sufficient historical exercise data and the limited period of time for which shares have been issued, the simplified method is used to determine the expected life of
options, calculated as the average of the sum of the vesting term and original contractual term for all periods presented. The expected volatility percentage is based on the average expected volatility of similar public financial institutions in the
Companys market area. The risk-free interest rates for periods within the contractual life of the awards are based on the U.S. Treasury yield curve in effect at the time of the grant.

Results of Operations

Income Statement Review

First Prioritys results of operations are affected by five major elements: (1) net interest income, or the difference between
interest income earned on loans and investments and interest expense paid on deposits and borrowed funds (2) the provision for loan losses, or the amount added to the allowance for loan losses to provide reserves for inherent losses on loans;
(3) non-interest income, consisting of income from wealth management services, fees and other charges to our banking customers, and net gains or losses realized from the sale of assets; (4) non-interest expense, which consists primarily of
salaries, employee benefits and other operating expenses; and (5) income taxes, including deferred taxes, when applicable. Each of these major elements is reviewed in more detail in the following discussion.

Summary

For the three
months ended March 31, 2013, First Priority reported a net loss of $648 thousand compared to net income of $262 thousand for the three months ended March 31, 2012. Reported results are before preferred dividends and amortization of a
preferred warrant, totaling $133 thousand for each of the three months ended March 31, 2013 and 2012 related to preferred stock issued to the U.S. Treasury under the TARP Capital Purchase Program during 2009. The resulting loss to common
shareholders, after the preferred dividends and amortization, was $781 thousand, or $0.18 per basic and fully diluted common share for the three months ended March 31, 2013, compared to net income to common shareholders of $129 thousand, or
$0.04 per basic and fully diluted common share, on this same basis for the three month period ended March 31, 2012.

The
results of Affinitys operations are included in the Companys consolidated financial statements prospectively from the date of the merger, February 28, 2013; therefore, one month of Affinitys operating results are included in
the first quarter of 2013.

First Prioritys reported consolidated results decreased $910 thousand for the first three
months of 2013 compared to the same period in 2012. Included in the 2013 results are $797 thousand of merger related costs compared to none for the prior year. Total revenue for the three months ended March 31, 2013 was $3.02 million,
compared to $2.60 million in 2012, as net interest income in 2013 was $2.90 million and non-interest income was $120 thousand. Net interest income for the first three months of 2012 was $2.34 million and non-interest income was $261
thousand, which included $142 thousand of gains recorded from the sale of investment securities available for sale. The provision for loan losses was $165 thousand for the three months ended March 31, 2013



38



---

##### Table of Contents

versus $175 thousand for the same three month period in the prior year. Operating expenses were $3.50 million, $1.34 million higher than the first three months of 2012 from $2.16 million in 2012
primarily due to $797 thousand of merger related costs, $319 thousand in increased salaries and employee benefits primarily due to the merger with Affinity and $118 thousand related to other real estate owned costs.

Net Interest Income

First Prioritys primary source of revenue is net interest income. Net interest income is determined by the average balances of
interest-earning assets and interest-bearing liabilities and the interest rates earned and paid on these balances. The amount of net interest income recorded by First Priority is affected by the rate, mix and amount of growth of interest-earning
assets and interest-bearing liabilities, the amount of interest-earning assets as compared to the amount of interest-bearing liabilities, and by changes in interest rates earned and interest rates paid on these assets and liabilities.

The following table sets forth, for the three months ended March 31, 2013 and 2012, information related to First Prioritys
average balances, yields on average assets, and costs of average liabilities. Average balances are derived from the daily balances throughout the periods indicated and yields are derived by dividing income or expense by the average balance of the
corresponding assets or liabilities. Average loans are stated net of deferred costs. Non-accruing loans averaged $5.0 million and $6.8 million for the three months ended March 31, 2013 and 2012, respectively.

Average Balances, Income and Expenses, and Rates



|                                           |  |                                      |         |  |                        |   |       |            |  |  |                |   |  |                        |         |  |            |   |       |  |  |  |      |  
|------------------------------------------ |  | ------------------------------------ | ------- |  | ---------------------- | - | ----- | ---------- |  |  | -------------- | - |  | ---------------------- | ------- |  | ---------- | - | ----- |  |  |  | ---- | -
|                                           |  | For the Three Months Ended March 31, |        
|                                           |  | 2013                                 |         |  | 2012                   |  
|                                           |  | AverageBalance                       |         |  | InterestIncome/Expense |   |       | Yield/Rate |  |  | AverageBalance |   |  | InterestIncome/Expense |         |  | Yield/Rate |  
|                                           |  | (Dollars in thousands)               |        
|Interest-earning assets:                   |  |                                      |         |  |                        |   |       |            |  |  |                |   |  |                        |         |  |            |   |       |  |  |  |      |  
|Loans receivable                           |  | $                                    | 274,485 |  |                        | $ | 3,488 |            |  |  | 5.15           | % |  | $                      | 241,521 |  |            | $ | 3,109 |  |  |  | 5.18 | %
|Taxable investment securities              |  |                                      | 29,910  |  |                        |   | 166   |            |  |  | 2.25           | % |  |                        | 25,362  |  |            |   | 193   |  |  |  | 3.06 | %
|Nontaxable investment securities           |  |                                      | 2,465   |  |                        |   | 27    |            |  |  | 4.43           | % |  |                        | 1,018   |  |            |   | 11    |  |  |  | 4.55 | %
|                                           |  |                                      |         |  |                        |   |       |            |  |  |                |   |  |                        |         |  |            |   |       |  |  |  |      |  
|Total investment securities                |  |                                      | 32,375  |  |                        |   | 193   |            |  |  | 2.41           | % |  |                        | 26,380  |  |            |   | 204   |  |  |  | 3.11 | %
|Deposits with banks and other              |  |                                      | 10,338  |  |                        |   | 9     |            |  |  | 0.35           | % |  |                        | 4,443   |  |            |   | 3     |  |  |  | 0.28 | %
|                                           |  |                                      |         |  |                        |   |       |            |  |  |                |   |  |                        |         |  |            |   |       |  |  |  |      |  
|Total interest earning assets              |  |                                      | 317,198 |  |                        |   | 3,690 |            |  |  | 4.72           | % |  |                        | 272,344 |  |            |   | 3,316 |  |  |  | 4.90 | %
|Non-interest-earning assets                |  |                                      | 13,468  |  |                        |   |       |            |  |  |                |   |  |                        | 9,594   |  |            |   |       |  |  |  |      |  
|                                           |  |                                      |         |  |                        |   |       |            |  |  |                |   |  |                        |         |  |            |   |       |  |  |  |      |  
|TOTAL ASSETS                               |  | $                                    | 330,666 |  |                        |   |       |            |  |  |                |   |  | $                      | 281,938 |  |            |   |       |  |  |  |      |  
|                                           |  |                                      |         |  |                        |   |       |            |  |  |                |   |  |                        |         |  |            |   |       |  |  |  |      |  
|Interest-bearing liabilities:              |  |                                      |         |  |                        |   |       |            |  |  |                |   |  |                        |         |  |            |   |       |  |  |  |      |  
|Demand, interest-bearing                   |  | $                                    | 22,289  |  |                        |   | 14    |            |  |  | 0.26           | % |  | $                      | 4,392   |  |            |   | 2     |  |  |  | 0.23 | %
|Money market and savings                   |  |                                      | 74,974  |  |                        |   | 78    |            |  |  | 0.42           | % |  |                        | 56,713  |  |            |   | 97    |  |  |  | 0.69 | %
|Time deposits                              |  |                                      | 145,719 |  |                        |   | 636   |            |  |  | 1.77           | % |  |                        | 159,037 |  |            |   | 796   |  |  |  | 2.01 | %
|Borrowed funds                             |  |                                      | 18,003  |  |                        |   | 65    |            |  |  | 1.45           | % |  |                        | 8,275   |  |            |   | 83    |  |  |  | 4.02 | %
|                                           |  |                                      |         |  |                        |   |       |            |  |  |                |   |  |                        |         |  |            |   |       |  |  |  |      |  
|Total interest-bearing liabilities         |  |                                      | 260,985 |  |                        |   | 793   |            |  |  | 1.23           | % |  |                        | 228,417 |  |            |   | 978   |  |  |  | 1.72 | %
|Non interest-bearing liabilities:          |  |                                      |         |  |                        |   |       |            |  |  |                |   |  |                        |         |  |            |   |       |  |  |  |      |  
|Demand, non-interest bearing deposits      |  |                                      | 31,326  |  |                        |   |       |            |  |  |                |   |  |                        | 24,720  |  |            |   |       |  |  |  |      |  
|Other liabilities                          |  |                                      | 1,421   |  |                        |   |       |            |  |  |                |   |  |                        | 1,122   |  |            |   |       |  |  |  |      |  
|Shareholders equity                       |  |                                      | 36,934  |  |                        |   |       |            |  |  |                |   |  |                        | 27,679  |  |            |   |       |  |  |  |      |  
|                                           |  |                                      |         |  |                        |   |       |            |  |  |                |   |  |                        |         |  |            |   |       |  |  |  |      |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |  | $                                    | 330,666 |  |                        |   |       |            |  |  |                |   |  | $                      | 281,938 |  |            |   |       |  |  |  |      |  
|                                           |  |                                      |         |  |                        |   |       |            |  |  |                |   |  |                        |         |  |            |   |       |  |  |  |      |  
|Net interest income/rate spread            |  |                                      |         |  |                        | $ | 2,897 |            |  |  | 3.49           | % |  |                        |         |  |            | $ | 2,338 |  |  |  | 3.18 | %
|                                           |  |                                      |         |  |                        |   |       |            |  |  |                |   |  |                        |         |  |            |   |       |  |  |  |      |  
|Net interest margin                        |  |                                      |         |  |                        |   |       |            |  |  | 3.70           | % |  |                        |         |  |            |   |       |  |  |  | 3.45 | %
|                                           |  |                                      |         |  |                        |   |       |            |  |  |                |   |  |                        |         |  |            |   |       |  |  |  |      |  



39



---

##### Table of Contents

Net interest income increased 23.9%, or $559 thousand, in the first three months of 2013 to
$2.90 million from $2.34 million for the same period in 2012. The increase in net interest income resulted from growth of average interest earning assets due to the merger with Affinity. Average interest earning assets for the first three
months of 2013 increased $44.9 million, or 16.5%, from $272.3 million in 2012 to $317.2 million in 2013, primarily related to average loans which grew $33.0 million, or 13.7%, from an average of $241.5 million to $274.5 million. Average
interest bearing liabilities increased $32.6 million, or 14.3%, in 2013 to $261.0 million in 2013 from $228.4 million in 2012, which include increases in average interest bearing demand deposits of $17.9 million, $18.3 million in money market
and savings deposits and $9.7 million in borrowings while time deposits decreased $13.3 million.

Net interest margin
increased 25 basis points from 3.45% for the first three months of 2012 to 3.70% for the same period in 2013. Reflecting the declining interest rate environment, First Prioritys average yield on earning assets declined 18 basis points compared
to the prior year three month period from 4.90% to 4.72%, while the average cost of funds declined 49 basis points from 1.72% to 1.23%. Average rates on money market and savings deposits declined 27 basis points and time deposit average rates
declined 24 basis points in the current year three month period compared to the prior years first three months. The federal funds rate remained constant throughout the year as set by the Federal Open Market Committee (FOMC) of the
Federal Reserve at a range of 0.00% to 0.25%.

Net interest spread, defined as the mathematical difference between the yield
on average earning assets and the rate paid on average interest bearing liabilities, increased 31 basis points from 3.18% for the first three months of 2012 to 3.49% for the same period in 2013. This slight increase in the net interest spread was
impacted by the continued low rate environment and the effect of those interest rates on repricing assets and liabilities and due to the changing mix of average earning assets and average interest bearing liabilities during the two periods. Interest
rates paid on new and repricing liabilities declined consistent with the lower level of market rates of interest. Net interest spread was also positively impacted by the fair value adjustments made during acquisition accounting of earning assets and
interest bearing liabilities acquired in the merger with Affinity which have been adjusted to yield current market rates and costs.

Analysis of Changes in Net Interest Income

Net interest income can also be analyzed in terms of the impact of changing interest rates and changing volume. As shown in the Changes in Net Interest Income table below, total net interest income
increased $559 thousand for the first three months of 2013 compared to the same period of 2012, of which incremental growth of balances accounted for an increase of $417 thousand while the change in our relative rate structure resulted in an
increase in net interest income of $142 thousand. The increased volume of average earning assets provided an additional $445 thousand in interest income, $394 thousand provided from loan growth and $46 thousand from investment securities. At
the same time, however, the lower average yield on earning assets, partially due to a larger proportion of earning assets in lower yielding investments as compared to loans, resulted in a reduction of interest income between the periods of $71
thousand. From a funding perspective, although interest-bearing liabilities increased between the two periods, the incremental growth at an overall lower average rate resulted in an increase of interest expense related to the volume of only $28
thousand while the lower average rates resulted in lower interest expense of $213 thousand by comparison.

The following table
sets forth the effect which varying levels of average interest-earning assets, interest-bearing liabilities and the applicable rates have had on changes in net interest income for the periods presented.



40



---

##### Table of Contents

|                                   |  |                                                                                      |     |   |      |   |      |            |  |   |      |  
|---------------------------------- |  | ------------------------------------------------------------------------------------ | --- | - | ---- | - | ---- | ---------- |  | - | ---- | -
|                                   |  | Changes in Net Interest Income                                                       |    
|                                   |  | For the three Months
EndedMarch 31, 2013 vs. 2012Increase (Decrease)Due to Change In |    
|                                   |  | (Dollars in thousands)                                                               |    
|                                   |  | Volume                                                                               |     |   | Rate |   |      | Net Change | 
|Interest income:                   |  |                                                                                      |     |   |      |   |      |            |  |   |      |  
|Loans receivable                   |  | $                                                                                    | 394 |   |      | $ | (15  | )          |  | $ | 379  |  
|Taxable investment securities      |  |                                                                                      | 30  |   |      |   | (57  | )          |  |   | (27  | )
|Nontaxable investment securities   |  |                                                                                      | 16  |   |      |   |     |            |  |   | 16   |  
|                                   |  |                                                                                      |     |   |      |   |      |            |  |   |      |  
|Total investment securities        |  |                                                                                      | 46  |   |      |   | (57  | )          |  |   | (11  | )
|Deposits with banks and other      |  |                                                                                      | 5   |   |      |   | 1    |            |  |   | 6    |  
|                                   |  |                                                                                      |     |   |      |   |      |            |  |   |      |  
|Total interest earning assets      |  |                                                                                      | 445 |   |      |   | (71  | )          |  |   | 374  |  
|Interest expense:                  |  |                                                                                      |     |   |      |   |      |            |  |   |      |  
|Demand, interest-bearing           |  |                                                                                      | 12  |   |      |   |     |            |  |   | 12   |  
|Money market and savings           |  |                                                                                      | 25  |   |      |   | (44  | )          |  |   | (19  | )
|Time deposits                      |  |                                                                                      | (65 | ) |      |   | (95  | )          |  |   | (160 | )
|Borrowed funds                     |  |                                                                                      | 56  |   |      |   | (74  | )          |  |   | (18  | )
|                                   |  |                                                                                      |     |   |      |   |      |            |  |   |      |  
|Total interest bearing liabilities |  |                                                                                      | 28  |   |      |   | (213 | )          |  |   | (185 | )
|                                   |  |                                                                                      |     |   |      |   |      |            |  |   |      |  
|Change in net interest income      |  | $                                                                                    | 417 |   |      | $ | 142  |            |  | $ | 559  |  
|                                   |  |                                                                                      |     |   |      |   |      |            |  |   |      |  

Provision for Loan Losses

The allowance for loan losses is established through provisions for loan losses charged against operations. Loans deemed to be uncollectible are charged against the allowance for loan losses, and
subsequent recoveries, if any, are credited to the allowance as recoveries.

The allowance for loan losses is maintained at a
level considered adequate to provide for losses that can be reasonably anticipated. Managements periodic evaluation of the adequacy of the allowance is based on known or potential risks in the portfolio, adverse situations that may affect a
borrowers ability to repay, the estimated value of any underlying collateral, the composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material
estimates that may be susceptible to significant revisions as more information becomes available or economic conditions change.

Acquired loans are initially recorded at acquisition date at their acquisition date fair values, and therefore, are excluded from the
calculation of loan loss reserves as of the acquisition date. To the extent there is a decrease in the present value of cash from the acquired impaired loans after the date of acquisition, the Company records a provision for potential losses. During
the three months ending March 31, 2013 and 2012, the Company did not record an allowance for loan losses for acquired impaired loans.

At the end of each quarter or more often, if necessary, First Priority analyzes the collectability of its loans and accordingly adjusts the loan loss allowance to an appropriate level. The allowance for
loan losses covers estimated credit losses on individually evaluated loans that are determined to be impaired, as well as estimated credit losses inherent in the remainder of the loan portfolio. For a description of the process for determining the
adequacy of the allowance for loan losses, see the Allowance for Loan Losses section below.

The provision for
loan losses decreased $10 thousand for the first three months of 2013 to $165 thousand as compared to $175 thousand for the three months ended March 31, 2012. The level of provision is impacted by the analysis of the adequacy of the allowance
as described above, including an analysis of impaired and non-performing loans, as well as by the level of incremental loan volume. Total loans increased $87.1 million when comparing March 31, 2013 to the same date in the prior year, of which
$77.9 million was related to the merger with Affinity. Net charge-offs for the three months ended March 31, 2013 and 2012, totaled $60 thousand and $189 thousand, respectively. The allowance for loan losses was $2.6 million and $2.5 million as
of March 31, 2013 and 2012, respectively, which represented 0.77% and 1.01% of total loans outstanding at each respective date. As of March 31, 2013, the allowance for loan losses related to originated loans totaled 1.01%.



41



---

##### Table of Contents

Non-Interest Income

Non-interest income totaled $120 thousand for the three months ended March 31, 2013 compared to $261 thousand for the same period in 2012. Non-interest income is comprised of wealth management fees
which are principally non-recurring commissions and fees related to the sale of insurance products and annuities, service charges on deposit accounts, and other fees which First Priority Bank collects from its banking customers. In addition, First
Priority recorded $142 thousand of gains from the sale of investment securities available for sale for the three months ended March 31, 2012; there were no investment securities gains in the first quarter of 2013.

Components of non-interest income are shown in the table below:



|                                        |  |                                     |     |  |      |   |     | 
|--------------------------------------- |  | ----------------------------------- | --- |  | ---- | - | --- | 
|                                        |  | For the three months endedMarch 31, |    
|                                        |  | 2013                                |     |  | 2012 |  
|                                        |  | (Dollars in thousands)              |    
|Non-Interest Income                     |  |                                     |     |  |      |   |     | 
|Wealth management fee income            |  | $                                   | 59  |  |      | $ | 77  | 
|Service charges on deposits             |  |                                     | 25  |  |      |   | 21  | 
|Other branch fees                       |  |                                     | 23  |  |      |   | 14  | 
|Loan related fees                       |  |                                     | 10  |  |      |   | 4   | 
|Gains on sales of investment securities |  |                                     |    |  |      |   | 142 | 
|Other                                   |  |                                     | 3   |  |      |   | 3   | 
|                                        |  |                                     |     |  |      |   |     | 
|Total Non-Interest Income               |  | $                                   | 120 |  |      | $ | 261 | 
|                                        |  |                                     |     |  |      |   |     | 

Non-Interest Expenses

Non-interest expenses were $3.50 million for the first three months of 2013 compared to $2.16 million for the same period in the prior year, an increase of $1.34 million, or 62.0%. The following
table sets forth information related to the various components of non-interest expenses for each respective period.



|                                                |  |                                     |       |  |      |   |       | 
|----------------------------------------------- |  | ----------------------------------- | ----- |  | ---- | - | ----- | 
|                                                |  | For the three months endedMarch 31, |      
|                                                |  | 2013                                |       |  | 2012 |  
|                                                |  | (Dollars in thousands)              |      
|Non-Interest Expenses                           |  |                                     |       |  |      |   |       | 
|Salaries and employee benefits                  |  | $                                   | 1,540 |  |      | $ | 1,221 | 
|Occupancy and equipment                         |  |                                     | 355   |  |      |   | 258   | 
|Data processing equipment and operations        |  |                                     | 169   |  |      |   | 125   | 
|Professional fees                               |  |                                     | 146   |  |      |   | 179   | 
|Marketing, advertising and business development |  |                                     | 36    |  |      |   | 19    | 
|FDIC insurance assessments                      |  |                                     | 73    |  |      |   | 63    | 
|Pennsylvania bank shares tax expense            |  |                                     | 74    |  |      |   | 57    | 
|Collateral protection expense                   |  |                                     |      |  |      |   | 79    | 
|Merger related costs                            |  |                                     | 797   |  |      |   |      | 
|Other real estate owned costs                   |  |                                     | 118   |  |      |   |      | 
|Other                                           |  |                                     | 192   |  |      |   | 161   | 
|                                                |  |                                     |       |  |      |   |       | 
|Total Non-Interest Expenses                     |  | $                                   | 3,500 |  |      | $ | 2,162 | 
|                                                |  |                                     |       |  |      |   |       | 

Salaries and employee benefits totaled $1.54 million for the first three months of 2013 compared to
$1.22 million for the same period in 2012, an increase of $319 thousand between the comparable periods. The increase is related to incremental staffing costs related to Affinity, incremental bonus accrual and a higher overall cost of employee
healthcare benefits to the Company.

Occupancy and equipment expenses were $355 thousand for the first three months of 2013
compared to $258 thousand for the prior year, an increase of $97 thousand, or 37.6%, primarily related to the addition of five office locations from Affinity.

Data processing expenses increased $44 thousand, or 35.2%, for the first three months of 2013 to $169 thousand compared to $125 thousand for the same period in 2012. Of this increase, $29 thousand is
related to operating multiple core banking systems, including Affinitys system, prior to conversion onto one system anticipated in August 2013. In addition, the cost of outsourced core banking services processing related to a higher level of
banking customer activity continues to increase.



42



---

##### Table of Contents

Professional fees declined $33 thousand, or 18.4%, to $146 thousand for the three month
period ending March 31, 2013 compared to $179 thousand for the same period in the prior year. This decrease is due to a decline of $24 thousand in legal costs primarily related to a lower level of litigation costs and a $20 thousand
reduction of consulting costs.

Direct marketing, advertising and business development costs increased $17 thousand, or
89.5%, from $19 thousand to $36 thousand, when comparing the first three months of 2012 to 2013, respectively. This increase primarily relates to a radio advertising campaign to increase name awareness in the Banks market place.

FDIC insurance assessment expense increased $10 thousand, or 15.9%, from $63 thousand to $73 thousand when comparing the
first three months of 2013 to the prior year. This increase is primarily related to the addition of Affinity.

The
Pennsylvania bank shares tax expense was $74 thousand for the first three months of 2013 compared to $57 thousand for the same period in 2012. This tax is calculated based on the reported level of equity, adjusted for exclusions and other items, and
therefore, increased due to growth and due to the merger with Affinity.

Collateral protection expense totaled $79 thousand
for the three months ended March 31, 2012. First Priority Bank entered into a settlement and release agreement in the second quarter of 2012; accordingly, collateral protection expense was eliminated beginning in the second half of 2012.

First Priority Bank recorded $797 thousand in merger related costs during the first three months of 2013 for expenses paid or
incurred related to the merger with Affinity.

Other real estate owned expenses totaled $118 thousand in 2013 compared to none
for the same period in 2012. These costs consist of valuation adjustments related to the fair value of the properties held totaling $96 thousand and $24 thousand related to costs to acquire or maintain these properties during the holding period.
These properties were acquired either through deeds in lieu of foreclosure or through other means on properties that were used as collateral for Bank loans.

All other expenses increased $31 thousand to $192 thousand for the three months ended March 31, 2013 from $161 thousand for the same period in 2012, an increase of 19.3%. This increase is
primarily related to incremental costs due to the addition of Affinity.

Provision for Income Taxes

Management considers various factors in evaluating the need for a valuation allowance related to the Companys net deferred tax
asset, including but not limited to forecasted future earnings which management believes provides positive evidence to support the utilization of the deferred tax asset in the future and the negative evidence of accumulated operating losses that
First Priority experienced during the Companys start-up years. Management concluded that the weight of the positive evidence of future earnings was not sufficient to outweigh the negative evidence of prior period losses, and therefore, this
analysis does not support the more likely than not requirement to reduce any portion of the valuation allowance for deferred tax assets at this time. Therefore, the Company has not recorded any income tax expense or benefit in the related income
statements.

Balance Sheet Review

Overview

Total assets at March 31, 2013 were $442.7 million
representing an increase of $167.6 million or 37.8% when compared to December 31, 2012. Asset growth during this period is attributable primarily to the merger with Affinity. Total assets consisted principally of loans outstanding of $331.4
million, investment securities available for sale of $56.3 million and cash and cash equivalents of $45.1 million at March 31, 2013 compared to loans outstanding of $244.3 million, investments securities available for sale of $16.7 million and
cash and cash equivalents of $11.0 million at December 31, 2012.

Loans outstanding increased $87.1 million from year-end
2012 to March 31, 2013 or 35.7%. Loan growth of $77.9 million is attributable to the merger with AB, while $9.2 million of net new loan production was achieved. Investment securities increased $39.6 million during this period, with growth
attributable to the merger.

Deposits totaled $358.4 million at March 31, 2013 compared to $233.0 million at
December 31, 2012, representing an increase of $125.4 million or 53.8%. Deposit balances acquired through the merger totaling $150.9 were partially offset by the planned maturities of brokered certificates of deposit totaling $16.0 million and
other deposit declines of $9.5 million. Borrowings totaled $38 million at March 31, 2013 compared to $13 million at December 31, 2012. All of the growth was in short-term borrowings.



43



---

##### Table of Contents

Equity capital at March 31, 2013 was $43.7 million, compared to $27.7 million at
December 31, 2012. The enhanced capital position is attributable to net proceeds of $6.6 million realized through the private placement of 1,268,575 shares of common stock offered in conjunction with the merger and $10.0 million of common
equity acquired through the merger.

Investments

First Prioritys investment portfolio totaled $56.3 million at March 31, 2013 and $16.7 million at December 31, 2012, accounting for 12.7% and 6.1% of total assets at these respective
dates. All investment securities were classified as available for sale and accounted for at fair market value, with the difference between fair market value and amortized cost reflected in the capital account as other comprehensive income or loss.
Net unrealized gains totaled $747 thousand and $683 thousand at March 31, 2013 and December 31, 2012, respectively. Available for sale securities are securities that management intends to hold for an indefinite period of time or securities
that may be sold in response to changes in interest rates, prepayment expectations, capital management and liquidity needs.

The investment portfolio at March 31, 2013 was comprised of federal agency securities (39.0%), agency mortgage backed securities and
agency collateralized mortgage obligations (21.0%), obligations of states and political subdivisions (35.9%, primarily federal taxable municipal securities), corporate debt (4.0%) and an overnight money market fund (0.1%). All investment
securities were either government guaranteed, issued by a government agency or rated investment grade. First Priority had no investment securities deemed to have other than temporary impairment (OTTI) at March 31, 2013 or
December 31, 2012 and recorded no OTTI charges during the three months ended March 31, 2013 or 2012.

The increase
in the investment portfolio is attributable to securities acquired through the merger and to the reinvestment of proceeds from a portion of investment securities sold by Affinity Bank just prior to the merger as part of a balance sheet restructuring
plan. Affinity Bank, prior to the merger, maintained a diversified investment portfolio that accounted for approximately 47% of its total assets. A substantial amount of these investments were mortgage backed securities and other mortgage related
securities. Under the acquisition accounting rules, the investment assets are carried on the books at current market prices and current market yields. In todays low interest rate environment, with high premiums and low yields available on
mortgage related securities, performance of the portfolio is highly dependent upon prepayment trends. Accordingly, the decision was made to sell approximately $55 million of mortgage related securities in order to mitigate the increased risk to high
premium bonds and the significantly lower carrying yield. The restructuring occurred just prior to the merger as part of a tax planning strategy to utilize a portion of Affinity Banks net operating losses.

The following table sets forth information about the contractual maturities and weighted average yields of investment securities at
March 31, 2013. Actual maturities may differ from contractual maturities due to scheduled principal payments and unscheduled prepayments of mortgage backed securities and, where applicable, the ability of an issuer to call a security prior to
the contractual maturity date.



44



---

##### Table of Contents

|                                                 |  |                        |     |  |                                 |  |      |                                |  |   |                |  |  |        |      |   |       |   |        |        |  |  |       |   |  |        |        |  |       |  |      |   |  |   |        |  |  |  |      |  
|------------------------------------------------ |  | ---------------------- | --- |  | ------------------------------- |  | ---- | ------------------------------ |  | - | -------------- |  |  | ------ | ---- | - | ----- | - | ------ | ------ |  |  | ----- | - |  | ------ | ------ |  | ----- |  | ---- | - |  | - | ------ |  |  |  | ---- | -
|                                                 |  | As of March 31, 2013   |    
|                                                 |  | Within 1 year          |     |  | After one butwithin 
five years |  |      | After five butwithin ten
years |  |   | Over ten years |  |  | Total  |     
|                                                 |  | Amount                 |     |  | Yield                           |  |      | Amount                         |  |   | Yield          |  |  | Amount |      |   | Yield |   |        | Amount |  |  | Yield |   |  | Amount |        |  | Yield | 
|                                                 |  | (Dollars in thousands) |    
|U.S. Government agency securities                |  | $                      |    |  |                                 |  |     |                                |  | $ | 6,012          |  |  |        | 0.86 | % |       | $ | 14,989 |        |  |  | 1.31  | % |  | $      | 1,000  |  |       |  | 0.92 | % |  | $ | 22,001 |  |  |  | 1.17 | %
|Obligations of states and political subdivisions |  |                        |    |  |                                 |  |     |                                |  |   | 525            |  |  |        | 2.57 | % |       |   | 5,801  |        |  |  | 2.78  | % |  |        | 13,895 |  |       |  | 4.40 | % |  |   | 20,221 |  |  |  | 3.89 | %
|Agency mortgage backed securities                |  |                        |    |  |                                 |  |     |                                |  |   |               |  |  |        |     |   |       |   |       |        |  |  |      |   |  |        | 10,601 |  |       |  | 1.84 | % |  |   | 10,601 |  |  |  | 1.84 | %
|CMOs                                            |  |                        |    |  |                                 |  |     |                                |  |   |               |  |  |        |     |   |       |   | 574    |        |  |  | 1.10  | % |  |        | 636    |  |       |  | 1.77 | % |  |   | 1,210  |  |  |  | 1.45 | %
|Other debt securities                            |  |                        | 252 |  |                                 |  | 1.33 | %                              |  |   | 1,006          |  |  |        | 0.83 | % |       |   |       |        |  |  |      |   |  |        | 1,015  |  |       |  | 2.29 | % |  |   | 2,273  |  |  |  | 1.54 | %
|Money market mutual fund                         |  |                        | 31  |  |                                 |  | 0.01 | %                              |  |   |               |  |  |        |     |   |       |   |       |        |  |  |      |   |  |        |       |  |       |  |     |   |  |   | 31     |  |  |  | 0.01 | %
|                                                 |  |                        |     |  |                                 |  |      |                                |  |   |                |  |  |        |      |   |       |   |        |        |  |  |       |   |  |        |        |  |       |  |      |   |  |   |        |  |  |  |      |  
|Total investments available for sale             |  | $                      | 283 |  |                                 |  | 1.19 | %                              |  | $ | 7,543          |  |  |        | 0.98 | % |       | $ | 21,364 |        |  |  | 1.70  | % |  | $      | 27,147 |  |       |  | 3.13 | % |  | $ | 56,337 |  |  |  | 2.29 | %
|                                                 |  |                        |     |  |                                 |  |      |                                |  |   |                |  |  |        |      |   |       |   |        |        |  |  |       |   |  |        |        |  |       |  |      |   |  |   |        |  |  |  |      |  

The amortized cost and fair value of First Prioritys investments, all classified as available for
sale, at March 31, 2013 and December 31, 2012 are shown in the following table:



|                                                 |  |                        |        |  |                   |   |        |               |  |   |           |  |  |   |        | 
|------------------------------------------------ |  | ---------------------- | ------ |  | ----------------- | - | ------ | ------------- |  | - | --------- |  |  | - | ------ | 
|                                                 |  | March 31, 2013         |        |  | December 31, 2012 |  
|                                                 |  | AmortizedCost          |        |  | FairValue         |   |        | AmortizedCost |  |   | FairValue | 
|                                                 |  | (Dollars in thousands) |       
|U.S. Government agency securities                |  | $                      | 21,966 |  |                   | $ | 22,001 |               |  | $ | 1,000     |  |  | $ | 1,001  | 
|Obligations of states and political subdivisions |  |                        | 19,635 |  |                   |   | 20,221 |               |  |   | 11,304    |  |  |   | 11,857 | 
|Agency mortgage backed securities                |  |                        | 10,484 |  |                   |   | 10,601 |               |  |   | 3,552     |  |  |   | 3,681  | 
|CMOs                                            |  |                        | 1,210  |  |                   |   | 1,210  |               |  |   |          |  |  |   |       | 
|Other debt securities                            |  |                        | 2,264  |  |                   |   | 2,273  |               |  |   |          |  |  |   |       | 
|Money market mutual fund                         |  |                        | 31     |  |                   |   | 31     |               |  |   | 140       |  |  |   | 140    | 
|                                                 |  |                        |        |  |                   |   |        |               |  |   |           |  |  |   |        | 
|Total investments available for sale             |  | $                      | 55,590 |  |                   | $ | 56,337 |               |  | $ | 15,996    |  |  | $ | 16,679 | 
|                                                 |  |                        |        |  |                   |   |        |               |  |   |           |  |  |   |        | 

Restricted investments in bank stocks

Restricted investments in bank stocks represent the investment in the common stock of correspondent banks required in order to transact business with those banks. Investments in restricted stock are
carried at cost.

At March 31, 2013 and December 31, 2012, First Priority Bank held $110 thousand and $50 thousand,
respectively, in common stock of Atlantic Central Bankers Bank, Camp Hill, Pennsylvania. The increase between the two dates is attributable to the merger with Affinity. Additionally, First Priority had investments in the common stock of the FHLB
Bank of Pittsburgh totaling $2.68 million and $1.29 million as of March 31, 2013 and December 31, 2012, respectively. The increase in the investment of $1.39 million is attributable primarily to the merger ($1.10 million) and to
incremental investment required to support increased borrowings.

Loans

First Prioritys loan portfolio is the primary component of its assets. At March 31, 2013, total loans were
$331.4 million, representing an increase of $87.1 million or 35.7% from total loans outstanding of $244.3 million at December 31, 2012, of which $77.9 million of the increase was related to the merger with Affinity.



45



---

##### Table of Contents

The following table sets forth the classification of First Prioritys loan portfolio at
March 31, 2013 and December 31, 2012.



|                                  |  |                        |         |   |                  |  |     |        |  |   |                 |   |  |  |     |  
|--------------------------------- |  | ---------------------- | ------- | - | ---------------- |  | --- | ------ |  | - | --------------- | - |  |  | --- | -
|                                  |  | March 31,2013          |         |   | December 31,2012 | 
|                                  |  | (Dollars in thousands) |        
|                                  |  | Amount                 |         |   | Percentof total  |  |     | Amount |  |   | Percentof total |  
|Commercial & Industrial           |  | $                      | 88,586  |   |                  |  | 27  | %      |  | $ | 62,366          |   |  |  | 26  | %
|Commercial Mortgage               |  |                        | 123,127 |   |                  |  | 37  | %      |  |   | 93,775          |   |  |  | 38  | %
|Commercial Construction           |  |                        | 4,987   |   |                  |  | 1   | %      |  |   | 4,112           |   |  |  | 2   | %
|                                  |  |                        |         |   |                  |  |     |        |  |   |                 |   |  |  |     |  
|Total Commercial                  |  |                        | 216,700 |   |                  |  | 65  | %      |  |   | 160,253         |   |  |  | 66  | %
|Residential Mortgages             |  |                        | 55,834  |   |                  |  | 17  | %      |  |   | 49,354          |   |  |  | 20  | %
|Home Equity Lines                 |  |                        | 33,621  |   |                  |  | 10  | %      |  |   | 20,654          |   |  |  | 8   | %
|Other Consumer                    |  |                        | 25,529  |   |                  |  | 8   | %      |  |   | 14,298          |   |  |  | 6   | %
|                                  |  |                        |         |   |                  |  |     |        |  |   |                 |   |  |  |     |  
|Total Consumer                    |  |                        | 59,150  |   |                  |  | 18  | %      |  |   | 34,952          |   |  |  | 14  | %
|                                  |  |                        |         |   |                  |  |     |        |  |   |                 |   |  |  |     |  
|Total Loans                       |  |                        | 331,684 |   |                  |  | 100 | %      |  |   | 244,559         |   |  |  | 100 | %
|Net deferred loan (fees) or costs |  |                        | (291    | ) |                  |  |    |        |  |   | (284            | ) |  |  |    |  
|                                  |  |                        |         |   |                  |  |     |        |  |   |                 |   |  |  |     |  
|Total                             |  | $                      | 331,393 |   |                  |  | 100 | %      |  | $ | 244,275         |   |  |  | 100 | %
|                                  |  |                        |         |   |                  |  |     |        |  |   |                 |   |  |  |     |  

A majority of First Priority Banks loans are to business owners of many types. First Priority Bank
makes commercial loans for real estate development and other business purposes required by its customer base.

First Priority
Banks credit policies determine advance rates against the different forms of collateral that can be pledged against commercial loans. Typically, the majority of loans will be limited to a percentage of their underlying collateral values such
as real estate values, equipment, eligible accounts receivable and inventory. Individual loan advance rates may be higher or lower depending upon the financial strength of the borrower and/or term of the loan. The assets financed through commercial
loans are used within the business for its ongoing operation. Repayment of these kinds of loans generally comes from the cash flow of the business or the ongoing conversions of assets. Commercial mortgage loans include loans to finance commercial
real estate properties. Repayment of this kind of loan is dependent upon either the ongoing cash flow of the borrowing entity or the resale or lease of the subject property. Commercial mortgage loans typically require a loan to value ratio of not
greater than 80% and vary in terms.

Residential mortgages and home equity loans are secured by the borrowers
residential real estate in either a first or second lien position. Pricing for residential mortgages and home equity loans is subject to market conditions, the applicants income and qualified credit bureau score and the collaterals loan
to value ratio. Residential mortgages have amortization terms up to but not longer than 30 years and home equity loans generally have maturities up to 10 years.

Other consumer loans include installment loans, car loans, and overdraft lines of credit. The majority of these loans are secured.

Commercial mortgage loans consist of loans originated for commercial purposes which are secured by nonfarm nonresidential properties, multifamily residential properties, or 1-4 family residential
properties. As of March 31, 2013 and December 31, 2012, commercial mortgage loans totaled $123.1 million and $93.8 million, respectively, of which 50% or more are owner occupied.

The payment experience of certain non-owner occupied commercial mortgage loans may be dependent upon the successful operation of the real
estate project. These risks can be significantly affected by supply and demand conditions in the market for office and retail space and for apartments and, as such, may be subject to a greater extent to adverse conditions in the economy. In dealing
with these risk factors, First Priority generally limits itself to a real estate market or to borrowers with which First Priority has experience. First Priority generally concentrates on originating commercial real estate loans secured by properties
located within its market area and many of First Prioritys commercial real estate loans are secured by owner-occupied property with personal guarantees of the debt.

Regulatory guidance exists whereby total construction, land development and other land loans should not exceed 100% of total risk-based capital and further guidance whereby total construction, land
development and other land loans combined with real estate loans secured by multifamily or nonresidential properties and loans to finance commercial real estate or construction loans (not secured by real estate) should not exceed 300% of total
risk-based capital. First Priority Bank monitors these two ratios which as of March 31, 2013, totaled 14% and 142% of total risk-based capital, respectively, both well within the regulatory suggested guidance.



46



---

##### Table of Contents

Credit Quality

First Priority Banks written lending policies require specified underwriting, loan documentation and credit analysis standards to be met prior to funding, with additional credit department approval
for the majority of new loan balances. The Loan Committee is comprised of senior members of management who oversee the loan approval process to monitor that proper standards are maintained.

The accrual of interest on loans is generally discontinued when the contractual payment of principal or interest has become 90 days past
due or when management has serious doubts about further collectability of principal or interest, even though the loan is currently performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well
secured. When a loan is placed on non-accrual status, unpaid interest credited to income in the current year is reversed and unpaid interest accrued in prior years is charged against the allowance for loan losses. Interest received on non-accrual
loans is generally either applied against principal or reported as interest income, according to managements judgment as to the collectability of principal. Generally, loans are restored to accrual status when the obligation is brought
current, has performed in accordance with the contractual terms for a reasonable period of time, and the ultimate collectability of the total contractual principal and interest is no longer in doubt.

The following table summarizes non-performing assets and performing troubled debt restructurings which were in accruing status at the
dates indicated.



|                                                                                                  |  |                        |        |   |                  |   |       |  
|------------------------------------------------------------------------------------------------- |  | ---------------------- | ------ | - | ---------------- | - | ----- | -
|                                                                                                  |  | March 31,2013          |        |   | December 31,2012 |  
|                                                                                                  |  | (Dollars in thousands) |       
|Loans past due 90 days or more and still accruing interest                                        |  | $                      |       |   |                  | $ |      |  
|Non-accrual loans                                                                                 |  |                        | 7,165  |   |                  |   | 4,093 |  
|                                                                                                  |  |                        |        |   |                  |   |       |  
|Total non-performing loans (1)                                                                    |  |                        | 7,165  |   |                  |   | 4,093 |  
|Other real estate owned                                                                           |  |                        | 1,237  |   |                  |   | 184   |  
|Repossessed assets (2)                                                                            |  |                        |       |   |                  |   |      |  
|                                                                                                  |  |                        |        |   |                  |   |       |  
|Total non-performing assets (3)                                                                   |  |                        | 8,402  |   |                  |   | 4,277 |  
|                                                                                                  |  |                        |        |   |                  |   |       |  
|Performing troubled debt restructurings (4)                                                       |  |                        | 4,254  |   |                  |   | 4,279 |  
|                                                                                                  |  |                        |        |   |                  |   |       |  
|Total non-performing assets and performing troubled debt restructurings                           |  | $                      | 12,656 |   |                  | $ | 8,556 |  
|                                                                                                  |  |                        |        |   |                  |   |       |  
|Non-performing loans as a percentage of total loans                                               |  |                        | 2.16   | % |                  |   | 1.68  | %
|Non-performing assets as a percentage of total assets                                             |  |                        | 1.90   | % |                  |   | 1.55  | %
|Non-performing assets and performing troubled debt restructurings as a percentage of total assets |  |                        | 2.86   | % |                  |   | 3.11  | %
|Ratio of allowance to non-performing loans at end of period                                       |  |                        | 36     | % |                  |   | 60    | %
|Ratio of allowance to non-performing assets at end of period                                      |  |                        | 31     | % |                  |   | 58    | %
|Allowance for loan losses as a percentage of total loans                                          |  |                        | 0.77   | % |                  |   | 1.01  | %
|Allowance for loan losses as a percentage of originated loans (5)                                 |  |                        | 1.01   | % |                  |   | 1.01  | %



|(1) | Non-performing loans are comprised of (i) loans that have a non-accrual status; (ii) accruing loans that are 90 days or more past due and
(iii) non-performing troubled debt restructured loans.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Repossessed assets include personal property, consisting of manufactured housing, that has been acquired for debts previously contracted.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------

|(3) | Non-performing assets are comprised of non-performing loans, other real estate owned (assets acquired in foreclosure) and repossessed assets.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Performing troubled debt restructurings are accruing loans that have been restructured in troubled debt restructurings and are in compliance with their modified terms.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | The allowance for loan losses as a percentage of originated loans excludes loans acquired in the merger with Affinity, which were recorded at acquisition date at their
fair values, including a discount related to potential credit impairment for the acquired loans. Therefore, the acquired loans are excluded from the calculation of loan loss reserves as of the acquisition date. The carryover of an allowance for loan
losses is prohibited as any credit losses in the loans are included in the determination of the fair value.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



47



---

##### Table of Contents

Total non-performing loans were $7.2 million at March 31, 2013, an increase of $3.1
million from the $4.1 million at December 31, 2012, primarily related to the addition of acquired non-accrual loans totaling $2.6 million from the Affinity merger. Non-performing loans as a percentage of total loans at March 31, 2013 was
2.16%, up from 1.68% at December 31, 2012. Other real estate owned totaled $1.2 million at March 31, 2013 and $184 thousand at December 31, 2012, an increase of $1.1 million primarily related to other real estate owned by Affinity
which was added to First Prioritys portfolio with a fair value of $1.3 million as of completion of the merger. There were no repossessed assets at March 31, 2013 or December 31, 2012. Non-performing assets totaled $8.4 million, or
1.90% of total assets, as of March 31, 2013, compared to $4.3 million, or 1.55% of total assets as of December 31, 2012.

While not considered non-performing, First Prioritys performing troubled debt restructurings are closely monitored as they consist of loans that have been modified where the borrower is experiencing
financial difficulty. Troubled debt restructurings may be deemed to have a higher risk of loss than loans which have not been restructured. At March 31, 2013 and December 31, 2012, First Prioritys performing troubled debt
restructurings totaled $4.3 million consisting of two commercial loan relationships totaling $4.1 million and one mortgage loan of $131 thousand which are paid current and one commercial relationship totaling $80 thousand and one home equity line of
credit of $246 thousand which are currently in default.

First Priority Banks management continues to monitor and
explore potential options and remedial actions to recover First Priority Banks investment in non-performing loans. According to policy, First Priority Bank is required to maintain a specific reserve for impaired loans. See the Allowance
for Loan Losses section below for further information.

First Priority Banks total delinquency amount is comprised
of loans past due 30 to 89 days and still accruing plus the balance of non-performing loans. As of March 31, 2013 and December 31, 2012, loans past due 30 to 89 days and still accruing totaled $898 thousand and $674 thousand, respectively,
which when added to the non-performing loans for each period, resulted in a total delinquency ratio of 2.43% and 1.95%, respectively, of total loans outstanding.

Allowance for Loan Losses

The allowance for loan losses represents an
amount that First Priority believes will be adequate to absorb estimated credit losses on loans that may become impaired. While First Priority applies the methodology discussed below in connection with the establishment of the allowance for loan
losses, the allowance is subject to critical judgments on the part of management. Risks within the loan portfolio are analyzed on a continuous basis by the management of First Priority Bank, periodically analyzed by an external independent loan
review function, and are also reviewed by the audit committee. A risk system, consisting of multiple grading categories, is utilized as an analytical tool to assess risk and appropriate allowances. In addition to the risk system, management further
evaluates the risk characteristics of the loan portfolio under current and anticipated economic conditions and considers such factors as the financial condition of the borrower, past and expected loss experience, and other factors which management
believes deserve recognition in establishing an appropriate allowance. These estimates are reviewed at least quarterly, and, as adjustments become necessary, they are realized in the periods in which they become known.

First Priority uses a quantitative and qualitative method to allocating its allowance to the various loan categories. An unallocated
component, which is maintained to cover uncertainties that could affect managements estimate of probable losses, reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and
general losses in the portfolio.

Additions to the allowance are made by provisions charged to expense and the allowance is
reduced by net charge-offs, which are loans judged to be impaired, less any recoveries on loans previously charged off. Although management attempts to maintain the allowance at an adequate level, future additions to the allowance may be required
due to the growth of the loan portfolio, changes in asset quality, changes in market conditions and other factors. Additionally, various regulatory agencies periodically review the allowance for loan losses. These agencies may require additional
provisions based upon their judgment about information available to them at the time of their examination. Although management uses what it believes to be the best information available, the level of the allowance for loan losses remains an estimate
which is subject to significant judgment and short term change.

Acquired loans are initially recorded at acquisition date at
their acquisition date fair values, and therefore, are excluded from the calculation of loan loss reserves as of the acquisition date. To the extent there is a decrease in the present value of cash from the acquired impaired loans after the date of
acquisition, the Company records a provision for potential losses. During the three months ended March 31, 2013 and 2012, the Company did not record an allowance for loan losses for acquired impaired loans.

The Banks policy for interest income recognition on nonaccrual loans is to recognize income under the cash basis when the loans are
both current and the collateral on the loan is sufficient to cover the outstanding obligation to the Bank. The Bank will not recognize income if these factors do not exist. Interest that would have been accrued on non-accruing loans under the
original terms but was not recognized as interest income totaled $62 thousand and $65 thousand for the three months ended March 31, 2013 and 2012, respectively.



48



---

##### Table of Contents

Based on the information available as of March 31, 2013, management believes that the
allowance for loan losses of $2.6 million is adequate as of that date.

The following table sets forth a summary of the
changes in the allowance for loan losses for the periods indicated:



|                                                                                                   |  |                                      |         |   |      |   |         |  
|-------------------------------------------------------------------------------------------------- |  | ------------------------------------ | ------- | - | ---- | - | ------- | -
|                                                                                                   |  | For the three 
monthsended March 31, |        
|                                                                                                   |  | 2013                                 |         |   | 2012 |  
|                                                                                                   |  | (Dollars in thousands)               |        
|Balance at the beginning of period                                                                 |  | $                                    | 2,460   |   |      | $ | 2,470   |  
|Charge-offs:                                                                                       |  |                                      |         |   |      |   |         |  
|Commercial and Industrial                                                                          |  |                                      | 54      |   |      |   |        |  
|Commercial Mortgage                                                                                |  |                                      |        |   |      |   |        |  
|Commercial Construction                                                                            |  |                                      |        |   |      |   |        |  
|Residential Mortgage Loans                                                                         |  |                                      | 8       |   |      |   |        |  
|Home equity lines of credit                                                                        |  |                                      |        |   |      |   | 190     |  
|Other consumer loans                                                                               |  |                                      |        |   |      |   |        |  
|                                                                                                   |  |                                      |         |   |      |   |         |  
|Total loans charged off                                                                            |  |                                      | 62      |   |      |   | 190     |  
|Recoveries:                                                                                        |  |                                      |         |   |      |   |         |  
|Commercial and Industrial                                                                          |  |                                      |        |   |      |   | 1       |  
|Commercial Mortgage                                                                                |  |                                      |        |   |      |   |        |  
|Commercial Construction                                                                            |  |                                      |        |   |      |   |        |  
|Residential Mortgage Loans                                                                         |  |                                      | 1       |   |      |   |        |  
|Home equity lines of credit                                                                        |  |                                      |        |   |      |   |        |  
|Other consumer                                                                                     |  |                                      | 1       |   |      |   |        |  
|                                                                                                   |  |                                      |         |   |      |   |         |  
|Total recoveries                                                                                   |  |                                      | 2       |   |      |   | 1       |  
|                                                                                                   |  |                                      |         |   |      |   |         |  
|Net loans charged off                                                                              |  |                                      | 60      |   |      |   | 189     |  
|Provision charged to operations                                                                    |  |                                      | 165     |   |      |   | 175     |  
|                                                                                                   |  |                                      |         |   |      |   |         |  
|Balance at end of period                                                                           |  | $                                    | 2,565   |   |      | $ | 2,456   |  
|                                                                                                   |  |                                      |         |   |      |   |         |  
|Average loans (1)                                                                                  |  | $                                    | 274,485 |   |      | $ | 241,521 |  
|                                                                                                   |  |                                      |         |   |      |   |         |  
|Ratio of net charge-offs during period to average loans outstanding during period (annualized) (1) |  |                                      | 0.09    | % |      |   | 0.31    | %
|Allowance for loan losses as a percentage of total loans                                           |  |                                      | 0.77    | % |      |   | 1.01    | %
|Allowance for loan losses as a percentage of non-acquired loans                                    |  |                                      | 1.01    | % |      |   | 1.01    | %



|(1) | Includes non-accrual loans
|--- | --------------------------

The
allowance for loan losses was $2.6 million at March 31, 2013 and $2.5 million at December 31, 2012, which represented 0.77% and 1.01% of total loans outstanding at each respective date. The allowance as a percentage of originated loans as
of March 31, 2013 was 1.01%. The allowance for loan losses as a percentage of originated loans excludes loans acquired in the merger with Affinity, which were recorded at acquisition date at their fair values, including a discount related to
potential credit impairment for the acquired loans. Therefore, acquired loans are excluded from the calculation of the loan loss reserve as of the acquisition date. The carryover of an allowance for loan losses is prohibited as any credit losses in
the loans are included in the determination of the fair value. As discussed in Note 2  Merger with Affinity Bancorp, Inc., as of February 28, 2013, acquired loans without evidence of credit deterioration included a general
credit fair value adjustment of $1.6 million while acquired credit impaired loans included a nonaccretable discount of $1.1 million representing a specific credit valuation adjustment. There were no acquired loans as of December 31, 2012. Net
charge-offs for the Company totaled $60 thousand for the first three months of 2013 compared to $189 thousand for the same period in 2012.



49



---

##### Table of Contents

The following table sets forth the allocation of the allowance for loan losses by loan
category. The specific allocations in any particular category may be reallocated in the future to reflect the then current conditions. Accordingly, management considers the entire allowance to be available to absorb losses in any category.



|                            |  |                        |       |  |                            |  |     |        |  |   |                            |  |  |  |     |  
|--------------------------- |  | ---------------------- | ----- |  | -------------------------- |  | --- | ------ |  | - | -------------------------- |  |  |  | --- | -
|                            |  | March 31, 2013         |       |  | December 31, 2012          | 
|                            |  | (Dollars in thousands) |      
|                            |  | Amount                 |       |  | Percent oftotal loans 
(1) |  |     | Amount |  |   | Percent oftotal loans 
(1) | 
|Commercial and Industrial   |  | $                      | 760   |  |                            |  | 27  | %      |  | $ | 566                        |  |  |  | 26  | %
|Commercial Mortgage         |  |                        | 587   |  |                            |  | 37  | %      |  |   | 559                        |  |  |  | 38  | %
|Commercial Construction     |  |                        | 26    |  |                            |  | 1   | %      |  |   | 31                         |  |  |  | 2   | %
|Residential Mortgage Loans  |  |                        | 132   |  |                            |  | 17  | %      |  |   | 176                        |  |  |  | 20  | %
|Home Equity Lines of Credit |  |                        | 87    |  |                            |  | 10  | %      |  |   | 89                         |  |  |  | 8   | %
|Other Consumer              |  |                        | 43    |  |                            |  | 8   | %      |  |   | 41                         |  |  |  | 6   | %
|                            |  |                        |       |  |                            |  |     |        |  |   |                            |  |  |  |     |  
|Total Allocated             |  |                        | 1,635 |  |                            |  | 100 | %      |  |   | 1,462                      |  |  |  | 100 | %
|                            |  |                        |       |  |                            |  |     |        |  |   |                            |  |  |  |     |  
|Unallocated                 |  |                        | 930   |  |                            |  |     |        |  |   | 998                        |  |  |  |     |  
|                            |  |                        |       |  |                            |  |     |        |  |   |                            |  |  |  |     |  
|Total                       |  | $                      | 2,565 |  |                            |  |     |        |  | $ | 2,460                      |  |  |  |     |  
|                            |  |                        |       |  |                            |  |     |        |  |   |                            |  |  |  |     |  



|(1) | Represents loans outstanding in each category, as of the date shown, as a percentage of total loans outstanding
|--- | ---------------------------------------------------------------------------------------------------------------

A specific allocation of the allowance for loan losses of $752 thousand has been provided on originated impaired loans of $7.3 million at
March 31, 2013 compared to a specific allocation of $616 thousand related to $10.7 million of impaired loans at December 31, 2012. The increased level of the specific allocation for loan losses is attributable to an increase in the first
position lien liability related to a second lien home equity loan of $184 thousand between these two dates. The March 31, 2013 qualitative and quantitative analysis of the loan portfolio, after the effect of net charge-offs and the above
mentioned specific allocation, resulted in the general portion of the allowance for loan losses of $883 thousand compared to $846 thousand at December 31, 2012.

Loan Concentrations

The Banks loans consist of credits to borrowers
spread over a broad range of industrial classifications. The largest concentrations of loans are to lessors of nonresidential buildings and lessors of residential buildings and dwellings. As of March 31, 2013, these loans totaled $56.9 million
and $33.7 million, respectively, or 17.2% and 10.2%, respectively, of the total loans outstanding. As of December 31, 2012, these same classifications of loans totaled $48.1 million and $27.6 million, respectively, or 19.7% and 11.3%,
respectively, of the total loans outstanding at that time. These credits were subject to normal underwriting standards and did not present more than the normal amount of risk assumed by the Banks other lending activities. Management believes
this concentration does not pose abnormal risk when compared to the risk it assumes in other types of lending. The Bank has no other concentration of loans which exceeds 10% of total loans.

Deposits

Deposits represent the primary source of funding for earning
assets. Deposits totaled $358.4 million at March 31, 2013 compared to $233.0 million at December 31, 2012, representing an increase of $125 million or 53.8%. Deposits acquired through the merger totaling $150.9 were partially offset by the
planned maturities of brokered certificates of deposit totaling $16.0 million and other deposit declines of $9.5 million.

It
has been a strategic objective of First Priority to develop its core deposit base and to supplement core deposits with cost effective alternative funding sources. The merger with Affinity provided the opportunity to expand core deposits and enhance
the mix of deposit sources. For the period ended March 31, 2013 compared to December 31, 2012, First Priority recorded increases in transaction account balances of $48.9 million, or 130.2%, with non-interest bearing transaction accounts
increasing $10.6 million and interest bearing transaction accounts increasing $38.3 million of the total growth. Also during this period money market and savings accounts increased $45.9 million, or 77.0%, for a net increase in these key core
deposit categories of $94.8 million, or 97.6%.



50



---

##### Table of Contents

First Priority attracts deposits by offering competitive products and interest rates on a
broad spectrum of deposit products to customers in its local marketplace, generally through its retail branch system, and also through its internet banking platform. First Priority Bank supplements deposits raised locally with the issuance of
brokered deposits when cost effective relative to local market pricing. At March 31, 2013 and December 31, 2012, brokered deposits totaled $35.5 million and $48.5 million, respectively. The guidelines governing First Priority Banks
participation in the brokered CD market are included in First Priority Banks Asset Liability Management Policy, which is reviewed, revised and approved annually by the asset liability management committee and the board of directors. The FDIC
places restrictions on a depository institutions use of brokered deposits based on the banks capital classification. A well-capitalized institution may accept brokered deposits without FDIC restrictions. An adequately capitalized
institution must obtain a waiver from the FDIC in order to accept brokered deposits, while an undercapitalized institution is prohibited by the FDIC from accepting brokered deposits. First Priority Bank is classified as well-capitalized under prompt
corrective action provisions (see Note 11  Regulatory Matters of the Notes to Consolidated Financial Statements) and, therefore, may accept brokered deposits without FDIC restrictions.

The following table sets forth the average balance of First Prioritys deposits and the average rates paid on deposits for the three
months ended March 31, 2013 and 2012.



|                                  |  |                                      |         |  |      |  |      |                |  |   |         |  |  |  |      |  
|--------------------------------- |  | ------------------------------------ | ------- |  | ---- |  | ---- | -------------- |  | - | ------- |  |  |  | ---- | -
|                                  |  | For the three months ended March 31, |        
|                                  |  | 2013                                 |         |  | 2012 | 
|                                  |  | AverageBalance                       |         |  | Rate |  |      | AverageBalance |  |   | Rate    | 
|                                  |  | (Dollars in thousands)               |        
|Demand, non-interest bearing      |  | $                                    | 31,326  |  |      |  |      |                |  | $ | 24,720  |  |  |  |      |  
|Demand, interest bearing          |  |                                      | 22,289  |  |      |  | 0.26 | %              |  |   | 4,392   |  |  |  | 0.23 | %
|Money market and savings deposits |  |                                      | 74,974  |  |      |  | 0.42 | %              |  |   | 56,713  |  |  |  | 0.69 | %
|Time deposits                     |  |                                      | 145,719 |  |      |  | 1.77 | %              |  |   | 159,037 |  |  |  | 2.01 | %
|                                  |  |                                      |         |  |      |  |      |                |  |   |         |  |  |  |      |  
|Total interest-bearing deposits   |  |                                      | 242,982 |  |      |  | 1.22 | %              |  |   | 220,142 |  |  |  | 1.64 | %
|                                  |  |                                      |         |  |      |  |      |                |  |   |         |  |  |  |      |  
|Total deposits                    |  | $                                    | 274,308 |  |      |  |      |                |  | $ | 244,862 |  |  |  |      |  
|                                  |  |                                      |         |  |      |  |      |                |  |   |         |  |  |  |      |  

The maturity distribution of time deposits of $100,000 or more as of March 31, 2013, is as follows:



|                               |  |                        |        | 
|------------------------------ |  | ---------------------- | ------ | 
|                               |  | March 31,2013          |       
|                               |  | (Dollars in thousands) |       
|Three Months or Less           |  | $                      | 5,067  | 
|Over Three Through Six Months  |  |                        | 6,342  | 
|Over Six Through Twelve Months |  |                        | 6,582  | 
|Over Twelve Months             |  |                        | 30,569 | 
|                               |  |                        |        | 
|TOTAL                          |  | $                      | 48,560 | 
|                               |  |                        |        | 

Other Interest-Bearing Liabilities

Short-Term Borrowed Funds

At March 31, 2013, First Priority had short
term borrowings totaling $25.0 million, consisting of overnight advances from the FHLB. There were no short term borrowings at December 31, 2012. Advances from the FHLB at March 31, 2013 are collateralized by our investment in the common
stock of the FHLB and by a blanket lien on selected mortgage loans within First Priority Banks loan portfolio.

The
following table outlines First Prioritys various sources of short-term borrowed funds at or for each of the three months ended March 31, 2013 and 2012. The maximum balance represents the highest indebtedness for each category of
short-term borrowed funds at any month end during each of the periods shown.



51



---

##### Table of Contents

|                                        |  |                                           |        |   |      |   |       |  
|--------------------------------------- |  | ----------------------------------------- | ------ | - | ---- | - | ----- | -
|                                        |  | At or for the three months endedMarch 31, |       
|                                        |  | 2013                                      |        |   | 2012 |  
|                                        |  | (Dollars in thousands)                    |       
|Federal funds purchased:                |  |                                           |        |   |      |   |       |  
|Balance at period end                   |  | $                                         |       |   |      | $ |      |  
|Weighted average rate at period end     |  | $                                         |       |   |      | $ |      |  
|Maximum month end balance               |  | $                                         |       |   |      | $ |      |  
|Average daily balance during the period |  | $                                         | 25     |   |      | $ | 72    |  
|Weighted average rate during the period |  |                                           | 0.51   | % |      |   |      |  
|Other short-term borrowings:            |  |                                           |        |   |      |   |       |  
|Balance at period end                   |  | $                                         | 25,000 |   |      | $ | 4,000 |  
|Weighted average rate at period end     |  |                                           | 0.25   | % |      |   | 0.25  | %
|Maximum month end balance               |  | $                                         | 25,000 |   |      | $ | 4,000 |  
|Average daily balance during the period |  | $                                         | 2,478  |   |      | $ | 275   |  
|Weighted average rate during the period |  |                                           | 0.25   | % |      |   | 0.29  | %

Long-Term Debt

Long term debt totaled $13.0 million at March 31, 2013 and December 31, 2012, respectively. These borrowings consisted of advances from the FHLB with an average interest rate of 1.37% at each of
these dates and an average remaining life of 3.4 years and 3.6 years, respectively. Advances from the FHLB are collateralized by an investment in the common stock of the FHLB, by a specific pledge of First Priority Banks investment assets and
by a blanket lien on selected mortgages within First Priority Banks loan portfolio. Balances of FHLB long-term debt averaged $15.5 million for the three months ending March 31, 2013 and $8.0 million during the same period in 2012 with an
average rate of 1.64% for the first three months of 2013 and 4.15% for the same period in 2012. The maximum month end balance of these borrowings was $26.0 million and $8.0 million for the first three months of 2013 and 2012, respectively.

Capital Resources

Under TARP, the Treasury authorized a voluntary Capital Purchase Program to purchase up to $250 billion of senior preferred shares of qualifying financial institutions. This program was created to
stabilize the financial system by directly infusing capital into healthy, viable institutions, thereby increasing their capacity to lend to U.S. businesses and consumers and support the U.S. economy. On February 20, 2009, First Priority issued
to the Treasury 4,579 shares of First Prioritys Series A preferred stock and a warrant to purchase, on a net basis, 229 shares of First Prioritys Series B preferred stock, which was immediately exercised, for an aggregate
purchase price of $4.6 million under the TARP CPP.

On May 21, 2009, the Treasury announced an expansion of the TARP CPP
for small community banks to help stimulate lending to small to medium size businesses. On December 18, 2009, First Priority entered into an additional purchase agreement with the Treasury as part of the Treasurys TARP CPP for Small
Banks, pursuant to which First Priority issued and sold, and the Treasury agreed to purchase 4,596 shares of Series C preferred stock, $100.00 par value per share, having a liquidation preference of $1,000 per share, for an aggregate purchase price
of $4.6 million (see Note 8 of the Notes to Consolidated Financial Statements).

On February 8, 2013, the U.S. Department
of Treasury sold its entire holdings of the Companys preferred stock as part of its ongoing efforts to wind down and recover its remaining Capital Purchase Program (CPP) investments in financial institutions through a modified
Dutch auction methodology by offering to domestic qualified institutional buyers and certain domestic institutional accredited investors an opportunity to purchase the Companys preferred stock from the Treasury. Upon final closing of the sale
of these securities to private investors, the previously placed limitations on executive compensation expired. There were no additional changes to the previously existing outstanding preferred stock which resulted from the sale to private investors.

Shareholders equity totaled $43.7 million and $27.7 million at March 31, 2013 and December 31, 2012,
respectively. The increase in shareholders equity of $16.0 million during the first three months of 2013 resulted primarily from the issuance of $6.6 million of common equity through the private placement; incremental capital related to the
acquisition of Affinity totaling $10.0 million and a net loss for the period of $648 thousand.



52



---

##### Table of Contents

First Priority Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet the minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on First Priority
Banks financial condition and results of operations. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, First Priority Bank must meet specific capital guidelines that involve quantitative measures of
First Priority Banks assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. First Priority Banks capital amounts and classifications are also subject to qualitative judgments by the
regulators about components, risk-weightings and other factors.

First Priority Bank exceeds the minimum capital requirements
established by regulatory agencies. Under the capital adequacy guidelines, capital is classified into two tiers. These guidelines require an institution to maintain a certain level of Tier 1 and Tier 2 capital to risk-weighted assets.
Tier 1 capital consists of common shareholders equity and qualifying preferred stock, excluding the unrealized gain or loss on securities available for sale, minus certain intangible assets plus trust preferred securities up to 25% of
Tier 1 capital, with the excess being treated as Tier 2 capital. Tier 2 capital also consists of the allowance for loan losses, subject to certain limitations, and qualifying subordinated debt. In determining the amount of
risk-weighted assets, all assets, including certain off-balance sheet assets, are multiplied by a risk-weight factor of 0% to 100% based on the risks believed inherent in the type of asset.

Quantitative measures established by regulation to ensure capital adequacy require First Priority Bank to maintain minimum amounts and
ratios of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets and of Tier 1 capital to average assets, known as the Tier 1 leverage ratio. Under the capital guidelines, First Priority Bank must maintain a
minimum total risk-based capital of 8%, with at least 4% being Tier 1 capital. In addition, First Priority Bank must maintain a minimum Tier 1 leverage ratio of at least 4%. To be considered well-capitalized, First Priority
Bank must maintain total risk-based capital of at least 10%, Tier 1 capital of at least 6%, and a leverage ratio of at least 5%.

Brokered certificates of deposit, which are used by First Priority Bank as a cost effective funding alternative, totaled $35.5 and $48.5 million at March 31, 2013 and December 31, 2012,
respectively. The FDIC places restrictions on banks with regards to issuing brokered deposits based on the banks capital classification. A well-capitalized institution may accept brokered deposits without FDIC restrictions. An adequately
capitalized institution must obtain a waiver from the FDIC in order to accept brokered deposits, while an undercapitalized institution is prohibited by the FDIC from accepting brokered deposits.

The following table sets forth First Priority Banks capital ratios at March 31, 2013 and December 31, 2012. For both
periods, First Priority Bank was considered well-capitalized and met or exceeded its applicable regulatory requirements.



|                          |  |                                     |       |   |                    |  |       |                        |  |  |       |  
|------------------------- |  | ----------------------------------- | ----- | - | ------------------ |  | ----- | ---------------------- |  |  | ----- | -
|                          |  | To Be 
ConsideredWell-Capitalized |       |   | As ofMarch 31,2013 |  |       | As ofDecember 31, 2012 | 
|First Priority Bank:      |  |                                     |       |   |                    |  |       |                        |  |  |       |  
|Total risk-based capital  |  |                                     | 10.00 | % |                    |  | 13.34 | %                      |  |  | 12.48 | %
|Tier 1 risk-based capital |  |                                     | 6.00  | % |                    |  | 12.51 | %                      |  |  | 11.39 | %
|Tier 1 leverage capital   |  |                                     | 5.00  | % |                    |  | 12.16 | %                      |  |  | 9.40  | %

First Priority Banks total risk based capital ratio and its Tier 1 ratio improved notably during
the period from December 31, 2012 to March 31, 2013 due primarily to the impact of the merger with Affinity and the issuance of $6.6 million in equity capital through the private placement offering.

Return on Average Equity and Assets

The following table shows the return on average assets (net income divided by total average assets), return on equity (net income divided by average equity), and the equity to assets ratio (average equity
divided by total average assets) for the three months ended March 31, 2013 and 2012.



|                                       |  |                                           |       |   |      |  |      |  
|-------------------------------------- |  | ----------------------------------------- | ----- | - | ---- |  | ---- | -
|                                       |  | At or for the three months endedMarch 31, |      
|                                       |  | 2013                                      |       |   | 2012 | 
|Return on average assets               |  |                                           | -0.79 | % |      |  | 0.37 | %
|Return on average equity               |  |                                           | -7.12 | % |      |  | 3.81 | %
|Average equity to average assets ratio |  |                                           | 11.17 | % |      |  | 9.82 | %



53



---

##### Table of Contents

Effect of Inflation and Changing Prices

The effect of relative purchasing power over time due to inflation has not been taken into effect in First Prioritys consolidated
financial statements. Rather, the statements have been prepared on a historical cost basis in accordance with accounting principles generally accepted in the United States of America.

Unlike most industrial companies, the assets and liabilities of financial institutions, such as First Priority and First Priority Bank,
are primarily monetary in nature. Therefore, the effect of changes in interest rates will have a more significant impact on its performance than will the effect of changing prices and inflation in general. In addition, interest rates may generally
increase as the rate of inflation increases, although not necessarily in the same magnitude. First Priority seeks to manage the relationships between interest-sensitive assets and liabilities in order to protect against wide interest rate
fluctuations, including those resulting from inflation.

Off-Balance Sheet Arrangements

Through the operations of First Priority Bank, First Priority has made contractual commitments to extend credit, in the ordinary course of
its business activities, to meet the financing needs of customers. Such commitments involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amount recognized on the balance sheets. These commitments are legally
binding agreements to lend money at predetermined interest rates for a specified period of time and generally have fixed expiration dates or other termination clauses. The same credit and collateral policies are used in making these commitments as
for on-balance sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Each customers
creditworthiness is evaluated on a case-by-case basis and collateral is obtained, if necessary, based on the credit evaluation of the borrower. The amount of collateral obtained, if deemed necessary by First Priority Bank upon extension of credit,
is based on managements credit evaluation. Collateral held varies but may include personal or commercial real estate, accounts receivable, inventory and equipment.

At March 31, 2013 and December 31, 2012, outstanding commitments to extend credit consisting of total unfunded commitments under lines of credit were $64.5 million and $53.7 million,
respectively. In addition, as of each of these dates, there were $1.2 million of performance standby letters of credit outstanding, and as of March 31, 2013, $1.3 million of financial standby letters of credit. There were no financial standby
letters of credit outstanding as of December 31, 2012. First Priority believes that it has adequate sources of liquidity to fund commitments that may be drawn upon by borrowers.

In addition, as of March 31, 2013 and December 31, 2012 the Bank pledged $199 thousand of deposit balances at a correspondent
bank to support a $199 thousand letter of credit issued by the correspondent on behalf of a customer of the Bank. This transaction is fully secured by the customer through a pledge of the customers deposits at the Bank. Also, as of
March 31, 2013, the Bank had outstanding a financial standby letter of credit, which was collateralized by a pledge of Bank assets at a correspondent bank totaling $615 thousand.

First Priority is not involved in any other off-balance sheet contractual relationships, unconsolidated related entities that have
off-balance sheet arrangements or transactions that could result in liquidity needs or other commitments that could significantly impact earnings.

Liquidity

The objective of liquidity management is to assure that
sufficient sources of funds are available, as needed and at a reasonable cost, to meet the ongoing and unexpected operational cash needs and commitments of First Priority and to take advantage of income producing opportunities as they arise.
Sufficient liquidity must be available to meet the cash requirements of depositors wanting to withdraw funds and of borrowers wanting their credit needs met. Additionally, liquidity is needed to insure that First Priority has the ability to act at
those times when profitable new lending and investment opportunities arise. While the desired level of liquidity may vary depending upon a variety of factors, it is a primary goal of First Priority to maintain adequate liquidity in all economic
environments through active balance sheet management.

Liquidity management is the ongoing process of monitoring and managing
First Prioritys sources and uses of funds. The primary sources of funds are deposits, scheduled amortization of loans outstanding, maturities and cash flow generated from the investment portfolio and funds provided by operations. Scheduled
loan payments and investment maturities are relatively predictable sources of funds; however, deposit flows and loan prepayments are far less predictable and are influenced by the level of interest rates, economic conditions, local competition and
customer preferences. Liquidity is also provided by unused lines of credit with



54



---

##### Table of Contents

correspondent banks and First Prioritys borrowing capacity at the FHLB. First Priority measures and monitors its liquidity position on an ongoing basis in order to better understand,
predict and respond to balance sheet trends, unused borrowing capacity and liquidity needs. The liquidity position is managed on a daily basis as part of the daily settlement function and on an ongoing basis through the asset liability management
function.

The key elements of First Prioritys liquidity planning process involve a primary focus on the development of
a stable, core funding base; utilization of wholesale funding sources to supplement core funding; maintenance of an appropriate level of asset liquidity; management of the maturity structure of funding sources and of funding concentrations; and
maintenance of borrowing facilities.

Wholesale funding sources utilized by First Priority Bank include brokered certificates
of deposits, secured advances from the Federal Home Loan Bank of Pittsburgh, federal funds purchased and other secured borrowing facilities. At March 31, 2013, wholesale funding sources totaled $73.5 million and were comprised of $35.5 million
of brokered certificates of deposit and $38.0 million of FHLB advances. At December 31, 2012, wholesale funding sources totaled $61.5 million and were comprised of $48.5 million of brokered certificates of deposit and $13.0 million of secured
funding from the FHLB. Wholesale funding is generally used in managing the daily liquidity needs and when it is the most cost effective funding source available to First Priority. Management continually evaluates all available funding sources for
cost and availability.

An integral part of First Priority Banks balance sheet management strategy is to establish and
maintain borrowing facilities with correspondent banks, for access to funding. Off balance sheet borrowing capacity provides the immediate availability of funds to meet short term financing needs without requiring the bank to maintain excess
liquidity in its investment portfolio, which may have a negative impact on earnings. In todays environment of historically low interest rates, it also provides the most effective longer term funding, in terms of the cost and structure. Long
term borrowings from the FHLB cannot be called prior to maturity, which provides much greater protection against a rise in interest rates when compared to retail deposits which can be redeemed early by the depositor at lower than market rate
penalties.

As of March 31, 2013 and December 31, 2012, First Priority Bank had a borrowing facility with a
correspondent bank totaling $10 million, available for short-term limited purpose usage, of which $2 million is available unsecured. The remaining $8 million is a secured line of credit.

At March 31, 2013 and December 31, 2012, First Priority Bank had borrowing capacity with the FHLB of $80 million and $85
million, respectively, with advances outstanding as of those dates of $38.0 million and $13.0 million, respectively.

Short-term liquid assets held in interest bearing deposit accounts with correspondent banks totaled $39.4 million at March 31, 2013
compared to $6.2 million at December 31, 2012. The balance at March 31, 2013 was comprised primarily of deposits held at the Federal Reserve Bank in First Priority Banks excess balance account.

Interest Rate Sensitivity

It is the responsibility of the board of directors and senior management to understand and control the interest rate risk exposures assumed by First Priority. The board has delegated authority to the
asset liability management committee (ALCO) for the development of ALCO policies and for the management of the asset liability management function. The ALCO committee is comprised of senior management representing all primary functions
of First Priority and meets monthly. ALCO has the responsibility for maintaining a level of interest rate risk exposures within board of director approved limits.

The primary objective of asset liability management is to optimize net interest income over time while maintaining a balance sheet mix that is prudent with respect to liquidity, capital adequacy and
interest rate risk. The absolute level and volatility of interest rates can have a significant impact on the profitability of First Priority. Interest rate risk management is the process of identifying and controlling the potential adverse impact of
interest rates movements on First Prioritys net interest income and on the fair value of its assets and liabilities.

One tool used to monitor interest rate risk is the measurement of its interest sensitivity gap, which is the positive or
negative dollar difference between interest earning assets and interest bearing liabilities that are subject to interest rate repricing within a given period of time. Interest rate sensitivity can be managed by changing the mix, pricing and
repricing characteristics of its assets and liabilities, through management of its investment portfolio, loan and deposit product offerings, and through wholesale funding. Managing the amount of assets and liabilities repricing in the same time
interval helps to hedge interest rate risk and minimize the impact on net interest income of rising or falling interest rates. First Priority generally would benefit from increasing market rates of interest when it has an asset-sensitive gap
position and generally would benefit from decreasing market rates of interest when First Priority is liability-sensitive.



55



---

##### Table of Contents

At March 31, 2013, First Priority was moderately liability sensitive at the one-year
gap position, as it has more liabilities subject to repricing in the subsequent twelve month period than assets. It must be noted, however, that the gap analysis is not a precise indicator of First Prioritys exposure to changing interest
rates. The analysis presents only a static view of the timing of maturities and repricing opportunities, without taking into consideration that changes in interest rates do not affect all assets and liabilities equally. Furthermore, the results are
influenced by management assumptions concerning the repricing characteristics of deposit products with no contractual maturities, the timing of the repricing of variable rate loans with interest rates currently fixed at interest rate floors, and
prepayment speeds of loans and investments subject to prepayment prior to maturity. Additionally, net interest income performance may be impacted by other significant factors in a given interest rate environment, including changes in the volume and
mix of interest earning assets and interest bearing liabilities.

Contractual Obligations

First Priority Bank utilizes a variety of deposit products and short-term borrowings to supplement its supply of lendable funds, to assist
in meeting deposit withdrawal requirements, and to fund growth of interest-earning assets in excess of traditional deposit growth. Brokered certificates of deposit, borrowings from the FHLB, borrowings under correspondent bank lines of credit, and
repurchase agreements serve as the primary sources of such funds.

Obligations under non-cancelable operating lease agreements
are payable over several years with the longest obligation expiring in 2029. Management does not believe that any existing non-cancelable operating lease agreements are likely to materially impact First Prioritys financial condition or results
of operations in an adverse way.

The following table provides payments due by period for contractual obligations as of
March 31, 2013.



|                            |  |                        |        |  |                      |   |        |                      |  |   |                      |  |  |             |        |  |       |   |       |  |  |   |         | 
|--------------------------- |  | ---------------------- | ------ |  | -------------------- | - | ------ | -------------------- |  | - | -------------------- |  |  | ----------- | ------ |  | ----- | - | ----- |  |  | - | ------- | 
|                            |  | Payments Due by Period |       
|                            |  | Within 1Year           |        |  | Over 1through2 Years |   |        | Over 2through3 Years |  |   | Over 3through5 Years |  |  | Over 5Years |        |  | Total |  
|                            |  | (Dollars in thousands) |       
|Time deposits               |  | $                      | 66,102 |  |                      | $ | 39,180 |                      |  | $ | 29,036               |  |  | $           | 32,019 |  |       | $ | 67    |  |  | $ | 166,404 | 
|Operating lease obligations |  |                        | 1,279  |  |                      |   | 1,200  |                      |  |   | 1,161                |  |  |             | 1,804  |  |       |   | 5,559 |  |  |   | 11,003  | 
|Long-term debt              |  |                        | 2,000  |  |                      |   |       |                      |  |   | 1,000                |  |  |             | 10,000 |  |       |   |      |  |  |   | 13,000  | 
|Short-term borrowings       |  |                        | 25,000 |  |                      |   |       |                      |  |   |                     |  |  |             |       |  |       |   |      |  |  |   | 25,000  | 
|Accrued interest payable    |  |                        | 460    |  |                      |   |       |                      |  |   |                     |  |  |             |       |  |       |   |      |  |  |   | 460     | 
|                            |  |                        |        |  |                      |   |        |                      |  |   |                      |  |  |             |        |  |       |   |       |  |  |   |         | 
|Total                       |  | $                      | 94,841 |  |                      | $ | 40,380 |                      |  | $ | 31,197               |  |  | $           | 43,823 |  |       | $ | 5,626 |  |  | $ | 215,867 | 
|                            |  |                        |        |  |                      |   |        |                      |  |   |                      |  |  |             |        |  |       |   |       |  |  |   |         | 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Risk identification and management are essential elements for the successful management of First Priority. In the normal course of
business, First Priority is subject to various types of risk, including interest rate, credit, and liquidity risk. First Priority controls and monitors these risks with policies, procedures, and various levels of managerial and board oversight.
First Prioritys objective is to optimize profitability while managing and controlling risk within board approved policy limits. Interest rate risk is the sensitivity of net interest income and the market value of financial instruments to the
magnitude, direction, and frequency of changes in interest rates. Interest rate risk results from various repricing frequencies and the maturity structure of assets and liabilities. First Priority uses its asset liability management policy to
control and manage interest rate risk.

Liquidity risk represents the inability to generate cash or otherwise obtain funds at
reasonable rates to satisfy commitments to borrowers, as well as, the obligations to depositors and debt holders. First Priority uses its asset liability management policy and contingency funding plan to control and manage liquidity risk.

Credit risk represents the possibility that a customer may not perform in accordance with contractual terms. Credit risk
results from extending credit to customers, purchasing securities, and entering into certain off-balance sheet loan funding commitments. First Prioritys primary credit risk occurs in the loan portfolio. First Priority uses its credit policy
and disciplined approach to evaluating the adequacy of the allowance for loan losses to control and manage credit risk. First Prioritys investment policy limits the degree of the amount of credit risk that may be assumed in the investment
portfolio. First Prioritys principal financial market risks are liquidity risks and exposures to interest rate movements.



56



---

##### Table of Contents

Item 4. Controls and Procedures

Under the supervision and with the participation of our management, including the Chairman and Chief Executive Officer and the Chief
Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a  15(e) and 15 d  15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the
period covered by this report. Based on that evaluation, the Chairman and Chief Executive Officer and the Chief Financial Officer have concluded that, as of the end of such period, these disclosure controls and procedures are effective.

PART II

Item 1. Legal Proceedings

A certain amount of litigation arises in the ordinary course of the business of First
Priority and First Priority Bank. In the opinion of the management of First Priority, there are no proceedings pending to which First Priority or First Priority Bank is a party or to which their property is subject, that, if determined adversely to
them, would be material in relation to First Prioritys shareholders equity or financial condition, nor are there any proceedings pending other than ordinary routine litigation incident to the business of First Priority and First Priority
Bank. In addition, no material proceedings are pending or are known to be threatened or contemplated against First Priority or First Priority Bank by governmental authorities.

Item 1A. Risk Factors

Not Required

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.



57



---

##### Table of Contents

Item 6. Exhibits



|           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|---------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Title                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|           | 
|3.1        |  | Articles of Incorporation of First Priority Financial Corp. (incorporated by reference to Exhibit 3.1 to First Prioritys Registration Statement No. 333-147950 on
Form S-4 filed with the SEC on December 7, 2007)                                                                                                                                                                                                                                                                                                                                               
|           | 
|3.2        |  | Certificate of Designations for the Fixed Rate Cumulative Perpetual Preferred Stock, Series A of First Priority Financial Corp. (incorporated by reference to
Exhibit 3.3 to First Prioritys Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 24, 2009)                                                                                                                                                                                                                                                            
|           | 
|3.3        |  | Certificate of Designations for the Fixed Rate Cumulative Perpetual Preferred Stock, Series B of First Priority Financial Corp. (incorporated by reference to
Exhibit 3.4 to First Prioritys Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 24, 2009)                                                                                                                                                                                                                                                            
|           | 
|3.4        |  | Certificate of Designations for the Fixed Rate Cumulative Perpetual Preferred Stock, Series C of First Priority Financial Corp. (incorporated by reference to
Exhibit 2.1 to First Prioritys Registration Statement No. 333-183118 on Form S-4 filed with the SEC on January 25, 2013)                                                                                                                                                                                                                                                                         
|           | 
|3.5        |  | Bylaws of First Priority Financial Corp. (incorporated by reference to Exhibit 3.2 to First Prioritys Registration Statement No. 333-147950 on Form S-4 filed with
the SEC on December 7, 2007)                                                                                                                                                                                                                                                                                                                                                                  
|           | 
|31.1       |  | Certification of Chief Executive Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|           | 
|31.2       |  | Certification of Chief Financial Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|           | 
|32.1       |  | Certification of Chief Executive Officer in accordance with Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|           | 
|32.2       |  | Certification of Chief Financial Officer in accordance with Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|           | 
|101        |  | Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of March 31, 2013 and December 31, 2012, (ii) the Consolidated
Statements of Operations and Comprehensive Income (Loss) for the three months ended March 31, 2013 and 2012, (iii) the Consolidated Statements of Changes in Equity for the three months ended March 31, 2013 and 2012, (iv) the Consolidated
Statements of Cash Flows for the three months ended March 31, 2013 and 2012, and (v) the Condensed Notes to Consolidated Financial Statements.*



|* | To be filed by amendment pursuant to Rule 405(a)(ii).
|- | -----------------------------------------------------



58



---

##### Table of Contents

SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                    |  |  |  |                                             |  |                                     
|------------------- |  |  |  | ------------------------------------------- |  | ------------------------------------
|                    |  |  |  | FIRST PRIORITY FINANCIAL CORP. (Registrant)
|                    |  |  | 
|Dated: May 20, 2013 |  |  |  | By                                          |  | /s/ David E. Sparks                 
|                    |  |  |  |                                             |  | David E. Sparks,                    
|                    |  |  |  |                                             |  | Chairman and Chief Executive Officer
|                    |  |  | 
|Dated: May 20, 2013 |  |  |  | By                                          |  | /s/ Mark J. Myers                   
|                    |  |  |  |                                             |  | Mark J. Myers                       
|                    |  |  |  |                                             |  | Chief Financial Officer             



59



---

##### Table of Contents

Exhibit Index



|           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|---------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Title                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|           | 
|3.1        |  | Articles of Incorporation of First Priority Financial Corp. (incorporated by reference to Exhibit 3.1 to First Prioritys Registration Statement No. 333-147950 on
Form S-4 filed with the SEC on December 7, 2007)                                                                                                                                                                                                                                                                                                                                               
|           | 
|3.2        |  | Certificate of Designations for the Fixed Rate Cumulative Perpetual Preferred Stock, Series A of First Priority Financial Corp. (incorporated by reference to
Exhibit 3.3 to First Prioritys Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 24, 2009)                                                                                                                                                                                                                                                            
|           | 
|3.3        |  | Certificate of Designations for the Fixed Rate Cumulative Perpetual Preferred Stock, Series B of First Priority Financial Corp. (incorporated by reference to
Exhibit 3.4 to First Prioritys Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 24, 2009)                                                                                                                                                                                                                                                            
|           | 
|3.4        |  | Certificate of Designations for the Fixed Rate Cumulative Perpetual Preferred Stock, Series C of First Priority Financial Corp. (incorporated by reference to
Exhibit 2.1 to First Prioritys Registration Statement No. 333-183118 on Form S-4 filed with the SEC on January 25, 2013)                                                                                                                                                                                                                                                                         
|           | 
|3.5        |  | Bylaws of First Priority Financial Corp. (incorporated by reference to Exhibit 3.2 to First Prioritys Registration Statement No. 333-147950 on Form S-4 filed with
the SEC on December 7, 2007)                                                                                                                                                                                                                                                                                                                                                                  
|           | 
|31.1       |  | Certification of Chief Executive Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|           | 
|31.2       |  | Certification of Chief Financial Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|           | 
|32.1       |  | Certification of Chief Executive Officer in accordance with Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|           | 
|32.2       |  | Certification of Chief Financial Officer in accordance with Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|           | 
|101        |  | Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of March 31, 2013 and December 31, 2012, (ii) the Consolidated
Statements of Operations and Comprehensive Income (Loss) for the three months ended March 31, 2013 and 2012, (iii) the Consolidated Statements of Changes in Equity for the three months ended March 31, 2013 and 2012, (iv) the Consolidated
Statements of Cash Flows for the three months ended March 31, 2013 and 2012, and (v) the Condensed Notes to Consolidated Financial Statements.*



|* | To be filed by amendment pursuant to Rule 405(a)(ii).
|- | -----------------------------------------------------



60