| Oregon                            | 93-0810577                            |
|-----------------------------------|---------------------------------------|
| (State or other jurisdiction      | I.R.S. Employer Identification Number |
| of incorporation or organization) |                                  |

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| PART I            | PAGE                           |
|-------------------|--------------------------------|
|              |       | Forward Looking Statement Disclosure | 2 |
|              |                           |   |   |
| Item 1.           |                           | Business | 3 |
|              |                           |   |   |
| Item 1A.          |                           | Risk Factors | 11 |
|              |                           |   |   |
| Item 1B.          |                           | Unresolved Staff Comments | 15 |
|              |                           |   |   |
| Item 2.           |                           | Properties | 15 |
|              |                           |   |   |
| Item 3.           |                           | Legal Proceedings | 15 |
|              |                           |   |   |
| Item 4.           |                           | [Reserved] | 15 |
|              |                           |   |   |
| PART II           |                           |
|              |                           |
| Item 5.           |                           | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 16 |
|              |                           |   |   |
| Item 6.           |                           | Selected Financial Data | 18 |
|              |                           |   |   |
| Item 7.           |                           | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 20 |
|              |                           |   |   |
| Item 7A.          |                           | Quantitative and Qualitative Disclosures about Market Risk | 50 |
|              |                           |   |   |
| Item 8.           |                           | Financial Statements and Supplementary Data | 52 |
|              |                           |   |   |
| Item 9.           |                           | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 95 |
|              |                           |   |   |
| Item 9A.          |                           | Controls and Procedures | 95 |
|              |                           |   |   |
| Item 9B.          |                           | Other Information | 97 |
|              |                           |   |   |
| PART III          |                           |
|              |                           |
| Item 10.          |                           | Directors, Executive Officers and Corporate Governance | 97 |
|              |                           |   |   |
| Item 11.          |                           | Executive Compensation | 97 |
|              |                           |   |   |
| Item 12.          |                           | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 98 |
|              |                           |   |
| Item 13.          |                           | Certain Relationships and Related Transactions, and Director Independence | 98 |
|              |                           |   |   |
| Item 14.          |                           | Principal Accountant Fees and Services | 98 |
|              |                           |   |   |
| PART IV           |                           |
|              |                           |
| Item 15.          |                           | Exhibits and Financial Statement Schedules | 99 |
|              |                           |   |   |
| Signatures        | 100                            |
|              |                           |
| Index to Exhibits | 101                            |

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- General economic conditions, whether national or regional, and conditions in real estate markets, that may affect the demand for our loan and other products, lead to further declines in credit quality and additional loan losses, negatively affect the value and salability of the real estate that we own or that is the collateral for many of our loans and hinder our ability to increase lending activities;  
- Changing bank regulatory conditions, policies, or programs, whether arising as new legislation or regulatory initiatives or changes in our regulatory classifications, that could lead to restrictions on activities of banks generally or West Coast Bank (the “Bank”) in particular, increased costs, including deposit insurance premiums, price controls on debit card interchange, regulation or prohibition of certain income producing activities, or changes in the secondary market for bank loan and other products;  
- Competitive factors, including competition with community, regional and national financial institutions, that may lead to pricing pressures that reduce yields the Bank earns on loans and increase rates the Bank pays on deposits, the loss of our most valued customers, defection of key employees or groups of employees, or other losses;  
- Increasing or decreasing interest rate environments, including the slope and level of the yield curve, that could lead to decreases in net interest margin, lower net interest and fee income, including lower gains on sales of loans, and changes in the value of the Company’s investment securities; and  
- Changes or failures in technology or third party vendor relationships in important revenue production or service areas or increases in required investments in technology that could reduce our revenues, increase our costs, or lead to disruptions in our business. 

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- Declare or pay any dividends without the prior written approval of the Reserve Bank, the Federal Reserve Director, and the DFCS;  
- Directly or indirectly take dividends or any other form of payment representing a reduction in capital at the Bank without the prior written approval of the Reserve Bank and the DFCS;  
- Make any payments of interest or principal on subordinated indebtedness or trust preferred securities without the prior written approval of the Reserve Bank, the Federal Reserve Director, and the DFCS; or  
- Directly or indirectly incur, increase, or guarantee any debt without the prior written approval of the Reserve Bank and the DFCS. 

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| ITEM 5.  | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDERMATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
|---------------|-------------------------------------------------------------------------------------------------------------------|

|      |        |                           | 2010         |                                     | 2009          |
|--------------------------|-------------|--------------------------------|--------------|------------------------------------------|---------------|
|                     |        |                           | Market Price |                                     | Cash dividend |   | Market Price |   | Cash dividend |
|                     |        |       | High         |                 | Low           |       | declared |       | High |       | Low |       | declared |
|                     | 1st Quarter |                           | $            | 3.00                                     |          | $ | 2.05 |   | $ | 0.00 |   | $ | 6.59 |   | $ | 1.09 |   | $ | 0.01 |
|                     | 2nd Quarter |                           | $            | 3.44                                     |          | $ | 2.55 |   | $ | 0.00 |   | $ | 4.56 |   | $ | 1.85 |   | $ | 0.01 |
|                     | 3rd Quarter |                           | $            | 2.75                                     |          | $ | 2.06 |   | $ | 0.00 |   | $ | 3.33 |   | $ | 1.53 |   | $ | 0.00 |
|                     | 4th Quarter |                           | $            |       2.94 |          | $ |       2.45 |   | $ |       0.00 |   | $ |       2.82 |   | $ |       2.00 |   | $ |       0.00 |

|   |                                                   |                      |                   |                           |               |                           |                          | Total Number of Shares         |                                | Maximum Number of Shares Remaining |
|--------|--------------------------------------------------------|---------------------------|------------------------|--------------------------------|--------------------|--------------------------------|-------------------------------|--------------------------------|-------------------------------------|------------------------------------|
|   |                                                   |       | Total Number of Shares |                           | Average Price Paid |                           | Purchased as Part of Publicly |                           | at Period End that May Be Purchased |
|   | Period                                                 |                      | Purchased/Cancelled 1  |       | per Share          |       | Announced Plans or Programs 2 |       | Under the Plans or Programs         |
|   | 10/1/10 - 10/31/10                                     |                      | (1,525                 | )                              |               | $                              | 2.63                          |                           | -                                   |                               | 1,051,821 |
|   | 11/1/10 - 11/30/10                                     |                      | -                      |                           |               | $                              | 0.00                          |                           | -                                   |                               | 1,051,821 |
|   | 12/1/10 - 12/31/10                                     |                      | -                      |                           |               | $                              | 0.00                          |                           | -                                   |                               | 1,051,821 |
|   |        Total for quarter |                      | (1,525                 | )                              |               |                           |                          |                           | -                                   |                               |   |

|       | 1 Shares repurchased by Bancorp during the quarter include shares repurchased from employees in connection with cancellation of restricted stock to pay withholding taxes totaling 1,525 shares, 0 shares, and 0 shares, respectively, for the periods indicated. There were no shares repurchased in the periods indicated pursuant to the Company’s corporate stock repurchase program publicly announced in July 2000 (the “Repurchase Program”) and described in footnote 2 below.                                                                                   |
|--------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                           | 2 Under the Repurchase Program, the board of directors originally authorized the Company to purchase up to 330,000 common shares, which amount was increased by 550,000 shares in September 2000, by 1.0 million shares in September 2001, by 1.0 million shares in September 2002, and by 1.0 million shares in April 2004, and by 1.0 million shares in September 2007 for a total authorized repurchase amount as of December 31, 2010, of approximately 4.9 million shares, 1.05 million shares remain available for repurchase under the plan subject to any regulatory restrictions. |

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|                      | Period Ended |
|---------------------------|--------------|
|   Index              | 12/31/05     | 12/31/06 | 12/31/07 | 12/31/08 | 12/31/09 | 12/31/10 |
|   West Coast Bancorp | 100          | 132.6 |  72.7 | 27.5 |    8.9 |   13.0 |
|   NASDAQ Composite   | 100          | 110.3 | 122.1 | 73.5 | 106.6 | 125.8 |
|   NASDAQ Bank Index  | 100          | 113.7 |   91.4 | 72.0 |   60.2 |   68.6 |

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| (Dollars in thousands, except per share data)                                                      |                           |   |                                           | As of and For the Year ended December 31, |
|----------------------------------------------------------------------------------------------------|--------------------------------|--------|------------------------------------------------|-------------------------------------------|
|                                                                                               |       | 2010   |                       | 2009                                      |       | 2008 |       | 2007 |       | 2006 |
| Interest income                                                                                    |                           | $      | 105,576                                        |                                      |   | $ | 112,150 |   |   | $ | 140,846 |   |   | $ | 183,190 |   | $ | 150,798 |   |
| Interest expense                                                                                   |                           |   | 22,269                                         |                                      |   |   | 33,423 |   |   |   | 48,696 |   |   |   | 68,470 |   |   | 49,926 |   |
| Net interest income                                                                                |                           |   | 83,307                                         |                                      |   |   | 78,727 |   |   |   | 92,150 |   |   |   | 114,720 |   |   | 100,872 |   |
| Provision for credit losses                                                                        |                           |   | 18,652                                         |                                      |   |   | 90,057 |   |   |   | 40,367 |   |   |   | 38,956 |   |   | 2,733 |   |
| Net interest income after provision for credit losses                                              |                           |   | 64,655                                         |                                      |   |   | (11,330 | ) |   |   | 51,783 |   |   |   | 75,764 |   |   | 98,139 |   |
| Noninterest income                                                                                 |                           |   | 32,697                                         |                                      |   |   | 9,129 |   |   |   | 24,629 |   |   |   | 33,498 |   |   | 28,096 |   |
| Noninterest expense                                                                                |                           |   | 90,337                                         |                                      |   |   | 108,288 |   |   |   | 90,323 |   |   |   | 85,299 |   |   | 81,665 |   |
| Income (loss) before income taxes                                                                  |                           |   | 7,015                                          |                                      |   |   | (110,489 | ) |   |   | (13,911 | ) |   |   | 23,963 |   |   | 44,570 |   |
| Provision (benefit) for income taxes                                                               |                           |   | 3,790                                          |                                      |   |   | (19,276 | ) |   |   | (7,598 | ) |   |   | 7,121 |   |   | 15,310 |   |
| Net income (loss)                                                                                  |                           | $      | 3,225                                          |                                      |   | $ | (91,213 | ) |   | $ | (6,313 | ) |   | $ | 16,842 |   | $ | 29,260 |   |
|                                                                                               |                           |   |                                           |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income on a tax equivalent basis 2                                                    |                           | $      | 84,478                                         |                                      |   | $ | 80,222 |   |   | $ | 93,901 |   |   | $ | 116,361 |   | $ | 102,432 |   |
|                                                                                               |                           |   |                                           |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Per share data:                                                                                    |                           |   |                                           |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Basic earnings (loss) per share                               |                           | $      | 0.03                                           |                                      |   | $ | (5.83 | ) |   | $ | (0.41 | ) |   | $ | 1.08 |   | $ | 1.95 |   |
|        Diluted earnings (loss) per share                             |                           | $      | 0.03                                           |                                      |   | $ | (5.83 | ) |   | $ | (0.41 | ) |   | $ | 1.04 |   | $ | 1.86 |   |
|        Cash dividends                                                |                           | $      | -                                              |                                      |   | $ | 0.02 |   |   | $ | 0.29 |   |   | $ | 0.51 |   | $ | 0.45 |   |
|        Period end book value per common share                        |                           | $      | 2.61                                           |                                      |   | $ | 7.02 |   |   | $ | 12.63 |   |   | $ | 13.35 |   | $ | 12.89 |   |
|        Weighted average common shares outstanding                    |                           |   | 87,300                                         |                                      |   |   | 15,510 |   |   |   | 15,472 |   |   |   | 15,507 |   |   | 15,038 |   |
|        Weighted average diluted shares outstanding                   |                           |   | 90,295                                         |                                      |   |   | 15,510 |   |   |   | 15,472 |   |   |   | 16,045 |   |   | 15,730 |   |
|                                                                                               |                           |   |                                           |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                                                                       |                           | $      | 2,461,059                                      |                                      |   | $ | 2,733,547 |   |   | $ | 2,516,140 |   |   | $ | 2,646,614 |   | $ | 2,465,372 |   |
| Total deposits                                                                                     |                           | $      | 1,940,522                                      |                                      |   | $ | 2,146,884 |   |   | $ | 2,024,379 |   |   | $ | 2,094,832 |   | $ | 2,006,352 |   |
| Total long-term borrowings                                                                         |                           | $      | 168,599                                        |                                      |   | $ | 250,699 |   |   | $ | 91,059 |   |   | $ | 83,100 |   | $ | 57,991 |   |
| Total loans, net                                                                                   |                           | $      |        1,496,053 |                                      |   | $ |        1,686,352 |   |   | $ |        2,035,876 |   |   | $ |        2,125,752 |   | $ |        1,924,673 |   |
| Stockholders’ equity                                                                         |                           | $      | 272,560                                        |                                      |   | $ | 249,058 |   |   | $ | 198,187 |   |   | $ | 208,241 |   | $ | 200,882 |   |
| Financial ratios:                                                                                  |                           |   |                                           |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Return on average assets                                      |                           |   | 0.13                                           | %                                         |   |   | -3.49 | % |   |   | -0.25 | % |   |   | 0.66 | % |   | 1.33 | % |
|        Return on average equity                                      |                           |   | 1.21                                           | %                                         |   |   | -45.66 | % |   |   | -3.06 | % |   |   | 7.93 | % |   | 16.47 | % |
|        Average equity to average assets                              |                           |   | 10.32                                          | %                                         |   |   | 7.64 | % |   |   | 8.04 | % |   |   | 8.37 | % |   | 8.10 | % |
|        Dividend payout ratio                                         |                           |   | 0.00                                           | %                                         |   |   | -0.34 | % |   |   | -70.73 | % |   |   | 47.51 | % |   | 24.19 | % |
|        Efficiency ratio 1                                            |                           |   | 78.14                                          | %                                         |   |   | 122.34 | % |   |   | 72.79 | % |   |   | 56.90 | % |   | 62.23 | % |
|        Net loans to assets                                           |                           |   | 60.79                                          | %                                         |   |   | 61.69 | % |   |   | 80.91 | % |   |   | 80.33 | % |   | 78.07 | % |
|        Average yields earned 2                                       |                           |   | 4.40                                           | %                                         |   |   | 4.71 | % |   |   | 5.92 | % |   |   | 7.72 | % |   | 7.37 | % |
|        Average rates paid                                            |                           |   | 1.27                                           | %                                         |   |   | 1.76 | % |   |   | 2.60 | % |   |   | 3.76 | % |   | 3.27 | % |
|        Net interest spread 2                                         |                           |   | 3.13                                           | %                                         |   |   | 2.95 | % |   |   | 3.32 | % |   |   | 3.96 | % |   | 4.10 | % |
|        Net interest margin 2                                         |                           |   | 3.48                                           | %                                         |   |   | 3.33 | % |   |   | 3.90 | % |   |   | 4.86 | % |   | 4.96 | % |
|        Nonperforming assets to total assets                          |                           |   | 4.09                                           | %                                         |   |   | 5.59 | % |   |   | 7.86 | % |   |   | 1.12 | % |   | 0.06 | % |
|        Allowance for loan losses to total loans                      |                           |   | 2.62                                           | %                                         |   |   | 2.23 | % |   |   | 1.40 | % |   |   | 2.16 | % |   | 1.18 | % |
|        Allowance for credit losses to total loans                    |                           |   | 2.67                                           | %                                         |   |   | 2.29 | % |   |   | 1.45 | % |   |   | 2.53 | % |   | 1.18 | % |
|        Net loan charge-offs to average loans                         |                           |   | 1.05                                           | %                                         |   |   | 4.21 | % |   |   | 3.04 | % |   |   | 0.34 | % |   | 0.06 | % |
|        Allowance for loan loss to                                    |                           |   |                                           |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|               nonperforming loans |                           |   | 65.68                                          | %                                         |   |   | 38.74 | % |   |   | 22.67 | % |   |   | 177.53 | % |   | 1567.61 | % |

| 1 | The efficiency ratio has been computed as noninterest expense divided by the sum of net interest income on a tax equivalent basis and noninterest income excluding gains/losses on sales of securities. |
|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2 | Interest earned on nontaxable securities has been computed on a 35% tax equivalent basis.                                                                                                               |

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| 2010                                                                                   |                           |         |                                        |          |                           |     |                                        |      |   |   |                                        |   |   |   |                                        |   |
|----------------------------------------------------------------------------------------|--------------------------------|--------------|---------------------------------------------|---------------|--------------------------------|----------|---------------------------------------------|-----------|--------|--------|---------------------------------------------|--------|--------|--------|---------------------------------------------|--------|
| (Dollars in thousands, except per share data)                                          |       | December 31, |                    | September 30, |       | June 30, |                    | March 31, |
| Interest income                                                                        |                           | $            | 25,509                                      |          |                           | $        | 26,053                                      |      |   | $      | 26,816                                      |   |   | $      | 27,198                                      |   |
| Interest expense                                                                       |                           |         | 3,620                                       |          |                           |     | 4,178                                       |      |   |   | 7,906                                       |   |   |   | 6,565                                       |   |
|        Net interest income                               |                           |         | 21,889                                      |          |                           |     | 21,875                                      |      |   |   | 18,910                                      |   |   |   | 20,633                                      |   |
| Provision for credit losses                                                            |                           |         | 1,693                                       |          |                           |     | 1,567                                       |      |   |   | 7,758                                       |   |   |   | 7,634                                       |   |
| Noninterest income                                                                     |                           |         | 8,595                                       |          |                           |     | 8,069                                       |      |   |   | 9,625                                       |   |   |   | 6,408                                       |   |
| Noninterest expense                                                                    |                           |         |        23,330 |          |                           |     |        23,003 |      |   |   |        22,909 |   |   |   |        21,095 |   |
|        Net income (loss) before income taxes             |                           |         | 5,461                                       |          |                           |     | 5,374                                       |      |   |   | (2,132                                      | )      |   |   | (1,688                                      | )      |
| Provision (benefit) for income taxes                                                   |                           |         | 3,549                                       |          |                           |     | (676                                        | )         |   |   | 1,717                                       |   |   |   | (800                                        | )      |
|        Net income (loss)                                 |                           | $            | 1,912                                       |          |                           | $        | 6,050                                       |      |   | $      | (3,849                                      | )      |   | $      | (888                                        | )      |
|                                                                                   |                           |         |                                        |          |                           |     |                                        |      |   |   |                                        |   |   |   |                                        |   |
| Earnings (loss) per common share:                                                      |                           |         |                                        |          |                           |     |                                        |      |   |   |                                        |   |   |   |                                        |   |
|               Basic   |                           | $            | 0.02                                        |          |                           | $        | 0.06                                        |      |   |   | ($0.04                                      | )      |   |   | ($0.01                                      | )      |
|               Diluted |                           | $            | 0.02                                        |          |                           | $        | 0.06                                        |      |   |   | ($0.04                                      | )      |   |   | ($0.01                                      | )      |
|                                                                                   |                           |         |                                        |          |                           |     |                                        |      |   |   |                                        |   |   |   |                                        |   |
| Return on average assets 1                                                             |                           |         | 0.31                                        | %             |                           |     | 0.96                                        | %         |   |   | -0.58                                       | %      |   |   | -0.13                                       | %      |
| Return on average equity 1                                                             |                           |         | 2.75                                        | %             |                           |     | 8.84                                        | %         |   |   | -5.92                                       | %      |   |   | -1.42                                       | %      |

| 1 | Ratios have been annualized. |
|---|------------------------------|

| 2009                                                                                   |                           |         |                                         |          |                           |     |                                         |      |   |   |                                        |   |   |   |                                         |   |
|----------------------------------------------------------------------------------------|--------------------------------|--------------|----------------------------------------------|---------------|--------------------------------|----------|----------------------------------------------|-----------|--------|--------|---------------------------------------------|--------|--------|--------|----------------------------------------------|--------|
| (Dollars in thousands, except per share data)                                          |       | December 31, |                     | September 30, |       | June 30, |                     | March 31, |
| Interest income                                                                        |                           | $            | 26,948                                       |          |                           | $        | 27,725                                       |      |   | $      | 28,869                                      |   |   | $      | 28,608                                       |   |
| Interest expense                                                                       |                           |         | 7,710                                        |          |                           |     | 8,580                                        |      |   |   | 8,655                                       |   |   |   | 8,478                                        |   |
|        Net interest income                               |                           |         | 19,238                                       |          |                           |     | 19,145                                       |      |   |   | 20,214                                      |   |   |   | 20,130                                       |   |
| Provision for credit losses                                                            |                           |         | 35,233                                       |          |                           |     | 20,300                                       |      |   |   | 11,393                                      |   |   |   | 23,131                                       |   |
| Noninterest income (loss)                                                              |                           |         | (6,148                                       | )             |                           |     | 4,971                                        |      |   |   | 5,958                                       |   |   |   | 4,348                                        |   |
| Noninterest expense                                                                    |                           |         | 24,181                                       |          |                           |     | 23,489                                       |      |   |   | 25,244                                      |   |   |   | 35,374                                       |   |
|        Loss before income taxes                          |                           |         | (46,324                                      | )             |                           |     | (19,673                                      | )         |   |   | (10,465                                     | )      |   |   | (34,027                                      | )      |
| Provision (benefit) for income taxes                                                   |                           |         | 2,543                                        |          |                           |     | (7,265                                       | )         |   |   | (4,126                                      | )      |   |   | (10,428                                      | )      |
|        Net loss                                          |                           | $            |        (48,867 | )             |                           | $        |        (12,408 | )         |   | $      |        (6,339 | )      |   | $      |        (23,599 | )      |
|                                                                                   |                           |         |                                         |          |                           |     |                                         |      |   |   |                                        |   |   |   |                                         |   |
| Loss per common share:                                                                 |                           |         |                                         |          |                           |     |                                         |      |   |   |                                        |   |   |   |                                         |   |
|               Basic   |                           |         | ($3.13                                       | )             |                           |     | ($0.79                                       | )         |   |   | ($0.41                                      | )      |   |   | ($1.51                                       | )      |
|               Diluted |                           |         | ($3.13                                       | )             |                           |     | ($0.79                                       | )         |   |   | ($0.41                                      | )      |   |   | ($1.51                                       | )      |
|                                                                                   |                           |         |                                         |          |                           |     |                                         |      |   |   |                                        |   |   |   |                                         |   |
| Return on average assets 1                                                             |                           |         | -7.06                                        | %             |                           |     | -1.85                                        | %         |   |   | -0.99                                       | %      |   |   | -3.85                                        | %      |
| Return on average equity 1                                                             |                           |         | -74.54                                       | %             |                           |     | -29.39                                       | %         |   |   | -14.61                                      | %      |   |   | -48.54                                       | %      |

| 1 | Ratios have been annualized. |
|---|------------------------------|

----

- General economic conditions, whether national or regional, and conditions in real estate markets, that may affect the demand for our loan and other products, lead to further declines in credit quality and additional loan losses, and negatively affect the value and salability of the real estate that we own or is the collateral for many of our loans and hinder our ability to increase lending activities;   
- Changing bank regulatory conditions, policies, or programs, whether arising as new legislation or regulatory initiatives or changes in our regulatory classifications, that could lead to restrictions on activities of banks generally or West Coast Bank (the “Bank”) in particular, increased costs, including deposit insurance premiums, price controls on debit card interchange, regulation or prohibition of certain income producing activities, or changes in the secondary market for bank loan and other products;  
- Competitive factors, including competition with community, regional and national financial institutions, that may lead to pricing pressures that reduce yields earned on loans and increase rates paid on deposits, the loss of our most valued customers, defection of key employees or groups of employees, or other losses;  
- Increasing or decreasing interest rate environments, including the slope and level of the yield curve, that could lead to decreases in net interest margin, lower net interest and fee income, including lower gains on sales of loans, and changes in the value of Bancorp’s investment securities; and   
- Changes or failures in technology or third party vendor relationships in important revenue production or service areas or increases in required investments in technology that could reduce our revenues, increase our costs, or lead to disruptions in our business. 

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- Net income of $3.2 million compared to a loss of $91.2 million in 2009;  
- A net interest margin of 3.48%, an increase of 15 basis points from 3.33% in 2009;  
- An average rate paid on total deposits of .60%, a decline from 1.17% in 2009;  
- A provision for credit losses of $18.7 million, down $71.4 million from $90.1 million in 2009;  
- Net loan charge-offs of $17.0 million, a decline from $80.6 million in 2009; and  
- Net Other Real Estate Owned (“OREO”) valuation adjustments and gains and losses on sales of $4.4 million, a reduction from $27.0 million in 2009. 

- Increasing the Bank’s total and tier 1 risk-based capital ratios to 18.05% and 16.79%, respectively, at December 31, 2010, up from 15.37% and 14.11% at December 31, 2009;  
- Improving the Bank’s leverage ratio to 12.51% at December 31, 2010, from 10.57% a year ago; and   
- Reducing total nonperforming assets by 34% or $52.2 million over the past twelve months to $100.7 million at year end. 

----

| (Dollars in thousands)                                                                      | Year Ended December 31, |                           | Increase (Decrease) |                           | Percentage Change |
|---------------------------------------------------------------------------------------------|-------------------------|--------------------------------|---------------------|--------------------------------|-------------------|
|                                                                                        | 2010                    |       | 2009                |       | 2008              |       | 10-09 |       | 09-08 |       | 10-09 |       | 09-08 |
| Interest and fee income 1                                                                   |                    | $106,747                       |                |                           |              | $113,645 |   |   |   | $142,597 |   |   |   | ($6,898 | ) |   |   | ($28,952 | ) |   | -6.1 | % |   | -20.3 | % |
| Interest expense                                                                            |                    | $22,269                        |                |                           |              | $33,423 |   |   |   | $48,696 |   |   |   | ($11,154 | ) |   |   | ($15,273 | ) |   | -33.4 | % |   | -31.4 | % |
| Net interest income 1                                                                       |                    | $84,478                        |                |                           |              | $80,222 |   |   |   | $93,901 |   |   |   | $4,256 |   |   |   | ($13,679 | ) |   | 5.3 | % |   | -14.6 | % |
|                                                                                        |
| Average interest earning assets                                                             |                    | $2,425,073                     |                |                           |              | $2,410,755 |   |   |   | $2,409,896 |   |   |   | $14,318 |   |   |   | $859 |   |   | 0.6 | % |   | 0.0 | % |
| Average interest bearing liabilities                                                        |                    | $1,751,296                     |                |                           |              | $1,897,170 |   |   |   | $1,876,083 |   |   |   | ($145,874 | ) |   |   | $21,087 |   |   | -7.7 | % |   | 1.1 | % |
|                                                                                        |
| Average interest earning assets/                                                            |                    |                           |                |                           |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Average interest bearing liabilities                   |                    | 138.47                         | %                   |                           |              | 127.07 | % |   |   | 128.45 | % |   |   | 11.40 | % |   |   | -1.38 | % |   |   |   |   |   |   |
| Average yield earned 1                                                                      |                    | 4.40                           | %                   |                           |              | 4.71 | % |   |   | 5.92 | % |   |   | -0.31 | % |   |   | -1.21 | % |   |   |   |   |   |   |
| Average rate paid                                                                           |                    | 1.27                           | %                   |                           |              | 1.76 | % |   |   | 2.60 | % |   |   | -0.49 | % |   |   | -0.84 | % |   |   |   |   |   |   |
| Net interest spread 1                                                                       |                    | 3.13                           | %                   |                           |              | 2.95 | % |   |   | 3.32 | % |   |   | 0.18 | % |   |   | -0.37 | % |   |   |   |   |   |   |
| Net interest margin 1                                                                       |                    | 3.48                           | %                   |                           |              | 3.33 | % |   |   | 3.90 | % |   |   | 0.15 | % |   |   | -0.57 | % |   |   |   |   |   |   |
|                                                                                        |
| 1 Interest earned on nontaxable securities has been computed on a 35% tax equivalent basis. |

----

|                                                                                                                                          | Year Ended December 31,   |
|-----------------------------------------------------------------------------------------------------------------------------------------------|---------------------------|
| (Dollars in thousands)                                                                                                                        | 2010                      |   | 2009 |   | 2008 |
|                                                                                                                                          | Average                   |   |   |   |   |   |   |   | Average |     | Interest |     |   |   |     | Average |     | Interest |     |   |   |
|                                                                                                                                          | Outstanding               |   | Interest |   | Yield/ |     | Outstanding |   | Earned/ |   | Yield/ |   | Outstanding |   | Earned/ |   | Yield/ |
|                                                                                                                                          | Balance                   |   | Earned/ Paid |   | Rate 1 |   | Balance |   | Paid |   | Rate 1 |   | Balance |   | Paid |   | Rate 1 |
| ASSETS:                                                                                                                                       |                      |   |   |     |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Interest earning balances                                                                                |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|               due from banks                                                 | $     | 188,925 |   |   | $     | 493 |   | 0.26 | % |   | $     | 136,944 |   |   | $     | 366 |   | 0.27 | % |   | $     | 2,333 |   |   | $     | 38 |   | 1.63 | % |
|        Federal funds sold                                                                                       |                      | 6,194 |   |   |   | 6 |   | 0.09 | % |   |   | 6,673 |   |   |   | 6 |   | 0.09 | % |   |   | 16,867 |   |   |   | 340 |   | 2.02 | % |
|        Taxable securities 2                                                                                     |                      | 547,960 |   |   |   | 14,493 |   | 2.64 | % |   |   | 276,852 |   |   |   | 8,646 |   | 3.12 | % |   |   | 157,648 |   |   |   | 7,700 |   | 4.88 | % |
|        Nontaxable securities 3                                                                                  |                      | 58,139 |   |   |   | 3,346 |   | 5.76 | % |   |   | 72,770 |   |   |   | 4,270 |   | 5.87 | % |   |   | 83,826 |   |   |   | 5,002 |   | 5.97 | % |
|        Loans, including fees 4                                                                                  |                      | 1,623,855 |   |   |   | 88,409 |   | 5.44 | % |   |   | 1,917,516 |   |   |   | 100,357 |   | 5.23 | % |   |   | 2,149,222 |   |   |   | 129,517 |   | 6.03 | % |
|               Total interest earning assets                                  |                      | 2,425,073 |   |   |   | 106,747 |   | 4.40 | % |   |   | 2,410,755 |   |   |   | 113,645 |   | 4.71 | % |   |   | 2,409,896 |   |   |   | 142,597 |   | 5.92 | % |
|                                                                                                                                          |
|        Allowance for loan losses                                                                                |                      | (42,003 | ) |   |   |   |   |   |   |   |   | (37,363 | ) |   |   |   |   |   |   |   |   | (38,328 | ) |   |   |   |   |   |   |
|        Premises and equipment                                                                                   |                      | 27,517 |   |   |   |   |   |   |   |   |   | 31,309 |   |   |   |   |   |   |   |   |   | 34,141 |   |   |   |   |   |   |   |
|        Other assets                                                                                             |                      | 165,284 |   |   |   |   |   |   |   |   |   | 210,575 |   |   |   |   |   |   |   |   |   | 163,910 |   |   |   |   |   |   |   |
|               Total assets                                                   | $                         | 2,575,871 |   |   |   |   |   |   |   |   | $ | 2,615,276 |   |   |   |   |   |   |   |   | $ | 2,569,619 |   |   |   |   |   |   |   |
|                                                                                                                                          |
| LIABILITIES AND                                                                                                                               |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| STOCKHOLDERS' EQUITY:                                                                                                                         |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Interest bearing demand                                                                                  | $                         | 335,134 |   |   | $ | 447 |   | 0.13 | % |   | $ | 298,002 |   |   | $ | 776 |   | 0.26 | % |   | $ | 279,227 |   |   | $ | 1,963 |   | 0.70 | % |
|        Savings                                                                                                  |                      | 103,531 |   |   |   | 278 |   | 0.27 | % |   |   | 89,903 |   |   |   | 714 |   | 0.79 | % |   |   | 71,542 |   |   |   | 578 |   | 0.81 | % |
|        Money market                                                                                             |                      | 659,542 |   |   |   | 3,939 |   | 0.60 | % |   |   | 617,881 |   |   |   | 8,194 |   | 1.33 | % |   |   | 658,360 |   |   |   | 14,633 |   | 2.22 | % |
|        Time deposits                                                                                            |                      | 388,500 |   |   |   | 7,466 |   | 1.92 | % |   |   | 587,299 |   |   |   | 14,758 |   | 2.51 | % |   |   | 566,195 |   |   |   | 20,375 |   | 3.60 | % |
|        Short-term borrowings 5                                                                                  |                      | 7,570 |   |   |   | 494 |   | 6.52 | % |   |   | 44,220 |   |   |   | 806 |   | 1.82 | % |   |   | 149,016 |   |   |   | 4,312 |   | 2.89 | % |
|        Long-term borrowings 5 6                                                                                 |                      | 257,019 |   |   |   | 9,645 |   | 3.75 | % |   |   | 259,865 |   |   |   | 8,175 |   | 3.15 | % |   |   | 151,743 |   |   |   | 6,835 |   | 4.50 | % |
|               Total interest bearing liabilities                             |                      | 1,751,296 |   |   |   | 22,269 |   | 1.27 | % |   |   | 1,897,170 |   |   |   | 33,423 |   | 1.76 | % |   |   | 1,876,083 |   |   |   | 48,696 |   | 2.60 | % |
|        Demand deposits                                                                                          |                      | 540,280 |   |   |   |   |   |   |   |   |   | 499,283 |   |   |   |   |   |   |   |   |   | 470,601 |   |   |   |   |   |   |   |
|        Other liabilities                                                                                        |                      | 18,486 |   |   |   |   |   |   |   |   |   | 19,044 |   |   |   |   |   |   |   |   |   | 16,409 |   |   |   |   |   |   |   |
|               Total liabilities                                              |                      | 2,310,062 |   |   |   |   |   |   |   |   |   | 2,415,497 |   |   |   |   |   |   |   |   |   | 2,363,093 |   |   |   |   |   |   |   |
|        Stockholders' equity                                                                                     |                      | 265,809 |   |   |   |   |   |   |   |   |   | 199,779 |   |   |   |   |   |   |   |   |   | 206,526 |   |   |   |   |   |   |   |
|               Total liabilities and                                          |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                      stockholders' equity | $                         | 2,575,871 |   |   |   |   |   |   |   |   | $ | 2,615,276 |   |   |   |   |   |   |   |   | $ | 2,569,619 |   |   |   |   |   |   |   |
|        Net interest income                                                                                      |                      |   |   |   | $ | 84,478 |   |   |   |   |   |   |   |   | $ | 80,222 |   |   |   |   |   |   |   |   | $ | 93,901 |   |   |   |
|        Net interest spread                                                                                      |                      |   |   |   |   |   |   | 3.13 | % |   |   |   |   |   |   |   |   | 2.95 | % |   |   |   |   |   |   |   |   | 3.32 | % |
|                                                                                                                                          |
|        Net interest margin                                                                                      |                      |   |   |   |   |   |   | 3.48 | % |   |   |   |   |   |   |   |   | 3.33 | % |   |   |   |   |   |   |   |   | 3.90 | % |
|                                                                                                                                          |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| 1  | Yield/rate calculations have been based on more detailed information and therefore may not recompute exactly due to rounding.                                                                                                                                                               |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2       | 2010 does not include Federal Home Loan Bank stock balances. In 2010 FHLB stock is included in other assets. 2009 and 2008 investment securities includes Federal Home Loan Bank stock balances.                                                                                            |
| 3       | Interest earned on nontaxable securities has been computed on a 35% tax equivalent basis. The tax equivalent basis adjustment for the years ended December 31, 2010, 2009 and 2008, was $1.2 million, $1.5 million and $1.8 million, respectively.                                          |
| 4       | Includes balances of loans held for sale and nonaccrual loans.                                                                                                                                                                                                                              |
| 5       | Includes portion of $2.3 million prepayment fee in connection with prepaying $99.1 million in FHLB borrowings in the second quarter of 2010. The maximum amount of short-term borrowings was $17.6 million and $193.0 million for the years ended December 31, 2010 and 2009, respectively. |
| 6       | Includes junior subordinated debentures with average balance of $51 million for 2010, 2009, and 2008.                                                                                                                                                                                       |

----

|                                                                     | Year Ended December 31,         |
|--------------------------------------------------------------------------|---------------------------------|
|                                                                     | 2010 compared to 2009           |   | 2009 compared to 2008 |
|                                                                     |
| (Dollars in thousands)                                                   | Increase (Decrease) due to:     |   | Total Increase |   | Increase (Decrease) due to: |       | Total Increase |
|                                                                     | Volume                          |       | Yield/Rate |       | (Decrease) |       | Volume |       | Yield/Rate |   | (Decrease) |
| Interest income:                                                         |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest earning balances due                                            |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        from banks                          | $      | 98 |   |   | $      | 29 |   |   | $      | 127 |   |   | $      | 2,216 |   |   | $      | (1,888 | ) |   | $      | 328 |   |
| Federal funds sold                                                       |                            | - |   |   |   | - |   |   |   | - |   |   |   | (206 | ) |   |   | (128 | ) |   |   | (334 | ) |
| Investment security income:                                              |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Interest on taxable securities      |                            | 8,637 |   |   |   | (2,789 | ) |   |   | 5,848 |   |   |   | 5,781 |   |   |   | (4,835 | ) |   |   | 946 |   |
|        Interest on nontaxable securities 1 |                            | (859 | ) |   |   | (66 | ) |   |   | (925 | ) |   |   | (660 | ) |   |   | (73 | ) |   |   | (733 | ) |
| Loans, including fees on loans                                           |                            | (12,182 | ) |   |   | 234 |   |   |   | (11,948 | ) |   |   | (10,234 | ) |   |   | (18,925 | ) |   |   | (29,159 | ) |
|        Total interest income 1             |                            | (4,306 | ) |   |   | (2,592 | ) |   |   | (6,898 | ) |   |   | (3,103 | ) |   |   | (25,849 | ) |   |   | (28,952 | ) |
|                                                                     |
| Interest expense:                                                        |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest bearing demand                                                  |                            | 97 |   |   |   | (425 | ) |   |   | (328 | ) |   |   | 132 |   |   |   | (1,319 | ) |   |   | (1,187 | ) |
| Savings                                                                  |                            | 108 |   |   |   | (545 | ) |   |   | (437 | ) |   |   | 148 |   |   |   | (12 | ) |   |   | 136 |   |
| Money market                                                             |                            | 552 |   |   |   | (4,807 | ) |   |   | (4,255 | ) |   |   | (900 | ) |   |   | (5,539 | ) |   |   | (6,439 | ) |
| Time deposits                                                            |                            | (4,618 | ) |   |   | (2,674 | ) |   |   | (7,292 | ) |   |   | (1,349 | ) |   |   | (4,268 | ) |   |   | (5,617 | ) |
| Short-term borrowings                                                    |                            | (668 | ) |   |   | 356 |   |   |   | (312 | ) |   |   | (3,032 | ) |   |   | (474 | ) |   |   | (3,506 | ) |
| Long-term borrowings 2                                                   |                            | (90 | ) |   |   | 1,560 |   |   |   | 1,470 |   |   |   | 4,871 |   |   |   | (3,531 | ) |   |   | 1,340 |   |
|        Total interest expense              |                            | (4,619 | ) |   |   | (6,535 | ) |   |   | (11,154 | ) |   |   | (130 | ) |   |   | (15,143 | ) |   |   | (15,273 | ) |
| Increase (decrease) in net interest income 1                             | $                               | 313 |   |   | $ | 3,943 |   |   | $ | 4,256 |   |   | $ | (2,973 | ) |   | $ | (10,706 | ) |   | $ | (13,679 | ) |
|                                                                     |

----

| (Dollars in thousands)                                                      | Full year                       |       | Full year |       | 2010 to 2009                    |       | Full year |
|-----------------------------------------------------------------------------|---------------------------------|--------------------------------|-----------|--------------------------------|---------------------------------|--------------------------------|-----------|
|                                                                        | 2010                            |                           | 2009      |                           | Change                          |                           | 2008      |
| Noninterest income                                                          |                            |                           |      |                           |                            |                           |      |   |   |   |   |   |   |   |   |
|        Service charges on deposit accounts    | $      | 15,690                         |      |                           | $      | 15,765                         |      |   | $      | (75 | ) |   | $      | 15,547 |   |
|        Payment systems related revenue        |                            | 11,393                         |      |                           |                            | 9,399                          |      |   |   | 1,994 |   |   |   | 9,033 |   |
|        Trust and investment services revenues |                            | 4,267                          |      |                           |                            | 4,101                          |      |   |   | 166 |   |   |   | 5,413 |   |
|        Gains on sales of loans                |                            | 1,197                          |      |                           |                            | 1,738                          |      |   |   | (541 | ) |   |   | 2,328 |   |
|        Other                                  |                            | 3,003                          |      |                           |                            | 4,438                          |      |   |   | (1,435 | ) |   |   | 3,252 |   |
|        Other-than-temporary impairment losses |                            | -                              |      |                           |                            | (192                           | )         |   |   | 192 |   |   |   | (6,338 | ) |
|        Gain on sales of securities            |                            | 1,562                          |      |                           |                            | 833                            |      |   |   | 729 |   |   |   | 780 |   |
| Total                                                                       |                            | 37,112                         |      |                           |                            | 36,082                         |      |   |   | 1,030 |   |   |   | 30,015 |   |
|                                                                        |
|        OREO gains (losses) on sale, net       |                            | 2,234                          |      |                           |                            | (1,725                         | )         |   |   | 3,959 |   |   |   | (602 | ) |
|        OREO valuation adjustments             |                            | (6,649                         | )         |                           |                            | (18,562                        | )         |   |   | 11,913 |   |   |   | (4,784 | ) |
|        OREO loss on bulk sale                 |                            | -                              |      |                           |                            | (6,666                         | )         |   |   | 6,666 |   |   |   | - |   |
| Total                                                                       |                            | (4,415                         | )         |                           |                            | (26,953                        | )         |   |   | 22,538 |   |   |   | (5,386 | ) |
|                                                                        |                            |                           |      |                           |                            |                           |      |   |   |   |   |   |   |   |   |
| Total noninterest income                                                    | $                               | 32,697                         |      |                           | $                               | 9,129                          |      |   | $ | 23,568 |   |   | $ | 24,629 |   |
|                                                                        |

----

| (Dollars in thousands)                                                     | Full year                       |       | Full year |        | 2010 to 2009 |       | Full year                       |
|----------------------------------------------------------------------------|---------------------------------|--------------------------------|-----------|---------------------------------|--------------|--------------------------------|---------------------------------|
|                                                                       | 2010                            |                           | 2009      |                            | Change       |                           | 2008                            |
| Noninterest expense                                                        |                            |                           |      |                            |         |                           |                            |   |   |   |   |   |
|        Salaries and employee benefits        | $      | 45,854                         |      | $      | 44,608       |                           | $      | 1,246 |   |   | $      | 47,500 |
|        Equipment                             |                            | 6,247                          |      |                            | 8,120        |                           |                            | (1,873 | ) |   |   | 7,117 |
|        Occupancy                             |                            | 8,894                          |      |                            | 9,585        |                           |                            | (691 | ) |   |   | 9,440 |
|        Payment systems related expense       |                            | 4,727                          |      |                            | 4,036        |                           |                            | 691 |   |   |   | 3,622 |
|        Professional fees                     |                            | 3,991                          |      |                            | 4,342        |                           |                            | (351 | ) |   |   | 4,317 |
|        Postage, printing and office supplies |                            | 3,148                          |      |                            | 3,201        |                           |                            | (53 | ) |   |   | 3,834 |
|        Marketing                             |                            | 3,086                          |      |                            | 2,990        |                           |                            | 96 |   |   |   | 3,583 |
|        Communications                        |                            | 1,525                          |      |                            | 1,574        |                           |                            | (49 | ) |   |   | 1,722 |
|        Goodwill impairment                   |                            | -                              |      |                            | 13,059       |                           |                            | (13,059 | ) |   |   | - |
|        Other noninterest expense             |                            | 12,865                         |      |                            | 16,773       |                           |                            | (3,908 | ) |   |   | 9,188 |
| Total noninterest expense                                                  | $                               | 90,337                         |      | $                               | 108,288      |                           | $                               | (17,951 | ) |   | $ | 90,323 |
|                                                                       |

----

|                                                                                         |                                         |   |           |       |                                   |    |           |       | 2010 to 2009                          |       |   |   |                                    |
|----------------------------------------------------------------------------------------------|----------------------------------------------|--------|----------------|--------------------------------|----------------------------------------|---------|----------------|--------------------------------|---------------------------------------|--------------------------------|--------|--------|-----------------------------------------|
| (Dollars in thousands)                                                                       | Full year 2010                               |   | Full year 2009 |                           | Change                                 |    | Full year 2008 |
| Benefit for income taxes net of initial                                                      |                                         |   |           |                           |                                   |    |           |                           |                                  |                           |   |   |                                    |   |   |
|        establishment of deferred tax asset valuation allowance | $                                            | -      |           |                           | $                                      | (40,275 | )              |                           |                                  | (40,275                        | )      |   | $                                       | (7,598 | ) |
| Provision (benefit) for income taxes from deferred                                           |                                         |   |           |                           |                                   |    |           |                           |                                  |                           |   |   |                                    |   |   |
|        tax asset valuation allowance:                          |                                         |   |           |                           |                                   |    |           |                           |                                  |                           |   |   |                                    |   |   |
|        Establishment of deferred tax asset valuation allowance |                                         | -      |           |                           |                                   | 23,296  |           |                           |                                  | 23,296                         |   |   |                                    | - |   |
|        Unrealized loss on securities                           |                                         | (1,197 | )              |                           |                                   | (2,297  | )              |                           |                                  | (1,100                         | )      |   |                                    | - |   |
|        Change in deferred tax assets-tax return adjustments    |                                         | 4,987  |           |                           |                                   | -       |           |                           |                                  | (4,987                         | )      |   |                                    | - |   |
| Total provision (benefit) for income taxes                                                   | $         | 3,790  |           |                           | $        | (19,276 | )              |                           | $       | (23,066                        | )      |   | $         | (7,598 | ) |
|                                                                                         |

| (Dollars in thousands)                                                          | Year ended December 31,         |
|---------------------------------------------------------------------------------|---------------------------------|
|                                                                            | 2010                            |       | 2009 |       | 2008 |
| Expected federal income tax (benefit) provision 1                               | $                               | 2,385 |   |   | $ | (38,671 | ) |   | $ | (4,730 | ) |
| State income tax, net of federal income tax effect                              |                            | 66 |   |   |   | (3,504 | ) |   |   | (769 | ) |
| Interest on obligations of state and political subdivisions                     |                            |   |   |   |   |   |   |   |   |   |   |
|        exempt from federal tax                    |                            | (901 | ) |   |   | (1,148 | ) |   |   | (1,302 | ) |
| Federal low income housing tax credits                                          |                            | (427 | ) |   |   | (972 | ) |   |   | (880 | ) |
| Bank owned life insurance                                                       |                            | (302 | ) |   |   | (307 | ) |   |   | (309 | ) |
| Stock options                                                                   |                            | 70 |   |   |   | 123 |   |   |   | 177 |   |
| Goodwill impairment                                                             |                            | - |   |   |   | 4,570 |   |   |   | - |   |
| Change in deferred tax asset valuation allowance                                |                            | 2,465 |   |   |   | 20,999 |   |   |   | - |   |
| Other, net                                                                      |                            | 434 |   |   |   | (366 | ) |   |   | 215 |   |
|        Total (benefit) provision for income taxes | $      | 3,790 |   |   | $      | (19,276 | ) |   | $      | (7,598 | ) |
|                                                                            |

----

- Total assets were $2.5 billion as of December 31, 2010, down from $2.7 billion at December 31, 2009;  
- Total loans decreased to $1.5 billion, a decline of 11% or $188.6 million from December 31, 2009, primarily due to declines of $60.8 million or 16% in commercial loan balances, $55.2 million or 56% in real estate construction loan balances, and $43.6 million or 5% in commercial real estate loan balances;  
- The combined balance of total cash and cash equivalents and investment securities was substantial at $824.1 million at December 31, 2010, and represented 35% of earning assets at year end;  
- Total deposits decreased to $1.9 billion at December 30, 2010, a $206.4 million or 10% decline since year end 2009, primarily due to planned contraction in time deposit balances to reduce our cost of funds. 

- Shift our earning asset mix toward loan balances by increasing loan production within our concentration parameters to targeted customer segments as opportunities arise;  
- Continue to resolve nonaccrual loans through potential loan sales and disposal of OREO properties; and  
- Manage the size of our balance sheet and maintain regulatory capital ratios at high levels until we have more certainty regarding economic conditions. 

| (Dollars in thousands)                                                        | Dec. 31,                  |       | % of   |       | Dec. 31, |       | % of                      |       | Change |       |   |   |       | Dec. 31, |         | % of   |
|-------------------------------------------------------------------------------|---------------------------|--------------------------------|--------|--------------------------------|----------|--------------------------------|---------------------------|--------------------------------|--------|--------------------------------|--------|--------|--------------------------------|----------|--------------------------------------------|--------|
|                                                                          | 2010                      |                           | total  |                           | 2009     |                           | total                     |                           | Amount |                           | %      |   | 2008                           |     | total                                      |
| Cash and Cash equivalents:                                                    |                      |                           |   |                           |     |                           |                      |                           |   |                           |   |   |                           |     |                                       |   |   |   |   |   |   |   |   |   |
|        Cash and due from banks                  | $     | 42,672                         |   | 24                             | %        |                           | $     | 47,708                         |   | 16                             | %      |   | $          | (5,036   | )                                          |   | -11 | % |   | $     | 58,046 |   | 90 | % |
|        Federal funds sold                       |                      | 3,367                          |   | 2                              | %        |                           |                      | 20,559                         |   | 7                              | %      |   |                           | (17,192  | )                                          |   | -84 | % |   |   | 6,682 |   | 10 | % |
|        Interest-bearing deposits in other banks |                      | 131,952                        |   | 74                             | %        |                           |                      | 234,830                        |   | 77                             | %      |   |                           | (102,878 | )                                          |   | -44 | % |   |   | 50 |   | 0 | % |
| Total cash and cash equivalents                                               | $                         | 177,991                        |   | 100                            | %        |                           |                      | 303,097                        |   | 100                            | %      |   | $                              | (125,106 | )                                          |   | -41 | % |   | $ | 64,778 |   | 100 | % |

----

|                                                            | December 31, 2010         |                           | December 31, 2009 |
|-----------------------------------------------------------------|---------------------------|--------------------------------|-------------------|
|                                                            |                      |                           |              |   |   |   | Net |   |   |   |   |   |   |   | Net |
|                                                            | Amortized                 |                           |              |   |   | Unrealized |   | Amortized |   |   |   |   | Unrealized |
| (Dollars in thousands)                                          | Cost                      |       | Fair Value        |       | Gain/(Loss) |       | Cost |       | Fair Value |       | Gain/(Loss) |
| U.S. Treasury securities                                        | $                         | 14,347                         |              | $ | 14,392 |   |   | 45 |   |   | $ | 24,907 |   | $ | 25,007 |   |   | 100 |   |
| U.S. Government agency securities                               |                      | 193,901                        |              |   | 194,230 |   |   | 329 |   |   |   | 104,168 |   |   | 103,988 |   |   | (180 | ) |
| Corporate securities                                            |                      | 14,499                         |              |   | 9,392 |   |   | (5,107 | ) |   |   | 14,436 |   |   | 9,753 |   |   | (4,683 | ) |
| Mortgage-backed securities                                      |                      | 359,965                        |              |   | 363,618 |   |   | 3,653 |   |   |   | 344,179 |   |   | 344,294 |   |   | 115 |   |
| Obligations of state and political subdivisions                 |                      | 51,111                         |              |   | 52,645 |   |   | 1,534 |   |   |   | 67,651 |   |   | 70,018 |   |   | 2,367 |   |
| Equity investments and other securities                         |                      | 11,423                         |              |   | 11,835 |   |   | 412 |   |   |   | 9,274 |   |   | 9,217 |   |   | (57 | ) |
|        Total Investment Portfolio | $     | 645,246                        |              | $     | 646,112 |   | $     | 866 |   |   | $     | 564,615 |   | $     | 562,277 |   | $      | (2,338 | ) |
|                                                            |

----

|                                                          |                      |               |   |               |       |               | After                     |               |      |               |         | After              |                      |               |   |               |   |               |                      |    |   |   |   |   |                      |    |   |
|---------------------------------------------------------------|---------------------------|--------------------|--------|--------------------|------------|--------------------|---------------------------|--------------------|-----------|--------------------|--------------|--------------------|---------------------------|--------------------|--------|--------------------|--------|--------------------|---------------------------|---------|--------|--------|--------|--------|---------------------------|---------|--------|
| (Dollars in thousands)                                        | One year                  |               |   |               |       | One through        |                      |               |      |               | Five through |               |                      |               |   | Due after          |   |               |                      |    |   |   |   |   |                      |
|                                                          | or less                   |     | Yield  |     | five years |     | Yield                     |     | ten years |     | Yield        |     | ten years                 |     | Yield  |     | Total  |     | Yield                     |
| U.S. Treasury securities                                      | $     | 14,181             |   | 1.08               | %          |               | $     | 211                |      | 4.50               | %            |               | $     | -                  |   | -                  |   |               | $     | -       |   | -      |   |   | $     | 14,392  |   | 1.13 | % |
| U.S. Government agency securities                             |                      | -                  |   | -                  |       |               |                      | 164,087            |      | 2.34               | %            |               |                      | 30,143             |   | 1.76               | %      |               |                      | -       |   | -      |   |   |                      | 194,230 |   | 2.25 | % |
| Obligations of state and                                      |                      |               |   |               |       |               |                      |               |      |               |         |               |                      |               |   |               |   |               |                      |    |   |   |   |   |                      |    |   |   |   |
|        political subdivisions 1 |                      | 6,328              |   | 6.27               | %          |               |                      | 11,966             |      | 5.87               | %            |               |                      | 29,441             |   | 6.61               | %      |               |                      | 4,910   |   | 5.31   | %      |   |                      | 52,645  |   | 6.28 | % |
| Other securities 2                                            |                      | -                  |   | -                  |       |               |                      | 2,642              |      | 4.31               | %            |               |                      | 127,675            |   | 3.64               | %      |               |                      | 254,528 |   | 3.80   | %      |   |                      | 384,845 |   | 3.75 | % |
|        Total 1                  | $                         | 20,509             |   | 2.68               | %          |               | $                         | 178,906            |      | 2.61               | %            |               | $                         | 187,259            |   | 3.81               | %      |               | $                         | 259,438 |   | 3.83   | %      |   | $                         | 646,112 |   | 2.94 | % |
|                                                          |

| 1 Yields are stated on a federal tax equivalent basis at 35%.                                                                                                                                 |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2 Contractual maturities do not reflect prepayments on mortgage-backed and asset-backed securities. Actual durations are anticipated to be significantly shorter than contractual maturities. |

|                                                                                            | December 31,                    |
|-------------------------------------------------------------------------------------------------|---------------------------------|
| (Dollars in thousands)                                                                          | 2010                            |   | 2009 |   | 2008 |   | 2007 |   | 2006 |
|                                                                                            | Amount                          |    | Percent |    | Amount |    | Percent |    | Amount |    | Percent |    | Amount |    | Percent |    | Amount |    | Percent |
| Commercial                                                                                      | $                               | 309,327 |   |   | 20 | % |   | $ | 370,077 |   |   | 21 | % |   | $ | 482,405 |   |   | 23 | % |   | $ | 504,101 |   |   | 23 | % |   | $ | 463,188 |   |   | 24 | % |
| Real estate construction                                                                        |                            | 44,085 |   |   | 3 | % |   |   | 99,310 |   |   | 6 | % |   |   | 285,149 |   |   | 14 | % |   |   | 517,988 |   |   | 24 | % |   |   | 365,954 |   |   | 19 | % |
| Real estate mortgage                                                                            |                            | 349,016 |   |   | 23 | % |   |   | 374,668 |   |   | 22 | % |   |   | 393,208 |   |   | 19 | % |   |   | 330,803 |   |   | 15 | % |   |   | 287,495 |   |   | 15 | % |
| Commercial real estate                                                                          |                            | 818,577 |   |   | 53 | % |   |   | 862,193 |   |   | 50 | % |   |   | 882,092 |   |   | 43 | % |   |   | 796,622 |   |   | 37 | % |   |   | 804,865 |   |   | 41 | % |
| Installment and other                                                                           |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        consumer                                                   |                            | 15,265 |   |   | 1 | % |   |   | 18,594 |   |   | 1 | % |   |   | 21,942 |   |   | 1 | % |   |   | 23,155 |   |   | 1 | % |   |   | 26,188 |   |   | 1 | % |
|               Total loans      |                            | 1,536,270 |   |   | 100 | % |   |   | 1,724,842 |   |   | 100 | % |   |   | 2,064,796 |   |   | 100 | % |   |   | 2,172,669 |   |   | 100 | % |   |   | 1,947,690 |   |   | 100 | % |
|                                                                                            |
| Allowance for loan losses                                                                       |                            | (40,217 | ) |   | 2.62 | % |   |   | (38,490 | ) |   | 2.23 | % |   |   | (28,920 | ) |   | 1.40 | % |   |   | (46,917 | ) |   | 2.16 | % |   |   | (23,017 | ) |   | 1.18 | % |
|                                                                                            |
|               Total loans, net | $      | 1,496,053 |   |   |   |   |   | $      | 1,686,352 |   |   |   |   |   | $      | 2,035,876 |   |   |   |   |   | $      | 2,125,752 |   |   |   |   |   | $      | 1,924,673 |   |   |   |   |
|                                                                                            |

----

| (Dollars in thousands)                                                               | Commercial                      |    | Real estate                    |                            | Real estate |                           | Commercial                      |    | Installment                    |                            |    |                           |
|--------------------------------------------------------------------------------------|---------------------------------|---------|--------------------------------|---------------------------------|-------------|--------------------------------|---------------------------------|---------|--------------------------------|---------------------------------|---------|--------------------------------|
|                                                                                 | loans                           |    | construction                   |                            | mortgage    |                           | real estate                     |    | and other                      |                            | Total   |
| Maturity distribution:1                                                              |                            |    |       |                            |        |       |                            |    |       |                            |    |       |   |   |       |   |   |
|        Due within one year                             | $      | 168,033 |                           | $      | 44,085      |                           | $      | 20,895  |                           | $      | 48,909  |                           | $      | 4,833 |   | $      | 286,755 |
|        Due after one through five years                |                            | 118,619 |                           |                            | -           |                           |                            | 116,541 |                           |                            | 315,420 |                           |   | 4,970 |   |   | 555,550 |
|        Due after five years                            |                            | 22,675  |                           |                            | -           |                           |                            | 211,580 |                           |                            | 454,248 |                           |   | 5,462 |   |   | 693,965 |
|               Total | $                               | 309,327 |                           | $                               | 44,085      |                           | $                               | 349,016 |                           | $                               | 818,577 |                           | $ | 15,265 |   | $ | 1,536,270 |
| Interest rate sensitivity:                                                           |                            |    |                           |                            |        |                           |                            |    |                           |                            |    |                           |   |   |   |   |   |
|        Fixed-interest rate loans                       | $                               | 103,881 |                           | $                               | 12,635      |                           | $                               | 93,536  |                           | $                               | 209,514 |                           | $ | 7,639 |   | $ | 427,205 |
|        Floating or adjustable interest rate loans2     |                            | 205,446 |                           |                            | 31,450      |                           |                            | 255,480 |                           |                            | 609,063 |                           |   | 7,626 |   |   | 1,109,065 |
|               Total | $                               | 309,327 |                           | $                               | 44,085      |                           | $                               | 349,016 |                           | $                               | 818,577 |                           | $ | 15,265 |   | $ | 1,536,270 |
|                                                                                 |

| 1 The table is based on stated maturities, not expected maturities or durations.                                                                                                                         |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2 Certain loans contain provisions which place maximum or minimum limits on interest rates or interest rate changes. Adjustable rate loans include all loans whose rates could change prior to maturity. |

----

| (Dollars in thousands)            |                                                                |                           |   |                           | Percent of              |                           |     |                                                                |    |                           | Percent |   |   |   |                            |    | Percent |
|-----------------------------------|---------------------------------------------------------------------|--------------------------------|--------|--------------------------------|-------------------------|--------------------------------|----------|---------------------------------------------------------------------|---------|--------------------------------|---------|--------|--------|--------|---------------------------------|---------|---------|
|                              | December 31, 2010                                                   |       | total  |       | December  31, 2009 |       | of total |                                            | Change  |       | change  |
| Commercial lines of credit:       |                                                                |                           |   |                           |                    |                           |     |                                                                |    |                           |    |   |   |   |                            |    |    |   |   |   |
| Total commitment                  | $            | 448,042                        |   |                           |                    |                           |     | $            | 492,394 |                           |    |   |   |   | $      | (44,352 | )       |   | -9 | % |
| Outstanding balance               |                                                                | 187,983                        |   |                           | 61                      | %                              |     |                                                                | 221,779 |                           |    | 60     | %      |   |                            | (33,796 | )       |   | -15 | % |
| Utilization %                     |                                                                | 42.0                           | %      |                           |                    |                           |     |                                                                | 45.0    | %                              |    |   |   |   |                            |    |    |   |   |   |
|                              |
| Commercial term loans:            |                                                                |                           |   |                           |                    |                           |     |                                                                |    |                           |    |   |   |   |                            |    |    |   |   |   |
| Total commitment                  | $                                                                   | 121,344                        |   |                           |                    |                           |     | $                                                                   | 148,298 |                           |    |   |   |   | $                               | (26,954 | )       |   | -18 | % |
| Outstanding balance               |                                                                | 121,344                        |   |                           | 39                      | %                              |     |                                                                | 148,298 |                           |    | 40     | %      |   |                            | (26,954 | )       |   | -18 | % |
|                              |
| Total commercial lines and loans: |                                                                |                           |   |                           |                    |                           |     |                                                                |    |                           |    |   |   |   |                            |    |    |   |   |   |
| Total commitment                  | $                                                                   | 569,386                        |   |                           |                    |                           |     | $                                                                   | 640,692 |                           |    |   |   |   | $                               | (71,306 | )       |   | -11 | % |
| Outstanding balance               |                                                                | 309,327                        |   |                           | 100                     | %                              |     |                                                                | 370,077 |                           |    | 100    | %      |   |                            | (60,750 | )       |   | -16 | % |

| (Dollars in thousands)                                                    | December 31, 2010         |                           | December 31, 2009 |                           | Change |                           | December 31, 2008 |
|---------------------------------------------------------------------------|---------------------------|--------------------------------|-------------------|--------------------------------|--------|--------------------------------|-------------------|
|                                                                      | Amount                    |       | Percent           |       | Amount |       | Percent           |       | Amount |       | Percent |       | Amount |       | Percent |
| Commercial construction                                                   | $     | 19,781                         |              |                           | 45     | %                              |              | $     | 29,615 |   |   | 30 | % |   | $     | (9,834 | ) |   | -33 | % |   | $      | 92,615 |   |   | 32 | % |
| Two-step residential construction loans                                   |                      | 1,132                          |              |                           | 3      | %                              |              |   | 2,407 |   |   | 2 | % |   |   | (1,275 | ) |   | -53 | % |   |   | 53,084 |   |   | 19 | % |
| Residential construction to builders                                      |                      | 12,301                         |              |                           | 28     | %                              |              |   | 44,786 |   |   | 45 | % |   |   | (32,485 | ) |   | -73 | % |   |   | 71,296 |   |   | 25 | % |
| Residential subdivision or site development                               |                      | 10,903                         |              |                           | 24     | %                              |              |   | 22,590 |   |   | 23 | % |   |   | (11,687 | ) |   | -52 | % |   |   | 68,485 |   |   | 24 | % |
| Net deferred fees                                                         |                      | (32                            | )                 |                           | 0      | %                              |              |   | (88 | ) |   | 0 | % |   |   | 56 |   |   | 64 | % |   |   | (331 | ) |   | 0 | % |
|        Total real estate construction loans | $                         | 44,085                         |              |                           | 100    | %                              |              | $ | 99,310 |   |   | 100 | % |   | $ | (55,225 | ) |   | -56 | % |   | $ | 285,149 |   |   | 100 | % |
|                                                                      |

----

| (Dollars in thousands)                                               |                           | December 31, 2010               |                           | December 31, 2009 |                           | Change |                           | December 31, 2008               |
|----------------------------------------------------------------------|--------------------------------|---------------------------------|--------------------------------|-------------------|--------------------------------|--------|--------------------------------|---------------------------------|
|                                                                 |       | Amount                          |       | Percent           |       | Amount |       | Percent                         |       | Amount |       | Percent |       | Amount |       | Percent |
| Mortgage                                                             |                           | $      | 67,525                         |              | 19                             | %      |                           | $      | 74,977 |   | 20 | % |   | $      | (7,452 | ) |   | -10 | % |   | $     | 87,628 |   | 22 | % |
| Nonstandard mortgage product                                         |                           |                            | 12,523                         |              | 4                              | %      |                           |                            | 20,108 |   | 5 | % |   |   | (7,585 | ) |   | -38 | % |   |   | 32,597 |   | 8 | % |
| Home equity loans and lines of credit                                |                           |                            | 268,968                        |              | 77                             | %      |                           |                            | 279,583 |   | 75 | % |   |   | (10,615 | ) |   | -4 | % |   |   | 272,983 |   | 70 | % |
|        Total real estate mortgage |                           | $                               | 349,016                        |              | 100                            | %      |                           | $                               | 374,668 |   | 100 | % |   | $ | (25,652 | ) |   | -7 | % |   | $ | 393,208 |   | 100 | % |
|                                                                 |                           |                            |                           |              |                           |   |                           |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| (Dollars in thousands)        |               | Year of Origination             |
|-------------------------------|--------------------|---------------------------------|
|                          |               |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 2004 & |   |   |   |   |
|                          |               | 2010                            |   | 2009 |   | 2008 |   | 2007 |   | 2006 |   | 2005 |   | Earlier |   | Total |
| Home equity lines             |     |                            |   |   |     |   |   |   |     |   |   |   |     |   |   |   |     |   |   |   |     |   |   |   |     |   |   |   |     |   |   |   |
| Commitments                   |               | $      | 23,679 |   |   | $      | 30,195 |   |   | $      | 58,022 |   |   | $      | 74,930 |   |   | $      | 74,980 |   |   | $      | 53,717 |   |   | $      | 80,612 |   |   | $      | 396,135 |   |
| Outstanding balance           |               |                            | 11,763 |   |   |   | 18,573 |   |   |   | 36,695 |   |   |   | 50,154 |   |   |   | 48,012 |   |   |   | 34,109 |   |   |   | 42,943 |   |   |   | 242,249 |   |
|                          |               |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Utilization at year end (1)   |               |                            | 49.7 | % |   |   | 61.5 | % |   |   | 63.2 | % |   |   | 66.9 | % |   |   | 64.0 | % |   |   | 63.5 | % |   |   | 53.3 | % |   |   | 61.2 | % |
|                          |               |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Home equity loans             |               |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Outstanding balance           |               |                            | 1,772 |   |   |   | 2,929 |   |   |   | 7,319 |   |   |   | 5,389 |   |   |   | 3,650 |   |   |   | 942 |   |   |   | 3,402 |   |   |   | 25,403 |   |
|                          |               |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total home equity outstanding |               | $                               | 13,535 |   |   | $ | 21,502 |   |   | $ | 44,014 |   |   | $ | 55,543 |   |   | $ | 51,662 |   |   | $ | 35,051 |   |   | $ | 46,345 |   |   | $ | 267,652 |   |
|                          |               |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| (Dollars in thousands)                                                         |       | December 31, 2010               |       | December 31, 2009              |
|--------------------------------------------------------------------------------|--------------------------------|---------------------------------|--------------------------------|--------------------------------|
|                                                                           |                           |                            |                           |       | Percent of |   |   |   |       | Percent of |
| Region                                                                         |                           |                            | Amount                         |                           | total |   | Amount |   | total |
| Portland-Beaverton, Oregon / Vancouver, Washington                             |                           | $                               | 127,479                        |                           | 47.4 | % |   | $      | 135,647 |   | 48.5 | % |
| Salem, Oregon                                                                  |                           |                            | 62,533                         |                           | 23.2 | % |   |   | 64,241 |   | 23.0 | % |
| Oregon non-metropolitan area                                                   |                           |                            | 27,615                         |                           | 10.3 | % |   |   | 27,333 |   | 9.8 | % |
| Olympia, Washington                                                            |                           |                            | 17,236                         |                           | 6.4 | % |   |   | 18,803 |   | 6.7 | % |
| Washington non-metropolitan area                                               |                           |                            | 14,489                         |                           | 5.4 | % |   |   | 15,541 |   | 5.6 | % |
| Bend, Oregon                                                                   |                           |                            | 5,692                          |                           | 2.1 | % |   |   | 5,665 |   | 2.0 | % |
| Other                                                                          |                           |                            | 13,924                         |                           | 5.2 | % |   |   | 12,353 |   | 4.4 | % |
|        Total home equity loan and line portfolio |                           | $      | 268,968                        |                           | 100.0 | % |   | $ | 279,583 |   | 100.0 | % |
|                                                                           |                           |                            |                           |                           |   |   |   |   |   |   |   |   |

| (Dollars in thousands)                                                  |                           | December 31, 2010               |                           | December 31, 2009 |
|-------------------------------------------------------------------------|--------------------------------|---------------------------------|--------------------------------|-------------------|
|                                                                    |       | Amount                          |       | Percent           |       | Amount |       | Percent |
| Office Buildings                                                        |                           | $      | 182,376                        |              | 22.3 | % |   | $      | 193,233 |   | 22.4 | % |
| Retail Facilities                                                       |                           |                            | 108,874                        |              | 13.3 | % |   |   | 114,697 |   | 13.3 | % |
| Industrial parks and related                                            |                           |                            | 59,493                         |              | 7.3 | % |   |   | 55,955 |   | 6.5 | % |
| Multi-Family - 5+ Residential                                           |                           |                            | 58,606                         |              | 7.2 | % |   |   | 50,498 |   | 5.9 | % |
| Medical Offices                                                         |                           |                            | 55,294                         |              | 6.8 | % |   |   | 61,636 |   | 7.1 | % |
| Commercial/Agricultural                                                 |                           |                            | 54,361                         |              | 6.6 | % |   |   | 62,366 |   | 7.2 | % |
| Manufacturing Plants                                                    |                           |                            | 47,341                         |              | 5.8 | % |   |   | 55,216 |   | 6.4 | % |
| Hotels/Motels                                                           |                           |                            | 35,724                         |              | 4.4 | % |   |   | 37,829 |   | 4.4 | % |
| Assisted Living                                                         |                           |                            | 25,669                         |              | 3.1 | % |   |   | 26,600 |   | 3.1 | % |
| Mini Storage                                                            |                           |                            | 24,678                         |              | 3.0 | % |   |   | 25,778 |   | 3.0 | % |
| Land Development and Raw Land                                           |                           |                            | 19,534                         |              | 2.4 | % |   |   | 26,594 |   | 3.1 | % |
| Food Establishments                                                     |                           |                            | 16,370                         |              | 2.0 | % |   |   | 18,108 |   | 2.1 | % |
| Other                                                                   |                           |                            | 130,257                        |              | 15.8 | % |   |   | 133,683 |   | 15.5 | % |
|        Total commercial real estate loans |                           | $                               | 818,577                        |              | 100.0 | % |   | $ | 862,193 |   | 100.0 | % |
|                                                                    |                           |                            |                           |              |   |   |   |   |   |   |   |   |

|                                                                    |                           | December 31,                    |                           | December 31, |                           | Change |
|-------------------------------------------------------------------------|--------------------------------|---------------------------------|--------------------------------|--------------|--------------------------------|--------|
| (Dollars in thousands)                                                  |                           | 2010                            |                           | 2009         |                           |   |   |   |   | Mix |
|                                                                    |       | Amount                          |       | Percent      |       | Amount |       | Percent |       | Amount |       | Percent |
| Owner occupied                                                          |                           | $      | 383,047                        |         | 47                             | %      |   | $      | 423,031 |   | 49 | % |   | $      | (39,984 | ) |   | -9 | % |
| Non-owner occupied                                                      |                           |                            | 435,530                        |         | 53                             | %      |   |   | 439,162 |   | 51 | % |   |   | (3,632 | ) |   | -1 | % |
|        Total commercial real estate loans |                           | $                               | 818,577                        |         | 100                            | %      |   | $ | 862,193 |   | 100 | % |   | $ | (43,616 | ) |   |   |   |
|                                                                    |                           |                            |                           |         |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| (Dollars in thousands)                                                  |                           | December 31, 2010               |
|-------------------------------------------------------------------------|--------------------------------|---------------------------------|
|                                                                    |       |                            |   |       | Number of |       | Percent of |
| Region                                                                  |                           |                            | Amount |   | loans |   | total |
| Portland-Beaverton, Oregon / Vancouver, Washington                      |                           | $      | 440,506 |   | 742 |   | 53.8 | % |
| Salem, Oregon                                                           |                           |                            | 145,217 |   | 408 |   | 17.7 | % |
| Oregon non-metropoliton area                                            |                           |                            | 56,601 |   | 172 |   | 6.9 | % |
| Seattle-Tacoma-Bellevue, Washington                                     |                           |                            | 38,742 |   | 42 |   | 4.7 | % |
| Washington non-metropoliton area                                        |                           |                            | 30,876 |   | 113 |   | 3.8 | % |
| Olympia, Washington                                                     |                           |                            | 26,661 |   | 77 |   | 3.3 | % |
| Bend, Oregon                                                            |                           |                            | 22,774 |   | 24 |   | 2.8 | % |
| Other                                                                   |                           |                            | 57,200 |   | 87 |   | 7.0 | % |
|        Total commercial real estate loans |                           | $                               | 818,577 |   | 1,665 |   |     100.0 | % |
|                                                                    |                           |                            |   |   |   |   |   |   |

|                                                                    |                           | December 31, 2010               |
|-------------------------------------------------------------------------|--------------------------------|---------------------------------|
|                                                                    |                           |                            |   |   | Number of |   | Percent of |
| (Dollars in thousands)                                                  |       | Amount                          |       | loans |       | total |
| 2011                                                                    |                           | $      | 48,909 |   | 100 |   | 6.0 | % |
| 2012                                                                    |                           |                            | 52,676 |   | 82 |   | 6.4 | % |
| 2013 and after                                                          |                           |                            | 716,992 |   | 1,483 |   | 87.6 | % |
|        Total commercial real estate loans |                           | $                               | 818,577 |   | 1,665 |   |     100.0 | % |
|                                                                    |                           |                            |   |   |   |   |   |   |

----

----

|                                                                      |                           | December 31,                    |
|---------------------------------------------------------------------------|--------------------------------|---------------------------------|
| (Dollars in thousands)                                                    |       | 2010                            |       | 2009 |       | 2008 |       | 2007 |       | 2006 |
| Nonperforming loans:                                                      |                           |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                                                |                           | $      | 13,377 |   |   | $      | 36,211 |   |   | $      | 6,250 |   |   | $      | 2,401 |   |   | $      | 385 |   |
| Real estate construction:                                                 |                           |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Commercial real estate construction  |                           |                            | 4,077 |   |   |   | 1,488 |   |   |   | 2,922 |   |   |   | - |   |   |   | - |   |
|        Residential real estate construction |                           |                            | 6,615 |   |   |   | 22,373 |   |   |   | 90,712 |   |   |   | 22,121 |   |   |   | 567 |   |
| Total real estate construction                                            |                           |                            | 10,692 |   |   |   | 23,861 |   |   |   | 93,634 |   |   |   | 22,121 |   |   |   | 567 |   |
| Real estate mortgage:                                                     |                           |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Mortgage                             |                           |                            | 9,318 |   |   |   | 11,563 |   |   |   | 8,283 |   |   |   | 552 |   |   |   | - |   |
|        Nonstandard mortgage                 |                           |                            | 5,223 |   |   |   | 8,752 |   |   |   | 15,229 |   |   |   | - |   |   |   | - |   |
|        Home equtiy                          |                           |                            | 950 |   |   |   | 2,036 |   |   |   | 1,043 |   |   |   | - |   |   |   | - |   |
| Real estate mortgage                                                      |                           |                            | 15,491 |   |   |   | 22,351 |   |   |   | 24,555 |   |   |   | 552 |   |   |   | - |   |
| Commercial real estate                                                    |                           |                            | 21,671 |   |   |   | 16,778 |   |   |   | 3,145 |   |   |   | 1,353 |   |   |   | 516 |   |
| Installment and other consumer                                            |                           |                            | - |   |   |   | 144 |   |   |   | 6 |   |   |   | - |   |   |   | - |   |
|        Total loans on nonaccrual status     |                           |                            | 61,231 |   |   |   | 99,345 |   |   |   | 127,590 |   |   |   | 26,427 |   |   |   | 1,468 |   |
| Loans past due 90 days or more but not on                                 |                           |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        nonaccrual status                    |                           |                            | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Other real estate owned                                                   |                           |                            | 39,459 |   |   |   | 53,594 |   |   |   | 70,110 |   |   |   | 3,255 |   |   |   | - |   |
|        Total nonperforming assets           |                           | $                               | 100,690 |   |   | $ | 152,939 |   |   | $ | 197,700 |   |   | $ | 29,682 |   |   | $ | 1,468 |   |
| Percentage of nonperforming assets to                                     |                           |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        total assets                         |                           |                            | 4.09 | % |   |   | 5.60 | % |   |   | 7.86 | % |   |   | 1.12 | % |   |   | 0.06 | % |
|                                                                      |                           |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                                              |                           | $                               | 2,461,059 |   |   | $ | 2,733,547 |   |   | $ | 2,516,140 |   |   | $ | 2,646,614 |   |   | $ | 2,465,372 |   |

----

| (Dollars in thousands)                                              |                           | December 31, 2010               |                           | December 31, 2009 |
|---------------------------------------------------------------------|--------------------------------|---------------------------------|--------------------------------|-------------------|
|                                                                |       | Amount                          |       | # of properties   |       | Amount |       | # of properties |
| Beginning balance                                                   |                           | $      | 53,594                         |              |   | 672 |   |   | $      | 70,110 |   |   | 288 |   |
|        Additions to OREO              |                           |                            | 25,199                         |              |   | 123 |   |   |   | 74,174 |   |   | 699 |   |
|        Capitalized improvements       |                           |                            | 3,185                          |              |   | - |   |   |   | 4,933 |   |   | - |   |
|        Valuation adjustments          |                           |                            | (6,649                         | )                 |   | - |   |   |   | (18,562 | ) |   | - |   |
|        Disposition of OREO properties |                           |                            | (35,870                        | )                 |   |              (393 | ) |   |   | (77,061 | ) |   |              (315 | ) |
| Ending balance                                                      |                           | $                               | 39,459                         |              |   | 402 |   |   | $ | 53,594 |   |   | 672 |   |
|                                                                |                           |                            |                           |              |   |   |   |   |   |   |   |   |   |   |

| (Dollars in thousands)                     |                           | December 31,                    |                           | # of       |                           | December 31, |                            | # of       |
|--------------------------------------------|--------------------------------|---------------------------------|--------------------------------|------------|--------------------------------|--------------|---------------------------------|------------|
|                                       |       | 2010                            |       | properties |       | 2009         |        | properties |
| Homes                                      |                           | $      | 17,297                         |       | 69                             |         | $      | 29,435     |   | 118 |
| Residential site developments              |                           |                            | 7,340                          |       | 245                            |         |                            | 14,851     |   | 453 |
| Lots                                       |                           |                            | 3,700                          |       | 56                             |         |                            | 5,235      |   | 71 |
| Land                                       |                           |                            | 5,135                          |       | 12                             |         |                            | 1,607      |   | 7 |
| Income producing properties                |                           |                            | 5,162                          |       | 7                              |         |                            | 1,255      |   | 4 |
| Condominiums                               |                           |                            | 128                            |       | 2                              |         |                            | 982        |   | 12 |
| Multifamily                                |                           |                            | 697                            |       | 11                             |         |                            | 229        |   | 7 |
|        Total |                           | $                               | 39,459                         |       | 402                            |         | $                               | 53,594     |   | 672 |
|                                       |                           |                            |                           |       |                           |         |                            |       |   |   |

----

|                                                          |                           | December 31,                    |
|---------------------------------------------------------------|--------------------------------|---------------------------------|
| (Dollars in thousands)                                        |       | 2010                            |       | % of |       | 2009 |       | % of |       | 2008 |       | % of |
|                                                          |                           | Amount                          |   | category |   | Amount |   | category |   | Amount |   | category |
| Commercial                                                    |                           | $      | 52 |   |   | 0.02 | % |   | $      | 1,151 |   |   | 0.31 | % |   | $      | 2,814 |   |   | 0.58 | % |
| Real estate construction                                      |                           |                            | - |   |   | 0.00 | % |   |   | 606 |   |   | 0.61 | % |   |   | 1,940 |   |   | 0.68 | % |
| Real estate mortgage                                          |                           |                            | 2,062 |   |   | 0.59 | % |   |   | 2,649 |   |   | 0.71 | % |   |   | 1,934 |   |   | 0.49 | % |
| Commercial real estate                                        |                           |                            | 555 |   |   | 0.07 | % |   |   | 3,962 |   |   | 0.46 | % |   |   | 1,324 |   |   | 0.15 | % |
| Installment and other consumer                                |                           |                            | 52 |   |   | 0.34 | % |   |   | 59 |   |   | 0.32 | % |   |   | 80 |   |   | 0.36 | % |
|                                                          |                           |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total loans 30-89 days past due,                              |                           |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        not in nonaccrual status |                           | $                               | 2,721 |   |   |   |   |   | $ | 8,427 |   |   |   |   |   | $ | 8,092 |   |   |   |   |
|                                                          |                           |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Delinquent loans to total loans                               |                           |                            | 0.18 | % |   |   |   |   |   | 0.49 | % |   |   |   |   |   | 0.39 | % |   |   |   |

----

- Specific Reserve Allowances.  Specific reserve allowances may be established when management can estimate the amount of an impairment of a loan, typically on a non real estate collateralized loan or to address the unique risks associated with a group of loans or particular type of credit exposure. The Company does not establish specific reserve allowances on collateral dependent impaired loans. Impairment amounts related to these loans are charged off to the allowance for credit losses when impairment is established.  
- Formula Allowance.  The formula allowance is calculated by applying loss factors to individual loans based on the assignment of risk ratings, or through the assignment of loss factors to homogenous pools of loans. Changes in risk ratings of both performing and nonperforming loans affect the amount of the formula allowance. Loss factors are based on our historical loss experience and such other data as management believes to be pertinent, and may be adjusted for significant factors that, in management’s judgment, affect the collectability of the portfolio as of the evaluation date.  
- Unallocated Allowance.  The unallocated loan loss allowance represents an amount for imprecision or uncertainty that is inherent in estimates used to determine the allowance. In determining whether to carry an unallocated allowance and, if so, the amount of the allowance, management considers a variety of qualitative factors, including regional economic and business conditions that impact important categories of our portfolio, loan growth rates, the depth and skill of lending staff, the interest rate environment, and the results of bank regulatory examinations and findings of our internal credit analysts.  The current level of unallocated reserves is high by historical standards; however, the Company believes higher levels of unallocated reserves are appropriate given downward pressure on real estate values and higher levels of uncertainty associated with strained economic conditions.   
- Reserve for Unfunded Commitments.  A reserve for unfunded commitments is maintained at a level that, in the opinion of management, is adequate to absorb probable losses associated with commitments to lend funds under existing agreements; for example, the Bank’s commitment to fund advances under lines of credit. The reserve amount for unfunded commitments is determined based on our methodologies described above with respect to the formula allowance. As our unfunded commitments decrease due to the transition to a funded loan, the corresponding reserve for unfunded commitments will decrease. 

----

|                                                                                                                |                           | December 31,              |
|---------------------------------------------------------------------------------------------------------------------|--------------------------------|---------------------------|
| (Dollars in thousands)                                                                                              |                           | 2010                      |   | 2009 |   | 2008 |   | 2007 |   | 2006 |
| Loans outstanding at end of period                                                                                  |       | $     | 1,536,270 |   |       | $      | 1,724,842 |   |       | $      | 2,064,796 |   |       | $      | 2,172,669 |   |       | $      | 1,947,690 |   |
| Average loans outstanding during the period                                                                         |                           | $                         | 1,622,445 |   |   | $ | 1,914,975 |   |   | $ | 2,146,870 |   |   | $ | 2,094,977 |   |   | $ | 1,745,777 |   |
|                                                                                                                |                           |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for credit losses, beginning of period                                                                    |                           | $                         | 39,418 |   |   | $ | 29,934 |   |   | $ | 54,903 |   |   | $ | 23,017 |   |   | $ | 20,469 |   |
| Allowance for loan losses, from acquisition                                                                         |                           |                      | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 887 |   |
| Loans charged off:                                                                                                  |                           |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Commercial                                                                     |                           |                      | (5,229 | ) |   |   | (22,411 | ) |   |   | (6,464 | ) |   |   | (3,798 | ) |   |   | (831 | ) |
|               Commercial real estate construction  |                           |                      | (811 | ) |   |   | (325 | ) |   |   | (1,422 | ) |   |   | - |   |   |   | - |   |
|               Residential real estate construction |                           |                      | (2,211 | ) |   |   | (28,287 | ) |   |   | (10,105 | ) |   |   | - |   |   |   | - |   |
|               Two-step residential construction    |                           |                      | (554 | ) |   |   | (6,963 | ) |   |   | (42,483 | ) |   |   | (2,540 | ) |   |   | - |   |
|        Total real estate construction                                                 |                           |                      | (3,576 | ) |   |   | (35,575 | ) |   |   | (54,010 | ) |   |   | (2,540 | ) |   |   | - |   |
|               Mortgage                             |                           |                      | (2,430 | ) |   |   | (10,022 | ) |   |   | (1,811 | ) |   |   | - |   |   |   | - |   |
|               Nonstandard mortgage                 |                           |                      | (2,224 | ) |   |   | (3,666 | ) |   |   | (3,036 | ) |   |   | - |   |   |   | - |   |
|               Home equity                          |                           |                      | (2,807 | ) |   |   | (3,394 | ) |   |   | (249 | ) |   |   | (71 | ) |   |   | (48 | ) |
|        Total real estate mortgage                                                     |                           |                      | (7,461 | ) |   |   | (17,082 | ) |   |   | (5,096 | ) |   |   | (71 | ) |   |   | (48 | ) |
|        Commercial real estate                                                         |                           |                      | (1,321 | ) |   |   | (5,383 | ) |   |   | (826 | ) |   |   | - |   |   |   | - |   |
|        Installment and consumer                                                       |                           |                      | (706 | ) |   |   | (840 | ) |   |   | (531 | ) |   |   | (254 | ) |   |   | (130 | ) |
|        Overdraft                                                                      |                           |                      | (1,183 | ) |   |   | (1,054 | ) |   |   | (1,328 | ) |   |   | (1,050 | ) |   |   | (912 | ) |
|        Total loans charged off                                                        |                           |                      | (19,476 | ) |   |   | (82,345 | ) |   |   | (68,255 | ) |   |   | (7,713 | ) |   |   | (1,921 | ) |
| Recoveries:                                                                                                         |                           |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Commercial                                                                     |                           |                      | 1,073 |   |   |   | 1,005 |   |   |   | 203 |   |   |   | 269 |   |   |   | 501 |   |
|               Commercial real estate construction  |                           |                      | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|               Residential real estate construction |                           |                      | 697 |   |   |   | 44 |   |   |   | - |   |   |   | - |   |   |   | - |   |
|               Two-step residential construction    |                           |                      | - |   |   |   | 241 |   |   |   | 2,339 |   |   |   | 7 |   |   |   | - |   |
|        Total real estate construction                                                 |                           |                      | 697 |   |   |   | 285 |   |   |   | 2,339 |   |   |   | 7 |   |   |   | - |   |
|               Mortgage                             |                           |                      | 247 |   |   |   | 11 |   |   |   | - |   |   |   | - |   |   |   | - |   |
|               Nonstandard mortgage                 |                           |                      | 5 |   |   |   | 1 |   |   |   | 38 |   |   |   | - |   |   |   | - |   |
|               Home equity                          |                           |                      | 128 |   |   |   | 35 |   |   |   | 32 |   |   |   | 33 |   |   |   | 36 |   |
|        Total real estate mortgage                                                     |                           |                      | 380 |   |   |   | 47 |   |   |   | 70 |   |   |   | 33 |   |   |   | 36 |   |
|        Commercial real estate                                                         |                           |                      | 28 |   |   |   | 151 |   |   |   | - |   |   |   | 2 |   |   |   | 4 |   |
|        Installment and consumer                                                       |                           |                      | 92 |   |   |   | 65 |   |   |   | 78 |   |   |   | 112 |   |   |   | 75 |   |
|        Overdraft                                                                      |                           |                      | 203 |   |   |   | 219 |   |   |   | 229 |   |   |   | 220 |   |   |   | 233 |   |
|        Total recoveries                                                               |                           |                      | 2,473 |   |   |   | 1,772 |   |   |   | 2,919 |   |   |   | 643 |   |   |   | 849 |   |
| Net loans charged off                                                                                               |                           |                      | (17,003 | ) |   |   | (80,573 | ) |   |   | (65,336 | ) |   |   | (7,070 | ) |   |   | (1,072 | ) |
|        Provision for credit losses loans other than two-step loans                    |                           |                      | 18,098 |   |   |   | 83,756 |   |   |   | 30,867 |   |   |   | 7,976 |   |   |   | 2,733 |   |
|        Provision for credit losses two-step loans                                     |                           |                      | 554 |   |   |   | 6,301 |   |   |   | 9,500 |   |   |   | 30,980 |   |   |   | - |   |
| Total provision for credit losses                                                                                   |                           |                      | 18,652 |   |   |   | 90,057 |   |   |   | 40,367 |   |   |   | 38,956 |   |   |   | 2,733 |   |
| Allowance for credit losses, end of period                                                                          |                           | $                         | 41,067 |   |   | $ | 39,418 |   |   | $ | 29,934 |   |   | $ | 54,903 |   |   | $ | 23,017 |   |
|                                                                                                                |                           |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Components of allowance for credit losses                                                                           |                           |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Allowance for loan losses                                                      |                           | $                         | 40,217 |   |   | $ | 38,490 |   |   | $ | 28,920 |   |   | $ | 46,917 |   |   | $ | 23,017 |   |
|        Reserve for unfunded commitments                                               |                           |                      | 850 |   |   |   | 928 |   |   |   | 1,014 |   |   |   | 7,986 |   |   |   | - |   |
| Total allowance for credit losses                                                                                   |                           | $                         | 41,067 |   |   | $ | 39,418 |   |   | $ | 29,934 |   |   | $ | 54,903 |   |   | $ | 23,017 |   |
|                                                                                                                |                           |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratio of net loans charged off to average                                                                           |                           |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        loans outstanding                                                              |                           |                      | 1.05 | % |   |   | 4.21 | % |   |   | 3.04 | % |   |   | 0.34 | % |   |   | 0.06 | % |
| Ratio of allowance for loan losses to end of                                                                        |                           |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        period loans                                                                   |                           |                      | 2.62 | % |   |   | 2.23 | % |   |   | 1.40 | % |   |   | 2.16 | % |   |   | 1.18 | % |
| Ratio of allowance for credit losses to end of                                                                      |                           |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        period loans                                                                   |                           |                      | 2.67 | % |   |   | 2.29 | % |   |   | 1.45 | % |   |   | 2.53 | % |   |   | 1.18 | % |

----

| (Dollars in thousands)                                                    |                           | December 31, 2010               |                           | December 31, 2009 |
|---------------------------------------------------------------------------|--------------------------------|---------------------------------|--------------------------------|-------------------|
|                                                                      |                           |                            |                           |              |
|                                                                      |       | Net loan charge-                |       | % of average      |       | Net loan charge- |       | % of average |
|                                                                      |                           | offs                            |                           | loan category     |   | offs |   | loan category |
| Commercial                                                                |                           |                            | 4,156                          |              | 1.26 | % |   |   | 21,406 |   | 4.92 | % |
|        Commercial real estate construction  |                           |                            | 811                            |              | 3.61 | % |   |   | 325 |   | 0.49 | % |
|        Residential real estate construction |                           |                            | 2,068                          |              | 4.00 | % |   |   | 34,965 |   | 25.85 | % |
| Total real estate construction                                            |                           |                            | 2,879                          |              | 3.88 | % |   |   | 35,290 |   | 17.55 | % |
|        Mortgage                             |                           |                            | 2,183                          |              | 3.16 | % |   |   | 10,011 |   | 12.88 | % |
|        Nonstandard mortgage                 |                           |                            | 2,219                          |              | 15.27 | % |   |   | 3,665 |   | 17.58 | % |
|        Home equity                          |                           |                            | 2,679                          |              | 0.96 | % |   |   | 3,359 |   | 1.16 | % |
| Total real estate mortgage                                                |                           |                            | 7,081                          |              | 1.95 | % |   |   | 17,035 |   | 4.39 | % |
| Commercial real estate                                                    |                           |                            | 1,293                          |              | 0.15 | % |   |   | 5,232 |   | 0.60 | % |
| Installment and consumer                                                  |                           |                            | 614                            |              | 4.12 | % |   |   | 775 |   | 4.20 | % |
| Overdraft                                                                 |                           |                            | 980                            |              | 68.87 | % |   |   | 835 |   | 56.19 | % |
| Total loan net charge-offs                                                |                           | $      | 17,003                         |              | 1.05 | % |   | $      | 80,573 |   | 4.21 | % |
|                                                                      |                           |                            |                           |              |   |   |   |   |   |   |   |   |

----

|                                                         |                           | 2010                            |      | 2009                           |    | 2008                           |
|--------------------------------------------------------------|--------------------------------|---------------------------------|-----------|--------------------------------|---------|--------------------------------|
|                                                         |       |                            |      |       | Percent |       | Rate |       |   |   |       | Percent |       | Rate |       |   |   |       | Percent |       | Rate |
| (Dollars in thousands)                                       |                           | Average Balance                 |      | of total                       |    | Paid                           |   | Average Balance |   | of total |   | Paid |   | Average Balance |   | of total |   | Paid |
| Demand deposits                                              |                           | $      | 540,280   |                           | 26.7    | %                              |   | - |   |   | $      | 499,283 |   | 23.9 | % |   | - |   |   | $      | 470,601 |   | 23.0 | % |   | - |   |
| Interest bearing demand                                      |                           |                            | 335,134   |                           | 16.5    | %                              |   | 0.13 | % |   |   | 298,002 |   | 14.2 | % |   | 0.26 | % |   |   | 279,227 |   | 13.6 | % |   | 0.70 | % |
| Savings                                                      |                           |                            | 103,531   |                           | 5.1     | %                              |   | 0.27 | % |   |   | 89,903 |   | 4.3 | % |   | 0.79 | % |   |   | 71,542 |   | 3.5 | % |   | 0.81 | % |
| Money market                                                 |                           |                            | 659,542   |                           | 32.5    | %                              |   | 0.60 | % |   |   | 617,881 |   | 29.5 | % |   | 1.33 | % |   |   | 658,360 |   | 32.2 | % |   | 2.22 | % |
|        Total non-time deposits |                           |                            | 1,638,487 |                           | 80.8    | %                              |   | 0.28 | % |   |   | 1,505,069 |   | 71.9 | % |   | 0.64 | % |   |   | 1,479,730 |   | 72.3 | % |   | 1.16 | % |
| Time deposits                                                |                           |                            | 388,500   |                           | 19.2    | %                              |   | 1.92 | % |   |   | 587,299 |   | 28.1 | % |   | 2.51 | % |   |   | 566,195 |   | 27.7 | % |   | 3.60 | % |
|        Total deposits          |                           |                            | 2,026,987 |                           | 100     | %                              |   | 0.60 | % |   |   | 2,092,368 |   | 100 | % |   | 1.17 | % |   |   | 2,045,925 |   | 100 | % |   | 1.84 | % |
|                                                         |                           |                            |      |                           |    |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Short-term borrowings                                        |                           |                            | 7,570     |                           |    |                           |   | 6.52 | % |   |   | 44,220 |   |   |   |   | 1.82 | % |   |   | 149,016 |   |   |   |   | 2.89 | % |
| Long-term borrowings 1                                       |                           |                            | 257,019   |                           |    |                           |   | 3.75 | % |   |   | 259,865 |   |   |   |   | 3.15 | % |   |   | 151,743 |   |   |   |   | 4.50 | % |
|        Total borrowings        |                           |                            | 264,589   |                           |    |                           |   | 3.83 | % |   |   | 304,085 |   |   |   |   | 2.95 | % |   |   | 300,759 |   |   |   |   | 3.71 | % |
|                                                         |                           |                            |      |                           |    |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total deposits and borrowings                                |                           | $                               | 2,291,576 |                           |    |                           |   | 1.27 | % |   | $ | 2,396,453 |   |   |   |   | 1.76 | % |   | $ | 2,346,684 |   |   |   |   | 2.60 | % |
|                                                         |                           |                            |      |                           |    |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                             |                           | Time deposits       |                                        |                |                                       |                |
|--------------------------------------------------|--------------------------------|---------------------|---------------------------------------------|---------------------|--------------------------------------------|---------------------|
| (Dollars in thousands)                           |                           | of $100,000 or more |                                        | Other time deposits |                                       | Total time deposits |
|                                             |       | Amount              |                    | Percent             |                   | Amount              |       | Percent |       | Amount |       | Percent |
| Reprice/mature in 3 months or less               |                           | $                   | 17,959                                      |                | 20.4                                       | %                   |   | $ | 52,241 |   | 27.9 | % |   | $ | 70,200 |   | 25.5 | % |
| Reprice/mature after 3 months through 6 months   |                           |                | 25,439                                      |                | 28.9                                       | %                   |   |   | 43,353 |   | 23.1 | % |   |   | 68,792 |   | 25.0 | % |
| Reprice/mature after 6 months through one year   |                           |                | 24,501                                      |                | 27.9                                       | %                   |   |   | 48,033 |   | 25.6 | % |   |   | 72,534 |   | 26.3 | % |
| Reprice/mature after one year through five years |                           |                | 20,089                                      |                | 22.8                                       | %                   |   |   | 43,796 |   | 23.4 | % |   |   | 63,885 |   | 23.2 | % |
| Reprice/mature after five years                  |                           |                | -                                           |                | 0.0                                        | %                   |   |   | - |   | 0.0 | % |   |   | - |   | 0.0 | % |
|        Total       |                           | $                   |        87,988 |                |        100.0 | %                   |   | $ |        187,423 |   |        100.0 | % |   | $ |        275,411 |   | 100.0 | % |
|                                             |

|                                                     |                           | December 31, |                                         | December 31,                   |
|----------------------------------------------------------|--------------------------------|--------------|----------------------------------------------|--------------------------------|
| (Dollars in thousands)                                   |       | 2010         |                     | 2009                           |
| Time deposits less than $100,000                         |                           | $            | 187,423                                      |       | 68 | % |   | $ | 313,452 |       | 60 | % |
| Time deposits $100,000 to $250,000                       |                           |         | 64,528                                       |                           | 23 | % |   |   | 162,886 |   | 31 | % |
| Time deposits greater than $250,000                      |                           |         | 23,460                                       |                           | 9 | % |   |   | 48,187 |   | 9 | % |
|        Total time deposits |                           | $            |        275,411 |                           |        100 | % |   | $ |        524,525 |   |        100 | % |
|                                                     |

| (Dollars in thousands) |                           | Due in three   |                           | Three months     |                           | Due after one year |                           | Due after  |                                         |   |
|------------------------|--------------------------------|----------------|--------------------------------|------------------|--------------------------------|--------------------|--------------------------------|------------|----------------------------------------------|--------|
|                   |       | months or less |       | through one year |       | through five years |       | five years |                     | Total  |
| Short-term borrowings  |                           | $              | -                              |             | $                              | -                  |                           | $          | -                                            |   | $ | - |   | $ | - |
| Long-term borrowings 1 |                           |           | -                              |             |                           | -                  |                           |       | 168,599                                      |   |   | - |   |   | 168,599 |
| Total borrowings       |                           | $              | -                              |             | $                              | -                  |                           | $          |        168,599 |   | $ |        - |   | $ |        168,599 |
|              |

| 1 Based on contractual maturities; actual terms may vary based on call dates. |
|-------------------------------------------------------------------------------|

----

| (Dollars in thousands)          |                           |           |                           |               |                           |   |                           |         |                           |     |                           |          |                           |              |                 |
|---------------------------------|--------------------------------|----------------|--------------------------------|--------------------|--------------------------------|--------|--------------------------------|--------------|--------------------------------|----------|--------------------------------|---------------|--------------------------------|-------------------|----------------------|
|                            |                           |           |                           | Preferred security |                           | Rate   |                           |         |                           | Rate at  |                           |          |                           | Next possible     |
| Issuance Trust                  |       | Issuance date  |       | amount             |       | type 1 |       | Initial rate |       | 12/31/10 |       | Maturity date |       | redemption date 2 |
| West Coast Statutory Trust III  |                           | September 2003 |                           | $                  | 7,500                          |   | Variable                       |         | 6.75%                          |     | 3.25%                          |          | September 2033                 |              | Currently redeemable |
| West Coast Statutory Trust IV   |                           | March 2004     |                           | $                  | 6,000                          |   | Variable                       |         | 5.88%                          |     | 3.09%                          |          | March 2034                     |              | Currently redeemable |
| West Coast Statutory Trust V    |                           | April 2006     |                           | $                  | 15,000                         |   | Variable                       |         | 6.79%                          |     | 1.73%                          |          | June 2036                      |              | June 2011            |
| West Coast Statutory Trust VI   |                           | December 2006  |                           | $                  | 5,000                          |   | Variable                       |         | 7.04%                          |     | 1.98%                          |          | December 2036                  |              | December 2011        |
| West Coast Statutory Trust VII  |                           | March 2007     |                           | $                  | 12,500                         |   | Variable                       |         | 6.90%                          |     | 1.85%                          |          | March 2037                     |              | March 2012           |
| West Coast Statutory Trust VIII |                           | June 2007      |                           | $                  | 5,000                          |   | Variable                       |         | 6.74%                          |     | 1.68%                          |          | June 2037                      |              | June 2012            |
|                            |                           | Total          |                           | $                  | 51,000                         |   |                           |         | Weighted rate                  |     | 2.16%                          |          |                           |              |                 |
|                            |

| 1 The variable rate preferred securities reprice quarterly.                 |
|-----------------------------------------------------------------------------|
| 2 Securities are redeemable at the option of Bancorp following these dates. |

----

|                            |                           |               |                                         |            |                           |                   |                                         |   |                           |        |                                         |        |   |   |                                         |   |   | Bank-level                                |
|---------------------------------|--------------------------------|--------------------|----------------------------------------------|-----------------|--------------------------------|------------------------|----------------------------------------------|--------|--------------------------------|-------------|----------------------------------------------|-------------|--------|--------|----------------------------------------------|--------|--------|-------------------------------------------|
|                            |                           | West Coast Bancorp |                                         | West Coast Bank |                           | guideline requirements |
|                            |                           | December 31,       |                                         | December 31,    |                           | Adequately             |                                         | Well   |
|                            |       | 2010               |                     | 2009            |       | 2010                   |                     | 2009   |       | Capitalized |                     | Capitalized |
| Tier 1 risk-based capital ratio |                           |               | 17.47                                        | %               |                           |                   | 7.17                                         | %      |                           |        | 16.79                                        | %           |   |   | 14.11                                        | %      |   | 4.00                                      | % |   | 6.00 | % |
| Total risk-based capital ratio  |                           |               | 18.74                                        | %               |                           |                   | 9.13                                         | %      |                           |        | 18.05                                        | %           |   |   | 15.37                                        | %      |   | 8.00                                      | % |   |        10.00 | % |
| Leverage ratio                  |                           |               | 13.02                                        | %               |                           |                   | 5.37                                         | %      |                           |        | 12.51                                        | %           |   |   | 10.57                                        | %      |   |        4.00 | % |   | 5.00 | % |
|                            |                           |               |                                         |            |                           |                   |                                         |   |                           |        |                                         |        |   |   |                                         |   |   |                                      |   |   |   |   |
| Total stockholders' equity      |                           | $                  |        272,560 |            |                           | $                      |        249,058 |   |                           | $           |        310,487 |        |   | $      |        288,477 |   |   |                                      |   |   |   |   |

----

|                            |                           | December 31,                             |
|---------------------------------|--------------------------------|------------------------------------------|
|                            |       | 2010                                     |       | 2009 |
| Primary liquidity               |                           |        37% |   |        38% |
| Net non-core funding dependency |                           | 6%                                       |   | 10% |

----

|                                       |                           | Payments due within time period at December 31, 2010 |
|--------------------------------------------|--------------------------------|------------------------------------------------------|
| (Dollars in thousands)                     |                           |                                                 |   |   |   |   |   |   |   |   | Due After Five |   |   |   |
|                                       |       | 0-12 Months                                          |       | 1-3 Years |       | 4-5 Years |       | Years |       | Total |
| Operating leases 1                         |                           | $                                                    | 3,937 |   | $ | 7,851 |   | $ | 6,520 |   | $ | 10,237 |   | $ | 28,545 |
| Junior subordinated debentures 2 3         |                           |                                                 | 2,893 |   |   | 2,207 |   |   | 2,207 |   |   | 72,799 |   |   | 80,106 |
| Long-term borrowings 3                     |                           |                                                 | 5,345 |   |   | 133,160 |   |   | 42,690 |   |   | - |   |   | 181,195 |
| Other long-term liabilities                |                           |                                                 | 213 |   |   | 413 |   |   | 416 |   |   | 1,055 |   |   | 2,097 |
|        Total |                           | $                                                    | 12,388 |   | $ | 143,631 |   | $ | 51,833 |   | $ | 84,091 |   | $ | 291,943 |
|                                       |

| 1 Operating leases do not include increases in common area charges.                                                                                              |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2 Junior subordinated debenture obligations reflect contractual maturities which are 30 years from origination and do not reflect possible call dates.           |
| 3 Long-term borrowings and junior subordinated debenture obligations reflect interest payment obligations based on December 31, 2010 contractual interest rates. |

----

----

| Stable rate scenario compared to: | Percent Change in   |
|-----------------------------------|---------------------|
|                              | Net Interest Income |
| Up 200 basis points               | 1.9%                |
| Up 100 basis points               | .1%                 |
| Down 100 basis points             | -1.4%               |

| December 31, 2010        | Percent Change in       |
|--------------------------|-------------------------|
| Change in Interest Rates | Present Value of Equity |
| Up 200 basis points      | -3.7%                   |
| Up 100 basis points      | -2.0%                   |
| Down 100 basis points    | -1.9%                   |

----

|                                                                                                                        |                           | Estimated Maturity or Repricing at December 31, 2010 |
|-----------------------------------------------------------------------------------------------------------------------------|--------------------------------|------------------------------------------------------|
| (Dollars in thousands)                                                                                                      |                           |                                                 |   |   |   |   |   |   |   |   |   |   |   | Due After |   |   |   |   |
|                                                                                                                        |       | 0-3 Months                                           |       | 4-12 Months |       | 1-5 Years |       | Five Years |       | Total |
| Interest Earning Assets:                                                                                                    |                           |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Interest earning balances due from banks                                               |                           | $                                                    | 131,952 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 131,952 |   |
|        Federal funds sold                                                                     |                           |                                                 | 3,367 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 3,367 |   |
|        Trading assets                                                                         |                           |                                                 | 808 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 808 |   |
|        Investments available for sale1 2                                                      |                           |                                                 | 52,957 |   |   |   | 59,241 |   |   |   | 285,711 |   |   |   | 248,203 |   |   |   | 646,112 |   |
|        Federal Home Loan Bank Stock, held at cost1                                            |                           |                                                 | 12,148 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 12,148 |   |
|        Loans held for sale                                                                    |                           |                                                 | 3,102 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 3,102 |   |
|        Loans, including fees                                                                  |                           |                                                 | 588,190 |   |   |   | 252,532 |   |   |   | 629,721 |   |   |   | 65,827 |   |   |   | 1,536,270 |   |
|               Total interest earning assets                |                           | $                                                    |        792,524 |   |   | $ |        311,773 |   |   | $ |        915,432 |   |   | $ |        314,030 |   |   |   |        2,333,759 |   |
|        Allowance for loan losses                                                              |                           |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (40,217 | ) |
|        Cash and due from banks                                                                |                           |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 42,672 |   |
|        Other assets                                                                           |                           |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 124,845 |   |
|               Total assets                                 |                           |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 2,461,059 |   |
|                                                                                                                        |                           |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest Bearing Liabilities:                                                                                               |                           |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Savings, interest bearing demand                                                       |                           |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|               and money markets 3                          |                           | $                                                    | 56,262 |   |   | $ | 137,723 |   |   | $ | 440,419 |   |   | $ | 474,941 |   |   | $ | 1,109,345 |   |
|        Time deposits                                                                          |                           |                                                 | 70,202 |   |   |   | 141,324 |   |   |   | 63,885 |   |   |   | - |   |   |   | 275,411 |   |
|        Borrowings 2                                                                           |                           |                                                 | - |   |   |   | - |   |   |   | 168,599 |   |   |   | - |   |   |   | 168,599 |   |
|        Junior subordinated debentures                                                         |                           |                                                 | 51,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 51,000 |   |
|               Total interest bearing liabilities           |                           | $                                                    | 177,464 |   |   | $ | 279,047 |   |   | $ | 672,903 |   |   | $ | 474,941 |   |   |   | 1,604,355 |   |
|        Other liabilities                                                                      |                           |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 584,144 |   |
|        Total liabilities                                                                      |                           |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 2,188,499 |   |
|        Stockholders' equity                                                                   |                           |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 272,560 |   |
|               Total liabilities & stockholders' equity |                           |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 2,461,059 |   |
|                                                                                                                        |                           |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Interest sensitivity gap                                                               |                           | $                                                    | 615,060 |   |   | $ | 32,726 |   |   | $ | 242,529 |   |   | $ | (160,911 | ) |   | $ | 729,404 |   |
|        Cumulative interest sensitivity gap                                                    |                           | $                                                    | 615,060 |   |   | $ | 647,786 |   |   | $ | 890,315 |   |   | $ | 729,404 |   |   |   |   |   |
|        Cumulative interest sensitivity gap                                                    |                           |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|               as a percentage of total assets              |                           |                                                 | 25 | % |   |   | 26 | % |   |   | 36 | % |   |   | 30 | % |   |   |   |   |

| 1 Equity investments have been placed in the 0-3 month category.                         |
|------------------------------------------------------------------------------------------|
| 2 Repricing is based on anticipated call dates and may vary from contractual maturities. |
| 3 Repricing is based on estimated average lives.                                         |

----

|       | Report of Independent Registered Public Accounting Firm          |       | 53 |
|---------------------------|------------------------------------------------------------------|--------------------------------|----|
|                      | Consolidated Balance Sheets                                      |                           | 54 |
|                      | Consolidated Statements of Income (Loss)                         |                           | 55 |
|                      | Consolidated Statements of Cash Flows                            |                           | 56 |
|                      | Consolidated Statements of Changes in Stockholders’ Equity |                           | 57 |
|                      | Notes to Consolidated Financial Statements                       |                           | 58 |

----

----

| As of December 31 (Dollars and shares in thousands)                                                                            |       | 2010   |       | 2009   |
|--------------------------------------------------------------------------------------------------------------------------------|--------------------------------|--------|--------------------------------|--------|
| ASSETS                                                                                                                         |                           |   |                           |   |   |   |   |   |
| Cash and cash equivalents:                                                                                                     |                           |   |                           |   |   |   |   |   |
|        Cash and due from banks                                                                   |                           | $      | 42,672                         |   |   | $ | 47,708 |   |
|        Federal funds sold                                                                        |                           |   | 3,367                          |   |   |   | 20,559 |   |
|        Interest-bearing deposits in other banks                                                  |                           |   | 131,952                        |   |   |   | 234,830 |   |
|               Total cash and cash equivalents                 |                           |   | 177,991                        |   |   |   | 303,097 |   |
| Trading securities                                                                                                             |                           |   | 808                            |   |   |   | 731 |   |
| Investment securities available for sale, at fair value                                                                        |                           |   |                           |   |   |   |   |   |
|        (amortized cost: $645,246 and $564,615, respectively)                                     |                           |   | 646,112                        |   |   |   | 562,277 |   |
| Federal Home Loan Bank stock, held at cost                                                                                     |                           |   | 12,148                         |   |   |   | 12,148 |   |
| Loans held for sale                                                                                                            |                           |   | 3,102                          |   |   |   | 1,176 |   |
| Loans                                                                                                                          |                           |   | 1,536,270                      |   |   |   | 1,724,842 |   |
| Allowance for loan losses                                                                                                      |                           |   | (40,217                        | )      |   |   | (38,490 | ) |
|               Loans, net                                      |                           |   | 1,496,053                      |   |   |   | 1,686,352 |   |
| Premises and equipment, net                                                                                                    |                           |   | 26,774                         |   |   |   | 28,476 |   |
| Other real estate owned, net                                                                                                   |                           |   | 39,459                         |   |   |   | 53,594 |   |
| Core deposit intangible, net                                                                                                   |                           |   | 358                            |   |   |   | 637 |   |
| Bank owned life insurance                                                                                                      |                           |   | 25,313                         |   |   |   | 24,417 |   |
| Other assets                                                                                                                   |                           |   | 32,941                         |   |   |   | 60,642 |   |
|               Total assets                                    |                           | $      | 2,461,059                      |   |   | $ | 2,733,547 |   |
|                                                                                                                           |                           |   |                           |   |   |   |   |   |
| LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                           |                           |   |                           |   |   |   |   |   |
|                                                                                                                           |                           |   |                           |   |   |   |   |   |
| Deposits:                                                                                                                      |                           |   |                           |   |   |   |   |   |
|        Demand                                                                               |                           | $      | 555,766                        |   |   | $ | 542,215 |   |
|        Savings and interest bearing demand                                                  |                           |   | 445,878                        |   |   |   | 422,838 |   |
|        Money market                                                                         |                           |   | 663,467                        |   |   |   | 657,306 |   |
|        Time deposits                                                                        |                           |   | 275,411                        |   |   |   | 524,525 |   |
|               Total deposits                             |                           |   | 1,940,522                      |   |   |   | 2,146,884 |   |
| Short-term borrowings                                                                                                          |                           |   | -                              |   |   |   | 12,600 |   |
| Long-term borrowings                                                                                                           |                           |   | 168,599                        |   |   |   | 250,699 |   |
| Junior subordinated debentures                                                                                                 |                           |   | 51,000                         |   |   |   | 51,000 |   |
| Reserve for unfunded commitments                                                                                               |                           |   | 850                            |   |   |   | 928 |   |
| Other liabilities                                                                                                              |                           |   | 27,528                         |   |   |   | 22,378 |   |
|               Total liabilities                          |                           |   | 2,188,499                      |   |   |   | 2,484,489 |   |
| Commitments and contingent liabilities (Notes 12 and 20)                                                                       |                           |   |                           |   |   |   |   |   |
| Stockholders' equity:                                                                                                          |                           |   |                           |   |   |   |   |   |
| Preferred stock: no par value, 10,000 shares authorized;                                                                       |                           |   |                           |   |   |   |   |   |
|        Series A issued and outstanding: none at December 31, 2010, and                      |                           |   |                           |   |   |   |   |   |
|               1,429 at December 31, 2009                 |                           |   | -                              |   |   |   | 118,124 |   |
|        Series B issued and outstanding: 121 at December 31, 2010 and 2009                   |                           |   | 21,124                         |   |   |   | 21,124 |   |
| Common stock: no par value, 250,000 shares authorized;                                                                         |                           |   |                           |   |   |   |   |   |
|        issued and outstanding: 96,431 at December 31, 2010 and 15,641 at December 31, 2009  |                           |   | 229,722                        |   |   |   | 93,246 |   |
| Retained earnings                                                                                                              |                           |   | 21,175                         |   |   |   | 17,950 |   |
| Accumulated other comprehensive income (loss)                                                                                  |                           |   | 539                            |   |   |   | (1,386 | ) |
|        Total stockholders' equity                                                           |                           |   | 272,560                        |   |   |   | 249,058 |   |
|               Total liabilities and stockholders' equity |                           | $      | 2,461,059                      |   |   | $ | 2,733,547 |   |
|                                                                                                                           |                           |   |                           |   |   |   |   |   |

----

| Years ended December 31 (Dollars and shares in thousands, except per share amounts) | 2010                                  |      | 2009   |      | 2008                                  |
|-------------------------------------------------------------------------------------|---------------------------------------|--------------------------|--------|--------------------------|---------------------------------------|
| INTEREST INCOME:                                                                    |                                  |                     |   |                     |                                  |   |   |   |   |   |   |
| Interest and fees on loans                                                          | $       | 88,409                   |   |                     | $       | 100,356 |   |   | $       | 129,517 |   |
| Interest on taxable investment securities                                           |                                  | 14,493                   |   |                     |                                  | 8,646 |   |   |   | 7,700 |   |
| Interest on nontaxable investment securities                                        |                                  | 2,175                    |   |                     |                                  | 2,776 |   |   |   | 3,251 |   |
| Interest on deposits in other banks                                                 |                                  | 493                      |   |                     |                                  | 366 |   |   |   | 38 |   |
| Interest on federal funds sold                                                      |                                  | 6                        |   |                     |                                  | 6 |   |   |   | 340 |   |
|        Total interest income                          |                                  | 105,576                  |   |                     |                                  | 112,150 |   |   |   | 140,846 |   |
|                                                                                |                                  |                     |   |                     |                                  |   |   |   |   |   |   |
| INTEREST EXPENSE:                                                                   |                                  |                     |   |                     |                                  |   |   |   |   |   |   |
| Savings, interest bearing demand deposits and money market                          |                                  | 4,664                    |   |                     |                                  | 9,684 |   |   |   | 17,174 |   |
| Time deposits                                                                       |                                  | 7,466                    |   |                     |                                  | 14,758 |   |   |   | 20,375 |   |
| Short-term borrowings                                                               |                                  | 494                      |   |                     |                                  | 806 |   |   |   | 4,312 |   |
| Long-term borrowings                                                                |                                  | 8,502                    |   |                     |                                  | 6,693 |   |   |   | 4,201 |   |
| Junior subordinated debentures                                                      |                                  | 1,143                    |   |                     |                                  | 1,482 |   |   |   | 2,634 |   |
|        Total interest expense                         |                                  | 22,269                   |   |                     |                                  | 33,423 |   |   |   | 48,696 |   |
| Net interest income                                                                 |                                  | 83,307                   |   |                     |                                  | 78,727 |   |   |   | 92,150 |   |
| Provision for credit losses                                                         |                                  | 18,652                   |   |                     |                                  | 90,057 |   |   |   | 40,367 |   |
| Net interest income (loss) after provision for credit losses                        |                                  | 64,655                   |   |                     |                                  | (11,330 | ) |   |   | 51,783 |   |
|                                                                                |                                  |                     |   |                     |                                  |   |   |   |   |   |   |
| NONINTEREST INCOME:                                                                 |                                  |                     |   |                     |                                  |   |   |   |   |   |   |
| Service charges on deposit accounts                                                 |                                  | 15,690                   |   |                     |                                  | 15,765 |   |   |   | 15,547 |   |
| Payment systems related revenue                                                     |                                  | 11,393                   |   |                     |                                  | 9,399 |   |   |   | 9,033 |   |
| Trust and investment services revenue                                               |                                  | 4,267                    |   |                     |                                  | 4,101 |   |   |   | 5,413 |   |
| Gains on sales of loans                                                             |                                  | 1,197                    |   |                     |                                  | 1,738 |   |   |   | 2,328 |   |
| Other real estate owned valuation adjustments and (loss) gain on sales              |                                  | (4,415                   | )      |                     |                                  | (26,953 | ) |   |   | (5,386 | ) |
| Other noninterest income                                                            |                                  | 3,003                    |   |                     |                                  | 4,438 |   |   |   | 3,252 |   |
| Other-than-temporary impairment losses                                              |                                  | -                        |   |                     |                                  | (192 | ) |   |   | (6,338 | ) |
| Gains on sales of securities                                                        |                                  | 1,562                    |   |                     |                                  | 833 |   |   |   | 780 |   |
|        Total noninterest income                       |                                  | 32,697                   |   |                     |                                  | 9,129 |   |   |   | 24,629 |   |
|                                                                                |                                  |                     |   |                     |                                  |   |   |   |   |   |   |
| NONINTEREST EXPENSE:                                                                |                                  |                     |   |                     |                                  |   |   |   |   |   |   |
| Salaries and employee benefits                                                      |                                  | 45,854                   |   |                     |                                  | 44,608 |   |   |   | 47,500 |   |
| Equipment                                                                           |                                  | 6,247                    |   |                     |                                  | 8,120 |   |   |   | 7,117 |   |
| Occupancy                                                                           |                                  | 8,894                    |   |                     |                                  | 9,585 |   |   |   | 9,440 |   |
| Payment systems related expense                                                     |                                  | 4,727                    |   |                     |                                  | 4,036 |   |   |   | 3,622 |   |
| Professional fees                                                                   |                                  | 3,991                    |   |                     |                                  | 4,342 |   |   |   | 4,317 |   |
| Postage, printing and office supplies                                               |                                  | 3,148                    |   |                     |                                  | 3,201 |   |   |   | 3,834 |   |
| Marketing                                                                           |                                  | 3,086                    |   |                     |                                  | 2,990 |   |   |   | 3,583 |   |
| Communications                                                                      |                                  | 1,525                    |   |                     |                                  | 1,574 |   |   |   | 1,722 |   |
| Goodwill impairment                                                                 |                                  | -                        |   |                     |                                  | 13,059 |   |   |   | - |   |
| Other noninterest expense                                                           |                                  | 12,865                   |   |                     |                                  | 16,773 |   |   |   | 9,188 |   |
|        Total noninterest expense                      |                                  | 90,337                   |   |                     |                                  | 108,288 |   |   |   | 90,323 |   |
|                                                                                |                                  |                     |   |                     |                                  |   |   |   |   |   |   |
| INCOME (LOSS) BEFORE INCOME TAXES                                                   |                                  | 7,015                    |   |                     |                                  | (110,489 | ) |   |   | (13,911 | ) |
| PROVISION (BENEFIT) FOR INCOME TAXES                                                |                                  | 3,790                    |   |                     |                                  | (19,276 | ) |   |   | (7,598 | ) |
| NET INCOME (LOSS)                                                                   | $                                     | 3,225                    |   |                     | $                                     | (91,213 | ) |   | $ | (6,313 | ) |
|                                                                                |                                  |                     |   |                     |                                  |   |   |   |   |   |   |
|        Basic earnings (loss) per share                | $                                     | 0.03                     |   |                     |                                  | ($5.83 | ) |   |   | ($0.41 | ) |
|        Diluted earnings (loss) per share              | $                                     | 0.03                     |   |                     |                                  | ($5.83 | ) |   |   | ($0.41 | ) |
|                                                                                |                                  |                     |   |                     |                                  |   |   |   |   |   |   |
|        Weighted average common shares                 |                                  | 87,300                   |   |                     |                                  | 15,510 |   |   |   | 15,472 |   |
|        Weighted average diluted shares                |                                  | 90,295                   |   |                     |                                  | 15,510 |   |   |   | 15,472 |   |

----

| Years ended December 31 (Dollars in thousands)                                           | 2010                                  |      | 2009   |      | 2008                                  |
|------------------------------------------------------------------------------------------|---------------------------------------|--------------------------|--------|--------------------------|---------------------------------------|
| CASH FLOWS FROM OPERATING ACTIVITIES:                                                    |                                  |                     |   |                     |                                  |   |   |   |   |   |   |
| Net income (loss)                                                                        | $       | 3,225                    |   |                     | $       | (91,213 | ) |   | $       | (6,313 | ) |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |                                  |                     |   |                     |                                  |   |   |   |   |   |   |
| Depreciation, amortization and accretion                                                 |                                  | 8,778                    |   |                     |                                  | 8,281 |   |   |   | 4,520 |   |
| Amortization of tax credits                                                              |                                  | 1,085                    |   |                     |                                  | 1,320 |   |   |   | 1,264 |   |
| Deferred income tax provision (benefit)                                                  |                                  | (2,540                   | )      |                     |                                  | 11,926 |   |   |   | 3,811 |   |
| Amortization of intangibles                                                              |                                  | 279                      |   |                     |                                  | 358 |   |   |   | 437 |   |
| Provision for credit losses                                                              |                                  | 18,652                   |   |                     |                                  | 90,057 |   |   |   | 40,367 |   |
| Goodwill impairment                                                                      |                                  | -                        |   |                     |                                  | 13,059 |   |   |   | - |   |
| Decrease in accrued interest receivable                                                  |                                  | 892                      |   |                     |                                  | 591 |   |   |   | 5,535 |   |
| Decrease (Increase) in other assets                                                      |                                  | 30,070                   |   |                     |                                  | (14,854 | ) |   |   | (12,268 | ) |
| Loss on impairment of securities                                                         |                                  | -                        |   |                     |                                  | 192 |   |   |   | 6,338 |   |
| Gains on sales of securities                                                             |                                  | (1,562                   | )      |                     |                                  | (833 | ) |   |   | (780 | ) |
| Net loss on disposal of premises and equipment                                           |                                  | 61                       |   |                     |                                  | 186 |   |   |   | 14 |   |
| Net other real estate owned valuation adjustments and loss (gain) on sales               |                                  | 4,415                    |   |                     |                                  | 26,953 |   |   |   | 5,386 |   |
| Gains on sale of loans                                                                   |                                  | (1,197                   | )      |                     |                                  | (1,738 | ) |   |   | (2,328 | ) |
| Origination of loans held for sale                                                       |                                  | (34,927                  | )      |                     |                                  | (66,485 | ) |   |   | (61,159 | ) |
| Proceeds from sales of loans held for sale                                               |                                  | 34,198                   |   |                     |                                  | 69,907 |   |   |   | 63,814 |   |
| Increase (decrease) in interest payable                                                  |                                  | 504                      |   |                     |                                  | 359 |   |   |   | (579 | ) |
| Increase (decrease) in other liabilities                                                 |                                  | 1,651                    |   |                     |                                  | 3,345 |   |   |   | (21,151 | ) |
| Increase in cash surrender value of bank owned life insurance                            |                                  | (896                     | )      |                     |                                  | (892 | ) |   |   | (913 | ) |
| Stock based compensation expense                                                         |                                  | 2,089                    |   |                     |                                  | 1,520 |   |   |   | 2,865 |   |
| Excess tax deficiency associated with stock plans                                        |                                  | (357                     | )      |                     |                                  | (496 | ) |   |   | - |   |
| Increase (decrease) in trading securities                                                |                                  | (77                      | )      |                     |                                  | 815 |   |   |   | 36 |   |
|        Net cash provided by operating activities           |                                  | 64,343                   |   |                     |                                  | 52,358 |   |   |   | 28,896 |   |
|                                                                                     |                                  |                     |   |                     |                                  |   |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                                    |                                  |                     |   |                     |                                  |   |   |   |   |   |   |
| Proceeds from maturities of available for sale securities                                |                                  | 288,050                  |   |                     |                                  | 69,140 |   |   |   | 51,151 |   |
| Proceeds from sales of available for sale securities                                     |                                  | 77,551                   |   |                     |                                  | 36,189 |   |   |   | 35,033 |   |
| Purchase of available for sale securities                                                |                                  | (449,665                 | )      |                     |                                  | (467,360 | ) |   |   | (32,854 | ) |
| Purchase of Federal Home Loan Bank stock                                                 |                                  | -                        |   |                     |                                  | (1,305 | ) |   |   | (4,849 | ) |
| Redemption of Federal Home Loan Bank stock                                               |                                  | -                        |   |                     |                                  | - |   |   |   | 4,301 |   |
| Investments in tax credits                                                               |                                  | -                        |   |                     |                                  | (9 | ) |   |   | (476 | ) |
| Loans made to customers less (greater) than principal collected on loans                 |                                  | 138,459                  |   |                     |                                  | 185,293 |   |   |   | (38,373 | ) |
| Proceeds from the sale of other real estate owned                                        |                                  | 38,106                   |   |                     |                                  | 68,670 |   |   |   | 16,969 |   |
| Proceeds from the sales of premises and equipment                                        |                                  | -                        |   |                     |                                  | - |   |   |   | 31 |   |
| Capital expenditures on other real estate owned                                          |                                  | (3,234                   | )      |                     |                                  | (4,881 | ) |   |   | (1,230 | ) |
| Capital expenditures on premises and equipment                                           |                                  | (2,265                   | )      |                     |                                  | (1,275 | ) |   |   | (3,124 | ) |
|        Net cash provided (used) by investing activities    |                                  | 87,002                   |   |                     |                                  | (115,538 | ) |   |   | 26,579 |   |
|                                                                                     |                                  |                     |   |                     |                                  |   |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                                    |                                  |                     |   |                     |                                  |   |   |   |   |   |   |
| Net increase (decrease) in demand, savings and interest                                  |                                  |                     |   |                     |                                  |   |   |   |   |   |   |
|        bearing transaction accounts                        |                                  | 42,752                   |   |                     |                                  | 182,273 |   |   |   | (104,481 | ) |
| Net increase (decrease) in time deposits                                                 |                                  | (249,114                 | )      |                     |                                  | (59,768 | ) |   |   | 34,028 |   |
| Proceeds from issuance of short-term borrowings                                          |                                  | -                        |   |                     |                                  | 347,600 |   |   |   | 2,321,801 |   |
| Repayment of short-term borrowings                                                       |                                  | (17,600                  | )      |                     |                                  | (479,600 | ) |   |   | (2,391,801 | ) |
| Proceeds from issuance of long-term borrowings                                           |                                  | 4,400                    |   |                     |                                  | 192,240 |   |   |   | 42,959 |   |
| Repayment of long-term borrowings                                                        |                                  | (81,500                  | )      |                     |                                  | (20,000 | ) |   |   | - |   |
| Proceeds from issuance of preferred stock, net of costs                                  |                                  | -                        |   |                     |                                  | 139,248 |   |   |   | - |   |
| Proceeds from secured borrowings                                                         |                                  | 7,991                    |   |                     |                                  | - |   |   |   | - |   |
| Proceeds from issuance of common stock-Rights Offering                                   |                                  | 10,000                   |   |                     |                                  | - |   |   |   | - |   |
| Costs of issuance of common stock-Rights Offering                                        |                                  | (650                     | )      |                     |                                  | - |   |   |   | - |   |
| Proceeds from issuance of common stock-Discretionary Program                             |                                  | 7,856                    |   |                     |                                  | - |   |   |   | - |   |
| Costs of issuance of common stock-Discretionary Program                                  |                                  | (817                     | )      |                     |                                  | - |   |   |   | - |   |
| Activity in deferred compensation plan                                                   |                                  | 262                      |   |                     |                                  | (1 | ) |   |   | (50 | ) |
| Proceeds from issuance of common stock-stock options                                     |                                  | 4                        |   |                     |                                  | - |   |   |   | 25 |   |
| Redemption of stock pursuant to stock plans                                              |                                  | (35                      | )      |                     |                                  | (22 | ) |   |   | (190 | ) |
| Tax expense associated with equity plans                                                 |                                  | -                        |   |                     |                                  | - |   |   |   | (287 | ) |
| Cash dividends paid                                                                      |                                  | -                        |   |                     |                                  | (471 | ) |   |   | (6,503 | ) |
|        Net cash provided (used) by financing activities    |                                  | (276,451                 | )      |                     |                                  | 301,499 |   |   |   | (104,499 | ) |
|                                                                                     |                                  |                     |   |                     |                                  |   |   |   |   |   |   |
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                     |                                  | (125,106                 | )      |                     |                                  | 238,319 |   |   |   | (49,024 | ) |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                           |                                  | 303,097                  |   |                     |                                  | 64,778 |   |   |   | 113,802 |   |
| CASH AND CASH EQUIVALENTS AT END OF YEAR                                                 | $                                     | 177,991                  |   |                     | $                                     | 303,097 |   |   | $ | 64,778 |   |
|                                                                                     |                                  |                     |   |                     |                                  |   |   |   |   |   |   |

----

|                                                                                                          |                                          |                     |                                        |                     |   |                                  |     |                     |          |                                  |    |   |   | Accumulated                           |   |   |   |                                  |
|---------------------------------------------------------------------------------------------------------------|-----------------------------------------------|--------------------------|---------------------------------------------|--------------------------|--------|---------------------------------------|----------|--------------------------|---------------|---------------------------------------|---------|--------|--------|---------------------------------------|--------|--------|--------|---------------------------------------|
|                                                                                                          |                                          |                     |                                        |                     |   |                                  |     |                     |          |                                  |    |   |   | Other                                 |   |   |   |                                  |
| (Shares and dollars in thousands)                                                                             | Preferred                                     |                     | Common Stock                                |                     |   | Retained                              |     | Comprehensive            |          |                                  |    |   |
|                                                                                                          | Stock                                         |      | Shares                                      |      | Amount |                   | Earnings |      | Income (Loss) |                   | Total   |
| BALANCE, January 1, 2008                                                                                      | -                                             |                     | 15,593                                      |                     |   | $       | 89,882   |                     |          | $       | 118,792 |   |   | $       | (433   | )      |   | $       | 208,241 |   |
| Comprehensive loss:                                                                                           |                                          |                     |                                        |                     |   |                                  |     |                     |          |                                  |    |   |   |                                  |   |   |   |                                  |   |   |
|        Net loss                                                                 | -                                             |                     | -                                           |                     |   |                                  | -        |                     |          |                                  | (6,313  | )      |   |                                  | -      |   |   | $                                     | (6,313 | ) |
|        Other comprehensive loss, net of tax:                                    |                                          |                     |                                        |                     |   |                                  |     |                     |          |                                  |    |   |   |                                  |   |   |   |                                  |   |   |
|               Net unrealized investment loss | -                                             |                     | -                                           |                     |   |                                  | -        |                     |          |                                  | -       |   |   |                                  | (1,167 | )      |   |                                  | (1,167 | ) |
|        Other comprehensive loss, net of tax                                     | -                                             |                     | -                                           |                     |   |                                  | -        |                     |          |                                  | -       |   |   |                                  | -      |   |   |                                  | (1,167 | ) |
| Comprehensive loss                                                                                            | -                                             |                     | -                                           |                     |   |                                  | -        |                     |          |                                  | -       |   |   |                                  | -      |   |   | $                                     | (7,480 | ) |
| Cash dividends, $.29 per common share                                                                         | -                                             |                     | -                                           |                     |   |                                  | -        |                     |          |                                  | (4,550  | )      |   |                                  | -      |   |   |                                  | (4,550 | ) |
|                                                                                                          |                                          |                     |                                        |                     |   |                                  |     |                     |          |                                  |    |   |   |                                  |   |   |   |                                  |   |   |
| Issuance of common stock-stock options                                                                        | -                                             |                     | 2                                           |                     |   |                                  | 25       |                     |          |                                  | -       |   |   |                                  | -      |   |   |                                  | 25 |   |
| Redemption of stock pursuant to stock plans                                                                   | -                                             |                     | (20                                         | )                        |   |                                  | (190     | )                        |          |                                  | -       |   |   |                                  | -      |   |   |                                  | (190 | ) |
| Activity in deferred compensation plan                                                                        | -                                             |                     | (7                                          | )                        |   |                                  | (50      | )                        |          |                                  | -       |   |   |                                  | -      |   |   |                                  | (50 | ) |
| Issuance of common stock-restricted stock                                                                     | -                                             |                     | 128                                         |                     |   |                                  | -        |                     |          |                                  | -       |   |   |                                  | -      |   |   |                                  | - |   |
| Stock based compensation expense                                                                              | -                                             |                     | -                                           |                     |   |                                  | 2,865    |                     |          |                                  | -       |   |   |                                  | -      |   |   |                                  | 2,865 |   |
| Tax adjustment associated with stock plans                                                                    | -                                             |                     | -                                           |                     |   |                                  | (287     | )                        |          |                                  | -       |   |   |                                  | -      |   |   |                                  | (287 | ) |
| Post retirement benefit adjustment                                                                            | -                                             |                     | -                                           |                     |   |                                  | -        |                     |          |                                  | (387    | )      |   |                                  | -      |   |   |                                  | (387 | ) |
| BALANCE, December 31, 2008                                                                                    | -                                             |                     |        15,696 |                     |   |                                  | 92,245   |                     |          |                                  | 107,542 |   |   |                                  | (1,600 | )      |   |                                  | 198,187 |   |
| Comprehensive loss:                                                                                           |                                          |                     |                                        |                     |   |                                  |     |                     |          |                                  |    |   |   |                                  |   |   |   |                                  |   |   |
|        Net loss                                                                 | -                                             |                     | -                                           |                     |   |                                  | -        |                     |          |                                  | (91,213 | )      |   |                                  | -      |   |   | $                                     | (91,213 | ) |
|        Other comprehensive income, net of tax:                                  |                                          |                     |                                        |                     |   |                                  |     |                     |          |                                  |    |   |   |                                  |   |   |   |                                  |   |   |
|               Net unrealized investment gain | -                                             |                     | -                                           |                     |   |                                  | -        |                     |          |                                  | -       |   |   |                                  | 2,149  |   |   |                                  | 2,149 |   |
|        Other comprehensive income, net of tax                                   | -                                             |                     | -                                           |                     |   |                                  | -        |                     |          |                                  | -       |   |   |                                  | -      |   |   |                                  | 2,149 |   |
| Comprehensive loss                                                                                            | -                                             |                     | -                                           |                     |   |                                  | -        |                     |          |                                  | -       |   |   |                                  | -      |   |   | $                                     | (89,064 | ) |
|                                                                                                          |                                          |                     |                                        |                     |   |                                  |     |                     |          |                                  |    |   |   |                                  |   |   |   |                                  |   |   |
| Cumulative effect of adopting ASC 320                                                                         | -                                             |                     | -                                           |                     |   |                                  | -        |                     |          |                                  | 1,935   |   |   |                                  | (1,935 | )      |   |                                  | - |   |
| Cash dividends, $.02 per common share                                                                         | -                                             |                     | -                                           |                     |   |                                  | -        |                     |          |                                  | (314    | )      |   |                                  | -      |   |   |                                  | (314 | ) |
| Redemption of stock pursuant to stock plans                                                                   | -                                             |                     | (12                                         | )                        |   |                                  | (22      | )                        |          |                                  | -       |   |   |                                  | -      |   |   |                                  | (22 | ) |
| Issuance of Series A preferred stock, net of costs                                                            | 118,124                                       |                     | -                                           |                     |   |                                  | -        |                     |          |                                  | -       |   |   |                                  | -      |   |   |                                  | 118,124 |   |
|                                                                                                          |                                          |                     |                                        |                     |   |                                  |     |                     |          |                                  |    |   |   |                                  |   |   |   |                                  |   |   |
| Issuance of Series B preferred stock and warrant, net of costs                                                | 21,124                                        |                     | -                                           |                     |   |                                  | -        |                     |          |                                  | -       |   |   |                                  | -      |   |   |                                  | 21,124 |   |
| Activity in deferred compensation plan                                                                        | -                                             |                     | (43                                         | )                        |   |                                  | (1       | )                        |          |                                  | -       |   |   |                                  | -      |   |   |                                  | (1 | ) |
| Stock based compensation expense                                                                              | -                                             |                     | -                                           |                     |   |                                  | 1,520    |                     |          |                                  | -       |   |   |                                  | -      |   |   |                                  | 1,520 |   |
| Tax adjustment associated with stock plans                                                                    | -                                             |                     | -                                           |                     |   |                                  | (496     | )                        |          |                                  | -       |   |   |                                  | -      |   |   |                                  | (496 | ) |
| BALANCE, December 31, 2009                                                                                    | 139,248                                       |                     | 15,641                                      |                     |   |                                  | 93,246   |                     |          |                                  | 17,950  |   |   |                                  | (1,386 | )      |   |                                  | 249,058 |   |
| Comprehensive income:                                                                                         |                                          |                     |                                        |                     |   |                                  |     |                     |          |                                  |    |   |   |                                  |   |   |   |                                  |   |   |
|        Net income                                                               | -                                             |                     | -                                           |                     |   |                                  | -        |                     |          |                                  | 3,225   |   |   |                                  | -      |   |   | $                                     | 3,225 |   |
|        Other comprehensive income, net of tax:                                  |                                          |                     |                                        |                     |   |                                  |     |                     |          |                                  |    |   |   |                                  |   |   |   |                                  |   |   |
|               Net unrealized investment gain | -                                             |                     | -                                           |                     |   |                                  | -        |                     |          |                                  | -       |   |   |                                  | 1,925  |   |   |                                  | 1,925 |   |
|        Other comprehensive income, net of tax                                   | -                                             |                     | -                                           |                     |   |                                  | -        |                     |          |                                  | -       |   |   |                                  | -      |   |   |                                  | 1,925 |   |
| Comprehensive income                                                                                          | -                                             |                     | -                                           |                     |   |                                  | -        |                     |          |                                  | -       |   |   |                                  | -      |   |   | $                                     | 5,150 |   |
|                                                                                                          |                                          |                     |                                        |                     |   |                                  |     |                     |          |                                  |    |   |   |                                  |   |   |   |                                  |   |   |
| Redemption of stock pursuant to stock plans                                                                   | -                                             |                     | (58                                         | )                        |   |                                  | (35      | )                        |          |                                  | -       |   |   |                                  | -      |   |   |                                  | (35 | ) |
| Conversion of Series A preferred stock                                                                        |        (118,124 | )                        | 71,442                                      |                     |   |                                  | 118,124  |                     |          |                                  | -       |   |   |                                  | -      |   |   |                                  | - |   |
| Issuance of common stock-Rights Offering,                                                                     |                                          |                     |                                        |                     |   |                                  |     |                     |          |                                  |    |   |   |                                  |   |   |   |                                  |   |   |
| net of costs                                                                                                  |                                          |                     | 5,000                                       |                     |   |                                  | 9,350    |                     |          |                                  | -       |   |   |                                  | -      |   |   |                                  | 9,350 |   |
| Issuance of common stock-Discretionary Program,                                                               |                                          |                     |                                        |                     |   |                                  |     |                     |          |                                  |    |   |   |                                  |   |   |   |                                  |   |   |
| net of costs                                                                                                  |                                          |                     | 2,804                                       |                     |   |                                  | 7,039    |                     |          |                                  | -       |   |   |                                  | -      |   |   |                                  | 7,039 |   |
| Activity in deferred compensation plan                                                                        | -                                             |                     | (13                                         | )                        |   |                                  | 262      |                     |          |                                  | -       |   |   |                                  | -      |   |   |                                  | 262 |   |
| Issuance of common stock-stock options                                                                        | -                                             |                     | 2                                           |                     |   |                                  | 4        |                     |          |                                  | -       |   |   |                                  | -      |   |   |                                  | 4 |   |
| Issuance of common stock-restricted stock                                                                     | -                                             |                     | 1,613                                       |                     |   |                                  | -        |                     |          |                                  | -       |   |   |                                  | -      |   |   |                                  | - |   |
| Stock based compensation expense                                                                              | -                                             |                     | -                                           |                     |   |                                  | 2,089    |                     |          |                                  | -       |   |   |                                  | -      |   |   |                                  | 2,089 |   |
| Tax adjustment associated with stock plans                                                                    | -                                             |                     | -                                           |                     |   |                                  | (357     | )                        |          |                                  | -       |   |   |                                  | -      |   |   |                                  | (357 | ) |
| BALANCE, December 31, 2010                                                                                    | 21,124                                        |                     | 96,431                                      |                     |   | $                                     | 229,722  |                     |          | $                                     | 21,175  |   |   | $                                     | 539    |   |   | $                                     | 272,560 |   |
|                                                                                                          |                                          |                     |                                        |                     |   |                                  |     |                     |          |                                  |    |   |   |                                  |   |   |   |                                  |   |   |

----

|      | (Dollars in thousands)                                                                                         | December 31,                          |
|--------------------------|----------------------------------------------------------------------------------------------------------------|---------------------------------------|
|                     |                                                                                                           | 2010                                  |      | 2009 |      | 2008 |
|                     | Supplemental cash flow information:                                                                            |                                  |   |   |   |   |   |   |   |   |   |   |
|                     | Cash (received) paid in the year for:                                                                          |                                  |   |   |   |   |   |   |   |   |   |   |
|                     |        Interest                                                                  | $       | 21,765 |   |   | $       | 33,063 |   |   | $       | 49,275 |   |
|                     |        Income taxes, net                                                         |                                  | (27,742 | ) |   |   | (14,585 | ) |   |   | 4,385 |   |
|                     | Noncash investing and financing activities:                                                                    |                                  |   |   |   |   |   |   |   |   |   |   |
|                     |        Change in unrealized gain (loss) on available                             |                                  |   |   |   |   |   |   |   |   |   |   |
|                     |               for sale securities, net of tax | $                                     | 1,925 |   |   | $ | 2,149 |   |   | $ | (1,167 | ) |
|                     |        Dividends declared and accrued in other liabilities                       |                                  | - |   |   |   | - |   |   |   | 157 |   |
|                     |        Sale of SBA loans - transfer to other assets                              |                                  | 7,991 |   |   |   | - |   |   |   | - |   |
|                     |        Settlement of secured borrowings                                          |                                  | (4,906 | ) |   |   | - |   |   |   | - |   |
|                     |        OREO and premises and equipment expenditures                              |                                  |   |   |   |   |   |   |   |   |   |   |
|                     |               accrued in other liabilities    |                                  | 74 |   |   |   | 242 |   |   |   | 129 |   |
|                     |        Transfer of loans to OREO                                                 |                                  | 25,199 |   |   |   | 74,174 |   |   |   | 87,881 |   |

----

----

----

----

----

|      | (Dollars in thousands)                          |                                  |                     |        |                                  |         |                     |                                  |   |   |   |                                  |    |
|--------------------------|-------------------------------------------------|---------------------------------------|--------------------------|-------------|---------------------------------------|--------------|--------------------------|---------------------------------------|--------|--------|--------|---------------------------------------|---------|
|                     | December 31, 2010                               | Amortized                             |                     | Unrealized  |                                  | Unrealized   |                     |                                  |   |
|                     |                                            | Cost                                  |      | Gross Gains |                   | Gross Losses |      | Fair Value                            |
|                     | U.S. Treasury securities                        | $       | 14,347                   |        | $       | 45           |                     | $       | -      |   |   | $       | 14,392  |
|                     | U.S. Government agency securities               |                                  | 193,901                  |        |                                  | 836          |                     |                                  | (507   | )      |   |                                  | 194,230 |
|                     | Corporate securities                            |                                  | 14,499                   |        |                                  | -            |                     |                                  | (5,107 | )      |   |                                  | 9,392   |
|                     | Mortgage-backed securities                      |                                  | 359,965                  |        |                                  | 5,853        |                     |                                  | (2,200 | )      |   |                                  | 363,618 |
|                     | Obligations of state and political subdivisions |                                  | 51,111                   |        |                                  | 1,789        |                     |                                  | (255   | )      |   |                                  | 52,645  |
|                     | Equity investments and other securities         |                                  | 11,423                   |        |                                  | 437          |                     |                                  | (25    | )      |   |                                  | 11,835  |
|                     |        Total      | $                                     | 645,246                  |        | $                                     | 8,960        |                     | $                                     | (8,094 | )      |   | $                                     | 646,112 |
|                     |                                            |                                  |                     |        |                                  |         |                     |                                  |   |   |   |                                  |    |
|                     | (Dollars in thousands)                          |                                  |                     |        |                                  |         |                     |                                  |   |   |   |                                  |    |
|                     | December 31, 2009                               | Amortized                             |                     | Unrealized  |                                  | Unrealized   |                     |                                  |   |
|                     |                                            | Cost                                  |                     | Gross Gains |                                  | Gross Losses |                     | Fair Value                            |
|                     | U.S. Treasury securities                        | $                                     | 24,907                   |        | $                                     | 100          |                     | $                                     | -      |   |   | $                                     | 25,007  |
|                     | U.S. Government agency securities               |                                  | 104,168                  |        |                                  | 300          |                     |                                  | (480   | )      |   |                                  | 103,988 |
|                     | Corporate securities                            |                                  | 14,436                   |        |                                  | -            |                     |                                  | (4,683 | )      |   |                                  | 9,753   |
|                     | Mortgage-backed securities                      |                                  | 344,179                  |        |                                  | 3,013        |                     |                                  | (2,898 | )      |   |                                  | 344,294 |
|                     | Obligations of state and political subdivisions |                                  | 67,651                   |        |                                  | 2,562        |                     |                                  | (195   | )      |   |                                  | 70,018  |
|                     | Equity investments and other securities         |                                  | 9,274                    |        |                                  | 2            |                     |                                  | (59    | )      |   |                                  | 9,217   |
|                     |        Total      | $                                     | 564,615                  |        | $                                     | 5,977        |                     | $                                     | (8,315 | )      |   | $                                     | 562,277 |
|                     |                                            |                                  |                     |        |                                  |         |                     |                                  |   |   |   |                                  |    |

----

|      | (Dollars in thousands)                          | Less than 12 months                   |                     | 12 months or more |                                  | Total      |
|--------------------------|-------------------------------------------------|---------------------------------------|--------------------------|-------------------|---------------------------------------|------------|
|                     |                                            |                                  |                     |              | Unrealized                            |       |   |   |   | Unrealized |   |   |   |   | Unrealized |
|                     | As of December 31, 2010                         | Fair Value                            |      | Losses            |                   | Fair Value |      | Losses |      | Fair Value |      | Losses |
|                     | U.S. Government agency securities               | $       | 40,528                   |              | $       | (507       | ) |   | $       | - |   | $       | - |   |   |   | 40,528 |   |   | (507 | ) |
|                     | Corporate securities                            |                                  | -                        |              |                                  | -          |   |   |   | 8,892 |   |   | (5,107 | ) |   |   | 8,892 |   |   | (5,107 | ) |
|                     | Mortgage-backed securities                      |                                  | 110,414                  |              |                                  | (2,088     | ) |   |   | 978 |   |   | (112 | ) |   |   | 111,392 |   |   | (2,200 | ) |
|                     | Obligations of state and political subdivisions |                                  | 4,084                    |              |                                  | (255       | ) |   |   | - |   |   | - |   |   |   | 4,084 |   |   | (255 | ) |
|                     | Equity and other securities                     |                                  | 1,776                    |              |                                  | (24        | ) |   |   | 1 |   |   | (1 | ) |   |   | 1,777 |   |   | (25 | ) |
|                     |        Total      | $                                     | 156,802                  |              | $                                     | (2,874     | ) |   | $ | 9,871 |   | $ | (5,220 | ) |   | $       | 166,673 |   | $       | (8,094 | ) |
|                     |                                            |                                  |                     |              |                                  |       |
|                     | (Dollars in thousands)                          | Less than 12 months                   |                     | 12 months or more |                                  | Total      |
|                     |                                            |                                  |                     |              | Unrealized                            |       |   |   |   | Unrealized |   |   |   |   | Unrealized |
|                     | As of December 31, 2009                         | Fair Value                            |                     | Losses            |                                  | Fair Value |   | Losses |   | Fair Value |   | Losses |
|                     | U.S. Government agency securities               | $                                     | 65,422                   |              | $                                     | (480       | ) |   | $ | - |   | $ | - |   |   | $ | 65,422 |   | $ | (480 | ) |
|                     | Corporate securities                            |                                  | -                        |              |                                  | -          |   |   |   | 9,253 |   |   | (4,683 | ) |   |   | 9,253 |   |   | (4,683 | ) |
|                     | Mortgage-backed securities                      |                                  | 136,313                  |              |                                  | (2,074     | ) |   |   | 5,882 |   |   | (824 | ) |   |   | 142,195 |   |   | (2,898 | ) |
|                     | Obligations of state and political subdivisions |                                  | 2,470                    |              |                                  | (49        | ) |   |   | 1,866 |   |   | (146 | ) |   |   | 4,336 |   |   | (195 | ) |
|                     | Equity and other securities                     |                                  | 4,736                    |              |                                  | (59        | ) |   |   | - |   |   | - |   |   |   | 4,736 |   |   | (59 | ) |
|                     |        Total      | $                                     | 208,941                  |              | $                                     | (2,662     | ) |   | $ | 17,001 |   | $ | (5,653 | ) |   | $ | 225,942 |   | $ | (8,315 | ) |
|                     |                                            |                                  |                     |              |                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|      | (Dollars in thousands)                                                                          | Available for sale                    |
|--------------------------|-------------------------------------------------------------------------------------------------|---------------------------------------|
|                     |                                                                                            | Amortized cost                        |      | Fair value |
|                     | U.S. Treasury securities                                                                        |                                  |   |   |   |   |
|                     |        One year or less                                           | $       | 14,147 |   | $       | 14,181 |
|                     |        After one year through five years                          |                                  | 200 |   |   | 211 |
|                     |        After five through ten years                               |                                  | - |   |   | - |
|                     |        Due after ten years                                        |                                  | - |   |   | - |
|                     |               Total            |                                  | 14,347 |   |   | 14,392 |
|                     |                                                                                            |                                  |   |   |   |   |
|                     | U.S. Government agency securities:                                                              |                                  |   |   |   |   |
|                     |        One year or less                                           |                                  | - |   |   | - |
|                     |        After one year through five years                          |                                  | 163,481 |   |   | 164,087 |
|                     |        After five through ten years                               |                                  | 30,420 |   |   | 30,143 |
|                     |        Due after ten years                                        |                                  | - |   |   | - |
|                     |               Total            |                                  | 193,901 |   |   | 194,230 |
|                     |                                                                                            |                                  |   |   |   |   |
|                     | Corporate securities:                                                                           |                                  |   |   |   |   |
|                     |        One year or less                                           |                                  | - |   |   | - |
|                     |        After one year through five years                          |                                  | 500 |   |   | 500 |
|                     |        After five through ten years                               |                                  | - |   |   | - |
|                     |        Due after ten years                                        |                                  | 13,999 |   |   | 8,892 |
|                     |               Total            |                                  | 14,499 |   |   | 9,392 |
|                     |                                                                                            |                                  |   |   |   |   |
|                     | Obligations of state and political subdivisions:                                                |                                  |   |   |   |   |
|                     |        One year or less                                           |                                  | 6,223 |   |   | 6,328 |
|                     |        After one year through five years                          |                                  | 11,359 |   |   | 11,966 |
|                     |        After five through ten years                               |                                  | 28,668 |   |   | 29,441 |
|                     |        Due after ten years                                        |                                  | 4,861 |   |   | 4,910 |
|                     |               Total            |                                  | 51,111 |   |   | 52,645 |
|                     |                                                                                            |                                  |   |   |   |   |
|                     |               Sub-total        |                                  | 273,858 |   |   | 270,659 |
|                     |                                                                                            |                                  |   |   |   |   |
|                     | Mortgage-backed securities                                                                      |                                  | 359,965 |   |   | 363,618 |
|                     | Equity investments and other securities                                                         |                                  | 11,423 |   |   | 11,835 |
|                     |               Total securities | $                                     | 645,246 |   | $ | 646,112 |
|                     |                                                                                            |                                  |   |   |   |   |

----

|       | (Dollars in thousands)                                | December 31,                    |
|--------------------------------|-------------------------------------------------------|---------------------------------|
|                           |                                                  | 2010                            |       | 2009 |
|                           | Commercial loans                                      | $      | 309,327 |   |   | $      | 370,077 |   |
|                           | Real estate construction                              |                            | 44,085 |   |   |   | 99,310 |   |
|                           | Real estate mortgage                                  |                            | 349,016 |   |   |   | 374,668 |   |
|                           | Commercial real estate                                |                            | 818,577 |   |   |   | 862,193 |   |
|                           | Installment and other consumer                        |                            | 15,265 |   |   |   | 18,594 |   |
|                           |        Total loans      |                            | 1,536,270 |   |   |   | 1,724,842 |   |
|                           | Allowance for loan losses                             |                            | (40,217 | ) |   |   | (38,490 | ) |
|                           |        Total loans, net | $                               | 1,496,053 |   |   | $ | 1,686,352 |   |
|                           |

----

|       | (Dollars in thousands)         | December 31, 2010         |
|--------------------------------|--------------------------------|---------------------------|
|                           |                           | 30 - 89 days              |   | Greater than |   | Total |   | Current |   | Total |
|                           |                           | past due                  |       | 90 days past due |       | past due |       | loans |       | loans |
|                           | Commercial                     | $     | 953 |   | $     | 9,984 |   | $     | 10,937 |   | $     | 298,390 |   | $     | 309,327 |
|                           | Real estate construction       |                      | 2,098 |   |   | 4,039 |   |   | 6,137 |   |   | 37,948 |   |   | 44,085 |
|                           | Real estate mortgage           |                      | 4,662 |   |   | 5,669 |   |   | 10,331 |   |   | 338,685 |   |   | 349,016 |
|                           | Commercial real estate         |                      | 3,988 |   |   | 12,157 |   |   | 16,145 |   |   | 802,432 |   |   | 818,577 |
|                           | Installment and other consumer |                      | 53 |   |   | - |   |   | 53 |   |   | 15,212 |   |   | 15,265 |
|                           | Total                          | $                         | 11,754 |   | $ | 31,849 |   | $ | 43,603 |   | $ | 1,492,667 |   | $ | 1,536,270 |
|                           |                           |
|                           | (Dollars in thousands)         | December 31, 2009         |
|                           |                           | 30 - 89 days              |   | Greater than |   | Total |   | Current |   | Total |
|                           |                           | past due                  |   | 90 days past due |   | past due |   | loans |   | loans |
|                           | Commercial                     | $                         | 7,540 |   | $ | 23,280 |   | $ | 30,820 |   | $ | 339,257 |   | $ | 370,077 |
|                           | Real estate construction       |                      | 3,462 |   |   | 13,284 |   |   | 16,746 |   |   | 82,564 |   |   | 99,310 |
|                           | Real estate mortgage           |                      | 7,215 |   |   | 11,399 |   |   | 18,614 |   |   | 356,054 |   |   | 374,668 |
|                           | Commercial real estate         |                      | 5,626 |   |   | 3,227 |   |   | 8,853 |   |   | 853,340 |   |   | 862,193 |
|                           | Installment and other consumer |                      | 59 |   |   | 128 |   |   | 187 |   |   | 18,407 |   |   | 18,594 |
|                           | Total                          | $                         | 23,902 |   | $ | 51,318 |   | $ | 75,220 |   | $ | 1,649,622 |   | $ | 1,724,842 |
|                           |

----

|       | (Dollars in thousands)         | December 31, 2010         |
|--------------------------------|--------------------------------|---------------------------|
|                           |                           | Unpaid principal          |   | Impaired loans |   | Impaired loans |   | Total impaired |   | Related |   | Average |
|                           |                           | balance1                  |       | with no allowance |       | with allowance |       | loan balance |       | allowance |       | balance |
|                           | Commercial                     | $     | 22,692 |   | $     | 13,377 |   | $     | 1,679 |   | $     | 15,056 |   | $     | 2 |   | $     | 19,992 |
|                           | Real estate construction       |                      | 15,570 |   |   | 10,692 |   |   | 323 |   |   | 11,015 |   |   | 2 |   |   | 20,191 |
|                           | Real estate mortgage           |                      | 28,856 |   |   | 15,491 |   |   | 7,828 |   |   | 23,319 |   |   | 443 |   |   | 20,610 |
|                           | Commercial real estate         |                      | 28,717 |   |   | 21,648 |   |   | 5,634 |   |   | 27,282 |   |   | 103 |   |   | 17,187 |
|                           | Installment and other consumer |                      | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 45 |
|                           | Total                          | $                         | 95,835 |   | $ | 61,208 |   | $ | 15,464 |   | $ | 76,672 |   | $ | 550 |   | $ | 78,025 |
|                           |

|       | (Dollars in thousands)                                                                                                                                                                        | December 31, 2009         |
|--------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------|
|                           |                                                                                                                                                                                          | Unpaid principal          |   | Impaired loans |   | Impaired loans |   | Total impaired |   | Related |   | Average |
|                           |                                                                                                                                                                                          | balance1                  |       | with no allowance |       | with allowance |       | loan balance |       | allowance |       | balance |
|                           | Commercial                                                                                                                                                                                    | $     | 55,150 |   | $     | 35,640 |   | $     | - |   | $     | 35,640 |   | $     | - |   | $     | 38,500 |
|                           | Real estate construction                                                                                                                                                                      |                      | 36,455 |   |   | 23,861 |   |   | - |   |   | 23,861 |   |   | - |   |   | 58,703 |
|                           | Real estate mortgage                                                                                                                                                                          |                      | 31,459 |   |   | 23,523 |   |   | - |   |   | 23,523 |   |   | - |   |   | 28,228 |
|                           | Commercial real estate                                                                                                                                                                        |                      | 16,801 |   |   | 15,783 |   |   | - |   |   | 15,783 |   |   | - |   |   | 8,881 |
|                           | Installment and other consumer                                                                                                                                                                |                      | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 14 |
|                           | Total                                                                                                                                                                                         | $                         | 139,865 |   | $ | 98,807 |   | $ | - |   | $ | 98,807 |   | $ | - |   | $ | 134,326 |
|                           |
|                           | 1 The unpaid principal balance on impaired loans represents the amount owed by the borrower. The carry value of impaired loans is lower than the unpaid principal balance due to charge-offs. |

|       |                                                                  | December 31,                    |
|--------------------------------|-----------------------------------------------------------------------|---------------------------------|
|                           | (Dollars in thousands)                                                | 2010                            |       |   2009 |
|                           | Commercial                                                            | $      | 13,377 |   | $      | 36,211 |
|                           | Real estate construction                                              |                            | 10,692 |   |   | 23,861 |
|                           | Real estate mortgage                                                  |                            | 15,491 |   |   | 22,351 |
|                           | Commercial real estate                                                |                            | 21,671 |   |   | 16,778 |
|                           | Installment and other consumer                                        |                            | - |   |   | 144 |
|                           |        Total loans on nonaccrual status | $                               | 61,231 |   | $ | 99,345 |
|                           |

----

- Ratings 1, 2 and 3 - These ratings include loans to very high credit quality borrowers of investment or near investment grade. These borrowers have significant capital strength, moderate leverage, stable earnings and growth, and readily available financing alternatives. Smaller entities, regardless of strength, would generally not fit in these ratings. These ratings also include loans that are collateralized by U. S. Government securities and certificates of deposits.   
- Rating 4 - These ratings include loans to borrowers of solid credit quality with moderate risk. Borrowers in these ratings are differentiated from higher ratings on the basis of size (capital and/or revenue), leverage, asset quality and the stability of the industry or market area.   
- Ratings 5 and 6 - These ratings include “pass rating” loans to borrowers of acceptable credit quality and risk. Such borrowers are differentiated from Rating 4 in terms of size, secondary sources of repayment or they are of lesser stature in other key credit metrics in that they may be over-leveraged, undercapitalized, inconsistent in performance or in an industry or an economic area that is known to have a higher level of risk, volatility, or susceptibility to weaknesses in the economy. However, no material adverse trends are evident with borrowers in these pass ratings.   
- Rating 7 - This rating includes loans on management’s “watch list” and is intended to be utilized on a temporary basis for pass rating borrowers where a significant risk-modifying action is anticipated in the near term.   
- Rating 8 - This rating includes “Substandard” loans, in accordance with regulatory guidelines, for which the accrual of interest may or may not been discontinued. By definition under regulatory guidelines, a “Substandard” loan has defined weaknesses which make payment default or principal exposure likely, but not yet certain. Such loans are apt to be dependent upon collateral liquidation, a secondary source of repayment, or an event outside of the normal course of business.   
- Rating 9 - This rating includes “Doubtful” loans in accordance with regulatory guidelines. Such loans are placed on nonaccrual status and may be dependent upon collateral having a value that is difficult to determine or upon some near-term event which lacks certainty.  
- Rating 10 - This rating includes “Loss” loans in accordance with regulatory guidelines. Such loans are to be charged-off or charged-down when payment is acknowledged to be uncertain or when the timing or value of payments cannot be determined.  “Loss” is not intended to imply that the loan or some portion of it will never be paid, nor does it in any way imply that there has been a forgiveness of debt. 

|       | (Dollars in thousands)                                                                                                                                              | December 31, 2010               |                           | December 31, 2009 |
|--------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------|--------------------------------|-------------------|
|                           |                                                                                                                                                                | Weighted average                |       | Classified        |       | Weighted average |       | Classified |
|                           |                                                                                                                                                                | risk rating                     |                           | loans             |   | risk rating |   | loans |
|                           | Commercial                                                                                                                                                          |                            | 5.89                           |              | $      | 32,895 |   |   | 5.92 |   | $      | 50,517 |
|                           | Real estate construction                                                                                                                                            |                            | 7.33                           |              |   | 24,131 |   |   | 7.18 |   |   | 38,337 |
|                           | Real estate mortgage                                                                                                                                                |                            | 6.34                           |              |   | 20,913 |   |   | 6.70 |   |   | 15,090 |
|                           | Commercial real estate                                                                                                                                              |                            | 5.75                           |              |   | 42,045 |   |   | 5.54 |   |   | 32,627 |
|                           | Installment and other consumer1                                                                                                                                     |                            | 7.41                           |              |   | 137 |   |   | - |   |   | - |
|                           | Total                                                                                                                                                               |                            |                           |              | $ | 120,121 |   |   |   |   | $ | 136,571 |
|                           |                                                                                                                                                                |
|                           | Total loans risk graded                                                                                                                                             | $      | 1,096,859                      |              |   |   |   | $      | 1,197,263 |   |   |   |
|                           |                                                                                                                                                                |
|                           | 1 Installment and other consumer loans are primarily evaluated on a homogenous pool level and generally not individually risk rated unless certain factors are met. |

----

|       | (Dollars in thousands)         | December 31, 2010               |                           | December 31, 2009 |
|--------------------------------|--------------------------------|---------------------------------|--------------------------------|-------------------|
|                           |                           | Current                         |                           | Nonaccrual        |   | 30 - 89 days |   | Current |   | Nonaccrual |   | 30 - 89 days |
|                           |                           | status                          |       | status            |       | past due |       | status |       | status |       | past due |
|                           | Commercial                     | $      | 54,217                         |              | $      | 245 |   | $      | 7 |   | $      | 57,635 |   | $      | 582 |   | $      | 29 |
|                           | Real estate construction       |                            | -                              |              |   | 1,136 |   |   | - |   |   | 2,787 |   |   | 2,420 |   |   | - |
|                           | Real estate mortgage           |                            | 269,862                        |              |   | 4,958 |   |   | 1,931 |   |   | 318,176 |   |   | 14,540 |   |   | 1,102 |
|                           | Commercial real estate         |                            | 90,782                         |              |   | 1,334 |   |   | 8 |   |   | 110,557 |   |   | 989 |   |   | 167 |
|                           | Installment and other consumer |                            | 14,878                         |              |   | - |   |   | 52 |   |   | 18,391 |   |   | 144 |   |   | 59 |
|                           | Total                          | $                               | 429,739                        |              | $ | 7,673 |   | $ | 1,998 |   | $ | 507,546 |   | $ | 18,675 |   | $ | 1,357 |
|                           |

----

|       | (Dollars in thousands)                                                | Year Ended December 31,         |
|--------------------------------|-----------------------------------------------------------------------|---------------------------------|
|                           |                                                                  | 2010                            |       |   2009 |       | 2008 |
|                           | Balance, beginning of period                                          | $      | 39,418 |   |   | $      | 29,934 |   |   | $      | 54,903 |   |
|                           | Provision for credit losses                                           |                            | 18,652 |   |   |   | 90,057 |   |   |   | 40,367 |   |
|                           | Losses charged to the allowance                                       |                            | (19,476 | ) |   |   | (82,345 | ) |   |   | (68,255 | ) |
|                           | Recoveries credited to the allowance                                  |                            | 2,473 |   |   |   | 1,772 |   |   |   | 2,919 |   |
|                           | Balance, end of period                                                | $                               | 41,067 |   |   | $ | 39,418 |   |   | $ | 29,934 |   |
|                           |                                                                  |
|                           | Components of allowance for credit losses                             |                            |   |   |   |   |   |   |   |   |   |   |
|                           |        Allowance for loan losses        | $                               | 40,217 |   |   | $ | 38,490 |   |   | $ | 28,920 |   |
|                           |        Reserve for unfunded commitments |                            | 850 |   |   |   | 928 |   |   |   | 1,014 |   |
|                           | Total allowance for credit losses                                     | $                               | 41,067 |   |   | $ | 39,418 |   |   | $ | 29,934 |   |
|                           |

|       | (Dollars in thousands)               | December 31, 2010         |
|--------------------------------|--------------------------------------|---------------------------|
|                           |                                 |                      |   |   |   | Real estate |   | Real estate |   | Commercial |   | Installment and |   |   |   |   |   |   |   |
|                           |                                 | Commercial                |       | construction |       | mortgage |       | real estate |       | other consumer |       | Unallocated |       | Total |
|                           | Balance, beginning of period         | $     | 8,224 |   |   | $     | 7,240 |   |   | $     | 8,211 |   |   | $     | 9,492 |   |   | $         | 1,294 |   |   | $     | 4,957 |   | $     | 39,418 |   |
|                           | Provision for credit losses          |                      | 4,474 |   |   |   | 113 |   |   |   | 7,025 |   |   |   | 4,262 |   |   |   | 1,574 |   |   |   | 1,204 |   |   | 18,652 |   |
|                           | Losses charged to the allowance      |                      | (5,229 | ) |   |   | (3,576 | ) |   |   | (7,461 | ) |   |   | (1,321 | ) |   |   | (1,889 | ) |   |   | - |   |   | (19,476 | ) |
|                           | Recoveries credited to the allowance |                      | 1,072 |   |   |   | 697 |   |   |   | 381 |   |   |   | 29 |   |   |   | 294 |   |   |   | - |   |   | 2,473 |   |
|                           | Balance, end of period               | $                         | 8,541 |   |   | $ | 4,474 |   |   | $ | 8,156 |   |   | $ | 12,462 |   |   | $ | 1,273 |   |   | $ | 6,161 |   | $ | 41,067 |   |
|                           |                                 |
|                           | Loans valued for impairment:         |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                           | Individually                         | $                         | 15,056 |   |   | $ | 11,015 |   |   | $ | 23,319 |   |   | $ | 27,282 |   |   | $ | - |   |   | $ |  - |   | $ | 76,672 |   |
|                           | Collectively                         |                      | 294,271 |   |   |   | 33,070 |   |   |   | 325,697 |   |   |   | 791,295 |   |   |   | 15,265 |   |   |   | - |   |   | 1,459,598 |   |
|                           | Total                                | $                         | 309,327 |   |   | $ | 44,085 |   |   | $ | 349,016 |   |   | $ | 818,577 |   |   | $ | 15,265 |   |   | $ |  - |   | $ | 1,536,270 |   |
|                           |

|       | (Dollars in thousands)               | December 31, 2009         |
|--------------------------------|--------------------------------------|---------------------------|
|                           |                                 |                      |   |   |   | Real estate |   | Real estate |   | Commercial |   | Installment and |   |   |   |   |   |   |   |
|                           |                                 | Commercial                |       | construction |       | mortgage |       | real estate |       | other consumer |       | Unallocated |       | Total |
|                           | Balance, beginning of period         | $     | 7,221 |   |   | $     | 7,875 |   |   | $     | 5,002 |   |   | $     | 6,552 |   |   | $         | 1,341 |   |   | $     | 1,943 |   | $     | 29,934 |   |
|                           | Provision for credit losses          |                      | 22,409 |   |   |   | 34,656 |   |   |   | 20,244 |   |   |   | 8,171 |   |   |   | 1,563 |   |   |   | 3,014 |   |   | 90,057 |   |
|                           | Losses charged to the allowance      |                      | (22,411 | ) |   |   | (35,576 | ) |   |   | (17,082 | ) |   |   | (5,382 | ) |   |   | (1,894 | ) |   |   | - |   |   | (82,345 | ) |
|                           | Recoveries credited to the allowance |                      | 1,005 |   |   |   | 285 |   |   |   | 47 |   |   |   | 151 |   |   |   | 284 |   |   |   | - |   |   | 1,772 |   |
|                           | Balance, end of period               | $                         | 8,224 |   |   | $ | 7,240 |   |   | $ | 8,211 |   |   | $ | 9,492 |   |   | $ | 1,294 |   |   | $ | 4,957 |   | $ | 39,418 |   |
|                           |                                 |
|                           | Loans valued for impairment:         |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                           | Individually                         | $                         | 35,640 |   |   | $ | 23,861 |   |   | $ | 23,523 |   |   | $ | 15,783 |   |   | $ | - |   |   | $ |  - |   | $ | 98,807 |   |
|                           | Collectively                         |                      | 334,437 |   |   |   | 75,449 |   |   |   | 351,145 |   |   |   | 846,410 |   |   |   | 18,594 |   |   |   | - |   |   | 1,626,035 |   |
|                           | Total                                | $                         | 370,077 |   |   | $ | 99,310 |   |   | $ | 374,668 |   |   | $ | 862,193 |   |   | $ | 18,594 |   |   | $ |  - |   | $ | 1,724,842 |   |
|                           |

----

|       | (Dollars in thousands)     | December 31,                    |
|---------------------------|----------------------------|---------------------------------|
|                      |                       | 2010                            |       | 2009 |
|                      | Land                       | $      | 4,439 |   |   | $      | 4,439 |   |
|                      | Buildings and improvements |                            | 31,002 |   |   |   | 30,832 |   |
|                      | Furniture and equipment    |                            | 28,917 |   |   |   | 28,147 |   |
|                      | Construction in progress   |                            | 398 |   |   |   | 370 |   |
|                      |                       |                            | 64,756 |   |   |   | 63,788 |   |
|                      | Accumulated depreciation   |                            | (37,982 | ) |   |   | (35,312 | ) |
|                      | Total                      | $                               | 26,774 |   |   | $ | 28,476 |   |
|                      |

|       | (Dollars in thousands)     |                            |                           |       |   | Core deposit                                              |
|--------------------------------|----------------------------|---------------------------------|--------------------------------|------------|--------|-----------------------------------------------------------|
|                           |                       | Goodwill                        |       | intangible |
|                           | Balance, January 1, 2009   | $      | 13,059                         |       |   | $            | 995 |   |
|                           | Amortization               |                            | -                              |       |   |                                                      | (358 | ) |
|                           | Impairment                 |                            | (13,059                        | )          |   |                                                      | - |   |
|                           | Balance, December 31, 2009 | $                               | -                              |       |   | $                                                         | 637 |   |
|                           | Amortization               |                            | -                              |       |   |                                                      | (279 | ) |
|                           | Balance, December 31, 2010 | $                               | -                              |       |   | $                                                         | 358 |   |
|                           |

|       | (Dollars in thousands) | Full year                       |
|--------------------------------|------------------------|---------------------------------|
|                           |                   | expected                        |
|                           | Year                   | amortization                    |
|                           | 2011                   | $      | 199 |
|                           | 2012                   |                            | 119 |
|                           | 2013                   |                            | 40 |

----

|       | (Dollars in thousands)              | December 31,                    |
|--------------------------------|-------------------------------------|---------------------------------|
|                           |                                | 2010                            |       | 2009 |
|                           | Balance, beginning period           | $      | 53,594 |   |   | $      | 70,110 |   |
|                           | Additions to OREO                   |                            | 28,384 |   |   |   | 79,107 |   |
|                           | Disposition of OREO                 |                            | (35,870 | ) |   |   | (77,061 | ) |
|                           | Valuation adjustments in the period |                            | (6,649 | ) |   |   | (18,562 | ) |
|                           | Total OREO                          | $                               | 39,459 |   |   | $ | 53,594 |   |
|                           |

|       | (Dollars in thousands)                                     | December 31, |
|--------------------------------|------------------------------------------------------------|--------------|
|                           |                                                       | 2010         |       | 2009 |
|                           | Balance, beginning period                                  | $            |       9,489 |   |   | $      | 3,920 |   |
|                           | Valuation adjustments in the period                        |         | 6,649 |   |   |   | 18,562 |   |
|                           | Deductions from the valuation allowance due to disposition |         | (8,554 | ) |   |   | (12,993 | ) |
|                           | Total OREO valuation allowance                             | $            | 7,584 |   |   | $ | 9,489 |   |
|                           |

|       | (Dollars in thousands)                       | December 31,                    |
|--------------------------------|----------------------------------------------|---------------------------------|
|                           |                                         | 2010                            |       | 2009 |
|                           | Deferred tax assets, net                     | $      | 5,789 |   | $      | 3,249 |
|                           | Accrued interest receivable                  |                            | 9,522 |   |   | 10,415 |
|                           | Investment in affordable housing tax credits |                            | 3,915 |   |   | 4,833 |
|                           | Income taxes receivable                      |                            | - |   |   | 31,493 |
|                           | Other                                        |                            | 13,715 |   |   | 10,652 |
|                           | Total other assets                           | $                               | 32,941 |   | $ | 60,642 |
|                           |

----

|        | (Dollars in thousands)                                                                                    | December 31,                    |
|---------------------------------|-----------------------------------------------------------------------------------------------------------|---------------------------------|
|                            |                                                                                                      | 2010                            |   | 2009 |
|                            | Short-term borrowings:                                                                                    |                            |   |       |   |   |
|                            |        FHLB advances                                                        | $      | - |   | $      | 12,600 |
|                            | Long-term borrowings:                                                                                     |                            |   |   |   |   |
|                            |        FHLB non-putable advances                                            |                            | 138,599 |   |   | 220,699 |
|                            |        FHLB putable advances                                                |                            | 30,000 |   |   | 30,000 |
|                            |               Total long-term borrowings |                            | 168,599 |   |   | 250,699 |
|                            | Total borrowings                                                                                          | $                               | 168,599 |   | $ | 263,299 |
|                            |

----

| (Dollars in thousands)          |                           |           |                           |               |                           |        |                           |         |                           |     |                           |          |                           |              |                 |
|---------------------------------|--------------------------------|----------------|--------------------------------|--------------------|--------------------------------|-------------|--------------------------------|--------------|--------------------------------|----------|--------------------------------|---------------|--------------------------------|-------------------|----------------------|
|                            |                           |           |                           | Preferred security |                           |        |                           |         |                           | Rate at  |                           |          |                           | Next possible     |
| Issuance Trust                  |       | Issuance date  |       | amount             |       | Rate type 1 |       | Initial rate |       | 12/31/10 |       | Maturity date |       | redemption date 2 |
| West Coast Statutory Trust III  |                           | September 2003 |                           | $                  | 7,500                          |        | Variable                       |         | 6.75%                          |     | 3.25%                          |          | September 2033                 |              | Currently redeemable |
| West Coast Statutory Trust IV   |                           | March 2004     |                           | $                  | 6,000                          |        | Variable                       |         | 5.88%                          |     | 3.09%                          |          | March 2034                     |              | Currently redeemable |
| West Coast Statutory Trust V    |                           | April 2006     |                           | $                  | 15,000                         |        | Variable                       |         | 6.79%                          |     | 1.73%                          |          | June 2036                      |              | June 2011            |
| West Coast Statutory Trust VI   |                           | December 2006  |                           | $                  | 5,000                          |        | Variable                       |         | 7.04%                          |     | 1.98%                          |          | December 2036                  |              | December 2011        |
| West Coast Statutory Trust VII  |                           | March 2007     |                           | $                  | 12,500                         |        | Variable                       |         | 6.90%                          |     | 1.85%                          |          | March 2037                     |              | March 2012           |
| West Coast Statutory Trust VIII |                           | June 2007      |                           | $                  | 5,000                          |        | Variable                       |         | 6.74%                          |     | 1.68%                          |          | June 2037                      |              | June 2012            |
|                            |                           | Total          |                           | $                  | 51,000                         |        |                           |         | Weighted rate                  |     | 2.16%                          |          |                           |              |                 |
|                            |

| 1 The variable rate preferred securities reprice quarterly.                 |
|-----------------------------------------------------------------------------|
| 2 Securities are redeemable at the option of Bancorp following these dates. |

----

|       | (Dollars in thousands) | Year ended December 31,         |
|--------------------------------|------------------------|---------------------------------|
|                           |                   | 2010                            |       | 2009 |
|                           | Beginning balance      | $      | 2,514 |   |   | $      | 2,356 |   |
|                           | Benefit expense        |                            | 209 |   |   |   | 281 |   |
|                           | Benefit payments       |                            | (105 | ) |   |   | (123 | ) |
|                           | Ending balance         | $                               | 2,618 |   |   | $ | 2,514 |   |
|                           |

|       | (Dollars in thousands) |       | Benefits expected to |
|--------------------------------|------------------------|--------------------------------|----------------------|
|                           | Year                   |                           | be paid              |
|                           | 2011                   |                           | $                    | 213 |
|                           | 2012                   |                           |                 | 206 |
|                           | 2013                   |                           |                 | 207 |
|                           | 2014                   |                           |                 | 208 |
|                           | 2015                   |                           |                 | 208 |
|                           | 2016 through 2020      |                           |                 | 1,055 |

----

|       | (Dollars in thousands)                               |       | Minimum Future                  |
|--------------------------------|------------------------------------------------------|--------------------------------|---------------------------------|
|                           | Year                                                 |                           | Lease Payments                  |
|                           | 2011                                                 |                           | $      | 3,937 |
|                           | 2012                                                 |                           |                            | 3,960 |
|                           | 2013                                                 |                           |                            | 3,891 |
|                           | 2014                                                 |                           |                            | 3,578 |
|                           | 2015                                                 |                           |                            | 2,942 |
|                           |        Thereafter |                           |                            | 10,237 |
|                           | Total                                                |                           | $                               | 28,545 |
|                           |                                                 |                           |                            |   |

----

|                      |                           | 2010                            |                           | 2009   |
|---------------------------|--------------------------------|---------------------------------|--------------------------------|--------|
|                      |                           |                            |                           |   |   |   |   | Amount |   | Percent |   |   |   |   |   |   |   | Amount |   | Percent |
|                      |                           |                            |                           |   |   |   |   | Required For |   | required for |   |   |   |   |   |   |   | Required For |   | required for |
|                      |                           |                            |                           |   |   |   |   | Minimum |   | Minimum |   |   |   |   |   |   |   | Minimum |   | Minimum |
| (Dollars in thousands)    |                           |                            |                           |   |   |   |   | Capital |   | Capital |   |   |   |   |   |   |   | Capital |   | Capital |
|                      |       | Amount                          |       | Ratio  |       | Adequacy |       | Adequacy |       | Amount |       | Ratio |       | Adequacy |       | Adequacy |
| Tier 1 risk-based capital |                           |                            |                           |   |   |   |   |   |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| West Coast Bancorp        |                           | $      | 322,648                        |   | 17.47 | % |   | $      | 73,859 |   | 4 | % |   |   | $      | 147,153 |   | 7.17 | % |   | $       | 82,047 |   | 4 | % |       |
| West Coast Bank           |                           |                            | 309,578                        |   | 16.79 | % |   |   | 73,765 |   | 4 | % |   |   |   | 289,236 |   | 14.11 | % |   |   | 81,894 |   | 4 | % |   |
|                      |                           |                            |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total risk-based capital  |                           |                            |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| West Coast Bancorp        |                           | $                               | 345,951                        |   | 18.74 | % |   | $ | 147,718 |   | 8 | % |   |   | $ | 187,359 |   | 9.13 | % |   | $ | 164,094 |   | 8 | % |   |
| West Coast Bank           |                           |                            | 332,852                        |   | 18.05 | % |   |   | 147,530 |   | 8 | % |   |   |   | 315,027 |   | 15.37 | % |   |   | 163,969 |   | 8 | % |   |
|                      |                           |                            |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Leverage ratio            |                           |                            |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| West Coast Bancorp        |                           | $                               | 322,648                        |   | 13.02 | % |   | $ | 99,088 |   | 4 | % |   |   | $ | 147,153 |   | 5.37 | % |   | $ | 109,635 |   | 4 | % |   |
| West Coast Bank           |                           |                            | 309,578                        |   | 12.51 | % |   |   | 98,975 |   | 4 | % |   |   |   | 289,236 |   | 10.57 | % |   |   | 109,454 |   | 4 | % |   |

----

|       |                                                   |                           |                                           |                           |     | 2010                            |        |                           |                                      |                           | 2009        |                            |     |   |                                           | 2008     |
|--------------------------------|--------------------------------------------------------|--------------------------------|------------------------------------------------|--------------------------------|----------|---------------------------------|-------------|--------------------------------|-------------------------------------------|--------------------------------|-------------|---------------------------------|----------|--------|------------------------------------------------|----------|
|                           |                                                   |                           |                                           |                           |     | Weighted                        |        |                           |                                      |                           | Weighted    |                            |     |   |                                           | Weighted |
|                           |                                                   |       | 2010 Common                                    |       | Avg. Ex. |        | 2009 Common |       | Avg. Ex.                                  |       | 2008 Common |        | Avg. Ex. |
|                           |                                                   |                           | Shares                                         |                           | Price    |                            | Shares      |                           | Price                                     |                           | Shares      |                            | Price    |
|                           | Balance, beginning of year                             |                           |        1,746,752 |                           |     | $      | 13.08       |                           |        1,407,515 |                           |        | $      | 16.41    |   |        1,311,585 |     |   | $      | 16.97 |
|                           |        Granted           |                           | 950                                            |                           |     |                            | 2.63        |                           | 421,900                                   |                           |        |                            | 2.31     |   | 178,000                                        |     |   |   | 12.73 |
|                           |        Exercised         |                           | (1,525                                         | )                              |     |                            | 2.31        |                           | -                                         |                           |        |                            | -        |   | (2,622                                         | )        |   |   | 9.46 |
|                           |        Forfeited/expired |                           | (213,543                                       | )                              |     |                            | 10.96       |                           | (82,663                                   | )                              |        |                            | 14.90    |   | (79,448                                        | )        |   |   | 17.56 |
|                           | Balance, end of year                                   |                           | 1,532,634                                      |                           |     | $                               | 13.38       |                           | 1,746,752                                 |                           |        | $                               | 13.08    |   | 1,407,515                                      |     |   | $ | 16.41 |
|                           | Exercisable, end of year                               |                           | 1,293,978                                      |                           |     |                            |        |                           | 1,245,135                                 |                           |        |                            |     |   | 1,150,201                                      |     |   |   |   |

|       |                          |   |                            |                           | Non-Qualified    |                           |
|--------------------------------|-------------------------------|--------|---------------------------------|--------------------------------|------------------|--------------------------------|
|                           |                          |   |                            |                           | Director Options |       | Employee Options |
|                           |                          |   |                            |       | 2009             |       | 2008 |   | 2010 | 2009 |       | 2008 |
|                           | Risk Free interest rates      |   |                            | 1.64                           | %                |                           |   | 2.75 | % |   |   | 1.43 | % |   | 1.64 | % |   |   | 2.75%-3.52 | % |
|                           | Expected dividend             |   |                            | 1.22                           | %                |                           |   | 3.60 | % |   |   | 0.00 | % |   | 0%-1.22 | % |   |   | 3.60%-4.18 | % |
|                           | Expected lives, in years      |   |                            | 4                              |             |                           |   | 4 |   |   |   | 4 |   |   | 4 |   |   |   | 4 |   |
|                           | Expected volatility           |   |                            | 37                             | %                |                           |   | 27 | % |   |   | 38 | % |   | 37 | % |   |   | 27 | % |
|                           | Fair value of options granted |   | $      | 0.65                           |             |                           | $      | 2.20 |   |   | $      | 0.83 |   | $      | 0.65 |   |   | $      |   |  2.20 |   |

|       |                            |                 |                           |                            |                           |      |                           |           | Weighted Avg.                  |                |                           |                            |   |      |          |   |
|--------------------------------|---------------------------------|----------------------|--------------------------------|---------------------------------|--------------------------------|-----------|--------------------------------|----------------|--------------------------------|---------------------|--------------------------------|---------------------------------|--------|-----------|---------------|--------|
|                           |                            |                 |                           |                            |                           |      | Options                        |           | Remaining Time to              |                | Weighted Avg.                  |                            |   |      | Weighted Avg. |
|                           |                            | Exercise Price Range |       | Outstanding                     |       | Maturity  |       | Exercise Price |       | Options Exercisable |       | Exercise Price                  |
|                           | $      | 2.31                 | -                              | $      | 8.56                           |      | 406,625                        |           | $          | 8.25                |                           | $      | 2.33   |      | 242,700       |   | $     | 2.34 |
|                           |                            | 8.56                 | -                              |                            | 12.75                          |      | 332,780                        |           |                           | 3.75                |                           |                            | 11.49  |      | 260,736       |   |   | 11.15 |
|                           |                            | 12.75                | -                              |                            | 20.64                          |      | 504,870                        |           |                           | 2.62                |                           |                            | 17.11  |      | 504,870       |   |   | 17.11 |
|                           |                            | 20.64                | -                              |                            | 34.13                          |      | 288,359                        |           |                           | 4.27                |                           |                            | 24.59  |      | 285,672       |   |   | 24.52 |
|                           | Total                           |                 |                           |                            |                           | 1,532,634 |                           | $              | 4.67                           |                | $                              | 13.38                           |   | 1,293,978 |          | $      | 14.78 |

----

|       | (Dollars in thousands, except share and per share data)                                |                           | Year ended December 31,         |
|--------------------------------|----------------------------------------------------------------------------------------|--------------------------------|---------------------------------|
|                           |                                                                                   |                           | 2010                            |   | 2009 |   | 2008 |
|                           | Intrinsic value of options exercised in the period                                     |       | $      | - |       | $      | - |       | $      | 6 |
|                           |                                                                                   |                           |                            |   |   |   |   |   |   |   |
|                           | Stock options fully vested and expected to vest:                                       |                           |                            |   |   |   |   |   |   |   |
|                           |        Number                                       |                           |                            | 1,494,590 |   |   | 1,704,448 |   |   | 1,375,273 |
|                           |        Weighted average exercise price              |                           | $                               | 13.38 |   | $ | 13.08 |   | $ | 16.10 |
|                           |        Aggregate intrinsic value                    |                           | $                               | 190 |   | $ | - |   | $ | - |
|                           |        Weighted average contractual term of options |                           |                            | 4.7 years |   |   | 5.5 years |   |   | 4.7 years |
|                           |                                                                                   |                           |                            |   |   |   |   |   |   |   |
|                           | Stock options vested and currently exercisable                                         |                           |                            |   |   |   |   |   |   |   |
|                           |        Number                                       |                           |                            | 1,293,978 |   |   | 1,245,135 |   |   | 1,150,201 |
|                           |        Weighted average exercise price              |                           | $                               | 14.78 |   | $ | 15.71 |   | $ | 16.09 |
|                           |        Aggregate intrinsic value                    |                           | $                               | 123 |   | $ | - |   | $ | - |
|                           |        Weighted average contractual term of options |                           |                            | 4.1 years |   |   | 4.0 years |   |   | 3.9 years |

|       |                                           |                           |                                                             |                           |      | Weighted                        |            |                           |                                                                    |                           | Weighted        |                            |      |   |                                                             | Weighted   |
|--------------------------------|------------------------------------------------|--------------------------------|------------------------------------------------------------------|--------------------------------|-----------|---------------------------------|-----------------|--------------------------------|-------------------------------------------------------------------------|--------------------------------|-----------------|---------------------------------|-----------|--------|------------------------------------------------------------------|------------|
|                           |                                           |                           |                                                             |                           |      | Avg. Grant                      |            |                           |                                                                    |                           | Avg. Grant      |                            |      |   |                                                             | Avg. Grant |
|                           |                                           |       | 2010 Restricted                                                  |       | Date Fair |        | 2009 Restricted |       | Date Fair                                                               |       | 2008 Restricted |        | Date Fair |
|                           |                                           |                           | Shares                                                           |                           | Value     |                            | Shares          |                           | Value                                                                   |                           | Shares          |                            | Value     |
|                           | Balance, beginning of year                     |                           | 136,680                                                          |                           |      | $      | 17.06           |                           | 210,768                                                                 |                           |            | $      | 18.41     |   | 148,317                                                          |       |   | $      | 27.97 |
|                           |        Granted   |                           |           1,612,808 |                           |      |                            | 3.24            |                           | -                                                                       |                           |            |                            | -         |   | 127,900                                                          |       |   |   | 11.48 |
|                           |        Vested    |                           | (66,709                                                          | )                              |      |                            | 16.90           |                           | (71,183                                                                 | )                              |            |                            | 20.85     |   | (59,949                                                          | )          |   |   | 26.53 |
|                           |        Forfeited |                           | (45,797                                                          | )                              |      |                            | 4.67            |                           | (2,905                                                                  | )                              |            |                            | 22.44     |   | (5,500                                                           | )          |   |   | 26.26 |
|                           | Balance, end of year                           |                           | 1,636,982                                                        |                           |      | $                               | 3.80            |                           | 136,680                                                                 |                           |            | $                               | 17.06     |   | 210,768                                                          |       |   | $ | 18.41 |
|                           |                                           |                           |                                                             |                           |      |                            |            |                           |                                                                    |                           |            |                            |      |   |                                                             |       |   |   |   |
|                           | Weighted avg. remaining                        |                           |                                                             |                           |      |                            |            |                           |                                                                    |                           |            |                            |      |   |                                                             |       |   |   |   |
|                           | recognition period                             |                           | 3.03 years                                                       |                           |      |                            |            |                           |            1.29 years |                           |            |                            |      |   |          1.40 years |       |   |   |   |

|       |                                                                             |                           | Twelve months ended December 31, |
|--------------------------------|----------------------------------------------------------------------------------|--------------------------------|----------------------------------|
|                           | (Dollars in thousands)                                                           |       | 2010                             |       | 2009 |       | 2008 |
|                           | Restricted stock expense                                                         |                           | $       | 1,883 |   | $      | 1,106 |   | $      | 2,301 |
|                           | Stock option expense                                                             |                           |                             | 205 |   |   | 414 |   |   | 564 |
|                           |        Total stock-based compensation expense |                           | $                                | 2,088 |   | $ | 1,520 |   | $ | 2,865 |
|                           |                                                                             |                           |                             |   |   |   |   |   |   |   |
|                           | Tax benefit recognized on share-based expense                                    |                           | $                                | 793 |   | $ | 578 |   | $ | 1,089 |

----

|       | (Dollars in thousands)                                                     |                           | Year ended December 31,         |
|--------------------------------|----------------------------------------------------------------------------|--------------------------------|---------------------------------|
|                           |                                                                       |                           | 2010                            |   | 2009 |   | 2008 |
|                           | Net income (loss) as reported                                              |       | $      | 3,225 |   |       | $      | (91,213 | ) |       | $      | (6,313 | ) |
|                           |                                                                       |                           |                            |   |   |   |   |   |   |   |   |   |   |
|                           | Unrealized holding gains (losses) on securities:                           |                           |                            |   |   |   |   |   |   |   |   |   |   |
|                           | Unrealized holding gains (losses) arising during the year                  |                           |                            | 4,766 |   |   |   | 4,082 |   |   |   | (7,480 | ) |
|                           | Tax (provision) benefit                                                    |                           |                            | (1,888 | ) |   |   | (1,538 | ) |   |   | 2,891 |   |
|                           | Unrealized holding gains (losses) arising during the year, net of tax      |                           |                            | 2,878 |   |   |   | 2,544 |   |   |   | (4,589 | ) |
|                           |                                                                       |                           |                            |   |   |   |   |   |   |   |   |   |   |
|                           | Less: Reclassification adjustment for impairment and                       |                           |                            |   |   |   |   |   |   |   |   |   |   |
|                           |        (gains) losses on sales of securities |                           |                            | (1,562 | ) |   |   | (641 | ) |   |   | 5,558 |   |
|                           | Tax provision (benefit)                                                    |                           |                            | 609 |   |   |   | 246 |   |   |   | (2,136 | ) |
|                           | Net realized (gains) losses, net of tax                                    |                           |                            | (953 | ) |   |   | (395 | ) |   |   | 3,422 |   |
|                           |                                                                       |                           |                            |   |   |   |   |   |   |   |   |   |   |
|                           | Total comprehensive income (loss)                                          |                           | $                               | 5,150 |   |   | $ | (89,064 | ) |   | $ | (7,480 | ) |
|                           |                                                                       |                           |                            |   |   |   |   |   |   |   |   |   |   |

|       | (Dollars and shares in thousands, except per share amounts)             |                           | Year ended December 31,         |
|--------------------------------|-------------------------------------------------------------------------|--------------------------------|---------------------------------|
|                           |                                                                    |       | 2010                            |       | 2009 |       | 2008 |
|                           | Net income (loss)                                                       |                           | $      | 3,225 |   | $      | (91,213 | ) |   | $      | (6,313 | ) |
|                           | Less: Net income (loss) allocated to participating securities-basic:    |                           |                            |   |   |   |   |   |   |   |   |   |
|                           |        Preferred stock               |                           |                            | 367 |   |   | - |   |   |   | - |   |
|                           |        Non-vested restricted stock   |                           |                            | 37 |   |   | (728 | ) |   |   | (44 | ) |
|                           | Net income (loss) available to common stock holders-basic               |                           |                            | 2,821 |   |   | (90,485 | ) |   |   | (6,269 | ) |
|                           | Add: Net income (loss) allocated per two-class method-diluted:          |                           |                            |   |   |   |   |   |   |   |   |   |
|                           |        Stock options and Class C warrants |                           |                            | 12 |   |   | - |   |   |   | - |   |
|                           | Net income (loss) available to common stockholders-diluted              |                           | $                               | 2,833 |   | $ | (90,485 | ) |   | $ | (6,269 | ) |
|                           |                                                                    |                           |                            |   |   |   |   |   |   |   |   |   |
|                           | Weighted average common shares outstanding-basic                        |                           |                            | 87,300 |   |   | 15,510 |   |   |   | 15,472 |   |
|                           | Common stock equivalents from:                                          |                           |                            |   |   |   |   |   |   |   |   |   |
|                           |        Stock options                      |                           |                            | 29 |   |   | - |   |   |   | - |   |
|                           |        Class C Warrants                   |                           |                            | 2,966 |   |   | - |   |   |   | - |   |
|                           | Weighted average common shares outstanding-diluted                      |                           |                            | 90,295 |   |   | 15,510 |   |   |   | 15,472 |   |
|                           |                                                                    |                           |                            |   |   |   |   |   |   |   |   |   |
|                           | Basic earnings (loss) per share                                         |                           | $                               | 0.03 |   | $ | (5.83 | ) |   | $ | (0.41 | ) |
|                           | Diluted earnings (loss) per share                                       |                           | $                               | 0.03 |   | $ | (5.83 | ) |   | $ | (0.41 | ) |
|                           |                                                                    |                           |                            |   |   |   |   |   |   |   |   |   |
|                           | Common stock equivalent shares excluded due to anti-dilutive effect     |                           |                            | 2,203 |   |   | 1,883 |   |   |   | 60 |   |

----

|       | (Dollars in thousands)                       |                           | Year ended December 31,         |
|--------------------------------|----------------------------------------------|--------------------------------|---------------------------------|
|                           |                                         |       | 2010                            |       | 2009 |       | 2008 |
|                           | Current                                      |                           |                            |   |   |   |   |   |   |   |   |   |   |
|                           |        Federal |                           | $      | 6,230 |   |   | $      | (24,220 | ) |   | $      | (9,717 | ) |
|                           |        State   |                           |                            | 100 |   |   |   | (6,982 | ) |   |   | (1,692 | ) |
|                           |                                         |                           |                            | 6,330 |   |   |   | (31,202 | ) |   |   | (11,409 | ) |
|                           | Deferred                                     |                           |                            |   |   |   |   |   |   |   |   |   |   |
|                           |        Federal |                           |                            | (2,483 | ) |   |   | 10,335 |   |   |   | 3,302 |   |
|                           |        State   |                           |                            | (57 | ) |   |   | 1,591 |   |   |   | 509 |   |
|                           |                                         |                           |                            | (2,540 | ) |   |   | 11,926 |   |   |   | 3,811 |   |
|                           | Total                                        |                           |                            |   |   |   |   |   |   |   |   |   |   |
|                           |        Federal |                           |                            | 3,747 |   |   |   | (13,885 | ) |   |   | (6,415 | ) |
|                           |        State   |                           |                            | 43 |   |   |   | (5,391 | ) |   |   | (1,183 | ) |
|                           | Total provision (benefit) for income taxes   |                           | $                               | 3,790 |   |   | $ | (19,276 | ) |   | $ | (7,598 | ) |
|                           |                                         |                           |                            |   |   |   |   |   |   |   |   |   |   |

|       | (Dollars in thousands)                                                          |                           | Year ended December 31,         |
|--------------------------------|---------------------------------------------------------------------------------|--------------------------------|---------------------------------|
|                           |                                                                            |       | 2010                            |       | 2009 |       | 2008 |
|                           | Expected federal income tax (benefit) provision 1                               |                           | $      | 2,385 |   |   | $      | (38,671 | ) |   | $      | (4,730 | ) |
|                           | State income tax, net of federal income tax effect                              |                           |                            | 66 |   |   |   | (3,504 | ) |   |   | (769 | ) |
|                           | Interest on obligations of state and political subdivisions                     |                           |                            |   |   |   |   |   |   |   |   |   |   |
|                           |        exempt from federal tax                    |                           |                            | (901 | ) |   |   | (1,148 | ) |   |   | (1,302 | ) |
|                           | Federal low income housing tax credits                                          |                           |                            | (427 | ) |   |   | (972 | ) |   |   | (880 | ) |
|                           | Bank owned life insurance                                                       |                           |                            | (302 | ) |   |   | (307 | ) |   |   | (309 | ) |
|                           | Stock options                                                                   |                           |                            | 70 |   |   |   | 123 |   |   |   | 177 |   |
|                           | Goodwill impairment                                                             |                           |                            | - |   |   |   | 4,570 |   |   |   | - |   |
|                           | Change in deferred tax asset valuation allowance                                |                           |                            | 2,465 |   |   |   | 20,999 |   |   |   | - |   |
|                           | Other, net                                                                      |                           |                            | 434 |   |   |   | (366 | ) |   |   | 215 |   |
|                           |        Total (benefit) provision for income taxes |                           | $                               | 3,790 |   |   | $ | (19,276 | ) |   | $ | (7,598 | ) |
|                           |                                                                            |                           |                            |   |   |   |   |   |   |   |   |   |   |

----

|       | (Dollars in thousands)                                                    |                           | December 31,                    |
|--------------------------------|---------------------------------------------------------------------------|--------------------------------|---------------------------------|
|                           |                                                                      |       | 2010                            |       | 2009 |
|                           | Deferred tax assets:                                                      |                           |                            |   |   |   |   |   |   |
|                           | Allowance for loan losses                                                 |                           | $      | 15,455 |   |   | $      | 14,792 |   |
|                           | Reserve for unfunded commitments                                          |                           |                            | 327 |   |   |   | 357 |   |
|                           | Net unrealized loss on investments                                        |                           |                            |   |   |   |   |   |   |
|                           |        available for sale                   |                           |                            | - |   |   |   | 952 |   |
|                           | Deferred employee benefits                                                |                           |                            | 1,768 |   |   |   | 1,484 |   |
|                           | Stock option and restricted stock                                         |                           |                            | 973 |   |   |   | 682 |   |
|                           | Valuation allowance on OREO                                               |                           |                            | 2,914 |   |   |   | 3,647 |   |
|                           | Capitalized OREO expenses                                                 |                           |                            | 988 |   |   |   | 889 |   |
|                           | Taxable interest on nonaccrual loans                                      |                           |                            | 2,207 |   |   |   | - |   |
|                           | State net operating loss carryforwards                                    |                           |                            | 3,195 |   |   |   | 3,630 |   |
|                           | State business energy and low income housing tax credits                  |                           |                            | 631 |   |   |   | 477 |   |
|                           | Federal low income housing tax credits                                    |                           |                            | 2,313 |   |   |   | 972 |   |
|                           | Other                                                                     |                           |                            | 3,514 |   |   |   | 1,041 |   |
|                           |        Total gross deferred tax assets      |                           |                            | 34,285 |   |   |   | 28,923 |   |
|                           |                                                                      |                           |                            |   |   |   |   |   |   |
|                           | Deferred tax liabilities:                                                 |                           |                            |   |   |   |   |   |   |
|                           | Accumulated depreciation                                                  |                           |                            | 868 |   |   |   | 582 |   |
|                           | Net unrealized gain on investments available for sale                     |                           |                            | 327 |   |   |   | - |   |
|                           | Loan origination costs                                                    |                           |                            | 1,645 |   |   |   | 1,807 |   |
|                           | Federal Home Loan Bank stock dividends                                    |                           |                            | 1,893 |   |   |   | 1,893 |   |
|                           | Intangible assets                                                         |                           |                            | 138 |   |   |   | 193 |   |
|                           | Other                                                                     |                           |                            | 161 |   |   |   | 200 |   |
|                           |        Total gross deferred tax liabilities |                           |                            | 5,032 |   |   |   | 4,675 |   |
|                           | Net deferred tax assets before valuation allowance                        |                           |                            | 29,253 |   |   |   | 24,248 |   |
|                           | Deferred tax asset valuation allowance                                    |                           |                            | (23,464 | ) |   |   | (20,999 | ) |
|                           | Net deferred tax assets                                                   |                           | $                               | 5,789 |   |   | $ | 3,249 |   |
|                           |                                                                      |                           |                            |   |   |   |   |   |   |

|       | (Dollars in thousands) |                                    |                           |                            |   |
|--------------------------------|------------------------|-----------------------------------------|--------------------------------|---------------------------------|--------|
|                           | Year of expiration     | Type                                    |       | Amount                          |
|                           | 2023-2024              | State net operating losses              |                           | $      | 3,195  |
|                           | 2016-2017              | State tax credits- business energy      |                           |                            | 569    |
|                           | 2013-2014              | State tax credits- low income housing   |                           |                            | 62     |
|                           | 2029                   | Federal tax credits- low income housing |                           |                            | 2,313  |

----

----

- Quoted prices in active markets for identical assets (Level 1): Inputs that are quoted unadjusted prices in active markets for identical assets that the Company has the ability to access at the measurement date. An active market for the asset is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.  
- Other observable inputs (Level 2): Inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity including quoted prices for similar assets, quoted prices for securities in inactive markets and inputs derived principally from or corroborated by observable market data by correlation or other means.  
- Significant unobservable inputs (Level 3): Inputs that reflect the reporting entity's own estimates about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. 

----

|                           |                                                                                 |                           |              |                           |                         | Fair value measurements at December 31, 2010, using |
|--------------------------------|--------------------------------------------------------------------------------------|--------------------------------|-------------------|--------------------------------|------------------------------|-----------------------------------------------------|
|                           |                                                                                 |                           |              |                           |                         | Quoted prices in active                             |   | Other observable |   | Significant |
|       |                                                                                 |                           | Total fair value  |       | markets for identical assets |                            | inputs |   | unobservable inputs |
|                           | (Dollars in thousands)                                                               |       | December 31, 2010 |                           | (Level 1)                    |                                                | (Level 2) |   | (Level 3) |
|                           | Trading securities                                                                   |                           | $                 | 808                            |                         | $                                                   | 808 |   | $      | - |       | $      | - |
|                           | Available for sale securities:                                                       |                           |              |                           |                         |                                                |   |   |   |   |   |   |   |
|                           |        U.S. Treasury securities                        |                           |              | 14,392                         |                         |                                                | - |   |   | 14,392 |   |   | - |
|                           |        U.S. Government agency securities               |                           |              | 194,230                        |                         |                                                | - |   |   | 194,230 |   |   | - |
|                           |        Corporate securities                            |                           |              | 9,392                          |                         |                                                | - |   |   | - |   |   | 9,392 |
|                           |        Mortgage-backed securities                      |                           |              | 363,618                        |                         |                                                | - |   |   | 363,618 |   |   | - |
|                           |        Obligations of state and political subdivisions |                           |              | 52,645                         |                         |                                                | - |   |   | 51,688 |   |   | 957 |
|                           |        Equity investments and other securities         |                           |              | 11,835                         |                         |                                                | 1 |   |   | 11,834 |   |   | - |
|                           | Total recurring assets measured at fair value                                        |                           | $                 | 646,920                        |                         | $                                                   | 809 |   | $ | 635,762 |   | $ | 10,349 |
|                           |                                                                                 |                           |              |                           |                         |                                                |   |   |   |   |   |   |   |

|       |                                                                                 |                           |              |                           |                         | Fair value measurements at December 31, 2009, using |
|--------------------------------|--------------------------------------------------------------------------------------|--------------------------------|-------------------|--------------------------------|------------------------------|-----------------------------------------------------|
|                           |                                                                                 |                           |              |                           |                         | Quoted prices in active                             |   | Other observable |   | Significant |
|                           |                                                                                 |                           | Total fair value  |                           | markets for identical assets |                                                | inputs |   | unobservable inputs |
|                           | (Dollars in thousands)                                                               |       | December 31, 2009 |       | (Level 1)                    |                            | (Level 2) |       | (Level 3) |
|                           | Trading securities                                                                   |                           | $                 | 731                            |                         | $                                                   | 731 |   | $ | - |   | $ | - |
|                           | Available for sale securities:                                                       |                           |              |                           |                         |                                                |   |   |   |   |   |   |   |
|                           |        U.S. Treasury securities                        |                           |              | 25,007                         |                         |                                                | 25,007 |   |   | - |   |   | - |
|                           |        U.S. Government agency securities               |                           |              | 103,988                        |                         |                                                | - |   |   | 103,988 |   |   | - |
|                           |        Corporate securities                            |                           |              | 9,753                          |                         |                                                | - |   |   | - |   |   | 9,753 |
|                           |        Mortgage-backed securities                      |                           |              | 344,294                        |                         |                                                | - |   |   | 344,294 |   |   | - |
|                           |        Obligations of state and political subdivisions |                           |              | 70,018                         |                         |                                                | - |   |   | 69,045 |   |   | 973 |
|                           |        Equity investments and other securities         |                           |              | 9,217                          |                         |                                                | 1 |   |   | 9,216 |   |   | - |
|                           | Total recurring assets measured at fair value                                        |                           | $                 | 563,008                        |                         | $                                                   | 25,739 |   | $ | 526,543 |   | $ | 10,726 |
|                           |                                                                                 |                           |              |                           |                         |                                                |   |   |   |   |   |   |   |

----

|                               |                           | Twelve months ended December 31, 2010 |
|------------------------------------|--------------------------------|---------------------------------------|
|                               |                           |                                  |   |   | Gains (loss) |   | Reclassification of |   |   |   |   |   |   |
|                               |                           |                                  |   |   | included in other |   | losses from adjustment |   |   |   |   | Balance |
|                               |                           | Balance                               |   | comprehensive |   | for impairment of |   | Purchases, Issuances, |   | December 31, |
| (Dollars in thousands)             |       | January 1, 2010                       |       | income (loss) |       | securities |       | and Settlements |       | 2010 |
| Corporate securities               |                           | $                                     | 9,753 |   | $ | (361 | ) |   | $ | - |   | $ | - |   | $ | 9,392 |
| Obligations of state and political |                           |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| subdivisions                       |                           |                                  | 973 |   |   | (16 | ) |   |   | - |   |   | - |   |   | 957 |
| Fair value                         |                           | $                                     | 10,726 |   | $ | (377 | ) |   | $ | - |   | $ | - |   | $ | 10,349 |
|                               |
|                               |                           | Twelve months ended December 31, 2009 |
|                               |                           |                                  |   | Gains (loss) |   | Reclassification of |   |   |   |   |   |   |
|                               |                           |                                  |   | included in other |   | losses from adjustment |   |   |   |   | Balance |
|                               |                           | Balance                               |   | comprehensive |   | for impairment of |   | Purchases, Issuances, |   | December 31, |
| (Dollars in thousands)             |                           | January 1, 2009                       |   | income (loss) |   | securities |   | and Settlements |   | 2009 |
| Corporate securities               |                           | $                                     | 9,520 |   | $ | 165 |   |   | $ | 68 |   | $ | - |   | $ | 9,753 |
| Obligations of state and political |                           |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| subdivisions                       |                           |                                  | - |   |   | (31 | ) |   |   | - |   |   | 1,004 |   |   | 973 |
| Fair value                         |                           | $                                     | 9,520 |   | $ | 134 |   |   | $ | 68 |   | $ | 1,004 |   | $ | 10,726 |
|                               |                           |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|       |                                             |                           | Twelve months ended December 31, 2010 |
|--------------------------------|--------------------------------------------------|--------------------------------|---------------------------------------|
|                           | (Dollars in thousands)                           |       | Impairment                            |       | Fair Value 1 |
|                           | Loans measured for impairment                    |                           | $                                     | 19,476 |   | $ | 82,910 |
|                           | OREO                                             |                           |                                  | 6,649 |   |   | 74,146 |
|                           | Total nonrecurring assets measured at fair value |                           | $                                     | 26,125 |   | $ | 157,056 |
|                           |                                             |                           |                                  |   |
|                           |                                             |                           | Twelve months ended December 31, 2009 |
|                           | (Dollars in thousands)                           |                           | Impairment                            |   | Fair Value 1 |
|                           | Loans measured for impairment                    |                           | $                                     | 82,345 |   | $ | 212,311 |
|                           | OREO                                             |                           |                                  | 18,562 |   |   | 162,153 |
|                           | Goodwill                                         |                           |                                  | 13,059 |   |   | - |
|                           | Total nonrecurring assets measured at fair value |                           | $                                     | 113,966 |   | $ | 374,464 |
|                           |                                             |                           |                                  |   |   |   |   |

|       | 1 Fair value excludes costs to sell collateral. |
|--------------------------------|-------------------------------------------------|

----

|       | (Dollars in thousands)                                                  |       | Carrying Value                  |       | Fair Value |
|--------------------------------|-------------------------------------------------------------------------|--------------------------------|---------------------------------|--------------------------------|------------|
|                           | FINANCIAL ASSETS:                                                       |                           |                            |                           |       |   |   |
|                           | Cash and cash equivalents                                               |                           | $      | 177,991                        |       | $      | 177,991 |
|                           | Trading securities                                                      |                           |                            | 808                            |       |   | 808 |
|                           | Investment securities available for sale                                |                           |                            | 646,112                        |       |   | 646,112 |
|                           | Federal Home Loan Bank stock                                            |                           |                            | 12,148                         |       |   | 12,148 |
|                           | Net loans (net of allowance for loan losses                             |                           |                            |                           |       |   |   |
|                           |        and including loans held for sale) |                           |                            | 1,499,155                      |       |   | 1,407,366 |
|                           | Bank owned life insurance                                               |                           |                            | 25,313                         |       |   | 25,313 |
|                           |                                                                    |                           |                            |                           |       |   |   |
|                           | FINANCIAL LIABILITIES:                                                  |                           |                            |                           |       |   |   |
|                           | Deposits                                                                |                           | $                               | 1,940,522                      |       | $ | 1,942,301 |
|                           | Long-term borrowings                                                    |                           |                            | 168,599                        |       |   | 175,305 |
|                           |                                                                    |                           |                            |                           |       |   |   |
|                           | Junior subordinated debentures-variable                                 |                           |                            | 51,000                         |       |   | 26,597 |

|       | (Dollars in thousands)                                                  |       | Carrying Value                  |       | Fair Value |
|--------------------------------|-------------------------------------------------------------------------|--------------------------------|---------------------------------|--------------------------------|------------|
|                           | FINANCIAL ASSETS:                                                       |                           |                            |                           |       |   |   |
|                           | Cash and cash equivalents                                               |                           | $      | 303,097                        |       | $      | 303,097 |
|                           | Trading securities                                                      |                           |                            | 731                            |       |   | 731 |
|                           | Investment securities available for sale                                |                           |                            | 567,277                        |       |   | 567,277 |
|                           | Federal Home Loan Bank stock                                            |                           |                            | 12,148                         |       |   | 12,148 |
|                           | Net loans (net of allowance for loan losses                             |                           |                            |                           |       |   |   |
|                           |        and including loans held for sale) |                           |                            | 1,687,528                      |       |   | 1,575,033 |
|                           | Bank owned life insurance                                               |                           |                            | 24,417                         |       |   | 24,417 |
|                           |                                                                    |                           |                            |                           |       |   |   |
|                           | FINANCIAL LIABILITIES:                                                  |                           |                            |                           |       |   |   |
|                           | Deposits                                                                |                           | $                               | 2,146,884                      |       | $ | 2,151,850 |
|                           | Short-term borrowings                                                   |                           |                            | 12,600                         |       |   | 12,600 |
|                           | Long-term borrowings                                                    |                           |                            | 250,699                        |       |   | 256,841 |
|                           |                                                                    |                           |                            |                           |       |   |   |
|                           | Junior subordinated debentures-variable                                 |                           |                            | 51,000                         |       |   | 17,850 |

----

|                                                                                                      |                           | Contract or       |                           | Contract or       |
|-----------------------------------------------------------------------------------------------------------|--------------------------------|-------------------|--------------------------------|-------------------|
|                                                                                                      |                           | Notional Amount   |                           | Notional Amount   |
| (Dollars in thousands)                                                                                    |       | December 31, 2010 |       | December 31, 2009 |
| Financial instruments whose contract amounts represent credit risk:                                       |                           |              |                           |              |   |   |
| Commitments to extend credit in the form of loans                                                         |                           |              |                           |              |   |   |
|        Commercial                                                           |                           | $                 | 246,702                        |              | $ | 260,934 |
|        Real estate construction                                             |                           |              | 10,568                         |              |   | 15,044 |
|        Real estate mortgage                                                 |                           |              |                           |              |   |   |
|               Mortgage                   |                           |              | 4,265                          |              |   | 4,063 |
|               Home equity line of credit |                           |              | 154,073                        |              |   | 164,638 |
|        Total real estate mortgage loans                                     |                           |              | 158,338                        |              |   | 168,701 |
|        Commercial real estate                                               |                           |              | 7,756                          |              |   | 10,832 |
|        Installment and consumer                                             |                           |              | 10,734                         |              |   | 12,147 |
|        Other 1                                                              |                           |              | 10,395                         |              |   | 10,363 |
| Standby letters of credit and financial guarantees                                                        |                           |              | 8,531                          |              |   | 9,491 |
| Account overdraft protection instruments                                                                  |                           |              | 118,596                        |              |   | 76,919 |
|               Total                      |                           | $                 | 571,620                        |              | $ | 564,431 |
|                                                                                                      |                           |              |                           |              |   |   |

|       | 1 |   | The category “other” represents commitments extended to clients or borrowers that have been extended but not yet fully executed. These extended commitments are not yet classified nor have they been placed into our loan system. |
|--------------------------------|---|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                           | WEST COAST BANCORP                                                                                              |
|--------------------------------|-----------------------------------------------------------------------------------------------------------------|
|                           | UNCONSOLIDATED BALANCE SHEETS                                                                                   |
|                           |                                                                                                            |
|       | As of December 31 (Dollars in thousands)                                                                        |       | 2010 |       | 2009 |
|                           | Assets:                                                                                                         |   |   |   |   |   |   |
|                           |               Cash and cash equivalents        |   | $      | 10,910 |   | $      | 10,965 |
|                           |               Investment in bank subsidiary    |   |   | 309,951 |   |   | 289,883 |
|                           |               Investment in other subsidiaries |   |   | 5,223 |   |   | 3,036 |
|                           |               Other assets                     |   |   | 1,892 |   |   | 1,884 |
|                           |        Total assets                                                               |   | $ | 327,976 |   | $ | 305,768 |
|                           |                                                                                                            |   |   |   |   |   |   |
|                           | Liabilities and stockholders’ equity:                                                                     |   |   |   |   |   |   |
|                           |               Junior subordinated debentures   |   | $ | 51,000 |   | $ | 51,000 |
|                           |               Other liabilities                |   |   | 4,416 |   |   | 5,710 |
|                           |        Total liabilities                                                          |   |   | 55,416 |   |   | 56,710 |
|                           | Stockholders’ equity                                                                                      |   |   | 272,560 |   |   | 249,058 |
|                           |        Total liabilities and stockholders’ equity                           |   | $      | 327,976 |   | $      | 305,768 |
|                           |                                                                                                            |   |   |   |   |   |   |

| WEST COAST BANCORP                                                                               |
|--------------------------------------------------------------------------------------------------|
| UNCONSOLIDATED STATEMENTS OF INCOME (LOSS)                                                       |
|                                                                                             |
| Year ended December 31 (Dollars in thousands)                                                    |       | 2010 |       | 2009 |       | 2008 |
| Income:                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
|        Cash dividends from Bank                                    |   | $ | - |   |   | $ | - |   |   | $ | 6,000 |   |
|        Other income                                                |   |   | 10 |   |   |   | 10 |   |   |   | 10 |   |
|               Total income      |   |   | 10 |   |   |   | 10 |   |   |   | 6,010 |   |
| Expenses:                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |
|        Interest expense                                            |   |   | 1,143 |   |   |   | 1,483 |   |   |   | 2,635 |   |
|        Other expense                                               |   |   | 961 |   |   |   | 905 |   |   |   | 869 |   |
|               Total expense     |   |   | 2,104 |   |   |   | 2,388 |   |   |   | 3,504 |   |
| Income (loss) before income taxes and equity in                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
|        undistributed earnings (loss) of the subsidiaries           |   |   | (2,094 | ) |   |   | (2,378 | ) |   |   | 2,506 |   |
| Income tax benefit                                                                               |   |   | 816 |   |   |   | 927 |   |   |   | 1,363 |   |
| Net income (loss) before equity in undistributed                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
|        earnings (loss) of the subsidiaries                         |   |   | (1,278 | ) |   |   | (1,451 | ) |   |   | 3,869 |   |
| Equity in undistributed earnings (loss) of the subsidiaries                                      |   |   | 4,503 |   |   |   | (89,762 | ) |   |   | (10,182 | ) |
|               Net income (loss) |   | $      | 3,225 |   |   | $      | (91,213 | ) |   | $      | (6,313 | ) |
|                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |

----

| WEST COAST BANCORP                                                                                                                 |
|------------------------------------------------------------------------------------------------------------------------------------|
| UNCONSOLIDATED STATEMENTS OF CASH FLOWS                                                                                            |
|                                                                                                                               |
| Year ended December 31 (Dollars in thousands)                                                                                      |       | 2010 |       | 2009 |       | 2008 |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                                                                                                  |   | $      | 3,225 |   |   | $      | (91,213 | ) |   | $      | (6,313 | ) |
| Adjustments to reconcile net income to net cash                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
|        provided by operating activities:                                                             |   |   |   |   |   |   |   |   |   |   |   |   |
|        Undistributed (earnings) loss of subsidiaries                                                 |   |   | (4,503 | ) |   |   | 89,762 |   |   |   | 10,182 |   |
|        (Increase) decrease in other assets                                                           |   |   | (535 | ) |   |   | 1,633 |   |   |   | (1,805 | ) |
|        Increase in other liabilities                                                                 |   |   | (1,294 | ) |   |   | 3,222 |   |   |   | 5 |   |
|        Excess tax deficiency associated with stock plans                                             |   |   | (357 | ) |   |   | (496 | ) |   |   | - |   |
|        Stock based compensation expense                                                              |   |   | 2,089 |   |   |   | 1,520 |   |   |   | 2,865 |   |
|               Net cash provided by operating activities           |   |   | (1,375 | ) |   |   | 4,428 |   |   |   | 4,934 |   |
|                                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |
|        Capital contribution to subsidiaries                                                          |   |   | (15,300 | ) |   |   | (134,248 | ) |   |   | - |   |
|               Net cash used in investing activities               |   |   | (15,300 | ) |   |   | (134,248 | ) |   |   | - |   |
|                                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |
|        Activity in deferred compensation plan                                                        |   |   | 262 |   |   |   | (1 | ) |   |   | (50 | ) |
|        Proceeds from issuance of common stock                                                        |   |   | 16,393 |   |   |   | - |   |   |   | 25 |   |
|        Redemption of stock pursuant to stock plans                                                   |   |   | (35 | ) |   |   | (22 | ) |   |   | (190 | ) |
|        Tax adjustment associated with stock plans                                                    |   |   | - |   |   |   | - |   |   |   | (287 | ) |
|        Proceeds from issuance of preferred stock, net of costs                                       |   |   | - |   |   |   | 139,248 |   |   |   | - |   |
|        Cash dividends paid                                                                           |   |   | - |   |   |   | (471 | ) |   |   | (6,503 | ) |
|        Other, net                                                                                    |   |   | - |   |   |   | - |   |   |   | - |   |
|               Net cash provided by (used in) financing activities |   |   | 16,620 |   |   |   | 138,754 |   |   |   | (7,005 | ) |
|                                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Net increase (decrease) in cash and cash equivalents                                                                               |   |   | (55 | ) |   |   | 8,934 |   |   |   | (2,071 | ) |
| Cash and cash equivalents at beginning of year                                                                                     |   |   | 10,965 |   |   |   | 2,031 |   |   |   | 4,102 |   |
| Cash and cash equivalents at end of year                                                                                           |   | $ | 10,910 |   |   | $ | 10,965 |   |   | $ | 2,031 |   |
|                                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                                   |                           | As of and for the year ended    |
|------------------------------------------------------------------------|--------------------------------|---------------------------------|
| (Dollars in thousands)                                                 |                           | December 31, 2010               |
|                                                                   |       | Banking                         |       | Other |       | Intercompany |       | Consolidated |
| Interest income                                                        |                           | $                               | 105,510 |   |   | $ | 66 |   |   | $ | - |   |   | $ | 105,576 |   |
| Interest expense                                                       |                           |                            | 21,126 |   |   |   | 1,143 |   |   |   | - |   |   |   | 22,269 |   |
|        Net interest income (expense)     |                           |                            | 84,384 |   |   |   | (1,077 | ) |   |   | - |   |   |   | 83,307 |   |
| Provision for credit losses                                            |                           |                            | 18,652 |   |   |   | - |   |   |   | - |   |   |   | 18,652 |   |
| Noninterest income                                                     |                           |                            | 30,789 |   |   |   | 3,053 |   |   |   | (1,145 | ) |   |   | 32,697 |   |
| Noninterest expense                                                    |                           |                            | 87,841 |   |   |   | 3,641 |   |   |   | (1,145 | ) |   |   | 90,337 |   |
|        Income (loss) before income taxes |                           |                            | 8,680 |   |   |   | (1,665 | ) |   |   | - |   |   |   | 7,015 |   |
| Provision (benefit) for income taxes                                   |                           |                            | 4,439 |   |   |   | (649 | ) |   |   | - |   |   |   | 3,790 |   |
|        Net income (loss)                 |                           | $                               | 4,241 |   |   | $ | (1,016 | ) |   | $ | - |   |   | $ | 3,225 |   |
|                                                                   |                           |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation, amortization and accretion                               |                           | $                               | 8,742 |   |   | $ | 36 |   |   | $ | - |   |   | $ | 8,778 |   |
| Assets                                                                 |                           | $                               | 2,456,223 |   |   | $ | 17,650 |   |   | $ | (12,814 | ) |   | $ | 2,461,059 |   |
| Goodwill                                                               |                           | $                               | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| Loans, net                                                             |                           | $                               | 1,496,053 |   |   | $ | - |   |   | $ | - |   |   | $ | 1,496,053 |   |
| Deposits                                                               |                           | $                               | 1,952,780 |   |   | $ | - |   |   | $ | (12,258 | ) |   | $ | 1,940,522 |   |
| Equity                                                                 |                           | $      | 310,487 |   |   | $      | (37,927 | ) |   | $      | - |   |   | $      | 272,560 |   |
|                                                                   |                           |                            |
|                                                                   |                           | As of and for the year ended    |
| (Dollars in thousands)                                                 |                           | December 31, 2009               |
|                                                                   |                           | Banking                         |   | Other |   | Intercompany |   | Consolidated |
| Interest income                                                        |                           | $                               | 112,068 |   |   | $ | 82 |   |   | $ | - |   |   | $ | 112,150 |   |
| Interest expense                                                       |                           |                            | 31,941 |   |   |   | 1,482 |   |   |   | - |   |   |   | 33,423 |   |
|        Net interest income (expense)     |                           |                            | 80,127 |   |   |   | (1,400 | ) |   |   | - |   |   |   | 78,727 |   |
| Provision for credit losses                                            |                           |                            | 90,057 |   |   |   | - |   |   |   | - |   |   |   | 90,057 |   |
| Noninterest income                                                     |                           |                            | 7,208 |   |   |   | 3,032 |   |   |   | (1,111 | ) |   |   | 9,129 |   |
| Noninterest expense                                                    |                           |                            | 105,917 |   |   |   | 3,482 |   |   |   | (1,111 | ) |   |   | 108,288 |   |
|        Loss before income taxes          |                           |                            | (108,639 | ) |   |   | (1,850 | ) |   |   | - |   |   |   | (110,489 | ) |
| Benefit for income taxes                                               |                           |                            | (18,555 | ) |   |   | (721 | ) |   |   | - |   |   |   | (19,276 | ) |
|        Net loss                          |                           | $                               | (90,084 | ) |   | $ | (1,129 | ) |   | $ | - |   |   | $ | (91,213 | ) |
|                                                                   |                           |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation, amortization and accretion                               |                           | $                               | 8,253 |   |   | $ | 28 |   |   | $ | - |   |   | $ | 8,281 |   |
| Assets                                                                 |                           | $                               | 2,729,453 |   |   | $ | 17,370 |   |   | $ | (13,276 | ) |   | $ | 2,733,547 |   |
| Goodwill                                                               |                           | $                               | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| Loans, net                                                             |                           | $                               | 1,686,352 |   |   | $ | - |   |   | $ | - |   |   | $ | 1,686,352 |   |
| Deposits                                                               |                           | $                               | 2,159,342 |   |   | $ | - |   |   | $ | (12,458 | ) |   | $ | 2,146,884 |   |
| Equity                                                                 |                           | $                               | 288,477 |   |   | $ | (39,419 | ) |   | $ | - |   |   | $ | 249,058 |   |

----

|                                                               |                           | As of and for the year ended    |
|--------------------------------------------------------------------|--------------------------------|---------------------------------|
| (Dollars in thousands)                                             |                           | December 31, 2008               |
|                                                               |       | Banking                         |       | Other |       | Intercompany |       | Consolidated |
| Interest income                                                    |                           | $                               | 140,767 |   |   | $ | 79 |   |   | $ | - |   |   | $ | 140,846 |   |
| Interest expense                                                   |                           |                            | 46,061 |   |   |   | 2,635 |   |   |   | - |   |   |   | 48,696 |   |
|        Net interest income (expense) |                           |                            | 94,706 |   |   |   | (2,556 | ) |   |   | - |   |   |   | 92,150 |   |
| Provision for credit losses                                        |                           |                            | 40,367 |   |   |   | - |   |   |   | - |   |   |   | 40,367 |   |
| Noninterest income                                                 |                           |                            | 22,429 |   |   |   | 3,329 |   |   |   | (1,129 | ) |   |   | 24,629 |   |
| Noninterest expense                                                |                           |                            | 87,836 |   |   |   | 3,616 |   |   |   | (1,129 | ) |   |   | 90,323 |   |
|        Loss before income taxes      |                           |                            | (11,068 | ) |   |   | (2,843 | ) |   |   | - |   |   |   | (13,911 | ) |
| Benefit for income taxes                                           |                           |                            | (6,489 | ) |   |   | (1,109 | ) |   |   | - |   |   |   | (7,598 | ) |
|        Net loss                      |                           | $                               | (4,579 | ) |   | $ | (1,734 | ) |   | $ | - |   |   | $ | (6,313 | ) |
|                                                               |                           |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation, amortization and accretion                           |                           | $                               | 4,493 |   |   | $ | 27 |   |   | $ | - |   |   | $ | 4,520 |   |
| Assets                                                             |                           | $                               | 2,511,006 |   |   | $ | 9,470 |   |   | $ | (4,336 | ) |   | $ | 2,516,140 |   |
| Goodwill                                                           |                           | $                               | 13,059 |   |   | $ | - |   |   | $ | - |   |   | $ | 13,059 |   |
| Loans, net                                                         |                           | $                               | 2,035,876 |   |   | $ | - |   |   | $ | - |   |   | $ | 2,035,876 |   |
| Deposits                                                           |                           | $                               | 2,027,899 |   |   | $ | - |   |   | $ | (3,520 | ) |   | $ | 2,024,379 |   |
| Equity                                                             |                           | $      | 241,701 |   |   | $      | (43,514 | ) |   | $      | - |   |   | $      | 198,187 |   |

|       | (Dollars in thousands)         |                           | December 31,                    |
|--------------------------------|--------------------------------|--------------------------------|---------------------------------|
|                           |                           |       | 2010                            |       | 2009 |
|                           | Balance, beginning of period   |                           | $                               | 3,893 |   |   | $ | 22,861 |   |
|                           | New loans and advances         |                           |                            | 1,237 |   |   |   | 1,199 |   |
|                           | Principal payments and payoffs |                           |                            | (91 | ) |   |   | (20,167 | ) |
|                           | Balance, end of period         |                           | $      | 5,039 |   |   | $      | 3,893 |   |
|                           |                           |                           |                            |   |   |   |   |   |   |

----

| 2010                                                                                   |                           |                                         |                           |          |                           |                                    |                           |      |   |                                    |    |   |   |                                    |    |   |
|----------------------------------------------------------------------------------------|--------------------------------|----------------------------------------------|--------------------------------|---------------|--------------------------------|-----------------------------------------|--------------------------------|-----------|--------|-----------------------------------------|---------|--------|--------|-----------------------------------------|---------|--------|
| (Dollars in thousands, except per share data)                                          |       | December 31,                                 |       | September 30, |       | June 30,                                |       | March 31, |
| Interest income                                                                        |                           | $         | 25,509                         |          |                           | $         | 26,053                         |      |   | $         | 26,816  |   |   | $         | 27,198  |   |
| Interest expense                                                                       |                           |                                         | 3,620                          |          |                           |                                    | 4,178                          |      |   |                                    | 7,906   |   |   |                                    | 6,565   |   |
|        Net interest income                               |                           |                                         | 21,889                         |          |                           |                                    | 21,875                         |      |   |                                    | 18,910  |   |   |                                    | 20,633  |   |
| Provision for credit losses                                                            |                           |                                         | 1,693                          |          |                           |                                    | 1,567                          |      |   |                                    | 7,758   |   |   |                                    | 7,634   |   |
| Noninterest income                                                                     |                           |                                         | 8,595                          |          |                           |                                    | 8,069                          |      |   |                                    | 9,625   |   |   |                                    | 6,408   |   |
| Noninterest expense                                                                    |                           |                                         | 23,330                         |          |                           |                                    | 23,003                         |      |   |                                    | 22,909  |   |   |                                    | 21,095  |   |
|        Net income (loss) before income taxes             |                           |                                         | 5,461                          |          |                           |                                    | 5,374                          |      |   |                                    | (2,132  | )      |   |                                    | (1,688  | )      |
| Provision (benefit) for income taxes                                                   |                           |                                         | 3,549                          |          |                           |                                    | (676                           | )         |   |                                    | 1,717   |   |   |                                    | (800    | )      |
|        Net income (loss)                                 |                           | $                                            | 1,912                          |          |                           | $                                       | 6,050                          |      |   | $                                       | (3,849  | )      |   | $                                       | (888    | )      |
|                                                                                   |                           |                                         |                           |          |                           |                                    |                           |      |   |                                    |    |   |   |                                    |    |   |
| Net Income (loss) per common share:                                                    |                           |                                         |                           |          |                           |                                    |                           |      |   |                                    |    |   |   |                                    |    |   |
|               Basic   |                           |                                         | $0.02                          |          |                           |                                    | $0.06                          |      |   |                                    | ($0.04  | )      |   |                                    | ($0.01  | )      |
|               Diluted |                           |                                         | $0.02                          |          |                           |                                    | $0.06                          |      |   |                                    | ($0.04  | )      |   |                                    | ($0.01  | )      |
|                                                                                   |                           |                                         |                           |          |                           |                                    |                           |      |   |                                    |    |   |   |                                    |    |   |
| 2009                                                                                   |                           |                                         |                           |          |                           |                                    |                           |      |   |                                    |    |   |   |                                    |    |   |
| (Dollars in thousands, except per share data)                                          |                           | December 31,                                 |                           | September 30, |                           | June 30,                                |                           | March 31, |
| Interest income                                                                        |                           | $                                            | 26,948                         |          |                           | $                                       | 27,725                         |      |   | $                                       | 28,869  |   |   | $                                       | 28,608  |   |
| Interest expense                                                                       |                           |                                         | 7,710                          |          |                           |                                    | 8,580                          |      |   |                                    | 8,655   |   |   |                                    | 8,478   |   |
|        Net interest income                               |                           |                                         | 19,238                         |          |                           |                                    | 19,145                         |      |   |                                    | 20,214  |   |   |                                    | 20,130  |   |
| Provision for credit losses                                                            |                           |                                         | 35,233                         |          |                           |                                    | 20,300                         |      |   |                                    | 11,393  |   |   |                                    | 23,131  |   |
| Noninterest income (loss)                                                              |                           |                                         | (6,148                         | )             |                           |                                    | 4,971                          |      |   |                                    | 5,958   |   |   |                                    | 4,348   |   |
| Noninterest expense                                                                    |                           |                                         | 24,181                         |          |                           |                                    | 23,489                         |      |   |                                    | 25,244  |   |   |                                    | 35,374  |   |
|        Loss before income taxes                          |                           |                                         | (46,324                        | )             |                           |                                    | (19,673                        | )         |   |                                    | (10,465 | )      |   |                                    | (34,027 | )      |
| Provision (benefit) for income taxes                                                   |                           |                                         | 2,543                          |          |                           |                                    | (7,265                         | )         |   |                                    | (4,126  | )      |   |                                    | (10,428 | )      |
|        Net loss                                          |                           | $                                            | (48,867                        | )             |                           | $                                       | (12,408                        | )         |   | $                                       | (6,339  | )      |   | $                                       | (23,599 | )      |
|                                                                                   |                           |                                         |                           |          |                           |                                    |                           |      |   |                                    |    |   |   |                                    |    |   |
| Loss per common share:                                                                 |                           |                                         |                           |          |                           |                                    |                           |      |   |                                    |    |   |   |                                    |    |   |
|               Basic   |                           |                                         | ($3.13                         | )             |                           |                                    | ($0.79                         | )         |   |                                    | ($0.41  | )      |   |                                    | ($1.51  | )      |
|               Diluted |                           |                                         | ($3.13                         | )             |                           |                                    | ($0.79                         | )         |   |                                    | ($0.41  | )      |   |                                    | ($1.51  | )      |

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| ITEM 9.  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. |
|---------------|---------------------------------------------------------------------------------------|

----

----

----

| ITEM 12. |    | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCK HOLDER MATTERS |
|----------|--------------|------------------------------------------------------------------------------------------------------|

----

|      | (a) (1)                                                                                                                                                                                    |       | Financial Statements:           |
|--------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|---------------------------------|
|                     |                                                                                                                                                                                       |                           |                            |
|                     | The financial statements and related documents listed in the Index set forth in Item 8 of this report are filed as part of this report.                                                    |
|                     |                                                                                                                                                                                       |                           |                            |
|                     |  (2)                                                                                                                                                                                  |                           | Financial Statements Schedules: |
|                     |                                                                                                                                                                                       |                           |                            |
|                     | None.                                                                                                                                                                                      |
|                     |                                                                                                                                                                                       |                           |                            |
|                     | (3)                                                                                                                                                                                        |                           | Exhibits:                       |
|                     |                                                                                                                                                                                       |                           |                            |
|                     | The response to this portion of Item 15 is submitted as a separate section of this report appearing immediately following the signature page and entitled “Index to Exhibits.” |

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|   | WEST COAST BANCORP |
|--------|--------------------|
|   |               |
|   | (Registrant)       |
|   |               |
|   | By:      | /s/ Robert D. Sznewajs |   |
|   |               | Robert D. Sznewajs |
|   |               | President and CEO |

| Principal Executive Officer:         |                                                                                                               |                                                 |
|--------------------------------------|--------------------------------------------------------------------------------------------------------------------|------------------------------------------------------|
| /s/ Robert D. Sznewajs               |                     | President and CEO and Director                       |
| Robert D. Sznewajs                   |                                                                                                               |                                                 |
|                                 |                                                                                                               |                                                 |
| Principal Financial Officer:         |                                                                                                               |                                                 |
| /s/ Anders Giltvedt                  |                                                                                                               | Executive Vice President and Chief Financial Officer |
| Anders Giltvedt                      |                                                                                                               |                                                 |
|                                 |                                                                                                               |                                                 |
| Principal Accounting Officer:        |                                                                                                               |                                                 |
| /s/ Kevin M. McClung                 |                                                                                                               | Senior Vice President and Controller                 |
| Kevin M. McClung                     |                                                                                                               |                                                 |
|                                 |                                                                                                               |                                                 |
| Remaining Directors:                 |                                                                                                               |                                                 |
| *Lloyd D. Ankeny, Chairman           |                                                                                                               |                                                 |
| *Shmuel (“Sam”) Levinson |                                                                                                               |                                                 |
| *Duane C. McDougall                  |                                                                                                               |                                                 |
| *Steven J. Oliva                     |                                                                                                               |                                                 |
| *John T. Pietrzak                    |                                                                                                               |                                                 |
| *Steven N. Spence                    |                                                                                                               |                                                 |
| *Nancy A. Wilgenbusch, PhD.          |                                                                                                               |                                                 |
| *By                        | /s/ Robert D. Sznewajs                                                                                             |                                                 |   |
|                                 | Robert D. Sznewajs                                                                                                 |                                                 |   |
|                                 | Attorney-in-Fact                                                                                                   |                                                 |   |

----

| Exhibit No. |       | Exhibit                                                                                                                                                                                                                                                                                               |   |
|-------------|--------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| 3.1         |                           | Restated Articles of Incorporation (as amended through January 20, 2010).                                                                                                                                                                                                                             |
|        |
| 3.2         |                           | Amended and Restated Bylaws of the Company (as amended through February 9, 2010).                                                                                                                                                                                                                     |
|        |
| 4.1         |                           | Form of Class C Warrant. Incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K dated October 22, 2009, and filed with the Securities and Exchange Commission on October 28, 2009 (the "October 8-K").                                                                  |
|        |
| 4.2         |                           | Tax Benefit Preservation Plan, dated as of October 23, 2009, between West Coast Bancorp and Wells Fargo Bank, National Association. Incorporated by reference to Exhibit 4.4 to the October 8-K.                                                                                                      |
|        |
| 4.3         |                           | The Company has incurred long-term indebtedness as to which the amount involved is less than ten percent of the total assets of the Company and its subsidiaries on a consolidated basis. The Company agrees to furnish instruments relating to such indebtedness to the Commission upon its request. |
|        |
| 10.1        |                           | Form of Indemnification Agreement for all directors and executive officers. Incorporated by reference to Exhibit 10.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008 (the "2008 10-K").*                                                                            |
|        |
| 10.2        |                           | Change in Control Agreement between the Company and Robert D. Sznewajs dated January 1, 2004, and amended and restated December 30, 2008. Incorporated by reference to Exhibit 10.2 to the 2008 10-K.*                                                                                                |
|        |
| 10.3        |                           | Change in Control Agreement between the Company and Anders Giltvedt dated January 1, 2004, and amended and restated December 30, 2008. Incorporated by reference to Exhibit 10.3 to the 2008 10-K.*                                                                                                   |
|        |
| 10.4        |                           | Change in Control Agreement between the Company and Xandra McKeown dated January 1, 2004, and amended and restated December 30, 2008. Incorporated by reference to Exhibit 10.4 to the 2008 10-K.*                                                                                                    |
|        |
| 10.5        |                           | Change in Control Agreement between the Company and James D. Bygland dated January 1, 2004 and amended and restated December 30, 2008. Incorporated by reference to Exhibit 10.5 to the 2008 10-K.*                                                                                                   |
|        |
| 10.6        |                           | Change in Control Agreement between the Company and Hadley Robbins dated March 5, 2007 and amended and restated December 30, 2008. Incorporated by reference to Exhibit 10.6 to the 2008 10-K.*                                                                                                       |
|        |
| 10.7        |                           | Supplemental Executive Retirement Plan adopted by West Coast Bank, the Company and Robert D. Sznewajs dated August 1, 2003, and amended and restated as of January 1, 2011. Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K dated January 14, 2011.*            |
|        |
| 10.8        |                           | Supplemental Executive Retirement Plan adopted by West Coast Bank, the Company and Anders Giltvedt dated August 1, 2003, and amended and restated as of January 1, 2009. Incorporated by reference to Exhibit 10.8 to the 2008 10-K.*                                                                 |
|        |
| 10.9        |                           | Supplemental Executive Retirement Plan adopted by West Coast Bank, the Company and Xandra McKeown dated August 1, 2003, and amended and restated as of January 1, 2009. Incorporated by reference to Exhibit 10.9 to the 2008 10-K.*                                                                  |
|        |
| 10.10       |                           | Supplemental Executive Retirement Plan adopted by West Coast Bank, the Company and James D. Bygland dated August 1, 2003, and amended and restated as of January 1, 2009. Incorporated by reference to Exhibit 10.10 to the 2008 10-K.*                                                               |

----

| Exhibit No. |       | Exhibit                                                                                                                                                                                                                                                                                                                                                                                                                           |   |
|-------------|--------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| 10.11       |                           | Supplemental Executive Retirement Plan adopted by West Coast Bank, the Company and Hadley Robbins dated April 1, 2007, and amended and restated as of January 1, 2009. Incorporated by reference to Exhibit 10.11 to the 2008 10-K.*                                                                                                                                                                                              |
|        |
| 10.12       |                           | 401(k) Profit Sharing Plan. Incorporated by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-8 (Reg. No. 333-01649) filed March 12, 1996.*                                                                                                                                                                                                                                                       |
|        |
| 10.13       |                           | Directors’ Deferred Compensation Plan. Incorporated by reference to Exhibit 10.13 to the 2008 10-K.*                                                                                                                                                                                                                                                                                                                        |
|        |
| 10.14       |                           | Executives’ Deferred Compensation Plan. Incorporated by reference to Exhibit 10.14 to the 2008 10-K.*                                                                                                                                                                                                                                                                                                                       |
|        |
| 10.15       |                           | 1999 Stock Option Plan and Form of Agreement. Incorporated by reference to Exhibits 99.1 and 99.2 to the Company’s Registration Statement on Form S-8 (Reg. No. 333-86113) filed August 30, 1999.*                                                                                                                                                                                                                          |
|        |
| 10.16       |                           | 2002 Stock Incentive Plan, as amended. Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009.*                                                                                                                                                                                                                                                       |
|        |
| 10.17       |                           | Forms of Option Agreements, Restricted Stock Agreements and Restricted Stock Performance Award Agreement under the 2002 Stock Incentive Plan. Incorporated by reference to Exhibits 10.3 through 10.7 to the September 2006 10-Q and Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2008.                                                                                             |
|        |
| 10.18       |                           | Employment Agreement dated effective as of January 1, 2011, between Robert D. Sznewajs and the Company. Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated January 14, 2011.*                                                                                                                                                                                                            |
|        |
| 10.19       |                           | Form of Investment Agreement, dated as of October 23, 2009 by and between West Coast Bancorp and the investors party thereto. Incorporated by reference to Exhibit 10.1 to the October 8-K.                                                                                                                                                                                                                                       |
|        |
| 10.20       |                           | Written Agreement, dated as of December 18, 2009, by and among West Coast Bancorp, the Federal Reserve Bank of San Francisco and the Oregon Department of Consumer and Business Services, Division of Finance and Corporate Securities. Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated December 18, 2009 and filed with the Securities and Exchange Commission on December 21, 2009. |
|        |
| 21          |                           | Subsidiaries of the Company.                                                                                                                                                                                                                                                                                                                                                                                                      |
|        |
| 23          |                           | Consent of Deloitte & Touche LLP.                                                                                                                                                                                                                                                                                                                                                                                             |
|        |
| 24          |                           | Power of Attorney.                                                                                                                                                                                                                                                                                                                                                                                                                |

----